ML19308B194

Syllabus:Otter Tail Power Co Vs Us,Appeal from Us District Court for District of Mn.Opinion & Concur & Dissent Encl

ML19308B194
Person / Time
Site:	Oconee
Issue date:	02/22/1973
From:	U.S. SUPREME COURT
To:
References
NUDOCS 7912160050
Download: ML19308B194 (30)

Text

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o .

, APPENDIX A

, NOTE: T.*bere f t is &,a::=1 ja irote. t ey tab'n hee!noren wtf1 be re4+a *J. a 4 :< ! cla.: . r e c: e >c : e ...o rn t r 1. + s i .e. .. t !.'.e t ette the ot. inion i i 4n- I etthe i.'ourturw.t nu ta a:* r. ::2% . . r: :n.nc S. .tr v-;ia ev.1 o .n !: > pre it,t:.e et.t:: ira

,.- er.; a t . i, aa. far the erns, .at *n. trwr. 4ve L ut v1.5:stes s. m trus ,.umser Co., 090 L .J. 401. 3.4 L SUPREME COURT OF TIIE UNITED STATES sy!!abu.s OTTER TAIL POWER CO. v. UNITED STATES APPEAL FRO 1! THE l'N:TED : TATE.- DifTRICT cot *RT FOR THE DiaTHICT OF 5t!NNE.WTA No.71-991. Ar:;ued December .>.1972-D-rided Fabr tary 22, 197.1 In this Sherman ter nit. bron:hr hv the Goternment. 'he Dimrice Court ennmed .t< .al.itn e of 4 2 the foHnwm: praence- in viach appellant. Dtter Tid P.>c.er Ce t orter T id i -nz em! to pr" van' rown, f rem e-r 'bh.-!un: ".4 mvn p va er -e -

.th en i n rr r T - 3 rcrad iraniiu. - npirrd : ei -:.4 ro ui. ole-air < ver er, rbr murne:- ..

pa! 3ystems or t*an3rer i~ wnet!") :r over

• errer T.id fanbrin from other -ource3 linia :en mre:ui-d to tar e-r: Ht hmant er mumcipal -y>reme a t.a avnca'nn . i rr . ton r< nt ract i m-vutons to forc<ta!! .<npn "m: hv othe r par e mp me< HM L Orr er Tad : 1.it m- ia e.t r in;m s i:r:- rartiren he raa-on of the Fri!er d Poner Ac- vnc-e ie::-iatwe ' : rnrs tunne no pu rpo-e to make the u.t i ru-r i a w.- mappi; .:Ne to p.rver cc,n.-

pan:a . The +nnai th .-r of *he mnor:ry ,t n:e Feier d P i.v.:r Comm: .-ion i Fl'C i r> enrunte min . in nn rmnnernce -

Thon:h the FPC :n.- "rde: :wrec.nn~ :n- :( ~nac - t rv ..r w-i repriate in the pubhr .en- um " on-ai rr .ori- r her n n !es ant onder that r t..ni!. r !. a re nor de rmin.mve. Pp . ,- 7

2. The Dier ner Cantr '- i;~r

• a.c, nor nn he w uh 'ho reena-tory re-pon ibdtie. of F PC. Pp. 7-9.

(a s T1.e co trt'3 or& for s ne.chn: n corret - Orrer Tai! - I

nricomponin e :ind m. opoii-ne prart:re- - nor couar r to -

surhuri : of the FPC uh:6 ;ack the p xe. to impo3e -nch requirenx ur. P;s 61 ibi A; pr3c i - i r: a , nr ha- a . re- ov rn!c- F PC'-

power oerr inten.onr. . un- - p re ma t u ra. " i e ne m prr,  ;

conrhet be ucen 'he ceu- - dem.' n .! any cs:.tr.:ry r din; by *hr r

i FPC, P. 9.

3 The creord -::qvro ha Di-t r;. C - - in !in:- rhat 0"at Tcd ..d Is r.. res-n- he :1: :me ; . -t- in- :ro.o enal::: l mo:.opo:. rir y-a e,n--rei - d r..

. M a- < . ie . 0- o ni. c l

t 79121600 O

It OTTEI TAIL POWER CO. v. UNITED STATES Syllabus and that Otter Tad to the amo and invoke d re-enctive provi ions in its contracts with the Bureau of Reclamation and other ,up-plier 3 the court corree-iy condudir; that -mh provmons. per 3e.

violated the Shermin Art. Pp. 611.

4. The Dietner Court hoijd det rmine on remand therher the litigation that Orrer Tad wu fo ind to br e :n tituted for the purpo* of mamt:.mn:: :t - monopedi.-ric po.-ition was a mere sham" within the mnn:n ni Ea < tern Rmin r'>W e e > hr nni re-talen behra r*:bne:iths la the preli:ntu iry pr::'t of t'.e C;:r 1.wt.eter Lo orts. Ke uers are re-ques t*9 to necr* the Itepor ter ,( ! *<1 =le n a. *@reme Caritt sf !!!e United 5 rates. W.phertgv.a. O C. ."14 : of anr p n .; fat utcal or other farmal errors. tu order Part carrrrrauus tuay tra :naue before the pre-11ntinary prattt pes t's press.

SUPREME COURT OF THE UNITED STATES No.71-991 Otter Tail Power Company.1 On Appeal from the Appellant, [ United States District

v. Court for the District of United States.  ; Minnesota.

[ February 22.1^73]

Ma. JcsTtcr Dorat..u delivered the opinion of the Court.

In this civil antitrust suit brou:;ht by appellee against Otter Tail Power Company (Otter Tailt an electrie utilitv company. the District Court found that Otter Tail hari attempted ta monopolize anci had mor.op-olized the retali riistnbution of electric power in its service area in violation of i 2 of the Sherman Ac.1.5 e

U.S.C.!2. The District Court founti that Otter Tail had attempted to preven communities in which its retail distribution franchi e had expirnd from replacing it with a municipal distribution ettem. The principal means employed were (1) refusais to sell power at wholesale to proposed municipal systems in the conunumties where it had been retailin: power i 2) refusals to " wheel" power to suen systems tnat is to say to transfer, by direct transmiss:on or riispiacement. electric power from one utility to another over the facilities of an inter-mediate utility. 3, the mstttu_ tion and support of ;iti-gation desigacd to prevent or delay estabhshmerit of those systems; and (4) the invocation of provisions in its transmission contracts with sercral other power suppliers for the purpose ci !ca cin; the municipal systems access to other suppliers by n.e..r- of Otter t an s tran nuss.on systems M

71-091-0 PINION 2 OTTER TAIL POWER CO. v. UNITED STATES Otter Tail sells electric power at retail in 40 2 towns in Minnesota. North Dakota. and South Dakota. The de-cree er. joins it from refusing to sell electric power at wholesale to existing or proposed municipal electric power systems in the areas serviced by Otter Tail and from refusing to " wheel" electric power over the lines from the electric power supplies to existine or proposed munici-pal systems in the area and from enterine into or enforc-ing any contract which proinbits use of Otter Tail's lines to " wheel" electric power to municipal eleerric power systems or from enterine into or enforcine any contract which limits the cus omers to whom and areas in which Otter Tail or any other electric power company may 3 ell electric power.

The decree also en.ioins Otter Tail from instituting.

supporting or engacir.; in litigation. direct! e or indirectly against municipalities and their odicials which have voted to establish municipi! electrie power systems for the purpose of de!ayinc. preventine or interfering rich the establishment of a municipal e!cetric power system. 331 F. S u pp. ~)4. Otter Tail took a direct appeal to this Court under 4 2 of the Exre liting Act. 15 i?. S. C. ; 20; and we noted probable ur ~lic: ion. 406 U p. 044.

