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| Before the Atomic Safety and Licensing Board
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| THE TOLEDO EDISON COMPANY', ET AU. )" t
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| , (Davis-Besse Nuclear Power- Station, ) : Docket Nos. 50.-500A' 6
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| DONALD H. HAUSER, .
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| . Gen,eral Attorney. ;.
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| g.- ~ ROBERT'E. '
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| -f LESLIFHEN'Rh["
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| MICHAEL M. BRILEY._ N. -.,v.:.e c ro
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| : t. ROGER P. KLEE ,
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| , FULLER, HENRY, HODGE & SNYDER
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| 9 WW D'sQffg;Dpp-~ ~ %b@&jQ M WILLIAM S.. LERACH' 3iM' [,@N % [@O Q' "WWODb
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| JOSEPH A. RIESER.
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| __
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| .
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| - TABLE OF CONTENTS
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| _. S Page I. Introduction . . . . . . . . . . . . . . . . . . 1
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| .
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| II. Background Statemet . . . . . . . . . . . . . . 15
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| .-
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| III. The Scope of NRC Antitrust Review . . . . . . . . 24 A. THE PHRASE " SITUATION INCONSISTENT WITH THE ANTITRUST LAWS" AS A
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| --
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| 2EVIEW STANDARD . . . . . . . . . . . . . . . 25
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| : 1. The Legislative History . . . . . . . . . 28
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| .-
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| : 2. Adherence to Section 5 of the FTC Act . . . . . . . . . . . . . . . . . 36
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| : 3. The Scope of Review . . . . . . . . . . . 45
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| . 4. The Proper Sta.,dards for Review . . . . . 55
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| -
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| B. THE IMPACT ON THE BOARD'S ANTITRUST ANALYSIS OF THE REGULATED NATURE OF
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| .
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| THE INDUSTRY , . . . . . . . . . . . . . . . 67
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| : i. 1. The Scope and Extent of Govern-
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| ment Regulation . . . . . . . . . . . . . 69
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| ,_ Federal Regulation . . . . . . . . . . . 69 State Regulation . . . . . . . . . . . . 81
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| . .
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| ,
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| : 2. The Economic Basis For Recon-
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| ciliation . . . . . . . . . . . . . . . . 90
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| : 3. The Legal Basis For Reconciliation . . . 98
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| : 4. The Parker v Brown Doctrine . . . . . . . 113 l~ C. THE PHRASE " ACTIVITIES UNDER THE LICENSE" l
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| ; -- AS A LIMITATION ON THE SCOPE OF SECTION
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| -
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| 105c ANTITRUST REVIEW . . . . . . . . . . . 121
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| : 1. The Nexus Standard . . . . . . . . . . 122
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| [' 2. Applying The Nexus Standard . . . . . . 127 L. 3. The Proper Approach To The Nexus Question . . . . . . . . . . . . . . . 141
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| 3
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| Page IV. Applicable Legal Principles . . . . . . . . . . 144
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| "
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| A. THE DEPARTMENT, THE STAFF AND l ,
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| CLEVELAND HAVE THE BURDEN OF PROOF . . . . . . . . . . . . . . . . . . . 144
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| .
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| '
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| B. EACH APPLICANT'S POSITION OF DOMINANCE IN THE GENERATION AND TRANSMISSION OF ELECTRIC POWER WITHIN ITS RESPECTIVE SERVICE AREA l RAISES NO INFERENCE OF UNLAWFUL i
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| --
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| CONDUCT UNDER SECTION 2 OF THE SHERMAN ACT . . . . . . . . . . . . . . . 149 C. RELIANCE ON THE THEORY OF BOTTLENECK
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| ._
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| MONOPOLY IS MISPLACED IN THE CIRCUM-
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| ,
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| STANCES PRESENTED IN THIS PROCEEDING . . . 158
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| -
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| "
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| D. CONSTITUTIONALLY PROTECTED LEGISLATIVE AND JUDICIAL ACTION IS SHIELDED FROM c ANTITRUST SCRUTINY UNDER NOERR-PENNINGTON , 175
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| > - E. NO RATE CHARGED, NOR PRACTICE FOLLOWED BY APPLICANTS PURSUANT TO A TARIFF ON
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| !" FILE WITH A REGULATORY AGENCY CAN BE
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| _ THE BASIS FOR AN ANTITRUST VIOLATION . . . 185
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| . F. AS TO THOSE ANTITRUST ALLEGATIONS ALREADY LITIGATED BY THE SAME PARTY
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| '--
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| BEFORE THE FPC THE DOCTRINE OF COL-
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| ,
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| LATERAL ESTOPPEL APPLIES . . . . . . . . . 195
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| ; c. V. The CAPCO Pool Arrangement . . . . . . . . . . 203
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| .
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| !- A. THE ESTABLISHMENT OF THE CAPCO POOL ARRANGEMENT WAS IN FURTHERANCE OF A SPECIFIC FEDERAL POLICY FAVORING
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| _ COORDINATION . . . . . . . . . . . . . . . 204 B. APPLICANTS' POWER POOL ACTIVITIES PROVIDE NO BASIS FOR INFERRING ANY INCONSISTENCY WITH THE ANTITRUST LAWS . 212
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| '-
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| . .
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| VI. Conclusion". . . . . . . . . . . . . . . . . . 223
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| ...
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| __ UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION
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| _
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| Before the Atomic Safety and Licensing Board
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| -
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| In the Matter of )
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| '
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| )
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| THE TOLEDO EDISON COMPANY and )
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| -
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| '__ THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
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| ) Docket No. 50-346A
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| )
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| (Davis-Besse Nuclear Power Station, )
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| ~
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| Unit 1) )
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| , )
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| , THE CLEVELAND ELECTRIC ILLUMINATING )
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| COMPANY, ET AL. ) Docket Nos. 50-440A
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| -. (Perry Nuclear Power Plant, ) 50-441A Units 1 and 2) )
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| )
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| ~
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| THE TOLEDO EDISON COMPANY, ET AL. )
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| (Davis-Besse Nuclear Power Station, ) Docket Nos. 50-500A Units 2 and 3) ) 50-501A
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| -.
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| ''
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| PREHEARING LEGAL BRIEF
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| _ ON BEHALF OF THE APPLICANTS
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| -
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| I. Introduction
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| .
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| _
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| This consolidated proceeding brings to the Atomic Safety and Licensing Board an antitrust inquiry under Section
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| -
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| 105c of the Atomic Energy Act which is novel in almost every
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| ''
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| respect. It is the first proceeding of its kind involving
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| multiple applicants for a nuclear plant. By virtue of the r
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| pooling arrangement in which these Applicants participate,
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| {
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| the basic structure of the electric energy industry is being
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| ~
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| - called into question under the antitrust laws for the first time in this or any other forum. Significantly, and also
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| ..
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| wm
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| _
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| _ _
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| _ _ _ _ . _ _.
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| ~
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| - -
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| without precedent, four of the five Applicants involved are
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| '
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| being put to the task of answering antitrust charges with t-
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| ; respect to smaller electric systems locateo in their respec-
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| .
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| '_ tive areas notwithstanding the fact that none of these so-called competitors saw fit to intervene in any of the three
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| -
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| proceedings or request antitrust review.
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| Moreover, this Licensing Board must examine the E antitrust allegations made here in a wholly new context.
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| L
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| .-
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| For, unlike the position taken by applicants in other Sec-tion 105c hearings, the Applicants here have explicitly pro-
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| , posed to have affixed to their nuclear licenses a set of 6-conditions which, inter alia , will grant to entities making
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| ''
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| a timely request therefor (a) the opportunity to participate
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| "
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| in the nuclear units involved here either by an ownership r-interest, a contractual prepurchase of power arrangement or
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| .
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| a unit power purchase, together with (b) sufficient trans-
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| _ mission services to deliver to the participating entity its share of the nuclear power or (when the output from the nu-
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| '"
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| clear unit is unavailable as a result of a forced or sched-uled outage) an equivalent amount of replacement power --
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| _
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| which these Applicants have offered to wheel-in from outside
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| _ sources on appropriate notice. (Applicants' proposed license conditions, as set forth in an earlier filing with the Board
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| .
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| tea s%
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| .m O
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| __
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| _
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| _
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| _
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| - on March 14, 1975, are attached hereto as Exhibit A.)~1/
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| !
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| This is the backdrop against which the Licensing Board is to determine whether, within the specific parame-
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| _
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| ters of Section 105c, " activities under the [ nuclear] license will create or maintain a situation inconsistent with the
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| _ antitrust laws." Section 105c, as amended, 42 U.S.C. 52135(c).
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| -
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| As we embark on what now promises to be a lengthy, evidentiary hearing into all sorts of alleged practices which these Appli-
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| ~
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| cants have purportedly engaged in over the past 10 or more
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| -
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| years, we would urge the Licensing Board not to lose sight of its responsibility in the area of antitrust review. This is
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| .
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| ._ but one of three hearing-matters that Congress has instructed
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| -
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| the Commission to undertake in connection with an application
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| ~
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| to construct and operate a nuclear plant. Its purpose and ob-jective, similar to that of the safety and environmental pro-
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| .
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| ceedings, is to examine only the activities associated with
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| . the designated nuclear facility to ascertain their impact on
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| -
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| '-
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| 1/ Applicants' proposed license conditions also provide 4_
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| for the joint establishment of a reserve arrangement between the Company providing nuclear power out of its ownership share 4_ in the designated unit and the participating entity. The minimum reserve requirement is to be set by agreed criteria,
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| <
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| but if no agreement can be reached on the criteria' for deter-
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| -
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| mining reserves, the proposed license conditions provide that the participating entity's minimum reserve requirement shall be determined on the basis of the smallest reserve requirement agreed to by the Company under other similDr reserve arrange- )
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| i
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| ,-
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| ments then in effect -- but in no event shall the entity's !
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| minimum reserve be less than its largest single block of i nuclear capacity out of any of the designated nuclear units y_ involved in this proceeding. ,
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| i
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| ,
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| -
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| , --
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| i l
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| _4
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| .
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| the existing situation as of the time the NRC license -
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| f issues.
| |
| [ As will be discussed at greater length in a lat..r W
| |
| section of this Prehearing Brief (see Part III.C, infra), the
| |
| '
| |
| Licensing Board clearly does not have a roving commission to
| |
| '._ scrutinize all antitrust implications of Applicants' general L-behavior and conduct. Rather, under its statutory mandate,
| |
| ~
| |
| it must confine its review in this area to the antitrust b.
| |
| ! -
| |
| implications, if any, of licensing a particular nuclear plant or plants. Given this limited focus, the Applicants'
| |
| ,
| |
| _ offer of access outlined above is an integral part of the t-
| |
| " situation" to be considered.
| |
| The Department of Justice, the NRC Staff and the
| |
| .' r I
| |
| "~
| |
| City of Cleveland have faulted this offer as not going far enough. It is apparently their position that, without a
| |
| ,,
| |
| , long-term commitment from Applicants to provide to all m_ smaller electric systems in their respective service areas c (whether or not those smaller systems seek to participate in
| |
| ' " -
| |
| the nuclear facility) full access to Applicants' existing LI t: ansmission facilities for purposes of general wheeling,
| |
| .
| |
| there will be created or maintained in some yet-to-be-defined
| |
| , relevant market an anticompetitive situation. The immediate
| |
| ', question raised by this assertion -- which has been posed'
| |
| -
| |
| repeatedly by Applicants.in this proceeding, but never an-I l
| |
| .
| |
| ?
| |
| -
| |
| -. -. , - . , , , . . ,a--
| |
| | |
| -.
| |
| i t
| |
| -
| |
| swered -- is how fpplicants' refusal to acquiesce in such a
| |
| _
| |
| long-term general wheeling commitment, even assuming arguendo
| |
| ! that the refusal could be properly classified as anticompet-
| |
| -- itive, has anything whatsoever to do with " activities under
| |
| * the (nuclear] license," as required by Section 105c of the
| |
| ~
| |
| Act. It is only those anticompetitive situations which have' been created or maintained by the licensed activities that
| |
| ..
| |
| ,
| |
| are relevant to this proceeding. The denial of access to Ap-plicants' existing transmission facilities for general wheel-ing purposes is plainly not within that category. While wheeling of a reasonable amount of supplementary power re-
| |
| .
| |
| quired to make access to the nuclear plants meaningful may
| |
| .
| |
| be necessary and is previded by Applicants' offer to wheel-
| |
| ~
| |
| . in replacement power when the nuclear unit is down, general 1 wheeling is not so required and is outside the juri'sdiction of the Commission to mandate.
| |
| ^-
| |
| We uestion the wisdom of this Licensing Board's launching into an extensive antitrust review of all the peri-u._
| |
| pheral allegations made by the other parties, and imposing e
| |
| 'l
| |
| ,_ upon the public the enormous costs involved, without first coming to grips with this threshold nexus issue. The real
| |
| "~
| |
| controversy between the parties in this case revolves around the question whether it is appropriate to impose on Applicants
| |
| .
| |
| O m a h*9
| |
| -- n --
| |
| | |
| - 1 r
| |
| i
| |
| .
| |
| :
| |
| ;
| |
| --
| |
| a forty-year general wheeling obligation as a condition to licensing these nuclear plants. Thus, the first step logi-cally to be taken by the Licensing Board here is to ascer-
| |
| -
| |
| tain whether the denial of the general wheeling services
| |
| ! (assuming such a denial is anti-competitive) is indeed an
| |
| ,- " activity under the license" -- i.e., is causally related
| |
| '
| |
| to such an " activity" or is essential to access to the nu-clear plant at issue. If, as Applicants maintain, it is none of these, the antitrust review process can be shortened considerably.
| |
| .
| |
| ,
| |
| There is, we submit, good reason to so focus the
| |
| - hearing. The public interest in adhering to the present con-
| |
| ,
| |
| struction and operating schedules of these nuclear plants should be of paramount concern to the Licensing Board and
| |
| -f
| |
| .i all parties.
| |
| ,
| |
| That interest will not be served by a broad-
| |
| ,
| |
| side antitrust review of the sort contemplated by the De-
| |
| ,_ partment of Justice, the NRC Staff and the City of Cleveland.
| |
| At the heart of this consolidated proceeding is the allega-
| |
| "-
| |
| tion that Applicants have refused to wheel electric power.
| |
| I However, Applicants can demonstrate to this Licensing Board w
| |
| that, but for a single instance which was entirely consistent
| |
| .
| |
| _
| |
| with the antitrust laws (i.e., the PASNY situation mentioned in Part IV. C, infra), there have been no refusals of speci-
| |
| .- fic requests for wheeling by these Applicants. Indeed, one '
| |
| .
| |
| | |
| _
| |
| i
| |
| !
| |
| ,.
| |
| I
| |
| :
| |
| <
| |
| '
| |
| _ of the more bizarre aspects of this hearing is that, while
| |
| '
| |
| all five of the Applicants have throughout this proceeding
| |
| -"
| |
| remained receptive to.considering specific wheeling trans-t
| |
| '
| |
| actions with smaller electric systems located in their ser-vice areas if requested to do so, only one municipality has
| |
| ,_
| |
| made such a request. That request was made just recently of The Cleveland Electric Illuminating Company ("CEI") by
| |
| -
| |
| the City of Cleveland (" Cleveland"), and CEI advised Cleve-land that it would agree to wheel any power which would also be available to CEI at a Federal Power Commission approved
| |
| ;
| |
| wheeling rate, so long as it is given adequate advance no-
| |
| .i l[ tice to allow for the scheduling of Cleveland's use of the
| |
| , 2/
| |
| ,:
| |
| , transmission lines.-
| |
| 'l' It is against this background that the Applicants' l[^ are mystified why this Licensing Board and the other parties
| |
| '._
| |
| are insistent upon engaging in an exhaustive antitrust examin-ation of the basic structure of the electric energy industry.
| |
| -
| |
| 2/ CEI stated that it would not wheel to Cleveland any.
| |
| -- power unavailable to CEI as a result of any conspiratorial or legal impediment. PASNY power would fall into this cate- !
| |
| ( gory. It must be remembered that CEI and Cleveland are di-
| |
| ;
| |
| rect competitors on a door-to-door basis in the retail elec-tric energy market within the City of Cleveland. The anti-
| |
| , trust laws have not yet been interpreted to require a company to give to its competitor anything more than what is avail-able to the company itself. Indeed, as we will develop
| |
| '
| |
| '-
| |
| shortly, it would be directly contrary to the policies under-lying the antitrust laws to classify as anticompetitive CEI's
| |
| _
| |
| refusal to wheel into Cleveland low-cost preference power for sale in the retail market, especially in view of the substantial subsidies already enjoyed by Cleveland which
| |
| , are unavailable to CEI.
| |
| i l-
| |
| ,, , - .--
| |
| | |
| I l
| |
| .-
| |
| *
| |
| ;
| |
| f i
| |
| _, If, as we suspect is the case, the Department of Justice ("De-( partment") and the NRC Staff (" Staff") envision using the re- .
| |
| -
| |
| view provisions of Section 105C as a vehicle for imposing upon
| |
| :l
| |
| '
| |
| all applicants essentially standard license conditions thereby restructuring the industry as a whole -- by, as alluded to in
| |
| ,
| |
| the Department's October 31, 1975 responses to interrogatories, I requiring Applicants to afford to all electric systems in their
| |
| -
| |
| service areas all the benefits of coordinated operation and de-i
| |
| ''
| |
| velopment that are presently available to Applicants as members
| |
| ,
| |
| of the CAPCO arrangement -- it would be well for this Licen-sing Board to pause to consider whether it intends to allow
| |
| ,
| |
| its antitrust review responsibility to be so abused.
| |
| -
| |
| -
| |
| In this regard, we have perhaps come full circle.
| |
| l- The Applicants' offer of access to the nuclear facilities I affords to those entities choosing to participate in the' units a
| |
| all the benefits of coordination that have any relationship
| |
| . -.
| |
| to " activities under the license." Whatever other benefits might be available to members of a coordinated arrangement --
| |
| -
| |
| and Applicants do not deny that there may be some -- they have )
| |
| jj no bearing on the legitimate area of inquiry in this proceed-
| |
| '
| |
| ing. This is particularly so with respect to entities not even interested in participating in the nuclear units. No
| |
| ;u party should be allowed to come into this forum and launch a wholesale antitrust attack on pooling arrangements per se in l*
| |
| j.
| |
| t
| |
| ._
| |
| )
| |
| l
| |
| __
| |
| | |
| I i
| |
| ,_
| |
| (
| |
| (
| |
| i
| |
| _.
| |
| an effort to obtain for totally disinterested entities bene- s
| |
| ( fits of coordination having nothing whatsoever to do with d
| |
| -
| |
| the nuclear faci' es under scrutiny.
| |
| >
| |
| '
| |
| Not only does such an approach squarely contradict the Department's and the Staff's own representations to Con-
| |
| .
| |
| gress as to how Section 105c would be implemented; it also l 1s contrary to the public interest and to the best interests of the small systems on whose behalf the Department and the k Staff pretend to act -- and who, for good reason, have not
| |
| _
| |
| J
| |
| '
| |
| sought such coordination here or elsewhere. As we will de-l velop in the discussion to follow (see Part V. A and B, in-fra), with the benefits of coordination necessarily go cer-I tain responsibilities which must be shared on an equitable basis by all participants in a coordinated arrangement. It r
| |
| i is the height of irresponsibility to suggest that small sys-
| |
| ~
| |
| tems in the service areas of these Applicants have either
| |
| _.
| |
| the expertise or the financial and engineering capability to '
| |
| assume these responsibilities. How, for example, would the
| |
| ,L Department and the NRC Staff propose that the City of Paines-
| |
| .-
| |
| \
| |
| ville meet its obligations under the CAPCO joint construction l" program when its turn came to assume responsibility for build-i
| |
| !
| |
| . ing the next large unit for the pool?
| |
| L )
| |
| It is considerations of this sort which, when l looked at in pragmatic rather than theoretical terms, make
| |
| _
| |
| | |
| I l
| |
| _
| |
| (
| |
| f l
| |
| ~
| |
| the suggestion to spread around the benefits of coordination
| |
| .
| |
| :( to small systems totally impractical. Anyone advancing the
| |
| . _.
| |
| notion that these benefits can be distributed without also passing along a proportionate share of responsibilities has
| |
| ~
| |
| overlooked the bedrock concept of coordinated development i
| |
| ?-
| |
| and operation. As Applicants will demonstrate at the hearing, j coordination depends on mutuality and reciprocity; without an equitable sharing of both the benefits and the burdens, no
| |
| ( coordinated arrangement can remain viable. The ultimate loser in such circumstances is the public which, through coordina-tion, is able to obtain the electric power supply on a more l reliable basis and at lower costs.
| |
| .
| |
| It may well be, as our adversaries seem to sug-ti
| |
| -(. gest, that adherence to the principle of an equitable al-
| |
| ,
| |
| location of pool responsibilities will frequently result in
| |
| .I"-
| |
| the imposition on smaller entities seeking membership of a
| |
| [I burden they cannot easily bear. But there is nothing in J.
| |
| either the letter or the spirit of the antitrust laws which
| |
| ;r
| |
| ,{. requires in such circumstances that the smaller systems be
| |
| ,
| |
| allowed to participate in larger coordinated arrangements l~ on some preferential basis. A competitor may not offer the l' benefits of coordination, for example, to one element of his lL competition on terms that he is unwilling to make available to some other competitive element. As Applicants will demon-1 b
| |
| ..
| |
| .
| |
| , , , .
| |
| | |
| __ _ _ . . _ _ _
| |
| r i
| |
| r
| |
| (
| |
| --
| |
| provided equally by large competito- ,o smaller competitors, I
| |
| competition as we know and understand it in the context of an unregulated industry is neither a viable nor desirable concept
| |
| _
| |
| within the basic natural monopoly structure that not only
| |
| } exists, but is studiously encouraged, in the electric utility industry. In enacting Section 105c, Congress recognized this; it clearly never intended for the Commission to apply the antitrust laws in such a manner as to restructure this per-f vasively regulated industry by creating competition in areas
| |
| .(-
| |
| I where Congress has declined to direct it.
| |
| y Such, we submit, would be the effect of any whole-i
| |
| "
| |
| sale extension of all the benefits of coordination to non-
| |
| ' i~ coordinated small electric systems without due regard for a L.
| |
| reciprocal sharing of the responsibilities. N)t only would
| |
| :
| |
| r such a result be contrary to the public interest; it would 4[
| |
| ,_
| |
| also, in all likelihood, sound the death knell for coordi-
| |
| - nated development and operation. If the Licensing Board is
| |
| .c going to insist on intruding into this area by transgressing
| |
| 'l the jurisdictional bounds of its nuclear-based review function, we strongly urge that, in applying the antitrust laws to this regulated industry, it remain acutely aware of the historical l- encouragement, particularly federal regulatory policies, for ,
| |
| ; such coordination on a reciprocal basis.
| |
| .,
| |
| bm i
| |
| _
| |
| | |
| I I
| |
| ~
| |
| (
| |
| ( t
| |
| [ taneously by each of the Applicants.
| |
| s Before turning to the above-referenced matters,
| |
| _
| |
| ; however, we will first attempt to put the discussion in
| |
| _ some meaningful perspective by explaining briefly the back-
| |
| '
| |
| ground of this hearing.
| |
| -
| |
| ,
| |
| .-
| |
| r-i e
| |
| % =
| |
| e~
| |
| a r
| |
| L.
| |
| ';.
| |
| I! )
| |
| 1 l
| |
| \ \
| |
| lL
| |
| ... ;
| |
| '
| |
| 1
| |
| .
| |
| $
| |
| -d-
| |
| .
| |
| . - -. _ - . _ _ , g
| |
| | |
| I i
| |
| -
| |
| .
| |
| II. Background Statement
| |
| '
| |
| _
| |
| On August 1, 1969, the Toledo Edison Company ("TECO")
| |
| and CEI, two of the Applicants herein, filed with the Atomic Energy Commission a joint application for a license to con-struct and operate Davis-Besse Unit 1, an 872 megawatt nuclear
| |
| ~~
| |
| unit located in north central Ohio on the shores of Lake Erie,
| |
| .
| |
| . 3/
| |
| approximately 21 miles east of the City of Toledo! Some 15
| |
| _
| |
| ' months after the filing of this application, Congress enacted Pub. L. 91-560 (December 19, 1970), which, inter alia, pro-vided for an antitrust review procedure with respect to re-quests to construct and operate nuclear facilities to deter-mine whether " activities under the [ nuclear] license [would)
| |
| ;
| |
| ,
| |
| create or maintain a situation inconsistent with the antitrust laws." Section 105c of the Act, as amended, 42 U.S.C. S2135(c).
| |
| Paragraph 8 of the new statutory provision permitted the
| |
| : Commission to inquire into antitrust inconsistencies that
| |
| -
| |
| ; might be attributable to nuclear plants for which certain L.
| |
| l license applications were pending with the Commission on the effective date of the legislation. Section 105c(8), as amend-ed, 42 U.S.C. 52135(c)(8). The Davis-Besse Unit 1 construc-h tion permit and operating license application fell into this catege.,.
| |
| 3/ The plant is jointly owned by the two investor-owned utilities, with TECO hsving a 52.5% ownership interest and CEI having a 47.5% ownership interest.
| |
| .
| |
| ..
| |
| .. - - -
| |
| | |
| r
| |
| -
| |
| ,
| |
| r I
| |
| Safety and environmental hearings were held on the
| |
| ~
| |
| Davis-Besse Unit 1 application in December, 1970, and January j and February 1971; and the Commission issued a construction I
| |
| -
| |
| l permit on March 24, 1971. Applicants promptly began construc-
| |
| _ tion work at the plant site. On July 9, 1971, the Department of Justice, having undertaken an investigation of Applicants'
| |
| -'
| |
| projected activities, issued its advice letter recommending against an antitrust hearing. 36 Fed. Reg. 17888 (September 4,
| |
| , 1971).
| |
| ,
| |
| However, on July 6, 1971, the City of Cleveland pe-titioned to intervene in the Davis-Besse Unit 1 proceeding
| |
| -
| |
| and requested antitrust review with respect to alleged anti-
| |
| .
| |
| competitive conduct by CEI. Inexplicably, the Commission c
| |
| ! delayed referring Cleveland's petition to an Intervention
| |
| :t Board until January 1, 1974. Finally, on March 15, 1974 i
| |
| ;. more than two and one half years after the filing of the petition the Intervention Board granted Cleveland's petition
| |
| '-
| |
| and for the first time announced that a hearing would be held on antitrust matters in the Davis-Besse Unit 1 proceeding.
| |
| s In the same Memorandum and Order, an antitrust
| |
| . ,
| |
| hearing was also announced in connection with the joint
| |
| :. application by TECO, CEI, Ohio Edison Company, Pennsylvania
| |
| --
| |
| Power Company and Duquesne Light Company for a permit to
| |
| ..
| |
| t ARd
| |
| - . .- -
| |
| | |
| _.
| |
| -
| |
| ,
| |
| ~
| |
| 4/
| |
| construct and operate Perry Units 1 and 2. This application
| |
| _ had been filed on March 28, 1973; it related to two nuclear i 1
| |
| units of 1205 megawatts and 1265 megawatts each, both located 1
| |
| -
| |
| near Lake Erie in Lake County, Ohio, some 35 miles northeast of the City of Cleveland. On December 17, 1973, the Department of Justice had issued an advice letter recommending antitrust re-view; at this time its focus was exclusively upon the activ-ities of CEI within the corporate limits of the City of Cleve-
| |
| -
| |
| land. 39 Fed. Reg. 2029 (January 16, 1974). As to the other four Applicants, the Depai' ment stated that their "competi-
| |
| ''
| |
| tive situation," outlined in an earlier advice letter recom-
| |
| .-
| |
| mending against antitrust review as to the Beaver Valley Unit 2 1 nuclear facility remained " unchanged." See Beaver Valley Unit
| |
| :7 2 Advice Letter, 38 Fed. Reg. 10659 (April 30, 1973). Interven-
| |
| -'-
| |
| tion petitions seeking a hearing on antitrust issues were ,
| |
| f' filed in Perry by the City of Cleveland and American Muni-
| |
| 'L.
| |
| cipal Power-Ohio (" AMP-Ohio"); they, too, involved allegations
| |
| ,
| |
| "
| |
| directed almost exclurively against CEI. Both Cleveland and 5/
| |
| ~
| |
| AMP-Ohio were allowed to intervene.
| |
| s 4/ These two plants are jointly owned by all five investor-owner utilities, with each utility having the same percentage
| |
| ,
| |
| ownership interest in each unit, to wit: Ohio Edison - 35.60%;
| |
| CEI - 24.47%; TECO - 19.91%; Duquesne Light - 13.74%; Penn
| |
| , Power - 6.28%.
| |
| I
| |
| '
| |
| 5/ On August 15, 1974, Applicants filed a motion for summary disposition against AMP-Ohio. The Licensing Board denied this motion en November 4, 1974, but granted Appli-
| |
| ,
| |
| cants leave to refile at the conclusion of discovery. On August 18, 1975, Applicants renewed their summary disposi-(Cont'd on page 18)
| |
| _
| |
| | |
| r f
| |
| ..
| |
| ,
| |
| f I Pursuant to the March 15, 1974 Memorandum and
| |
| -
| |
| Order, the Davis-Besse Unit 1 and Perry proceedings were consolidated for purposes of the present antitrust inquiry.
| |
| The Licensing Board thereafter issued Prehearing Conference
| |
| _
| |
| Order No. 2 on July 25, 1974, in which it set forth two Broad Issues and eleven Matters in Controversy under those
| |
| -
| |
| Broad Issues "for purposes of discovery." The discovery f
| |
| period commenced on August 1, 1974 and continued for one
| |
| -
| |
| full year to August 2, 1975. During that period both sides s
| |
| exchanged interrogatories and document requests, along with answers thereto. In response to the several document re-
| |
| - quests, Applicants produced over 2,375,000 document pages
| |
| '
| |
| for inspection and copying.
| |
| 'I Depositions commenced on April 22, 1975, with Ap-
| |
| :t plicants taking the initiative. Since the only discoverable
| |
| .(' allegations made against Applicants at the time concerned t
| |
| 7 Cleveland's claims against CEI, Applicants' discovery program
| |
| - focused only on those matters; some 25 Cleveland witnesses were deposed. On May 27, 1975, the Depa-tment, the Staff and the City of Cleveland commenced their deposition dis-l l" 5/ Cont'd
| |
| ', tion motion. In an apparent effort to avoid a final ruling
| |
| ,
| |
| on the isolated and fully framed issue presented by AMP-Ohio's
| |
| '-.
| |
| petition to intervene, AMP-Ohio filed at the last moment on i September 12, 1975, a motion for leave to withdraw its peti-l tion to intervene. That motion was granted orally by the Li-
| |
| '
| |
| censing Board at the Sixth Prehearing Conference on Septem-(Tr. p. 1183; see also " Sixth Prehearing Con-
| |
| ,
| |
| ber 18, 1975.
| |
| ference Order", p. 1, filed October 2, 1975.)
| |
| _,
| |
| _
| |
| __-
| |
| | |
| e l
| |
| -.
| |
| i
| |
| ,
| |
| r covery program (with the Staff rarely attending). Some 35 r- witnesses from the five utilities were deposed over the ensuing two and a half months.
| |
| -
| |
| While discovery was in progress in the Davis-Besse r
| |
| ,_
| |
| Unit 1/ Perry proceeding, the Department of Justice, on Feb-ruary 14, 1975 issued its advice letter with regard to the r application on file for Davis-Besse Units 2 and 3. 40 Fed. Reg.
| |
| ,
| |
| 8395 (February 27, 1975). These two units, each with an output
| |
| '
| |
| ...
| |
| of 906 megawatts, are jointly owned by the same five investor-s.
| |
| owned utilities who applied for licenses to construct and
| |
| '~
| |
| l operate the Perry units;-6/ they are to be located adjacent to
| |
| - Davis-Besse Unit 1. The Department recommended that an anti-
| |
| ' trust review also be commenced with respect to these two T plants. On March 31, 1975, the City of Cleveland petitione,d L. .
| |
| to intervene and participate in the antitrust review process, I
| |
| and by Memorandum and Order dated May 6, 1975, the petition ,
| |
| _,
| |
| was granted. Thereafter, on July 30, 1975 (the last day of
| |
| ,
| |
| L discovery in the Davis-Besse Unit 1/ Perry proceeding), the
| |
| '
| |
| Licensing Board ordered that Lavis-Besse Unit 5 2 and 3 be
| |
| .(
| |
| t' 6/ Each utility has the same percentage ownership interest
| |
| -
| |
| in Davis-Besse Units 2 and 3 as they have in the two Perry units, to wit: Ohio Edison - 35.60%; CEI - 24.47%; TECO -
| |
| ;[ 19.91%; Duquesne Light - 13.74%; Penn Power - 6.28%.
| |
| t.
| |
| .
| |
| 4 .
| |
| !
| |
| .
| |
| | |
| r
| |
| '!
| |
| l l
| |
| ,
| |
| j
| |
| .
| |
| E' ;
| |
| I ,
| |
| consolidated with,the ongoing antitrust proceeding; it railed )
| |
| I that the " Broad Issues and Matters in Controversy under those
| |
| '
| |
| Broad Issues" which had been framed "for purpost.s of discovery" l
| |
| .
| |
| l j in the Davis-Besse Unit 1/ Perry proceeding would continue to be '
| |
| r applicable.
| |
| '
| |
| Applicants had opposed consolidation of Davis-Besse F Units 2 and 3 if, inter alia, consolidation would "in any way I
| |
| lead to an enlargesent of the issues that had been identified in Prehearing Conference Order No. 2" in the Davis-Besse Unit 1/
| |
| v- Perry proceeding ar.d thus necessitate "any expansion of the scope y,
| |
| ! of discovery."- In an effort to ascertain the nature of the al-
| |
| --
| |
| ,
| |
| .
| |
| legations underlying the Department's Davis-Besse Units 2 and 3
| |
| '
| |
| advice letter, Applicants had served additional interrogatories
| |
| 'I and document requests on the Department on July 15, 1975.
| |
| ;L However, it was not until September 5, 1975, the fil-
| |
| ;F L ing date on which all parties (other than Applicants) were to
| |
| ., set forth the nature of the cases they intended to present,
| |
| '
| |
| that Applicants learned fcr the first time of the Department's
| |
| '
| |
| specific allegations in Davis-Besse Units 2 and 3. These new i.
| |
| allegations materially and substantially enlarged the issues
| |
| _
| |
| that had been raised in the Davis Besse Unit 1/ Perry proceed-l<
| |
| c
| |
| '-
| |
| 7/ See " Applicants' Reply To The City of Cleveland's
| |
| ~
| |
| Petition For Leave To Intervene," p. 3, filed in the Davis-Besse Units 2 and 3 proceeding on April 18, 1975.
| |
| l-l l '..
| |
| -
| |
| | |
| .. _-. _ ___ _ ___ ________
| |
| r a 4
| |
| !
| |
| ing and clearly called for discovery into the new matters
| |
| -
| |
| raised. Only CEI had been given sufficient notice of the
| |
| - charges being made against it to take advantage of the l
| |
| earlier discovery period.
| |
| ,E Applicants, however, found themselves in an im-possible predicament. They had urged the Licensing Board not to allow consolidation of Davis-Besse Units 2 and 3 if the effect of such action'would " result in any delay in the i [ Davis-Besse Unit 1/ Perry] hearing schedule, including the
| |
| '~
| |
| discovery schedule" (see n. 7, supra). Applicants knew full
| |
| !
| |
| well that the prehearing process, including discovery, had been so protracted that antitrust review posed a real threat to the plant schedules. In the absence of some relief from i
| |
| L. the Commission by way of allowing a post-licensing antitrust j hearitg, it seemed unlikely that either the operating license for Davis-Besse Unit 1 or the construction permit for Perry Units 1 and 2 would issue,on time. Both energy needs and financial considerations argued forcefully against holding i these permits up beyond the second quarter of 1976 in order l
| |
| '
| |
| to complete the present inquiry; yet-that is precisely the i prospec t. Any further delays because of the Licensing Board's
| |
| :
| |
| j' decision to consolidate Davis-Besse Units 2 and 3 would elim-inate all hope of meeting the plant schedules.
| |
| -
| |
| -
| |
| -
| |
| .
| |
| e v -w e
| |
| | |
| _ _ _
| |
| _
| |
| k i.
| |
| -
| |
| ,
| |
| e f'
| |
| In these circumstances, Applicants generally were r forced to forego seeking to reopen discovery in order to in-vestigate the Department's new allegations -- which neither were, nor could have been, anticipated. The Licensing Board's
| |
| , consolidation order of July 30, 1975 has effectively put them k
| |
| in the unfair position of having to defend themselves against
| |
| 'r serious antitrust allegations without adequate notice of the charges being made and with no opportunity to conduct meaning-ful discovery on those charges.
| |
| t c
| |
| what makes the situation all the more offensive to .
| |
| ! fundamental notions of due process is the total disregard which
| |
| -
| |
| the other parties have displayed for the Licensing Board's
| |
| '
| |
| limited review responsibility. Rather than confining their
| |
| .F broad assertions to inconsistencies under the antitrust laws it.
| |
| that may arise from " activities under the license," they have
| |
| :(
| |
| l[ asked this Licensing Board tc examine alleged anticompetitive l7 practices which are both remote in time, and substantively un-
| |
| ' related, to any of the nuclear facilities involved here. In
| |
| '
| |
| short, the other parties are attempting to utilize the time )
| |
| i..
| |
| pressures exerted by the electric generating capacity needs of the Applicants if they are to meet their public service i
| |
| ,
| |
| responsibilities and the financial burdens wnich would result
| |
| : h. from delays in bringing these nuclear facilities into service, l
| |
| ,,_.
| |
| e W
| |
| _,y_. . , . - . _ , . , _ _ p c.,,,-g -, , , . _ , , , , , _--p ., ,,.y -,,,
| |
| | |
| -
| |
| 1 r
| |
| l to extract from the Applicants concessions to their particular notions of how the industry should be restructured. In this the other parties have been willing to ignore legislative
| |
| --
| |
| and regulatory policy and seem to prefer not to risk the I
| |
| normal court process for antitrust action available to them
| |
| --
| |
| without delaying the nuclear plant.
| |
| * It is precisely because cf this irresponsible " shot-gun" approach that Applicants feel compelled, before answering
| |
| -
| |
| the baseless charges that have been made, to address in compre-
| |
| '
| |
| hensive terms the scope of the Licensing Board's Section 105c
| |
| '[ l review authority. We therefore now turn to that task.
| |
| f t
| |
| 4 L
| |
| :[- .
| |
| i lL .
| |
| r
| |
| -.
| |
| l
| |
| ~
| |
| f k,
| |
| _-
| |
| M
| |
| ,
| |
| | |
| _
| |
| 4 t
| |
| --
| |
| _
| |
| III. The Sc)pe of NRC Antitrust Review
| |
| -
| |
| Section 105c of the Atomic Energy Act, as amended
| |
| - (42 U.S.C. 52135(c)), delegates to the Nuclear Regulatory Com- l l l t mission the responsibility for conducting an administrative f antitrust hearing -- upon the recommendation of the Department of Justice or a proper request by an intervenor -- with re-
| |
| .
| |
| spect to applications for a license to construct and operate l.
| |
| ._ a Class 103 (nuclear) facility, and, on the basis thereof, to
| |
| '
| |
| t "make a 'inding whether activities under the license would
| |
| "
| |
| I create or maintain a situation inconsistent with the antitrust ;
| |
| '
| |
| laws as specified in subsection 105a." As we approach the commencement of the evidentiary proceeding under this statu-tory provision, it is important at the outset that the Licens-
| |
| :i. ing Board understand and appreciate both what it is that Con-r gress asked it to do and what it is that Congress never intend-
| |
| ~ ['
| |
| ed for it to do.
| |
| -[ The language of the statute as well as its underlying l
| |
| .t legislative history are instructive in arriving at such an
| |
| :r L understanding. Section 105c speaks in terms of inconsistencies with the antitrust laws, rather than actual violations; but the L intent was not to formulate a review standard that deviated from well-developed antitrust principles. Nor was Congress unmindful e
| |
| of the comprehensively regulated nature of the electric utility l
| |
| l-
| |
| _
| |
| l
| |
| ,
| |
| | |
| --. ._ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
| |
| _
| |
| .. !
| |
| .
| |
| industry; its directive to the Commission to look into alleged I~ anticompetitive practices was with full recognition and without disapproval of the basic natural monopoly structure of this
| |
| _
| |
| industry as it existed on the date of enactment of the statute.
| |
| _ Antitrust review is thus to be undertaken with due regard for the pervasive regulatory environment in which electric utili-F ties operate. Moreover, Congress was very circumspect in its
| |
| (
| |
| grant of antitrust review authority to the Commission; it limit-ed the permissible area of inquiry only to consideration of the
| |
| ,
| |
| impact of those activities sought to be licensed by the particu-
| |
| ! lar application for which a Sectior. 05c hearing is conducted.
| |
| These clear guidelines, by operation of law, must be
| |
| '
| |
| closely adhered to by the Licensing Board in assessing the al-
| |
| .
| |
| legations of anticompetitive conduct that have been made against these Applicants.
| |
| F L
| |
| :p A. THE PHRASE " SITUATION INCONSISTENT WITH
| |
| < THE ANTITRUST LAWS" AS A REVIEW STANDARD
| |
| :L The fact that Congress chose to have the Commission focus on inconsistencies with specifically enumerated antitrust laws, rather than look to licensed accivities violative of such
| |
| ; legislation, raises a threshold question as to what standard
| |
| 'i should be applied under Section 105c to determine whether or not l
| |
| l 1
| |
| -
| |
| s+%
| |
| l~
| |
| _ _
| |
| | |
| _
| |
| __
| |
| -
| |
| issuance of an unconditioned nuclear license would run afoul I
| |
| of the statute. The logical place to turn as a starting point for our inquiry is the Report of the Joint Committee on Atomic
| |
| _
| |
| Energy which accompanied the bill eventually enacted. H.R.
| |
| _ Rep. No. 91-1470, 91st Cong., 2nd Sess. (1970) (hereinafter
| |
| * referred to as " Committee Report").-7/ In discussing the " sit-
| |
| ~
| |
| untion inconsistent" language of the statute, it was there ex-plained (3 U.S. Code Cong. & Admin. News, at 4994-95; emphasis
| |
| -
| |
| added):
| |
| ,_ The concept of certainty of con-
| |
| .j travention of the antitrust laws
| |
| 't or the policies clearly underly-ing these laws is not intended to
| |
| -
| |
| be implicit in this standard; nor i is mere possibility of inconsis-tency. It is intended that the finding be based on reasonable h
| |
| t-probability of contravention of the antitrust laws or the poli-cies clearly underlying these laws.
| |
| ''
| |
| It is intended that, in effect, the
| |
| - Commission will conclude whether in its judgment, it is reasonably prob-r able that the activities under the license would, when the license is
| |
| ~[ issued or thereafter, be inconsis-
| |
| *
| |
| - tent with any of the antitrust laws or the policies clearly underlying
| |
| -
| |
| these laws. * ** The Committee is well aware of the phrases "may be" r or " tend to" in the Clayton Act, and d; of the meaning they have been given by virtue of decisions of the Supreme
| |
| {
| |
| L 7/ The Committee Report is reprinted in 3 U.S. Code Cong.
| |
| & Admin. News 4981-5013 (1970).
| |
| _
| |
| w w
| |
| | |
| _ _ .
| |
| _
| |
| _.
| |
| -
| |
| Court and the will of Congress -- namely, ;
| |
| reasonable probability. The Committee l r has -- very deliberate 3y -- also j
| |
| ,
| |
| chosen the touchstone of reasonable probability for the standard to be con-
| |
| -. sidered by the Commission under the j revised subsection 105c of the bill.
| |
| ,
| |
| _
| |
| Applicants submit that the cautionary note sounded i
| |
| i in the above remarks was designed to alert the commission that
| |
| ~
| |
| J r its review responsibility under Section 105c was not an open l
| |
| invitation to use the licensing procedure as an excuse for
| |
| ~
| |
| fostering unintended competition within the highly regulated
| |
| .
| |
| framework of the electrie utility industry. Indeed, the Com-
| |
| ; mittee Report specifically admonished the Commission against implementing the antitrust licensing process in a manner which 7
| |
| would "further such competitive postures, outside the ambit of
| |
| : [' the provisions and established policies of the antitrust laws.,
| |
| :L as the Commission might consider beneficial to the free enter-
| |
| -
| |
| _
| |
| prise system" (3 U.S. Code Cong. & Admin. News, at p. 4994).
| |
| 1
| |
| , Rather, Section 105c was carefully framed to reach ll
| |
| '- only those licensed activities having a reasonable probability
| |
| ^
| |
| of producing or maintaining actual anticompetitive consequences
| |
| .-
| |
| prohibited by t.he letter or the settled policies of the Sherman Act, the Clayton Act, the Federal Trade Commission Act, or other
| |
| !
| |
| antitrust statutes. The legislative history of the provision,
| |
| - while not entirely conclusive on the subject, suggests that
| |
| <
| |
| w..s
| |
| -
| |
| -
| |
| - - - ,- a , - - - - - - -- - - , - -
| |
| | |
| .
| |
| -
| |
| ...
| |
| -
| |
| ; any broader reading of the " situation inconsistent" language
| |
| -
| |
| was unintended.
| |
| '
| |
| : l. The Legislative History. The forerunner to the
| |
| [ phrase in question can be found in the predecessor statute, the Atomic Energy Act of 1954, 5105(c), ch. 1073, 51, 68 Stat.
| |
| -
| |
| 938 (1954). The standard there formulated -- namely, "would
| |
| . tend to create or maintain a situation inconsistent with the antitrust laws" -- had its derivation in.the Federal Property E and Administrative Services Act of 1949, Section 207," which
| |
| ; 8/
| |
| -
| |
| dealt with disposals of surplus federal property. On the I e-
| |
| .
| |
| basis of the legislative history of that statute, it is fair
| |
| .. to assume that Congress optad for the " situation inconsistent" l language in order to reach disposals which were clearly anti-p competitive in nature, but fell outside the limited jurisdic-L.
| |
| h 8/ 40 U.S.C. 541iF TI970).
| |
| -
| |
| At the time the Atomic Energy
| |
| -
| |
| Act of 1954 was enar:ted, Section 207 of the Federal Property and Administrative Services Act of 1949 provided (Act of June l 30, 1949, ch. 288, S207, 63 Stat. 318 (1949)):
| |
| L.
| |
| Whenever any' executive agency shall r begin negotiations for the disposi-I tion to private interests of a plant or plants or other property, which
| |
| ,
| |
| cost the Government $1,000,000 or j more, or of patents, processes, tech-L- niques, or inventions, irrespective (Cont'd next page) i e
| |
| f i
| |
| w
| |
| | |
| . _- , - - ._.
| |
| _
| |
| ..
| |
| .
| |
| tional reach of Section 7 of the Clayton Act as then in ef-
| |
| ~ ~
| |
| 9/
| |
| fact.
| |
| l when this same review standard was incorporated
| |
| , r-
| |
| '
| |
| into the Atomic Energy Act of 1954, every indication is that
| |
| _ Congress still looked upon it as having very limited applica-t i
| |
| tion outside the area of actual antitrust violations. This
| |
| -
| |
| can perhaps best be seen from the debate on the floor of the
| |
| ,
| |
| '
| |
| Senate over the amendment proposed by Senator Humphrey to the i-suggested legislation. The bill that was then under considera-
| |
| _
| |
| tion, and ultimately enacted, was known as the Hickenlooper
| |
| -
| |
| 8/ Cont'd
| |
| -
| |
| of cost, the executive agency shall promptly notify the Attorney General
| |
| .,... of the proposed disposal and the
| |
| :l probable terms or conditions thereof.
| |
| : '- Within a reasonable time, in no event i
| |
| to exceed sixty days after receiving l{
| |
| !u such notification, the Attorney General shall advise the Administrator and the interested executive agency whether, in-sofar as he can determine, the proposed
| |
| :: lr
| |
| ' ' -
| |
| disposition would tend to create or maire tain a situation inconsistent with the
| |
| .. antitrust laws.
| |
| :L 9/ Prior to 1950, Section 7 of the Clayton Act applied only to stock acquisitions and mergers. Accordingly, the
| |
| '.
| |
| disposal of assets, as opposed to stock, under the Federal ll- Property and Administrative Services Act, was not considered a violation of the antitrust laws. The predecessor statute (Cont'd next page)
| |
| __
| |
| K_ i i
| |
| . . . , _ _ . - . _ _ . . - . - , - - - ------ --- .
| |
| . - . -
| |
| | |
| _
| |
| ..
| |
| _
| |
| Amendment, which provided in relevant part for the' Attorney
| |
| ~
| |
| General to advise the Atomic Energy Commission whether a proposed license "would tend to create or maintain a situa-r 10/
| |
| ! tion inconsistent with the antitrust laws."-- rnder this
| |
| _
| |
| legislative formulation, the Commlssion was not required to
| |
| ~
| |
| take any action as a result of the Attorney General's advice
| |
| -
| |
| letter.
| |
| Senator Humphrey proposed that the Hickenlooper
| |
| -
| |
| Amendment be revised to require the Commission to follow the Attorney General's recommendation and reject the license application upon receiving advice that issuance of the license "would create or maintain a situation inconsistent with the
| |
| '
| |
| antitrust la ??" however, the recommendation would not be
| |
| ..
| |
| < deemed binding on the AEC if the Attorney General concluded
| |
| :L only that the proposed license "would tend to create or I
| |
| -.
| |
| : r 9/ Cont'd i to the Fed' ral Property and Administrative Services Act --
| |
| -
| |
| the Surplus Property Act of 1944, ch. 479, S20,,58 Stat. 765, 775 (1944) -- had used as the relevant standard, "would violate l[ the antitrust laws." By changing this standard in 1949 to
| |
| " inconsistent with the antitrust laws," Congress was able c.
| |
| to reach asset disposals under the Federal Property and .
| |
| * Administrative Services Act. The need for this modification wad, however, short-lived, since Congress extended Section 7
| |
| ~
| |
| of the Clayton Act to asset acquisitions and mergers in 1950.
| |
| See generally, Comments on the Practical Value Legislation, Comm. on Atomic Energy, The Ass'n of the Bar of the City of
| |
| ,- New York, April 8, 1970, reported in Hearings on Prelicensing l Arcitrust Review of Nuclear Powerplants Before the Joint l Committee on Atomic Energy, 91st Cong., 1st Sess., Pt. 2, <
| |
| at 597 (1970) (hereinafter referred to as " Hearings").
