Hurdling Ever Higher: A New Obstacle Course for Mergers at the FERC?
close assessment of whether the merger may substantially lessen competition or create a monopoly in the relevant market.
RAISING THE HURDLES
So what is Massey's basis for saying that the current public-interest standard is not very high nor the FERC analysis particularly rigorous? After all, the current standard is as high as that applied in other industries under the antitrust laws. Nor can the increasingly competitive nature of utility markets justify abandonment or reengineering of the traditional antitrust principles that historically have been used in precisely such competitive markets. Moreover, the FERC's standard, as noted, was rigorous enough to begin the movement toward generic transmission tariff filings during the late 1980s. If the traditional Clayton Act merger analysis standard isn't rigorous enough, companies proposing mergers may shudder to consider the scope of a potential new FERC merger analysis.
Indeed, suggesting a need for heightened merger scrutiny by federal regulators is ironic. As
the FERC itself observes in the
"The electric power industry is today an industry in transition. In response to changes in the law, technology and markets, competitive pressures are steadily building .... Development of [competitive] markets is certain."6
Advocacy of a new and more intrusive merger policy implies that a regulator rather than market forces should preside over the realignment of economic interests that results from this increased competition in bulk-power markets.
Understandably, the FERC should permit only those mergers that pass muster under traditional Clayton Act principles. A sound merger policy, however, requires the FERC to allow mergers that fulfill a procompetitive role in the marketplace. For this reason, the Supreme Court's seminal merger decision in Brown Shoe specifically credited the Clayton Act with having "recognized the stimulation to competition that might flow from particular mergers," and credited Congress with desiring "to restrain mergers only to the extent that such combinations may tend to lessen competition."7
The Department of Justice has also recognized the importance of balance in merger enforcement policy:
"Although they sometimes harm competition, mergers generally play an important role in a free-enterprise economy. They can penalize ineffective management and facilitate the efficient flow of investment capital and the redeployment of existing productive assets. While challenging competitively harmful mergers, the Department seeks to avoid unnecessary interference with that larger universe of mergers that are either competitively beneficial or neutral."8
A much less balanced perspective is being urged upon the Commission: "[T]he FERC
arguably should avoid any diminishment of competition. One could argue that every merger diminishes competition by eliminating competition between two independent companies."9 A FERC merger policy that seeks to inject what it considers "procompetitive policies," rather than merely weeding out competitively harmful mergers, would compromise the Congressional aims as embodied in Brown Shoe.
Competition provides a strong profit incentive for efficiency and progress, and is thus widely viewed as superior to economic regulation in workably competitive markets.10 If the FERC were to create a standard of heightened scrutiny for electric utility mergers that goes beyond the requirements of traditional Clayton Act principles, its actions would suggest that electric markets not be allowed to react