In towns where Otter Tail distributes at retail it op-erates under municipally granted franchises which are limited from 10 to 20 years. Each town in Otter Tail's service area zenera!!y can accommodate only one dis-tribution system. makinz each town a natural monopoly market for the distribution and 3 ale of electric power at retail. The at:regate of towns in Otter Tail's service area is the geographic market in which Otter Tail com-petes for the right to wrve the towns at retail.2 That

Northern sures Pc a et .t!-o mpplies mme carn- , crer Thil*4 d re:14 tVith de'ef t T Of :Pr. i}. Sl! 'he I)i- Tir! Cst;rt ex.+:rlo ! tem r.to ir n i % Tds a em b.c. m e f he t ro e m-panica b not emnre' m vns 'r c+i he id <.r her. Of ,

61.3 .*e!: Min :M WV!M :n * :M* 4 's.* . o -a * . m i - r- ht' O~*

. o 714014 PINION OTTER T.iIL POWEP. CO. re. UNITED ST.tTES 3 competition is gener: for the ri;ht to serve the entire retail market within the compo+ite limits of a town and that competition is generally between Otter Tail and a prospective or existin; municipal svstem. These towns number 510 and of tho-e Otter Tail serves 01ci. or 465.

Otter Tail's polley is to acquire when it can existing municipal systems within its service areas. It has ac-quired six since 1947. Between 1945 and 1970 there were contests in 12 towns served by Otter Tail over proposals to replace it with municipal sy: stem +. In only three-Elbow Lake. Minnesota. Cohnan. 4,uth Dakota.

and Aurora. South Dakota-vere municinal systems ac-tually established. Propose 1 municipal c' stems have .

great obstacles: they must purchase the electric power at wholesale. To do .+0 -hey must have access to existing transmission lines. The only ones available belong to 2 Otter Tail. While the Bureau of Reclamation has hign voltage bulk power surply lim in the area. it .lces not operate a subtransmission network. but relies on " wheel-ing" comracts with Otter Tail an,I other utilities to deliver power for :t bulk supply lines to its wholesale I

customers.' t Tail. 45 ';y municinal synas. ami 105 by - tral eIcetric cooperativu The enoperariu tra h t- <.t by the I: nrm E: ectr:tia.rmn .wr C U. S. C. ! v04: from borrowm: b ral omti4 to provale power to towm ;! reedy receiving ceu r ? -rat:on erv:t e. For th:, and re-lated rez-ons tha Darne Cmtr' exchded the n:ra! coop 3 from the re!evant marker. -

2 5cberansmi -ion !!n". i:h voir.,: - irnm a4 5 kv to <> kr are uecd for movm; now. - ,m he Unik cir i me- ro pomr or local di. tnbut:on. Oi 0"cr Trrs b.mc -ubtran mi.-en ersrem in this area, two-thini, of tha e hnes are il A kr -uhtran-mimon 'ines.

2 The M di+trib.nina rural ennp4 in Orrer Talli area :ener,Ily cwn oc!y low vsi .t:- ni' -

. <- och m mn- n-r a nes enuid no: Le -r! > up;n po ver *n ;.ro;

'i m';:n .;,.1 :!i':r- l The i.. r:ra' cup-: > e ce . .

• n - . .. er u . -a m et. :ce<

do not !* n- m:r. i.  : .

it" o i." - r T u ..i minant pr-  :. i.ier . .

e ab

71431-.-OPINION 4 OTTER TAIL POWER CO. :. UNITED STATES The antitrust charge against Otter Tail does not in-volve the lawfulne.=5 of its retail outlets. but only its methods of preventing the towns it served from estab-lishing their own municipal systems when Otter Tail's franchises expired. The critical events centered largely in four cit i es-Elbow Lake. Minnesota. Hankinson. North t

Dakota. Cohnan. South Dakote. and Aurora. South Da-kota. When Otter Tail's franchise in each of these towns terminated. the citizens voted to establish a municipal distribution syste:n. Otter Tail refused to sell the new systerns onergy at wholesale and refused to agree to wheel power from other suppliers of wholesale eneray.

Cohnan and Aurora had access to other transmission.

Against thern Otter Tail used the weapon of litigation.

As respects Elbow Lake and ifaukinson. Otter Tail sim-ply refused to deal although accordimt to thn fintiings it had the ability to do so. Elbow Lake. cut orf frum all sources of wholesale power. constructed its own gen-erating plant. Both Elbow Lake and Hankinson re-quested the Bureau of Recia: nation and various evope ,

to furnish them with who'.e-ale power: they were wi!!ir.; '

to supply it if Otter Tail vonid " wheel" it. But Otter Tail rainaed. relying on provisions in :ts contracts which j barred the u< .' of its lines for wheeling pou er to towns j which it ser x at retail. Elbow Lake after completu.:: '

its plant as.nl the Federal Power Conunission under s 202 ib) of the Federal Pour Act.16 I~. S. C. s 524 t b e, to require Otter t au to mterconnect with the town and l sell it power at uholesa!c. The Federal Pou er Conunis- l sion orflered drst a temporary ' al.d theti a per:nanetit connection.' IIankinson tr:ed unsuccessfully to get re-lief from the Lrth Dakota Conunission and then died

• E%e U.x , ' mo .- Ta h  ? .c r. .. 40 F. P. C WU. Ei Ou, - T i l'. - r- -

i' n r C>rn'ri ~ * . 42n F. 2 i 'l :

(CA u. e". .b. u. :. ml 11 .i;7 3 {'Ap p. [ .; - . , Q,* ; y. . ,

, '"v., 46 F. P. C. 671 b

71-991-OPINION O' ITER TAIL POWER CO. c. UN!TED STATES 5 a complaint with the federal commission seekinc an order to compel Otter Tail to wheel. While tha application was pending the town councii voted to witharaw it and subsequently renewed Otter Tail's franchisa.

It was found that Otter Tail instituted or sponsored litigation involvinz four towns in its service area which had the efect of halting er delaying aforts to estab-lish municipal systems. Municipal pmeer systems are financed by the sale of electr:e revenue bonds. Before such bonds can be sold. the town's attorney must submit an opimon which incimies a statement at there is no pending or threatene<i lit;gation which might !!npair the value or Icgality of the bonds. The recorri amply bears out the District Court s holding thar Otter Tail's use of litigation halted or appreciably 3! owed the eEncts for municipal ownership. The delay thus occasioned and the large finaaeia! '.aurrien imposed on the town's limited treasury da:npened locai enthusiasm for public ownership." 331 F. Supp. 54.

I Otter Tail contends that by reason of the Fe ieral Power Act it is not subject to antitrust regulation n:th respcci, to its refusal to deal. We disagree with that, position.

" Repeals of the antitrust laws by itaplication from a regulatory statute are strongly ciisfavored. and have only been found in cases of plain repugnancy between the antitru.st and reculatory provi.sions." Unitc<l Slatcs v.

Philadelphia .Yatic.nl Bani:. 374 T *. S. 321. 3.W351. See also SJrcr v. .Yetc Yori: Stock E.rcitange, 373 C. ?. 341, 357-361. Activities which come under the jurisdiction of a re;ulatory agency nevertheless may be subject to scrutiny under the antitru<t !aws.

In Californk Feh a! Pa:n.r Comn leiov. 300 U. S.

