Markets Wired

The Federal Trade Commission has submitted a comment to the Federal Energy Regulatory Commission (FERC) concerning FERC’s competitive assessments of partial acquisitions of electric power providers, including by private equity firms holding investments in competing electric power providers (Docket No. PL09-3-000). FERC is currently reviewing its policy for assessing the competitive effects of partial acquisitions to determine whether a proposed acquisition would adversely affect competition. FERC policy is also relevant in evaluating the eligibility of a public utility to sell wholesale electricity at market-based rates.

In its comment, the FTC encourages FERC to avoid adopting policies that assess competitive effects based solely on control and that fail to examine closely the competitive effects of partial acquisitions that fall short of control.

The review stems from the Electric Power Supply Association’s request that FERC clarify that investments in a publicly held company be deemed not to convey “control” or to result in “affiliation” so long as the investor (1) owns less than 20 percent of the acquired company’s voting securities, and (2) certifies, through a filing with the Securities and Exchange Commission, that the investment is not for the purpose of controlling the company whose shares are acquired.

According the FTC comment, which can be found on the agency’s Web site and as a link to this press release at http://www.ftc.gov/os/2009/05/V090008ferccomment.pdf, the Commission is concerned that, based on the comments FERC has received to date, commenters have placed too much emphasis on the role of control in the competitive analysis, with little discussion of the incentive effects associated with partial acquisitions or of the possible increased risks of coordinated interaction from such investments.

The FTC’s comment describes accepted antitrust analysis of the competitive effects of partial acquisitions, which examines not only whether the acquisition confers control but also whether a transaction could change the competitive incentives of the acquiring and acquired firms, even when the acquirer does not gain control of the acquired party. The comment also points in particular to the increased risk of collusion or of anticompetitive information sharing that can occur in the context of partial acquisitions.

Concluding the comment, the Commission encourages FERC to engage in careful, case-by-case analysis of the potentially significant competitive effects that can stem from partial – but not control-conferring – acquisitions.

The Commission vote authorizing the filing of the comment was 4-0. (FTC File No. V090008; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of General Counsel, 202-326-2702.)

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.

(FYI 21.2009.wpd)