Models can overcome a key oversight (em
that both supply and demand affect competition.
This past December, the Federal Energy Regulatory Commission (FERC) issued a policy statement describing important changes in how it will evaluate proposed mergers under the Federal Power Act's public interest standard. These changes should lead to significant improvements (em not only in the evaluation of mergers, but also for other matters that affect market power, %n1%n including industry restructuring and market-based pricing.
It comes as no surprise that the policy statement identifies "effects on competition" as the central issue raised by a merger application. Of greater interest, the statement takes positions on how such effects should be analyzed, of which three stand out.
First, FERC formally adopts the Horizontal Merger Guidelines developed by the Department of Justice (DOJ) and the Federal Trade Commission (FTC) as a framework to analyze competitive effects, bringing its evaluation of market power into the mainstream of antitrust. Combined with heightened interest in the electric industry at the federal antitrust agencies, this action should mean no lack of work for experienced antitrust attorneys and economists.