4S2,459. the Ceurt hew that apprcaval ci an acquistuon of the 0Hets ot' a ':atara! ga- co:r.pa"' by the i'm!rral 6

i

4 71-MI---OPINION 6 OTI'ER T.1IL P0nTR CO. v. UNITED ST.tTES Power Commission pursuant to i 7 of the Natural Gas Act "would be no bar to (ani antitrust suit." Under i 7 the standard for approving such acquisitions is " pub-lic convenience and necessity " Although the impact on competition is relevant to the Conunission's determina-tion, the Court noted that there was "no

• pervasive reg-ulatory scheme' including the antitrust laws that ha[d]

been entrusted to the Commission.' Id. at 455. Sim-ilarly, in United Stata v. Radio Co"pornH,n ol .lmerica,

, 353 U. 5. 334. the Court held that an . chance of radio stations that had been approved by the Federal Com-munications Commis ion as in the "public intsrest" was subject to attack in antitrust procemiir.c.

The District Court below determim d that Otter Tail':

consistent refusals to wholesale or whoel power to its municipal customers constituted illegal :nonopolization.

Otter Tail maintains here that its retusals to deal <hould be inunune from antitrun preteeution because the Fed-eral Power Conunission has the authority to ecmpel in-voluntary interconnections of power pur uant to i 202 (b) of the Federa! Power Act. The essential thrust of f 202.

however, is to encourage voluntary interennnections ci power. See 5. Rep. No. 621. Tith Cone.1st Sess.10-20.

4S-49; H. R. I!en. No.131S. 74th Cong.,1st 5ess.. S.

Only if a power company refuses to interconneet volun-tarily may the Federal Power Conunission. subject to limitations unrelated to antitrust considerations. order the interconnection. The standard thich :overns its decision is whether such action is '"necewary or appro-priate in the public interest.' Ahhon:'h ant: trust con-siderations may be relevant. they are not determinative.  ;

There is nothing in the legislative history which re-veals a purpose to insulate electric power companies from the cperation vi the antitrust !ra = To % contrary. I the history of Part II ci the Fede:al P. wor Act indi-cates an overridine policy of maintainine competition t0 the m3 !!n'im :R"' "M-;W m n .- ":t ' ' ; t h e p'.th-e

71-991--OMNION OTTER TAIL POWER CO. re. UNITED S TATES 7 lie interest. As originally conceived. Part II would have included a " common carrier" provision making it "the duty of every public utility to . . transmit enerzy for any person upon reasonable request. In addi-tion, it would have empowered the Federal Power Com-mission to order whee!ine if it formd anch action to be "necessary or desirable in the public interest." II. R.

5423, 74th Cong.. Ist Sess.. 5.1725. 74th Cone.,1st Sess. These provisions were e!iminated to prewrve "the voluntary action of the nt ities/ 5. Rep. No. 021, 74th Cong.,1st Sess. 10.

It is clear. then, that Con;ree rejecte<i a pervasive rezulatory scheme for controllh.: the inter = tate distri-bution of power in favor of voluntary commercial rela-tionships. When these relation: hips are coverned in the first instance by business judgment and not regu-latory coercion. courts must be hesitant to ionclude that Congress intended to overritie the fundamental national policies embodied in the antitrust law s. See United States v. Radio Corporation of .Lmerica. npra. at 3.51.

This is particularly true in this instance because Cun-gress. in passing the Public Utiiic:. Ifolding Company Act. which included Part II of the Federal Power Act, was concerned with " rest.raint of free and mdependent competition" amon: public titility hoiding companies.

See 15 U. S. C. i 70a i b.n 2 ).

Thus, there is no basis for concludin: that the limited authority of the Federal Power Connnission to order interconnections was intented to be a substitute for or immuni:e Otter Tail from antitrust re:ulation for re-iusing to deal with municipai corporat;uns.

II The decree of the Diarict Cour enieins Otter Tail from "refusinz to sell eicetFe ; ouer at .iui < ale to exiit-ilig or prop 0'et niuitleiai poY.er C'tactlis in citici abil tow!M IecatOI in HS servie? a' a" :n : fret reti.sirig to i

4

71-091--OPINION S OTTER TAII. POWER CO. c. UNITED iTATES

" wheel" electric power over its transmission lines from cther electric power lines to <uch cities and towns. But the decree goes on to provide:

"The defendant shall not be compelled by the Judg-ment in this case to furnish wholesale electric service or wheeling service to a municipality except at rates which are compensatory'and under terms and con-ditions which :.re died with and =ubject to approval by the Federal Power Commission."

So far as "wheeline" is concerned. there is no authority granted the Conuniuion under Part II of the Federal Power Act to order it. for the bi'Is originally inrrori.:ced contained common carrier provision

• winch were deleted.*

The Act as passed contained only the interconnection provision set forth in x 002 (b)/ The comn:on carrier provision la the original b!!! and the power to direct

" wheeling" were left to the " voluntary coordination ei

• See S. Rep. No. 621. 74th Core.. I t Se s. H. R. Rep. No. l'115.

TUh Con: In Se s.: E3w Ld:e '. Quer T.n! i%ee Co., e>

F. P. C. 67 *>. G73.

' 5ection 000 ibi provides ~Whenever the Commi- :on. upon ap-plication of .iny Stat. cemnu--:ci. or of nne per-on enza:rd in the tran,miutcn or sale of e!ccinc >>ner v, and a: er nari"e to rach State ermmui on and ;mbiia u t :1. ,- viecmt and aimr opmcru:n'y for hearin: Snda wh action nece ,ry or approprbre in % pcNi interest it may by order dire"' a ruMie >:ti!i:. Tif the Comma 3icn Ends that no undne burden wn! he n:rced wu teh puNic ut:hty thereby] to e-tabli<h phynca connee:mn of i's eran.nd- ion 6cdities with the fae:hties ni one or more nther per-on- nece.*l in :he transmis ion or nie of riectr:e ence v. *o <c!! cr.errv m or exchartre ener;y with v:ch perut - /% ri i. < hat the C..mn:t -:un -hai! L.ve no au' hon" 'a . mpei the ordar:ement ni zenerati::; farditie- for such purpm aor to ecmpal rich public unii:p to '" cr exchance ener:rv when to do <o would :mpair it< . bdu *o render ad'quata

!crViC0 'o i'! eth! Jn:'*r The C6Ht:1 ' b'n no " ; r * "a * "

Pe r.M.-

and CCnditien< of 'ho ,;rt.M:etn'n' h. I*' " :4de E" ' O 'h3 p r-on*

d' Ice'Al be ihV h order .!aine!it:: he '-!ef.'  ::t of I't '

be' wee n rh. m an.1 h ' anre- .a oc "' .- mr.. %y d': ' ? 3 ;; t J J. i .'

6

,- ~

71-901--OPINION OTTER TAIL POWER CO. c. L*NITED 5TATES 9 electric facilities."' Insofar as the District Court or-dered " wheeling" to correct anticompetitive and monop-olistic practices of Otter Tail there is no condiet with the authority of the Federal Power Commission.

As respects the orderine of interconnections there is no condict on the present record. E!how Lake applied to the Federal Power Comminion for an interconnection with Otter Tail and as we have said obtained it. Hank-inson renewed Otter Talli franchise. So the decree of the District Court. as far as the present record is concerned presents no act tal condict bervoen the fed-eral judicial decree and an order or tne reucral Power Commission. The araunwar concerning the pre-emption of the area by the Federal Po'..or Conanision m this area concerns only in:tances which may arir in the future. if Otter Tail continue 3 its hostile attitude anri conduct against " existing cr propo-o.i eleertie power systems."