| |
| 10/ 100 Cong. Rec. 11905 (1954).
| |
| __
| |
| %M
| |
| __. -
| |
| , _ - . .
| |
| | |
| - _ - _ _ _ _ _ _ _ _ _ _ _-_____.____
| |
| _
| |
| -.
| |
| -
| |
| '
| |
| maintain a situation inconsistent with the antitrust laws."
| |
| a
| |
| { In the ensuing floor discussion, Senator Ferguson focused directly on the "situstion inconsistent" language and asked Senator Humphrey whether it was tantamoun't to an actual
| |
| _. violation of the antitrust laws, or was something less.
| |
| l Senator Humphrey responded that he intended it to mean an anti-
| |
| --
| |
| 11/
| |
| trust violation.-- When Senator Ferguson pressed his point on others, Senator Hickenlooper confirmed that the intended construction of the quoted phrase was that the Attorney Gen-
| |
| _
| |
| eral's recommendation would be binding on the AEC if the ad-vice letter concluded that the proposed license would estab-lish and maintain a condition in violation of the antitrust 12/
| |
| --
| |
| laws. Senator Ferguson then indicated that he had no dif-
| |
| -
| |
| ficulty with this interpretation, and he later clarified the
| |
| -
| |
| matter in response to Senator Capehart's inquiry as to the 6
| |
| ,,
| |
| meaning of the " situation inconsistent" language by stating 13/
| |
| .r categorically: " violation of the antitrust laws."--
| |
| -
| |
| !
| |
| 11/ Ibid.
| |
| l
| |
| -
| |
| 12/ Ibid.
| |
| -
| |
| 13/ 100 Cong. Rec. 11906 (1954).
| |
| M 4
| |
| " O g e
| |
| _ . ~ , _~ .i - , , , . , . - , _ _ .- % m ,, , .,, ., .,
| |
| | |
| -
| |
| _
| |
| -
| |
| Although the Humphrey Amendment passed the Senate I on July 24, 1954, it differed from the House version of the
| |
| !
| |
| antitrust review provision (H.R. 9757) in that the latter I -
| |
| l gave the Attorney General's recommendation no binding effect
| |
| - whatsoever on the AEC. In the compromise bill that was final-ly adopted, the House view prevailed. The standard ultimately
| |
| ~
| |
| selected was the less conclusive "would tend to create or maintain a situation inconsistent with the antitrust' laws."
| |
| -
| |
| 68 Stat. 938 (1954).
| |
| On the basis of the foregoing analysis, it.would ap-pear that the insertion of the phrase " tend to", rather than use of the " situation inconsistent" language, was what Congress primarily relied upon to extend the reach of the 1954 Act beyond
| |
| ,
| |
| actual antitrust violations. This was plainly the understand-ing of both the AEC Staff and the Department of Justice when
| |
| .. they commented on the proposed 1970 amendments to the Atomic Energy Act of 1954.
| |
| '-'
| |
| Thus, Joseph F. Hennessey, then General Counsel of
| |
| '
| |
| the AEC, argued in support of the Staff's 1969 antitrust re- l
| |
| -
| |
| view proposal, which included the " tend to" phrase, by making _
| |
| t, reference to its historical derivations in the following terms (Hearings, Pt. 1, at pp. 89-90):
| |
| -
| |
| The language in the 1954 act was borrowed from the language of the Federal Property and Administrative j l
| |
| l l
| |
| ._
| |
| _
| |
| | |
| - _ _
| |
| _
| |
| -
| |
| ,
| |
| '
| |
| Services Act which requires
| |
| * consulta-
| |
| -
| |
| tion with the Attorney General be-g fore disposing of certain Government i property and the language is the same,
| |
| " tend to create or maintain a posi-F tion inconsistent with the anti-trust laws."
| |
| .
| |
| - But I think it is interesting go-ing beyond [ sic] the Federal Property Act to its predecessor, the surplus
| |
| ,,
| |
| Disposal Act, the Surplus Disposal Act used the words "which violates antitrust laws."
| |
| p So when the Congress considered the matter, at least in that period in the late forties, they thought that
| |
| - there was good reason to move from
| |
| " violates" to "tends to violate".
| |
| Looking at this from the stand-point of prelicensing review, you were pretty well restricted if you were looking for violation of the n antitrust laws at that time. What you are more likely to have is an
| |
| [' evolving situation that presents a
| |
| ,.
| |
| potential for later violations of
| |
| '
| |
| the law which you can prevent by 147
| |
| - proper guidance at the early stage As he explained at another point in his testimony before the
| |
| "
| |
| Joint Committee on Atomic Energy (Hearings, Pt. 1, at p. 39):
| |
| "I think the provisions of the [1954] act and the [" tend to"]
| |
| !
| |
| L 14/ See S. 1883, H.R. 9647., 91st Cong., 1st Sess. 517 (19II). The Staff's proposed amendment was not adopted.
| |
| .-
| |
| l l'
| |
| _
| |
| | |
| _
| |
| MS
| |
| -
| |
| - bills that we have go beyond actual violations to activ-i
| |
| '
| |
| ities in their inception which may head in the direction
| |
| 'F of violating the laws."
| |
| of similar import were the remarks made by
| |
| ._
| |
| Walker B. Comegys, then Acting Assistant Attorney General,
| |
| , Antitrust Division, at his appearance before the same Joint Committee (Hearings, Pt. 1, at p. 122):
| |
| . . -
| |
| [F] rom a legal sense we feel that apply-ing the accepted criteria of the Sherman
| |
| -
| |
| Act, the Clayton Act and the other anti-trust statutes, there may be a lower
| |
| -
| |
| threshold of anti-competitive effect in-volved under the " tend to" language that you have reference to, and we feel that advice to this effect should be made available to the AEC as contemplated by the existing statute. *** I would
| |
| "
| |
| regard that language as requiring the Attorney General to give views which would indicate, just as the statute said, whether this< tended to go contrary to
| |
| --
| |
| the antitrust statutes, without requiring the Attorney General to state that the li-censing transaction under consideration was m in actual violation of the antitrust laws.
| |
| I It is with this as background that we think it not altogether insignificant that Congress eliminated the
| |
| ;- words " tend to" from the 1970 amendment to Section 105c.
| |
| The clear implication of this deletion is that the expan-
| |
| ~
| |
| sive antitrust standard urged upon the Joint Committee by
| |
| -
| |
| O w
| |
| , _ _ _ ,
| |
| | |
| _ _ _
| |
| _.
| |
| -
| |
| _
| |
| the Staff and the Department was rejected in favor of the for-
| |
| ~
| |
| mulation originally suggested in the Humphrey Amendment of
| |
| .
| |
| 1954, as then understood to mean "the equivalent of [an) actu-r j al violation of the antitrust laws" (3 U.S. Code Cong. & Admin.
| |
| , News, at pp. 4991-4992).
| |
| '
| |
| This conclusion remains unaltered even if the elimi-
| |
| ,
| |
| i F nation of the " tend to" language is ex'plained away as nothing
| |
| }
| |
| more than an effort to rid the statutory provision of an inher-r- 15/
| |
| ~~
| |
| ent redundancy. Even on those terms, this change reflects l
| |
| .
| |
| a perceptive understarlding by Congress that both Section 7 of the Clayton Act (15 U.S C. 518) and Section 5 of the Federal Trade Commission Act (15 U.S.C. 545) accomplish b-f their ex-press terms precisaly what Congress intended under section 105c
| |
| '
| |
| '
| |
| -- namely, to " nip in the bud" (U.S. Code Cong. & Admin. News, at p. 4994) antitrust violations. It was not the intent of L the framers of Section 105c to bestow on the Commission author-ity to fault licensed activities which " tend to" be incipient
| |
| '
| |
| violations. Congress eschewed such a tautological formula, I
| |
| opting instead for a more meaningful standard which incorpo-c
| |
| ''
| |
| I 15/ See Brebbia, Antitrust Problems in The Licensing and Fermit Authority of the United States Nuclear Regula-tory Commission, 26 Mercer L. Rev. 749, 772 (1975).
| |
| .
| |
| Wf
| |
| . - - ,
| |
| | |
| _
| |
| ~
| |
| _
| |
| _.
| |
| rates only the " inconsistency" concept which is implicit in j the incipiency doctrine already extant in certain antitrust
| |
| __ laws.
| |
| '
| |
| That a broader reach of this Section 105c review
| |
| -'
| |
| standard was unintended is perhaps reflected most clearly in the earlier-quoted remarks in the Committee Report on the
| |
| ._.
| |
| ,
| |
| new legislation. What was said there in connection with the
| |
| _ " situation inconsistent" language bears repeating (3 U.S. Code Cong. & Admin. News, at p. 4995):
| |
| '
| |
| The Committee is well aware of the phrases "may be" and " tend to" in the Clayton Act, and of the meaning they have been given by virtue of decisions of the Supreme Court and
| |
| '
| |
| the will of Congress -- namely, rea-sonable probability. The Committee
| |
| '[
| |
| -
| |
| t.
| |
| has -- very deliberately -- also chosen the touchstone of reasonable probability for the standard to be r- considered by the Commission under i
| |
| "
| |
| the revised subsection 105c of the bill.
| |
| ,
| |
| : 2. Adherence to Section 5 of the FTC Act. It
| |
| : t. -
| |
| thus appears that the congressional focus on inconsistencies
| |
| ,[~
| |
| L with the antitrust laws was motivated more by a desire to give full recognition to the looser review standards in the
| |
| (>
| |
| ( '' Clayton Act and the Federal T .de Commission Act than by any design to expand the existing criteria for proving vio-
| |
| _
| |
| 1ations under other antitrust provisions beyond the limits l
| |
| l l-
| |
| .
| |
| - -
| |
| | |
| ____ _
| |
| -
| |
| -
| |
| -
| |
| -
| |
| already assigned to them by Congress and the courts. Appli-
| |
| -
| |
| l cants recognize, howe' - that in the legislative effort to
| |
| ,i accommodate the incipiency doctrine under Section 7 of the
| |
| ! Clayton Act and Section 5 cf the FTQ Act through use of the
| |
| -
| |
| " situation inconsistent" language, there inevitably crept in-to the Sherman Act standard, for example, a degree of elastic-
| |
| ,-
| |
| I ity which the actual terms of the statute do not normally per-
| |
| -
| |
| mit. Even so, in ascertaining the extent to which this has 1 resulted in an enlargement of the prohinited area covered by
| |
| -
| |
| these other restrictive antitrust standards (such as Sections
| |
| '
| |
| 1 and 2 of the Sherman Act) for purposes of Section 105c re'-
| |
| view, we are not without guidance. For every indicaticn is L
| |
| that Congress considered as the outer limits of its " reason-
| |
| -
| |
| able probab'ility" yardstick that which the Federal Trade Com-
| |
| .r. mission has determined to be offensive to general antitrust
| |
| :
| |
| policies under Section 5 of the Federal Trade Commission Act.
| |
| .{a In this regard, we are essentially in agreement with the conclusion of the only licensing board to date which has had occas' ion to ad6ress this question following a full anti-trust hearing. This was in the Consumers Power Company (Mid-
| |
| '[- land Units 1 & 2) proceeding, Docket Nos. 50-329A and 50-330A,
| |
| '
| |
| decided July 18, 1975 (hereinafter referred to as " Consumers").
| |
| l The licensing board there ruled (Consumers, p. 40):
| |
| _
| |
| --
| |
| ..
| |
| m -
| |
| | |
| _ _ _ . - - _ . __--_ _.
| |
| l n.
| |
| !
| |
| .-
| |
| :
| |
| F
| |
| ,
| |
| ,
| |
| '
| |
| i
| |
| - In summary, we conclude as a matter
| |
| ;
| |
| of law that " situation inconsistent with the antitrur,t laws" means anti-
| |
| _
| |
| competitive conduct, which term in- )
| |
| cludes both violations of the anti-trust laws and practices determined to be unfair by the use of the cri-
| |
| ~
| |
| teria quoted in Heater v FTC [503 F.2d 321 (9th Cir. 1974)]. [Empha-sis in original.]
| |
| This conclusion reats on sound logic and common sense. Section 5 of the Federal Trade Commission Act con-tains the most expansive standard of the antitrust laws
| |
| -
| |
| specifically enumerated in Section 105a of the Atomic Energy Act (42 U.S.C. 52135(a)). Its interdiction against unfair competition has been deemed to extend beyond unfair methods
| |
| .
| |
| illegal at common law. See FTC v Motion Picture Advertising I
| |
| '', Service Co., 344 U.S. 392, 394 (1953); Luria Bros. & Co. v FTC,
| |
| ,- 389 F.2d 847, 859 (2d Cir.), certiorari denied, 393 U.S. 829
| |
| '
| |
| -
| |
| (1968). More significantly, the statute has been recognized
| |
| ;~ as an additional, and indeed longer, enforcement arm against L.
| |
| practices that tend to run afoul of the Sherman and Clayton
| |
| _
| |
| Acts. As the Supreme Court declared in FTC v Motion Picture
| |
| ,
| |
| Advertising Services Co., 344 U.S. 392, 394-395 (1953):
| |
| t
| |
| '- It is * *
| |
| * clear that the Federal Trade Commisson Act was designed to supplement and bolster the Sherman
| |
| _
| |
| Act and the Clayton Act * ** to stop in their incimiency acts and practices which, w1en full blown, would violate those acts. [ Emphasis
| |
| . -
| |
| added.]
| |
| ,
| |
| %=-4
| |
| .~-w
| |
| | |
| _
| |
| _
| |
| _
| |
| Accord: FTC v Brown Shoe Co., 384 U.S. 316, 322 (1966);
| |
| _
| |
| : FTC v Cement Institute, 333 U.S. 683, 708 (1948).
| |
| -. This was similarly the principal concern of Con-t
| |
| .
| |
| gress in pres ribing antitrust review under Section 105c as
| |
| ~
| |
| an element of the Commission's licensing responsibility.
| |
| As reflected in the Committee Report, the antitrust deter-
| |
| - ,
| |
| mination required prior to issuance of a license to construct
| |
| _,
| |
| or operate a nuclear facility was whether, in the Commission's judgment, "it [was] reasonably probable that the activities
| |
| -
| |
| under the license would, when the license issued or thereafter, be inconsistent with any of the antitrust laws or the policies clearly underlying these laws" -(3 U.S. Code Cong. & Admin.
| |
| News, at p. 4994; emphasis added). The clear objective was,
| |
| -
| |
| [_ as the Committee Re? ort suggests (id.), "to nip in the bud any incipient antitrust situation" attributable to the license -
| |
| -
| |
| activities.
| |
| 'i Resort to the accepted criteria which serve to define
| |
| -
| |
| .-
| |
| the scope of Section 5 of the Federal Trade Commission Act --
| |
| ,
| |
| .
| |
| first announced by the Ninth Circuit in , Heater v FTC, 503 F.2d
| |
| , 321, 323 (9th Cir. 1974) -- fully accomplish this objective.
| |
| '!
| |
| -
| |
| Those criteria were referenced by the consumers licensing board
| |
| ''
| |
| as working guidelines for Section 105c review in the following
| |
| -.
| |
| terms (Consumers, supra, at pp. 40-41):
| |
| -
| |
| m l-l l
| |
| __ _
| |
| | |
| ._
| |
| _
| |
| __
| |
| _
| |
| l
| |
| --
| |
| (a) conduct which is a violation 1 of the antitrust laws enumerated in Section 105a of the Atomic Energy 1 Act, including conduct heretofore '
| |
| _
| |
| '
| |
| determined to be unfair by the FTC pursuant to Section 5 of the FTC
| |
| >
| |
| Act; and (b) conduct, without neces-
| |
| ~
| |
| sarily having been previously con-sidered unlawful, (1) which offend public policy as it has been estab-lished by statutes, the common
| |
| -
| |
| law, or otherwise, or, in other words, is within at least the penumbra of some common law,
| |
| , statutory, or other established concept of unfairness; (2) which is immoral, unethical, oppressive or l unscrupulous; and (3) which causes l substantial injury to consumers competitors or other businessmen.16/
| |
| -
| |
| Reliance on this standard as the measure of pos-I sible antitrust consequences flowing from the issuance of a ll license for a nuclear facility has still another virtue.
| |
| 't Under Section 105c, Congress made clear that it was con-cerned not only with the reasonable probability of a con-
| |
| , travention of the antitrust laws, but also "the policies
| |
| ._
| |
| i I"
| |
| 16/ The derivation of the Ninth Circuit's statement of
| |
| ,_ criteria, at feast insofar as it went beyond judicially determined antitrust violations, is the Federal Trade Com-
| |
| ,
| |
| mission's Statement of Basis and Purpose of Trade Regula-i
| |
| -
| |
| tion Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. 8355 (1964) (hereinafter "FTC Statement").
| |
| This FTC Statement was quoted by the Supreme Court in its
| |
| _ most recent analysis of the scope of Section 5 of the Fed-l eral Trade Commission Act in FTC v Sperry & Hutchinson Com-l Eagy, 405 U.S. 233 (1972).
| |
| ._
| |
| Se
| |
| , , r -=-T -~"
| |
| | |
| -
| |
| _
| |
| ~
| |
| _.
| |
| j
| |
| -
| |
| clearly underlying these laws" (3 U.S. Code Cong & Admin.
| |
| News, at p. 4994). Section 5 of the Federal Trade Commis- j
| |
| - sion Act takes those antitrust policies into account.
| |
| This was articulated in unambiguous terms by the Supreme
| |
| ~
| |
| Court in FTC v Brown Shoe Co., 384 U.S. 316, 321 (1966),
| |
| where it stated:
| |
| .-
| |
| This broad power (to declare trade practices unfair under Section 5]
| |
| _ is particularly well established with regard to trade practices which conflict with the basic pol-icies of the Sherman and Clavton Acts even though such practices may not actually violate these laws. [ Emphasis added.]
| |
| Accord: Fashion Originators' Guild of America v FTC, 312 U.S.
| |
| .
| |
| -
| |
| 457, 463 (1941).
| |
| [. A superficial reading of the " policies clearly under-
| |
| -
| |
| lying" language, might suggest at first glance that reliance
| |
| "
| |
| on Section 5 of the Federal Trade Commission Act to define the
| |
| '
| |
| outer limits of Section 105c review is too restrictive in that,
| |
| -
| |
| .
| |
| under the Commission's mandate, the policies of other antitrust
| |
| _ laws are not alone to be considered, but the established poli-p cies underlying FTC Section 5 itself are relevant as well. But
| |
| ' such an argument fails to appreciate the full reach of the un-fair trade practices provision. It seems by now to be well rec-
| |
| ._
| |
| ognized that Section 5 is to be applied in a manner that takes
| |
| .
| |
| 4 m.
| |
| _ ____ _ __ - - - - - - - - - --
| |
| emav v-"-
| |
| | |
| _
| |
| -
| |
| ,
| |
| ..
| |
| cognizance of all antitrust policies. It long ago was held
| |
| ._.
| |
| to be applicable to practices which are offensive to public
| |
| _ policy, including "the policy of the common law, equity or statutory, with statutes paramount." See FTC v Paramount Famous-Lasky Corp., 57 F.2d 152, 154 (2d Cir. 1932).
| |
| ~
| |
| And more recently the Ninth Circuit made clear in Heater v FTC,
| |
| -
| |
| supra, 503 F.2d at 323, that one of the factors to be con-sidered in making the determination of unfairness is:
| |
| Whether the practice, without necessarily having been previously considered unlawful, offends pub-lic policy as it has been estab-lished by statutes, the common -
| |
| law, or otherwise -- whether, in other words, it is within the penumbra of some common-law,
| |
| -
| |
| statutory, or other established concept of unfairness * * * *
| |
| -
| |
| Accordingly, it is, we submit, analytically and
| |
| .-
| |
| legally sound to conclude that the congressional intent to
| |
| ._.
| |
| ,
| |
| insure against the issuance of a nuclear license where the '
| |
| _ activities proposed thereunder could have a reasonable prob-ability of contravening the letter or underlying policies of
| |
| ~
| |
| the antitrust laws is fully served by the Commission's adher-ence to FTC Section 5 criteria as the appropriate benchmarks for Section 105c review. In this regard, we disagree with
| |
| _ the suggestion in Consumers that a broader standard might be inferred from the fact that Congress framed the antitrust re-l
| |
| ~
| |
| ._
| |
| --s
| |
| | |
| _
| |
| -
| |
| l 1
| |
| .
| |
| view provision in terms of the " antitrust laws" generally, rather than restricting its scope, as it could have done,
| |
| ,_ simply to inconsistencies with the Federal Trade Commission
| |
| !
| |
| .
| |
| 17/
| |
| Act in particular (Consumers, supra, p. 39).-- In the
| |
| ~
| |
| first place, Congress did not have before it et any time the cumbersome language proposed in Consumers; its focus e-was, instead, on framing amendatory language to the Atomic
| |
| ,,
| |
| Energy Act of 1954, which already contained the general reference to " antitrust laws." Second, it must be remem-bered that the congressional deliberations surrounding
| |
| '
| |
| enactment of the 1970 antitrust review provision took place without the benefit of the Ninth Circuit's decision t.
| |
| in Heater v FTC, supra. While the tenor of that ruling
| |
| --
| |
| L might well have been anticipated from the FTC Statement of
| |
| , . .
| |
| --
| |
| 17/ The Consumers' licensing board made this point in
| |
| ,
| |
| the Tollowing terms (Consumers, supra, at p. 39):
| |
| .
| |
| Similarly, it would not have been a difficult feat of draftsmanship
| |
| -
| |
| to have restricted the operation
| |
| "
| |
| of Section 105 of the Atomic Energy Act to violations of the
| |
| , antitrust laws including Section 5 of the FTC Act including " unfair
| |
| -
| |
| methods of competition" or " unfair or deceptive acts or practices" as determined by the FTC. In fact
| |
| _ the Board in the last sentence essentially drafted such a re-striction. However, Congress did not. [ Emphasis is original.)
| |
| .__
| |
| M
| |
| | |
| ._ _ - _ _ ___ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ .
| |
| .__
| |
| !
| |
| -
| |
| .. l l
| |
| _
| |
| 1964 (n. 16, supra), and from the progenitors of the l 1
| |
| , Heater decision (see, e.g., Sperry & Hutchinson v FTC,
| |
| -
| |
| 432 F.2d 146 (5th Cir. 1970), modified, 405 U.S. 233 i (1972)), nowhere had the Section 5 criteria been so
| |
| ~
| |
| clearly and concisely articulated. It is, therefore, not at all surprising that Congress opted for the more
| |
| -
| |
| i elegant and inclusive reference to "the antitrust laws"
| |
| - in drafting Section 105c. Nor is there anything in the legislative history to support the supposition in Con-
| |
| '
| |
| sumers that Congress used these words to reflect an in-tent to delegate to the Commission antitrust review re-
| |
| [ sponsibility on more expansive terms than those dis-
| |
| ,
| |
| cussed above.
| |
| - In reaching this conclusion, we are not un-
| |
| '~
| |
| mindful of the Supreme Court's recent decision in FTC
| |
| "
| |
| v Sperry & Hutchinson Co., 405 U.S. 233 (1972), which
| |
| ,
| |
| " appears to have taken a quantum jump in broadening
| |
| -
| |
| ,.
| |
| the reach of Section 5 to include challenged practices
| |
| _ which fall outside the ambit of the letter or the spirit
| |
| -
| |
| of the antitrust laws."--38/ What impact that ruling may
| |
| --
| |
| have on Section 105c antitrust review is something only
| |
| _
| |
| 18/ See Brebbia, Antitrust Problems in the Licensing and Fermit Authority of the United States Nuclear Regula-tory Commission, 26 Mercer L. Rev. 749, 776 (1975) (empha-sis added).
| |
| : w. ,
| |
| s-
| |
| | |
| ,
| |
| l
| |
| _ 1 l
| |
| 1 l
| |
| time will tell. It seems clear, however, that for pur-
| |
| -
| |
| poses of the present hearing the Licensing Board need !
| |
| not be concerned with the Sperry & Hutchinson decision.
| |
| ; For, it.is the exclusive responsibility of the Federal
| |
| -
| |
| Trade Commission to enforce the Federal Trade Commission Act. The courts, including the Supreme Court in the cited
| |
| ''
| |
| decision, have consistently accorded full deference to the special expertise of the FTC in defining unfair methods of ,
| |
| 19/
| |
| competition and unfair or deceptive acts or practices.--
| |
| The Federal Trade Commissio.; is plainly entitled to the same deference from the Nuclear Regulatory Commission; it would be remiss for this Licensing Board to redefine the established criteria for determining unfairness under
| |
| ; Section 5 on the basis of Sperry & Hutchinson without first
| |
| __
| |
| receiving FTC guidance -- and to our knowledge there has to
| |
| - date been none in this particular area.
| |
| ,
| |
| : 3. The Scope of Review. Applicants believe,
| |
| ~ '
| |
| therefore, that this Licensing Caard har no choice but to define the external parameters of its antitrust review
| |
| _
| |
| responsibility under Section 105c in terms of those " situ-lL. ations" created or maintained by the licensed activities
| |
| !
| |
| which can be shown to fall within the ambit of the provi-
| |
| -
| |
| sions and policies of the antitrust laws as determined 19/ Id. See also Jacobs and Melchoir, Antitrust As-pects of the Atomic Energy Industry, 25 Geo. Wash. L. Rev.
| |
| _.
| |
| 508, 510-12 (1957).
| |
| i
| |
| -
| |
| f l
| |
| t
| |
| __.
| |
| | |
| _ _ - _ _ _ _ .
| |
| _
| |
| l e
| |
| f
| |
| '
| |
| 1 l
| |
| l the FTC. Within this framework, it is clear from the
| |
| -
| |
| September 5, 1975 filings with this Board by the Department, l l
| |
| - the Staff and Cleveland that the relevant inquiry can be i i narrowed considerably. For we are not concerned here with
| |
| ~
| |
| all, or even most, of the antitrust laws and policies em-braced within Section 105a of the Atomic Energy Act (42 U.S.C.
| |
| , 52135(a)); rather, the focus of this proceeding has been con-
| |
| ._ fined by those filings to Sections 1 and 2 of the Sherman Act (15 U.S.C. SS1 and 2). The former proscribes contracts, com-binations and conspiracies in restraint of trade; the latter condemns monopolies or attempts to monopolize.
| |
| .
| |
| When we look to the treatment under FTC Section 5
| |
| .
| |
| of practices said to run afoul of Sections 1 and 2 of the Sherman Act, or the policies subsumed thereunder, we find the
| |
| '"
| |
| analysis to be much the same as that invoked by the courts
| |
| "
| |
| when examining alleged violations of these antitrust provi-sions. The difference is in the reach of the two statutes i
| |
| t.
| |
| (Sherman Act and FTC Act) not in the approach taken to as-
| |
| _ certain whether either has been breached. This was explained
| |
| ! by the Seventh Circuit in L. G. Balfour & Co. v FTC, 442 F.2d
| |
| "~
| |
| 1, 9 (7th Cir. 1971), with specific reference to Section 2 l
| |
| t of the Sherman Act, in the following terms:
| |
| l-
| |
| !
| |
| l I
| |
| >
| |
| ._
| |
| | |
| i
| |
| -
| |
| '
| |
| ,
| |
| Section 2 of the Sherman Act, 15
| |
| -
| |
| U.S.C. 52, makes monopolization
| |
| , illegal. Our review, then, is based on an examination of cri-
| |
| ~~ teria which constitute an offense
| |
| '
| |
| under Section 2 of the Sherman
| |
| ' Act. We understand that facts amounting to a Section 5 viola-tion of monopolization should be sustained if they contravene the policies of Section 2, though
| |
| _ they might not constitute a vio-lation of Section 2 itself.
| |
| _
| |
| Not surprisingly, there exists no litmus formula for determining what types of practices fall within the contraven-tion of policies category. The Consumers licensing board ac-t curately described the beneral policy underlying the Sherman Act as being the preservation of competition, not competitors
| |
| _
| |
| (Consumers, supra, at pp. 34, 36). See generally United States
| |
| .
| |
| v Aluminum Company of_ America, 148 F.2d 416, 429 (2d Cir. 1945).
| |
| : , .. In this regard, the provisions of Section 1 and 2 have a common purpose, with the latter designed to insure that "by no possible guise could the public policy embodied in the 1st see; ion be
| |
| -
| |
| frustrated or evaded." See Standard Oil Co. v United
| |
| ,
| |
| States,
| |
| -
| |
| 221 U.S. 1, 60 (1911). To the extent that Section 5 of the Federal Trade Commission Act protects this policy considera-
| |
| 'L tion beyond the protection already afforded by the Sherman Act itself, it operates, as we earlier noted, "* *
| |
| * to stop in their
| |
| ~
| |
| incipiency acts and practices which, when full blown would
| |
| ..
| |
| t_
| |
| | |
| '
| |
| :
| |
| t
| |
| ,I l
| |
| violate [that statute]." FTC v Motion Picture Advertising
| |
| -
| |
| l
| |
| , services Co., supra, 344 U.S. at 394-395 (emphasis add-
| |
| ..
| |
| -_
| |
| ed).
| |
| { The degree to which this incipiency doctrine en-1 - larges the scope of the Sherman Act deserves careful atten-tion. Plainly, an application of Section 5 criteria to the present allegations does not permit the other parties to
| |
| -.
| |
| sweep within the permissible area of inquiry practices which
| |
| '
| |
| do not relate to the Sherman policy. As pointed out by the Consumers licensing board, if a suspect activity results in i 4 -
| |
| no injury to competition, it poses neither an actual nor a i potential threat to the restraints of trade condemned in Sherman 1 and 2, even though it may conceivably conflict l with other antitrust policies. (See Consumers, supra, at~p.
| |
| ,
| |
| !r 36.)
| |
| is l- A good example of this situation was presented in
| |
| "
| |
| FTC v R. F. Keppel & Brothers, Inc., 291 U.S. 304 (1934).
| |
| There, the Keppel and Brothers' program of " break and take"
| |
| > ~
| |
| candy packs was challenged on the ground thtt it induced
| |
| , ,
| |
| children to buy concededly inferior candy in the hope of L obtaining a much-sought-after bonus pack. In view of the fact that the competitors of Keppel and Brothers were free L
| |
| .s o
| |
| . ,.
| |
| 9
| |
| ?
| |
| .
| |
| -r---- e .ay.- -
| |
| ---g,--- - - - -.s-aw y e ap-.r-yr . ---,,- ,-vy,----
| |
| | |
| - - .
| |
| l 4
| |
| !
| |
| _
| |
| (
| |
| _49 r-
| |
| '
| |
| l
| |
| !
| |
| ~
| |
| to engage in the same program (291 U.S. at 313), condem- !
| |
| !
| |
| ,
| |
| nation of the practice was based solely on the injury to
| |
| _ the consumer. See also FTC v Sperry & Hutchinson Co.,
| |
| I supra. .
| |
| -
| |
| The significance of the Keppel & Brothers de-cision to the current analysis is manifest. In that in-stance, Section 5 of the Federal Trade Commission Act was plainly not invoked "to supplement and bolster the Sherman Act * * *" (FTC v Motion Picture Advertising Services Co.,
| |
| supra, 344 U.S. at 394). It would therefore be entirely inappropriate in such circumstances for this Licensing
| |
| _
| |
| Board to condemn the practice used by Keppel and Brothers,
| |
| -.
| |
| for example, under Section 105c as being " inconsistent with"
| |
| , Sherman 1 or 2 or the policy thereunder.
| |
| r- On the other hand, the incipiency doctrine of FTC
| |
| -
| |
| Section 5 can properly be used to extend the reach of the Sherman Act for purposes of the instant Section 105c re-view insofar as the practices in question can be shown to
| |
| .
| |
| relate to the policy of protecting competition. Even in this area, however, there are identifiable limitations.
| |
| !c .
| |
| ;" Most noticeably, with regard to Section 2 of the l
| |
| Sherman Act there is very little distinction between the L.
| |
| statutory prohibition against an " attempt to monopolize,"
| |
| ,
| |
| .
| |
| . . _ _ . , _ _ _ _ _ _ . - _ .
| |
| _w-wp. _,. -
| |
| | |
| ___ . _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
| |
| *
| |
| ;
| |
| .- l
| |
| ( t on the one hand, and the " incipient monopoly" that is reached
| |
| .
| |
| } by virtue of an application of PTC Section 5 criteria, on the other hand. If the latter suggests any enlargement
| |
| ( of the normally forbidden area of conduct, the demarcation
| |
| -
| |
| necessarily lies with the divergent probability standards that are applicable in each case, namely, " dangerous pro-
| |
| _
| |
| bility" for attempted monopoly (see, e.g., American Tobacco Co. v United States, 328 U.S. 781, 785 (1946); Swift & Co. v t United States, 196 U.S. 375, 396 (1905)), and " reasonable probability" where the incipiency doctrine is invoked (see
| |
| '
| |
| Committee Report, supra, at p. 4994). In all other re-
| |
| '
| |
| spects, Section 5 of the Federal Trade Commission Act is coterminous with Section 2 of the Sherman Act insofar as y the former reaches forbidden monopolization, since it evi-
| |
| -. dences a purpose to curb monopoly power only when it is un-L lawfully acquired or wielded (see, e.2., United States v Aluminum Company of America, supra, 148 F.2d at 429), and 1.
| |
| ..
| |
| Section 2 accomplishes that purpose.
| |
| Likewise, the incipiency doctrine as applied
| |
| '
| |
| ,
| |
| to Section 1 of the Sherman Act does not have far-reaching '
| |
| l- implications. While the statutory provision forbids in
| |
| ; absolute terms contracts, combinations and conspiracies in restraint of trade, it is a well-settled principle of anti-
| |
| -
| |
| _ _ --
| |
| | |
| _ _ .
| |
| i
| |
| .
| |
| (
| |
| .
| |
| '.
| |
| trust law that Congress intended the prohibition to apply
| |
| '
| |
| only to those trade restraints which are determined to be un-
| |
| ~
| |
| reasonable. See Northern Pacific Railway Co. v United States, 356 U.S. 1, 5 (1958). Neither the Federal Trade Commission nor
| |
| -
| |
| any court has yet condemned a combination, for example, merely
| |
| - because it is a combination (incipient or otherwise). Rather, it is the purpose or effect of the combination which alone makes it vulnerable under the antitrust laws. On these terms, it is no escape from the proscription in Sherman 1 to be "a little bit" 20/
| |
| unreasonable, even at the inception.-- Thus, Section 5 of the Federal Trade Commission Act has little vitality in this s context; not even the incipiency doctrine goes to far as to fault a lawful combination on the basis of sheer speculation 21/
| |
| --
| |
| that it may in the future be abusively operated.
| |
| Where Section 5 of the FTC Act may supplement Section 1 of the Sherman Act, however, is with respect to
| |
| ;;. those situations involving a challenged practice which does
| |
| .
| |
| "
| |
| 20/ See Reeves, Toward A Coherent Antitrust Policy: The Role of Section 5 of the Federal Trade Commission Act In
| |
| ''
| |
| Price Discrimination Regulation, 16 Boston College Ind. E
| |
| 'w Comm. L. Rev. 151, 164-165 (1975).
| |
| 21/ Ibid.
| |
| _
| |
| .
| |
| ,
| |
| . _ _ _ - . _ _ - _ _ . . -. . _ _ . .. . _ _ _ _ _ - . - -
| |
| | |
| . - _-. . . - . _ . . - . - - - - _. . --_ - -
| |
| ,-
| |
| ;
| |
| i I i .
| |
| !
| |
| . ..
| |
| i !
| |
| _
| |
| not constitute a conventional Section 1 violation but is 3 22/
| |
| -- l 4 -
| |
| analogous and has a similar or identical effect. A l i ,-
| |
| I'
| |
| .
| |
| !- 22/ In this regard, Section 5 of the FTC Act operates
| |
| ! in much the same way as when applied "to supplement and j bolster * *
| |
| * the Clayton Act" (FTC ~~
| |
| v Motion Picture Adver-tising Service Co., supra, 344 U7S. at 394). Since the re-
| |
| ,- levant proscripcTons of the Clayton Act, Sections 3 and 7
| |
| : (15 U.S.C. 5514 and 18) pertain to sales, leases, etc.
| |
| where "the effect may be" to substantially lessen competi-
| |
| *
| |
| ,
| |
| ,- tion (Section 3) and to corporate acquisitions which " tend
| |
| .
| |
| to" create a monopoly (Section 7), the Clayton Act may it-
| |
| '
| |
| , self embody an incipiency test. See Oppenheim, Guides to i Harmonizing Section 5 of The Federal Trade Commission Act With The Sherman and Clayton Acts, 59 Mich. L. Rev., 821, 826 (1961). Thus, Section 5 of the FTC Act serves as a
| |
| <
| |
| supplement in this context to those practices which,
| |
| '
| |
| though not within the Clayton Act prohibition, flout the policies clearly underlying the statute. This area of operation has been denominated " jurisdictional deficien-l - cies." See Report of the Attorney General's National j; Committee To Study The Antitrust Laws 148-149 n.78 (1959).
| |
| i '
| |
| Section 5 would therefore reach a practice that would be i
| |
| ~
| |
| forbidden by Section 3 of the Clayton Act but for the fact that such practice arose in the context of a loan, not a
| |
| ;L sale or lease, or involved a sale of services, not a sale of goods. Similarly, Section 5 would serve to supplement ir Section 7 of the Clayton Act tp the extent that a trans-
| |
| . ,
| |
| '''
| |
| action offensive to the policy of that provision involved an acquisition of stock, for example, by an unincorporated firm, thus falling outside the restriction on corporate acquisition.
| |
| 1 .,
| |
| It is particularly noteworthy to observe in this
| |
| -
| |
| connection that Section 5 of the FTC Act performs precisely lL the same purpose that Congress intended to accomplish by i adding the " situation inconsistent" language to the Federal Property and Administrative Services Act of 1949. This language in the latter statute, it should be remembered,
| |
| '
| |
| served as the model for the Atomic Energy Act of 1954, and was incorporated in slightly modified form in the 1970 Amendments thereto, namely, the present Section 105c.
| |
| .
| |
| '
| |
| .
| |
| o
| |
| , - - - - - ,- --. ,-, ..,n -- .--.,.,,.-.,.,...a, . , , _,-g,,_ __g ,a-.-,.,, - , - . , , _ . , ,.--,,n,,,r,,-,,-
| |
| - -,, ,-. _.n,
| |
| | |
| .
| |
| -
| |
| .
| |
| clear example of this is provided in Atlantic Refining Co.
| |
| v FTC, 381 U.S. 357 (1965). There, the practice found vio-
| |
| - lative of Section 5 was a plan whereby Atlantic sponsored the sale of Goodyear tires, batteries and accessories to At-lantic's wholesale and retail outlets, but left to Goodyear the task of actually selling these products to the Atlantic
| |
| .
| |
| wholesalers and retailers at Goodyear's own price. For
| |
| . its promotional activities, which even included overt acts of coercion, Atlantic received a commission. While recog-nizing that the Atlantic-Goodyear contract was not techni-cally a tying arrangement, the Supreme Court noted (381 U.S.
| |
| at 369):
| |
| ".
| |
| * *
| |
| * the central competitive char-acteristic was the same in both cases -- the utilization of eco-nomic power in one market to cur-
| |
| -
| |
| tail competition in another.
| |
| '
| |
| Accordingly, the Court found that the practice, which con-cededly lacked the formal requisites of a prohibited tie t.
| |
| under Section 1 of the Sherman Act, but possessed the same m adverse consequences, offended Section 5 of the FTC Act.
| |
| And see FTC v Texaco, Inc., 393 U.S. 223 (1968), wherein
| |
| "
| |
| the same rationale was followed to reach a fact situation l;
| |
| distinguishable only for the absence of evidence of overt acts of coercion.
| |
| l l
| |
| l
| |
| '
| |
| .
| |
| | |
| _ _ _ . -
| |
| _
| |
| i
| |
| -
| |
| l
| |
| , I
| |
| '
| |
| 1 I
| |
| In summary then, it is, we submit, sound to con-
| |
| - ,
| |
| l clude from the above analysis that the " situation inconsis-
| |
| _ tent" language in Section 105c of the Atomic Energy Act leaves room for this Licensing Board to expand the reach of I the antitrust laws enumerated in Section 105a of the statute to the limits of Section 5 of the Federal Trade Commission Act, se determined by the FTC. Insofar as this proceeding is concerned, the September 5, 1975 pleadings of the Depart-ment, the Staff and the City of Cleveland simply allege vio-
| |
| )
| |
| lations of Sections 1 and 2 of the Sherman Act. In that con-I text, the incipiency doctrine of FTC Section 5 serves to sup- l plement tile explicit statutory prohibitions in only two respects. With reference to the Sherman 1 prohibition on un-
| |
| ,
| |
| [ reasonable restraints of trade, this Licensing Board may look
| |
| .
| |
| to whether the licensed activities create or maintain not only 2'
| |
| a situation offensive to conventional statutory violations, i
| |
| but also a situation that may not fit the conventional cold but has the same undesired effect as an acknowledged unreason-able restreint of trade. In the area of monopolization, on the !
| |
| other hand, the incipiency rationale dilutes the probability
| |
| ~-
| |
| standard of attempting to monopolize in violation of Section 2 from dangerous probability to reasonable probability.
| |
| <
| |
| .
| |
| .
| |
| | |
| . . - - ..
| |
| -.
| |
| l
| |
| . 1
| |
| . :
| |
| -
| |
| 55- l
| |
| .
| |
| : 4. The Proper Standards for Review. Within these 1 1
| |
| -
| |
| parameters, it is, of course, important that the Licensing !
| |
| "
| |
| l Board invoke the proper yardstick by which an antitrust in- l
| |
| . I
| |
| '
| |
| consistency is to be measured in this proceeding. For this
| |
| '
| |
| purpose, we need go no farther than the criteria enunciated by the courts in adjudicating violations of Sections 1 and 2
| |
| -
| |
| of the Sherman Act. For, as mentioned earlier, when Section
| |
| '
| |
| 5 of the Federal Trade Commission Act has been invoked to pur-
| |
| ~
| |
| sue alleged contracts, combinations or conspiracies in re- !
| |
| l straint of trade or claims of unlawful monopoly, the same considerations have, without material variation, been con-r trolling. See L. G. Balfour & Co. v FTC, supra, 442 F.2d at L 9; Sandura Co. v FTC, 339 F.2d 847 (6th Cir. 1964); Asheville
| |
| [ Tobacco Board of Trade, Inc. v FTC, 263 F.2d 502 (4th Cir.
| |
| L 1959).
| |
| Turning first to the appropriate benchmarks for
| |
| ,
| |
| ascert'aining whether or not there exists a Section 1 viola-
| |
| :- tion, these have been effectively enumerated by Mr. Justice f Brandeis in his usually precise manner in Chicago Board of
| |
| "
| |
| Trade v United States, 246 0'.S. 231 (1918). As there stated (246 U.S. at 238):
| |
| ,
| |
| l Every agreement concerning trade,
| |
| ,
| |
| every regulation of trade, restrains.
| |
| l To bind, ' o restrain, is of their very
| |
| '
| |
| essence. The true test of legality is whether the restraint imposed is such
| |
| '
| |
| as merely regulates and perhaps thereby promotes competition or whether it is
| |
| -
| |
| .
| |
| y , _y -, -- ,
| |
| | |
| 'r
| |
| _
| |
| {
| |
| * r
| |
| '- such as may suppresas or even dastroy competition. To determine that question I the Court must ordinarily consider the t facts peculiar to the business to which the restraint is a? plied; its condition
| |
| ,--
| |
| '
| |
| before and after tie restraint was imposed;
| |
| '
| |
| the nature of the restraint and its effect, actual or probable. The bistory of the
| |
| ..
| |
| restraint, the evil believed to exist, the reason for adopting che particular remedy, the purpose or end sought to be attained, are all relevant facts. This is not be-r cause a good intention will save an other-wise objectionable regulation or the reverse, but because knowledge of intent may help
| |
| _ the court to interpret facts e< to prooict consequences. [ Emphasis added.,
| |
| ~
| |
| This so-called " rule of reason" approach for Section 1 Sherman Act violations is similar to the approach that Congress intended under Section 5 of the Federal Trade Commission Act.
| |
| The House Conference Report accompanying this latter legislation L reflects that those who framed the statutory language designed r to effectuate a public policy of protecting competition against unfair trade r astraints were cognizant of the need to weigh competing factors in evaluating the propriety of a challenged
| |
| ,
| |
| practice. The attitude was expressed perhaps most succ,inctly
| |
| .. in the following terms:
| |
| r * ** Whether competition is unfair or
| |
| ;
| |
| "
| |
| -
| |
| not generally depends upon the surrounding circumstances of the particular case. What is harmful under certain circumstances may 23/
| |
| i;e beneficial under different circumstances.--
| |
| '
| |
| 23/ See House Conf. Report No. 1142, 63rd Cong. 2nd Sess.
| |
| 19 TI914).
| |
| _
| |
| 9 e
| |
| _ _ - . , , - _ _ . - . - - - - ,-----.,-,.-w- m w - y-- '
| |
| | |
| - __ _________
| |
| _
| |
| _.
| |
| That this view has gained judicial acceptance when
| |
| - alleged actual or potential violations of Sherman 1 are examined
| |
| '
| |
| through the eyes of Section 5 of the Federal Trade Commission Act i~ can hardly be contested. The Supreme Court articulated the appli-1 cable standard as early as 1935 in ALA Schecter Poultry Corp. v
| |
| -.
| |
| United States, 295 U.S. 495, when it was called upon to explain
| |
| ,. thu term " unfair competition" appearing in a Live Poultry Code of
| |
| -
| |
| Fair Competition promulgated under the National Industrial Recov-
| |
| : ery Act. The statement made there bears repeating (395 U.S. at
| |
| '
| |
| 532-533):
| |
| ..
| |
| The Federal Trade Commission Act (SS)
| |
| '
| |
| introduced the expression " unfair methods of competition," which were declared to be
| |
| ,i unlawful. That was an expression new in law. *** We have said * *
| |
| * that it
| |
| ; j- does not admit of precise definition; its
| |
| ! ', ' scope being left to judicial determination as controversies arise. What are " unfair
| |
| ,
| |
| methods of competition" are thus to be deter-mined in particular instances, upon evidenceg i l in light of particular competitive conditions and of what is found to be a specific and substantial public interest. [ Emphasis
| |
| '
| |
| ;,. added.]
| |
| Accord: Korber Hats, Inc. v FTC, 311 F.2d 358, 360-361 (1st
| |
| -
| |
| Cir. 1962) (what is unfair method of competition "can only be l assayed in the envr"onmental and marketing context of the par-ticular practice put in issue").
| |
| .
| |
| 24/ See also Reeves, Toward A Coherent Antitrust Policy:
| |
| -
| |
| l The Role of Section 5 of the Federal Trade Commission Act In
| |
| -
| |
| Price Discrimination Regulation, 16 Boston College Ind.
| |
| (Cont'd next page)
| |
| _
| |
| , . . . _ _ _ . _ _ _ _
| |
| ._. _ ___.-. _ _ _ _ _ _
| |
| ._ _ _.
| |
| | |
| -- - . - _ _ _ - - _ - _ . - _ _ _ _ _ _
| |
| .-
| |
| '
| |
| . . .
| |
| This same approach was intended by Congress under
| |
| - its delegation to the Commission of antitrust review authority
| |
| '
| |
| in Section 105c. The Commission itself indicated as much in I
| |
| 25/
| |
| its first Waterford decision.-- As there stated (6 AEC at 49):
| |
| " Careful analysis of the facts in each case is necessary,
| |
| ...
| |
| particularly in view of the groundbreaking nature of the in-
| |
| -. itial decisions in this new area of tb2 Commission's respon-sibility." The Department of Justice, in its 1970 testi-I mony before the Joint Committee on Atomic Energy, was equally emphatic with regard to the appropriate review standard to be
| |
| -
| |
| followed in this forum. Its representative made the following remarks in a context particularly relevant to the present in-t quiry (Hearings, Pt. 1, at p. 128):
| |
| r- Specifically, the industry is now
| |
| ,
| |
| "
| |
| going through a considerable contro-versey over the extent to which, and the 7-.
| |
| means by which, small systems should have
| |
| '
| |
| access to large new generation and trans-
| |
| ' mission facilities. As to this, I think antitrust law provides some general guid-
| |
| '
| |
| ance. Companies acting together to create
| |
| : t. . or control a unique facility may be re-quired by application of the rule of
| |
| ,
| |
| reason, to grant access on equal and non-
| |
| .
| |
| 24/ Cont'd
| |
| - & Domm. L. Rev. 151, 157 (1975); Oppenheim, Guides to Harmonizing Section 5 of The Federal Trade Commission Act With The Sherman and Clayton Acts, 59 Mich L. Rev. 821,
| |
| , 826-827 (1961).
| |
| 25/ See Louisiana Power & Light Compary (Waterford Steam Electric Generating Station, Unit 3), CLI-73-7, 6 AEC 48, 49 (February 23, 1973) (hereafter referred to as "Waterford I").
| |
| .
| |
| .a
| |
| | |
| _
| |
| .
| |
| '
| |
| w+=m discriminatory terms to others who lack a practical alterna-tive. [ Emphasis added.)
| |
| Accordingly, in evaluating the Section 1 Sherman
| |
| -
| |
| Act claims raised here, it is incumbent upon this Licen-
| |
| _ sing Board to factor into its Section 105c analysis the three basic considerations earmarked in Chicago Board of
| |
| "
| |
| Trade as essential to the determination of an alleged
| |
| '
| |
| restraint's reasonableness, namely: (1) the nature of
| |
| ,
| |
| the industry in which the purported restraint appears; (2) the nature and effect of said restraint on competition; and (3) the purpose or end sought to be achieved by engaging in the challenged practice out of which this restraint grew, including, among other things, the business justification therefor. Not only do traditional Section 1 cases support such an approach (see generally, United States v Citizens
| |
| 'T
| |
| : t. & Southern National Bank, 95 S. Ct. 2099 (1975); Silver
| |
| ,1 v New York Stock Exchange, 373 U.S. 341 (1963); Gamco, Inc.
| |
| '
| |
| v Providence Fruit & Produce Building, 194 F.2d 484 (1st Cir.
| |
| 1952), certiorari denied, 344 U.S. 817 (1952)); it is also encouraged by the FTC Section 5 decisions relevant to the
| |
| _
| |
| present inquiry (see generally, Luria Brothers & Co. v FTC, 389 F.2d 847 (3d Cir.), certiorari denied, 3?: U.S. 829
| |
| '
| |
| (1968); La Peyre v FTC, 366 F.2d 117 (5th Cir. 1966); Ashe-1 l
| |
| .
