FERC Reaffirms its Policies on Analyzing Horizontal Market Power

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In an order issued on February 16, 2012 (February 16 Order), the Federal Energy Regulatory Commission (FERC) reaffirmed its policies regarding horizontal market power analyses under Sections 203 and 205 of the Federal Power Act (FPA), and terminated a rulemaking that contemplated the potential adoption of revised guidelines issued by the Department of Justice (DOJ) and Federal Trade Commission (FTC) in 2010 (2010 Guidelines).

Under Section 203 of the FPA, FERC is charged with approving only those mergers and acquisitions of jurisdictional facilities that are consistent with the public interest. As part of its evaluation, FERC examines whether a merger would significantly increase market concentration in relevant markets. In recent years, FERC has relied heavily on a competitive analysis screen based on DOJ and FTC’s 1992 horizontal merger guidelines (1992 Guidelines). This screen analyzes market concentration using the Herfindahl-Hirschman Index (HHI), and uses concentration thresholds taken from the 1992 Guidelines to assess whether a proposed transaction may have anticompetitive effects.

The 2010 Guidelines increase the HHI thresholds relative to those set forth in the 1992 Guidelines. At the same time, however, the 2010 Guidelines embody a more flexible approach to merger analysis, including fact-specific inquiries using a variety of analytical tools.

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