The decree of the District Court has an open end by which that court retain: jurisdiction "necesary or an-propriate" to carry out the iiecree or " fur the mo.lidea-tion of any of the provnions. It also contemplates that future disputes over mretconnections and the terms and conditions governing those intercunnections will be subject to Federal Power Connui+sica perusal It will be time enough to consirier whether the antitrust remedy may override the power of the Commision under 1202 (b) as, if and when the Commie.on denies the interconnection and the District Court nevertheless un-dertakes to direct it. At present there is only a potential condict nat a preseat concrete case or controvers> con-cerning it.

III The record makes abundantly clear that Otter Tail used its monopoly cwer m the cit.a in in 5-rvice area to foreclon competition ;.r aam a ' spe: .re a<ivau-

• 6. 2ep. gw, n, - 14

71-MI--0 PINION 10 OTTER TAIL POWER CO. v. UNITED STATES tage. or to destroy a cornpetitor, all in violation of the antitrust laws. See United States v. Grifith, 334 C. S.

100.107. The District Court determined that Otter Tail has "a strategic dominance in the transmission of power in most of its serv:ce ares" and that it used this domi-nance to foreck.se potential entrant < into the retail arena from obtaining elretrie power from outside s.;urces of Supply. Use of :non0 poly power "to destroy threatelled Colupetition" is a Violatiott of the "attellipt to luonop-olize" clause of a 2 of the Sherman .ict. l.orain Journal

v. United States. 342 C. ~.143.134. E.utman IGuial: Co.

v. Southern Plwta Matcr,als Co. 273 C. 5. 3'>D. 373. So are agreements not to compete. with the aim ei pre-serving or extending a tuonopoly. SW inc Cimin Storcs

v. United States,334 V. S.110.110. En .4uuciated Fren

v. United States. 321 U i 1. a cooparative news associ-ation had bylans that pertuitted member newspapers to bar competitors from joining the as.s.ciation. We held that that practice valateri the Sherman .ict. even though the trans:reuer "hm! not yet achieved a corn-plete monopoly. l.i.. a t 13.

When a communitv. serviced bv Otter Tail. decides

..ot to renew its retail frarciii'e when it expire <. it may generate. transmit, and distribute its own electric power.

We recently described the dinicultie+ and problems of those isolated electric ; ower systems See Gainesville i Utilities v. Florida P.nrer Coop. 402 C. 5. 313. 317-320.

Interconnection with other utilities is frequently the only solution. I,i. at 319. n. 3. 'T: tat is what Elbow Lake in the present ease did. There were no engineer-ing factors that prevented Otter Tail from sel!!ng power at wholesale to those towns that wanted municipal plants nor of wheeling the power. The Dietrict Court found-and its tindin. < are mpp. t tn t-tha' Ot ter T :l's re-fu. sal to sell at u he , sa:e or to wh. .c! w.ve soiely to m

71-int--0 PINION OTTER TAIL POWER CO. v. UNITED 8 TATE 3 11 prevent municipal power systetus from eroding its monopolistic position.

Otter Tail relies on its 'wheeline contracts with the Bureau of Reclamation anti with cooperatives which it says relieves it of any duty to wheel po,ver to municipal-ities served at retail by Otter Tail at the time the con-tracts were made. The District Court held that these restrictive provisions were "in reality territorial alloca-tion scheines. ' 331 F. .au pp.. at 63. and w ere per se violations of the Shermar. .ict. citing .\'ortlicrn Paciic f R. Co. v. United it nes. %G U. F.1. Like covenants were there heki to ".leny defendent's competitors access to the fenced-od market in the same terms as the de-fondant." Id., at 12. We recently re-emphasized the vice under the Sherman .ict of territorial restrictions among >ctential competiters Udtul &nta v. Topco Asmeinta, -105 U 5. 596. 624. The fact that some of the restrictive provisions were contcined in a contract with the Bureau of Reclamation is not material to mr prob-leln, f..r as the Solicitor Get:eral -ays. ";avorini'.ent con-tracting 05eers do not have the power to arant inununirv from the Sherman Act ' 8uch contracu stand on their own footina u.d are calid or .or .b pending on the statutory frameworx within whit!. the fe4ral agency opera tes. The Soliciter General teih us that these re-strictive provisions oporate a= a " hindrance' to the Bu-reau and were "aareed to by the Bureau on!v at Otter Tail's insistence.' as the District Court found. The evidence support.s that findir.:.

1Y The District Court found that the litigation sponsored by Otter Tail had the purpose of delayin: and pre-ventine the estab!!-hnwnt of v.unicipal eketrie .<ystems "with the eXpNtat . '.ut 'h i 'Joil'[ [!C '2r'.*P its p!c-dominant position in tr." & ami tra:.-::a.mce i: electric t

m.

==

L

"I-MI--OPINION 12 OTTER TAIL l'OWEn ro. UNITED STATES power in the area."' 331 F. Supp.. at 62. The District Court in discuning Eamen Radroad C wlerence v. .nerr 1/otor Freight, he. 305 C. 3.127. explained that it was applicable "only to e:Iort- aimed at induateine the Icgis-lative and executive branches of the covermnent.' Ibid.

That was written before we decirled California .1/utor Transport Co. v. Tr'ic!:ing Unlimitni. 404 C. 5. 305.

513. where we held that the principle of Xocre may also apply to the use of ad:ninistrative or i':riicial processes where the purpose is to supprns competitio6 evidenced by repetitive lawsuits carrying the halhaark of insub-stantial claims and thu= vi:hin the "tnere sham" excep-tion announced in Xoc r. :M5 E F.. at 144. On that phase of the ceder we vacate and remand for cons!-

eration in light oi cur intervening deemon in Celefornia 1[otor Tran.<part Co.

V Otter Tail arzurs that withou the weapons uhich it used, more and more municipalities wi!! turn to public power and Otter Tail will 20 <iownhill. The arzument is a familiar one. It wa matie in Unitel Pet. ., v. .te".old.

acnremn & Co..o,,n- L. ,,.. . . wo. a civ:. suit unuer t i ot.

> Alter notin: t!ut rhe w:nce of Eri .: en '.s 1.e ..-+ ni preventin 'he mstkerme of -!:e nece- ar hon.!- ri us prevent;n: the eit't bh-hment oi 3 nt:! ':"?.I sem ~~ 't.a F. .-':pp. at 42, the Dietrict Court went on o ?.nd:

"ht ni the litization Trn ormt he the .dce!:nr n carried to the hi he t av.nl.& nnr. : .re mur: 'nri . it hot:::: .:I ni it v:ts

+

un. ucers.-int in the nicrit4 *i.e i eir :'i.>n ed 1

• n:u.. r of it had tlle (;!Icet Oi !u[lill! or ,pproctdNV dou il';. c *s ir?e or ut'in! Pip.d O n ner-itip. The (!0iar H .' - > !rns ! S I i .e ' 7* ' hri!rn 52np04.'t} oil the town [ !!n'.ited f rt'aIrV d.t!bpeno*! lde:1[ cu?l1'l-l.t-m ior public owner-hip. In acme in4 ances. Otter T.n! ma.ie .Mers to the town 3 to abeorb the rme<' en4 < 1nd expen '- :.1 enh;uum t!:e (;tLdi*y "I !!! o?rV!'O ;" '

0.' 6'.T a *'.f"'. " in !'!- .9.' nNin-' 't Sifer :eWril t eard 'M i> I, c r , i .* Mf t' . c t j " *d ' . * ' g- i Ci$t

• and tenewed de.'c n.it . e s ' ,T,

. D A

v 71-991-OPINION OTTER TAIL POWER CO. c. UNITED STATES 13 the Sherman Act dealing with a restrictive distribution program and practices of a bicycle manufacturer. We said: "The promotion of self-interest alone docs not invoke the rule of reason to inununize otherwise ille:al conduct." Id., at 3~ ~).