| |
| m
| |
| -
| |
| | |
| ,-
| |
| J ;-
| |
| _
| |
| s
| |
| :
| |
| _
| |
| ville Tobacco Board of Trade, Inc. v FTC, 263 F.2d 502 (4th
| |
| -
| |
| -
| |
| 26/
| |
| l Cir. 1959)).
| |
| - Nor do we find much different the relevant consid-
| |
| ,
| |
| - erations for assessing charges grounded on the Section 2
| |
| ~
| |
| interdiction against monopolizing and attempts to monopo-lize. While applicable only to individual entities (as r-distinguisheci from combinations), the kinship between Sec-
| |
| ,.
| |
| tion 2 and Section 1 has long been acknowledged. In one of its earliest pronouncements on the Sherman Act's i statutory scheme, the Supreme Court observed in United States v American Tobacco Co., 221 U.S. 106, 181 (1911),
| |
| l that the ts, sections "when taken together, embraced every conceivable act which could possibly come within the spirit
| |
| : r'
| |
| ;L or purpose of the publications of the law, without regard
| |
| .r to the garb in which such acts were clothed." See also
| |
| ':
| |
| '-
| |
| Standard 011 Co. v United States, supra, 221 U.S. at 60-61.
| |
| .i It is, therefore, not at all surprising that the aforesaid i
| |
| -
| |
| '
| |
| .
| |
| ,
| |
| -
| |
| l
| |
| ;w 26/ We discuss in Part V. of this Prehearing Legal Brief l '
| |
| l how Ehese considerations bear on the specific allegations l L- made here against Applicants as members of CAPCO; as to i i the allegations made against Applicants individually, see l li the separate Prehearing Fact Briefs filed herewith by each
| |
| _
| |
| Applicant.
| |
| .
| |
| .
| |
| - - - - , - - . . m r -- - . . q w --e, y
| |
| | |
| _ _
| |
| _ _ - -
| |
| .-
| |
| ..
| |
| _
| |
| _
| |
| elements underlying a Section 1 inquiry -- such as, the f the nature of the industry, the effect of the alleged re-
| |
| -
| |
| straint, and its underlying purpose -- play an equally prom-
| |
| !
| |
| inent role when the focus shifts to Section 2. See, e.2 r
| |
| -.
| |
| United States v Columbia Steel Co., 334 U.S. 495, 527-528
| |
| ('1948); Bushie v Stenocord Cogp., 460 F.2d 116, 121 (9th
| |
| ,
| |
| Cir. 1972); N.W. Controls, Inc. v Outboard Marine Corp.,
| |
| r 333 F. Supp. 493, 515 (D. Del. 1971).
| |
| l
| |
| '
| |
| This becomes abundantly clear as soon as one
| |
| "
| |
| pauses to reflect momentarily on the basic characteristics 1,
| |
| of a Section 2 offense. ' Unlawful monopoly within the meaning of the statutory prohibition embraces two distinct elements.
| |
| Borrowing from the Supreme Court's language in United States 7-L v Grinnell Corp., 384 U.S. 563, 570-571 (1966), they are:
| |
| P L (1) the possession of monopoly power in the relevant market, and (2) the r- willful acquisition or maintenance of
| |
| '
| |
| , that power as distinguished from growth
| |
| * or development as a consequence of a
| |
| ,
| |
| superior product, business acumen or
| |
| ].-
| |
| historic accident. [ Emphasis added.]
| |
| [ Monopoly power is defined as the ability to ex-
| |
| ~
| |
| clude competition and to control prices. United States v
| |
| ! E. I. du Pont de Nemours & Co., 351 U.S. 377, 389 (1956).
| |
| l -
| |
| -
| |
| ww
| |
| | |
| ,. . .__ .
| |
| ___-
| |
| .-
| |
| -
| |
| -
| |
| If achieved as "the inevitable consequences of ability, natural forces, or law," it is offensive to neither the letter nor the spirit of the Sherman Act. See United States v United Shoe Machinery Corp., 110 P. Supp. 295, 344 (D. Mass
| |
| .
| |
| - 1953), affirmed per curiam, 347 U.S. 521 (1954). What is proscribed oy the statute is " monopolizing" (United States
| |
| ~
| |
| v Aluminum Company of America, supra, 148 F.2d at 430), which !
| |
| I has consistently been interpreted to mean either the unlawful i acquisition of monopoly power (see, e.2., American Tobacco
| |
| !
| |
| -
| |
| Co. v United States 328 U.S. 781 (1946)), or wrongful use i of such power, although perhaps legally acquired, to control
| |
| ~
| |
| priccs or exclude competition (see, e.2., United States v
| |
| '
| |
| Griffith, 334 U.S. 100, 106-107 (1948)). "In either event, there must be some affirmative showing of conduct from which
| |
| ,
| |
| a wrongful intent can be inferred." Union Leader Corp.
| |
| ! b.. v Newspapers of New England, Inc., 284 F.2d 582, 584 (1st i Cir. 1960), certiorari denied, 365 U.S. 833 (1961).
| |
| I It therefore follows that the measure of both a l
| |
| ,
| |
| Section 1 and Section 2 violation -- whether or not the l
| |
| " rule of reason" label technically attaches -- depends i
| |
| L. in the final analysis essentially on the same careful balancing act that Mr. Justice Brandeis forecast so many u
| |
| -~
| |
| { M V
| |
| -.
| |
| i--.-
| |
| | |
| _.
| |
| r- ,
| |
| '
| |
| t'
| |
| . l
| |
| , i l- l
| |
| -
| |
| 63-
| |
| -
| |
| 1 years ago in Chicago Board of Trade. Compare, e.g., United
| |
| ,
| |
| States v Aluminum Company of America, supra, 148 F.2d at 429-l_ 430. This Licensing Board should steer such a course in the
| |
| !
| |
| . present proceeding.
| |
| !- In reaching this conclusion, Applicants are not ob-l livious to the E*E se rationale under Sherman Act Section 1, and the recognition that it has received in appropriate cases under the incipiency doctrine of Section 5 of the Federal
| |
| -
| |
| Trade Commission Act. See, e.g., Atlantic Refining Co. v FTC,
| |
| - supra, 381 U.S. at 371; Fashion Originators' Guild of America i
| |
| y FTC, 312 U.S. 457 (1941); Adolph Coors Co. v FTC, 497 F.2d
| |
| ~
| |
| 1178 (10th Cir. 1974), certiorari denied, 419 U.S. 1105 (1975).
| |
| ,
| |
| Perhaps the most concise definition of a per se violation can l
| |
| be found in Northern Pacific Railway Co. v United States, 356 l
| |
| .
| |
| U.S. 1, 5 (1958), where Mr. Justice Black declared:
| |
| L
| |
| [T)here are certain agreements or
| |
| ' practices which because of their ll
| |
| 'y pernicious effect on competition and lack of any redeeminc virtue
| |
| ;; are conclusively presumedi to be
| |
| ,l unreasonable and therefore illegal l- without regard to elaborate inquiry
| |
| ', as to the precise harm they have i caused or the business excuse for
| |
| - their use. [ Emphasis added.)
| |
| The types of activities within the ambit of this l
| |
| ~
| |
| l definition have been identified by case law on the basis I,
| |
| __
| |
| i h
| |
| ._
| |
| -- -- , w -. .-
| |
| - - , - - - -
| |
| | |
| -
| |
| !
| |
| -
| |
| )
| |
| i
| |
| - l 1 of " considerable experience with certain business relation-
| |
| ~
| |
| ships." United States,v Topco Associates, Inc., 405 U.S. l 596, 607 (1972); and see White Motor Co. v United States, 372 U.S. 253, 263 (1963). They include price-fixing arrange-
| |
| _ ments (see, e.g., United States v Socony-Vacuum Oil Co., 310 U.S. 150 (1940)); the allocation of marketing territories (see, I e.g., Timken Roller Bearing Co. v United States, 341 U.S. 593 (1951)); trying arrangements (see, e. E., Fortner Enterprises,
| |
| '
| |
| Inc. v United States Steel Corp., 394 U.S. 495 (1969)); and
| |
| .
| |
| perhaps on a showing of predatory intent group boycotts (see, j e.g., Klor's, Inc. v Broadway-Hale Stores, Inc., 359 U.S. 207, 212 (1959)).
| |
| l l
| |
| Even assuming arguendo that such practices had been
| |
| ,-
| |
| i engaged in by these Applicants -- and, if necessary, each Ap-plicant will demonstrate conclusively at the evidentiary hear-I-
| |
| .L ing that this is not the case -- there is, however, good reason for this Licensing Board to eschew a Eer se approach in the pre-
| |
| ~
| |
| sent context. Preliminarily, it has been observed that the i electric utili"y industry encompasses a " complicated web of
| |
| _
| |
| interrelationsaips which exists among and between component
| |
| ! 27/
| |
| j_ systems operating in local and regional markets."-- The very "groundbreaking nature" (Waterford I, supra, 6 AEC at p. 49)
| |
| - of the instant antitrust inquiry (see pp. 1-2, supra) testi-
| |
| ' _ 27/ See Brebbia', Antitrust Problems In The Licensing
| |
| 'And Fermit Authority of the United States Nuclear Regu-latory Commission, 26 Mercer L. Rev. 749, 774 (1975).
| |
| ._
| |
| men me - -- ,-- , - - - - , , r y-,ew, , , - - - - - - , +
| |
| ---e-
| |
| | |
| _ .
| |
| 1 I
| |
| -.
| |
| ._
| |
| fies to the Commission's lack of "donsiderable experience with
| |
| ; {~
| |
| [the kinds) of business relationships" (United States v Topco
| |
| '
| |
| Associates, Inc., s,upra, 405 U.S. at 607) that are fostered by such an industry structure. Without this experience,
| |
| _
| |
| legal precedents seem to discourage any per se treatment of the matters in controversy here. See, e.g., White Motor Co.
| |
| t- v United States, supra, 372 U.S. at 263.
| |
| In addition, and of far mare significance, this
| |
| ' i~ proceeding considers an application of the antitrust laws
| |
| ;
| |
| in an industry where pervasi.ve federal and state regulation
| |
| ,
| |
| has in large measure supplanted free and open competition.
| |
| In similar circumstances, the courts have routinely recog-
| |
| '
| |
| nized that practices normally deemed to run afoul of Section 1 of the Sherman Act as unreasonable restraints of trade per se are perfectly legitimate, and even competitively desirable, 7
| |
| in a highly regulated setting. See, e.g., Chastain v American t
| |
| '
| |
| Telephone & Telegraph Co., 351 F. Supp. 1320, 1321 (D.D.C.
| |
| " 1972) (scope and nature of control over regulated industry may bring IMTS action preventing competition in mobile telephon.e
| |
| __
| |
| market within legal boundaries), United States v Pan American World Airways, 193 F. Supp. 18, 33 (S.D.N.Y. 1961), reversed on other grounds, 371 U.S. 296 (1963) (approving territorial
| |
| - allocation scheme among shipping company, airline and joint l
| |
| .
| |
| W
| |
| - - - - - - - . - - - , , ,. . .y.r. .- r-- -
| |
| =-te--- - - - - - - - - - - -+r
| |
| | |
| ______ _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ _ _ _ _
| |
| .-
| |
| _
| |
| venture formed by them); United States v Morgan, 118 F. Supp.
| |
| ~
| |
| 621, 687-689 (S.D.N.Y. 1953) (syndication agrriements contain-t ing price maintenance clauses binding on underwriters and re-sale price maintenance clauses binding on selling groups or
| |
| _ selected dealers held permissible because of sui generis situa-tion); United States v National Football League, 116 F. Supp.
| |
| ~
| |
| , 319, 321 (E.D. Pa. 1953) (upheld allocation of marketing ter-f ritories by prohibiting telecasting of outside games into r
| |
| home territories of otner teams playing at home).
| |
| .
| |
| ._
| |
| Mindful of this settled authority, it would serve neither the needs of justice nor the public interest for this Licensing Board to race through the evidentiary hearing imper-vious to the comprehensive governmental regulation that pol-ices competition in this industry. Not only must Section 1 principles be reconciled with the regulatory framework within r-
| |
| _ which these Applicants operate (see, e.g., United States v
| |
| - Citizens & Southern National Bank, supra, 95 S. Ct. at 2104);
| |
| -
| |
| but also the Section 2 charges of unlawful monopoly power must i be carefully assayed in the context of such regulation (see, e.g., United States v Marine Bancorporation, Inc., 418 U.S.
| |
| L 602 (1974)).
| |
| In ,rder for this Licensing Board to arrive at a
| |
| -
| |
| proper accommodation of the " pro-competition" policy under-lying the Sherman Act, on the one hand, and the forces com-
| |
| -
| |
| .
| |
| %w
| |
| | |
| ,_
| |
| l
| |
| ..
| |
| l
| |
| ~
| |
| peting against that policy as a result of the high degree
| |
| "
| |
| of regulation in the electric utility industry, on the other
| |
| ,
| |
| hand, it.is necessary, before pressing forward, to explore the impact of federal and state regulation on the antitrust claims raised here. That, then, is our next area of discus-sion.
| |
| .-
| |
| B. THE IMPACT ON THE BOARD'S ANTITRUST ANALYSIS
| |
| -
| |
| OF THE REGULATED NATURE OF THE INDUSTRY
| |
| !
| |
| .
| |
| ,
| |
| The task of reconciling the letter and the spirit of the antitrust laws with the comprehensive regulatory struc-ture of the electric utility industry should not be taken lightly. Such an exercise has been aptly likened by one court
| |
| ,
| |
| to " steer [ing) a course between a regulatory Scylla and an
| |
| , ,, antitrust Charybdis." Latin America / Pacific Coast Steamship
| |
| : m. Conference v Federal Maritime Commission, 465 F.2d 542, 545
| |
| >
| |
| (D.C. Cir.), certiorari denied, 409 U.S. 967 (1972). There
| |
| ~
| |
| is thus good reason to " pause for a moment to reflect upon
| |
| ! the rhyme and reason for [the] voyage." lj.
| |
| The need for a reconciliation in this area can be
| |
| __
| |
| traced directly to a conflict in jurisdictional and policy considerations resulting from divergent statutory directives.
| |
| -
| |
| On the one hand, legislation at both the federal and state levels establish a comprehensive, though fragmented, scheme
| |
| .
| |
| k %
| |
| l
| |
| : - . .-. - . . -. .-
| |
| | |
| _ _ _ _- _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
| |
| 4M
| |
| ' l l
| |
| ~
| |
| _
| |
| for regulating the electric utility industry. On the other
| |
| - hand, Congress has separately devised a general framework of antitrust principles that, at least facially, contradicts
| |
| _. I
| |
| ; the basic philosophy underlying the regulatory programs.. A i
| |
| proper resolution of the antitrust claims in the present
| |
| ,_
| |
| proceeding requires the Licensing Board to strike a careful
| |
| - balance between the competing purposes sustaining these two statutory regimes.
| |
| '
| |
| Moreover, it is essential that any decision finally reached be economically sound. This consideration, as much as any other, serves as a beacon for insuring that the course charted for reconciliation will guide this Licensing Board to a correct destination. In this regard, due respect must be
| |
| :
| |
| r accorded to the di' ferent economic structure of an industry
| |
| )
| |
| ''
| |
| which is subject to extensive regulation. In the present con-
| |
| ,
| |
| text free and open competition is not a viable concept, de-
| |
| - .
| |
| spite the irresponsible efforts of the Department, the Staff
| |
| . __ and Cleveland to picture the electric utility industry in such j terms. The Supreme Court has just recently called to task the
| |
| -
| |
| Department of Justice for taking a similarly unrealistic view of the banking industry. See United States v Marine Bancor-
| |
| -
| |
| poration, Inc., supra, 418 U.S. at 619. This Licensing Board
| |
| _
| |
| should likewise be disabused at the outset of any lingering doubts it may have in this regard.
| |
| _
| |
| r I
| |
| l -
| |
| 1
| |
| _ _ _ . _ _ _ _ _ _ . _ .
| |
| | |
| .
| |
| I
| |
| ~
| |
| : 1. The Scope And Extent of Government Regulation.
| |
| - At the federal level the electric utility industry is sub-
| |
| ! ject to the regulatory supervision of five separate govern-I ment agencies: the Federal Power Commission; the Securities
| |
| '
| |
| '
| |
| and Exchange Commission; the Nuclear Regulatory Commission; the Department of the Interior; and the Department of Agri-
| |
| ._
| |
| culture. The restraints imposed by these agencies, however, "are typically viewed as supplementary forms of regula-28/
| |
| ; tion."-- This is because "today as in the 1930's electric-I j ity regulation takes place primarily at the state level; y.
| |
| i state commissions control the prices of retail sales and l
| |
| -
| |
| 29/
| |
| ,
| |
| review all construction plans."--
| |
| '
| |
| While a full exposition of all electric utility
| |
| -
| |
| activities covered by both federal and state regulation is
| |
| }
| |
| not necessary at this point, it might be helpful before going further to outline some of the more salient regula-
| |
| .
| |
| tory features at both levels.
| |
| ,
| |
| !
| |
| "
| |
| Federal Regulation
| |
| !
| |
| '-
| |
| (a) The Federal Power Act regulates the trans-l.
| |
| mission and sale of wholesale electric energy, i.e., a sale
| |
| _
| |
| 28/ See Breyer and MacAvoy, Energy Regulation by the l
| |
| Federal Power Commission 91 (1974).
| |
| !
| |
| 29/ Id.
| |
| l
| |
| . .
| |
| w
| |
| -
| |
| 1w r - - - - +-,--& . we- - - + . . , . , , . . . , - - . , . . . ,
| |
| | |
| .
| |
| of power for resale, in interstate commerce. See 16 U.S.C.
| |
| 30/
| |
| The Act declares that such business
| |
| --
| |
| I~ 5824 et seg. (1970).
| |
| :
| |
| "is affected with the public interest," and that federal regu-
| |
| _.
| |
| lation "is necessary in the public interest." 16 U.S.C.
| |
| 5824(a). Congress established the Federal Power Commission
| |
| ("FPC") to enforce the statutory provisions (16 U.S.C. S792);
| |
| ~
| |
| it delegated to the agency the responsibility to assure "an abundant supply of electric energy throughout the United States
| |
| (~
| |
| t with the greatest possible economy and with regard to the proper
| |
| .
| |
| utilization and conservation of natural resources * * *." .
| |
| I i 16 U.S.C. S824(a).
| |
| t The Federal Power Commission's jurisdiction over in-I terstate activities of electric power companies has been con-
| |
| ,_
| |
| tinually expanding. In an early opinion the Supreme Court held
| |
| , j, -~
| |
| that the direct transfer.of power from one utility to another r
| |
| ,
| |
| over state lines was in interstate commerce. Public Utilities
| |
| ,
| |
| Commission v Attleboro Steam & Electric Co., 273 U.S. 83 (1927).
| |
| -
| |
| More recently, the Court enlarged upon that decision by holding
| |
| ,
| |
| that if out-of-state power was transferred from one utility to another utility in the same state, that latter transaction was
| |
| _
| |
| 30/ Althotqh not as important to this proceeding, Part I of the Federal Power Act provides for comprehensive federal regu-
| |
| - lation of all hydro-electric power facilities. See 16 U.S.C.
| |
| S791a et seg. (1970).
| |
| _
| |
| | |
| _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _ _
| |
| _
| |
| !
| |
| - i
| |
| , likewise in interstate commerce. FPC v Southern California Edison Co., 376 U.S. 205 (1964). Where third-party intermedi-
| |
| .
| |
| ,
| |
| aries are involved, the jurisdiction of the FPC has also been
| |
| ,_ broadly construed. For example, in Connecticut Light & Power .
| |
| l
| |
| '
| |
| Co. v FPC, 324 U.S. 515 (1945), it was held that an intrastate )
| |
| -
| |
| transfer of power to an intermediary was in interstate commerce if the intermediary was merely a " funnel" for delivery of the
| |
| '
| |
| power to an out-of-state utility. The Supreme Court expanded
| |
| ,_
| |
| this principle even further in FPC v Florida Power & Light Co.,
| |
| '
| |
| 404 U.S. 453 (1972), ruling that if the power from an intrastate
| |
| ~
| |
| transfer " commingled" with power sent out-of-state, the FPC could assert jurisdiction. As a practical matter, this last-cited de-c1sion extends the FPC's authority to almost every investor-owned public utility that is connected with any other public utility
| |
| -r 1, engaged in interstate commerce. This plainly includes all of
| |
| .r the Applicants, thus bringing their transmission and wholesale activities under the supervision and control of the Commission.
| |
| l Significantly, the FPC has a duty to consider antitrust questions
| |
| -
| |
| in ecnnection with the exercise of its regulatory jurisdiction
| |
| .r (see discussion in Part IV. E and F, infra).
| |
| .
| |
| The net effect of these decisions is that Applicants
| |
| --
| |
| must obtain FPC approval before taking a large number of pro-posed actions. They must, for instance, file with the FPC all
| |
| ..
| |
| %
| |
| a 6-w
| |
| | |
| ,_ _ - - -___ _
| |
| }
| |
| .. t rate schedules showing their current rates and charges for the transmission or the sale of power, together with all contracts
| |
| -
| |
| 31/
| |
| relevant thereto. 16 U.S.C. S824d(c).~- In addition, in the
| |
| _
| |
| absence of approval by a state regulatory agency, any pro-
| |
| .
| |
| posed security issue must first be submitted,to, end pass, FPC
| |
| -
| |
| scrutiny as being for some lawful objective, within the corpo-rate purposes, necessary for proper electric service, and other-
| |
| __
| |
| wise compatible with the public interest. 16 U.S.C. 5824c(a).--32/
| |
| _
| |
| FPC authorization is also required with respect to all transac-
| |
| '
| |
| tions with other interstate electric utilities which contemplate the acquisition of, merger with, or sale of, all or part of 33/
| |
| --
| |
| either utility's power facilities. 16 U.S.C. S824b(a). And, -
| |
| ,
| |
| %
| |
| 31/ The FPC, upon complaint or upon its own initiative, may r suspend the operation of any schedule for up to 5 months and l hold a hearing concerning the lawfulness of any rate or charge. 16 U.S.C. S824d(e). To be lawful, a rate must be "just r and reasonable" (16 U.S.C. S824d(a)); must not "make or grant any undue preference or advantage to any person" (16 U.S.C.
| |
| -
| |
| S824d(b)(1)); and must not " maintain any unreasonable differ-ence in rates * *
| |
| * either as between localities or as between classes of service (16 U.S.C. S824d(b)(2)). If the FPC finds
| |
| ,.
| |
| after a hearing that a rate violates any of these standards, the FPC "shall determine the just and reasonable rate * *
| |
| * and shall
| |
| ; fix the same by order." 16 U.S.C. 5825e(a). The FPC may also i require a utility to refund any increase in rates later found to
| |
| -
| |
| be unjustifiable. 16 U.S.C. S825d(e).
| |
| 32/ After a hearing, the FPC may grant, modify or condition,
| |
| - on such terms as it finds necessary or appropriate, the pro-posed issuance of securities. 16 U.S.C. S824c(b). Once issued, the power company can e=nly the proceeds therefrom only to pur-
| |
| ,
| |
| poses specified in the s.C's order. 16 U.S.C. 824c(c).
| |
| 33/ The FPC may approve such acquisition, merger or sale only if It finds that it "will be consistent with the public interest" to do so (16 U.S.C. 5824b(a)); the FPC may also impose such condi-tions as it " finds necessary or appropriate to secure the main-tenance of adequate service and the coordination [of facilities)
| |
| . in the oublic interest." 16 U.S.C. S824b(b).
| |
| l
| |
| | |
| r 1
| |
| --
| |
| ,
| |
| -
| |
| 73-
| |
| ._
| |
| l as part of its responsibility "to promote and encourage" the
| |
| -
| |
| interconnection and coordination of generation, transmission i
| |
| and distribution facilities (16 U.S.C. 5824a(a)), the FPC, may I
| |
| (
| |
| upon complaint and after an opportunity for a hearing, order a
| |
| *
| |
| ..
| |
| physical interconnection of transmission facilities between
| |
| ,
| |
| power companies, or direct the sale or exchange of energy if it
| |
| ;-
| |
| " finds such action necessary or appropriate in the public in-34/
| |
| 16 U.S.C. S824a(b).-~
| |
| '
| |
| terest."
| |
| '
| |
| Complementing these statutory directives is the power
| |
| .-
| |
| of the FPC to investigate any alleged violation of the Federal Power Act, either upon complaint (16 U.S.C. S825e), or upon its
| |
| , _
| |
| own initiative (16 U.S.C. S825f(a)); or if any person is engaged or about to engage in an act that violates or will violate the f{ Act, to bring suit in federal district court to enjoin such ac-
| |
| .
| |
| tion (16 U.S.C. S825m(a)). The Act also imposes civil and crim-
| |
| '7
| |
| ..
| |
| inal penalties for willful and knowing violations (16 U.S.C.
| |
| SS825n & 825o).
| |
| m.
| |
| r 34/ The FPC may prescribe the terms and conditions of the
| |
| ,' interconnection; apportionment of costs for the interconnection; and the rate of compensation for the services provided. 16 U.S.C.
| |
| jc 5824a(b).
| |
| ~
| |
| The Act further provides as tallows: If the FPC finds, upon the complaint of a state commission and after opportunity for a hearing, that any interstate servir.e is " inadequate or in-
| |
| . . sufficient, the [FPC] shall determine the proper, adequate or sufficient service to be furnished, and shall fix the same by its order * * *." 16 U.S.C. 5824f. However, the FPC has no authority
| |
| -
| |
| to compel the enlargement of generating facilities for such pur-poses. (H) .
| |
| i-
| |
| ,
| |
| s Q4 g-- * -- w - - - - w -w _e ,, -----,wy----m-w - ei.e- -www -y-. e-- w w- *es --w iw.
| |
| | |
| ._
| |
| !
| |
| -
| |
| t
| |
| .
| |
| (b) The Public Utility Holding Company Act of 1935, 15 U.S.C. S79 et seg. (1970), authorizes the Securities and Ex-
| |
| _
| |
| <
| |
| change Commission ("SEC") to exercise regulatory supervision 35/
| |
| ~-
| |
| -
| |
| complementary to that given the FPC by the Federal Power Act.
| |
| !
| |
| In language similar to the Federal Power Act, the Holding Com-pany Act declares that utility holding companies and their subsidiaries "are affected with a national public interest,"
| |
| lr i, 15 U.S.C. S79a(a), and that regulation is necessary to protect t_ the public interest, and the interests of " investors" and " con-l sumers of electric energy." 15 U.S.C. S79a(b). Tht basic <b-
| |
| ~
| |
| ligation of the Act is to require all holding companies whJse
| |
| :
| |
| subsidiaries are engaged in the electric utility business to s.
| |
| 35/ That the two Acts are to be read together, providing a I comprehensive scheme of federal regulation, is evident from the i legislative origins of the Acts. Structurally, the Holding Com-pany Act is Title I of the Public Utility Act of 1935; Title II
| |
| -r of that Act amended the Federal Water Power Act of 1920 by add-
| |
| _
| |
| '
| |
| ing Parts II and III, which form the basis of FPC regulatory authority over the electrie utility industry. See generally 4
| |
| _ L. Loss, Securities Regulation 2275 (Supp. 1969). In Common-wealth Edison Co., 36 F.P.C. 927, 66 P.U.R.3d 417, 421-22 (1966),
| |
| -- the FPC emphasized the integrated nature of the entire Public Utility Act by holding, consistent with the statutory design "to
| |
| ' r bring the electric power industry under effective and continuing
| |
| : _ control," that review of merger proposals under Section 203 of the Federal Power Act, 16 U.S.C. 5824b, must include not only the
| |
| ; substantive standards of that Act, but also the " integrated public
| |
| : l. utility" concepts and corporate simplification standards of the l" Holding Company Act.
| |
| !
| |
| -
| |
| ,
| |
| l '
| |
| I
| |
| .-
| |
| | |
| _ _ _
| |
| _
| |
| )~
| |
| ; _
| |
| register with the SEC if they make use of the mails or inter-36/
| |
| --
| |
| -
| |
| state facilities. 15 U.S.C. S79e(a). Once a holding company
| |
| '
| |
| has registered, it becomes subject to two types of supervision:
| |
| (1) the geographical integration and corporate simplification requirements of 15 U.S.C. 579k; and (2) the financial and oper-
| |
| _
| |
| ational regulations interspersed throughout the Act. In the absence of registration it is unlawful for a holding company to engage in most of the activities one would expect from a utility )
| |
| ~
| |
| 37/
| |
| --
| |
| 1 company. Ohio Edison is a registered holding company subject !
| |
| to SEC jurisdiction.
| |
| -. 1 When enacted in 1935, a basic purpose of the Holding )
| |
| 1 Company Act was to strengthen the capital structures of holding s company systems and to return control over much of the country's
| |
| .-
| |
| .
| |
| ^'
| |
| 36/ The .ct contains definitions of " holding company" (15 U.STD. 579b(e)(7)); " subsidiary company" (15 U.S.C. 579b(a)(8));
| |
| 'I. and " affiliate" (15 U..S.C. 579b(a)(11)).
| |
| :L 37/ Thus, for example, it is unlawful for an unregistered hol3Ing company to: (1) " sell, transport, transmit, or distrib-
| |
| : s. ute, or own or operate any utility asset for the transportation, transmission, or distribution of * *
| |
| * electric energy in in-terstate commerce' (15 U.S. . S79d(a)(1)); (2) "take any step in the performance of any service, sales or construction contract
| |
| -
| |
| undertaking to perform services or construction work for, or sell goods to" any utility by means of the mails or interstate I commerce (15 U.S.C. S79d(a)(2)); (3) make any public offering lL of securities by means of the mails or interstate commerce (15 l U.S.C. 579d(a)(3)); (4) " acquire or negotiate for the acquisi-
| |
| '
| |
| tion of any security or utility asset" of any utility by means
| |
| ,. of the mails or interstate commerce (lo U.S.C. S79d(a)(4)); or (5) " engage in any business in incerstate commerce" (15 U.S.C.
| |
| 579d(a)(5)).
| |
| !
| |
| -
| |
| g- - - . . -
| |
| | |
| _ _ . . - - - _ . _ _ _ _ _ _ -
| |
| _
| |
| .-
| |
| electric utilities to local management and local regulation.
| |
| _
| |
| To accomplish this aim the SEC was instructed to examine the 4
| |
| corporate structure of every registered holding company to r determine how the structure could be " simplified," "unneces-sary complexities * *
| |
| * eliminated," and the business " con-
| |
| __
| |
| fined to those [ purposes] necessary or appropriate to the
| |
| ;
| |
| operations of an integrated public-utility system." 15 U.S.C.
| |
| , S79k(a). The Act grants to the SEC various powers in order to
| |
| -
| |
| implement those goals (15 U.S.C. SS79k(b)(1)(A)-(C), 79k(b)(2),
| |
| , 38/
| |
| 79k(d)).-- These implementing provisions have been character-
| |
| '
| |
| ized as "a special type of antitrust and corporate reorganiza-tion law" which is " designed to restore the effectiveness of state and federal regulation rather than the effectiveness of
| |
| '
| |
| 39/
| |
| .
| |
| competition in a free market."--
| |
| . [.
| |
| - f~ 38/ After 40 years of supervision, the corporate reorganiza-
| |
| ,
| |
| tion functions of the Act have been nearly completed. During that time, the SEC left its imprimatur on the organization of
| |
| - the electric utility industry. For example, Ohio Edison and its wholly-owned subsidiary Penn Power developed and grew under SEC
| |
| ' "
| |
| direction pursuant to the reorganization of the Commonwealth and Southern Corporation, while Duquesne Light was a spinoff from the reorganization of the Standard Gas and Electric Company and the
| |
| ~. Philadelphia Company. In addition, CEI was a part of the North American Company system and was divested pursuant to SEC require-
| |
| '
| |
| ments.
| |
| "
| |
| 39/ See 1 L. Loss, Securities Regulation 135 (1961) (emphasis
| |
| ,
| |
| ,
| |
| adde 3).
| |
| : .
| |
| .
| |
| ;
| |
| .
| |
| ..
| |
| .. .-.
| |
| -. - _. .
| |
| | |
| _.- - . _-
| |
| ,Mr i
| |
| -
| |
| .
| |
| In addition to the reorganization provisions, the Act requires registered holding companies to secure SEC approval for L certain proposed actions. It is unlawful for such companies to r- issue or sell any security unless a declaration containing.the re-i quired information has been filed with and approved by the SEC.
| |
| -
| |
| 15 U.S.C. SS79f and 79g. Nor may such a - mpany " acquire, direct-ly or indirectly, any securities or util_.y assets or any other
| |
| ,
| |
| interest in any business," unless an application for approval of the acquisition has been filed with and approved by the SEO. 15
| |
| ,
| |
| 40/
| |
| -
| |
| U.S.C. 55791 and 79j.
| |
| '
| |
| In aid of these provisions the SEC may investigate any facts which it deems necessary to determine whether any person
| |
| .
| |
| has violated or is about to violate the Act, 15 U.S.C. S79r(a),
| |
| .. and may at any time investigate, upon its own motion or at the
| |
| :'- request of a state commission, the " business, financial condi-
| |
| :P tions or practices" of any registered holding company. 15 U.S.C.
| |
| S79r(b).
| |
| ..
| |
| 40/ The SEC cAnnot approve an acquisition unless it finds that sucE acquisition: (1) will not " tend towards interlocking rela-lL tions", nor " unduly complicate the capital structure," nor be det-rimental to carrying out the reorganization provisions of the Act (15 U.S.C. SS79j(b)(1) & (3), 79j(c)(1)); (2) is not in violation
| |
| "
| |
| e of any applicable state law (15 U.S.C. S79j(f)); and (3) will serve the public interest by tending towards the economical and t
| |
| efficient development of an integrated public-utility system" (15 U.S.C. S79j(c)(2)). The SEC may also impose terms and conditions
| |
| "
| |
| on the acquisition "necessary or appropriate in the public in-terest or for the protection of investors or consumers." 15 U.S.C.
| |
| S79)(e).
| |
| .
| |
| . - - _ w - .,. -,.,my.- y 9 ., _. .m -ygm., - ww -, ,,
| |
| | |
| _ _ _ -- _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ _
| |
| ~
| |
| '~
| |
| (c) Under the terms of the Atomic Energy Act of 1954,
| |
| _. as amended, 42 U.S.C. S2011 et seg. (1970), the Nuclear Regula-L tory Commission ("NRC") is responsible for licensing and regulat-
| |
| [~
| |
| ing nuclear power plants cwned and operated by electric utilities.
| |
| As such, the NRC exercises a particularized form of regulatory
| |
| -,
| |
| supervision over the nuclear power facet of the electric utility
| |
| ,
| |
| industry. The antitrust review being conducted by this Licens-ing Board pursuant to 42 U.S.C. S2135(c), is but one part of
| |
| -
| |
| the total control exercised by the NRC.
| |
| 4 The licensing process requires that electric utilities secure both a construction permit and an operating license. 10 C.F.R. 550.10(a)-(b) (1975). At the construction permit stage a public hearing is mandatory, 42 U.S.C. S2239(a), and, in addi-
| |
| - tion to the antitrust review, radiological, health and safety
| |
| "
| |
| questions must be resolved; the cost-benefit balancing required under the National Environmental Policy Act must be made; and the t
| |
| applicant's technical and financial qualifications must be approv-
| |
| ,
| |
| ed. See 10 C.F.R. Part 2, App. A, VI (1975). At the operating
| |
| - license stage hearings need be held only if issuance of the license
| |
| ^- is contested, 42 U.S.C. S2239(a), and then only on those~ matters in controversy among the parties. 10 C.F.R. Part 2, App. A, VII
| |
| -
| |
| (1975). Such matters can include radiological health and safety
| |
| .
| |
| l- .
| |
| _ - - -
| |
| . ..
| |
| | |
| r
| |
| ,
| |
| _
| |
| _
| |
| questions, environmental issues, and under certain circum-stances antitrust allegations. See 42 U.S.C. 52135(c)(2).
| |
| Aside from the antitrust review conducted in connec-
| |
| '
| |
| tion with a licensing proceeding, the NRC is obligated to "re-
| |
| -
| |
| port promptly to the Attorney General any information it may have with respect to [ activities] which appear to violate or to tend toward the violation of [the antitrust laws] or to re-b strict free competition in private enterprise." 42 U.S.C.
| |
| 52135(b). The NRC may also " suspend [or] revoke [a permit or license], or'take such other action as it may deem necessary" if an applicant has been found to violate the antitrust laws.
| |
| 42 U.S.C. 52135(a). The latter provision is merely a special-ized case of the NRC's broader enforcement powers to aid in the r
| |
| ,[ performance of its regulatory functions. See 10 C.F.R. 52.200
| |
| .r et seq. (1975).
| |
| '
| |
| (d) In the course of implementing policy programs and
| |
| '
| |
| exercising regulatory supervision in areas not directly aimed at investor-owned public utilities, the Departments of In- ,
| |
| f terior and Agriculture assert some control over the electric
| |
| .
| |
| ,
| |
| utility industry. For example, the authority given to the
| |
| - Secretary of Interior to place conditions on the sale of power produced by the federal government and to construct or acquire
| |
| ,,
| |
| transmission lines and related facilities necessary for the sale of such power (see, e.g., 16 U.S.C. SS825s, 8311, 832d & 833c),
| |
| i
| |
| .
| |
| me a
| |
| -,
| |
| | |
| .-
| |
| 4
| |
| -
| |
| I
| |
| -
| |
| permits the Secretary to influence the competitive situation in I
| |
| 41/
| |
| a given area.--
| |
| L The Department of Agriculture exerts similar power by r'
| |
| means of the extensive control the Rural Electrification Admin-
| |
| - istration ("REA") exercises over rural electric cooperatives and the conditions it imposes on loans made to such bodies pursuant
| |
| ~
| |
| to 7 U.S.C. 5904. There are a' number of rural electric coopera-
| |
| '
| |
| tives in the geographic areas served by Applicants. The Act
| |
| .
| |
| requires that the security for any loan made thereunder be i 1
| |
| , " reasonably adequate." Id. In order to insure adequate secur- '
| |
| ity, the REA has required as a condition for granting a loan to
| |
| '~ a generation and transmission cooperative that the distribution
| |
| ''
| |
| cooperatives to be served sign long-term exclusive dealing con-tracts so as to guarantee the " territorial integrity," and there-
| |
| '
| |
| 42/
| |
| fore the worth, of the borrowing cooperatives!" The effect of 7
| |
| . this policy is substantially to foreclose competition by investor-e owned utilities for the distribution cooperatives' business.
| |
| 'u 9
| |
| 41/ See generally Meeks, Concentration in the Electric Power
| |
| 'L Industry: The Impact of Antitrust Policy, 72 Colum. L. Rev. 64,
| |
| '
| |
| 66 n.8 (1972).
| |
| ,_ 42/ See Comment, Alabama Power Company v Alabama Electric l
| |
| Cooperative: Rural Electrification and the Antitrust Laws--
| |
| Irresistible Force Meets Immovable Object, 55 Va. L. Rev. 325,
| |
| ,, 330-331, 356-58 (1969).
| |
| ;c l
| |
| _
| |
| ._
| |
| '
| |
| ,
| |
| --:-.-- , - . - ,
| |
| | |
| ..
| |
| -
| |
| - -
| |
| -
| |
| !
| |
| -- ;
| |
| Moreover, the Departments of Interior and Agriculture have additional supervisory power over the electric utility in-F
| |
| .j 4
| |
| dustry by virtue of their joint administration of public lands.
| |
| 43/
| |
| : r. Pursuant to statut.ory directive,~ and the regulations there- l t 44/
| |
| I under,- each Departmgnt may require any private utility seek- i
| |
| ~
| |
| ing a right-of-way for the construction and operation of electric transmission lines across lands within the jurisdiction of the r
| |
| ,
| |
| Department, to transmit or wheel electric energy from a federal
| |
| _ . ,
| |
| generating facility over the excess capacity of the proposed transmission line. See Utah Power & Light Co. v Morton, 504 F.2d 728 (9th Cir. 1974). By making sagacious use of this power it is possible for "the Government [to) utiliz[e] the transmis-
| |
| ! -
| |
| sion facilities of other systems to the maximum extent practic-L.
| |
| able" so as "to avoid duplication and waste of Government funds ir
| |
| ( for transmission lines." Id. at 735, quoting Southern California
| |
| ! r- Edison Co., 71 I.D. 405, 409-11 (1964).
| |
| l 1 L.
| |
| , ,
| |
| State Regulation .
| |
| ;L At the state level three of the five Applicants--CEI,
| |
| .L
| |
| .
| |
| 43/ There are separate provisions authorizing the Secretary of
| |
| ; ,i AgrTeulture to so condition rights-of-way over national parks (16
| |
| '' U.S.C..SS), military reservations (16 U.S.C. 5420), and national forests (16 U.S.C. S523); the authority of the Secretary of In-l terior is found at 43 U.S.C. 5961 dealing with public lands and et Indian reservations.
| |
| :
| |
| 44/ 36 C.F.i, S251.52(d) (1975) (Department of Agriculture);
| |
| 43 D7F.R. 52851.1-1(a)(5) (1974) (Department of Interior).
| |
| _
| |
| w W
| |
| _ . . _ - .- . . - , - - _ . - . - - . . _ - - , . . . . - - _ _ , . , _ _ . , , , . . _ - - , . , _ . . , . - . - - - - -
| |
| | |
| _ _ __ _____ _ _ _ _ _ _ _ _ _ _ _ _ -
| |
| : y. a i
| |
| !
| |
| _
| |
| ,
| |
| _
| |
| TECO and Ohio Edison--come within the jurisdiction of the Public r Utilities Comm,ission of Ohio. The other two Applicants, Duquesne L
| |
| Light and Penn Power, are regulated by the Pennsylvania Public h Dtility Commission. Under the relevant statutory provisions of
| |
| _ each state, both commissions exercise broad and comprehensive control over virtually every facet of Applicants' activities not
| |
| -
| |
| subject to federal regulation.
| |
| (a) Under the Revised Code of Ohio every public utility
| |
| -
| |
| is required to furnish "necessary and adequate service and faci-
| |
| .
| |
| lities," and not demand any " unjust or unreasonable charge" for the service so provided. R.C. 54905.22. The Public Utilities Commission of Ohio ("PUCO") is vested with the " power and juris-
| |
| '
| |
| diction to supervise and regui_te public utilities" to insure Pemme that those objectives are met. R.C. S4905.04.
| |
| ..
| |
| The basic regulatory control which the PUCO exerts over p
| |
| :
| |
| L
| |
| . public utilities is in the general area of the rates they charge
| |
| , and the practices the c follow. Every utility is required to file
| |
| '' with the PUCO a tariff which lists all rates and practices affect-
| |
| '
| |
| ing them. R.C. S4905.30. In addition, the PUCO can require that the utility file a copy of all contracts entered into. R.C.
| |
| S4905.16. It is unlawful for a utility to exact a rate or render
| |
| , a service different from those specified in the tariff. R.C.
| |
| lu S4905.32. If the PUCO should find, after hearing, that a rate
| |
| _
| |
| wm M
| |
| | |
| .. _ _ _-__ - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
| |
| i r
| |
| !
| |
| _
| |
| _
| |
| 1 i
| |
| is " unjust, unreasonable, unjustly discriminatory, unjustly pre- 2 1
| |
| -
| |
| ferential, or in violation of law," or that "the service is, or i
| |
| will be, inadequate," it shall "fix and determine the just and reasonable rate." R.C. S4909.15. Thereafter, the utility can-
| |
| -
| |
| not change or modify the rate or service, except on further ceder of the FUCO. Id.
| |
| -
| |
| The PUCO exercises similar powers over "the rules, reg-ulations, measurements, or practices of any public utility" (R.C.
| |
| f~ 54905.37), and may, when necessary, "
| |
| temporarily alter, amend, or I
| |
| with the consent of the * *
| |
| * utility * *
| |
| * suspend any existing m
| |
| rates * * *." R.C. S4909.16. In addition, the PUCO can require
| |
| , that " repairs, improvements, or additions to the plant or equip-
| |
| 'l ment" be made (R.C. S4905.38), and the legislative body of any r municipal corporation may require a utility to make "such addi-lL tions or extensions to its distributing plant * *
| |
| * as * *
| |
| * r reasonable and necessary in the interest of the public * * *."
| |
| li{
| |
| .
| |
| R.C. 54905.39.
| |
| ;j iL For a utility to establish any rate or practice, or to
| |
| :! change an existing rate or practice, a written application must
| |
| ' L be filed with the PUCO. R.C. 54909.18. In general, no rate or
| |
| !! proposal to change a rate "shall become effective until the L
| |
| [PUCO), by order, determines it to be just and reasonable * * *."
| |
| L R.C.-54909.17. If the application is not for an increase in l-
| |
| :-
| |
| ,"
| |
| _
| |
| ,, , -- -- w g--,--- ,, , - , - - - , - , - - - - - , - - - - -- g--
| |
| | |
| _
| |
| -
| |
| -.
| |
| any rate, however, the PUCO "shall permit the filing of the schedule proposed in the application and fix the time when such schedule shall take effect." R.C. S4909.18. In all other cases, the PUCO must make an investigation, issue a report,
| |
| -
| |
| and hold hearings on the application. R.C. S4909.19.
| |
| Notwithstanding the foregoing procedures, the Ohio
| |
| ~
| |
| Revised Code does reserve to every municipal corporation in which a public utility is established the important right to
| |
| -
| |
| fix the rate at which service to that municipality 1: to be
| |
| - provided by the utility. R.C. S4909.34. If accepted by the utility, the municipal rate becomes a contract under the stat-utes and constitution of the State of Ohio. If the rate is not accepted and the utility finds it objectionable, the utility may
| |
| ,p L appeal to the PUCO which may set the municipal rate aside and set r.
| |
| its own rate for a period of two years. R.C. S 4909.39. The
| |
| 'l"-
| |
| municipal corporation, just like any other person, may file a
| |
| '
| |
| complaint with the PUCO that a rate charged or service provided
| |
| '
| |
| is " unjust, unreasonable, unjustly discriminatory, unjustly
| |
| "
| |
| preferential, or in violation of law * * * . R.C. 54905.26.
| |
| _
| |
| There is also provision for a unique form of complaint
| |
| - that bears special attention. Section 4905.261 provides:
| |
| Whenever a public utility proposes
| |
| ,_
| |
| to furnish or furnishes electric energy to a consumer and which consumer is being furnished or was being furnished electric energy by another public util-l t 1
| |
| _
| |
| '
| |
| 1-l
| |
| | |
| - _ . _ . ____ _ _ _ _ - _ _ _ _ _ _ _
| |
| I i
| |
| -
| |
| -
| |
| ity, the latter public utility may file
| |
| : r. a complaint with the [PUCO) protesting i
| |
| '
| |
| the furnishing of service by the other public utility. * *
| |
| * In the event a consumer has been disconnected from the
| |
| [ lines of a public utility, and electric
| |
| : energy has not been furnished said con- ,
| |
| sumer for a period of more than ninety
| |
| -
| |
| days, no right to file a complaint shall accrue under the provisions of this section. The [PUCO] upon finding that
| |
| . the complaining public utility has been furnishing or will furnish an adequate
| |
| .
| |
| service to such consumer and that the public utility complained against will r duplicate facilities of the complainant,
| |
| ! shall order the public utility complained agains'c not to furnish electric energy to
| |
| - such consumer.
| |
| * * *
| |
| * I Public utility as used in this section
| |
| '
| |
| . shall include utilities which operate their property not for profit as well as utilities r which operate their property for profit.
| |
| I" This provision, the so-called 90-day anti-pirating statute, has been held to contemplate a proceeding before the PUCO between
| |
| ,
| |
| "a 'public utility' as complainant and a 'public utility' as re-L spondent." Public utility is defined to include "[a]n electric
| |
| .; light company, when engaged in the business of supplying electric-
| |
| -
| |
| ity for light, heat, or power purposes to consumers within [ Ohio] "
| |
| (R.C. S4905.03(A)(4)), whether operated for profit or not. See City of Piqua v Public Utilities Commission, 40 Ohio St. 2d 87,
| |
| .
| |
| L 320 N.E.2d 661, 663 (1974). The impact of the provision is to restrict severely, if not prevent, competition among electric
| |
| _
| |
| I"
| |
| :
| |
| ,-
| |
| _ _
| |
| _ -_ .-. . . . _ _ _ ..
| |
| | |
| .
| |
| _
| |
| .
| |
| 7- utilities for customers. It is highly unlikely that any customer
| |
| !
| |
| '
| |
| will disconnect from the utility presently providing it serv (ge and wait the full 90-day period before taking new service from
| |
| [
| |
| some other electric utility. In effect Section 4905.261 acts as
| |
| -
| |
| a de facto means for allocating service areas and insuring the
| |
| --
| |
| 45/
| |
| -_ territorial integrity of the area once " allocated."--
| |
| .
| |
| (b) The Pennsylvania Public Utility Law, 66 P.S.
| |
| ~
| |
| SS1101-1562, is designed to accomplish much the same purposes as the regulatory scheme in Ohio, although the particular meth-ods of exercising control differ. In Pennsylvania, a public
| |
| .
| |
| utility must obtain a " certificate of public convenience" from the Pennsylvania Public Utility Commission ("PPUC") before it
| |
| '-
| |
| can furnish electric service. (66 P.S. $1121). Prior to is-
| |
| ~'
| |
| suance, the PPUC must find that "the granting of such certifi-r cate is necessary or proper for the service, accommodation, con-
| |
| .
| |
| ,
| |
| venience, or safety of the publicr" it may subject the certifi-
| |
| ._
| |
| cate to such conditions as it deems to be "just and reasonable." {
| |
| i
| |
| '
| |
| 66 P.S. Sil23(a). Once secured, the certificate of public con-
| |
| -
| |
| venience functions as a franchise for the public utility to pro- ,
| |
| vide power in its service area.
| |
| 1
| |
| ,-
| |
| 45/ In this regard, mention should also be made of the power l of a municipality to exclude totally a public utility from serv-ing within the corporate limits. R.C. S4933.16. Such a provi- I
| |
| '
| |
| sien also acts to allocate service areas within Ohio.
| |
| -
| |
| T
| |
| !
