Although problems in the power business grabbed the headlines early this decade, the industry now seems fundamentally strong. In contrast to their ratings of banks, rating agencies appear to have...
Hurdling Ever Higher: A New Obstacle Course for Mergers at the FERC?
on their own to increased competition. Rather, federal regulators must actively manage the reconfiguration of markets. This suggestion would run counter to the basis for the nearly universal consensus, already adopted by the FERC, that "more competition will mean lower rates for wholesale customers and, ultimately, for consumers."11 Company management, rather than regulators, should bear the responsibility and authority for determining how best to achieve efficiencies and realign a company's economic interests in response to competition.
Under the guise of harmonizing its merger approach with that of the Department of Justice, the FERC should not selectively borrow principles it finds attractive. The unifying theme of the Merger Guidelines holds that "mergers should not be permitted to create or enhance market power or to facilitate its exercise." That premise underlies section 7 of the Clayton Act and traditional FERC merger analysis. The analysis focuses on harm to competition or anticompetitive results of the merger; it is not driven by a grand design to instill or inject more competition to further putatively procompetitive regulatory policies.12 The approach suggested in the Midwest Power Systems concurrence cannot be reconciled with the Merger Guidelines, which were never intended to introduce "managed competition" or make the marketplace more competitive in the eyes of the government than it would have been without the merger.
CHANGING THE RULES
In crafting its Guidelines, the Department of Justice recognized the importance of certainty and predictability: "By stating its policy as simply and clearly as possible, the [Department] hopes to reduce the uncertainty associated with enforcement of the antitrust laws in this area."13 Without question, the Guidelines are intended to be reasonably and flexibly applied in light of facts and circumstances surrounding each proposed merger. Yet, the Guidelines recognize the importance of providing business decisionmakers with basic direction and guidance so that they may fairly evaluate and predict whether a particular merger would be approved. To the extent that a new FERC merger policy would be designed not to preclude competitively injurious transactions but instead to bring about "regulator-enhanced" competition, it might significantly hinder managements' ability to react to changing market conditions by restructuring their businesses. Once again, market forces that would otherwise work to realign economic interests could be chilled, and regulatory oversight rather than competition would remain the "driving force" in the restructuring of the industry.
Also disturbing is the possibility that a new FERC merger policy might overemphasize one particular principle from the Guidelines that suits a new regulatory objective: i.e., whether the efficiency claims attributable to a merger reasonably can be achieved by the parties through other means. The concurring opinion in Midwest Power Systems specifically suggests that the FERC should examine whether "in an increasingly competitive market, the merger applicant should be held responsible for achieving efficiency and cost reductions in the ordinary course of business, outside the merger option."14 It is certainly possible that through devices such as contractual arrangements, strategic alliances, and joint ventures, investor-owned utilities might obtain some of these efficiencies. The incorporation, however, of a "can you work together without a merger" test as