The same inay proprrly be said oi ! 2 cases under the Sherman Act. That Act assumes that an enterpri.e will protect itself azainst loss by operating with superior service. lower costs and i:nproved ediciency. Otter Tail's theory collides with the Sherman Act as it sought to substitute for competition anticompetitive ures of its dominant e00110mic power."

The fact th n three municipalitie.- which Otter Tail oppo<ed dnally got their municipal sy: ten.a does not excuse Otter Tail's conduct. That fact do2s not condone the antitrust tacties which Otter Tail son:ht to impose.

Moreover. the District Court repeare.i "nat we said in Federal Trade Comminion v. .Yatiwnd Lcad Co. 332 U. S. 419. 431 "these caught violating the Act must expect some icncin: in." The proclivity for predatorv prac-tices has always been a consideration for the Dt. :riet Court in fashioning :ts antitrust decreo. See CuteI 1 States v. Cresecat .Lunnement Co. 323 C. S.173.100. l l

"The Federal Power Comnai en -ai.1 m Elbo c L& v. Once  !

Tc:t Pouer Co. 46 F. P. C. C.i 6h:

"The pub le imery ;s far broa.ier 'han the economic mrerest ei a particular pow, a supplier. It to our !r:nl tr-pon-;Nity, as the Supreme Cour nude c.ent .n Pcunenn:nta frut e a Preer Ca -

EPC. Gr1 U. 5. 4:4 G92. to me nur 4 tit'or e author " m u-ure an abundant .-upply of +!ce're a:erre thron:hmt: r !.e Un;r ed .- u ' , l and parue,uativ to u-o ;ur - .mrorv ;wwer u :.!e .swen F2 tbi to enmpti ur connection an.! roordma ...n when the puoiie inter e req mres n. The e.'.ereiee of th. t . chore n.ay weil ::qare. as it doe here r!..:r w.' onicr a rine '.-1:s o ia:er%nner: wth a:t i

wW.d mu ;;u! - -m. T!.e p er. a: . i r.m:>a n: la s of .n-tbmian. : - *ne arra::;uneu: ca r.nor i 5 r n . 4v 'oq .. the ; sia interCit ri ff t:*es l'

Ni y%

g,

• 8 y

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l

~1-901-OPINION 14 OTTEI: T.\IL POWER Co. e, rNITI D .'T.tTES We do not sug: rest. however. that the District Court.

concluding that Utter Tail violated the antitrust laws.

.should be itupervious to Otter Tail's a<-.'rtion that corn-pulsory interconnection or w heelin:t will erc de its inte-grated syste:n and threaten its capacity to 3erve ade-quately the publie .\, the dissent prop + ly notes. the Conunission may not order intercourwerton if to do so "would impair [the uttiity J ability to render adeqrate service to its cu3torners.~ 13 U. 5. C. : s_ya , b i. The District Court in this cas,' found that the 'pessimis:!c view" arivanced in Otter Tail', " erosion atu,iv- 9 not support < d by th , record.' Further: nun >. it conciu:!ed that "it does not appear that Isureau of faciarnation power is a -erious threit ta the defen h.ht nor that it will be in the fo re-era r ,r, f a t u r. . ' .nce c; e Dim et Court has made future connections uhmet to Commi3 sion approval and in any ,crent has retamed in. sriietion .

to nable the parties to apph for "t:eees:arv or ppropri-ate rehet sn<t pre 3u:nably :ti ;ive mrict.t to tho isoiicics embodied in the Fe leral P; wor .1ct. we cannot .-,.. under these circumitances

• hat it na, ai,u3e.i its di-. etion.

Except for the provi, ion , , . 3,. order di-cus-ed in p trt IV of this opn .on. the ju !;nwnt >< 1 1

.1 "irm c J. l AIn. Jrsitct Bt.acnt er .nd 1[n. Jc,rrer Pon m took no part in the conside ati ,n or rh cison ut tin 3 ca-e.

l l

(_

SUPR$E COURI OE ~ TIE UNITED STATES No.71-901 Otter Tail Power Cornpany. On Appeal from the Appellant. United State < District t'.

Court for the District of United States. , Minnesota.

(February 22. 1973]

Ma. Jesrict hinw.sar. with whom Tac Cninr Jr.s-TIcc and Mn. Jrarten Iltn.vorar join. concurri:q in part and ainentinz in part.

I join l' art IV of the Conct'= opinion. which sets aside the judg:nent and reinands the ca.se to the D: strict Court for consideration of the app.'!! ant's liri:at.on activitie.

in li:ht of our decision in California .Votor Trawncrt Co.

v. Truckinri Unibanitcri. 404 I* L os. As to the rest of the Court's opinion. however. I resnectfully .ii9ent.

The Caurt in this case has followe i the Disnict Court into a misappiiention ci the Sher: nan Act to a hi:bly regulated. ':atural monopoly indu3trv wholk, difierant from tho.3e that have given rise to ordinar:. antitrust principles. In my view. Otter Tail's refusal to whole-sale power throu h interconnection ur to perform vheel-ing services was conduct entailin: no anntrust violation.  !

It is undisputed that Otter Tail refuscri either to wheel power or to sell it at whoic< ale to the ' owns of Elbox l Lake. Minnc+ta. and II:nkin<on. Erth Dakara. both of which had foitnerly been it.s customers and had elected to establish municipally owned electrie utility systems.

The District Ceurt conclu.!ctl that Otter Tai! had sub- '

stanti.il :r.onopoly power at retail and 3tra arie demi-naDee" in the sidstra:ia:ni :on o[ pow"r i:1 !nett of its

.6

71-991---CONCilft & DIS 8E.N'T 2 GTTER TAIL POWET! C0. c. UNITED STATES market area." 331 r. .?upp. a4. 560. The District Court then mechanically applie<i the familiar Sherman Act formula: since Otter Tail pos<e sed monopoly power and had acted to preserve that power. it was guilty of an antitrust violation. Nowhere did the District Court come to grips with the signideance of the Fe ieral Power Act, either in terius of the specific reculatory apparatus it establi-hed or the policy considerations that moved the Congress to enact .: Yet it seems to ine that these concern 3 are central to the disposition of this case.

In considering the h:ll that beca:ne the Federal Powec Act of 1935 the Ceneren had before it the report of the National Power Polici Committea on P::blic-!'tilitt Holding Companies. That report chie:iy concerned par-terns of ownership in the po'.ter industry and the evils of concentrated owner 3 hip by holding companies. The problem that Conzress addressed in fashionin a regula-tory system reticeted a purpose to prevent ennocessary dnancial concentration wh!!c reco:nizing the " natural monopoly aspects. an.:1 concom: tant emc:ene:es. ot power generation an:1 transmsion. The r. mart tated that

"(w]hi!e the distribution oi .as or c!cetricity la any given conununity is teleratvi as a 'netural monopoly' to avoid local dupiication of plants there is no

• The Dt trict Court looked N O'tcr Tad -ervice are t. and me:wtired nurict domirun.n :n *ctn:- of 'he ro.mber ni tou n< wvhm that .traa *rtml by Orter T..d. Compurol uns war. Orter Taii pm-vicin 91c; nt tha re'ni ru i h e . ::;l F. .mpp 54. R .b 'ha appiibn' p Jnt- nut. hm' * - ' te ' t on :'- ~ :n 0 frant mr.re thaf t .M l'Uo [enp!e f O .M .. .';.Nnf a T.f 4 [!' f)f'er I.t d'- ;Zo Terr nie t -

ured by actual ter.iil sue.- i' ma rket m ire wr.uid be an.v Nr'. of the electricity nld r.t rcrad wi'hm it- roer.q hic nurkce irca. It id inin'ir* !'a' f9 nfi'e t h.;' '* * -' 'e ." of t. ; !!!" .i !'u r v '

Ittit? nu, ' e' ch ;t:ul'c , ' ' '

?i !  %.. 't r '-

tser p. M e * '

• t , ').i - '- " i.' af rf ',' i , a };;. a ?t if t.-

pMe runn * . ' y 4

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71-991--CONCUR a: DESENT O' ITER TAIL POWER CO. c. UNITED STATES 3 justification for an extension of that idea of local monopoly to embrace the common control, by a few powerini intere3ts. of utility piants scattcred otter many States and totally unconnected in operation."