| |
| ._
| |
| l
| |
| - -- . __- ._
| |
| _
| |
| | |
| _
| |
| The retail service areas of each public utility 1
| |
| I in Pennsylvania, and of each borough in the State which pro-vides electric service to its inhabitants, are mutually ex-clusive under the Public Utility Law, and are strictly
| |
| _
| |
| regulated by the PPUC. 66 P.S. S51121, 1122. See also 66 P.S. 51531 (" grandfather" provisions preserving the intepr_ y of service areas in existence prior to the advent of public
| |
| - utility regulation in 1914). No other utilit*f or borough
| |
| .\
| |
| t may provide electric service within the areas so defined,
| |
| "
| |
| except to the extent that a borough which serves its own in-l
| |
| '
| |
| ,
| |
| habitants may permit a public utility to serve within the
| |
| ' borough limits pursuant to the Borough Code of Fennsylvania.
| |
| 46/
| |
| -~
| |
| .. 53 P.S. 547471. These rigid legal boundaries within the w
| |
| State with respect to the areas within which public utilities
| |
| 'I and boroughs may provide electric service remain in full
| |
| .
| |
| force; they have been unaffected by Act No. 57, passed this
| |
| .
| |
| -
| |
| year by the Pennsylvania legislature, which requires the filing of maps delineating the service areas within the State
| |
| _
| |
| '
| |
| 46/ A borough may serve areas outside its corporate limits only on application to and approval by Cie PPUC; such approval l" may be granted only upon a showing that the existing electric
| |
| ( service in the area into which the borough wishes to expand
| |
| , is inadequate. 66 P.S. S1122(g). If the PPUC approves such l- an application, the borough's rates and service in the new areas will be subject to regulation by the PPUC to the same extent that an investor-owned utility's rates would be. 66 P.S.
| |
| SS1141 and 1171. In all other cases the rates and service of l
| |
| '
| |
| a borough or municipal system are not subject to regulation by the PPUC.
| |
| ._
| |
| % *
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| | |
| .
| |
| .-
| |
| .
| |
| of investor-owned electric utilities and rural electric co-I operatives.
| |
| I Every public utility is required to file a tariff with
| |
| -
| |
| the PPUC showing all rates (66 P.S. 51142), and upon request to
| |
| _ file a copy of every contract entered into. 66 P.S. 51184. It is unlawful for a public utility to demand or receive a " greater or less rate for any service rendered" than specified in its filed tariff. 66 P.S. S1143. And every rate filed shall be
| |
| _
| |
| "just and reasonable" (66 P.S. S1141), and shall not " grant any
| |
| .
| |
| , unreasonable preference or advantage" nor result in "any unrea-sonable prejudice or disadvantage." 66 P.S. S1144.
| |
| Whenever a utility files a new rate, the PPUC, either upon complaint or upon its own motion, may " enter upon a hearing
| |
| . . .
| |
| -
| |
| concerning the lawfulness of such rate * * *." 66 P.S. Sil48(b).
| |
| If, after the hearing, the PPUC finds the rate to be " unjust or
| |
| ,_ unreasonable, or in anywise in violation of law," it shall deter-mine the just and reasonable rate, and fix the same by order.
| |
| 66 P.S. Sil48(c).
| |
| -
| |
| No utility may change a duly established rate,
| |
| '
| |
| except after notice of 60 days to the PPUC. 66 P.S. Sll48(a).
| |
| . . .
| |
| During that period, the PPUC may hold hearings on the proposed
| |
| .
| |
| ..
| |
| change.and, pending the outcome of those hearings, suspend the change for up to 9 months. 66 P.S. Sll48(b). In addition, the
| |
| -
| |
| PPUC, upon complaint or upon its own motion, may hold hearings at any time on the lawfulness of a rate, and if the rate is found to
| |
| _
| |
| | |
| __
| |
| .
| |
| be unlawful, determine the just and reasonable rate and fix the I same by order. 66 P.S. 51149.
| |
| !
| |
| Finally, every public utility has an obligation to r-l
| |
| " furnish and maintain adequate, efficient, safe and reasonable service and facilities," and to make all repairs and improvements in such service and facilities "as shall be necessary or proper for the accommodation, convenience, and safety of its patrons,
| |
| '
| |
| employees, and the public." 66 P.S. S1171. The utility may not grant "any unreasonable preference or advantage to any person"
| |
| ,
| |
| in the types of service it offers. 66 P.S. S1172. The PPUC, upon complaint or upon its own motion, may hold hearings on the sufficiency of service; if it finds that the service or facili-
| |
| '
| |
| ties are " unreasonable, unsafe, inadequate, insufficient, or un-a reasonably discriminatory, or otherwise in violation of [the L.
| |
| -
| |
| law) ," the PPUC shall prescribe the proper service and fix the
| |
| ,
| |
| same by order. 66 P.S. S1183.
| |
| Given the comprehensive federal and state regulatory
| |
| -
| |
| regimes outlined above, it would be imprudent for the Licensing
| |
| '
| |
| Board to disregard this predominant industry characteristic
| |
| .-
| |
| in evaluating the antitrust claims made here. "Under the aegis
| |
| -
| |
| _
| |
| of the rule of reason, traditional antitrust concepts are flex-ible enough to permit" a meaningful reconciliation of the pol-
| |
| --
| |
| icies underlying Sections 1 and 2 of the Sherman Act and the mandate of other statutory directives implemented through regula-
| |
| [
| |
| .
| |
| f l
| |
| | |
| -
| |
| !
| |
| r-l i
| |
| l r
| |
| tory controls. Compare Silver v New York Stock Exchange, 373 U.S. 341, 360-361 (1963). There are both strong economic and
| |
| ,
| |
| persuasive legal bases for proceeding in this manner.
| |
| ! 2. The Economic Basis For Reconciliation. There are
| |
| -
| |
| any number of reasons why it may be desirable to regulate a particular industry. In some cases regulation is deemed neces-sary because a competitive market will not guarantee the proper
| |
| ,
| |
| -
| |
| allocation of resources. This might occur where significant
| |
| ! externalities lead the private entrepreneur to believe that
| |
| .-
| |
| the cost of a certain good or service is lower than the true
| |
| -
| |
| social cost, as in the case of pollution, and thus overproduce;
| |
| ,
| |
| or where inadequate resources are allocated because the amounts L.
| |
| paid to private suppliers fall short of the total benefit that
| |
| _
| |
| .;
| |
| '
| |
| the good or service actually confers on society, as in the case 47/
| |
| .. of education.-
| |
| -
| |
| In other cases regulation may be necessary for the fulfillment of important social goals unrelated to resource
| |
| "
| |
| allocation. For example, a ready explanation for restrictive entry into any of the " learned professions" is the need to in-
| |
| _
| |
| sure a sufficiently high level of competence. And entry into
| |
| .
| |
| 47/ See generally Turner, The Scope of Antitrust and Other
| |
| '
| |
| Economic Regulatory Policies, 82 Harv. L. Rev. 1207, 1208-1209 (1969).
| |
| l t
| |
| -
| |
| | |
| . _ _ _ _ _ _ - _ _ _ _ _ _ _ _ - _ _ _
| |
| i L
| |
| <-
| |
| !
| |
| '
| |
| _91-
| |
| .
| |
| commercial banking may be limited so that ruinous competition resulting from overbanking does not lead to bank failures.
| |
| r See generally United States v Philadelphia National Bank, 374 l
| |
| U.S. 321, 326-330 (1963).
| |
| '
| |
| A third class of cases involves the minimum and max-imum rate-making functions of many regulatory agencies. Regu-lation of this sort is imposed because the nature of the in-
| |
| - dustry is such that it cannot be fully responsive to the normal i
| |
| L competitive forces in the marketplace. See Hawaiian Telephone Co. v FCC, 498 F.2d 771, 777 (D.C. Cir. 1974). As reflected in the above description of the regulatory schemes at play in the
| |
| [ present proceeding, the electric utility industry has long been considered to fit this mold. The economies of scale in genera-
| |
| : b. tion and transmission, coupled with the waste of resources as-
| |
| -
| |
| sociated with needless duplication of large generation and
| |
| '
| |
| transmission facilities, and the unavoidable fragmentation of total energy demands (due to natural product differentiation
| |
| -
| |
| that results from the geographic limitations on electric trans-
| |
| ;._ mission), elimir.ates any real possibility of free competition in this industry. See Breyer and MacAvoy, Energy Regulation
| |
| -
| |
| by the Federal Power Commission 11 (1974). Thus the tendency in both the wholesale and retail markets for electrie energy l is toward natural monopolies.
| |
| l
| |
| - -
| |
| _ _.
| |
| | |
| I
| |
| ,..
| |
| { ,
| |
| This situation requires an economic approach to the present Sherman Act charges of inconsistent antitrust behavior which is different from the usual analysis invoked in the con-r j text of an unregul_ced industry. In our economic system, com-
| |
| ,. petition and the pricing mechanism of the marketplace normally provide the organizational framework within which resource al-
| |
| ''
| |
| locations are made. The goal of this system is to achieve the t
| |
| most efficient distribution of resources possible. Competition generally insures efficiency in the use of limited resources by
| |
| , rewarding firms that produce at' low cost and punishing firms
| |
| . that produce at high cost. In this manner, the less efficient
| |
| .r' producer will be displaced from the marketplace by the more 1
| |
| "
| |
| efficient producer.
| |
| In addition, the pricing mechanism serves as a rationing device. By valuing all goods and services on a r
| |
| -_ uniform standard, the pricing system allocates resources r toward those areas of greatest public demand. Thus, the
| |
| -y economic system guides production by providing a marketplace
| |
| .
| |
| ; where producers can compete in their efforts to obtain the
| |
| :-
| |
| .
| |
| factors of production.
| |
| * __ The normal marketplace within which these forces can operate is described by a collection of factors character-l- ized as " perfect competition." The economist's model of per-l i feet competition is narrowly defined, namely: a homogeneous
| |
| '
| |
| l
| |
| .
| |
| .-
| |
| --
| |
| | |
| . _ - .
| |
| e I
| |
| <
| |
| ~
| |
| !
| |
| '
| |
| t product produced by many different sellers and auctioned off r-
| |
| :
| |
| in a well-organized market. The perfect competitor is too
| |
| ,.. small and unimportant to affect the market price alone. He
| |
| ' I is a price-taker who sells as much or as little as he desires
| |
| ;p at the market price. In analytic terms, the perfect competi-tor faces a virtually horizontal demand curve for his pro-
| |
| '
| |
| ,
| |
| duct. No matter what level of output he decides upon, the
| |
| _
| |
| price he will get for his goods or services remains constant.
| |
| L He cannot create an artificial scarcity by holding back ou?- l put in an effort to force a price increase; nor can he effect i ~ a price decrease by expanding his output.
| |
| Haphazard interference with the economic system is likely to undermine this competitive structure. Such inter-I ference will undoubtedly alter output relative to that which is r normally available, thereby depriving society of the goods and
| |
| -
| |
| services it most desires. Resource allocation will thus no
| |
| "
| |
| longer be optimal; products most in demand will receive in-L.
| |
| sufficient resources and less desired products will have an
| |
| .
| |
| i ovtrabundance of resources. In addition, it is likely that j
| |
| - the interference will result in a distortion of income distri- )
| |
| '
| |
| -
| |
| bution.
| |
| _
| |
| 48/ This distortion may not be as wasteful as the misal-location of resources, however, since windfall gains can be taxed by the government or eliminated entirely through govern-ment-imposed price regulation.
| |
| l
| |
| .
| |
| * l l
| |
| l
| |
| '
| |
| - . ._
| |
| | |
| -
| |
| I
| |
| -
| |
| ,
| |
| i -
| |
| I
| |
| - The antitrust laws are designed to protect against
| |
| -
| |
| any such disruptive practices. Where a market is perfectly lf' competitive, or nearly so, actions of individuals or corpor-I
| |
| * ations that artifically skew marketplace decisions by interfer-ing with competition are condemned by statute as anticompeti-
| |
| ,_ tive. Historically, the concern of the antitrust laws has i been to preserve competition among producers by preventing
| |
| ;- them from joining together to achieve for themselves the
| |
| ,1 fruits of monopoly power. And where a single Iroducer has by himself sought by lawful means to monopolize a market, that conduct can be reached as well. See Areeda, Antitrust
| |
| '
| |
| . Analysis 1300 (1967).
| |
| -
| |
| When the antitrust laws function in the unregulated
| |
| -
| |
| sector of the economy--that is, within that economic area where society allows the marketplace to operate without govern-
| |
| .
| |
| ment participation--competition provides an adequate standard I for. measuring challenged activities. In such an environment, any disruption of normal competitive patterns is likely to
| |
| -
| |
| constitute a haphazard interference with the competitive forces j ,
| |
| in the marketplace and result in a wasteful misallocation of
| |
| _
| |
| resources.
| |
| _
| |
| But not all markets are sufficiently competitive in their own right to function witbaut government regulation.
| |
| -
| |
| A typical example where the market solution does not work IL.
| |
| | |
| ..
| |
| !
| |
| ,
| |
| :
| |
| (
| |
| t
| |
| -
| |
| is presented here in the form of the " basic natural monopoly structure" of the electric utility industry. See Gulf rtates
| |
| ,
| |
| Utilities Co. v FPC, 411 U.S. 747, 759 (1973). A natural
| |
| ( monopoly exists when there is a relation between the size of the market and the size of the most efficient firm therein
| |
| ~
| |
| such that the single most efficient firm can produce all the
| |
| _
| |
| ,
| |
| \
| |
| requirements of the market demand at a remunerative price and
| |
| _
| |
| also have the continuing ability to expand its capacity at less 49/
| |
| l cost than a prospective new entrant coming into the business.~-
| |
| This extraordinary situation occurs because the natural monopo-lict finds that continuing economies of scale eithe'r (a) produce
| |
| >c
| |
| ) a constantly decreasing marginal cost ( i . e,, , the incremental cost attributable to an extra unit of output), which enables the
| |
| , c.
| |
| [ natural monopolist to undersell all prospective competitors, or y (b) dictate an e*ficient level of production by a single firm so
| |
| -
| |
| large compared to total industry demand as to act as a disincen-50/
| |
| , tive to numerous other firms coexisting in the market. ~~
| |
| %-
| |
| The existence of .his natural monopoly phenomenon does ,
| |
| not eliminate entirely the concept of a competitive market, but i
| |
| ,L 49/ See Kaysen and Turner, Antitrust Poliev 191 (1959). !
| |
| 50/ In comparison, in a perfectly competitive market, mar-
| |
| ._ ginal costs normally increase due to diminishing returns from the factors of production. It is these increasing mar-ginal costs that impose an economic limitation on the level of
| |
| " output which is well below total industry demand, thereby allow-ing room for a number of producers in the market.
| |
| ,:
| |
| ;-
| |
| - - -, - - - , -
| |
| | |
| "r
| |
| !
| |
| !
| |
| -
| |
| 96-
| |
| '
| |
| it drastically alters the forces that are brought to bear in the
| |
| "
| |
| --
| |
| marketplace to insure that the public interest is best served.
| |
| #
| |
| Competition and the market pricing mechanism discussed above largely give way in such circumstances to pervasive rovernment
| |
| ,,
| |
| regulation. Theoretically, the aim of regulation is to duplicate
| |
| \
| |
| '
| |
| (albeit artifically) the competitive framework in an unregulated
| |
| -
| |
| market. That, of course, hardly ever occurs. Indeed, in many I
| |
| instances explicit statutory provisions instruct the regulatory
| |
| '~
| |
| body to achieve ends that probably would not occur in an unregu-(
| |
| lated market. See, e.g., 42 U.S.C. SS 2011, 2013(d) (1970), 42 l'
| |
| U.S.C.A. S5301(a) (Feb. 1975) (declaring a national policy to e develop n.uclear power).
| |
| !
| |
| -
| |
| Even so, the primary goal in this regulated context,
| |
| -[L as with perfect or near perfect competition, remains the same, r.amely: the efficient allocation of resources. Thus, in terms of the end desired there is no material conflict between anti-trust principles and regulation. This point was underscored in L Northern Natural Gas Co. v FPC, 399 F.2d 953, 959 (D.C. Cir.
| |
| 1968):
| |
| A basic goal of direct governmental
| |
| , regulation through administrative j bodies and the goal of indirect
| |
| -
| |
| governmental regulation in the form of antitrust law is the same--to achieve the most efficient alloca-
| |
| - tion of resources possible.
| |
| See also Latin America / Pacific Coast S.S. Conf. v FPC, 465 F.2d
| |
| '~
| |
| 542, 545 (D.C. Cir. 1972).
| |
| '
| |
| l
| |
| -
| |
| , - r -1 - - -
| |
| | |
| __ _
| |
| ..
| |
| l
| |
| ..
| |
| i
| |
| -
| |
| i'
| |
| <
| |
| It is precisely because of this identity of objective
| |
| _.
| |
| '[ that there exists the need to reconcile the competing methods by
| |
| ;r which each of these statutory regimes undertakes to accomplish
| |
| '
| |
| the desired end. This is, as we noted earlier, no easy assign-
| |
| { ment. Since the antitrust laws assume a nearly perfect competi-tive market structure, their principal emphasis is on competition as an end in itself. See, e.g., Northern Pacific Ry. v United
| |
| _
| |
| States, 356 U.S. 1, 4 (1958). But in a regulated industry, where I market conditions are normally non-competitive, competition is a ir poor yardstick by which to measure successful resource allocation.
| |
| '
| |
| For example, the pervasive utilization by the states of certifi-cates of public conveneince and necessitf; or other such mecha-
| |
| ,
| |
| nisms, is but one manifestation of tb i' ly felt need for a
| |
| ._ limitation of competition within the electric utility field as a
| |
| ;-- means of resource allocation.
| |
| "~
| |
| A harmonization of these divergent philosophies must strive to accommodate both concepts, at least in part.
| |
| '
| |
| Just as
| |
| ;[.
| |
| .
| |
| the existence of government regulation cannot be read so broadly 51/
| |
| l[ as to immunize Applicants entirely from antitrust scrutiny,~~
| |
| r so too the underlying purpose of the antitrust laws to enhance b competition cannot--as the Department, the Staff and Cleveland
| |
| '
| |
| would like to have it--be blindly applied to undermine the very m
| |
| market structure that government regulation was devised to protect.
| |
| l' 51/ Certain of Applicants' activities which are subject to I state regulation are in all respects beyond the reach of the antitrust laws, as we explain in Part III.B.4, infra, m
| |
| 'h-
| |
| , _ -- . _ - - - +v._ y
| |
| | |
| r I
| |
| .
| |
| '
| |
| r i
| |
| '
| |
| It is the task of this Licensing Board to arrive at the proper
| |
| ~
| |
| " interrelation of [the) two statutory schemes--each of which
| |
| ,
| |
| reflects different historical pressures and different concep-
| |
| .
| |
| I tions of the public interest." S. S. W., Inc. v Air Transport Ass'n. of America, 191 F.2d 658, 661 (D.C. ir. 1951), certio-
| |
| [. 52/
| |
| ~-
| |
| rari denied, 343 U.S. 955 (1952). And it must do so fully
| |
| ~
| |
| cognizant of the economic realities sustaining the existing i
| |
| market structure in the electric utility industry in order to
| |
| ..
| |
| , insure that the final decision will not only be legally sup-portable but also economically sound. See general.1y Atlantic Seaboard Corp. v FPC, 404 F.2d 1268, 1273 (D.C. Cir. 1968).
| |
| : 3. The Legal Basis For Reconciliation. Recent Supreme Court opinions dealing with an application of the anti-
| |
| .n trust laws to regulated industries provide helpful guidance
| |
| .-
| |
| ,,
| |
| on how the Licensing Board should carry out its respo62ibil-
| |
| ,_ ities in this area. Significantly, in charting this difficult course of reconciliation, the Court has shown in the past
| |
| "
| |
| several years an increas'ng respect for regulatory policies
| |
| ; that recognize a need in the particular circumstances to temper
| |
| -
| |
| l the antitrust emphasis on competition for competition's sake.
| |
| ,7 L In the case most often cited by our adversaries, Otter Tail Power Co. v Unitec States, 410 U.S. 366 (1973),
| |
| I
| |
| '''
| |
| a narrow majority of the Supreme Court affirmed (4-3) a lower u
| |
| $7/ See also Note, Of Raisins and Mushrooms, Applying the Parker Antitrust Ec .nption, 58 Va. L. Rev. 1511, 1513 (1972).
| |
| .-
| |
| | |
| r I
| |
| _
| |
| 1
| |
| .
| |
| 99_
| |
| t I
| |
| -
| |
| court ruling that the appellant had attempted to monopolize and
| |
| .
| |
| had monopolized the retail distribution of electric power in the
| |
| .,
| |
| relevant market. In concluding that the private utility's com-plete refusals to deal with small municipal systems in its ser-c-
| |
| f vice area offended the antitrust laws (see 410 U.S. at 372-374),
| |
| Mr. Justice Douglas--influenced, many believe, far more by the
| |
| ._
| |
| (
| |
| egregious facts presented than by any cogent legal analysis--
| |
| -
| |
| ascribed little significance to the regulatory framework discuss-
| |
| ,
| |
| ed earlier in this brief.
| |
| -
| |
| Mr. Justice Stewart, writing for himself, Chief Justice Burger and Mr. Justice Rehnqufst, vigorously dissented (410 U.S.
| |
| '
| |
| at 382-395). After reproaching t;;* Court for failing to differ-e entiate between traditional antitrust cases and those involving "a highly regulated, natural-monopoly industry wholly different from those that have given rise to ordinary antitrust principles" m
| |
| (410 U.S. at 382), Mr. Justice Stewart articulated the basis for his dissent in the following terms (410 U.S. at 389):
| |
| .(.
| |
| The very reason for the regulation of private utility rates--by state bodies and by the [ Federal Power] Commission--
| |
| l- is the inevitability of a monopole that
| |
| ;
| |
| requires price control to take t'.e ' ace l'~ of competition. Antitrust prin;iple L applicable to other industrie< 2annot be blindly applied to a unilateral refu d to deal on the part of a power company,
| |
| ;" operating in a regime of rate regulation l and license monopolies.
| |
| .
| |
| .
| |
| | |
| r I
| |
| .-
| |
| i -100-
| |
| -.
| |
| While it is not often that a dissenting view com-
| |
| ~
| |
| mands the attention of a deliberating body, one clear ex-
| |
| .
| |
| ception to that principle is when the dissenters' position
| |
| '
| |
| is subsequently adopted by a majority of the Court. Such
| |
| . is the case with respect to Mr. Justice Stewart's above reasoning in Otter Tail. Only last term, in United States
| |
| ~
| |
| v Citizens & Southern National Bank, 95 S. Ct. 2099 (1975),
| |
| :(
| |
| the Supreme Court rejected a Justice Department suit seeking to enjoin the acquisition of five banks--an acquisition which
| |
| , had previously been authorized by the Federal Deposit Insur-ance Corporation pursuant to the Bank Merger Act of 1966, 12 U.S.C. 51828 (1970). The Department alleged, inter alia, that the already existing relationship between the acquiring
| |
| .-
| |
| bank and the five banks to be acquired amounted to an un-
| |
| .
| |
| - reasonable restraint of trade in violation of Section 1 of
| |
| : m. the Sherman Act. As to this charge, the Court intimated that, in the absence of other circumstances, the challenged re-3' lationship might well have run afoul of die antitrust laws
| |
| '
| |
| (95 S. Ct. at 2115). However, Mr. Justice Stewart, this
| |
| -
| |
| time writing for the majority and over the discents of Mr.
| |
| _
| |
| Justice Douglas and two other members of the Court who'had sided with the majority in Otter Tail, upheld the practice.
| |
| -
| |
| In language ;eminiscent of his otter Tail dissent, Mr. Justice Stewart stated (95 S. Ct. at 2104):
| |
| l
| |
| _
| |
| -.
| |
| | |
| r
| |
| (
| |
| r
| |
| ( -101-
| |
| ;'
| |
| !
| |
| In applying the antitrust laws to
| |
| _. banking, careful account must be taken of the pervasive federal and
| |
| -
| |
| state regulation characteristic of the
| |
| ~
| |
| industry, "particularly the legal re-straints on entry unique to this line of commerce." United States v Marine Bancorporation, 418 U.S. 602, 606 (1974).
| |
| p This admonition has special force in the
| |
| ,
| |
| present case, for the de facto branch arrangements and the proposed acquisi-
| |
| _ tions involved were a direct response to Georgia's historic restrictions on i branch banking.
| |
| r- See also Gordon v New York Stock Exchange, Inc., 95 S. Ct. 2598 (1975); United States v National Association of Securities Dealers, Inc., 95 S. Ct. 2427 (1975).
| |
| Thus, it now appears to be the prevailing attitude of f
| |
| '
| |
| [, the supreme Court that regulatory schemes which pervade the
| |
| -
| |
| general market structure of an industry--as here--are er. titled
| |
| ' -
| |
| tc considerable deference when practices within that industry come under antitrust scrutiny. This is as it should be. For, s.
| |
| as previously indicated, competition, which is the touchstone
| |
| .
| |
| of antitrust enforcement, has only limited application in the l
| |
| i context of comprehensive government regulation. The very pur-
| |
| -
| |
| pose for imposing a regulatory scheme is that the usual com-1' l petitive forces in the marketplace are inadequate to accom-
| |
| "
| |
| plish society's desired goal (i.e., an efficient allocation of i
| |
| ,.
| |
| resources). As pointed out in Hawaiian Telephone Co. v FCC, supra, 498 F.2d at 777:
| |
| .
| |
| .E s e Wh
| |
| , -
| |
| | |
| e i
| |
| r
| |
| !
| |
| -102-
| |
| -.
| |
| ,
| |
| The whole theory of licensing and
| |
| -.
| |
| regolation by government agencies is based on the belief that com-petition cannot be trusted to do
| |
| ~
| |
| the job of regulation in that particular. industry which competi-tion does in other sectors of the economy.
| |
| -
| |
| l , In this connection, it has been accurately noted
| |
| _ that, while "[f]ree competition is a basic postulate of our
| |
| ''. free enterprise system, * *
| |
| * it is not always--in all con-
| |
| ~
| |
| ditions--in the public interest; sometimes regulated monopoly, or a measure of controlled monopoly is in the public interest."
| |
| .
| |
| California v FPC, 296 F.2d 348, 353 (D.C. Cir. 1961), reversed .
| |
| ,
| |
| on other grounds, 369 U.S. 482 (1962). In these latter cir-
| |
| , cumstances, where the practical limitations of the market
| |
| +
| |
| "severly limit the number of separate enterprises that can ef-ficiently, or conveniently, exist, the need for careful quali-
| |
| -
| |
| fication of the scope of competition becomes manifest." FCC
| |
| ~.
| |
| v RCA Communications, Inc., 346 U.S. 86, 92 (1953). This is
| |
| _ implicit in the Supreme Court's ruling in Gulf States Utili-7 ties Co. v. FPC, supra, 411 U.S. at 759, wherein it was stated:
| |
| l -- Within the confines of a basic
| |
| !
| |
| natural monopoly structure, limit- -
| |
| ed competition of the sort protect-m ed by the antitrust laws seems to have been anticipated. [ Emphasis add-ed.]
| |
| 4
| |
| "
| |
| The degree to which " limited competition" is appro-i.
| |
| fi.
| |
| l
| |
| .
| |
| *
| |
| | |
| ?
| |
| I
| |
| ,
| |
| r l I '
| |
| -103-
| |
| --
| |
| priate in such a market structure depends in the final analysis on the nature of the protection otherwise afforded by federal
| |
| .. and state regulation. In the electric utility industry, it has already been recognized by the U.S. Court of Appeals for
| |
| ''
| |
| the District of Columbia that tt:e regulatory protection is extensive. As explained by Chief Judge Bazelon in Pennsyl-
| |
| .-
| |
| vania Water & Power Co. v FPC, 193 F.2d 230, 234 (D.C. Cir.
| |
| ,
| |
| 1951), affirmed, 343 U.S. 414 (1952), competition does little to serve the public interest in this setting.
| |
| r (The Federal Power Act] evidences con-gressional recognition that competition can assure protection of the public in-
| |
| .
| |
| terest only in an industrial setting which is conducive to a free market and can have
| |
| '
| |
| no place in industries which are monopolies
| |
| ~ because of public grant, the exigencies of nature or legislative preference for a par-
| |
| _ ticular way of doing business. * *
| |
| * Rates charged by such utilities, as well as the
| |
| -
| |
| services and contractual provisions affect-
| |
| '-
| |
| ing them, must be "just and reasonable." <
| |
| And what is "just and reasonable" is not l determined by the pressures of competition I but by the adequacy of the service to the t .
| |
| public, the fairness of the return allowed upon the investment in the company, and the c' degree to which the congressional objective
| |
| '' of efficient use of the nation's power re-sources is served.
| |
| .
| |
| This Licensing Board should, therefore, not allow m
| |
| itself to be misled by the efforts here of the Department, the
| |
| ..
| |
| Staff and Cleveland automat!cally to equate the public interest with additional competition. This is precisely the heavy-
| |
| :i l
| |
| ,_.
| |
| ..
| |
| | |
| r i
| |
| l
| |
| -
| |
| .
| |
| j
| |
| ; -104-
| |
| :
| |
| . - .
| |
| '
| |
| handed approach that was ridiculed by the court in Hawaiian
| |
| ~
| |
| Telephone Co. v. FCC, supra, 498 F.2d at 777. As the Supreme Court made clear in FCC v RCA Communications, Inc., supra,
| |
| ..
| |
| 346 U.S. at 97:
| |
| .
| |
| '..
| |
| [I]t is not too much to ask that there be ground for reasonable expectation that competition may have some benefi-cial effect. Merely to assume that competition is bound to be of advantage, in an industry so regulated and so large-ly closed as [the communications industry] ,
| |
| is not enough. '
| |
| See also Apgar Travel Agency, Inc. v International Air Trans-1
| |
| '~ i port Ass'n., 107 F. Supp. 706, 709 (S.D.N.Y. 1952) (competi-tion in air transport industry not in national interest).
| |
| .
| |
| It is from this perspective that Applicants urge the Licensing Board to pay full respect to the comprehensive federal
| |
| - and state regulation that exists in this industry in implement-r 'ng its Section 105c antitrust review responsibility "[u]nder
| |
| '~
| |
| the aegis of the rule of reason." Compare Silver v New York e-Stock Exchange, 373 U.S. 341, 360-361 (1963). Such an approach l m
| |
| requires that in at least three classes of cases practices
| |
| . (.
| |
| m which in the absence of regulation might be considered unlaw-
| |
| [ ful should be found lawful because they are carried out under
| |
| '
| |
| government regulation.
| |
| I First, private action that is in direct furtheran e of a regulatory policy is lawful. In Silver v New York Stock L
| |
| 1
| |
| , I
| |
| :.
| |
| _
| |
| | |
| _ . _ _ . _ _ _ _ _ _ _ _ . _ _ . ________ _ __
| |
| , t
| |
| ,
| |
| l -105-t i Exchange, supra, the Supreme Court was asked to consider wheth-
| |
| )
| |
| * er the stock exchange could, consistent with the antitrust laws, )
| |
| f order the removal of telephone wires connecting a non-member i
| |
| ! with member firms. While acknowledging that such action would
| |
| .t constitute a per je violation of the Sherman Act "had it occur-i red in a context free from other federal regulation" (373 U.S.
| |
| i at 347), the Court declared that "the presence of another stat- )
| |
| l l
| |
| ;
| |
| utory scheme, that of the Securities Exchange Act of 1934, means that such a conclusion is only the beginning, not the l
| |
| end, of inquiry." 373 U.S. at 348-49. Since the Exchange Act i
| |
| 4 did not comprehensively regulate the practices in question, i the Court held that there was no exemption from the antitrust laws. 373 U.S. at 358. That conclusion did not, however,
| |
| ! terminate the inquiry. For the Court still had to determine i
| |
| (id.)!
| |
| .
| |
| i the extent to which the character and objectives of the duty of ex-
| |
| '
| |
| change self-regulation contemplated
| |
| <
| |
| by the Securities Exchange Act are
| |
| ' incompatible with the maintenance of an antitrust action. [ Emphasis
| |
| * addet.] ,
| |
| i !
| |
| This inquiry into the " character and objectives" of
| |
| [ the regulatory scheme was deemed necessary-because the particular instances of exchange self-regulation which fall within
| |
| '
| |
| the scope and purposes of the Se-l curities Exchange Act may be re-
| |
| ,
| |
| e
| |
| - _ , _ _ . _ _ . . _ _ _ _ _ _ _ , _ _ _ _ . _ _ _ _ . - _ _ . _ _ _ _ _ _ _ _
| |
| | |
| _ _ - - _ __ _ _ _ _ _ _ _ _ _
| |
| -
| |
| 1 1
| |
| -107-
| |
| _
| |
| 53/
| |
| --
| |
| that differ from those promulgated by the regulatory authority.
| |
| ~
| |
| With specific reference to the present proceeding, Applicants' decision to participate in the CAPCO pool arrangement, and the
| |
| ,
| |
| implementation of that decision, is but one example (among
| |
| - others) of precisely the sort of private action in further-ance of regulatory policies which the Gordon decision intend-
| |
| ~
| |
| ed to protect from antitrust condemnation. This is discussed in greater detail in Part V., , infra.
| |
| _.
| |
| Second, private action the effect of which is to
| |
| ,
| |
| ameliorate regulatory policy is lawful. Where a regulatory policy is on its face anticompetitive--e.g., price fixing, restrictive entry, territorial divisions, etc.--private ac-
| |
| '
| |
| tions thereunder must be evaluated within the framework of
| |
| '
| |
| such existing policy considerations. If government regula-
| |
| .
| |
| tion has itself skewed market decisions by adherence to a u scheme which would normally have antitrust overtones, it is neither appropriate nor fair to presume that private conduct
| |
| '
| |
| of the same ilk will necessarily have harmful effects on the
| |
| .
| |
| -- 53/ The Court indicated its sensi'eivity to this problem in
| |
| .
| |
| the Tollowing statement (95 S.Ct. at 2615):
| |
| .c
| |
| '
| |
| Such different standards are likely to result because the
| |
| . , sole aim of antitrust legis-lation is to protect competi-j' tion, whereas the SEC must consider, in addition, the economic health of investors,
| |
| .
| |
| . the exchanges, and the secur-ities industry.
| |
| !
| |
| l _
| |
| .%
| |
| _ , . _ - - , - _-
| |
| | |
| c-
| |
| !
| |
| -108-market structure. Careful attention must be given in such
| |
| _ circumstances to the actual, as opposed to theoretical, impact of the challenged activity on the existing situation.
| |
| This is essentially the teaching of United States v
| |
| '
| |
| * Citizens & Southern National Bank, supra. There the alleged
| |
| -
| |
| Sherman Act violation was based on Citizens & Southern National Bank's ("CES") system of de facto branch banking. Prior to
| |
| , 1970, Georgia law prevented city banks from opening branches in suburban areas. To counter this restriction, C&S estab-lished de facto branch banks in the suburbs. Under this pro-gram C&S held 5 percent of the stock of each bank and engaged in various management functions for the suburban banks, includ-
| |
| 'i
| |
| [ ing choosing the principal executive officer, overseeing the 7
| |
| selection of directors, selecting bank locations, providing L information on interest rates and service charges, and in gen-
| |
| '[b.
| |
| eral standing behind and openly assuring the banks of full financial support. In the absence of regulatory controls,
| |
| ,
| |
| ,
| |
| the Supreme Court stated that such a scheme might violate the Sherman Act (95 S.Ct. at 2115):
| |
| - Were we dealing with independent competitors having no permissible
| |
| 't reason for intinate and continuous
| |
| ,L cooperation and consultation as to almost every facet of doing busi-
| |
| .: ness, the evidence adduced here
| |
| , might well preclude a finding that
| |
| ' the parties were not engaged in a j
| |
| i conspiracy to affect prices.
| |
| l
| |
| ,
| |
| -
| |
| l.
| |
| .-
| |
| | |
| . . . . .-
| |
| !I il
| |
| '~
| |
| _10 9. .
| |
| -
| |
| The Court did, however, look at the surrounding cir-
| |
| -
| |
| cuentances. The opinion analyzed the scope and history of Georgia's anti-branching its, the nature of C&S's de facto branch banking system, the competitive advantages resulting
| |
| ~~
| |
| ,
| |
| from branch banking, and alternative programs open to C&S.
| |
| ; -.
| |
| Conceding that C&S's program went beyond conventional corre-
| |
| - spondent arrangements, the Court concluded that any restraints
| |
| :' of trade inherent in the challenged activities were not unrea-
| |
| ~
| |
| sonable because "their whole purpose and effect [was] to defeat I
| |
| a restraint of trade" (95 S.Ct. at 2117; emphasis in original)
| |
| ,r-I(
| |
| -
| |
| _i.e., the compulsory market division mandated by Georgia's ,
| |
| 54/
| |
| --
| |
| ,r bank regulatory policies and the anti-branching law.
| |
| In their separate Fact Briefs filed herewith, and at lb
| |
| -r the evidentiary hearing, Applicants will demonstrate that many lL r-l 54/ Mr. Justice Stetart, writing for the majority, also re-
| |
| '' jected the government's argument that there was a less restric-tive alternative open to C&S--i.e., a " conventional" correspon-
| |
| "
| |
| dent relationship--which allegedly would have better preserved L competition among and between the branch banks and C&S. The Court characterized this suggestion as
| |
| ,
| |
| * *
| |
| * mere speculation on the present
| |
| '"
| |
| record. * * * [I]t is far from clear that a conventional relationship would
| |
| :g
| |
| ,; have allowed C&S to put its full range
| |
| '' of services into the suburban market.
| |
| *** [And] the Government's argument
| |
| '' wholly disregards CES's ultimate goal L of acquiring the new banks outright as soon as legally possible * * *.
| |
| [95 S.Ct. at 2118.]
| |
| !
| |
| ~
| |
| !
| |
| -
| |
| l_ l t l
| |
| -
| |
| .
| |
| : w. -- , , - - . - - - - - , , ,
| |
| | |
| I
| |
| !
| |
| -
| |
| -110-I of the allegedly restrictive covenants included in the vari-
| |
| -
| |
| ous agreements between individual Applicants and municipal-ities located within their respective service aregs are, in
| |
| ~
| |
| similar fashion, ameliorative of certain state and federal regulatory policies and should, for that as well as other
| |
| ..
| |
| reasons, not be faulted under the antitrust laws.
| |
| _ Third, private action is lawful when the presence
| |
| <
| |
| of government regulation insures thet the public will be ful- ;
| |
| ~
| |
| ly insulated from any possible harmful effects of such action.
| |
| While in many cases the courts speak in terms of per se vio-I lations, or infer evil intent from the actions of a monopolist, it should be recognized that such language is merely a rule of t judicial convenience. It represents a preconceived judicial
| |
| ,
| |
| p judgment on the basis of past experience that certain types of L~
| |
| conduct are unlikely to benefit the economy; that pernicious t~
| |
| etfects can regularly be anticipated from such conduct; that
| |
| : L the dangers resulting from the conduct are so great and the m temptation to engage in it so strong that the public must be
| |
| ! protected by an absolute prohibition; and that to tolerate
| |
| ~
| |
| the conduct would require an unduly burdensome system of con-55/
| |
| ! tinuous regulation.~~ When these factors exist in the absence L
| |
| !
| |
| "
| |
| 55/ See Areeda, Antitrust Analysis 11319, 348 (1967).
| |
| -
| |
| 16 s
| |
| | |
| - - - -
| |
| -
| |
| ;
| |
| - -111-
| |
| _
| |
| of regulation, injury is presumed and the courts need look no
| |
| _
| |
| further than to the forbidden acts. However, almost by defi-
| |
| _
| |
| nition when society has recognized that a market cannot ope-rate within the traditional model of perfect or near perfect
| |
| -
| |
| competition and therefore sees the need for government regu-letion, the justification for this rule of judicial conve-
| |
| ~
| |
| nience is short-circuited. It is neither likely that the
| |
| ,
| |
| conduct of the per se variety will be unreasonable in such a
| |
| ,
| |
| context; nor that the challenged behavior will have harmful effects, since the very purpose of regulation is to guard the public generally against such harm. In this framework, the
| |
| '
| |
| antitrust sanctions serve little purpose.
| |
| .
| |
| The Supreme Court recognized as much in McLean Truck-
| |
| -
| |
| ing Co. v United States, 321 U.S. 67 (1944). It there declared
| |
| -
| |
| e in quite broad terms (321 U.S. at 85):
| |
| I
| |
| - [T]he business affected is subject to strict regulation and supervi- ,
| |
| sion, particularly with respect to L rates charged the public--an effec-
| |
| . tive safeguard against the evils attending monopoly at which the j-i
| |
| .
| |
| Sherman Act is directed.
| |
| -
| |
| In Pennsylvania Water & Power Co. v Consolidated Gas, Electric
| |
| - Light & Power Co., 89 F. Supp. 452 (D. Md.), reversed, 184 F.2d l' 552 (4th Cir.), certiorari denied, 340 U.S. 906 (1950), the dis-
| |
| 'L trict court, made a similar observation with specific reference
| |
| '
| |
| to the electric utility industry. In a statement ignored by the
| |
| __
| |
| l.
| |
| ,
| |
| I w
| |
| ,
| |
| [ w -
| |
| - . - , ,
| |
| , . - . . . _ _ _
| |
| | |
| . ._ ._ - _-
| |
| -
| |
| -112-l
| |
| ~
| |
| court of appeals in its subsequent reversal, the district
| |
| _
| |
| court pointed out (89 F. Supp at 466):
| |
| [It] is essential, in analyzing
| |
| [this case] to bear in mind that
| |
| [the parties) represent monopolies regulated by law. Price fixing is inherent in, and certainly within very broad limits, controlled by
| |
| ~
| |
| ,
| |
| '
| |
| private monopolies, but in public monopolies, prices are controlled by law. So, limiting production
| |
| - and preventing competition are questions which take on a differ-
| |
| -
| |
| ent aspect in dealing with public
| |
| ~
| |
| utilities as contrasted with pri-vate enterprises.
| |
| 1 It follows from these decisions that to the extent
| |
| -
| |
| Applicants, or any of them, have been accused of engaging in any kind of alleged price-fixing scheme -- and Applicants will
| |
| . demonstrate in their accompanying Fact Briefs and at the hear-
| |
| ~
| |
| ing that charges of this sort are baseless -- it is the compre-
| |
| "
| |
| hensive state and federal regulatory regimes that determine r
| |
| .{w the propriety of such rate practices in the first instance,
| |
| ,
| |
| not the antitrust laws. Nor should this come as a surprise.
| |
| -. It has long been recognized, as we have earlier discussed,
| |
| -
| |
| that where surrounding circumstances make it impossible for
| |
| ~
| |
| the parties to manipulate market decision there is no need to invoke the antitrust laws. See, e.g., Chicago Board of Trade
| |
| -
| |
| v United States, sup Apjalachian Coals, Inc. v United States,
| |
| ~-
| |
| _ 288 U.S. 344 (1933). One such " surrounding circumstance" 56/ See also the commentary on the above-cited decisions in
| |
| -
| |
| United States v Socony-Vacuum Oil Co., supra, 310 U.S. at 215, 217; United States v Trenton Potteries Co., 273 U.S. 392,401 (1927).
| |
| .-
| |
| :!
| |
| -l -
| |
| iL
| |
| .. _ _ -. - _ . _ _ _ _ . _ _ . _ . . _ , __,
| |
| | |
| _ _ _ _ _- _
| |
| 4 l
| |
| _
| |
| -113-r-
| |
| '
| |
| is plainly the regulatory supervision in this industry over l r e pricing practices and rate decisions. As to private activi-ties coming within that supervision, they must be accepted as lega?ly permissible even though they could perhaps be
| |
| - -
| |
| considered inconsistent with the ancitrust laws in the ab-sence of regulation.
| |
| r-( 4. The Parker v Brown Doctrine. There is one i
| |
| * final point to be considered by the Licensing Board in con-nection with its reconciliation effort. In addition to t he !
| |
| accommodation to which federal and state regulation is gen-
| |
| ,
| |
| erally entitled under an application of the antitrust rule-i of-reason standard, there is a separate area that has been
| |
| <
| |
| carved out by judicial decision which exempts various state
| |
| -
| |
| regulated practices from antitrust review altogether. This !
| |
| .
| |
| exemption has particular relevance here due to the earlier-described comprehensive regulation to which CEI, TECO and
| |
| ,_ Ohio Edison are subjec.t under the Public Utilities Code of
| |
| ._
| |
| the State of Ohio (R.C. S$4901.01 et seq.), and to which
| |
| --
| |
| Duquesne Light and Penn Power are subject under the Public i Utility Law of the State of Pennsylvania (66 P.F- 551101-
| |
| --
| |
| 1526).
| |
| _
| |
| The principle of antitrust immanity in question can be traced directly to the Supreme Court decision in l
| |
| -
| |
| i
| |
| _
| |
| __
| |
| n
| |
| | |
| : -
| |
| 1 1
| |
| __
| |
| l
| |
| , -114- l
| |
| - )
| |
| * Parker v Brown, 317 U.S. ',1 (1943). In that case, the Court held that a cooperative price fixing agreement among
| |
| .
| |
| _
| |
| California raisin growers did not violate federal antitrust
| |
| , laws since the agreement " derived its authority and its ef-
| |
| '
| |
| - ficacy from the legislative command of the state and was not intended to become effective without that command" (317 U.S.
| |
| ~
| |
| at 350). Applicants candidly admit that the Parker exemption I
| |
| has,had a checkered existence at the. hands of the lower
| |
| ...
| |
| ,
| |
| federal courts. The mixed reception it has been given is
| |
| - dte largely to the fact that litigants have sought to apply the doctrine to a wide variety of factual circumstances, few of which are particularly relevant to the present inquiry.
| |
| '~
| |
| Out of this tangle of cases, however, Applicants believe a r
| |
| coherent theory does emerge that has application to the
| |
| _
| |
| _
| |
| state regulation of public utilities involved here.
| |
| L. In Asheville Tobacco Board of Trade, Inc. v FTC, 263 F.2d 502 (4th Cir. 1959), the Fourth Circuit articulated
| |
| "
| |
| what seems to be the most meaningful test for applying the Parker doctrine -- a test based on the type of activities regulated and the purpose of that regulation. It was there n_ stated (263 F.2d at 509):
| |
| < When a state has a public policy against free competition in an
| |
| ~~
| |
| industry important to it, the state may regulate that industry in order to control or, in a proper
| |
| ._
| |
| he o
| |
| !=
| |
| f
| |
| ,
| |
| .- - --,
| |
| | |
| ___ __
| |
| T
| |
| .
| |
| .
| |
| l I -
| |
| 115- I
| |
| '
| |
| ! .
| |
| r- j case to eliminate, competition there- )
| |
| in. It may even permit persons i
| |
| '
| |
| - subject to such control to parti-
| |
| '
| |
| cipate in the regulation provided
| |
| - their activities are adequately supervised gy independent state
| |
| ~
| |
| officials.5 -
| |
| Subsequent decisions invoking this standard have read Parker r
| |
| as confirming that " state created or encouraged monopolies
| |
| ,
| |
| are not intended by Congress to be subject to the antitrust
| |
| [ laws * * * .
| |
| " United States v Pacific Southwest Airlines,
| |
| '
| |
| supra. To determine what is a " state created or encouraged t
| |
| monopoly," the First Circuit instructed in George R. Whitten,
| |
| '' Jr. v Paddock Pool Builders, Inc. 424 F.2d 25, 30 (1st Cir.
| |
| 1970), that one must look to see if the state has decided i "that competition is not the summum bonum in a particular
| |
| - field and deliberately attempt [ed] to provide an alternate
| |
| "
| |
| form of public regulation."
| |
| Our earlier description of the Ohio and Pennsylvania r.
| |
| Public Utility Codes provides strong support for the proposi-
| |
| _
| |
| tion that both of those States consider the public utility
| |
| , field to be one in which competition is not an end unto itself.
| |
| ._
| |
| . 57/ The test adopted in Asheville Tobacco was quoted approv-ingly in Business Aides, Inc. v Chesapeake & Potomac Telephone Co., 480 F.2d 754, 756-57 (4th Cir. 1973); Norman's on the Water-Tront, Inc. v Wheatley, 444 F.2d 1011, 1017 (3d Cir. 1971);
| |
| ~
| |
| (Cont'd next page)
| |
| ,
| |
| l y .
| |
| :
| |
| .-
| |
| -
| |
| -v -- ,
| |
| | |
| _ _ - . _ -_. -_ _ _ _ _
| |
| r i -116-t In this connection, it is noteworthy that some commentators
| |
| , have forcefully advanced the suggestion that the Parker ex-emption be given full force where public utility regulation
| |
| , is involved.
| |
| ~ [A]lthough the Court in Parker did
| |
| , not fully articulate the quantum of state involvement necessary to
| |
| , constitute protected state action, the Parker doctrine should play a
| |
| ( per se role in immunizing state public utility regulation from i antitrust scrutiny. The antitrust
| |
| ( laws are simply inapposite as long as a state has established regu-latory commissions with jurisdic-l 'c ..
| |
| tion to police the rates and ser-t vices provided by public utilities
| |
| "
| |
| and similarly control the entry and exit of companies into this fle'.d.
| |
| ,
| |
| The fact that some state commissions, not unlike some federal commissions,
| |
| -
| |
| are sof t on regulation does not jus-
| |
| ''
| |
| tify nullifying state public utility regulation under the auspices of anti-
| |
| _. trus: laws. The legislative choice ir. favor of regulation precludes anti-t trust oversight in all public utility cases, and this deference should apply i
| |
| w
| |
| .
| |
| ._
| |
| 57/ Cont'd
| |
| '
| |
| BecEt v Pro-Football Inc., 444 F.2d 931, 937 n.17 (D.C. Cir.
| |
| m 1971); Woods Exploration & Producing Co. v Aluminum Company of America, 438 F.2d 1286, 1294 (5th Cir. 1971); Washington Gas Light Co. v Virginia Electric & Power Co., 438 F.2d 248,
| |
| -
| |
| 33I~I4th Cir. 1971); United States y Pacific Southwest Air- ;
| |
| lines, 358 F. Supp. 1224, 1228 (C.D. Cal. 1973). '
| |
| -
| |
| -
| |
| !
| |
| i
| |
| _
| |
| ;
| |
| , . . . _ . . _.
| |
| ._ _ . , . . _ . ,
| |
| | |
| ,
| |
| i c -117-
| |
| '
| |
| irrespective of the " actual involve-ment" of the utility commission challenged activity.
| |
| in the }8/
| |
| [ Emphasis added.]
| |
| -.
| |
| ,
| |
| At least one circuit court has taken an equally
| |
| ,. expansive view of the Parker exemption. In Washington Gas i Light Co. v Virginia Electric & Power Co., 438 F.2d 248
| |
| "'
| |
| (4th Cir. 1971), the Fourth Circuit held that VEPCO's under-ground wiring incentive program was immune from antitrust sanctions even though the State Corporation Commission f
| |
| .
