REGULATORY: Converging On Federal Reviews Of Electricity Mergers


[author: Donna N. Kooperstein]

Although the Federal Energy Regulatory Commission and the U.S. Department of Justice have in large part concurrent jurisdiction over electricity mergers, the two agencies have coordinated little in their review of transactions. And not surprisingly, they have in fact at times reached disparate decisions on the competitive merits and effectiveness of remedies.

For example, in the American Electric Power Company Inc./Central and South West Corp. merger, the Commission had competitive concerns, while the DOJ cleared the transaction; and in Exelon Corp./Public Service Enterprise Group Inc., the Commission accepted the parties’ proposal of divestiture of a set number of megawatts from unspecified intermediate and peaking plants, accompanied by a “virtual” divestiture of a set number of megawatts of nuclear capacity, while the DOJ insisted on physical divestiture of five specifically identified plants. A recent Commission notice suggests that the DOJ and the Commission may be interested in avoiding such outcomes in the future.[1]

Perhaps testing the waters on collaboration, the Commission issued a notice in the Exelon/Constellation proceeding advising applicants and interveners that the Commission proposed to permit communications between DOJ Antitrust Division staff and Commission advisory staff. Because its rules require the consent of all parties, the Commission stated that it would deem all participants to have consented unless they filed objections within seven days of the order.

Would collaboration between the DOJ and the Commission result in more consistency in their decisions on the competitive aspects of transactions? It has in other cases. In the Comcast Corp./NBC Universal Inc. joint venture matter, for instance, the DOJ explained that its unprecedented coordination with the Federal Communications Commission allowed for more “effective, efficient and consistent remedies” enabling the DOJ to rely on the FCC’s order to remedy certain issues.

To similar effect, the DOJ decided not to challenge Cisco System Inc.’s acquisition of Tandberg ASA, which involved video conferencing, based in part on Cisco’s commitments to the EU, with which the Antitrust Division had worked closely. On the other hand, the division and the EU were unable to bridge their differences in the General Electric Co./Honeywell International Inc. transaction — the United States cleared it, and the EU blocked it — despite considerable efforts, with the divergence leading to a very public spat between the two agencies.

Whether there is convergence will depend on a number of factors. One is the scope and depth of cooperation. Successful cooperation typically requires that the agencies have similar records before them in terms of data, documents and other evidence, and are able to engage in full discussions. That in turn requires that the agencies have, and exercise, the authority to develop the information through compulsory process or similar means and that parties are willing to execute waivers of confidentiality where necessary.

Currently, the Commission obtains most of its evidence from the merging firms’ required filings, which focus on competitive screens, and interveners’ pleadings. The DOJ, on the other hand, obtains evidence confidentially from a myriad of sources — the parties, the regional transmission organizations, state and federal agencies, competitors, and customers, among others — through compulsory and voluntary production, interviews and depositions.

The evidence includes not only the data to which the Commission has access but also other data, as well as a wealth of documents, including strategic business plans, market studies, bidding and operating strategies, competitive analyses, and market forecasts. In order for the Commission to access this information, the DOJ would need waivers of confidentiality, which parties likely would hesitate to grant broadly, given the public nature of the Commission’s proceedings.

Successful cooperation also requires commitment by the agencies to regular and in-depth sharing of analyses on market definition, competitive effects, economic theories, efficiencies and remedies. At this point, it is impossible to gauge the level of commitment of either agency. The signs from the Commission are mixed: It waived its ex parte rule but cautioned that its proposal applied only to the Exelon proceeding, and the Commission has yet to propose amending its ex parte rules.

In the end, though, the outcome will likely depend on the substantive analysis. In the GE/Honeywell case, the DOJ and EU hit a fundamental impasse — where the DOJ saw a stronger, more competitive GE, the EU saw a GE that would disadvantage competitors. As Assistant U.S. Attorney General Charles A. James stated at the time, the agencies “appear to have reached different results from similar assessments of competitive conditions.”

Given the different approaches of the Commission and the DOJ to merger analysis and remedy the possibility for differing outcomes appears substantial. The Commission’s approach, based on the DOJ and Federal Trade Commission Horizontal Merger Guidelines issued in 1992 and revised in 1997[2], is formulaic, focused on measuring concentration in predefined markets, in contrast the DOJ approach is flexible and fact-intensive, focused on competitive effects, as explained in the DOJ and FTC’s recently issued Horizontal Merger Guidelines.[3]

While the Commission would likely not find competitive concerns with a merger that would result in only a small increase in concentration in the predefined markets, the DOJ could find that the merged firm would have an increased incentive and ability to increase prices unilaterally notwithstanding the small concentration changes or that harm could occur in markets not considered by the Commission. Perhaps the differences between the two agencies will narrow as a result of the Commission’s inquiry into whether it should revise its approach in light of the 2011 Horizontal Guidelines, but the support for full adoption of the DOJ approach has not been overwhelming.[4]

For remedies, the Commission has been far more receptive to conduct relief to resolve competitive concerns than the DOJ, which had a strong, stated preference for structural relief. The DOJ’s newly issued "Antitrust Guide to Merger Remedies"[5] suggests that it may be less doctrinal in the future but does continue the preference for divestiture remedies for horizontal mergers.

Of course, the most important issue is whether convergence, if it does occur, would be beneficial. From a private perspective, it may depend on who you are and what your goals are. Merging firms will be less likely to be subject to conflicting mandates but will also have less ability to leverage one agency against the other. Concerned competitors or customers will have one less forum in which to press their position. But from a public policy perspective, the answer seems clear — it should promote more efficient, informed, coherent and consistent governmental decision-making.[6]

This article was originally published as a Law360 guest column on January 17, 2012.

[1] Notice of Proposed Communication with Department of Justice, 136 FERC ¶ 61,161 (Sept. 2, 2011).

[2] Available at

[3] Available at

[4] Analysis of Horizontal Market Power under the Federal Power Act, 134 FERC ¶ 61,191 (March 17, 2011).

[5] Available at

[6] On Dec. 21, 2011, the DOJ simultaneously filed a lawsuit challenging the Exelon/Constellation and a proposed settlement, which requires the merged firm to divest three generating plants in Maryland in order to proceed with the transaction. Available at The Commission has yet to rule.

Donna N. Kooperstein
Washington, D.C.
+1 202 626 2386
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