S. Rep. No. 621, 74th Cong.1st Sess. 55 < emphasis added).

The resulting statutory system left roorn for the de-velopment of economies of lar:;e scale sintie company operations. One of the stated mandato to the Federal Power Commission was for it to assure "an abundant supply of electric energy throuzhout the United State 3 with the createst possible economy and with re ard to the proper utilization and conservation of natnral re-sources." 10 U. S. C. 1524a. In the face of natural monopolics at retail and similar economics of scale in the subtransmission of po.ver. Concress was forced to address the very problem raised by this case-use of the lines of one company by another. One obvious solution I wouhl have been to impose che oblications of a conunon l

carrier upon power companias ownine lines ccpable of 1 the wholesale transmission of elec:ricity. .iuch a pro-vision was ori:inally inch:iad in the bill. One proposed section provided that: '

"It shall be the duty of every public utility to furnish ennrgy to. exchange energy vith, and trans- t mit energy for" any person upon reasonable reque3t l therefor. S.1725. 74th Cong. 1st Sess.. .; 213.

l Another propoecd provision was'that:

I "Wheneve the Conunis-ion, after notice and op-portunity for hearing. nuds such action necessary or desirable in the public interest it may by order direct a publie utility to :nake additions. exten3 ions, repairs. or improvemem a o or chr...;cs in its faci.:- ,

IICS. to Ostahiish phv4icai er.nnection wi-h the ia- l cdities of. sell energy to. pntcha-e er,crgy [fom.

lI O

71-991--.CONCI'R & DISSENT 4 OTTER TAIL POWER CO. c. UNITED STATES transmit enerzy for or exchange energy with. one or more other persons." Ibid.

Had these provisions been enacted. the Conunission would c!carly have had the power to order interconnee-tions and wheelinz for the purpose i;i making available to local power companies wholesale power obtained from or through companies with subtransmission systems.

The latter compcnies would equally c!carly have had an oblication to provide such services upon request.

Yet. after substantial debate.' the Concress declined to follow this path. As the Senate report indicates in dis-cussing s 202 as enacted:

"[t]he committee is conedent that enlightened seif-interest will iead the utilities to co-oporate with the conunission and with each cther in brin:ing about the economies which can alone be secure zives the Commission limited authority to compel inter-state utili:ies to connect their lines and sell or exchance enerzy.

The power may only be invoked upon a complaint by a State conunission or a utility subject to the '

act.' 5. Rep. No. 621. 74th Cong.. Ist Sess. 40.

This legislative history, especially when viewed in the light of repeated subsequent concressional refusals

Corb of the,e provi< ion iu.i ilen': cal rounterpart, in H. R.

ScJ. 74th Cc,ne. 1 t .%-4.

8 Hearin;< nn S.1725 before the Sonate C'onunittee on Inter 4 tate Commerca. 74th Cc.nz .1-t h (!ct : He,rina on H. P. 54:3 t,fi. ire 'l-o He . o ';.immi: on in c. ra e .uoi Fore:;n C.c". re.

~4t h Cour.. .at 9-- (1935).

4

71-091-CONCUR & DIMENT OTTER TAIL POWER CO. c. UNITED STATE 3 3 to inipose comruon carrier obligations in this area.* in-dicates a clear congressiona! purpose to allow electric utilities to decide for thetuselves whether to wheel or sell at wholesale as they see :it. This freedont is quali-fled by a grant of authority to the Conunission to order interconnection (but not whcchng) :n certam circulu-stances. But the exercise or even that power is liruited by a consideration ref the ability of the regulated utility to function. The Conunission inay :ast order intercon-

• See, c. g. 8. 3,a and H. IL 2101. rth Can; . hr So-4.. pros irlin; t h.it :

Anv certife tre i. ned unar r! e provi ton- of this vib-cc.

tion authorume the operanon of r- i-mi . .n r."1 h ne* 46.di i>e

-nhjav' to the colnlir.nu shar .:ns c1p.netf y . i qch ! art!ir;0* dor terpurid for tha tran mi -ion nt o!"rrne ener:y :n int crdinary m;pe of such apph. ant'3 bn3ine- hai; he mm!a a e !. ink nn a conunon entrier k.-i- to the tran.-mi .-ion of ot her :de< :nc e nerre Thi bail wa re-introihice f a. 8.1472 and H R. 2072 . rbe 30*h Cor:rc *. !. r Fe -ion. and also ..nini to pa .- 4a a!-o i 2:40 :nd H. I!. 77'11. e rb Cang.,1-t pe -

Thr-c bi!b wcen all re-intrn.ba n i in the e* 'i Con:re-- a v::-

H. R.12322. on po-me an E!ce'ria i'mver !hhadirv Ae shar won '

have peci:h a'tr pr vuted the Commi--ion 'tr irrhnnt' rn u . ;r r w heelitie. In 'br 913r C. n:n < ':;i9 ra e-n.' i-h an LL5 ric P.nt" I!rli biiire Art w ere ..:ain n:'rnd anL 5.rne : .3 of hat pmpo ed Act inch;. led a : tant of anrhor. for rhe FPC o infer whe.fing.

saa. e. e.. i 1071. 91 t Cun:.. : r Se-  % merher bril. H. n.

12335. 01 r Con:. 1 r Sc-(, me!': del a s cry broad provt-ion e rab-li. hin; open .u ce-- ro tran nn con ncnv.3rk at rea-onable ra r.a<.

The propo ed E!ectne Pownr Reithd;ry At- va re intrahwed :n the 'J2d Con:rc- br Se ion. a 8. 204 H. Ih ?95 H. R. 2N irorn the 019 Coiure < w.u aim rnnnmeluml. a H P.. c.e72. 02 i Con .,

br Se *. inh another ~n!! ".. . . ave prm e~i prop-mi rc e:or..ii bulk power espple corpornemn= 'nm . antra..'in: with an elec'nc unlity un;e- r! at nr:;ity peran ' t . the r e of it, exce-* t r.:n--

mis ion capacity for the pt.rpo-a of whcoh = p cer iront t. cuu:04 of i:Ich corpor.iriiit to kO i trt"cre of v* . t r;cr e rle 'ttdi ;e*

c0h'r.tef in*; r.t [Mrcha-+ der r ric pqWer 4* . 'ch corpora ' in

~

S.2324 H. I: ." n. :r2 i Gr:..  : d - . a< ,.ci+:;iBt. Ne , ,

thP-o M ;n - ( na eU d.