| |
| (" SCC") made no investigation and gave no approval to the i practice in question. It ruled that (438 F.2d at 251-252):
| |
| '
| |
| the SCC possessed adequate regula-
| |
| ,
| |
| tory powers to stop VEPCO if it chose to do so, and that eventu-ally SCC spoke affirmatively and
| |
| ,
| |
| first modified and finally ended
| |
| '
| |
| the promotional practices upon which the suit was based. The antitrust laws are a poor substi-
| |
| , tute we think, for plaintiff's failure to promptly protest to
| |
| -
| |
| the SCC and to seek the adminis-trative remedy ultimately shown
| |
| ~~
| |
| to have been available and effec-tive. We think VEPCO's promo-tional practices were at all
| |
| - -
| |
| times within the ambit of regula-tion and under the control of SCC, and we hold these practices exempt
| |
| _
| |
| from the application of the laws of antitrust under the Parker doc-trine. [ Emphasis added.]
| |
| --
| |
| While Wasnington Gas Light represents the outer limits to which the Parker doctrine has thus far been ex-
| |
| _
| |
| G8/ Verkuil, State Action, Due Process and Antitrust:
| |
| RetTections on Parker v Brown, 75 Colum. L. Rev. 328, 339-340 l (1975). See also Note, Parker v Brown: A Preemption Analysis, !
| |
| !
| |
| 84 Yale L.J. 1164, 1175-76 (1975).
| |
| iu t
| |
| ..
| |
| - w -- w w vr
| |
| | |
| _ _______
| |
| _
| |
| l
| |
| \
| |
| ?-
| |
| 'i -118-l 59/
| |
| p tended in the public utility field,-- other relevant de-
| |
| '
| |
| cisions appear to be moving in the same direction. The
| |
| $' Fifth Circuit, for example, applied the Parker exemption to i
| |
| challenged tariffs and practices of the Georgia Power Com-( pany, including a graduated rate schedule, a budget payment plan, and underground and residential wiring incentives
| |
| :i I amounting to free electrical contract work. See Gas Light !
| |
| 1
| |
| ~
| |
| Co. v Georgia Power Co., 440 F.2d 1135 (5th Cir. 1971). I
| |
| \
| |
| Since the Georgia Public Service Commission had in fact
| |
| .I' i
| |
| considered each challenged activity in approving the util-
| |
| ,
| |
| p ity's tariff, the court found it unnecessary "to extend the Parker doctrine to the point of its extension in Washington
| |
| '~
| |
| Gas Light * * *" (440 F.2d at 1140); it had no difficulty,
| |
| ~
| |
| however, giving full effect to the antitrust exemption rule on the facts before it (id.):
| |
| the Parker exclusion applies to the rates and practices of public
| |
| . utilities enjoying monopoly status under state policy when their rates
| |
| ;F and practices are subjected to mean-
| |
| ;*- ingful regulation and supervision by the state to the end that they
| |
| :
| |
| : r. are the result of the state regu-
| |
| >
| |
| > 1atory authority * * *.
| |
| '_ 59/ We note in passing that the Supreme Court has recent-ly granted certiorari in Cantor v Detroit Edison Co., 392 F. Supp. 1110 (E.D. Mich. 1974), affirmed without opinion, 513 F.2d 630 (6th Cir. 1975), certiorari granted 44 U.S.
| |
| L.W. 3178 (October 6, 1975), which presents the Parker issue in a public' utility framework.
| |
| u.
| |
| :.
| |
| !.
| |
| .
| |
| ,, - - -
| |
| | |
| -. . . - - _ _ _ _ _ _ _ _ _ _ _ _
| |
| ,
| |
| ,
| |
| .
| |
| -119-
| |
| .
| |
| 7 i
| |
| '
| |
| Accord: Region Properties, Inc. v Appalachian Power Co., 368
| |
| ''
| |
| F. Supp. 630 (W.D. Va. 1973) (underground wiring incentive i
| |
| program); Cantor v Detroit Edison Co., supra (free re-
| |
| .1
| |
| :(. placement of electric lightbulbs to residential customers);
| |
| :
| |
| r-- Business Aides, Inc. v Chesapeake & Potomac Telephone Co.,
| |
| 'l i
| |
| 480 F.2d 754 (4th Cir. 1973), affirming, 339 F. Supp. 1391
| |
| .; (E.D. Va. 1972) (refusal of telephone company to provide it special equipment to allow telephone answering service to
| |
| -
| |
| 4 compete with telephone company immune under Parker since approved tariffs did not provide for nor require telephone
| |
| ,
| |
| company to provide such service); Lamb Enterprise, Inc. v Toledo Blade Co., 461 F.2d 506 (6th Cir. 1972) (refusal of
| |
| .
| |
| telephone company also in cable TV business to provide pole
| |
| -
| |
| space for competing cable company's wires immune under Parker
| |
| -
| |
| _
| |
| when refusal based on tariff provision that cable company
| |
| _ secure all necessary permits even though competing company's
| |
| -
| |
| inability to obtain permit from City of Toledo was due to
| |
| "
| |
| an unconsititutional ordinance).
| |
| The practical effect of these decisions seems
| |
| -
| |
| clear. Parker v Brown stands squarely for the proposition
| |
| (_ that federal courts and administrative agencies cannot use the antitrust laws to override state regulation and important
| |
| >-
| |
| -
| |
| state policies implemented through such regulation. While l
| |
| other courts have not yet had occasion to go so far as the i.\
| |
| ..
| |
| m
| |
| | |
| _ ._
| |
| k
| |
| . , -
| |
| -120-i' I Fourth Circuit's ruling in Washington Gas Light, at least in r the public utility context, the crucial issue under Parker
| |
| '
| |
| is not how diligently the state has enforced its supervisory
| |
| ,; powers, but the extent to which it has expressed a clear in-
| |
| ,
| |
| tent in a particular industry to displace the normal com-I petitive forces in the marketplace with'its own regulatory machinery. In both Ohio and Pennsylvania the pervasive re-
| |
| !
| |
| '
| |
| gulatory scheme in the public utility field leaves no le-
| |
| "'
| |
| gitimate doubts in this regard. Consistent with Parker v
| |
| :t.
| |
| Brown, and its above-cited progeny, this Licensing Board
| |
| ,(.
| |
| ,
| |
| ( must therefore tailor the present antitrust inquiry so as
| |
| - to accord the legislative judgments made by these two States 60/
| |
| --
| |
| -
| |
| full respect.
| |
| l!- In their separate Fact Briefs being filed herewith,
| |
| '
| |
| when the factual allegations are discussed in detail, Appli-cants will relate the Parker exemption to the practices speci-
| |
| _
| |
| ._
| |
| fically challenged in this proceeding. Accordingly, the pre-
| |
| - sent analysis will now move directly to the last element re-
| |
| ., levant to the scope of Section 105c review which this Licen-
| |
| '
| |
| sing Board must take into account. That element concerns the crucial statutory phrase " activities under the license".
| |
| -
| |
| 60/ We are not unmindful of the fact that the Licensing
| |
| - Board is already cognizant of its responsibilities in this regard, as reflected in its " Order on Objections To Inter-j- rogatories and Document Requests", p. 6, dated October 11, 1974.
| |
| l o
| |
| . .
| |
| - - _ _ - - - - - - . . _ . - _ - _ -
| |
| . , - _ ._,v - ,
| |
| | |
| -. _ _ __ -___ _ ___ ______.
| |
| f
| |
| $
| |
| "
| |
| I s' l
| |
| '~
| |
| -121-('
| |
| 1 C. THE PHRASE " ACTIVITIES UNDER THE LICENSE" f~ AS A LIMITATION ON THE SCOPE OF SECTION
| |
| ( 105c ANTITRUST REVIEW l
| |
| : e. l In granting to the Commission the authority to hold an l
| |
| [ I
| |
| ,
| |
| ,_ independent pre-licensing hearing on antitrust matters, Congress !
| |
| I framed the 1970 amendment to Section 105c of the Atomic Energy
| |
| '~
| |
| Act (Pub. L. 91-560, 84 Stat. 1472) in less expansive terms than I
| |
| .{
| |
| the Department, the Staff and Cleveland care to recognize. Cog-nizant of the fact that this additional area of inquiry was to l ('
| |
| ,
| |
| l.q be available only in connection with license applications for the .
| |
| ''
| |
| construction and operation of guclear facilities, and also mind-
| |
| ; ful that a basic purpose for the amendment was, as observed by l l' ' 61/
| |
| l the Commission in its second Waterford decision 7 to insure
| |
| ~
| |
| ~
| |
| "that access to nuclear facilities be as widespread as possible" i,
| |
| l (6 AEC at 620; emphasis added), the legislature authorized anti-
| |
| ,
| |
| trust review in this forum only with respect to " activities under the license" (Section 105c of the Act).
| |
| '
| |
| The Commission was
| |
| -
| |
| directed to determine whether the ~uicensed activities -- and those
| |
| ~
| |
| activities alone - "would create or maintain" the type of situa-
| |
| , tion condemned by the statute. Id.
| |
| i s._
| |
| !
| |
| l- 61/ See Louisiana Power & Light Co. (Waterfcrd Steam Electric Generating Station, Unit 3), CLI-73-25, 6 AEC 619 (September 28, 1 1973) (hereafter referred to as "Waterford II"). ;
| |
| ~.
| |
| l
| |
| .
| |
| e
| |
| -+ -em e p. +
| |
| w - - - . - .-r---mWw vNY-
| |
| | |
| 4
| |
| , <
| |
| f )
| |
| ._
| |
| { -122-
| |
| '
| |
| i'
| |
| : l. The Nexus Standard. In a number of earlier filings Applicants have explained generally to the Licensing
| |
| .
| |
| Board what they believe to be the proper reading of the "ac-
| |
| [- 62/
| |
| {
| |
| tivities under the license" language.-- Our position on this
| |
| _ point essentially coincides with the Commission's view as ar-ticulated in Waterford II, supra, 6 AEC at 620:
| |
| -
| |
| At the same time, however, we must empha-( size that the specific standard which Congress required for antitrust reviews
| |
| ,- * *
| |
| * has inherent boundaries. It does
| |
| ) not authorize an unlimited inquiry into
| |
| ' all alleged anticompetitive practices in
| |
| ,.
| |
| the utility industry. The statute in-volves licensed activities and not the
| |
| ; electric utility industry as a whole.
| |
| [ Emphasis in original.) If Congress had
| |
| ; intended to enact a broad remedy against t~
| |
| all anticompetitive practices throughout the electric utility industry, it would
| |
| ;-. have been anomalous to assign review re-sponsibility to the Atomic Energy Com-
| |
| : - mission [ predecessor to the NRC] whose regulatory jurisdiction in limited to
| |
| "
| |
| nuclaar facilities. It is the status
| |
| ( and role of these facilities which lie at the_ heart of the antitrust proceedings under the Atomic Energy Act. [ Emphasis
| |
| ,
| |
| _
| |
| added.]
| |
| This understanding of the intended scope of Section i
| |
| iw 105c finds strong support in the Committee Report accompany-
| |
| :
| |
| ( ing the antitrust review legislation. In discussing the Com-
| |
| ..
| |
| 'l
| |
| ''
| |
| 62/ See, e.g., Applicants' Memoranda filed on the following
| |
| -
| |
| dates: April 10, 1973; May 10, 1974; June 7, 1974; August 15, 1974; November 19, 1974; March 14, 1975; April 21, 1975; Sep-l- tember 15, 1975; September 23, 1975; October 7, 1975; October 8,
| |
| ;- 1975; October 21, 1975; October 30, 1975. j
| |
| '
| |
| l l
| |
| 1
| |
| _
| |
| - - - - me. - . . , , , , , , _ , , , - - . - - - , , . a. ,,,, ,, -e,- ., -- - , ,p- , - . - - - , .r----
| |
| | |
| . _ _ _ _ __
| |
| ir I -123-I~
| |
| (
| |
| mission's responsibility in this area, it was there clearly
| |
| '
| |
| stated (3 U.S. Code Cong. & Admin. News, at p. 4994):
| |
| It is intended that, in effect, the Com-(.~ mission will conclude whether, in its
| |
| .I judgment, it is reasonably probable that the activities under the license would, l
| |
| ~
| |
| when the license is issued or thereafter,
| |
| 'l be inconsistent with any of the antitrust laws or the policies clearly underlying
| |
| -. these laws. [ Emphasis added.]
| |
| $ Indeed, during the hearings on the statute that were held be-l j' fore the Joint Committee on Atomic Energy even the Department l
| |
| \
| |
| of Justice advised Congress that it intended for the antitrust l
| |
| ,,
| |
| review provision to have no broader sweep than the legisla-
| |
| [
| |
| tion's plain language now permits. Thus, Walker B. Comegys
| |
| _
| |
| -- declared (Hearings, Pt. 2, at p. 366):
| |
| -
| |
| * *
| |
| * antitrust review would consider
| |
| "
| |
| the contractual arrangements and othe.4 factors governing how the proposed p} gat
| |
| .
| |
| would be owned and its output used. We
| |
| .,
| |
| would also consider the arrangements under
| |
| '- which it would be built and supplied. No broader scope of review is contemplated,
| |
| ,I cognizant as we are of the need to avoid L delays in getting atomic plants in opera-tion. We do not consider such a licensing
| |
| : P' pro eeding as an appropriate forum for wide-
| |
| ,
| |
| rangTEl~ scrutiny of general industry affairs
| |
| ~
| |
| essenEially unconnected with the plant under
| |
| _
| |
| .eview. [ Emphasis added.]
| |
| :L In Waterford II, the Commission acknowledged that the
| |
| '( " activities under the license" limitation was of jurisdictional
| |
| =!
| |
| ~
| |
| significance. As there observed (6 AEC at 621), "* *
| |
| * alleged
| |
| (
| |
| -
| |
| .
| |
| Il
| |
| **
| |
| ._ ._ _ _ _ . _ . . _ _ _ _ - _ . _ _ . _ _ . . _ . . _ .
| |
| | |
| -
| |
| i
| |
| <
| |
| !
| |
| c l
| |
| -125-(
| |
| '
| |
| factor in a scheme or conspiracy, the purpose or effect of
| |
| -
| |
| which is to cause the creation or maintenance" of a forbid-den situation (id. at p. 51; emphasis added). To a similar effect is the Appeal Board's ruling in Kansas Gas and Electric f
| |
| Company and Kansas City Power and Light Company (Wolf Creek
| |
| -
| |
| ! Generating Station, Unit 1), ALAB-279, NRCI-75/6, 559, 569 (1975), wherein the requisite jurisdictional tie was con-I
| |
| '
| |
| strued to mean "* *
| |
| * intertwineo with or exacerbated by the I award of a license to construct or operate a nuclear facility."
| |
| \
| |
| Thus, there appears to be a uniformity of opinion within the agency as to the cohesiveness of the relationship that is required under the Waterford nexus standard if Sec-tion 105c review is to be permitted. Whether there exists a
| |
| ~
| |
| strong enough bond here between the activities under the license and the many matters raised by the parties in their
| |
| ; . September 5, 1975 statements is a threshold question to be addressed by this Licensing Board. For, as was pointed out L in Consumers, in language strikingly reminiscent of that
| |
| ', used by the Commission in Waterford II (see 6 AEC at 621):
| |
| '
| |
| "[t]he question of nexus remains a primary and predominant
| |
| #
| |
| matter which must be resolved as to each alleged anticompe-L 63/
| |
| titive practice" (Consumers, supra, at p. 42; emphasis added)."--
| |
| (
| |
| ~
| |
| 63/ While we are aware that the Licensing Board has already
| |
| ;'
| |
| intTmated its disagreement with the Commission's directive in Waterford II (6 AEC at 621) that, for jurisdictional purposes
| |
| '
| |
| (Cont'd next page)
| |
| .
| |
| 4 ID n --
| |
| g c , m e -- _ g, -- p. -.. - .e
| |
| | |
| __ _. .-. _ - _ _ _ _ _ _ - _ - _
| |
| i
| |
| !
| |
| n.
| |
| f
| |
| '
| |
| -126-(~
| |
| ,- 1 Or stated alternatively in the words of a former member of I
| |
| ..
| |
| -
| |
| this Licensing Board:
| |
| _
| |
| ,.
| |
| '
| |
| * *
| |
| * no matter how wide an array of antitrust practices the applicant is
| |
| ' alleged to have engaged in, a show-
| |
| ~
| |
| ing would have to be made that such practices would be " created" or " main-I tained" b license."g4}the activities under the
| |
| -
| |
| This is not without good reason. If, as seems clear, l
| |
| the statute is' intended to reach only those inconsistencies with
| |
| (._
| |
| i the antitrust laws which are " created" or " maintained" by the li-
| |
| ,
| |
| censed activities, then alleged anticompetitive practices of Applicants that do not depend in any meaningful way -- either at their inception or for their continuation -- on the nuclear
| |
| .
| |
| licenses are of no legitimate concern to the Commission. This j, Licensing Board should not advance into a thicket of antitrust
| |
| -- allegations without first ascertaining whether it is embarking t
| |
| ,
| |
| ,L 63/ Cont'd
| |
| -
| |
| '
| |
| the boarde must find a " substantial connection" between the
| |
| " activities under the license" and the " alleged anticompeti-
| |
| ; ', tive practices" (see " Order and Memorandum Ruling On Appli-cants' Objection To The Sixth Prehearing Conference Order,"
| |
| , dated November 19, 1975), we would hope and expect that the
| |
| '
| |
| t Board will rethink its inclinations to treat the nexus issue
| |
| ;I- in a manner at odds with the Commission's ruling in this area.
| |
| t 64/ See Brebbia, Antitrust Problems in the Licensing and
| |
| ,,
| |
| PermTt Authority Of The United States Nuclear ReguJatory Com-mission, 26 Mercer L. Rev. 749, 759 (1975).
| |
| l\
| |
| ls l
| |
| .
| |
| .
| |
| . _ . . . , ., ., _. __ __ _ _
| |
| | |
| _ _ - .. .- -_ _ _ _ _ _ _ _
| |
| i
| |
| !
| |
| ,
| |
| , -127-
| |
| _
| |
| -
| |
| on a futile journey. Not only is there the very real possi-
| |
| ,
| |
| p bility that a great deal of time and effort will be wasted;
| |
| '
| |
| there is also the danger of exposing Applicants unfairly to collateral lawsuits which, when all the evidence is in, will l
| |
| l prove to have been wholly unwarranted.
| |
| :/
| |
| , 2. Applying The Nexus Standard. Nor is this mere-
| |
| ,( ly a theoretical postulate. This very proceeding dramatically underscores the wisdom of applying the nexus test early in the t
| |
| s antitrust review process. For example, as to all Applicants
| |
| '-
| |
| but CEI, no request has been made by any municipal electric
| |
| '
| |
| system or any rural electric cooperative within those Appli-t cants' respective service areas for participation in the des-
| |
| ; ignated nuclear facilities. Whatever the reasons, these muni-n_ cipalities and rural cooperatives neither seek, nor have indi-
| |
| - cated any desire to obtain, access to the nuclear power gen-
| |
| '-
| |
| erated by these plants. When the Department of Justice has confronted such a situation in the past, it has concluded in L
| |
| its advice letter to the Commission that antitrust review is q not needed.-65/
| |
| <.
| |
| j 65/ See, e.g., the Attorney General's Advice Letter in In the Matter of The Toledo Edison Company and The Cleveland Electric
| |
| ; "-
| |
| '
| |
| Illuminating Company (Davis-Besse Nuclear Power Station, Unit 1),
| |
| Docket No. 50-346A, dated July 9, 1971, wherein the Department recommended against antitrust review, noting that the City of Cleveland had, as of that date "made no formal request to appli-s..
| |
| cants for participation nor * *
| |
| * formulated the terms of such a proposal" (p. 8). It was not until after such a request was made
| |
| '
| |
| (Cont'd next page) p
| |
| ..
| |
| l
| |
| .
| |
| _ _ _ _ . - _ . - - _ - _ .
| |
| | |
| - _ -
| |
| ,
| |
| I f
| |
| l -128- l
| |
| ('
| |
| This is sound policy. It is generally recognized
| |
| {
| |
| ,
| |
| that, prior to any request to deal, the antitrust laws do not permit an inference of anticompetitive conduct on the mere
| |
| (.
| |
| , assertion that an entity may perhaps, if later requested, re-fuse to deal. See Cleary v National Distillers & Chemical Corp., 505 F.2d 695, 697 (9th Cir. 1974); Royster Drive-In Theatres v American Broadcasting-Paramount Theatres, Inc.,
| |
| ~
| |
| I' 268 F.2d 246 (2d Cir.), certiorari denied, 361 U.S. 885 (1959);
| |
| i'
| |
| ..
| |
| .s Wilwaukee Towne Corp. v Loew's, Inc., 190 F.2d 561 (7th Cir.
| |
| _
| |
| 1951), certiorari denied, 342 U.S. 909 (1952). Bere, there is
| |
| ,
| |
| not even that kind of speculative assertion; nor is there any r basis for assuming that the disinterested small systems are likely to suffer any competitive injury as a result of "acti-L vities under the license" (Section 105c of the Act). Indeed,
| |
| -
| |
| the Department seemed to acknowledge as much in specific terms in its Beaver Valley Unit 2 Advice Letter of April 20, 1973, wherein it recommended against antitrust review, taxing special
| |
| '
| |
| note of the fact that "[o]ur investigation revealed that none of the municipal systems which are customers of the [same]
| |
| .s -
| |
| (
| |
| "~
| |
| 65/ Cont'd of CEI by Cleveland in a letter dated August 3, 1973, that the Department issued its Advice Letter in Perry on Decem-ber 17, 1973, recommending that a Section 105c hearing be
| |
| .
| |
| -
| |
| held. Compare Attorney General's Advice Letter in In The Matter Of The Cleveland Electric Illuminating Company, et al. (Perry Nuclear Power Plant, Units 1 and 2), Docket Nos.
| |
| , EUZ440A and 50-441A.
| |
| .
| |
| - . - - - .
| |
| | |
| .
| |
| F
| |
| ,
| |
| e f
| |
| -129-i
| |
| >
| |
| Appl ican ts [that are involved here] had sought ownership par-c- ticipation specifically in Unit No. 2 of the Beaver Valley I' 66/
| |
| Power Station."~~
| |
| Notwithstanding the continuing lack of interest in nuclear power on the part of these same small systems, the
| |
| )I Department and the Staff are now pressing this Licensing Board to hold an extensive evidentiary hearing on alleged
| |
| '
| |
| :,
| |
| '
| |
| anticompetitive practices which Ohio Edison and Penn Power, f
| |
| TECO, and Duquesne Light are said to have individually en-t gaged in over the past 10 or more years.with respect to iden-tified municipalities and unidentified rural electric coop-
| |
| .
| |
| eratives located within the areas each of these Applicants serve. Even assuming arguendo that there is any foundation
| |
| ~
| |
| to the charges made -- and there is not (as the accompanying
| |
| ~.
| |
| Fact Briefs of the Applicants indicate and, if necessary, the
| |
| , evidence introduced at the hearing will show) -- none of these alleged anticompetitive practices can be said to have been 4- " created" by activities under the license. Nor, in the absence of any showing of interest by these smaller systems in the nu-
| |
| ^
| |
| clear plants, can this Licensing Board properly conclude that the challenged practices will in any way be " maintained" by
| |
| _ 66/ See Attorney General's Advice Letter in In the Matter !
| |
| Of Buquesne Light Company, et al. (Beaver Valley Power Sta- I tion, Unit 2), Docket No. 50-412A, dated April 20, 1973. '
| |
| s a
| |
| 1
| |
| -
| |
| _ . _ _ _ _
| |
| | |
| '
| |
| <
| |
| r
| |
| .
| |
| -130-c-
| |
| ,
| |
| g the licensed activities -- particularly when it is recalled that each of these Applicants has unequivocally agreed, upon I receiving a timely request therefor, to afford to such enti-
| |
| !
| |
| ties an opportunity to participate in the nuclear units and
| |
| ,_
| |
| ,
| |
| to provide them with sufficient transmission services for
| |
| -
| |
| delivery of both the nuclear power requested and, when needed, I
| |
| an equivalent amount of replacement power (see Exhibit A,
| |
| "
| |
| infra). Compare Municipal Electric Association v FPC, 414 i
| |
| F.2d 1206, 1209 (D.C. Cir. 1969) (provisions for access to I hydro-electric plant "sufficiently guarantee that [the] pro-ject will not be used as part of [a group boycott]") .
| |
| - With regard to this latter point, it is important r to keep in mind the admonition of the Consumers licensing
| |
| ('
| |
| board that it is the " misuse" of activities under the nuclear
| |
| -.
| |
| license which is condemned under Section 105c (Consumers,
| |
| . ..
| |
| supra, at pp. 51-61). Misuse, or a reasonable probability L thereof, is also what is clearly contemplated in the prev-iously quoted statement from the Committee Report accompany-
| |
| '
| |
| ing the legislation (i.e., "whether * *
| |
| * it is reasonably probable that activities under the license would, when the
| |
| . i.
| |
| license is issued or thereafter, be inconsistent with any of
| |
| _
| |
| antitrust laws or the policies clearly underlying those laws" (emphasis added)). And this same concept is firmly embedded
| |
| -
| |
| in the Commission's Waterford nexus requirement that the nu-
| |
| ,
| |
| ,
| |
| 1 A
| |
| \
| |
| \
| |
| w
| |
| , - - -
| |
| | |
| i
| |
| -.
| |
| .
| |
| -131-4' clear activities be shown to have a close link with alleged "anticompetitive" practices (Waterford II, supra, 6 AEC at 621) before they can come under antitrust scrutiny.
| |
| As pointed out in Waterford II, it is not enough po show
| |
| -
| |
| simply that nuclear power "will be commingled" (id.) with i
| |
| power from other generating facilities in an applicant's system:
| |
| f Such a finding should not be utilized F to support the view that an application y to construct one nuclear plant somehow muthorizes an inquiry into all alleged e anticompetitive practices in the elec-
| |
| ,
| |
| tric utility industry. [Id.]
| |
| Thus, the nere addition to Applicants' respective
| |
| : t. electric systems of noclear capacity (even at lower costs)
| |
| .-- is not, without more, a sufficient basis for establishing a
| |
| "
| |
| sufficient tie between the licensed activitias involved here and the aforesaid alleged anticompetitive practices -- wheth-er those alleged practices are considered individually or are
| |
| .t looked at in separate groupings on the basis of the particular charges made against each Applicant, with each group describ-
| |
| :' ing an independent " situation." There would have to be some affirmative showing of a reasonable probability that Appli-
| |
| -.
| |
| cants' activities under the license would, by reason of some
| |
| ,_
| |
| anticipated misuse, impact adversely on the challenged " situ-ation." Here the impact (if indeed such an anticompetitive
| |
| .s
| |
| \.
| |
| 4 l
| |
| | |
| i 1
| |
| n.
| |
| -132-l
| |
| <-
| |
| " situation" could be shown as to any Applicant) is all the
| |
| -
| |
| other way. For Applicants are unalterably committed to pro-1
| |
| _.
| |
| viding requesting entities in their service territories an !
| |
| opportunity to participate in the n,uclear facilities. l To argue in the face of such an offer that the '
| |
| i i
| |
| licensed activities might possibly " maintain a situation
| |
| : c. !
| |
| inconsistent with the antitrust laws" within the meaning of Section 105c strains credulity. If there is a prospect t that the aforesaid alleged anticompetitive practices ascribed
| |
| -
| |
| separately to Ohio Edison, Penn Power, TECO or Duquesne Light i
| |
| might (assuming arguendo their present existence) continue *
| |
| -
| |
| into the future, it can only be as a result of activities t
| |
| wholly apart from those associated with the license. However, n
| |
| .
| |
| as the Commission pointed out in Waterford II, such unrelated
| |
| . p. " alleged anticompetitive practices -- however serious -- which L have no substantial connection with the nuclear facility, are
| |
| '
| |
| beyond the scope of antitrust review under the Atomic Energy
| |
| <L Act" (6 AEC at 621).
| |
| ,
| |
| By similar reasoning, it should also be clear that l the so-called " unfair retail practices" which Clevel.and has e alleged against CEI have no place in this proceeding. While those allegations can (and, if necessary, will) be fully an-swered by CEI at the evidentiary hearing, the heart of the matter is that this Licensing Board should not permit its x
| |
| %
| |
| t 6 a
| |
| | |
| _. . - --- _ _ _ _
| |
| .
| |
| -
| |
| -133-E antitrust review responsibility to be flouted by any airing
| |
| _.
| |
| of these accusations whatsoever. Nor should the Licensing Board permit this already overextended hearing process to be )
| |
| -
| |
| 1 utili7:d as a dry-run or discovery vehicle for Cleveland's I pending civil antitrust suit against Applicants. If the j
| |
| !
| |
| ,
| |
| concept of nexus means anything, it has to act as a juris- ;
| |
| l
| |
| [
| |
| i dictional bar with respect to " alleged anticompetitive prac- '
| |
| ,
| |
| tices" at the retail level -- such as, the absurd allegations '
| |
| l' by Cleveland of customer harassment, promotional allowances, 7
| |
| disconnecting of a customer's service, offers of free-wiring, l' and the like (see, e.g., Cleveland's Petitions to Intervene f in Perry Units 1 and 2 (p. 11) and Davis Besse Units 2 and 3 (p. 9). By no stretch of the imagination can such retail
| |
| ,
| |
| practices be said to have any connection, let alone a "sub-s.
| |
| stantial connection," with the " activities under the license."
| |
| Plainly, practices of this sort, whether viewed in-i dividually or collectively, do not come within the " created"
| |
| '
| |
| prong of the statute. Nor is there any basis for arguing that
| |
| '
| |
| the " situation" they describe (assuming arguendo that it can be shown to be inconsistent with the antitrust laws) will be m " maintained" by the licensed activities. Even under the worst possible hypothesis -- and we stress the word hypothesis --
| |
| "
| |
| Cleveland's proof could perhaps show that CEI has obtained monopoly power within the City of Cleveland by unlawful means
| |
| .
| |
| k
| |
| -,--e
| |
| | |
| - - _ _ _ _ _ _ _ _ .
| |
| r r
| |
| -134-r as a result of its so-called anticompetitive retail practices.
| |
| *M But nothing having to do with the nuclear facilities involved here would contribute to the " maintenance" of this hypothesized acquisition of monopoly power. CEI has offered to provide to Cleveland all the nuclear energy it has requested from the des-ignated facilities, together with whatever transmission services
| |
| -
| |
| ..
| |
| are necessary for delivery. In these circumstances, if wrong-t fully acquired monopoly power could be shown -- which it can-r
| |
| ,
| |
| not -- any support for the proposition that there exists a rea-
| |
| . sonable probability that it might be " maintained" would neces-
| |
| '
| |
| sarily rest on activities having absolutely no link to the
| |
| '
| |
| nuclear plants. As we have stated repeatedly in reliance on t
| |
| the decisions of the Commission, the Appeal Board and other
| |
| .,_
| |
| ,
| |
| licensing boards, such a scenario is an insufficient predicate on which to confer jurisdiction under Section 105c.
| |
| t In so stating, we are fully cognizant of the argument
| |
| '
| |
| made by the Department, the Staff and Cleveland that Applicants'
| |
| ~
| |
| '
| |
| offer of accesr. is not meaningful unless it embraces the full panoply of benefits available in coordinated arrangements, in-cluding, inter alia, general third-party wheeling. As we ob-
| |
| . served at the outset of this prehearing brief, the dispute among i
| |
| the parties as to what constitutes " meaningful access" to the nuclear plants is the central issue before this Licensing Board.
| |
| By addressing this matter first, rather than last, in the pre-
| |
| .
| |
| e -
| |
| bM 1
| |
| | |
| ?
| |
| I l
| |
| -135- l l
| |
| f
| |
| ,
| |
| sent antitrust hearing, the Board could telescope this pro-
| |
| -
| |
| ceeding considerably and in all probability thereby avoid
| |
| .
| |
| altogether the looming prospect of holding up the issuance
| |
| ,
| |
| r-of the Perry Units 1 and 2 construction permit and the Davis-Besse Unit 1 operating license pending a decision on anti-trust matters.
| |
| ~
| |
| This is not to suggest that the Licensing Board t
| |
| prematurely take up the question of remedy. Obviously, be-r
| |
| ,
| |
| fore any remedial judgments can be made, there must be a
| |
| , definitive determination of the nature and extent of the in-
| |
| ' However, under Section 105c of the Atomic jury to be cured.
| |
| '
| |
| Energy Act, as we have already pointed out, Congress limited i
| |
| the Commission's review responsibility only to those actual a-or reasonably probable antitrust injuries which can be shown
| |
| ,. at the outset to have a " substantial connection" with activi-a ties under the NRC permit or license being sought. Waterford II,
| |
| '
| |
| supra, 6 AEC at 621. To make that jurisdictional determination,
| |
| '
| |
| it is necessary to look not only at what Applicants have alleg-edly " refused" to provide to the small electric systems located ,
| |
| in their respective service areas (as the Department, the Staff
| |
| ,
| |
| a- and Cleveland urge), but also what they have agreed to provide by way of access to these plants (as Applicants urge). If this t
| |
| Licensing Board is satisfied on the basis of such an examina-tion that the Applicants' offer affords to requesting entities
| |
| .
| |
| .
| |
| . -
| |
| . - _
| |
| , , - - , , -- ,
| |
| | |
| - _ _ _ _ _ _ _ _ _ _ -__ - _______
| |
| r
| |
| .
| |
| -136-F
| |
| " meaningful access" to the nuclear facilities, this antitrust
| |
| ~~
| |
| inquiry comes to an end and the Board will have fully discharged its responsibilities under Section 105c. Any unrelated anti-r trust injuries that are alleged to exist are not appropriate for scrutiny here; nor, even assuming arguendo that such allega-tions had substance, would it be a proper function of this Com-
| |
| '
| |
| mission to try to frame any sort of remedy with respect thereto.
| |
| .
| |
| Once again, we direct the Licensing Board's attention to the r-ruling of the Commission in Waterford II (id.; emphasis added):
| |
| ,
| |
| If activities relating to a facility
| |
| '
| |
| have no substantial connection with I
| |
| t alleged anticompetitive practices, there is no need for a hearing as
| |
| -
| |
| to such practices or proposed forms of relief from them.
| |
| :,_
| |
| The details of Applicants' offer of access are set
| |
| : a. forth in full in Exhibit A to this Prehearing Brief. As the
| |
| -'
| |
| expert testimony of Dr. Joe D. Pace will demonstrate, that
| |
| '
| |
| offer provides to requesting entities a full opportunity to participate meaningfully in the nuclear facilities which are the subject of this proceeding, both in terms of the amount
| |
| . of nuclear power that will be- made available on request, and -
| |
| !r, in terms of the necessary transmission services to deliver
| |
| , "
| |
| that power -- including an agreement by Applicants to supple-ment the nuclear power in the event of a forced or scheduled outage of the nuclear facilities by wheeling-in an equivalent
| |
| .u amount of replacement power if so requested.
| |
| I l ._
| |
| _
| |
| __ _ _ __ _ _ _ - _ . _
| |
| | |
| e
| |
| -
| |
| -137-r The Department, the Staff and Cleveland assert that
| |
| -
| |
| this offer falls short of " meaningful access" because it does r n t afford all f.he benefits of coordinated development and coordinated operation. This argument is both economically unsound and legally insupportable. We will demonstrate short-ly (see Part V.B., infra) why it is neither a violation of, r
| |
| nor inconsistent with, the antitrust laws to refuse to open wide the doors of membership in a coordinated arrangement to
| |
| . small municipal systems which are unable and unwilling to
| |
| -
| |
| share on equal terms the responsibilities of coordination
| |
| '
| |
| that necessarily accompany the benefits. Quite apart from I
| |
| that unassailable legal conclusion, however, there is the L
| |
| .
| |
| threshold nexus consideration.which, when properly applied, t, eliminates the need for this Licensing Board ever to reach
| |
| - the antitrust analysis.
| |
| In this latter regard, as Applicants will demon-
| |
| '
| |
| strate at the hearing, all the benefits of coordination hav-L.
| |
| ing a relationship to the present nuclear facilities are
| |
| ,
| |
| included in Applicants' offer of access. With respect to
| |
| .I coordinated development as it relates to the designated nu-
| |
| -
| |
| clear plants, if electric entities are afforded an oppor-
| |
| '
| |
| .
| |
| tunity for " meaningful" participation in those units -- and t
| |
| Applicants will establish this point conclusively through
| |
| .
| |
| documentary evidence and expert testimony -- it necessarily
| |
| | |
| I e
| |
| 4
| |
| -138-r follows that they will realize the full advantages of joint I
| |
| planning and development attendant therewith. As to coor-r dinated operations, " meaningful" participation accomplishes i
| |
| the same end insofar as these nuclear units are concerned.
| |
| "
| |
| Moreover, to the extent that coordination at the operating level contemplates the exchange of emergency and maintenance
| |
| ,
| |
| power, Applicants have specifically agreed to provide supple-
| |
| .
| |
| ;_ mentary energy of this sort (either on their own or, if re-
| |
| , quested, by wheeling-in power from another source) whenever
| |
| , the nuclear plants are down. Exchanges of non-nuclear power
| |
| ' on other occasions -- whether it be labelled firm power, de-ficiency power, emergency power, maintenance power, surplus power or economy power -- involve coordinated transactions
| |
| ;r
| |
| '
| |
| .c which have no tie to the nuclear facilities and are therefore
| |
| !
| |
| - not essential to " meaningful access." )
| |
| .. \
| |
| I This leaves only the matter of general third-party l
| |
| ' wheeling, which the Department, the Staff and Cleveland also t
| |
| try to fold into the concept of " meaningful access" as an es-i
| |
| ,
| |
| sential ingredient of participation in the nuclear units. We 7
| |
| will save until later our discussion of wheeling within the
| |
| - context of the so-called " bottleneck theory" that has, without
| |
| '
| |
| good reason, been advanced by the other parties (see Part IV.C.,
| |
| U infra). For the present, the focus remains on nexus. It is Applicants position that general third-party wheeling does not i
| |
| .
| |
| ,
| |
| u l
| |
| l
| |
| -
| |
| ,
| |
| . -- _. _ _ _ _ . __, , _ . . . _ . _ , , . . . _ _ _ . _ . , . . . , _ _ . . , _ . _ . ~ _ _ . . .
| |
| | |
| . _ _ _ - .- _______________
| |
| r e
| |
| i
| |
| -139-have a sufficient relationship to the nuclear facilities to
| |
| _
| |
| satisfy the jurisdictional test announced in Waterford II.
| |
| A general wheeling requirement would effectively impose on these Applicants common carrier obligations with regard to the transmission of electric energy which go far beyond anything contemplaced by Congress. As pointed out
| |
| .
| |
| by the licensing board in Consumers, "[iln the electrical industry, there is no act of Congress requiring wheeling as a public utility" notwithstanding "[f]orty years of effort" to ' enact such "a requirement * * *". See Consumers, supra, I
| |
| at pp. 90-91. This Licensing Board, in the face of so clear
| |
| '
| |
| a history of firm resistance to the development of a nation-wide transmission grid, should not allow its Section 105c c ..
| |
| L antitrust review responsibility to be misused as a bootstrap
| |
| , . . for achieving just such an undesired result.
| |
| i This view was only recently expressed in quite
| |
| :( forceful terms by a member of the Appeal Board during oral L
| |
| arguments on an appeal from the denial of an intervention f
| |
| l petition requesting antitrust review in Kansas Gas and Elec-
| |
| .-
| |
| tric Company and Kansas City Power and Light Company (Wolf 67/
| |
| --
| |
| - Creek Nuclear Generating Station, Unit 1), Docket No. 50-482A.
| |
| r
| |
| '
| |
| The Appeal Board reversed the denial and ordered anti-
| |
| .
| |
| 67/
| |
| trust review on November 21, 1975. See Appeal Board Decision dated November 21, 1975 in Docket No. 50-482A.
| |
| , .
| |
| O P
| |
| l l
| |
| | |
| - .-. -_ . . _. - _ _ _ _ -
| |
| r l
| |
| -140-Mr. Richard S. Salzman there stated with respect to a request
| |
| _
| |
| for general wheeling (Transcript of October 23, 1975, at p. 40):
| |
| * *
| |
| * the Commission is not given general warranty to structure the
| |
| '' electric power industry and set up new entities. If someone asked
| |
| "
| |
| for relief designed not to make effective use of the plant, but !
| |
| t merely to create itself as a whole-sale supplier of electricity by the use of someone else's line, that re-lief is something we should not get
| |
| -
| |
| into. [ Emphasis added.] 1 At an earlier point in the argument, Mr. Salzman had put his
| |
| '[(
| |
| I finger on what really is at issue in this context (Tr. at p.
| |
| 16): "
| |
| The real purpose here is to wheel unlimited amounts of power across their [ applicants'] lines using the nuclear
| |
| '
| |
| _
| |
| power plant as an excuse."
| |
| ;L The Commission itself implicitly cautioned against
| |
| :r the utilization of proceedings of this sort for purposes of L' J gain.ng general access to an applicant's transmission system. 1
| |
| ,
| |
| See Waterford II, supra, at p. 621. Plainly, where the re-l quested wheeling can properly be tied to the nuclear if
| |
| !L facility, it is a legitimate matter for Section 105c con-
| |
| '
| |
| lg sideration. But Applicants' offer of access recognizes this ll
| |
| !- nexus requirement in connection with the obvious need for 1
| |
| !' replacer.ent power when the nuclear unit is not operating due f i.L to a forced (emergency) or scheduled (maintenance) outage.
| |
| :> In such circumstances, Applicants have agreed to wheel-in ;
| |
| ,- l l
| |
| -
| |
| l
| |
| _
| |
| - -
| |
| | |
| . .
| |
| .
| |
| l w l l -141-r i
| |
| power from outside energy sources if requested to do so.
| |
| Any additional, general third-party wheeling goes well l 1
| |
| _
| |
| beyond the proper concerns of this Licensing Board under !
| |
| '
| |
| 1 its legislati,ve mandate. Such large-scale transmission
| |
| -
| |
| is not only unnecessary for " meaningful access" to the nuclear facilities; it contemplates precisely the sort of
| |
| '
| |
| common carrier obligations which Congress has declined to 1
| |
| impose on this industry.
| |
| : 3. The Proper Approach To The Nexus Question. For all of the above reasons, Applicants strongly urge that this Licensing Board reconsider its attitude with regard to the
| |
| ,
| |
| nexus issue. The evidentiary hearing plainly can be con-
| |
| 't ducted within a more manageable framework if the Board first l
| |
| '
| |
| comes to grips with the central questions relating to the
| |
| ,~
| |
| scope of its jurisdiction as determined by the statutory
| |
| ,
| |
| ,
| |
| phrase " activities under the license." It serves no useful
| |
| ,L purpose to sit through days of testimony and read countless
| |
| !
| |
| (; documents which pertain to alleged anticompetitive practices
| |
| '-
| |
| * which, even if proven, must ultimately be found (whether I
| |
| considered individually or collectively) to have no "sub-
| |
| -
| |
| stantial connection" with the licensed activities. Similar-
| |
| [ ly, there is nothing to be gained by deferring until some later date the fundamental issue which is before this Licens-l x
| |
| i b-
| |
| %
| |
| | |
| . __ _ .__ _ _. _ _ - _ -_ ,
| |
| - .
| |
| -
| |
| -
| |
| 142-1 -
| |
| ing Board -- i.e., whether Applicants' offer of participation
| |
| ,-
| |
| in these nuclear facilities pre" ides " meaningful access."
| |
| ._ In view of the tremendous pressure that this Board
| |
| , and all the parties are under to complete the antitrust in-
| |
| ,
| |
| "
| |
| ;
| |
| quiry before the scheduled dates for fuel 1.oading of Davis-Besse Unit 1 and for commencing major construction at the site
| |
| ;
| |
| of Perry Units 1 and 2, an expedited hearing clearly seems to
| |
| _
| |
| be the wisest course. Applicants' approach offers that oppot-
| |
| ;
| |
| ,
| |
| tunity. If the alternative procedure suggested by the Depart-
| |
| .
| |
| ment, the Staff and Cleveland is followed, there appears to be no realistic possibility of completing antitrust review and
| |
| , obtaining an initial decision from this Licensing Board L2 fore the critical start-up dates for construction and operation of
| |
| ;t these plants.
| |
| jr The accuracy of this latter prediction can be con-firmed simply by a review of the laundry list of alleged anti-
| |
| '
| |
| competitive practices set forth by the other parties. No ef-
| |
| '-
| |
| fort has been made to confine the present inquiry to matters
| |
| _
| |
| relevant to " activities under the license." According to the
| |
| ;
| |
| Department, the Staff and Cleveland, we are dealing here with
| |
| -
| |
| nothing less than a full-blown antitrust case involving all aspects of the electric utility industry. To answer fully so l_
| |
| wide a spectrum of irresponsible charges will obviously take
| |
| _-
| |
| months. In the last section of thir Prehearing Brief and in w -
| |
| .
| |
| _
| |
| 4 - ., ,e -- ,-, , , -- +,--,+,,,--__.,,ne,_ . , , . - - - - , - - - - - s-----m-,,.,, _ ___,,__,,,,-,,.,,,,-,--..g ,,,-,,q 7-,.,7.----n---
| |
| | |
| >l
| |
| -
| |
| 143-Applicants' accompanying Fact Briefs, we have indicated the
| |
| , -
| |
| nature and scope of Applicants' fact responses. As a prelude
| |
| ,..
| |
| to these discussions, however, we believe some reference should be made to the important, overriding legal considera-
| |
| " tions that must guide this Licensing Board's deliberations.
| |
| That, then, is our next topic.
| |
| 4
| |
| * b -a
| |
| , _.
| |
| b 1
| |
| %
| |
| 9 W.
| |
| I
| |
| =
| |
| **
| |
| s u
| |
| -4
| |
| - - .,- -.-, y----- -, n
| |
| , -r,-
| |
| | |
| . -. - -
| |
| -
| |
| -144-
| |
| .
| |
| IV. Applicable Legal Principles
| |
| _.
| |
| In undertaking this excursion into the largely
| |
| --
| |
| unchartered area of prelicensing antitrust review, this Licensing Board -- unarmed as yet with the expertise that *
| |
| '~
| |
| will surely come when the novelty of these proceedings
| |
| .-
| |
| gives way to experience -- should keep in the forefront of its thinking certain legal principles of general im-portance as it attempts to relate the many allegations of i
| |
| -
| |
| anticompetitive conduct to the proper standard of decision.
| |
| '
| |
| The matters discussed below, while not offered as an ex-haustive list, are considered to be among those which are
| |
| ,
| |
| .
| |
| most likely to reoccur with some frequency throughout the evidentiary hearing.
| |
| i
| |
| .t~
| |
| A. THE DEPARTMENT, THE STAFF AND CLEVE-
| |
| ,p LAND HAVE THE BURDEN OF PROOF
| |
| - L
| |
| 'y Under the Commission's Rules of Practice, this i
| |
| w Licensing Board has the responhibility to allocate among
| |
| '
| |
| 68/
| |
| the parties the burden of proof.~- The party or parties
| |
| -
| |
| 68/ Section 2.732 of the Commission's Rules, 10 C.F.R.
| |
| -
| |
| 52.732 (1975) provides:
| |
| Unless otherwise ordered by the
| |
| _
| |
| presiding officer, the Applicant or the proponent of an order has the burden of proof.
| |
| _
| |
| '
| |
| .
| |
| l
| |
| !
| |
| .. .. .
| |
| | |
| - _ _ _ _ _ _ _ _ _ _ - - _ _
| |
| -145-f' upon whom falls the burden of proof, or the burden of per-
| |
| _
| |
| suasion as to the existence of the fact conclusions neces-sary to issue license conditions, must sustain their position by a preponderance of the evidence or some similar stpndard
| |
| "
| |
| of proof. In Consumers, the licensing board specifically held that "in accordance with the usual principles of law
| |
| -
| |
| 4 and the Comnission's Rules of Practice, the burden of proof
| |
| ,
| |
| rests upon Justice, Staff and Intervenors" (Consumers, supra, 1
| |
| ; at p. 31). There is no basis to conclude otherwise.
| |
| e- Unquestionably, if this antitrust action had been brought in federal district court -- where it really belongs,
| |
| "
| |
| as we have already indicated in the earlier portion of this d
| |
| Prehearing Brief addressing the matter of nexus -- the De-
| |
| -
| |
| partment, the Staff and Cleveland, as plaintiffs, would have
| |
| - the affirmative burden of proving their claims; it would not
| |
| -
| |
| be incumbent on Applicants to prove the negative. There is
| |
| [ no legitimate reason to reach a different result here be-L cause the inquiry is being undertaken in connection with applications filed by these Applicants with the NRC request-
| |
| : ing a permit to construct and a license to operate the des-
| |
| - ignated nuclear plants. Even if the initial application is l
| |
| considered a first step in the entire NRC hearing process, l~
| |
| and thus analogized to a complaint, the antitrust matters subsequently alleged against the applicants would in that I
| |
| -e
| |
| | |
| . - _ _ _
| |
| .
| |
| -146-
| |
| ,
| |
| context be in the nature of a counterclaim -- with the
| |
| [- burden of proof on the parties making the accusations of i
| |
| unlawful conduct.
| |
| r-The statutory scheme itself demands this view.
| |
| .
| |
| ,_
| |
| While the safety and environmental hearings required under the Atomic Energy Act (42 U.S.C. S2239) are to be held auto-r matically following the filing of a permit and license ap-plication, there is no similar mandate with respect to an
| |
| ; antitrust hearing. Before a proceeding of the latter sort can take place there must first be either (1) affirmative
| |
| ,
| |
| action on the part of the Department of Justice in the form of an advice letter to the Commission recommending anti-
| |
| '
| |
| trust review (see Duke Power Company (Catawba Nuclear
| |
| [ Station, Units 1 and 2) CLI-74-14, RAI-74-4, 307 (1974)),
| |
| ,u.
| |
| or, in the absence thereof, 2) affirmative action on the
| |
| ' r'
| |
| _
| |
| part of a prospective intervenor in the form of a petition
| |
| *
| |
| .,
| |
| to intervene requesting antitrust review (see, e.g., The Toledo Edison Company and.The Cleveland Electric Illumi-
| |
| '
| |
| nating Company (Davis-Besse Nuclear Power Station, Unit 1),
| |
| ~"
| |
| Docket No. 50-346A). Even in this latter instance, as
| |
| ,g '
| |
| stressed by the Appeal Board in Kansas Gas and Electric
| |
| ;-
| |
| Company and Kansas City Power and Light Company (Wolf Creek
| |
| - Generating Station, Unit 1), supra, ALAB-279, NRCI-75/6, at p. 566: I
| |
| _
| |
| .._
| |
| l 1
| |
| ..
