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Utility Marketing Affiliates: A Survey of Standards on Brand Leveraging and Codes of Conduct

Fortnightly Magazine - November 15 1998

on sabbatical at Harvard University. The author thanks Michael Clements and Jaison Abel of the NRRI staff for survey data for the telecommunications and electric industries, respectively. He also thanks various senior staff at the cited utility commissions for information regarding electric and natural gas cases.

Utility Arguments

Comments presented in the Illinois case, as characterized by the commission.*

Illinois Power indicates that the exclusive sharing of corporate support information, services, and personnel between a utility and its affiliated interests will not impact the competitive balance.

Commonwealth Edison asserts that the ban on joint marketing adversely affects legitimate competition and innovation.

MidAmerican Energy asserts that denial of the right of utilities and their affiliated interests to share corporate support services makes them less efficient and places them at a competitive disadvantage.

Nicor Gas states that joint marketing and sales activities by utilities and their affiliates utilize economies of scope and scale, result in cost savings to consumers, and reflect [the] customer's desire for one-stop shopping.

Edison Electric Institute states that requiring utility sharing of non-tariffed services [with unaffiliated entities] attempts to socialize the economies of integration that inherently are a part of any business organization.

* Petition for Rulemaking on Nondiscrimination in Affiliate Transactions for Electric Utilities, 98- 0013, 98-0035, order of Sept. 14, 1998.

References*

Abel, Jaison R. and Michael E. Clements, "Should Utility Incumbents Be Able to Extend Their Brand Name to Competitive Retail Markets? An Economic Perspective,"

The Electricity Journal, June 1998, Vol. 11, No. 5, p. 49-57.

Bain, Joe, Barriers to New Competition, Harvard University Press, Cambridge, MA, 1956.

Binz, Ronald J. and Mark W. Frankena, "Addressing Market Power: The Next Step in Restructuring," Competition Policy Institute (undated 1998), Washington, D.C.

Demsetz, Harold, "Barriers to Entry," American Economic Review 72(1), March 1982, pg. 47-57.

Klein, Benjamin and Keith B. Leffler, "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy 89, August 1981, pg. 615-641.

Klemperer, Paul, "Competition When Consumers Have Switching Costs: An Overview With Applications to Industrial Organization, Macroeconomics, and International Trade,"

Review of Economic Studies 62, 1995, pg. 515-539.

Krouse, Clement G., "Brand Name as a Barrier to Entry: The ReaLemon Case," Southern Economic Journal 51(2), October 1984, pg. 495-502.

Pashigian, Peter and Brian Bowen, "The Rising Cost of Time of Females, the Growth of National Brands, and the Supply of Retail Services," Economic Inquiry 32(1), January 1994, pg. 33-65.

Png, I.P.L., and David Reitman, "Why are some Products Branded and Others Not?" Journal of Law and Economics 38(1), April 1995, pg. 207-224.

Schmalensee, Richard, "Brand Loyalty and Barriers to Entry," Southern Economic Review 40, 1974, pg. 579-588.

Shepherd, William G., The Economics of Industrial Organization, 4th Edition, Prentice Hall, Saddle River, NJ, 1997.

Thomas, Louis A., "Brand Capital and Incumbent Firm's Positions in Evolving Markets," Review of Economics and Statistics 77(3), August 1995, pg. 522-534.

*Assembled with grateful assistance from Jaison R. Abel, NRRI staff.

1 Competition Handbook, Chapter 5, Negotiation and Arbitrations, 5.1 AT&T Arbitration Scoreboard, October 13, 1997.

2 Citations not given for the references that follow in the