71-901-CONCUlt 4: DISSENT 6 OTTEIt T.tIL POWER CO. v. UNITED ST.tTES nection where this would entail an " undue burden" on the regulated utility. In addition the Conunission has

". . . no authority to compel the enlar:ement of generatirig facilities for such pt:rposes. nor to coin-pel such public utility to sell or exchance energy ihen to do so wo'ild impair its' ability to render

~ adequate service to its customers." 16 T *. & C. .

i S24a c b).

As the District Court found. Otter Tail is a vertically inte; ated power company But the bulk of its busi-ness-some 009 of its income-!erives from sales of power at retail. Left to its own judgment in dealing with its customers. it 5eems entirely predictable that, Otter Tail would decline whole-a!e .iealh': vith towns in which it M i previously rione bu-ines at retail. Ifthe purpose of tite congressional scheme is to leave such de-cisions to the po".er companiu in the absence of t con-trary requirement impo.e.1 by the commission, it woul<l appear that Otter Tail's courw of comlunt in refusine to deal with the municipal . vstem at Elbow Lake anni in re-fusin: to promise to deal with the propo*.i system at Hankinson. was foieseeably cithin the zone of freedom specifically creat.si by '.ite -tar'ttorv scheme.' .\s a te.

'The Di rt:ct Court wi Per ':mb I *har the m tr: thn. on whrd-in:: cont.uned m otter T m conte. - w: ii i.n ilureau of Re. l.una.

tion were :n n alif v. terntori.d .G anon . .cnA .i:;t F. Supp.

34. a t tso u endi= w-:..,riv emn. . w,m...r&d:~

i catir>n a ran -turnt- that h.sve rmt :foni .st 'i.e a nnt-.: i hor- have i trmht:onaitt been horizontal, and hc.ve av.4,wi tha :irnination of '

Onntjert!!f it herwe'.'t; t'A a e .!!ctpr; t'- tha' e '.5 - :n!.i ' H!'t.t '. 'l !!1 t he in, wr, t 's. o'! t d n .'ct  ? .v , o .b s n t, , tG(*, .Q %)d -

o Tr'rrile rt /M e Be n m. / Co v. C o t. .I . !?* * .I41 C. 4 3D:$; ci, l 11*hite .ilv*ae Co. v. Unital 5ta!* s. ';; C. 5. 251. l'il-:');. Otter Tail an.1 the Bure:'u of I ee!.un.irir.n irr! in .i v *ic.d. nor a hntuo.t*: i 6 aw iup rir b. *m n th, n:n ' " T a' n . -. . i o

)

.d ., i p. . m r . , - - o.c . . - <

s ., .-n.-

it tiid P . .'v :n :n . ii . : c. a -' '

?!. ". r ww;.1 nr - 1 1

I

,6 ,

71-991-CONCUR & DIS 5ENT OTTER TAIL POWER CO. t UNITED STATES 7 tailer of power. Otter Tail asserted a legitimate business interest in keoping its lines free for its mvn pmver sales and in refusing to lentl a hand in its own demise by wheelin;; cheaper power from the Bureau of Reclamation to municipal consumers who might otherwise purchase power at retail from Otter Tail it= elf.

The opinion of the Court emph~asizes that Otter Tail's were not simple refusals to dea!-they resulted in Otter Tail's maintenance of monopoly control by hindering the emergence of municipal pmver companie<. The Court cites Lorain Journal v. Uniteri Stato: 342 C. 5. 143.

for the proposition that "f ul-e of monopoly ;10wer to destroy threatened competition' :s a violation of the

' attempt to monopolize' clausa oi 2 2 of the Sherman Act." This proposition seems to me defective. Lorain Journal dealt neither with a natural monopoly at retail nor with a congressionally approved system prod-icated on the e::istence of such monop., lies. In L., rain Journal, a newspaper in Lorain. Oliio. used it.s monopoly position to di: courage advcrtisers frcm supportine a nearby radio station seen by the new.< paper to be a competitor. Tho theory of the ca-e was that competi-tion in the communications business was beine foreelosed i by the newspaper's exercise of ntonopoly pEver. Her< . I by contrast. a monopoly i.s sure to result either way If I the consmners of Elbow Lake receive their electric power from a numicipally owned company or front Utter Tail, there will be a monopoly at the retaillevel. for there will in any event be only one suppiler The very reason for provide pnwer to -nch towr* by aircrtu:ive mcar- IIance I canr.ot see how the-e ennrrner- c;' crate v + , el @ cation -chemr-< If Of rPC It!( (Dei d ::1..!:dO! thcf * ,

r -eil in [Ormer O'Pr Tai' c': 'o:::cr.<. or if 0::~r n en. -! *x i h o !ict ri t _tr :=

,t , , - , 2 n.! . - <- , , . .nm< m i - c.::rc+:me n t -

hie wonM bc . i " u. --

71-901-CONCUR & DIS 5ENT S OTTER T.\IL POWER CO. v. UNITED ST.iTES the regulation of private utility rates-by state bodies and by the Conunission-is the inevitability of a monop-oly that requires price control to take the piace of price competition. Antitrust principles applicalde to other industries cannot be blindly applied to a unilateral re-fusal to deal on the part of a power company operating in a regime of rate regulation and licensed monopolies.

The Court's opinion scoifs at Otter Tail's cicfense of business justincation. United States v. Arnold Sc/ucinn

& Co., 355 L'. S. 30.3. is cited for the proposition that

"[t]he promotion of self-interest alone does not invoke the rule of reason to immunize otherwi.<e illezal conduct '

This facet of the Court's reasoning also escapes me in the case before us. where the health of power companies and the abundance of our enar:y supniy er- con-i.!erations central to the congressional purpose in devising the segulatory scheme. As noted above. the Commission is specideally prohibited from imposine interconnection re-quirements that are miduly burdensome or that interfere with a public utility's ability to serve its cutomers e-E-ciently. The District Court noted thar Otter Tad had odered "a so-calle i

• erosion nudy' ' documenting the war in which its business wouli suder if it vere forced to wholeule anci wheel power to m:micinally ovned com-panics. The District Court gave little credence to the report's predictions. "But retard!cse.' the court went on. "even the threat of losm; business does not justify er excuse violatin: the law. 331 F. Supp. 54. 0443. This question-beggin siisregard of the econotr.ie heaith of Otter Tail is wholly at odds eith the corr:ressional purpose in specifying the er.nditions 'mdre which interconnections can be required.

This is not to sa:. that Otter Tail's enancial health is.

paramount in all instances / or that the electric power In oc. Leu p. na rw neer .. .~: m. w n o- - T.ni i. .

dK YEm- sj }C.bW Ijiv? Ir.:; al'i. $ ?' 4'! . " 0 \..'!!',O , !!m FPC

. e = .r h

71-991-CONCUR c: DISSENT OTTER T.UL POWER CO. v. UNITED ST.iTES e r

industry as regulateri by the Commission is pe- se exempt from the antitrust laws. In the absence of a specitic statutory immunity, ci. Hughes Tool Co. . Trans IVorld

.ltrlines, - 1.,. O. . suen exemptions are not ,!2ntly a to be implied. United States . Philaicipi<ia Xational Bank, 374 U. S. 321. Fur:hermore no sweeping anti-trust exemption is warranted. as it has been in cases in-volving certain pervasively regulated n:dustries, under the doctrme or ,,prunary j.ur:sa ction..

C... C.nr.ted correctly noted : hat, "The puNie intcre r i ..:t broader than the economic intere-t of a par'tenl..r poveer mppiier. The priva e company 1- lack or ent:m-ta m :or [the ;merennneenon ,mine cannot de er n<. 30 !nn w the pui :ic nte e ' rv:nira, i' f F:l!c ;c of liiba e L de v. Orb Tad P+cu G . 4n F ?. C. C3. W.