| |
| | |
| 9
| |
| -147-e
| |
| * *
| |
| * a hearing is not automatic c- simply because an intervention petition is filed. Ra- tr, the
| |
| '
| |
| relevant Commission regulations,
| |
| ,_ 10 C.F.R. $2.714(a) and (b),
| |
| direct any party desiring leave to intervene in a licensing pro-ceeding to submit a timely peti-
| |
| ~
| |
| tion " setting forth with particu-
| |
| ,
| |
| larity both the facts pertaining to his interest and the basis for 7
| |
| his contentions with regard to each aspect on which he desires to intervene. *** Further-more, where antitrust contentions j" are sought to be raised, the g)
| |
| Commission has stressed that Section 2.714 requires the peti-tioner to " plead * *
| |
| * a meaning-ful nexus between the activities under the nuclear license and the
| |
| ' situations' alleged to be incon-sistent with the antitrust laws."
| |
| - [ Emphasis added.]
| |
| -7 Thus, the parties initiating a hearing on anti-lL trust matters are not Applicants, but Applicants' adversar-r les. The general rule in safety and environmental hearings
| |
| ..
| |
| has little application in such circumstances. There the ap-t L plicants are the ones claiming that their proposed nuclear r facilities will meet safety and environmental standards. Ac-
| |
| '
| |
| cordingly, the Appeal Board has said that it is the appli-cante who in that context must prove their claims. See Consolidated Edison Company of New York, Inc. (Indian Point
| |
| _
| |
| Station, Unit No. 2), ALAB-188, 7 AEC 323, 356-357 (April 4, 1974). On the other hand, here the Department, the Staff l
| |
| l l
| |
| .
| |
| ._ __ -
| |
| | |
| I
| |
| .
| |
| r
| |
| ,
| |
| -148-1 r-
| |
| ' '
| |
| and Cleveland are the parties claiming anticompetitive con-
| |
| ~
| |
| duct. And as correctly stated in Consumers, it is the parties u
| |
| " accusing another of unlawful behavior" on whom "the burden
| |
| .
| |
| of proof rests" (Consumers, supra, at p. 30).
| |
| _ The Commission in its Waterford II decision strong-ly intimated that the burden in an antitrust proceeding was
| |
| '~
| |
| to be on the accusing parties to " plead and prove" their case (see Waterford II, supra, 6 AEC at 621). The Kansas Gas and Electric ippeal Board decision just referred to also contem-
| |
| ,,
| |
| plated that the burden of proof would be on the one charging unlawful conduct, and that it would be Applicants' role "to defend" against those charges (ALAB-279, NRCI-75/6, at p. 576).
| |
| This approach fully comports with the general practice of al-locating the burden of proof. The specific tests normally considered in aid of such a decision place the burden on y
| |
| ._
| |
| (1) the party having the affirmative of the issue; (2) the
| |
| .
| |
| party to whose case the fact in question is essential;
| |
| -
| |
| (3) the party having peculiar means of knowing the fact;-
| |
| 69/
| |
| ~~
| |
| and (4) the party who has the burden of pleading it.
| |
| m A brief reflection on the issues in this proceeding indi-
| |
| ,1
| |
| _
| |
| cates that the parties adverse to Applicants meet not just
| |
| -
| |
| 69/ See Morgan, Some Observations Concerning Presump-tions, 44 Harv. L. Rev. 906, 910.(1931); 9 Wigmore, Evi-dence 52486, at 274-275 (3d ed. 1940).
| |
| j-i
| |
| . .
| |
| %4
| |
| . - - - -
| |
| - . - - . . , , , .- ..,,n-
| |
| | |
| 7 l
| |
| ,F
| |
| { -149-r-
| |
| "i one of the relevant criteria, but every single one of them.
| |
| p In such circumstances it would certainly be anomalous to
| |
| "
| |
| place the burden of proof on Applicants.
| |
| F I
| |
| B. EACH APPLICANT'S POSITION OF DOMINANCE IN THE GENERATIOll AND TRANSMISSION OF f ELECTRIC POWER WITHIN ITS RESPECTIVE SERVICE AREA RAISES NO INFERENCE OF UNLAWFUL CONDUCT UNDER SECTION 2 OF F THE SHERMAN ACT
| |
| ~i
| |
| ' r .. We have already set forth the elements required
| |
| 'f as a matter of law to establish the existence of an unlaw-ful monopoly under Section 2 of the Sherman Act (see Part III.
| |
| , A.4, supra). Whether viewed in terms of the " reasonable prob-ability" incipiency doctrine of Section 5 of the Federal
| |
| ,_
| |
| Trade Commission Act, or considered in the context of an 1
| |
| :... actual Sherman Act Section 2 violation, the conduct offen-
| |
| 'r sive to the statutory prohibition and its underlying policy
| |
| ''
| |
| is the same: "(1) the possession of monopoly power in the relevant market, and (2) the willful acquisition or main-tenance of that power * * *." See United States v Grinnell
| |
| .,
| |
| _ Corp., supra, 384 U.S. at 570-571 (emphasis added).
| |
| , In the present context of the highly regulated l" electric utility industry, it is conceptually difficult to l
| |
| talk in terms of a " possession of monopoly power." As the
| |
| ! Supreme Court clearly stated in United States v E.I. du Pont
| |
| ! . ..
| |
| .
| |
| %
| |
| , - -
| |
| -<-w_, -- , - - - . _ , - . , , . . , , , . , - , - , - . - , . .,- - . , -
| |
| | |
| i
| |
| ,.
| |
| -150- ,
| |
| '
| |
| i
| |
| '
| |
| .
| |
| de Nemours & Co., supra, 351 U.S. at 391, monopoly power
| |
| , means "the power to control prices or exclude competition."
| |
| Within the unregulated framework of normal competition, such power has sometimes been inferred by the courts on the '
| |
| ~
| |
| basis of predominant market shares. See United States v
| |
| .
| |
| Grinnell Corp., supra, 384 U.S. at 571; American Tobacco
| |
| , Co. v United States, supra, 328 U.S. at 797. These deci-
| |
| ,
| |
| ,
| |
| sions have reasoned that control by a sing 1c competitor of a large percentage of the market is indicative of in-sufficient competition to place adequate constraints on pricing decisions. The " dominant" company is thus said f
| |
| ,
| |
| to be in a position to set its own prices, to exclude com-
| |
| , petition, or to exercise its " monopoly power" in any manner I it desires.
| |
| r whether such an inference is always warranted on proof that a company has a statistically predominant share
| |
| .
| |
| of a normally competitive market is not altogether clear.
| |
| ..
| |
| .,
| |
| Compare United States v General Dynamics Corp., 415 U.S.
| |
| . 486 (1974) (circumstances surrounding coal industry negative .
| |
| finding of undue concentration from statistical showing on market shares). The observation has been made, for example,
| |
| -
| |
| that "* *
| |
| * no magic inheres in numbers; 'The relative ef-
| |
| -
| |
| feet of percentage command of a market varies with the l, setting in which the factor is placed.'" Times-Picayune
| |
| !
| |
| l
| |
| -
| |
| -r
| |
| | |
| p.-
| |
| -151-f.
| |
| ' Publishing Co. v United States, 345 U. S. 594, 612 (1953),
| |
| p quoting United States v Columbia Steel Co., 334 U. S. 495,
| |
| '
| |
| 528 (1948). And, in United States v United Shoe Machinery Corp., supra, 110 F. Supp, at 343, it was made clear that
| |
| _ while the court "gives some weight to the * *
| |
| * percentage
| |
| * ** [it] considers other factors as well."
| |
| r- However, in the context of a price regulated and
| |
| (
| |
| territorial regulated industry, there appears to be no dif-ference of opinion. As we earlier described, Government regulation has there supplanted the competitive forces that normally are present in the marketplace. Control over prices e and over the entry or exclusion of competitors from the market
| |
| -- i.e., " monopoly power" -- has, in essence, been taken out I of the hands of the private entrepreneur and turned over to
| |
| .. e the state and federal regulatory agencies. Dominance or the r-ownership of large market shares is not an anethema in such
| |
| , circumstances; rather, it is the inevitable result of economic l- and regulatory forces which recognize that such a monopoly
| |
| ; market structure in particular industries is in the public l-interest. See generally California v FPC, supra, 296 F.2d
| |
| , at 353 ("sometimes regulated monopoly, or a measure of con-l-
| |
| trolled monopoly, is in the public interest"). The existence
| |
| -
| |
| of' government regulation thus ef actively prevents a finding of monopoly power based on " dominance," and the courts have so
| |
| -
| |
| L
| |
| | |
| __
| |
| i
| |
| ,
| |
| ,.
| |
| F
| |
| -152-
| |
| ,-
| |
| i held. See Travelers Insurance Co. Blue Cross, 361 F. Supp.
| |
| 774, 780 (W.D. Pa. 1972), affirmed, 431 F.2d 80 (3d Cir.),
| |
| certiorari denied, 414 U.S. 1093 (1973); Nankin Hospital v
| |
| '
| |
| Michigan Hospital Service, 361 F. Supp. 1199, 1209-1210 (E.D.
| |
| Mich. 1973).
| |
| "
| |
| As the court stated in Travelers, supra, 361 F. Supp. at 780:
| |
| ,.
| |
| ,
| |
| '
| |
| * *
| |
| * Blue Cross is not a monopolist, for it not only lacks control over the
| |
| '' rate-making effects normally incident to lawful competition, but is without power to establish its own rates * * *.
| |
| A similar conclusion is the only permissible finding with respect to each of the Applicants involved in the present proceeding. To fault any of them on the basis of the genera-e tion and transmission dominance they have achieved in their respective service areas as a result of the economic realities r of the industry, the " inevitable consequences" of state and
| |
| -
| |
| federal regulatory policies and directives, and the logical result of natural forces, would run counter to a long line of settled antitrust authority. See United States v United Shoe
| |
| .
| |
| _
| |
| Machinery Corp., supra, 110 F. Supp. at 344 (practices that are "the inevitable consequences of ability, natural forces, L or law" do not contravene the Sherman Act).--70/ And this is t
| |
| '' 70/ Thus, the courts have declined to find a Section 2 Sherman Act violation where the predominant market share acquired is a result of " superior skill, foresight and in-
| |
| :"
| |
| dustry" (United States v Aluminum Company of America, supra, -
| |
| (Cont'd next page)
| |
| I'_
| |
| lt
| |
| | |
| _
| |
| __. _
| |
| :
| |
| )
| |
| -
| |
| !
| |
| '
| |
| ,
| |
| .
| |
| -153-e
| |
| (
| |
| _ so notwithstanding the fact that some of the smaller munici-1 t pal entities in competition with Applicants may have been
| |
| '
| |
| unable to survive the " competition." See Lamb Enterprises, J
| |
| Inc. v Toledo Blade Co., 461 F.2d 506, 514-515 (6th Cir.),
| |
| -
| |
| certiorari denied, 409 U.S. 1001 (1972); United States v
| |
| ,
| |
| ,Harte-Ranks Newspapers, Inc., 170 F. Supp. 227 (N.D. Tex.
| |
| i 1959). For as the First Circuit pointed out in Union
| |
| ~
| |
| Leader Corp. v Newspapers of New England, supra, 284 F.2d at 584, "a natural monopoly market does not of itself im-
| |
| . .
| |
| pose restrictions on one who activel.y, but fairly, com-t petes for it, any more than it does on one who passively acquires it." See also Philadelphia World Hockey Club, Inc.
| |
| -
| |
| 4 F
| |
| 70/ Cont'd
| |
| ~
| |
| 149 F.2d at 430; and see United States v E. I. duPont de Nemot7rs & Co., 118 F. Supp. 41, 214-217 (0.0cl. 1953),
| |
| aTITrmed on other grounds, 351 U.S. 377 (1956); John l Wright & Associates, Inc. v Ulrich, 328 F.2d 4747 178 (8th Cir. 1964)); economies of scale (United States v Aluminum Company of America, supra, 148 F.2d at 429-430; Union Leader lCor. v Newspapers of New England, Inc., supra, 284 F.2d 582); purposive government intervention.(United States v
| |
| - -
| |
| United Shoe Machinery Corp., Asu ra, 110 F. Supp. at 342; United States v Grinnel Corp., 236 F. Supp. 244, 248 (D. Mass. 1964), affirmed, 384 U.S. 563 (1966)); the lack y of more than one entrant (Union Leader Corp. v News-papers of New England, Inc., supra, 284 F.2d at 584); or changes in costs or consumers' tastes which drive all but one competitor from the market (United States v Aluminum
| |
| '~
| |
| Company of America, supra, 148 F!ld at 430).
| |
| ., -
| |
| .
| |
| ss
| |
| '
| |
| . _ . . . _ _ . . .- -
| |
| | |
| _ _ - - _ _ _ _ -
| |
| _
| |
| i i
| |
| -154- .
| |
| v i
| |
| ~ v Philadelphia Hockey Club, Inc., 351 F. Supp. 462, 511
| |
| \
| |
| i (E.D. Pa. 1972); Ovitron Corp. v General Motors Corp.,
| |
| U 295 F. Supp. 373, 378 (S.D.N.Y. 1969).
| |
| i In this latter regard, the decision in United
| |
| .
| |
| States v Western Union Telegraph Co., 53 F. Supp. 377
| |
| . (S.D.N.Y. 1943) is partic.ularly apposite to the present
| |
| ,
| |
| proceeding. There, the Government charged Western Unit.:
| |
| ~
| |
| with conspiracy to restrain commerce in telegraph communi-cations and with the monopolization of such commerce. The court found that Western Union controlled 80 percent of the market and that its system had been " built up as the result of gradual consolidating, by various forms of purchase,
| |
| -
| |
| merger and lease, of over 500 smaller telegraph companies"
| |
| '
| |
| (53 F. Supp. at 383). However, the court refused to infer any unlawful intent from such actions or from any of the practices followed by Western Union once the consolidation
| |
| <
| |
| _
| |
| was complete. Instead, the court found there was nothing in the record "to show that this was other than a normal
| |
| -
| |
| building up and extension of a public facility of a nation-
| |
| '
| |
| wide coverage which was in the interest of the public" (id.).
| |
| L.
| |
| Due to the nature of the communications industry, it was not "to be expected, nor would it be convenient or economical
| |
| , from the standpoint of the public, that there should be any l- considerable number of units" (53 F. Supp. at 390). Under
| |
| -
| |
| .
| |
| w
| |
| -
| |
| | |
| _ . - - - - - _ _ _ _ - _ _ _ _ _
| |
| -
| |
| -155-
| |
| .
| |
| < these circumstances, the actions of Western Union were found p- not to form part of a plan to exclude competing telegraph
| |
| '
| |
| companies or to monopolize the business, but rather were held
| |
| [' to be "the usual incidents attendant to a vigorous prosecu-
| |
| -
| |
| tion of the business * * *" (53 F. Supp. at 392). See also United States v General Dynamics Corp., supra, 415 U.S. at
| |
| ,. 492-93, quoting, 341 F. Supp. at 558 (since reduction in the
| |
| ''
| |
| number of coal producers from 144 to 39 between 1956 and 1967
| |
| ;I was "the inevitable result of'the change in the nature ^ de-i mand for coal," there is no substantial lessening of competi-tion and no antitrust violation).
| |
| . The evidence in this proceeding will show that Applicants' growth and development in the regulated electric P utility industry has been entirely consistent with these accepted principles. Plainly, it is not the design or the
| |
| :r
| |
| ,
| |
| purpose of Section 2 of the Sherman Act to bar the dominant
| |
| -
| |
| force in a regulated monopoly market from ever engaging in IL " active, enterprising and dynamic" business activity; he is 71/
| |
| -
| |
| not required to remain in a state of " passive stagnation."~-
| |
| '
| |
| As accurately observed in Ovitron Corp. v General Motors Corp., supra, 295 F. Supp. at 378:
| |
| [T]he natural monopolist is entitled to compete vigorously and f airly in
| |
| _ a struggle for a market which cannot support more than one supplier.
| |
| 71/ Attorney General National Commission, Antitrust Re-port 60 (1955).
| |
| .
| |
| *w
| |
| | |
| i
| |
| .
| |
| e
| |
| -156-
| |
| *
| |
| ,
| |
| '
| |
| Nor does the decision in United States v Aluminum I~ Co. of America, supra, suggest anything to the contrary. That t
| |
| case has been cited by the Department in earlier filings with
| |
| :
| |
| ,
| |
| this Licensing Board for the proposition that individual prac-
| |
| _
| |
| tices, lawful when viewed in isolation, may appropriately be
| |
| '
| |
| ' condemned under Section 2 of the Sherman Act if perpetrated by C one who possesses monopoly power. It is important to remember,
| |
| '
| |
| however, that ALCOA involved a monopolist in the ingot indus-
| |
| [ try where, unlike the electric utility industry, the free l,_ forces of competition had full play. In that context, the ex-clusion of competitiors from the ingot market by subtle
| |
| - (" doubling and redoubling its capacity before others entered
| |
| '
| |
| the field"; 148 F.2d at 431), as well as not so subtle (con-tracts with foreign cartels) means, directly undermined the overriding policy of the Sherman Act.
| |
| ,r i
| |
| ~[ Here, by contrast, that antitrust policy has largely
| |
| (
| |
| given way to th; state and federal regulatory schemes that pervade the e.'ectric utility industry. Competition, per se, I' is not deemed to be in the public interest. The " dominance" of a few, larre, investor-owned public utilities is even encouraged by regulation. Indeed, as noted in Part V., infra, the Federal Power COLmission itself actively promoted increases !
| |
| .i
| |
| -
| |
| in generation and transmission capacity by these utilities as I being in furtherance of the public interest. In teis setting
| |
| ..
| |
| .t.
| |
| l
| |
| | |
| ._ __ _-- -
| |
| -
| |
| r
| |
| .
| |
| .
| |
| '
| |
| -157-
| |
| ,
| |
| ,
| |
| 1
| |
| -- which is in stark contrast to the ALCOA situation -- ac-t tivity (including, licensed activity) of an entirely lawful nature which tends to preserve, or perhaps even marginally
| |
| '
| |
| increase, a utility's legitimate " dominance" cannot properly
| |
| -
| |
| be viewed as suspect under either the letter or the spirit of the antitrust laws -- unless, of course, under the second c
| |
| .
| |
| element of United States v Grinnell Corp., supra, a showing
| |
| - can be made (which is not possible here) of " wrongful use" from which predatory intent can be inferrnd (see Union Leader j
| |
| Corp. v Newspapers of New England, Inc., supra, 284 F.2d at
| |
| '
| |
| i 584). To read Judge Learned Hand's decision in ALCOA other-
| |
| '
| |
| wise is to give it a crabbed interpretation which was never
| |
| ; r- intended. Even he acknowledged, quoting with approval from
| |
| ' Mr. Justice Day's dissent in United States v United States
| |
| '
| |
| Steel Corp., 251 U.S. 417, 460 (1920), that:
| |
| r "the [Sherman] act offers no objection to the mere size of a corporation, nor
| |
| '
| |
| to the continued exertion of its law-
| |
| ,
| |
| ful power, when that size and power
| |
| ' have been obtained by lawful means and developed by natural growth, although its resources, capital and strength may give to such corporation acmin-
| |
| :
| |
| ating place in the business and industry with which it is concerned. It is en-titled to maintain its size and the power that legitimately goes with it, provided
| |
| - no law has been transgressed in obtain-ing it." [148 F.2d at 430 n.2; emphasis added.]
| |
| ,
| |
| t i
| |
| m
| |
| _ ._
| |
| . - - - - _ _ _ , . . _ . . - .- , ,_.
| |
| * I a
| |
| 3
| |
| -158-J'
| |
| .
| |
| C. RELIANCE ON THE THEORY OF BOTTLENECK p MONOPOLY IS MISPLACED IN THE CIRCUM-STANCES PRESENTED IN THIS PROCEEDING The Department, the Staff and Cleveland have sug-
| |
| ,_.
| |
| gested in their September 5, 1975 Statements -- although none too clearly -- that this Licensing Board can approach this r case as though the alleged " situation inconsistent with the
| |
| '
| |
| antitrust laws" fits the mold of a " bottleneck monopoly."
| |
| That term of art is basically used as a short-hand method of i
| |
| describing the general situation where a group of competitors collectively control some essential resource in an industry
| |
| , or trade, the use of which they have, without good reason, I
| |
| denied to others who need access thereto in order to remain
| |
| '"
| |
| 72/
| |
| ~-
| |
| effective competitors.
| |
| L.
| |
| The basic concept of bottleneck monopoly is gen-r arally credited to the early Supreme Court decision in United
| |
| .
| |
| f States v Terminal Railroad Association, 224 U.S. 383 (1912).
| |
| That case involved what was characterized by the Court as a f "most extraordinary" situation (224 U.S. at 405) in that all
| |
| '
| |
| three railway access routes to and from the City of St. Louis, Missouri, were in the possession and control of an associa-tion of some 38 corporate and individual defendants. The asso-L.
| |
| 72/ See Neale, The Antitrust Laws of the United States of America 66-67 (2d ed. 1974); Comment, Refusals to Deal By
| |
| ' '
| |
| Vertically Integrated Monopolists, 87 Harv. L. Rev. 1720, 1740-41 (1974).
| |
| l l
| |
| lt.
| |
| | |
| . _ _ _ _ _ _ _ _ _ _ .
| |
| Y l
| |
| .
| |
| '
| |
| -159-
| |
| ,-
| |
| l ciation had a veto power on the use and control of the only -
| |
| F
| |
| , available terminal facilities, and the " physical or topo-graphical condition peculiar to the locality" (id.) made construction by the association's non-member competitors of other terminals an unrealistic possibility. It was "in large measure" (id.) on the basis of these unique circum-F
| |
| ,
| |
| stances that the Court determined the denials of access
| |
| _ to the terminal facilities to be what has since been i referred to as an impermissible bottleneck as to those
| |
| '
| |
| "who, owing to conditions * * * [were] under compulsion
| |
| * *
| |
| * to use [the] facilities" (id.), in contravention of e
| |
| Section 1 of the Sherman Act.
| |
| t Confined to its peculiar facts, Terminal Railroad
| |
| ,
| |
| : s. would seem to be of limited significance here. The bottle-
| |
| ! r- neck principle gleaned from that decision has, however,
| |
| '
| |
| been applied in other factual settings so as to give rise
| |
| ''
| |
| to the suggestion of a somewhat broader reading of Terminal Railroad than was originally intended. In Associated Press F
| |
| v United States, 326 U.S. 1 (1945), for example, a case
| |
| ,
| |
| considered by some to invoke the bottleneck rationale al-
| |
| "
| |
| 73/
| |
| though Terminal Railroad was not cited,~~ AP's denial to
| |
| ,
| |
| 73/ Associated Press has been cited as a bottleneck case in two courts of appeals' decisions. See Jerrold Electronics Cor . v Wescoast Brcadcasting Co., 341 F.2d 653 (9th Cir.
| |
| '~
| |
| , and American Federation of Tobacco Growers v Neal, 183 F.2d 869 (4th Cir. 1950).
| |
| __. .-
| |
| | |
| r i
| |
| c-4
| |
| -160-
| |
| ,-
| |
| 4 non-members, through the operation of its men.bership by-r laws, of access to AP's newswire services was held "to block t
| |
| _
| |
| the initiative which brings newcomers into a field of busi-ness and to frustrate the free enterprise system which it c'
| |
| was the purpose of the Sherman Act to protect" (326 U.S.
| |
| I at 14 ) .
| |
| r This implicit recognition of the applicability of
| |
| ,
| |
| the bottleneck concept to unique services -- as distinguish i from unique facilities -- was later made explicit by the r- Supreme Court in Silver v New York Stocx Exchange, supra.
| |
| There, in rejecting the argument that severance of peti-
| |
| .[ tioners' (non-members) private wires was vitiated by the
| |
| 'L fact that member firms still remained willing to deal
| |
| :f g with petitioners, the Court cited both Associated Press
| |
| , and Terminal Railroad for the proposition that (373 U.S.
| |
| :L at 349 n.5):
| |
| '
| |
| A valuable service germane to peti-
| |
| .. tioners' business and important to
| |
| ; their effective competition with
| |
| :( others was withheld from them by collective action. That is enough i' to create a violation of the Sherman
| |
| , Act. [ Emphasis added.)
| |
| l- Coincident with this extension of Terminal Rail-road, the courts, not surprisingly, began to de-emphasize the physical or topographical underpinnings of the first bottleneck decision. The focus on " uniqueness" became train-
| |
| ;
| |
| j *l
| |
| ;
| |
| ,
| |
| l
| |
| _ _ __ , . _ _ .
| |
| ._ _ , _ _
| |
| | |
| -_. . - .- - - . _ .
| |
| I r
| |
| ! -161-e
| |
| * J
| |
| \
| |
| ed more directly on the extent to which access to, or use of, r
| |
| ,' the facility or service in question could be shown to be es-
| |
| '_
| |
| sential to an ostracized competitor's ability to compete ef-74/
| |
| . fectively.-- In this regard, the availability of alternative
| |
| "
| |
| ,
| |
| means for passing through or around the so-called neck of the I
| |
| bottle was deemed to warrant careful scrutiny in order to as-certain whether, for example, the availability of a similar
| |
| ;
| |
| 'c
| |
| .
| |
| I L
| |
| ,r
| |
| '
| |
| 74/ E.g., Six Twenty-Nine Productions, Inc. v Rollins Telecasting, Inc., 365 F.2d 478 (5th Cir. 1966) (sole
| |
| , television station in Pensacola refused to accept plaintiff
| |
| ; as advertising agency through whom ads could be placed); Jer-L rold Electronics Corp. v Wescoast Broadcasting Co., 341 F.
| |
| 2d 653 (9th Cir.), certiorari denied, 382 U.S. 817 (1965)
| |
| ;[ (sole manufacturer of automatic gain-control-device which
| |
| ,t was essential to the construction of a community television-antenna-operator, refused to sell device to Wescoast); Pack-
| |
| .c aged Programs, Inc. v Westingh]use Broadcasting Co., 255 F.2d 708 (3rd Cir. 1958) (holder of lawful monopoly of air waves
| |
| ' utilized such to monopolize program production); American
| |
| '"
| |
| Federation of Tobacco Growers v Neal, 183 F.2d 869 (4th Cir.
| |
| 1950) (Danville Tobacco Association denied membership and
| |
| .. selling allotment time to plaintiff); Bale v Glasc ow Tobacco Board of Trade, Inc., 223 F. Supp. 739 (W.D. Ky 15'63 ) , affirm-
| |
| ;
| |
| {
| |
| ed, 339 F.2d 281 (6th Cir. 1964) (allotment time formula dis-
| |
| ,
| |
| "
| |
| criminating against new larger warehousemen); Asheville Tobacco
| |
| ,
| |
| Board of Trade Inc. v FTC, 263 F.2d 502 (1959), appeal after ir remand, 294 F.2d 619 (TEE Cir. 1961) (same); Rogers v Douglas j' Tobacco Board of Trade, Inc., 266 F.2d 636 (5th Cir. 1959) lL (same); Gasco, Inc. v Providence Fruit & Produce Building, r 194 F.2d 484 (1st Cir.), certiorari denied, 344 U.S. 817 (1952)
| |
| ''
| |
| (refusal to renew lease on warehouse which provided selling, storage and shipping facilities to fresh fruit and vegetable dealers).
| |
| W.-
| |
| -- _- , _ _ _. -- - - . - , -
| |
| r . ,. ,.n. -
| |
| , ,, , , , , _ , , . . _ . . . ,. . . . . . ,, -
| |
| | |
| - . . .- - . - _ .. _. ._ _- -_-
| |
| e
| |
| ;^
| |
| -162-
| |
| ,
| |
| facility at a different locale (or an equivalent service) offers comparable competitive opportunities (see, e.2 r
| |
| , Americen Federation of Tobacco Growers v Neal, supra,
| |
| '
| |
| 183 F.2d at 871), or the construction of a new facility to r
| |
| gain the access desired (or the establishment of a similar service) presents an economically feasible option (see, e.g., _
| |
| Gamco, Inc. v Providence Fruit & Produce Building, supra,
| |
| , - 194 F.2d at 487; and see Associated Press v United States, I supra).
| |
| I Aside from these departures from Terminal Rail-road, however, the basic elements of the bottleneck theory e
| |
| g derived from that case appear to have remained largely in-tact. Thus, the bottleneck rationale has been used only to i' reach those situations where vertically integrated monopo-
| |
| 'r lists attempt by an exercise cf their monopoly power at one
| |
| !' market level (i.e., the wholesale market) to impede or in-jure competition at another market level (i.e., the retail, market). See generally United States v Terminal Railroad j L Association, supra, 224 U.S. at 405; Associated Press v F United States, supra, 326 U.S. at 13; Gamco, Inc. v Prov-
| |
| '~
| |
| idence Fruit & Produce Building, supra, 194 F.2d at 488.
| |
| ,
| |
| 'l Compare Lorain Journal v United States, 342 U.S. 143, 154 t t.
| |
| (1951); Eastman Kodak Co. v Southern Photo Materials Co.,
| |
| -
| |
| we l-
| |
| -- . - - - . . . - . - - . . _- - . . . - , _ _ , . . - . - - - _ , _ - , . -
| |
| | |
| - _ _ _ _ -_-
| |
| __
| |
| ,
| |
| .
| |
| '
| |
| -163-
| |
| -
| |
| 4 F 273 U.S. 359, 375 (1927). Joint control or ownership of the essential resource at the neck of the bottle is gen-i
| |
| ,
| |
| erally considered to be necessary. See Consumers, supra, at p. 92 ("[alll of the bottleneck cases involve conspir-I acies [as defined to include contracts, combinations, etc.]").--75/
| |
| '
| |
| r And, the competitor seeking access to a unique facility or service must still demonstrate the overriding importance of the use thereof to his competitive effective-r 1
| |
| ' 75/ In this regard, it should be noted that, while the district court in United States v Otter Tail Power Co.,
| |
| . 331 F. Supp. 54 (D. Minn. 1971), made reference to the
| |
| :! bottleneck theory as one of two rationales sustaining l
| |
| 't its holding that a single utility's complete refusal both to sell wholesale power and to wheel power to muni-l[ cipalities in its service area violated the Sherman Act jt (citing Packaged Programs, Inc. v Westinghouse Broadcasting Co., supra, and Six Twenty-Nine Productions, Inc. v Rollins
| |
| , Telecasting, Inc., supra), the Supreme Court steered clear of the bottleneck theory altogether in its Otter Tail de-
| |
| '"
| |
| cision. Otter Tail Power Co. v United States, 410 U.S. 366 ;
| |
| (1973). The approach of the Supreme Court seems in I accord with the generally accepted view that an essential
| |
| ;l_ ingredir.nt of bottleneck monopolies is the participation l ,
| |
| of multiple entities in the ownership or control of the '
| |
| l: unique facility or unique service. See United States
| |
| ~
| |
| v Terminal Railroad Association, supra; Associated Press v United States,~ supra; Silver v New York Stock Exchange, aupra; Jerrold Electronics Corp. v Wescoast Broadcasting Co., supra; Bale v Glasgow Tobacco Board of Trade, supra; I-
| |
| '
| |
| Asheville Tobacco Board of Trade v FTC, supra; Rogers v l Douglas Tobacco Board of Trade, supra.
| |
| ..
| |
| _
| |
| - _ - __ . . - - . - ,- . - - -..-----l
| |
| | |
| -
| |
| -164-r f
| |
| ness. See, e.g., Silver v New York Stock Exchange, supra,
| |
| ,
| |
| P 373 U.S. at 349; Jerrold Electronic Corp. v Wescoast Broad-i
| |
| _
| |
| casting Co., supra.
| |
| 1 It is far from clear how the Department, the Staff
| |
| -
| |
| and Cleveland propose to apply these principles to the pre-sent case. On the basis of statements by the Department
| |
| '
| |
| during legislative hearings on the antitrust review provi-sion, one anticipated argument is that a so-called bottle-I
| |
| , neck situation exists with respect to the nuclear facilities e themselves. Then Assistant Attorney General Walker B. Comegys testified (Hearings, Pt. 1, at p. 128):
| |
| Specifically, the industry is now i going through a considerable con-troversy over the extent to which, p and the means by which, small sys-
| |
| [ tems should have access to large new generation and transmission facilities. As to this, I think I. the antitrust law provides some L general guidance. Companies act-ing together to create or control a unique facility may be required,
| |
| ,_
| |
| by application of the rule of rea-son, to grant access on equal and nondiscriminatory terms to others *
| |
| ..
| |
| who lack a practical alternative.
| |
| ,
| |
| While this position has superficial appeal, it suf-l L fers when subjected to close analysis. As Applicants can show at the hearing, there is nothing intrinsically " unique" about
| |
| '
| |
| nuclear power that distinguishes it from any other forms of power -- the recipient thereof would be unable to discern a
| |
| ..
| |
| l
| |
| ..
| |
| | |
| -165-
| |
| .
| |
| difference. What may make nuclear power more attractive
| |
| -
| |
| than fossil fuel, for example, is the lower costs asso-ciated with nuclear generation, but even that is debatable in view of the current price gyrations in the uranium market.
| |
| ~
| |
| Even if some cost advantage can be shown, however, whether that factor would be a sufficient basis for classifying nu-clear power as an " essential resource" within the meaning of the bottleneck theory turns, as we have indicated, basi-
| |
| < cally on the extent to which it can be shown that such lower
| |
| [ cost fuel is vital to the smaller systems in Applicants'
| |
| '
| |
| service territories in order for them to remain effective competitors.
| |
| f
| |
| ,.
| |
| As to all Applicants but CEI an inquiry of this sort
| |
| : b. is largely theoretical, since state and federal regulation,
| |
| -
| |
| together with economic reality, has substantially -- although
| |
| -
| |
| not entirely -- eliminated retail competition between the pri-
| |
| '
| |
| vate and the municipal systems in these areas. Where such competition does exist, which (as the evidence at the hearing ,
| |
| _.
| |
| will show) is confined essentially to the fringe areas direct-ly outside the corporate limits of the various municipalities k in Ohio and perhaps in Pennsylvania, there is every indication
| |
| '
| |
| that access to the nuclear facilities is not deemed essential, j t
| |
| or even very important, to the maintenance of these small
| |
| , ..
| |
| municipal systems as " effective" competitors -- at least not 1
| |
| ' .
| |
| | |
| . _ _ _ _ .
| |
| r p,
| |
| -166-
| |
| -
| |
| to those most directly concerned. For, as earlier pointed
| |
| -
| |
| out, none of these small " competitors" has made any request
| |
| .
| |
| for access to this so-called " unique facility."
| |
| i Such a request has, of course, been made by at
| |
| "
| |
| least one municipal system in CEI's service area, the 76/
| |
| Municipal Electric Light Plant of the City of Cleveland.--
| |
| -
| |
| Admittedly, MELP is in direct door-to-door competition with CEI within the city limits and in some fringe areas. To the
| |
| [ extent it could be shown that, notwithstanding the consider-able tax subsidies enjoyed by MELP, access to nuclear power
| |
| ~
| |
| from these plants is essential to MELP's survival as an effective competitor -- which will require Cleveland to meet
| |
| .
| |
| the heavy burden of proving that nuclear power is today in
| |
| :F:t fact sufficiently cheaper than non-nuclear power to have a real impact on retail competition in and around the City
| |
| {
| |
| !'
| |
| -- there may well be a basis in this limited context for I
| |
| concluding that the nuclear facilities are an " essential L
| |
| resource."
| |
| '"
| |
| 76/ While some general interest in the nuclear facil-
| |
| , ities has been expressed by the City of Painesville,
| |
| ! neither CEI nor any of the other Applicants has yet re-
| |
| ._L ceived a specific request from Painesville for participa-
| |
| ,
| |
| tion in the units. Indeed even the City of Cleveland's j interest in access has apparently waned. On several occa-L sions since the City's " request," CEI has invited a seri-ous indication of the City's interest in Davis-Besse Unit 1.
| |
| No response has been received and we presume that, at least
| |
| '
| |
| as to Davis-Besse Unit 1, the City has effectively withdrawn its " request" for participation.
| |
| i
| |
| . w
| |
| +.
| |
| l
| |
| . . _ . .
| |
| .. . ._ - --
| |
| | |
| f*
| |
| i
| |
| - -
| |
| ! -167-
| |
| -
| |
| f That conclusion does not end the bottleneck in-
| |
| _
| |
| quiry, however. What is needed to bring this case within
| |
| .
| |
| Terminal Railroad and its progeny is a concerted refusal
| |
| ! by those who own the unique facility to allow competitors
| |
| -
| |
| in a second-level market (i.e. retail market) to use it.
| |
| See, e.g., Gamco, Inc. v Providence Fruit & Produce Build-
| |
| ~
| |
| ing, supra, 194 F.2d at 488. There is no such refusal here.
| |
| To the contrary, Applicants have agreed, not only as to MELP but also as to all entities making a timely request for nu-p clear power, to provide a full opportunity to participate t
| |
| in the nuclear facilities (see Exhibit A hereto). On this basis, any application of the bottleneck theory resting on the need for accecs to these plants must fail. l
| |
| -
| |
| \
| |
| [ In its Perry Units 1 and 2 Advice Letter of De- !
| |
| , cember 17, 1973, the Department suggests that another use of the bottlenscK theory might be appropriate with respect to the matter of coordination, which presumably is to be
| |
| ~
| |
| characterized as a " unique service." The anticipated
| |
| _
| |
| line of argument here is that Applicants, by virtue of the formation of the CAPCO pool arrangement, enjoy the
| |
| _ benefits of an essential resource (i.e., coordination) which, if denied to small entities with whom they com-
| |
| ~
| |
| pete at the retail level, will impede effective retail competition. 1
| |
| .-
| |
| l
| |
| -
| |
| ,
| |
| , :
| |
| i l.
| |
| .
| |
| | |
| - _ _ _ _
| |
| _
| |
| -
| |
| -168-
| |
| .
| |
| ,_
| |
| One fundamental fallacy with this argument is, as we have already exposed, that it goes well beyond the
| |
| .- legitimate area of inquiry open to this Licensing Board under Section 105c (see Part III.C., supra). That degree
| |
| ~
| |
| of coordination which has a " substantial connection" (Water-4 ford II, supra, 6 AEC at p. 621) with tne nuclear facilities
| |
| -
| |
| ; has clearly not been withheld by these Applicants (see Exhi-
| |
| -
| |
| bit A infra). This unassailable fact should pretermit any further consideration by the Board regarding the matter of
| |
| "
| |
| coordination -- whether in terms of a bottleneck analysis or otherwise.
| |
| .
| |
| Evei. going beyond the jurisdictional point, how-
| |
| ,_ ever, it is important to keep in mind with respect to any
| |
| 'i
| |
| - discussion regarding coordination that the sharing of co-
| |
| '~
| |
| ordinated benefits is a viable philosophy only if there is
| |
| ~
| |
| a concomitant sharing of the responsibilities that go along with those benefits. As Applicants explain in the next part of this Prehearing Brief and will demonstrate fully
| |
| __ at the evidentiary hearing, a coordinated arrangement, such j- as a power pool, depends for survival on the concepts of
| |
| '
| |
| ~
| |
| mutuality and reciprocity between and among the member par-
| |
| '
| |
| ticipants. Thus, in making any assessment under the bottle
| |
| _
| |
| neck theory of the importance of " coordination" to effective
| |
| !_ competition, the analysis must embrace both the benefits that
| |
| . _. -. . , . - - - _
| |
| | |
| _ _ - - _ _ _ _ _ _ _ _ _ _ _
| |
| -169-f a small system can enjoy as a result of coordination and the
| |
| -
| |
| proportionate burdens that it must be willing to shoulder.
| |
| -
| |
| It is only the net benefits (if any) which are germane to t,he inquiry.
| |
| ;- In this respect, it is noteworthy that there have been but two requests of Applicants for general access to
| |
| ~~
| |
| the benefits of coordination -- one by Cleveland and one by the Borough of Pitcairn. In neither instance, as the evi-
| |
| --
| |
| dence will show, was the requesting entity willing to accept its equitable share of CAPCO responsibilities; nor did either
| |
| -
| |
| one have sufficient capability to do so. The interests of
| |
| '
| |
| both were all in the direction of gaining access to this so-
| |
| < l.
| |
| called essential resource (i.e., coordination unrelated to
| |
| ,
| |
| .i.
| |
| the licensed activities) on a " free-ride" basis.
| |
| Applicants cannot be faulted for refusing to enter
| |
| _.. into any such arrangement. There is nothing in the bottleneck theory, at its furthest reach, which says a competitor can dictate its own terms of entry or requires the restructuring
| |
| ~
| |
| ,
| |
| of the " bottleneck" to a blueprint more favorable to it than
| |
| ,_
| |
| to others. Indeed, Terminal Railroad recognized explicitly r
| |
| _ that the access required under the Sherman Act in order to
| |
| ; break the neck of a bottle was that which would place a com-
| |
| -
| |
| petitor "upon a plane of equality in respect of benefits and burdens with the present proprietary companies" (224 U.S. at i
| |
| .
| |
| :
| |
| t
| |
| !
| |
| l
| |
| - _ _
| |
| _ _ _
| |
| _
| |
| | |
| _. .-_ _ _ _ - __ _ _ _ _ _ _ _ -____
| |
| _ _
| |
| .
| |
| .e,
| |
| -170-7
| |
| .l 411; emphasis added). Equal, and not preferential, treatment
| |
| , in connection with the unique facility or service in question
| |
| - was similarly the touchstone for relief in more recent bottle-b neck cases. See, e.g., Gamco, Inc. v Providence Fruit & Pro-
| |
| '
| |
| duce Building, supra, 194 F.2d at 489; Bale v Glasgow Tobacco Board of Trade, Inc., supra, 339 F.2d at 287. Even the Depart-
| |
| : ,.
| |
| ;; ment emphasized this point in its testimony before the Joint
| |
| ;,_ Committee on Atomic Energy, stating that access to the " unique
| |
| !' facility" was to be "on equal and nondiscriminatory terms"
| |
| *
| |
| (Hearings, Pt. 1, at p. 128). Thus, even if this Licensing
| |
| '
| |
| Board hed the authority to reach the matter of coordination unrelated to the licensed activities, there would be no basis for concluding from the Cleveland and Pitcairn exper'-
| |
| ::
| |
| iL ence that there exists a bottleneck situation in this area.
| |
| ,
| |
| '
| |
| One final possible contention under the bottleneck
| |
| '
| |
| rationale is suggested by Cleveland. It seems to be claim-
| |
| .
| |
| ing that CEI's transmission facilities, which essentially i
| |
| ,
| |
| surround the city, form a barrier against Cleveland's ac-
| |
| _ cess to outside power supply sources. The escape, so the
| |
| ; argument runs, is only by way of access to CEI's transmis-
| |
| .;
| |
| l- sion lines for general wheeling purposes. Again, putting to one side the jurisdictional problems with th.a alltga-tion, which we have already discussed, the; c n y ', number
| |
| ..
| |
| *
| |
| .._
| |
| !
| |
| _
| |
| - .
| |
| | |
| _ _ _ - - _ - _ - _ _ _ _ .
| |
| _ _
| |
| -
| |
| c.
| |
| - -171-
| |
| ..
| |
| of reasons why the bottleneck theory simply does not fit in
| |
| .-
| |
| such circumstances.
| |
| .
| |
| , . ,
| |
| Initially, it should be observed that Cleveland's
| |
| . apparent position runs counter to the usual bottleneck
| |
| - -
| |
| monopoly situation which contemplates joint ownership or control of the so-called " unique facility" by multiple en-
| |
| .n tities. See, e.g., Terminal Railroad Association v i' United States, supra; Associated Press v United States,
| |
| .-
| |
| j! supra; Gamco, Inc. v Providence Fruit & Prcduce Building,
| |
| - supra. And see Consumers, supra, at p. 92. The Supreme
| |
| * Court in Otter Tall Power Co. v United States, supra, in
| |
| ,
| |
| . condemning as anticompetitive the exclusionary practices of
| |
| .t.
| |
| '
| |
| a single electric utility vis-a-vis its municipal competi-r
| |
| : (, , tors, carefully eschewed reliance on the bottleneck analysis
| |
| - misapplied by the court below (see n.75, supra).
| |
| '' A second difficulty with Cleveland's bottleneck formulation relates to the identification of a unique facil-
| |
| ,m ity or an essential resource. Presumably, reference will be
| |
| .
| |
| made either to CEI's transmission lines or to CEI's wheeling m
| |
| services. In either event, Cleveland will have to demonstrate l
| |
| l L- that access to this facility or service is essential to effec-I tive competition in the retail market within or immediately L
| |
| '
| |
| outside of the city limits. On that point, we would observe that the central purpose for obtaining the use of CEI's lines i:
| |
| u
| |
| . . . ..
| |
| . _ _ _ _ - . . .. ..
| |
| | |
| ._ _ _ _ _ _ -
| |
| T :
| |
| I l
| |
| r
| |
| . -172- 1
| |
| -
| |
| E for general third-party wheeling is to enable Cleveland to c-bring in wholesale power from outside sources for resale to 77/
| |
| --
| |
| ,_
| |
| its customers. That wholesale power is basically no dif-l ferent in kind from the wholesale power CEI has explicitly
| |
| -
| |
| agreed to sell to Cleveland directly. While there may from
| |
| . .i time-to-time be some price variance involved, it is unlikely,
| |
| [~ i.: view of pervasive FPC regulation over rates, that the price 6
| |
| differential will ever be sufficiently great so that the
| |
| ; wholesale power obtained from other supply sources will,
| |
| -
| |
| after the addition of a wheeling charge (itself subject to FPC
| |
| '
| |
| regulation), be materially (if any) less'than the price at
| |
| [ which Cleveland could have purchased its wholesale power from L
| |
| CEI directly,
| |
| , Unless convincing evidence can be introduced to
| |
| .,_ the contrary -- and we seriously doubt that it can --
| |
| -
| |
| neither CEI's transmission lines nor its wheeling ser-vices would constitute an essential resource within the
| |
| '
| |
| meaning of Terminal Railroad and its progeny. In essence, Cleveland would not be able to show -- as it must under
| |
| ..
| |
| the bottleneck cases -- that it has suffered any competi-
| |
| ,
| |
| -
| |
| 11/ While Cleveland has also discussed wheeling in the
| |
| : context of a refusal by CEI to wheel 30 mw of low-cost,
| |
| ~
| |
| preference PASNY power to the City, it is clear that the wheeling position of Cleveland, togetner with that of the Department and the Staff, is concerned primarily with the (Cont'd on next page)
| |
| ._
| |
| o n--, -,
| |
| | |
| ,-
| |
| r*
| |
| !
| |
| -173-
| |
| .
| |
| tive disadvantage (or will likely suffer in the future) as
| |
| -
| |
| .
| |
| a result of the fact that it obtained its bulk power supply
| |
| -
| |
| from CEI at FPC :ates rather than from some other power
| |
| !
| |
| '
| |
| source. In this regard, the present situation is materially different from the facts confronting the Supreme Court in Otter Tail. There, the private investor-owned utility engaged
| |
| : in a complete refusal to deal with small municipal systems in
| |
| , its service area. It would ne'ither sell wholesale power to
| |
| ~L the municipal system nor wheel bulk power from other available
| |
| ,l sources. This combination of factors, coupled with a predatory
| |
| '
| |
| intent to eliminate competition at the retail level altogether,
| |
| :p
| |
| : is what the Supreme Court held to be intolerable under Section
| |
| ' [~
| |
| 78/
| |
| ~-
| |
| _
| |
| 2 of the Sherman Act. Cleveland can thus take little so-lace in the Otter Tail ruling for purposes of the present pro-
| |
| "
| |
| ceeding.
| |
| m
| |
| .-
| |
| m
| |
| ,t
| |
| ,_ 77/ Cont'd
| |
| ; matter of general, third-party wheeling of wholesale power.
| |
| .r As for the isolated question regarding the wheeling of pre-
| |
| !g ference power, see the final point of our discussion in this j ,
| |
| Part IV.C., infra.
| |
| '
| |
| 78/ See, e.g., the perceptive analysis of Otter Tail by l-- the Iicensing board in Kansas Gas & Electric Company and Kansas City Power and Light Company (Wolf Creek Generating Station, Unit 1), Docket No. 50-482A, Memorandum and Order
| |
| ,, dated September 10, 1975.
| |
| l
| |
| ;
| |
| -
| |
| I
| |
| -
| |
| | |
| i
| |
| : - i
| |
| .
| |
| ,
| |
| -174-
| |
| .s
| |
| : There is one further factor that militates strongly
| |
| ''-
| |
| -- indeed conclusively -- against an application of the bottle-neck analysis to CEI's transmission facilities or wheeling services. That is the undeniable fact, as the evidentiary
| |
| _
| |
| hearing will confirm, that CEI has agreed affirmatively to I
| |
| wheel bulk power from outside sources into Cleveland upon
| |
| -
| |
| request, with but one limited exception -- which concerns
| |
| ''
| |
| only wholesale power not available to CEI due to some legal
| |
| ,- 79/
| |
| ., or conspiratorial impediment. This agreement to wheel to i
| |
| ,
| |
| Cleveland wholesale power from any market equally open to CEI
| |
| , fully comports with the " equality" concept announced in Terminal Railroad, and followed in later bottleneck cases.
| |
| :.
| |
| '
| |
| The fact that CEI declined to go further and provide Cleve-
| |
| '
| |
| land a form of access to CEI's transmission lines which
| |
| .
| |
| CEI itself does not even enjoy suggests no infirmity under
| |
| ,..
| |
| l the antitrust laws. See DeFilippo v Ford Motor Co., 516
| |
| ,
| |
| F.2d 1313, 1320-21 (3d Cir. 1975) (anticompetitive purpose
| |
| '--
| |
| cannot be inferred from the deprivation of benefits under a
| |
| ~
| |
| contract offered on special terms).
| |
| -
| |
| '
| |
| -
| |
| 79/ This agreement to wheel power is in addition to CEI's offer to Cleveland regarding participation in CEI's share of the nuclear units, the terms of which are embodied in a draft Participation Agreement which CEI and the City are negotiat-
| |
| - ing. That this Participation Agreement also negates a bottle-neck argument as to CEI is apparent from the discussion in this h area in CEI's Fact Brief filed herewith, e
| |
| '!
| |
| l l
| |
| ,
| |
| - - - -.
| |
| ., , - . , . , . , , . . , . . . _ , , . . - - - - - . . . .
| |
| | |
| ,-
| |
| -175-
| |
| ;.
| |
| ,
| |
| In connection with this latter point, moreover, it is worth noting that no good reason exists why Cleveland
| |
| ,
| |
| must rely on CEI to transmit low-cost preference power to
| |
| . the City. On the basis of an analysis by CEI's expert wit-
| |
| { ness, it will be demonstrated at the hearing that it is economically feasible from an engineering standpoint for
| |
| ,-
| |
| Cleveland to build its own transmission lines, either to
| |
| ,
| |
| Pennsylvania Electric Company or to Ohio Power Company, and
| |
| '
| |
| [ transmit PASNY Power or Buckeye power over those lines direct-l
| |
| -
| |
| ly to the City. This availability to Cleveland of alternative transmission facilities at a reasonable cost is but one more basis for rejecting any notion that CEI has established a bottleneck situation around the City of Cleveland which has a
| |
| antitrust overtones.
| |
| ( r-D. CONSTITUTIONALLY PROTECTED LEGISLATIVE AND
| |
| '
| |
| : "-
| |
| JUDICIAL ACTION IS SHIELDED FROM ANTITRUST
| |
| ,.
| |
| SCRUTINY UNDER NOERR-PENNINCTON
| |
| ,
| |
| be In response to CEI's filed expert testimony demon-
| |
| _
| |
| strating the economic feasibility of Cleveland constructing
| |
| + .
| |
| I transmission lines to interconnect with private utilities l'- other than CEI, some suggestion has been made that CEI has, ij through lobbying efforts before the City Council, success-
| |
| '
| |
| fully dissuaded that legislative body from authorizing bond issues to finance such an undertaking. If the probing of
| |
| _
| |
| | |
| ._
| |
| lT a
| |
| ...
| |
| h
| |
| -176-
| |
| _
| |
| '
| |
| '
| |
| i this sort of alleged activity were a permissible exercise in
| |
| ...
| |
| this proceeding, CEI would demonstrate that this claim
| |
| , is nothing but another example of the fertile imagination of l i'
| |
| Cleveland's counsel. Fortunately, however, the valuable
| |
| -
| |
| time of this Licensing Board need not be taken up chasing
| |
| .I.
| |
| l this red herring. For, it is a well settled legal principle
| |
| !~
| |
| '
| |
| that activities designed to impact on the decision of legis-
| |
| ,
| |
| lative and executive officials are constitutionally protected
| |
| [ from antitrust scrutiny.
| |
| This exemption from the prohibitions of the anti-trust laws for attempts to restrain or monopolize trade by
| |
| ,
| |
| influencing or invoking the governmental decision-making processes was established in the trilogy of Supreme Court de-
| |
| !
| |
| , cisions in Eastern Railroad Presidents Conference v Noerr
| |
| ._ Motor Freight, Inc., 365 U.S. 127 (1961), United Mine Workers
| |
| -
| |
| of America v Pennington, 381 U.S. 657 (1965), and California
| |
| !
| |
| Motor Transport Co. v Trucking Unlimited, 404 U.S. 508 (1972).
| |
| m The Noerr-Pennington doctrine that evolved from those cases
| |
| .
| |
| represents a strong judicial commitment to defeating all
| |
| .
| |
| ,
| |
| efforts to compromise through the assertion of broad anti-
| |
| : s. trust claims those fundamental rights and activities which I
| |
| l i have long been recognized as worthy of protection under the
| |
| -
| |
| First Amendment. This constitutional underpinning for the
| |
| ._
| |
| exemption was clearly announced in California Motor Transport l;
| |
| .
| |
| . , - , - --.-,w,,_ .,,,-c.. , - - - _ , , - - - , , . . , --,s -
| |
| | |
| !
| |
| i
| |
| ;
| |
| ..
| |
| '
| |
| .-177-1 Co. v Trucking Unlimited, supra, 404 U.S. at 510-511, in the j
| |
| .
| |
| following terms:
| |
| We conclude that it would be destruc-
| |
| '
| |
| tive of rights of association and of petition to hold that groups with l common interests may not, without
| |
| - violating the antitrust laws, use
| |
| ! the channels and procedures of state and federal agencies and courts to
| |
| ,_
| |
| advocate their causes and points
| |
| ; of view respecting resolution of their business and economic in-terests vis-a-vis their competi-
| |
| :' tors.
| |
| '(
| |
| See also Eastern Railroad Presidents Conference v Noerr Motor Freight, Inc., supra (if activities we;e found to violate anti-trust laws, serious First Amendment problems, particularly as
| |
| ,
| |
| to right to petition, would arise).
| |
| - The range of activities and practices covered by the
| |
| >>
| |
| '
| |
| Noerr-Pennington doctrine is indeed broad, as is apparent from a review of the various court decisions in which it has been
| |
| .,
| |
| invoked. Thus, Vie doctrine has been repeatedly used to pro-tect a host of practices designed to ir fluence the decisions of legislative or executive officials at all levels of govern-( L- ment.--80/It has, in addition, been applied just as broadly to i
| |
| ~~
| |
| .
| |
| 80/ See, e.g., Eastern Railroad Presidents Conference v Noerr Motor Freight, Inc., 365 U.S. 127 (1961) (" vicious,
| |
| ; corrupt, and fraudulent" publicity campaign directed toward state governor and legislature); United Mine Workers of
| |
| -
| |
| American v Pennington, 381 U.S. 657 (1965) (concerted activities aimed at influencing Secretary of Labor and TVA);
| |
| Sun Valley Disposal Co. v Silver State Disposal Co., 420
| |
| -- F.2d 341 (9th Cir. 1969) (conspiracy among defendants and (Cont'd next page)
| |
| V
| |
| - , , , , , .-w- ---e- ,,m- w -- -r , ,-,r - *--ww- g-
| |
| | |
| - _ _ _ - - _ .
| |
| .
| |
| -178-efforts aimed at influencing administrative or judicial pro-
| |
| -
| |
| 81/
| |
| ceedings.-- Also held to be within the protection of the doctrine, have been efforts to influence citizens' votes in
| |
| -
| |
| a referendum.--82/Moreover, the courts have not hesitated to
| |
| -
| |
| protect such activities from antitrust scrutiny irrespective
| |
| !
| |
| ,~
| |
| 80/ Cont'd county commissioners to influence state and county legisla-tive bodies); A.B.T. Sightseeing Tours, Inc. v Gray Line
| |
| .{ New York Tours Corp., 2(2 F. Supp. 365 (S.D.N.YT"1965)
| |
| (lobbying activities before legislative bodies and adminis-trative agencies of New York City).
| |
| 81/ See, e.g., California Motor Transport Co. v Trucking UnlTmited, 404 U.S. 508 (1972) (concerted activity before state and federal courts and agencies to block acquisition
| |
| : i. by competitior of operating rights); Central Savings &
| |
| Loan Ass'n v Federal Home Loan Bank Board, 422 F.2d 504 r (8th Cir. 1970) (solicitation of federal agency for pur-i poses of obtaining favorable regulations which result in
| |
| '
| |
| economic or competitive advantage); Household Goods Carriers' r Bureau v Terrell, 452 F.2d 152 (5th Cir. 1971) (solicita-tion of federal agency to keep competitor's mileage guide
| |
| ~- from the market); Semke v Enid Automobile Dealers Ass'n, 456 F.2d 1361 (10th Cir. 1972) (solicitation of State Motor Vehicle Commission to enjoin acts of competitor violative
| |
| .
| |
| of state statute); Edward B. Marks Music Corp. v Colorado Mag-netics, Inc., 497 F.2d 285 (10th Cir. 1974), certiorari denied, 419 U.S. 1120 (1975) (utilization of courts to enforce copy-right); George Benz & Sons v Twin City Milk Producers Ass'n,
| |
| '' 299 F. Supp. 679 (D. Minn. 1969) (solicitation for action fixing prices favorable to defendants but harmful to plaintiff before Department of Agriculture).
| |
| 82/ See Rogers v Federal Trade Commission, 492 F.2d 228 (9th ls Cir. 1974) (representations to the public by opponents of " anti-litter" initiative protected, even though such representations may constitute " unfair and deceptive trade practices").
| |
| _
| |
| _
| |
| .--
| |
| | |
| :
| |
| i
| |
| '
| |
| ,
| |
| -179-t J
| |
| -.
| |
| of the type of governmental response hoped to be achieved.
| |
| Thus, for example, in addition to the more usual spectrum
| |
| .y of activities aimed at influencing specific pieces of legis-lation or securing a judicial or administrative order, courts
| |
| ['
| |
| have protected activities aimed at influencing proprietary 83/
| |
| policies of the government,-- including grants or denials
| |
| * r 84/
| |
| -~
| |
| .
| |
| of franchises and licenses. And finally, the courts have
| |
| .. expansively applied the doctrine to almost every conceivable
| |
| '
| |
| 'l
| |
| ' type of activity used to intluence the governmental decision-
| |
| -
| |
| 83/
| |
| 381 U.S. See,T1965)e.g., United to Mine Workers TVA of America v Pennington,
| |
| * 657 (efforts influence to curtail its
| |
| '
| |
| " spot market" purchases of coal); Household Goods Carriers'
| |
| _
| |
| Bureau v. Terrell, 452 F.2d 152 (5th Cir. 1971) (efforts to
| |
| .
| |
| prevent purchase of competing mileage guide by federal agency);
| |
| !' United States v Johns-Manville Corp., 245 F. Supp. 74 (E.D. Pa.
| |
| 1965) (erforts to influence governmental procurement specifica-lr tions of certain pipe); Hackensack Water Co. v Village of Nyack;
| |
| ..
| |
| '*
| |
| 289 F. Supp. 671 (S.D.N.Y. 1968) (attempt to influence condem-nation proceedings affecting competitor).
| |
| ,
| |
| 84/ See, e.g., Metro Cable Co. v CATV of Rockford, Inc.,
| |
| ' 516 7.2d 220 T7th Cir. 1975) (efforts to influence city coun-cil to grant utility franchise); Lamb Enterprises, Inc. V -
| |
| ''
| |
| Toledo Blade Co., 461 F.2d 506 (6th Cir.), certiorari denied,
| |
| -; 409 U.S. 1001 (1972) (efforts before city council both to gain a franchise and subsequently for legislation blocking a sim-
| |
| ,
| |
| ilar franchise to a competitor); Sun Valley Disposal Co. v Silver State Disposal Co., 420 F.2d 341 (9th Cir. 1969)
| |
| ''' (efforts to influence state and county legislative bodies
| |
| ..
| |
| to grant exclusive franchise); E. W. Wiggins Airways, Inc.
| |
| !\ v Massachusetts Port Authority, 362 F.2d 52 (1st Cir.),
| |
| : -- certiorari denied, 385 U.S. 947 (1966) (efforts to influence and allegedly conspire with administrative agency to termi-nate plaintiff's lease).
| |
| l~.
| |
| _ _ , - - _ , _ , - . . . . . . ___ _ __ _ .- _
| |
| - - - - , .. -. - .. . .. _
| |
| | |
| .. -- - _ _ - _ __
| |
| ,
| |
| 1 1
| |
| 1 i
| |
| ~
| |
| l l
| |
| '
| |
| -180-i making process. Deceptive and possibly unethical practices
| |
| -
| |
| 85/
| |
| --
| |
| have been upheld, as have activities violative of state
| |
| ~
| |
| 86/
| |
| law.
| |
| $
| |
| Once it has been determined that the challenged
| |
| -
| |
| practice or activity is of a type afforded protection by the Noerr-Pennington doctrine, the breadth of the protec-
| |
| 'I tion or immunity granted has been similarly broad. In t
| |
| . . .
| |
| Noerr, the Court was faced with a suit brought by 41 truck
| |
| ( operators and their trade association against 24 railroads,
| |
| ,
| |
| their trade association, and a public relations firm alleg-ing violations of Sections 1 and 2 of the Sherman Act. In
| |
| '
| |
| upholding practices characterized as a " vicious, corrupt
| |
| .
| |
| and fraudulent" publicity campaign to foster the adoption
| |
| -
| |
| , and retention of laws and law enforcement policies destruc-
| |
| . tive of the trucking business, the Court declared that the L right of the people to petition the government cannot pro-
| |
| , perly De made to depend upon the *etent behind the actions.
| |
| u It stated (365 U.S. at 139-140):
| |
| ,
| |
| ..
| |
| .
| |
| 85/ See, e.g., Eastern Railroad Presidents Conference v Noerr Motor Freight, Inc., 365 U.S. 127 [f961) (use or so-u called " third party" technique whereby spontaneous views of non-existent citizens are fabricated).
| |
| '
| |
| '~
| |
| 86/ See Cow Palace, Ltd. v Associated Milk Producers, IncT7 390 F. Supp. 696 (D. Colo. 1975) (bribery, illegal campaign contributions and misrepresentations); Schenley Industries, Inc. v New Jersey Wine & Spirit Wholesalers
| |
| -
| |
| --
| |
| Ass'n, 272 F. Supp. l'/2 (D.N.J. 1967) (lobbying activities illegal under state law).
| |
| t
| |
| * 6
| |
| '
| |
| | |
| i
| |
| _
| |
| ;
| |
| -181-
| |
| !
| |
| '
| |
| We * *
| |
| * hold that, at least insofar
| |
| -
| |
| as the railroads' campaign was di-
| |
| '
| |
| rected toward obtaining governmental action its legality was not at all
| |
| .,
| |
| affected by any anticompetitive i purpose it may have had.
| |
| In reaching that decision the Court put forth three reasons
| |
| _
| |
| , for its holding: (1) the " essential dissimilarity between p an agreement jointly to seek legislation or law enforcement i
| |
| and the agreements traditionally condemned by S1 of the
| |
| ''
| |
| Act," (365 U.S. at 136); (2) the harm to the " political i
| |
| activity" of the government that would result if " people
| |
| ..
| |
| [could not] freely inform the government of their wishes,"
| |
| . (365 U.S. at 137); and (3) the harm to constitucional rights
| |
| - that would arise from a contrary holding (365 U.S. at 137-38).
| |
| In Pennington, the Court extended the breadth of
| |
| -.
| |
| ; the immunity. That case involved a cross-clajm asserting
| |
| .g.
| |
| violation of Sections 1 and 2 of the Sherman Act based on
| |
| _
| |
| an allegation that, as part of r4 broad scheme to monopolize, plaintiffs and certain large coal operators had asked the
| |
| '
| |
| Secretary of Labor to increase the minimum wage for employ-i ees of contractors selling coal to the Tennessee Valley Au-
| |
| !s thority, thereby driving the small competitors out of 1
| |
| ._ business. In finding that the Sherman Act was inappli-cable to this minimum wage request, the Court held that
| |
| -
| |
| 4 1
| |
| t,
| |
| ._
| |
| l l - . . _ _
| |
| | |
| '
| |
| -182-I joint efforts to influence public officials do not violate
| |
| .
| |
| the antitrust laws even though such conduct is part of a
| |
| ,. broader scheme itself violative of the Sherman Act. As i
| |
| stated in Penningto_n (381 U.S. at 670):
| |
| '
| |
| The jury was instructed that the
| |
| <
| |
| approach to the Secretary of Labor was legal unless part of the con-
| |
| ,. spiracy to drive small operators l out of business * * * . If, there-
| |
| '
| |
| fore, the jury determined the re-
| |
| "
| |
| quisite anticompetitive purpose to be present, it was free to find l an illegal conspiracy based solely on (that episode], or in any event
| |
| -
| |
| to attribute illegality to these acts as part of a general plan to climinate Phillips and other opera-tors similarly situated. Neither finding, however, is permitted by
| |
| -
| |
| Noerr for the reasons stated in that case. Joint efforts to in-
| |
| "
| |
| fluence public officials do not L violate the antitrust laws even though intended to eliminate com-
| |
| ,- petition. Such conduct is not il-legal, either standing alone or
| |
| ' as part of a broader scheme itself violative of the Sherman Act. The I' jury should have been so instructed
| |
| - and, given the obviously telling nature of this evidence, we cannot hold this lapse to be mere harmless
| |
| ,,
| |
| error. [ Emphasis added.]
| |
| The justification for the decision in Pennington is s
| |
| ' that activities protected by the First Amendment, and there-
| |
| , fore lawful, may not be attacked indirectly by alleging that they form part of a broader scheme that is unlawful. Nor can
| |
| '
| |
| activities coming within the protection afforded by the Noerr-
| |
| ~
| |
| ~
| |
| km 1
| |
| | |
| ',
| |
| .
| |
| .f -183-Pennington doctrine be attacked indirectly by alleging that
| |
| ~
| |
| such activities evidence anticompetitive intent. In both
| |
| ,
| |
| situations, reliance on Noetr-Pennington activities, either
| |
| >
| |
| to show evil intent or to aggregate those activities with a
| |
| ,
| |
| -
| |
| larger illegal scheme, impermissibly chills the exercise of
| |
| '
| |
| these constitutionally protected rights. Thus, in United
| |
| '
| |
| States v Johns-Manville Corp., 259 F. Supp. 440 (E.D. Pa.
| |
| ,
| |
| 1966), the court excluded plaintiff's attempt to introduce
| |
| ,
| |
| evidence of activities subject to the doctrine's protection in an effort to show the purpose and character of other con-duct allegedly violative of the Sherman Act. The following
| |
| ~
| |
| explanation was given (259 F. Supp. at 453):
| |
| .
| |
| Relying on footnote 3 to the Penning-
| |
| -
| |
| ton opinion, the Government contends that even though J-M's activities with
| |
| '
| |
| respect to local specifications are
| |
| ,_.
| |
| lawful in themselves, evidence of such activities may be used to establish anti-competitive intent. The second step in the Government's argumerat is
| |
| ,,
| |
| to assert the proposition that preda-
| |
| .
| |
| tory intent can make conduct, otherwise
| |
| , lawful, an unreasonable restraint of trade or an attempt to monopolize.
| |
| ,
| |
| See, e.g., United States v Columbia
| |
| -
| |
| Steel Co., 334 U.S. 495, 525 (1948);
| |
| Nash v United States, 229 U.S. 373,
| |
| . 37E-(1913); United States v Reading
| |
| ;L Co., 226 U.S. 324, 370 (1912). On the other hand, not only is it illogical to infer from evidence that J-M engaged in certain completely iwful conduct that
| |
| ~
| |
| it also engaged in other conduct which was unlawful, but it would seem that to draw such an inference in this case l'
| |
| l' lm
| |
| :
| |
| | |
| . ._ - _ _ _ _ _ _ _ _ _ _
| |
| 1
| |
| .
| |
| -184-
| |
| ; r.
| |
| would be an infrinaement upon the defen-
| |
| ,
| |
| dant's First Amendment rigats. Cf.
| |
| * Bates v City of Little Rock, 361 U.S.
| |
| 516 (1960). It is noted that none of
| |
| : i. the caces cited by the Government in its Memorandum Regarding Evidence ol Predatory Intent To Establish Un-lawfulness of Restraint of Trade or by the Supreme Court in footnote 3 of the Pennington case involved a situa-
| |
| ,.
| |
| tion in which predatory intent was in-ferred from participation in constitu-tionally protected activities. [Em-phasis added.]
| |
| .
| |
| ,
| |
| See also Schenley Industries, Inc. v New Jersey Wine & Spirit
| |
| - Wholesalers Ass'n., 272 F. Supp. 872, 886 n.24 (D.N.J. 1967)
| |
| (an "important consideration [is] whether inferring unlawful conduct from predatory intent which was in turn inferred from constitutional 1y protected conduct would infringe defendants'
| |
| :- 87/
| |
| ~~
| |
| First Amendment rights").
| |
| .-
| |
| On the basis of this established authority Appli-1
| |
| - cants have heretofore argued to this Licensing Board on dis-
| |
| !, covery that they are entitled to protection in this area of L
| |
| 87/ The reference to footnote 3 of the Pennington opinion
| |
| -
| |
| ; is to the Court's language at 670-671 n.3:
| |
| -
| |
| It would of course still be within the I province of the trial judge to admit (
| |
| : s. this evidence, if he deemed it probative and not unduly prejudicial, under the
| |
| ,
| |
| " established judicial rule of evidence that testimony of prior or subsequent
| |
| ''
| |
| transactions, which for some reason are barred from forming the basis of a suit, may nevertheless be introduced if it
| |
| :- tends reasonably to show the purpose and character of the particular transactions a under scrutiny." Federal Trade Comm. v L Cement Institute, 333 U.S. 683, 705 (1948).
| |
| (Cont'd next page)
| |
| '
| |
| -
| |
| -- - - . . - - __
| |
| | |
| ,
| |
| f
| |
| -185-
| |
| ,
| |
| First Amendment activity. An appropriate sensitivity to the
| |
| ~( same constitutional safeguard requires a strict adherence
| |
| -E to the Noerr-Pennington doctrine during the evidentiary hear-ing with respect to all efforts by the other parties to in-
| |
| '[ trude into areas relating to acts or practices by CEI or any of the other Applicants which were designed, directly or in-
| |
| .r -
| |
| -
| |
| directly, to influence or invoke the government decision-88/
| |
| . making process.--
| |
| s
| |
| '"
| |
| E. NO RATE CHARGED, NOR PRACTICE FOL-LOWED BY APPLICANTS PURSUANT TO A u TARIFF ON FILE WITH A REGULATORY AGENCY CAN BE THE BASIS FOR AN ANTI-
| |
| ; TRUST VIOLATION L
| |
| 1,_ Many of the allegations raised in this proceeding
| |
| :s involve practices that have been approved by the appropriate
| |
| 'I
| |
| : L.
| |
| 87/ Cont'd
| |
| ~
| |
| But as Johns-Manville and Schenley Industries establish, that
| |
| : statement is not a justification for introducing evidence of
| |
| *-
| |
| Noerr-Pennington protected activities f'or the purpose of estab-
| |
| ,,
| |
| lishing anticompetitive intent from the activities.
| |
| it. 88/ While a narrow exception to the Noerr-Pennington doc-trine has been recognized in instances where a showing can be
| |
| )( made that the courts have been improperly used for " sham" law-suits as a harassment tactic (see California Transport Co. v
| |
| ''
| |
| Trucking Unlimited, 404 U.S. 508, 512 (1972); pnited States v Otter Tail Power Co., 410 U.S. 366, 379-380 (1973), on remand,
| |
| ~
| |
| '
| |
| 360 F. Supp. 451, 452 (D. Minn. 1975), affirmed, 417 U.S. 901
| |
| :-- (1974)), Applicants have been given no reason to believe that such a claim is being raised here. Nor are any of them aware
| |
| ,i of a situation that would cuggest, even remotely, a possible
| |
| .,
| |
| application of the " sham" exception to Noerr-Pennington.
| |
| I.
| |
| ~_
| |
| i I
| |
| . . . . _ _ _ _- __ _ . _ _
| |
| | |
| ;
| |
| f
| |
| -186-i
| |
| !
| |
| * l regulatory body. If this were a judicial proceeding brought !
| |
| in a federal court, Applicants might invoke the doctrine of
| |
| .. " primary jurisdiction" with respect to those practices. The theory of primary jurisdiction was explained in United States ,
| |
| ~
| |
| v Western Pacific R.R., 352 U.S. 59, 64 (1956) in the follow-ing terms:
| |
| * *
| |
| * where a claim is originally cognizable in the courts, and * * *
| |
| ~
| |
| enforcement of the claim requires the resolution of issues which,
| |
| :i under a regulatory scheme, have been placed within the special com-
| |
| --
| |
| petence of an administrative body
| |
| * *
| |
| * the judicial process is sus-pended pending referral of such is-
| |
| , sues to the administrative body for its views.
| |
| .
| |
| This doctrine has frequently been invoked as a
| |
| .
| |
| shield from antitrust prosecution in the district courts.
| |
| 3
| |
| : r. Applicants are not making quite the same claim to this Li-
| |
| -
| |
| cense Board. By analogy, however, we submit that this Board, in carrying out its responsibilities under Sec-w tion 105c, should be cognizant of the past determinations of a sister agency with regard to the propriety of a given practice or rater as to such determinations Applicants would
| |
| -
| |
| urge that full deference be given to the judgment and exper-tise of that agency.
| |
| '
| |
| In the electric utility industry, one basic form of regulation (see Part III.B.1, supra) is the requirement 1
| |
| '
| |
| l
| |
| _
| |
| | |
| \
| |
| .
| |
| ' l
| |
| '
| |
| -181-l that a public utility file all of its rates and contracts e
| |
| \
| |
| . as tariffs and that it act only in conformance with those 89/ j
| |
| ,
| |
| .
| |
| filed tariffs.-- The tariff indicates not only the price
| |
| ]
| |
| to be charged for a given service, but, even more I
| |
| ~
| |
| important, what types of services the utility may law-fully provide. Under the normal statutory pattern, the
| |
| ,.
| |
| regulatory agency can only approve those tariffs that are
| |
| , in the "public interest", or are "just and reasonable", or meet some similar standard. Such statutory guidelines have
| |
| '~
| |
| been held to require that the agency consider, as one of l the factors in the public interest, the antitrust impli-
| |
| ,
| |
| cations of the proposed tariff or of the agency approved
| |
| -
| |
| 90/
| |
| ,
| |
| !
| |
| action."-
| |
| .s
| |
| :
| |
| r 89/ A similar requirement is imposed under state law.
| |
| As Eo those public utility matters regulated by the states,
| |
| '
| |
| we have already pointed out that they are immune from anti-
| |
| , trust inquiry under the Parker v Brown doctrine (see Part III. i B.4, supra). l
| |
| ~
| |
| 90/
| |
| ,
| |
| See McLean Trucking Co. v United States, 321 U.S. l 67 TI944) (ICC required to consider anticompetitive effects '
| |
| ,'
| |
| in approving application for merger under Section 5 of In-terstate Commerce Act, 49 U.S.C. 55 (1970)); Denver &
| |
| .I R.G.W.R.R. v United States, 387 U.S. 485 (1967) (ICC re-quired to consider anticompetitive effects in approving
| |
| '-
| |
| issuance of stock under Section 20a of Interstate Commerce Act, 49 U.S.C. S20a (1970)); FMC v Aktiebolaget Svenska Amerika Linien, 390 U.S. 238 TIY68) (FMC properly con-
| |
| , sidered anticompetitive effects of shipping conference agreement under Section 15 of the Shipping Act of 1916,
| |
| .
| |
| '
| |
| 46 U.S.C. S814 (1970)); FCC v RCA Communications, Inc.,
| |
| '
| |
| 346 U.S. 86 (1953) (FCC required to consider anticompeti-(Cont'd next page)
| |
| _
| |
| l 1
| |
| , _ . _ . . . _ . . . _ . - _ . l
| |
| | |
| :
| |
| 1
| |
| -188-I With particular reference to the Federal Power Commission, that agency is required to consider: (1) the
| |
| .
| |
| , potential anticompetitive consequences of a public util-ity's proposed securities issue (not otherwise approved
| |
| -
| |
| by the state) before authorizing the issue pursuant to i
| |
| Section 204 of the Federal Power Act, 16 U.S.C. 5824c 7-(Gulf States Utilities Co. v FPC, 411 U.S. 747 (1973));
| |
| (2) the alleged anticompetitive effects of an interconnec-
| |
| , tion agreement filed as a rate schedule pursuant to I
| |
| j- Sections 205 and 206 of the Federal Power Act, 16 U.S.C.
| |
| l' SS824d & 824e (City of Huntingburg, Ind. v FPC, 498 F.2d
| |
| '
| |
| 778 (D.C. Cir. 1974)); and (3) the alleged anticompetitive l'
| |
| effects of a proposed wholesale rate increase filed pur-
| |
| --
| |
| l suant to Sections 205 and 206 (Conway Corp. v FPC, 510 i
| |
| lr i.
| |
| I l
| |
| -
| |
| ,
| |
| L. 90/ Cont'd
| |
| -
| |
| tive effects in approving application for modification r
| |
| of license under Section 314 of the Federal Communications Act of 1934, 47 U.S.C. 5314 (1970)); National Broadcast-
| |
| * ing Co. v United States, 319 U.S. 190 (1943) (FCC may
| |
| ,
| |
| properly consider anticompetitive effects in promulgating
| |
| !I.
| |
| chain broadcasting regulations under Section 311 of the t Federal Communications Act of 1934, 47 U.S.C. S311 (1970)); California v FPC, 369 U.S. 482 (1962) (FPC re-ii quired to consider anticompetitive effects in approving
| |
| !
| |
| ~
| |
| application for merger under Section 7(c) of the Natural Gas Act, 15 U.S.C. S717f(c) (1970)); Gulf States Utilities Co v FPC, 411 U.S. 747 (1973) (FPC required to consider anticompetitive effects in approving issuance of securi-
| |
| :'
| |
| ties under Section 204 of the Federal Power Act, 16 U.S.C.
| |
| S824c (1970)).
| |
| ;.
| |
| i
| |
| =
| |
| .r ,-
| |
| | |
| l 1
| |
| -189-l
| |
| ,_ F.2d 1264 (D.C. Cir. 1975)). In addition, the Supreme j i
| |
| -
| |
| Court has held that anticompetitive allegations may also l
| |
| -
| |
| be raised in proceedings relating to dispositions and mergers (16 U.S.C. S824b (1970)), and adequacy of serv-F* l ice (16 U.S.C. 5824f (1970)). See Gulf States Utilities
| |
| ,,
| |
| Co. v FPC, supra, 411 U.S. at 757.
| |
| s This Licensing Board should be circumspect
| |
| (- about reexamining such agency decisions under its anti-trust review responsibility. Where other regulatory
| |
| -
| |
| agencies have the obligation to consider antitrust fac-
| |
| .
| |
| ,
| |
| tors, it can fairly be presumed that they have not shirk-i ed their responsibility, but rather have considered fully I the antitrust implications of their decision. Moreover,
| |
| '-
| |
| their determination is necessarily based on a careful
| |
| '
| |
| balancing of the policies sustaining regulation and the antitrust policies -- an exercise involving the very sort
| |
| .,
| |
| ,
| |
| of weighing of competing factors which is best left to
| |
| , the agency most directly affected by such a task. On
| |
| -
| |
| these terms, there is every reason to defer to the anti-( trust judgment of a sister agency more familiar with the u
| |
| daily supervision of industry matters.
| |
| ,
| |
| Just such a result was reached in City of Lafayette v SEC, 454 F.2d 941 (D.C. Cir. 1971), affirmed !
| |
| l
| |
| - in part sub nom. Gulf States Utilities Co. v FPC, 411 I
| |
| i
| |
| -
| |
| | |
| -190-
| |
| ,
| |
| d
| |
| -.
| |
| U.S. 747 (1973). There, municipal electric systems
| |
| ,
| |
| petitioned for review of orders issued by the FPC and
| |
| -.
| |
| the SEC which approved a proposed securities issue to I
| |
| finance the capital requirements of Gulf States. Peti-
| |
| ''
| |
| tioners complained that the agencies failed to take proper account of their antitrust claim that the pro-e
| |
| ,
| |
| ceeds would be used as part of an unlawful conspiracy
| |
| , to suppress competition. The court of appeals found that the FPC should havo considered the allegations
| |
| '--
| |
| of anticompetitive conduct. However, while acknowledg- l
| |
| ' l ing that the SEC had a similar responsibility to con- l
| |
| -
| |
| 1 sider the antitrust consequences of its actions, the i
| |
| ,
| |
| court held that the SEC, lacking any operational au-
| |
| .s therity over the utility, was justified in refusing i
| |
| .F to adjudicate the claim (454 F.2d at 955). In affirm-ing this decision, the Supreme Court specifically ap-
| |
| '
| |
| proved the language of the court of appeals (454 F.2d at 955) on how jurisdictional responsibility should be
| |
| , divided (411 U.S. at 755 n.4):
| |
| e "Where an agency has some regu-
| |
| '-
| |
| latory jurisdiction over opera-tions, it must consider whether there is a reasonable nexus be-tween the matters subject to its surveillance and those under at-tack on anticompetitive grounds.
| |
| But the general doctrine requir-ing an agency to take account of l
| |
| l
| |
| .-
| |
| | |
| '
| |
| -191-antitrust considerations does not e~ extend to a case like the one be-
| |
| * fore us where the antitrust prob-lem arises out of operations cf the regulated company (past and projected) and the agency, here the SEC, has not been given any regulatory jurisdiction over r operations of the company."
| |
| Gulf States serves as an appropriate analogue for the proper approach to be taken by the Licensing Board here. As we discussed earlier, Section 105c imposes a -
| |
| statutory nexus requirement not dissimilar from that judi-
| |
| - cially incorporated into the FPC and SEC statutes. Super-visory responsibility over Applicants' daily operations
| |
| '
| |
| I rests with the FPC and with state regulatory agencies, not the NRC. General charges of anticompetitive activity have t
| |
| t been aired in both administrative forums, as well as in the r federal district court. In such circumstances, it is
| |
| -
| |
| enough if the NRC confines its antitrust inquiry to the
| |
| '
| |
| nuclear matters within the scope of its jurisdiction, while e
| |
| deferring to the FPC where that agency has passed on anti-trust questions relating to Applicants' filed tariffs
| |
| , (rates and practices), and leaving to the district court s.
| |
| all other " unrelated" allegations of anticompetitive con-duct.
| |
| Following this formula, there is no need, we sub-
| |
| ,s mit, for this Licensing Board to become bogged down with the
| |
| : d
| |
| | |
| C
| |
| .
| |
| i -192-
| |
| -,
| |
| allegations relating to the physical interconnection between
| |
| -
| |
| . CEI and Cleveland, for example. That is a matter which has I
| |
| ~
| |
| been thoroughly reviewed and adjudicated by the FPC after a 91/
| |
| , full adversary proceeding.-- Similarly, as to other rates
| |
| -
| |
| and practices of the Applicants on file with the FPC, the affirmative regulatory approval by that agency, including
| |
| '
| |
| its finding of no infirmity under the antitrust laws, should
| |
| ,
| |
| be accorded considerable weight.
| |
| Support for this philosophy is found in the raal-
| |
| ,. ization, alluded to earlier, that oft-times the action of
| |
| -
| |
| a sister agency is dictated more by the regulatory policies
| |
| '
| |
| it is obligated to uphold than by general antitrust princi-ples, which have only limited application in the context of a pervasive regulatory scheme. This point was articulated in precise terms in California Gas Producers Association v
| |
| -
| |
| FPC, 421 F.2d 422, 429 (9th Cir. 1970):
| |
| :r [F]ederal agencies may " properly"
| |
| , approve utility proposals "* * * ,
| |
| which might have seemed to con- '
| |
| ., travene antitrust policy when
| |
| .i i 91/ As to " fully litigated" matters before the FPC in
| |
| : a. connection with the CEI-Cleveland interconnection, such matters should be barred from this proceeding under the doctrine of collateral estoppel, as discussed infra, at
| |
| '[' Part IV.F. That is a different rationale than the point being made here, however. The present discussion goes only to the deference that we believe this Board should show to the antitrust decisions (implicit or explicit) of a sister agency.
| |
| ,
| |
| w
| |
| , - -
| |
| - - . , .
| |
| | |
| . _ _ ._.
| |
| _
| |
| e
| |
| .
| |
| i 1 -
| |
| lS3-
| |
| ..
| |
| other considerations peculiarly
| |
| ,_ within the sphere of regulatory
| |
| ,
| |
| expertise have been overriding."
| |
| I A.J.G. Priest, Principles of Pub-
| |
| -
| |
| lic Utility Regulation 17 (1969)
| |
| [other citations omitted).
| |
| 5 Accord: Northern Natural Gas Co. v FPC, supra, 399 F.2d at
| |
| (.
| |
| 961.
| |
| ,_ It would certainly be anomalous to allow regulatory I l agencies to approve practices that might, in the absence of regulation, be deemed to contravene antitrust laws and poli-cies, and then have this Licensing Board turn around and de-
| |
| !
| |
| clare those same practices unlawful. To insure against such
| |
| ; a consequence in federal district court, the rule has devel-1 r,
| |
| ,
| |
| oped "that a rate within the limits set by the FPC may not l
| |
| 3 be challenged in an antitrust proceeding * * *." McLeran v
| |
| ::
| |
| l )
| |
| El Paso Natural Gas Co., 357 F. Supp. 329, 331 (S.D. Tex. l l
| |
| f 1972). In Pennsylvania Water & Power Co. v FPC, 343 U.S.
| |
| : !.
| |
| 414 (1952), both the Supreme Court and the court of appeals
| |
| .e 3 upheld a FPC rate order even though it was based on a con-
| |
| ;, tract previously held to violate the antitrust laws. The il decision has been accurately explained on the basis of the
| |
| !! different antitrust standard used by the administrative t,
| |
| agency:
| |
| .
| |
| "
| |
| The content of the administrative standard should be different from that of the antitrust standard.
| |
| *** Since regulation is in a I
| |
| l
| |
| -
| |
| .
| |
| t
| |
| **w
| |
| _ - . - y , .,. n,,
| |
| , .,.n . _
| |
| | |
| -
| |
| 1
| |
| ,
| |
| -194-
| |
| -
| |
| large measure a substitute for com-
| |
| '
| |
| petition, it would be extraordinary to find that the content of the
| |
| ._
| |
| regulatory that of thestandard antitrustisstandard.g-the same gy t
| |
| -
| |
| This deference to administrative decision-making "when rates and practices relating thereto were challenged c under the antitrust laws" has been accepted by the Supreme
| |
| '
| |
| Court out of a concern that " sporadic action by federal courts would disrupt an agency's delicate regulatory scheme, and would throw existing rate structures out of balance."
| |
| 'f
| |
| ,
| |
| United States v Radio Corp. of America, 358 U.S. 334, 348
| |
| ,
| |
| (1959). See also United States v National Association of
| |
| .
| |
| Securities Dealers, Inc., 95 S.Ct. 2427 (1975). These same concerns should similarly persuade this Licensing Board not
| |
| '
| |
| to allow its Section 105c review responsibility to be used 1
| |
| as a vehicle for reexamining the antitrust implications of r.
| |
| .
| |
| practices and rates filed as tariffs with other regulatory
| |
| -t bodies.
| |
| l
| |
| .
| |
| I,
| |
| :( ~ .
| |
| 1
| |
| (. l 92/ von Mehren, The Antitrust Laws and Regulated In- 1
| |
| ''
| |
| dustries: The Doctrine of Primary Jurisdiction, 67 Harv.
| |
| L. Rev. 929, 955 (1954). '
| |
| l l
| |
| * l t
| |
| _
| |
| ---
| |
| e -
| |
| | |
| -
| |
| -
| |
| -195-F. AS TO THOSE ANTITRUST ALLEGA-
| |
| '
| |
| _,
| |
| TIONS ALREADY LITIGATED BY THE
| |
| - SAME PARTY BEFORE THE FPC THE DOCTRINE OF COLLATERAL ESTOPPEL
| |
| _ APPLIES i .
| |
| <-
| |
| Under the doctrine of collateral estoppel, a valid
| |
| , and final judgment, whether or not on the merits, is con-clusive as to the same parties or their privies in any sub-4 i
| |
| sequent litigation based on the same or another cause of ,
| |
| r action as to all issues of fact actually litigated in the l prior action. See Cromwell v County of Sac, 94 U.S. 351 (1876); Restatement of Judgments $68 (1942). This doctrine t
| |
| has equal application to administrative adjudications and
| |
| < judicial proceedings. Thus, the Supreme Court held in United i
| |
| .4 States v Utah Construction & Mining Co., 384 U.S. 394, 421-422
| |
| : t-(1966), that a party can be collaterally estopped in a later
| |
| :
| |
| f court proceeding if a relevant issue had already been resolved
| |
| ; t in a contested hearing before an agency:
| |
| if
| |
| 'i[ -
| |
| When an administrative agency is acting in a judicial capa-
| |
| . I.. city and resolves disputed L issues of fact properly before it which the parties had an ad-equate opportunity to litigate, if the courts have not hesitated
| |
| . L to apply res judicata to enforce repose.
| |
| .
| |
| ,_. See also Sunshine Anthracite Coal Co. v Adkins, 310 U.S. 381
| |
| .
| |
| (1940); Pacific Seafarers, Inc. v Pacific Far East Line, Inc.,
| |
| . .
| |
| 1
| |
| .*
| |
| , . . .y ,
| |
| : c. . - * ,
| |
| | |
| .
| |
| _
| |
| -196-
| |
| ,
| |
| 404 F.2d 804, 809 (D.C. Cir. 1968), certiorari denied, 393 U.S. 1093 (1969); Fairmont Aluminum Co. v Commissioner, 222 F.2d 622, 627 (4th Cir.), certiorari denied, 350 U.S. 838 (1955); International wire v , Local 38, Electrical Workers,
| |
| ~
| |
| 357 F. Supp. 1018 (N.D. Ohio 1972), affirmed, 475 F.2d 1078
| |
| _
| |
| (6th Cir.), certiorari denied, 414 U.S. 867 (1973). And the policies underlying the application of collateral estoppel would similarly support the view that if un earlier admin-istrative determination can bar the relitigation of an issue in a later court proceeding, it can also operate as a bar to )
| |
| ;
| |
| relitigating the same issue in an administrative proceeding.
| |
| 'f See generally FTC v Texaco, Inc., 517 F.2d 137, 147 (D.C.
| |
| .
| |
| Cir. 1975).
| |
| .y-
| |
| _
| |
| l This principle has special relevance to the pre-
| |
| .F sent antitrust inquiry, because allegations have been ad-
| |
| '
| |
| vanced here by Cleveland, for one, raising the identical
| |
| !
| |
| ,
| |
| issues that were litigated between the same parties in a L
| |
| previous administrative proceeding. The doctrine of col-I_ lateral estoppel would require that the final judgment which validly issued as a result of the earlier hearing be l
| |
| ~
| |
| given preclusive effect in this hearing. In order for the l doctrine to apply, three requirements must be met: (1) an
| |
| -
| |
| identity of parties; (2) an identity of issues; and (3) a
| |
| _
| |
| --- e,g gg g -
| |
| -
| |
| | |
| -
| |
| -197-
| |
| . . _
| |
| _
| |
| valid and final judgment.--93/ If all three elements are found to exist, this Licensing Board not only need not relitigate
| |
| ~
| |
| the issue, but in fact is barred as a matter of law from doing so. In this regard, the doctrine of collateral estop-
| |
| -
| |
| pel impacts on the present antitrust inquiry in the same manner as the Parker v Brown exemption and the Noerr-Penning-ton doctrine.
| |
| 4 When the same two parties involved in the ongoing )
| |
| proceeding were also parties to the earlier litigation there
| |
| !
| |
| is no doubt as to an identity of parties. In addition, when
| |
| ,r dealing with the special case of the government as a party to
| |
| .c the proceeding, collateral estoppel is applicable even if the q- prior proceeding involved a different government agency. This I is true because, for these purposes, agencies of the same I government are in privity with each other. The point was suc-L cinctly made in FTC v Texaco, Inc., supra, 517 F.2d at 146:
| |
| 1
| |
| '
| |
| . There is privity between officers of the same government so that a
| |
| * judgment in a suit between a party j
| |
| .
| |
| and a representative of the United L
| |
| m 93/ The requirement that the judgment be valid and final is a technicality which has spawned considerable discussion in some instances; we need not dwell on this requirement in the present context, however, for, as the
| |
| -
| |
| Fact Briefs' discussions relevant to collateral estoppel will reveal, the adjudications that Applicants intend to rely on in this connection are valid and final under ,
| |
| any reasonable view of those terms. I
| |
| _
| |
| l
| |
| _ _
| |
| | |
| _ _
| |
| -198-States is res judicata in relitiga-tion df the same issue between that party and another officer of the government. Sunshine Anthracite Coal Co. v Adkins, supra, 310 U.S.
| |
| at 402-03.
| |
| .
| |
| See also United States v Willard Tablet Co., 141 F.2d 141 (7th Cir. 1944) (collateral estoppel applicable in proceed-
| |
| '
| |
| ing under the Food and Drug Act where prior proceeding be-fore the FTC found that the defendant's labeling claims were not deceptive); George H. Lee Co. v PTC, 113 F.2d 583 (8th Cir. 1940) (col'nteral estoppel applicable in FTC p'roceeding claiming use of unfair methods of competition where prior
| |
| -
| |
| proceeding under Food and Drug Act resolved issues favorably for defendants). The determining f, actor is whether in the
| |
| ;) earlier litigation "the representative of the United States
| |
| :L had authority to represent its interests in a final adjudica-
| |
| ,-
| |
| ,
| |
| tion of the issue in controversy." Sunshine Anthracite Coal
| |
| , Co. v Adkins, supra, 310 U.S. at 403.
| |
| -
| |
| Once it has been established that there is an iden-
| |
| ! tity of parties, either because the same parties are involved a
| |
| in further litigation or because their privies are -- as might
| |
| ,
| |
| be the case when the United States is a party -- the inquiry
| |
| , turns to whether there is an identity of issues between the
| |
| -
| |
| two proceedings. There is no need that the same cause of ac-tion be relitigated or that the two proceedings be conducted
| |
| .
| |
| b m
| |
| -
| |
| . , - - , + - - - - - , . -
| |
| | |
| .
| |
| .
| |
| .
| |
| -199-
| |
| .
| |
| under identical statutory directives; only that "a single,
| |
| _
| |
| certain and material point arising out of the allegations
| |
| -
| |
| and contentions of the parties" in the first proceeding be raised in the second proceeding. Paine & Williams Co. v Baldwin Rubber Co., 113 F.2d 840, 843 (6th Cir. 1940).
| |
| Moreover, like a cause of action "an issue may not be * * *
| |
| ~
| |
| split into pieces. If it has been determined in a former action, it is binding notwithstanding the parties litigant
| |
| . . .
| |
| may have omitted to urge for or against it matters which, if urged, would have produced an opposite result." 1B J.
| |
| Moore, Federal Practice 1 0.443[2], at 3903 (1974), quoting
| |
| ,
| |
| Price v Sixth District, 201 Cal. 502, 511, 258 P. 387 (1927).
| |
| These principl's were recently applied by the U.S.
| |
| ,
| |
| o Court of Appeals for the District of Columbia in FTC v Texaco,
| |
| ,
| |
| Inc., supra. The case involved the collateral estoppel effect
| |
| -
| |
| of a finding by the Federal Power Commission in a subsequent
| |
| '
| |
| Federal Trade Commission proceeding. Defendants were a group
| |
| ~
| |
| of producers, distributors and marketers of natural gas who belonged to a trade association which annually published an
| |
| -
| |
| 9 estimate of proven reserves of natural gas. In adjudicatory
| |
| . rate proceedings before the FPC, it was alleged by a consumer i group that the estimates were false and were intended to mis-
| |
| -
| |
| lead the FPC into establishing artifically high rates on the producers' behalf. The FPC rejected the contention and held
| |
| _.
| |
| d h
| |
| | |
| i
| |
| -200-
| |
| _
| |
| that the estimates were valid and accurate. Subsequently, the FTC began an investigation into the reporting practices
| |
| -
| |
| of proved natu.31 gas reserves. One of the issues in that proceeding was the accuracy of the trade association's esti-
| |
| -
| |
| mates. On appeal, the court held that the FTC was collat-erally estopped from relitigating the " accuracy" issue (517
| |
| , - .
| |
| F.2d at 147):
| |
| - [T]he application of collateral estoppel is clearly appropriate on the facts of this case. The Trade Commission knew of the Power Commission's adjudicatory proceeding * *
| |
| * when it ini-tiated its own investigation and could have intervened in the pro-
| |
| '
| |
| ceeding. We also weigh heavily the fact that the Power Commission
| |
| _ has particular expertise on time factual issue involved, the accu-
| |
| -
| |
| racy of industry figures on proved natural gas reserves. * *
| |
| * The r record clearly indicates that !
| |
| L [the FPC proceeding] was conducted in an adveruarial environment where-l
| |
| ; in third parties with adverse econo-
| |
| : mic interests participated at all
| |
| '
| |
| stages of the proceedings.
| |
| '
| |
| One of the arguments raised by the FTC, and reject-
| |
| -
| |
| ed by the court, was that the FPC had only determined that the
| |
| .-
| |
| estimates were appropriate for its use in the determination of just and reasonable rates, and had not determined whether the
| |
| -
| |
| producers were underreporting reserves in violation of the
| |
| ,
| |
| Federal Trade Commission Act. As to this alleged distinction,
| |
| .
| |
| i
| |
| 'I
| |
| -
| |
| -
| |
| l
| |
| | |
| .
| |
| _ _ __
| |
| i
| |
| -201-
| |
| ~
| |
| I the court labelled it " illusory", observing that the FTC's j inquiry into the accuracy of the estimates would have been
| |
| ...
| |
| identical with the earlier inquiry of the FPC if the issue
| |
| _ was relitigated:
| |
| [T]he FTC's very theory is that ,
| |
| ~
| |
| there is antitrust significance !
| |
| in reporting misleading reserves l data because rates were affect- j ed. Id. j
| |
| *
| |
| \
| |
| A similar potential for overlap of antitrust is- i sues exists in the present setting. The legislative and judicial encouragement to federal agencies to consider the antitrust implications of their actions has been well docu-mented.
| |
| '
| |
| See generally Kansas Gas & Electric and Kansas Gas
| |
| 'I and Power Co., supra, ALAB-279, NRCI-75/6, at p. 568. Anti-
| |
| .L trust review authority under Section 105c of the Atomic ,
| |
| -r-l
| |
| : Energy Act is but one manifestation of this attitude. An-
| |
| ,
| |
| other involves the FPC, which has primary responsibility at i
| |
| '
| |
| the federal level for regulating the electric utility in-dustry. In Gulf States Utilities Co. v FPC, 411 U.S. 747, l
| |
| -
| |
| 758-759 (1973), the Supreme Court held that the FPC had the e
| |
| _
| |
| " responsibility to consider, in appropriate circumstances, the anticompetitive effect of regulated aspects of inter-
| |
| -
| |
| state utility operations." And in City of Huntingburg, Inc.
| |
| '
| |
| v FPC, 498 F.2d 778, 783 (D.C. Cir. 1974), the court of
| |
| _
| |
| appeals held that "when the [FPC] faced the decisions of l
| |
| l
| |
| [.
| |
| i
| |
| | |
| -202-
| |
| ..
| |
| whether to approve the Interconnection Agreement as filed,
| |
| _
| |
| it was obligated to consider the alleged anticompetitive effects of the provisions to which the Cities objected."