• The F,ieral l'ower Coman<-ton. a, noted :6 ve. univ order- mrcr-connectinn uni!er the provt-ions of ! 202 (b). N U 5. C. j 524a ibi.

thouzh it ha.< broader powers in time- of war c.r .pher . mer ency.

10 U. 8. C. ! s24a (c). The Cemmtsion :os not normaile -er rates. thou:h utilitic3 <ubinit to ire jurt-dictmn m t ; tb propo-ed rate -chetinle wuh it, and :t has the oppor'ur::V or a. .m-me 'ho lawinho, ni *ho-.

rates M U.3.C.!>2N In the event :.e Ccmum o,n .oncinder that vny rare or prac i< c i "im, vr. unre-t-sonable, un luir disenmmator: or preferentt.l ^ c .lerermine3 ,

"just and ren:.wible rate 10 C. 5. C. 1 s2 P t a l . Under the-e <ama prot i ion 3. rhe Cc:nmi- inn rari! tre th* rerna and ren-thtion.- ot interconneet:ons and wi:

• iinz arrance'nent- volun:ard l enterai into. l The re-"!!i:12 Sv tem of re: tiarian is th': r". ore compechen-iva than the reculatory apperatw ap;!! cabin to L.nk n:er "re thi '

was held to be in:.tuf:rient to ousr antitru.-r virt-dierion in Cuit,"I States v. Phil:v!riphi?t Sa* unal lho :. G4 C. 5 A2t. ann the re 't--

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e 71-991-CONCUR & DI55ENT OTTER TAIL POWER CO. v. UNITED STATES 11 mise! Fef." Cf. Unite <l States v. R. C. d. 355 U. S. 334.

350.*

Even assuming that Otter Tairs refusals to wholesale or wheel power to Elbow Lake and Hankinson were color-ably within the reach of the antitrust laws. I cannot square the opinion of the Court with our recent decision in Ricci . Chicago Mccantae E.rchange, - C 5. .

Otter Tairs refusal to rholesale or whee! power to Elbow Lake was the subject of two concurrent proceedings-one in the District Court. and another m tne receral Power Conuni3sion. It seems to me that the principles of Ricci, related to but not identical with the~ trarlitional doctrine of " primary juris<iiction.' should reauirn a Dis-trict Court in a case like this one to defer to the Com-mission proceeding then in progress. Surely the regula.

tory author;ty of the Commission with res; eet to Inter-connection is at least as substantial as the responsibility of the Conancdity Exchange Connaission. in Ricci, for the implementation of reasonable membership practices by its reaulated euntract markets. Id.. at - i di--enting opinion of mn.nt.st.:.. J. > . The re<pon-ibility of the Commission for "assurine an abundant supply of electrie i energy thmughout the I~nited States' and its authoriry l 1

$ Unlika the s:nanon p -enen.1 in R. C. A . mvim wirre tha rectiuory enry r.!eil 4 bnei : thi, Conr* ai .mc. vin: ny r n- u flict beew(rn e- rectiatory i:nenons nil the .c ranon of ho anti. ,

tnut law . i<i.. at 370. n.1s. in thi.- ra+ r he W.!. ral Power Commi-- i fiOR h.13 l3Een '!!P ttntbM.ik - fp Gi $!in! T I;r:0! a A J P'or'ig . !g d<;g- in 3npport of Orrer T:nh The Commi--ion c. ins our that it was con- i siclerine an mpiication c.r in arconne. ric,n d . ti hv ths Town ci .

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71-%I--CONCUR A DISSENT 12 OTTER TAIL POWER CO. c. UNITED STATES to order compulsory wholesaling satisfy the three criteria enunciated in Ricci for a deferral of antitrust jurisdiction to an achninistrative agency: il) that the court must first decide whether the conduct complained of. in light of the regulatory statute. is inunune from the antitrust laws; (2) that " ome faents of the dispute" are "within the statutory jurisdiction" of the agency and @ "that-adjudication of that dispute premises to be of ma-terial aid in resolving the inununity question.' li, at With respect to the last of the Riccicriteria. it is useful to contrast the cursory treatment 2iven to Otter Tails business justification .-iefen* by tha Court today with the opinion of the Cunuaission crriering permanent interconnection :

we cannot disagrc3 with the Examiner's view that Elbow Lake ha.s engaged in an ill-advised excursion into the power lausine:5.' Given the facts of record before us. it :s plain -hat Elbow Lake's effort has not brought it the re vards it expectet!

indeed. its first year of operations. .iurne c;hieb it perpetuated the rates formotiy chara<-d by Otter

. Tait resulted ia a :inancial :ose. Culike Otter Taiii carlier service to Elbow Lakn. Elbow Lake's own system is of doubtful reliability as evidenced by its presence before us now. While it is our re-sponsibility to take all pus-ible steps to insure to Elbow Lake's customers a hiah standard of service reliability, our terms anc! conditions must not invite improvitlent Vent' ires PIs " here.

"We aleo share the Examiner's "iew that Otter Tail is legitimately concerned about the possible erosiott of its system. If other CGminunities were to follow Elbow Lakei route. an i if, hacine nas-calculated the roulu. they exC; an eet to de 3.+

e TI-901-CONCUR & DIF6ENT OTTER TAIL POWER CO. c. UNITED STATES 13:

cued by overly-generons intereotmeetion tertns, then-Otter Tail's fears that it will lose its customers,.

seriatim, seem to us to be supported. We do rot mean by this that we accept a captive market con-cept, however . . The exercise of that { statutory]

authority may well require. as it does here. that we order a public utility to interconnect with an isolated municipal system. Villarte of Elbmc Lake v. Otter Tail Poteer Co., 46 F. P. C. 075, 677-675.

The opinion of the Court attempts to side-step the-Ricci problern by noting that the Conunission has in fact ordered interconnection with Elbow Like. resulting in the absence of a present actual conflict with the decree enterrd by the D: strict Court. The Court goes on vaguely to su: est that there will be time to cope with the problem of a Conunission refusal to order intercon-nection which condicts with this at.titrust decree when such a contlict arises. ,

But the basic condict between the Conuni.ssion's au-thority and the decree entered in the District Court cannot be so easily wi3hed away. The decree enfoins-Otrer Tail from " refusing to sell electric power at whole-sale to existing or proposed municipal electric pow. r sys-tems in cities and towns located in any area serviced by-Defendant." ' This injunction is qualified by a pro-vision that such wholesalin; be done at " compensatory" rates and umier " terms and conciitions which are filecf with and' subject to approval by the Federal Power Com-mission." The setting of rates. terms, and conditions.

however. is but part of the Conunibion's authority under i 202 ! b i.16 C. F. C. i S24a 4 b ). The Court's decree plainly izuores the Commission's authority to decide-tchethcr involuntar,' interconnection is warranted under-

• Th : 6.w * : cf he Dhtnct Cocn u anmor:cd.

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-ss r - zs 71-931--CONCUR & DISSENT 14 OTTER TAIL POWER CO. c. UNITED STATES the enunciated statutory criteria. Urbss the decree is modided, its future implementation will starkly condict, with the explicit statutory mandate of the Federal Power Commission.

Both because I believe Otter Tail's refusal to wheel or wholesale power was conduct exempt from the antitrust laws and because I believe the District Court s decree improperly pre-empted the jurisdiction of the Federal Power Commission, I wou!.! reverse the judgment be, fore us.

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