| |
| --
| |
| It was this very FPC antitrust jurisdiction which Cleveland invoked several years ago with respect to
| |
| ~
| |
| a proposed interconnection with CEI. As CEI's Fact Brief
| |
| -
| |
| indicates, and the evidentiary hearing will confirm, the antitrust issue was adjudicated there and finally determined
| |
| -
| |
| against Cleveland. City of Cleveland v Cleveland Electric Illuminatirig Co. , 49 F.P.C. 118 (1973). Now many of the same
| |
| "
| |
| allegations, involving the Cleveland-CEI interconnection i
| |
| arrangement, are being resurrected in this proceeding. As to e-n-
| |
| thess matters, the parties are the same, and the antitrust
| |
| ,
| |
| inquiry is the same. In accordance with the principles out-e lined above, this Licensing Board should apply the doctrine
| |
| -r of collateral estoppel in these (or any other similar) cir-cumstances to bar relitigation of the antitrust issues already 7_
| |
| adjudicated Jefore the FPC.
| |
| -
| |
| E ans-
| |
| ,-
| |
| +-
| |
| 9 me.
| |
| | |
| .
| |
| am-
| |
| -203-V. The CAPCO Pool Arrangement
| |
| .
| |
| Within the jurisdictional bounds of Section
| |
| -
| |
| 105c, and mindful of the aforementioned general legal principles that bear .:th directly and indirectly on its review responsibility, this Licensing Board must, in the final analysis, examine the various cognizable allega-tions of anticompetitive conduct made here to ascertain whether, on the basis of a rule-of-reason analysis, it is reasonably probable that licensed activities will, as to any of the Applicants, " create or maintain a situation in-consistent with the antitrust laws." Basically, the anti-l trust allegations seem to fit within one of two broad E categories: (1) those aimed.at the CAPCO pool arrangement
| |
| ,..
| |
| directly and CAPCO-related activities; and (2) those charged a.9 separate, individual anticompetitive acts and practices
| |
| -
| |
| against each Applicant with respect to municipal electric
| |
| _
| |
| systems or rural electric cooperatives located within that ;
| |
| ;
| |
| Applicant's service territory. We will address the first l
| |
| ' " ~
| |
| .
| |
| of these two areas in this section of the Prehearing Legal
| |
| ;
| |
| -
| |
| Brief; the second area has been discussed by each Applicant l in its accompanying Fact Brief insofar as individual claims i l
| |
| ._ have been made against that Applicant.
| |
| 1
| |
| '-
| |
| l
| |
| <_
| |
| _ . - . .
| |
| | |
| __ __
| |
| ,~
| |
| -204-
| |
| ,
| |
| A. THE ESTABLISHMENT OF THE CAPCO
| |
| ,,
| |
| POOL ARRANGEMENT WAS IN FURTHER-ANCE OF A SPECIFIC FEDERAL POLICY FAVORING COORDINATION
| |
| .
| |
| )[n order for this Licensing Board to assess accurately the allegations made here under Section 1 of the Sherman Act regarding a possible " combination * *
| |
| * in restraint of trade" (15 U. S . C. S1), it is essential that the exact nature of the so-called " combination" be fully understood.
| |
| The Central Area Power Coordi.:ation Organization ("CAPCO"), which seems to be under attack here, was established officially on September 14, 1967, I
| |
| with the signing by each of the five Applicants of a Memo-
| |
| [
| |
| ..
| |
| randum of Understanding.
| |
| _ CAPCO is what has generally been 1 characterized in the electric utility industry as a power pool arrangement.
| |
| ._
| |
| ,
| |
| Applicants will demonstrate at the evidentiary hearing, through expert testimony and otherwise, that
| |
| "
| |
| the national climate in the 1960's was not merely recep-
| |
| _
| |
| tive to the concept of pooling in the electric utility i
| |
| industry; the federal government was actively promoting f_ a position that private utilities take such a course.
| |
| l An I intensive industry study conducted by the Federal Power
| |
| - i Commission within this time-frame culminated in the National Power Survey: A Report By The Federal Power Commission,
| |
| _
| |
| _
| |
| l l
| |
| | |
| __
| |
| -205-
| |
| ,
| |
| i published in 1964.
| |
| ..
| |
| That report concluded that, by closely coordinating power plant construction and operations, the nation's electric companies cauld realize significant economies of scale and, through their interconnected sys-r tems, provide needed power over increasingly larger geo-graphic areas at reduced costs. Underlying this recom-mendation was the government's belief that technological developments in the industry had increased generation and transmission capacity levels beyond those feasible for most individual electric systems, both from an economic and an engineering point of view. National Power Survey, i p. 14.
| |
| L
| |
| .
| |
| The 1964 Survey " generally tended to minimize the IN matter of reliability [of service) and place great weight
| |
| ,.
| |
| on the need to reduce generating reserve margins" (see l
| |
| _
| |
| Lentz Expert Test., p. 7). In 1965, however, the north- l
| |
| )
| |
| eastern area of the country experienced a massive power !
| |
| !
| |
| -
| |
| failure which " focused national attention on the need to
| |
| -
| |
| improve reliability" (Firestone Expert Test. , p. 5). As the evidence introduced by Applicants will show, the Federal
| |
| _
| |
| Power Commission, in response to the Northeast blackout, undertook another exhaustive induutry study to ascertain
| |
| -
| |
| possible methods for avoiding similar large-scale failures in the future. In a three-volume report issued in July, 1967
| |
| .
| |
| h
| |
| | |
| .
| |
| -206-I
| |
| .-
| |
| and entitled Prevention of Power Failures: Report to the President, the following recommendation (among others) was made (t%1. I, p. 4):
| |
| To the extent that they do not
| |
| ~
| |
| now exist, strong regional or-ganizations need to be estab-lished throughout the nation for coordination and planning,
| |
| ,. construction, operation and I
| |
| maintenance of individual bulk power supply s;' stems.
| |
| One such regional organization that developed during this period of mounting federal pressure for in-creased coordination was set up under the East Central Area Reliability Coordination Agreement ("ECAR").
| |
| .
| |
| It has
| |
| : i. as its principle objective the " augment [ation of] relia- q
| |
| -
| |
| bility of [ participating] bulk power supply" systems (Lentz Expert Test., pp. 9-10; emphasis added). But ECAR's role is largely confined to the matter of coordi-
| |
| _
| |
| nating the planning and operation of transmission facil- -
| |
| ,_ ities as carried out by each of its members. The actual development and implementation of a coordinated system to
| |
| -
| |
| accomplish the related federal goals of economies of scale and a reduction of generating reserve margins has been
| |
| , . .
| |
| left to ECAR's indivi6ual participants.
| |
| -
| |
| The response of the five Applicants here was to establish, consistent with the urgings of the feleral gov-ernment, the CAPCO power pool. This loose association was
| |
| .
| |
| .- - -
| |
| . . - -
| |
| | |
| _
| |
| 1
| |
| -207-(
| |
| generally deemed preferable to the holding company system, for example, since the latter concept contemplates a for-f malistic legal structure with all members under single,
| |
| ( centralized management; in such circumstances, each Ap- .
| |
| i
| |
| -
| |
| plicant would have to surrender substantially all of its autonomy. See generally Public Utility Holding Company
| |
| '
| |
| Act, 15 U.S.C. S79 (1970). On the other hand, the power pool as a vehicle for coordination, as will be fully de-veloped at the hearing, rests on a much different philos-ophy -- one that preserves each participant's separate identity and gives it a veto power which can be exercised when necessary as to any pool activity that might tend to i
| |
| compromise the independent fiduciary responsibilities
| |
| ..
| |
| each investor-owned utility owes to its shareholders and
| |
| ,.
| |
| to the public it serves. The underlying pool philosophy
| |
| _
| |
| is that all members thereof share a mutuality of interest, not only with respect to the long-term objectives of the
| |
| "
| |
| arrangement, but also as to more immediate concerns such as the sharing of pool benefits and burdens. (See Slemmer 4
| |
| Expert Test., pp. 8-12).
| |
| _ ,
| |
| This concept of mutuality is fundamental to any coordination arrangement among interconnected utilities.
| |
| '
| |
| The Fedacal Power Commission recognized this point in pre-cise terms in its 1964 National Power Survey, explaining e
| |
| -
| |
| | |
| ,
| |
| -208-
| |
| ?
| |
| I
| |
| ,
| |
| (Vol. I, p. 169):
| |
| ..
| |
| Coordination is a vehicle by which groups of electrical systems
| |
| ''
| |
| through common action can obtain
| |
| '
| |
| the benefits of economy of size in the planning and development of ,
| |
| sources of power supply and trans-mission. There are two essential
| |
| ,
| |
| prerequisites for full coordination.
| |
| One is the construction of adequate transmission line interties and i
| |
| associated equipment to permit an uninterrupted and economical flow of electric energy throughout the 1 electrical network. The second is !
| |
| intersystem planning and the formu-lation of agreements between the interconnected systems to take full advantage of all of the economic opportunities for the' construction and operation of facilities that
| |
| :
| |
| will result in the lowest overall cost of power, with an equitable sharing of the costs and benefits.
| |
| -
| |
| [ Emphasis added.]
| |
| .,
| |
| "
| |
| As the evidentiary hearing will make clear, for e
| |
| ..
| |
| coordination to achieve the desired federal goals, each interconnecting participant must be assured that the
| |
| _ benefits to be derived from the arrangement and the re-sponsibilities he undertakes will be similarly shared on
| |
| '
| |
| an equitable basis by all other participating systems. If the arrangement lacks a total commitment to this concept
| |
| .
| |
| "of providing mutual assistance to help satisfy system needs" (Slemmer Expert Test., p. 14), it cannot long sur-vive. For, unlike a bilateral sale of goods and services
| |
| .
| |
| _
| |
| - -
| |
| | |
| -209-
| |
| ;
| |
| between a single buyer and a single seller, a multi party i
| |
| relationship to achieve coordinated development and op-r eration necessarily requires each participant to place significant, if not total, reliance on other pool members to plan and operate their own interconnected systems in a manner consistent with, and in furtherance of, the overall pool objectives of providing to the public re-
| |
| .
| |
| liable electric service at the lowest possible cost. (See Firestone Expert Test., p. 6).
| |
| If even one member of the pool is unwilling to shoulder its equitable share of the responsibilities that are required for participation, or does not have the abil-
| |
| [' ity to do so (either in terms of system capability or qualified personnel), the entire arrangement suffers. Sim-
| |
| .-<
| |
| ilarly, if so much as a single member system harbours no-tions of retaining for itself a disproportionate share of pool benefits, rather than sharing the benefits with others
| |
| ~
| |
| on an equitable basis, coordination will not remain a viable concept -- thus, the need for mutuality of interest l
| |
| and the willingness to surrender some degree of autonomy
| |
| :1
| |
| , in order to accommodate the other members of the pool As t
| |
| Mr. S3'6'er will testify (Slemmer Expert Test. , p. 14): l
| |
| "
| |
| This (mutuality] markedly takes different forms. It manifests itself in terms of rendering re-ciprocal services, of understanding
| |
| 'I
| |
| _
| |
| . - . .,
| |
| | |
| .
| |
| -210-1
| |
| (~ and fully appreciating each other's
| |
| ' problems, and having the trust and confidence that the other mem-
| |
| '
| |
| bers are willing and able to do
| |
| ,
| |
| '
| |
| their part in the pool operation --
| |
| all these kinds of reciprocity and f
| |
| mutuality are required if the i
| |
| '
| |
| benefits contemplated by the ar-rangement are to be fully obtained.
| |
| ~
| |
| Moreover, each of the pool members must be able and willing to provide the facilities and personnel that the pool needs in order to furnish
| |
| -
| |
| the services that the arrangement contemplates.
| |
| It is within this framework that the Licensing Board must examine the CAPCO pool arrangement to accertain whether, either in its organization or the implementation of its purposes, the charge of inconsistency with the letter or the spirit of the antitrust laws is justifiable.
| |
| --
| |
| Applicants are confident that, upon a review of the evi-
| |
| ; dence, this Board will conclude it is not. As will be 7 demonstrated at the hearing, CAPCO was established to en-
| |
| -
| |
| able its member systems to-take full " advantage of such economies of scale as will be available and to further the
| |
| .-
| |
| reliability of the group's bulk power supply." (Firestone
| |
| !
| |
| ..
| |
| Expert Test. , p. 9). The planning of CAPCO facilities is to be done on "a one-system basis," with an cverall pool
| |
| -t. objective to provide sufficient capacity so that " depen-
| |
| ,
| |
| dence on generating reserves of others, should not, unless
| |
| '~
| |
| unanimously agreed, exceed one day per calendar year"
| |
| '
| |
| (pd. at p. 10). In order to implement the various functional
| |
| .I
| |
| '-
| |
| | |
| r
| |
| ,
| |
| -211-C
| |
| #
| |
| aspects of the pool arrangement, separate agreements deal-C' ing specifically with CAPCO transmission, administration, i
| |
| operation and generation have been, or are being, nego-g tiated; they will be fully described at the hearing.
| |
| _
| |
| Applicants will also introduce testimony explain-ing the long-range planning efforts of the CAPCO companies
| |
| ~
| |
| with respect to nuclear generation, the coordinated de-t
| |
| ..
| |
| velopment of transmission facilities and the various pool l activities in the area of coordinated operations. In this latter respect, special attention will be given to the formula used within CAPCO for allocating capacity respon-sibility between and among the coordinated member systems
| |
| '
| |
| so as to achieve the appropriate level of reserves to be
| |
| --
| |
| shared by each participant.
| |
| :
| |
| r It will be demonstrated that the CAPCO reserve
| |
| _ sharing formula " properly addresses the factors that have significant impact upon reliability and establishes in-4-
| |
| dividual responsibilities which assure mutuality among the parties" (Firestone Expert Test., p. 21). Moreover, contrary to the suggesiton made in this proceeding by i
| |
| Cleveland that the CAPCO reserve formula was specially
| |
| , devised to impose on small electric systems wishing to en-
| |
| :1 i-ter CAPCO a disproportionately onerous reserve responsi-bility, Applicants will show through expert and fact wit-i L
| |
| | |
| .
| |
| .
| |
| .
| |
| -212-nesses that the probability method adopted by CAPCO had 4
| |
| neither such a purpose nor can reasonably be said to have
| |
| '
| |
| such an effect. Rather, consistent with the fundamental r
| |
| f concept of mutuality on which every coordination arrange-
| |
| _
| |
| ment is bottomed, the CAPCO formula guarantees an equi-1 table allocation of reserve responsibility among partici-
| |
| _
| |
| pants to a pool arrangement based on their unit configu-rations, system load, and individual reliability expe-
| |
| ,
| |
| rience.
| |
| -
| |
| B. APPLICANTS' POWER POOL ACTIVITIES PROVIDE NO BASIS FOR INFERRING ANY INCONSISTENCY WITH THE ANTI-TRUST LAWS r
| |
| In view of the technological, historical and
| |
| :
| |
| . economic underpinnings of the CAPCO pooling arrangement, there is no legal basis whatsoever to infer that Appli-
| |
| ,
| |
| cants' coordinated activities offemd either the letter or !
| |
| 4-the spirit or the antitrust laws. This so-called " combi-
| |
| '
| |
| a nation" was established in 1967 to achieve the very goals that the Federal Power Commission had placed high on its l
| |
| \
| |
| : t. list of priorities in the 1960's -- i.e., economies.of scale and increased reliability of service; the mechanism
| |
| --
| |
| used was one of the types of arrangements then deemed ap-propriate for coordinated development and operations.
| |
| '
| |
| ,
| |
| I
| |
| ,
| |
| --
| |
| i
| |
| | |
| -213-
| |
| -
| |
| Moreover, it is to be remembered that the power pool was,
| |
| ._
| |
| from its inception onward, subject to as pervasive a
| |
| .
| |
| f-scheme of regulation as were the independent operations of the individual companies.
| |
| -
| |
| Faced in the past with joint ventures and other such arrar...ments formed in response to circumstances F
| |
| not at all dissimilar from those that existed here, the
| |
| .-
| |
| courts have regularly upheld such " combinations" as per-
| |
| '
| |
| missible joint endeavors under Section 1 of the Sherman
| |
| ,__ Act. See, e.g., Rooffire Alarm Co. v Royal Indemnity Co.,
| |
| 202 F. Supp. 166, 169 (E.D. Tenn. 1969), affirmed, 313
| |
| -
| |
| F.2d 635 (6th Cir.), certiorari denied, 373 U.S. 949 (1963);
| |
| United States v Pan American World Airways, 193 F. Supp.
| |
| 18, 33 (S.D.N.Y. 1961); cf. Asheville Tobacco Bd. of Trade, Inc. v FTC, 263 F.2d 502 (1959), appeal after remand, 294
| |
| 'r
| |
| ,
| |
| F.2d 619 (4th Cir. 1961) (tobacco association new warehouse p unit system approved); Rogers v Douglas Tobacco Bd. cf Trade,, 224 F.2d 471 (5th Cir. 1957) (same). A proper
| |
| '
| |
| analogue is found in United States v Morgan, 118 F. Sup,.
| |
| :L 621 (S.D.N.Y. 1953), which involved a rejection of the gov-t
| |
| ,. ernment's claim that investment bankers violate the Sherman Act when they form syndicates to underwrite the issuance
| |
| '-
| |
| of new securities. Recognizing the need for joint action to raise large amounts of capital in an orderly fashion, 8
| |
| *,
| |
| ~~
| |
| -v
| |
| | |
| ._ _ _ _ _ _ _ _ _ _ _ - - _ _ _ - -
| |
| -214-
| |
| ,
| |
| the court observed, in language equally apposite here
| |
| -
| |
| .
| |
| (118 F. Supp. at 689):
| |
| "
| |
| They have a common purpose, they work together toward it, using
| |
| -
| |
| jointly the efforts, reputation and experience of all; and their
| |
| -
| |
| community of endeavor has a value in the practical world which negates any possible inference
| |
| ~ that their association is a mere cloak for an agreement to fix prices in restraint of trade.
| |
| -
| |
| It is, of course, an accepted principle of anti-trust law that no negative inference can properly be drawn
| |
| .
| |
| from the fact that entities knowingly engage in similar action. See Interstate Circuit Inc. v United States, 306 U.S. 208, 226-27 (1939); Theatre Enterprises, Inc. v Para-
| |
| ... nount Film Distributing Corp., 346 U.S. 537, 541 (1954);
| |
| -
| |
| Fiumura v Texaco, Inc., 204 F. Supp. 544 (D. Pa. 1962).
| |
| !
| |
| 'I Nor is conscious parallelism to be faulted merely because )
| |
| t there exists an interdependence between those engaging
| |
| ,e parallel business conduct. See Northern California Pharma-
| |
| ,
| |
| ceutical Association v United States, 306 F.2d 379, 388-89
| |
| -- (9th Cir.), certiorari denied, 371 U.S. 862 f.1.9 6 2 ) ; Bogosian
| |
| <
| |
| v Gulf Oil Corp., 393 F. Supp. 1046, 1052 (E.D. Pa. 1975).
| |
| '~
| |
| If this Licensing Board is to find any inconsistency with the antitrust laws on the basis of CAPCO activities, it must first conclude that these Applicants engaged in con-certed action in restraint of trade with the motive and
| |
| -
| |
| | |
| .
| |
| -215-predatory intent to exclude competition. See generally Eastman Kodak Co. V Southern Photo Materials Co., 273 U.S. 359 (1927). There is absolutely no support for such
| |
| "
| |
| a conclusion here.
| |
| .
| |
| Indeed, the only claim advanced by the Depart-ment, the Staff and Cleveland to sustain their Section 1
| |
| - charge appears to be that these Applicants each denied requests for CAPCO membership submitted in 1968 by the
| |
| ~
| |
| Borough of Pitcairn and in 1973 by the City of Cleveland.
| |
| As to these denials, this Licensing Board should be dis-abused at the outset of any notion that they can properly be treated as within any per se category as a manifesta-tion of some alleged group boycott. In the first place, as we explained earlier, this is not the sort of antitrust
| |
| '
| |
| inquiry that lends itself to a per se analysis. Within r
| |
| the context of heavy state and federal regulation, the
| |
| ,
| |
| courto have regularly shown a marked reluctance to apply
| |
| 't
| |
| ,t a per se rule formulated in radically different cases where e the free flow of competition was not tempered by competing
| |
| -
| |
| regulatory policies. See, e.g., chastain v American Tele-
| |
| :r phone & Telegraph Co., supra, 351 F. Supp. at 1321. This
| |
| :L.
| |
| Board should exercise the same judicious restraint.
| |
| _
| |
| Even apart from that consideration, however, it is to be noted that the per se doctrine has only limited
| |
| -
| |
| .
| |
| %w
| |
| .- - -
| |
| | |
| .
| |
| -216-effect in any event when a group boycott is alleged.
| |
| ~
| |
| Its application depends in that context on a showing of exclusionary intent as the principal motivation for
| |
| , ,.
| |
| taking collective action. See DeFilippo v Ford Motor Co.,
| |
| ,
| |
| supra, 516 F.2d at 1318; Joseph E. Seagram & Sons, Inc.
| |
| v Hawaiian Oke & Liquors, Ltd., 416 F.2d 71, 76 (9th Cir.
| |
| 1969), certiorari denied, 396 U.S. 1067 (1970); Areeda, Antitrust Analysis 11368, 388 (1967). Sound legal au-
| |
| .
| |
| thority eschews a ger se approach under the antitrust laws
| |
| ,
| |
| where, as can clearly be shown here, the joint venture under attack cannot be faulted as having an exclusionary purpose for its formation, even though some of its later practices are alleged to be anticompetitive. See T,nited
| |
| ~
| |
| States v Pan American World Airways, Inc., supra, 193 F. Supp.
| |
| .
| |
| at 33-34. In discussing combinations of this sort, one r-l commentator has succinctly-articulated the rule to be fol-
| |
| , lowed:
| |
| s But in the ordinary case these do not involve combining for the primary purpose of coercing
| |
| _, or excluding; rather they involve combinations of two or more per-sons to further direct the busi-ness of the parties to the agree-
| |
| " ment, and the effect on third parties and on competition is indirect. The issue in these cases is not the existence or non-existence of concerted refusal to deal, but rather whether the
| |
| ..
| |
| | |
| i -217-purpose and effect of the opera- ;
| |
| ~
| |
| tion of the * *
| |
| * association * *
| |
| * was such as unreasonably to ex- ,
| |
| clude outsiders from participation in the trade in question. The l
| |
| '
| |
| -
| |
| principle of the group boycott cases -- that it is prima facie unreasonable for a dominant group to combine to coerce -- is not here applicable. [ Emphasis added.]23/
| |
| ,
| |
| We turn then to an examination of Applicants' denials of CAPCO membership to Pitcairn and Cleveland j under the rule-of-reason analysis that is required here.
| |
| One obvious fact to be noted is that power pools are char- i 1
| |
| ' '
| |
| acteristically composed of a limited number of mtmbers.
| |
| s
| |
| .
| |
| As Mr. Sle:mmer will testify at the hearing (Slemmer Expert Test., p. 13):
| |
| .
| |
| There is a pohit at which the
| |
| .; effort involved in accommodating
| |
| ' the various individual positions to achieve an overall pool ben-
| |
| - I' efit becomes too great due to t the number of competing viewpoints involved. That is one measure
| |
| .e of the limit on the number of
| |
| .!" -
| |
| pool members. In short, the greater the number of pool mem-bers, the more compromises are necescary and the overall effec-
| |
| - tiveness of the pool is likely to be diminished.
| |
| i u It therefore follows that one should not leap to the con-clusion that a refusal to embrace additional members in
| |
| .
| |
| 5 94/ Barber, Refusals to Deal Under the Federal Antitrust
| |
| -- Laws, 103 U. of Pa. L. Rev. 847, 876-77 (1955), quoted approvingly in Joseph E. Seagram & Sons, Inc. v Hawaiian
| |
| * Oke & Liquors 7 Ltd., supra, 416 F.2d at 77-78.
| |
| -
| |
| [
| |
| %-
| |
| - - -
| |
| , - - . . - -- r
| |
| | |
| -218-
| |
| .
| |
| such a joint venture is alone indicative of any sinister
| |
| _
| |
| motive, and the courts have so held. See Silver v New York Stock Exchange, supra, 373 U.S. at 350; Deesen v Profes-
| |
| .
| |
| sional Golfers Association, 358 F.2d 165, 170-71 (9th Cir.),
| |
| : r. certiorari , denied, 385 U.S. 846 (1966); Rooffire Alarm
| |
| '
| |
| Company v Royal Indemnity Co., supra, 202 F. Supp. at 169; United States v Insurance Board of Cleveland, 188 F. Supp.
| |
| 949 (N.D. Ohio 1960).
| |
| -
| |
| Moreover, as we earlier explained, the foundation
| |
| ,_ on which any coordination arrangement rests is mutuality of interest; the CAPCO pool is no ex,ception. In order for this concept of mutuality to remain viable, it is essential
| |
| '
| |
| that each new member come to the pool with a common purpose
| |
| '
| |
| to further the pool objectives, an ability to assume its proportionate and equitable share of pool responsibilities, i g
| |
| t sufficient knowledge and expertise to assist in coordinated '
| |
| I
| |
| , planning and operations, and a willingness to share with other participants the net benefits derived from the joint
| |
| '
| |
| effort. Thus, in evaluating the denials of membership here, w
| |
| it can be seen that there exist "a whole variety of non-
| |
| .I J, conspiratorial motives involving the exercise of business l 1
| |
| judgment as to the attractiveness" of making Pitcairn and I l Cleneland full participants in the CAPCO pool, all of which must be taken into account. See First National Bank v
| |
| _
| |
| be
| |
| -
| |
| | |
| -219-Cities Service, 391 U.S. 253, 277 (1968); Dahl, Inc. v
| |
| ~
| |
| Roy Cooper Co., 448 F.2d 17, 19 (9th Cir. 1971); Modern Home Institute, Inc. v Hartford Accident & Industrial
| |
| .-
| |
| Company, 513 F.2d 102, 111 (2d Cir. 1975).
| |
| ,
| |
| At the evidentiary hearing, Applicants will demonstrate beyond any doubt that the decision each reached with regard to denying CAPCO membership to Pitcairn
| |
| -
| |
| and Cleveland was based on eminently sound business judg-ment. It will be shown, for example, that neither requestor
| |
| , had an electric system of any real size or capability; by contrast, each of the Applicants had a sophisticated, in-dependent high-voltage transmission system, which, when interconnected with the others, permitted a meaningful j'
| |
| , L.
| |
| sharing of transmission responsibilities among pool members.
| |
| A second point in the equation involves financial consid-p
| |
| ,
| |
| erations. In the first seven years after CAPCO's formation, the pool members had planned and committed themselves to o A-a system of coordinated development which involved a cap-
| |
| '
| |
| ital investment of billions of dollars. Neither Pitcairn m.
| |
| nor Cleveland was (or is now) able to assume any respon-sibility for that enormous financial commitment.
| |
| In fact, with respect to Cleveland, it will be
| |
| (
| |
| shown that at the time of its request to join CAPCO it was l
| |
| in serious financial difficulty, and its financial position l
| |
| '
| |
| l
| |
| _
| |
| N
| |
| | |
| - _ _ _ _ .
| |
| 5
| |
| -220-has continued to deteriorate since then. The testimony
| |
| ~
| |
| will reveal that Cleveland presently needs some S13 mil-lion just to get to the point where it could supply power Me+
| |
| to its own customers without having to rely on outside
| |
| ,
| |
| power. On top of this, Cleveland is indebted to CEI for i
| |
| '
| |
| several million dollars as a result of its failure to meet its financial obligations for emergency power sales which CEI has made to Cleveland on a continuous basis for
| |
| .
| |
| several years pursuant to an FPC-approved rate. This past
| |
| ,
| |
| history alone is sufficient business reason for denying Cleveland membership in CAPCO. The City clearly does not have the sort of record to inspire any confidence in the existing membership that Cleveland could be relied upon I
| |
| to meet its financial and participation commitments as a
| |
| -
| |
| t member of the pool. Nor does the antitrust law require
| |
| ~r that such impecuniousness be overlooked. See Gamco, Inc. ;
| |
| , v Providence Fruit & Produce Building, supra, 194 F.2d at i
| |
| L 487; Rutledge v Electric Hose & Rubber Co., 327 F. Supp.
| |
| '
| |
| 1267 (C.D. Cal. 1971), affirmed, 511 F.2d 668 (9th Cir. 1974).
| |
| '
| |
| See also DeFilippo v Ford Motor Co., supra, 516 F.2d at 318
| |
| :! (no anticompetitive intent can be inferred from a concerted
| |
| .L refusal to deal on special terms).
| |
| i, t Also to be considered is the extent to which a prospective member would be able to provide qualified per-l
| |
| -
| |
| O
| |
| '
| |
| -
| |
| _ _ _ _ . _ _ . . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _
| |
| | |
| -221-i sonnel to assist in the long-term planning of new CAPCO capacity. Neither Pitcairn nor Cleveland was (or is now) in a position to contribute on this front either. In fact, l the evidence will show conclusively that Cleveland has had
| |
| .
| |
| .
| |
| a history of ineptitude and mismanagement so egregious
| |
| ;i i l' that no CAPCO member could, consistent with its fiduciary !
| |
| responsibility to its stockholders, enter into any sort of coordinated arrangement with the municipal system. ,
| |
| l
| |
| '
| |
| ;- Combined with these overpowering operational, financial and qualitative justifications for denying mem-bership, there is the very real practical consideration of the impact that Pitcairn's and Cleveland's membership would have on the planning and operational decisions to be made
| |
| [ by the pool. As Applicants will prove, such a step would t
| |
| necessarily introduce into the decision-making process --
| |
| "F g which requires unanimity on all significant questions --
| |
| . the delays and vagaries that attend the politics of getting L any decision out of the respective governing bodies of these
| |
| '
| |
| !
| |
| two localities. Moreover, long-range planning would be L
| |
| undermined considerably since Applicants could not depend
| |
| ! on either requestor to commit in advance its aquitable share t
| |
| g of the necessary capital. Indeed, the more likely attitude
| |
| ;;
| |
| i of Pitcairn and Cleveland would be to shun altogether any further efforts of coordinated development, since, not having
| |
| .
| |
| w.
| |
| l l
| |
| l
| |
| .
| |
| _m,. .
| |
| --
| |
| -% ,- - ---
| |
| | |
| -222-the same public responsibilities as Applicants, they would lose all interest in adding capacity beyond that deemed
| |
| -
| |
| immediately necessary to satisfy their retail customers' i
| |
| ;
| |
| needs.
| |
| i All of these considerations conduce to support the denials of membership under attack here as being grounded in business reality and not in some conveniently ;
| |
| imagined anticompetitive conspiracy. Nor, in the face of so overwhelming a business justification, is there any cause to attach antitrust overtones to the fact that all Applicants reached a similar conclusion regarding this matter. The courts have correctly dismissed such strained efforts to fault parallel conduct with the astute observation: "Rea-I L.
| |
| sonable businessmen will act similarly when presented with
| |
| .
| |
| the same problem." Independent Iron Workr, v United States 4 Steel Corp., 177 F. Supp. 743, 747 (N.D. Cal. 1959) , af-firmed, 322 F.2d 656 (9th Cir.), certiorari denied, 375 U.S.
| |
| L 922 (1963), quoting United States v Borden Co., 111 F. Supp.
| |
| j 562, 579 (N.D. Ill. 1953).
| |
| L See also State of North Carolina v Chas. Pfizer & Co., Inc., 384 F. Supp. 265, 284 (E.D.N.C.
| |
| .
| |
| 1974); Overseas Motors, Inc. v Import Motors Ltd., Inc.,
| |
| , 375 F. Supp. 499, 534-35 (E.D. Mich. 1974), affirmed, 519 i
| |
| L F.2d 119 (6th Cir. 1975). That is an equally fitting re-sponse to the antitrust claims made here.
| |
| _
| |
| 'L
| |
| _ _ . . _ --
| |
| | |
| . -- . _ _ . _ _ _ _ _ _ _ _ - _ _ _ _ _ _
| |
| -223-
| |
| ~
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| ,
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| :
| |
| _
| |
| VI. Conclusion
| |
| .
| |
| The evidence presented at the hearing will show conclusively that the activities under the licenses to be issued for these nuclear plants will neither create
| |
| .i-nor maintain any inconsistencies with the antitrust laws.
| |
| "
| |
| The contrary view expressed by the Department, the Staff
| |
| ~,'
| |
| and Cleveland conveniently sidesteps the fact that these Applicants have agreed since the time a request was first
| |
| >
| |
| made to provide electric entities in their service areas with an opportunity to participate in these nuclear facil-ities on terms that provide for meaningful access. Per-t saps because they are unable to refute Applicants' clear JI position regarding the licensed activities, the other par-d..
| |
| ties have undertaken to justify engaging in a time-consuming
| |
| ,. proceeding of this sort by' structuring an antitrust case around allegations of anticompetitive practices having
| |
| ' nothing whatsoever to do with t's matters that Congress in-I' tended to be the focus of the Jommission's Section 105c L
| |
| review responsibility.
| |
| ._
| |
| This Licensing Board should not allow its anti-trust jurisdiction with respect'to " activities under the l- license" to be used for the sort of roving inquiry into all aspects of the electric utility industry that the Depart-
| |
| -
| |
| e i
| |
| L
| |
| -
| |
| | |
| -_ _ _ _ ._
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| ,
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| ,
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| -224-
| |
| -
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| ment, the Staff and Cleveland are seeking to accomplish.
| |
| Such an exercise will not further any public interest,
| |
| ~
| |
| and can only result in a needless delay in the present
| |
| _
| |
| construction and operation schedules of the nuclear fa-cilities involved here -- which, whether considered in
| |
| : y. terms of the financial impact or current energy needs in this country, can only be viewed as counterproductive.
| |
| If this Licensing Board nonetheless insists upon embarking on such a wide-ranging inquiry, Applicants urge that it proceed along the course charted in this Prehear-
| |
| ,
| |
| ing Legal Brief. As indicated in the foregoing discussion and reflected more fully in the several Fact Briefs filed r herewith, the journey is bound to be long and will prove I
| |
| . "
| |
| in the end to have been fruitless. For, there is no basis
| |
| '
| |
| in law or in fact for finding that any of these Applicants has engaged, either individually or collectively, in ac-
| |
| 'I L 'tivities of any kind (related or unrelated to the nuclear i facility) which run afoul of either the language or the
| |
| ' settled policies of the antitrust laws.
| |
| Moreover, after winding through the maze of al-
| |
| _
| |
| legations, which seem to multiply and get farther afield i
| |
| L with each new filing by the other parties, this Licensing Board must still return in the end to the fundamental ques-
| |
| __
| |
| + we-
| |
| - M
| |
| | |
| - _ _.
| |
| -225-
| |
| ,_
| |
| tion that is central to this hearing: whether any incon-sistency with the antitrust laws will be created or main-tained by " activities under" these nuclear licenses. The
| |
| .
| |
| route taken by the Board to answer that question, however unnecessarily long and circuitous, is always going to lead to a negative response.
| |
| .
| |
| Respectfully submitted,
| |
| \ u. 6~
| |
| Wm. Bracrord ReW olds \
| |
| el n 1
| |
| 1
| |
| ;
| |
| "D
| |
| .
| |
| Gerald Charnoff /
| |
| r I b i
| |
| - . p.,
| |
| yH Be'rbsteiv
| |
| ,
| |
| ,
| |
| ~
| |
| )/ ua RobKrt E. Zahler b . [ / _u
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| /
| |
| '
| |
| l
| |
| .
| |
| SHAW, PITTMAN, POTTS & TROWBRIDGE
| |
| 'l 910 17th Street, N. W.
| |
| 'L Washington, D. C. 20006 Counsel for Applicants
| |
| : {.
| |
| .
| |
| .L I
| |
| L. Dated: Decembcir 1,1975.
| |
| .,
| |
| 6 9
| |
| ' L.
| |
| | |
| .
| |
| .
| |
| EXHIBIT.A APPLICANTS' PROPOSED LICENSE CONDITIONS FOR
| |
| _
| |
| DAVIS-BESSE NUCLEAR UNIT 1 AND PERR*f NUCLEAR UNITS 1 AND 2
| |
| . -
| |
| , Definitions
| |
| " Company" means / or any i successor or assignee of this license end includes each present or future wholly-owned electric subsidiary and any 4
| |
| .
| |
| successor thereto.
| |
| " Applicable area" means that area within or to which Company is presently providing retail or wholesale or transmission service on a regular basis and any area immedi-ately adjacent thereto within which Company could ,vasonably be expected.to extend such service.
| |
| _
| |
| " Participation power" means the bulk power gen-
| |
| _ erated by the licensed nuclear generating unit, to which unit an entity has a contractual right to a portion of the
| |
| -
| |
| output thereof and/or the ownership of an interest therein.
| |
| '
| |
| " Unit power" means participation power without an ownership interest.
| |
| t
| |
| ;-[ " Entity" means a financially responsible person,
| |
| ,
| |
| '
| |
| private or public corporation (othel- than Applicants for this
| |
| -
| |
| license), governmental agency or authority, municipality,
| |
| '
| |
| l
| |
| / Inser't Applicant's corporate ~ identity or identities.
| |
| t
| |
| -.
| |
| '
| |
| it
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| ;--
| |
| .
| |
| ..
| |
| | |
| .
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| .
| |
| ~
| |
| _
| |
| rural electric cooperative, joi*.t stock association, busi-ness trust, or lawful association of the foregoing, owning, i 4
| |
| operating or proposing in good faith to own or operate fa-
| |
| ~
| |
| cilities for the generation, transmission or distribution of electricity, provided that, except for municipalities, governmental agencies or_ authorities or rural electric co-
| |
| . operatives, entity is restricted to those which are or will be public utilities under the laws of the state in which the
| |
| '
| |
| entity transacts or will transact business or under the Fed-eral Power Act, and are or will be providing electric service under a contract or rate schedule on file with and subject to the regulation of a state regulatory commission or the Federal Power Commission.
| |
| '.' Participating entity" means any entity which par-ticipates in the ownership of or power output from Davis-Besse Unit No. 1 [ Perry Units Nos. 1 and 2].
| |
| " Reserves" means the excess of the net capability
| |
| - of Company, or of a participating entity, after adjustment j for firm purchases and sales, over the maximum load require-
| |
| '
| |
| ments (peak load as of any time) of Company, or of a par-ticipating entity.
| |
| _
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| D*
| |
| .
| |
| O h
| |
| ,-- - --
| |
| , ,
| |
| | |
| .
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| I i
| |
| Commitments
| |
| -
| |
| t
| |
| : 1. Company shall offer to entities in the ap-
| |
| .
| |
| ; plicable area which have heretofore made a timely request therefor an opportunity to participate in Company's allo-
| |
| '
| |
| .
| |
| cated share in Davis-Besse Unit No. 1 [ Perry Units Nos. 1 and 2]. Such participation shall be in rer.conable amounts, -
| |
| and may be either by an ownership interest, by a contractual 7 prepurchase of power arrangement, or by a unit power pur-chase, as mutually agreed upon by Company and the participating
| |
| !
| |
| entity. Any entity heretofore making 'a request for partici- l pation must enter into a firm commitment (the validity and enforceability of which shall be acceptable to independent 7
| |
| counsel agreed upon by the Company and the entity) to par- i L ticipate in Davis-Besse Unit No. 1 prior to ,
| |
| [ 1975 [in Perry Units Nos.1 and 2 prior to February 1,1976].
| |
| L
| |
| : 2. (a) Company shall interecnnect, pursuant to
| |
| , agreement, with any participating entity in the applicable area which makes a reasonable request for such interconnection
| |
| -
| |
| for one or more of the following purposes:
| |
| (1) to deliver participation power
| |
| _;
| |
| from Davis-Besse Unit No. 1 [ Perry Units
| |
| :
| |
| [ Nos. 1 and 2];
| |
| (ii) to provide replacement power and replacement energy as necessary to carry '
| |
| .
| |
| i
| |
| %
| |
| ,
| |
| m
| |
| .
| |
| | |
| -4
| |
| .
| |
| 9 load up to an amount equal to the par-
| |
| -
| |
| ticipating entity's share of participa-tion power in Davis-Besse Unit No. 1
| |
| [ Perry Units Nos. 1 and 2] when-the
| |
| ,
| |
| output of this nuclear unit is unavailable because of an emergency or by reasons
| |
| [-
| |
| of maintenance or refueling; or alter-natively, (iii) at the option of a participating entity, and on appropriate notice to Company, to transmit or wheel power from an entity outside the applicable area to
| |
| ,
| |
| the participating entity within the ap-
| |
| ,[ plicable area as necessary to carry
| |
| : L load up to an amount equal to the partici-
| |
| _. pating entity's share of participation power in Davis-Besse Unit No. 1 [ Perry
| |
| -
| |
| * Units Nos. 1 and 2] when the output of l[L this nuclear unit is unavailable because of an emergency or by reason of maintenance
| |
| _
| |
| or refueling; (iv) to provide transmission services
| |
| '-
| |
| for the above.
| |
| Company shall provide to each participating entity that is
| |
| _
| |
| -a party to an interconnection agreement the above services
| |
| .
| |
| 5
| |
| -h
| |
| | |
| .. .
| |
| to the extent that Company can do so without impairing ser-vice to its customers, including other electric systems to which it has firm commitments.
| |
| _ (b) Interconnections pursuant to this li-cense will not be limited to lower, voltages when higher
| |
| ~
| |
| voltages are requested and are economically and technically l feasible. Interconnection agreements will not embody pro-1 visions which impose limitations upon the use or resale of !
| |
| ,
| |
| capacity and energy sold or exchanged pursuant to the agreement except as m'ay be necessary to protect the reliability of Com-
| |
| ,
| |
| pany's system. The entry into an interconnection agreement hereunder will not prohibit the parties thereto from entering into other interconnection or coordination agreements, but
| |
| ,,
| |
| appropriate provisions may be included in interconnection
| |
| ! l L, agreements under this license to ensure that (1) Company re-
| |
| -
| |
| ceives adequate notice of such additional interconnection or
| |
| "
| |
| coordination, and (ii) the parties shall j ointly consider and, agree upon such measures, if any, as are reasonably necessary for safety to protect the reliability of Company's' system.
| |
| Lj
| |
| 't 3. (a) Company and each participating entity shall enter into an arrangement for reserves which shall jointly
| |
| -
| |
| establish the minimum reserve requirement to be installed and/or provided under contractual arrangements as necessary to maintain for each party a reserve margin sufficient to
| |
| :{
| |
| ..
| |
| 3 #
| |
| .
| |
| 5 L .
| |
| | |
| ~6-
| |
| '
| |
| -
| |
| provide adequate reliability of power supply. The parties shall jointly establish criteria for determining such mini-
| |
| ,, mum reserves for each party, which criteria shall reflect the relevant load and capacity characteristics of the re-r spective parties, provided tha.t, if no agreement can be reached on the criteria for determination of reserves, the i
| |
| participating entity's minimum reserve requirement shall be determined on the basis of the smallest reserve require-ment which Company has agreed to under other similar reserve r I
| |
| [ arrangements then in effect, but in no event shall the par-
| |
| -
| |
| ticipating entity's minimum reserve be less than its largest
| |
| '
| |
| i single block of nuclear capacity, whether from Davis-Besse
| |
| ;
| |
| Unit No. 1 [ Perry Units Nos. 1 and 2] or from some other t
| |
| nuclear facility.
| |
| if j[ (b) The parties to such a reserve arrangement
| |
| {
| |
| _
| |
| shall provide such amounts of operating (ready and spinning) I L
| |
| reserve capacity as may be adequate to avoid the imposition
| |
| [ of unreasonable demands on the others in meeting the normal
| |
| <L contingencies of operating their systems.
| |
| :l IL 4. company and participating entities are to be compensated, in accordance with effective agreements and rate
| |
| -
| |
| schedules, for all facilities required and/or services ren-I dered. The rate schedules may recognize the extent to which ll mutuality of such services is available to each participating I!
| |
| .m k.
| |
| t k
| |
| l l 1
| |
| '
| |
| - - . .
| |
| .-. - ._ -
| |
| | |
| I
| |
| *
| |
| ,
| |
| "
| |
| entity. Rate schedules, as required to provide for the facilities and arrangements needed to implement the license l conditions herein, including provisions as are reasonably
| |
| ,- necessary to protect the adequacy and reliability of the 4
| |
| i i
| |
| electrical system, are to be submitted by Company to the regulatory agency having jurisdiction thereof. Company I
| |
| agrees to include a provision in new rate submissions asso-F l ciated with these license conditions, so that if the rates 1
| |
| r
| |
| _ become effe.ctive prior to the resolution of the contested l issues (ass'ciated o with the rate schedules) and are there-
| |
| [ after reduced in accordance with the regulatory proceedings
| |
| !
| |
| and findings, appropriate refunds (including interest) would be made to retroactively reflect the decrease. The cost of l
| |
| _ installing each connection and the cost of maintenance thereof
| |
| -
| |
| shall be shared on the basis of net benefits to be derived
| |
| -r from the interconnection by each party, as determined or l
| |
| :L accepted and approved by the appropriate regulatory author-
| |
| '
| |
| =r ities.
| |
| [ ,
| |
| 5 The foregoing license conditions are to be
| |
| _
| |
| implemented in a manner consistent with the provisions of the Federal Power Act to the extent applicable, and any ap-
| |
| "
| |
| plicable State or local laws, and all rates, charges or
| |
| { practices in connection therewith are to be subject to the
| |
| ,
| |
| approval of regulatory agencies having jurisdiction over
| |
| ,I .
| |
| c them.
| |
| .
| |
| 'W
| |
| '
| |
| .
| |
| L
| |
| | |
| .__ _ _ _ _ _ . _ __ . - - _ _ _ _ - - _ __ - . - _ _ _ _ _ _ _ _ _ _
| |
| I i
| |
| ,
| |
| r' I,
| |
| c .
| |
| I
| |
| ,
| |
| l CERTIFICATE OF SERVICE l
| |
| [ !
| |
| ; I hereby certify that copies of the foregoing
| |
| ,
| |
| .
| |
| "Prehearing Legal Brie.f On Behalf Of The Applicants" I f- were served upon each of the persons listed on the at- 1
| |
| '
| |
| tached Service List, by hand delivering a copy to those 1 i
| |
| persons in the Washington, D. C. area and by mailing a copy, postage prepaid, to all others, all on this 1st f )
| |
| day of December, 1975.
| |
| : L i .
| |
| ~
| |
| b). -C!E A -
| |
| _L Wm. Bradford Reynolds\
| |
| ..
| |
| _-
| |
| 4 i!
| |
| .,
| |
| G
| |
| ' .,
| |
| r}~
| |
| 'l
| |
| - _ - . -. . . - - _ .
| |
| | |
| -
| |
| r UNITED STATES OF AMERICA
| |
| ,
| |
| NUCLEAR REGULATORY COMMISSION
| |
| _ Before the Atomic Safety and Licensing Board
| |
| ,
| |
| ,
| |
| r In the Matter of
| |
| '
| |
| )
| |
| )
| |
| THE TOLEDO EDISON COMPANY and )
| |
| r THE CLEVELAND ELECTRIC ILLUMINATING ) Docket No. 50-346A
| |
| !
| |
| '
| |
| COMPANY )
| |
| (Davis-Besse Nuclear Power Station, )
| |
| '
| |
| Unit 1) )
| |
| )
| |
| i THE CLEVELAND ELECTRIC ILLUMINATING )
| |
| COMPANY, ET AL. ) Docket Nos. 50-440A r- (Perry Nuclear Power Plant, ) 50-441A
| |
| -
| |
| I Units 1 and 2) )
| |
| )
| |
| THE TOLEDO EDISON COMPANY, ET AL. )
| |
| (Davis-Besse Nuclear Power Station, ) Docket Nos. 50-500A Units 2 and 3)
| |
| '
| |
| ) 50-501A c
| |
| SERVICE LIST Douglas V. Rigler, Esq. Mr. Chase R. Stephens Chairman, Atomic Safety and Docketing & Service Section Licensing Board U.S. Nuclear Regulatory Commission Foley, Lardner, Hollabaugh 1717 H Street, N.W.
| |
| and Jacobs Washington, D.C. 20006 i
| |
| f Chanin Building - Suite 206 I 815 Connecticut Avenue, N.W. Benjamin H. Vogler, Esq.
| |
| '
| |
| Washington, D.C. 20006 Roy P. Lessy, Jr., Esq.
| |
| Jack R. Goldberg, Esq.
| |
| Ivan W. Smith, Esq. Office of the Executive Legal Director
| |
| -
| |
| Atomic Safety and Licensing U.S. Nuclear Regulatory Commission Board Panel Washington, D.C. 20555
| |
| [ U.S. Nuclear Regulatory Commission L Washington, D.C. 20005 Joseph J. Saunders, Esq.
| |
| Steven M. Charno, Esq.
| |
| John M.Frysiak, Esq. Melvin G. Berger, Esq.
| |
| Atomic Safety and Licensing Anthony G. Aiuvalasit, Esq.
| |
| -
| |
| Board Panel Ruth Greenspan Bell, Esq.
| |
| U.S. Nuclea; Regulatory Commission Janet R. Urban, Esq.
| |
| J Washington, D.C. 20555 Antitrust Division
| |
| .L Department of Justice Atomic Safety and Licensing Washington, D.C. 20530 4 Board Panel
| |
| ;
| |
| "
| |
| U.S. Nuclear Regulatory Commission Washington, D.C. 20555
| |
| ;
| |
| w lL
| |
| .. .. -
| |
| | |
| F
| |
| :
| |
| Reu% n Goldberg, Esq. Russell J. Spetrino, Esq.
| |
| r David C. Hjelmfelt, Esq. Thomas A. Kayuha, Esq.
| |
| !
| |
| Michael D. Oldak, Esq. Ohio Edison Company Goldberg, Fieldman & Hjelmfelt 47 North Main Street
| |
| . 1700 Pennsylvania Ave., N.W. Akron, Ohio 44308 l l Washington, D. C. 20006 '
| |
| Terence H. Benbow, Esq.
| |
| Wallace E. Brand, Esq. A. Edward Grashof, Esq.
| |
| j Pearce & Brand Steven A. Berger, Esq.
| |
| '
| |
| Suite 1200 Winthrop, Stimson, Putnam & Roberts 1000 Connecticut Ave., N.W. 40 Wall Street
| |
| ; Washington, D. C. 20036 New York, New York 10005 i
| |
| '
| |
| Frank R. Clokey,Esq. Thomas J. Munsch, Esq.
| |
| ,
| |
| Special Assistant General Attorney l Attorney General Duquesne Light Company
| |
| ! Room 219 435 Sixth Avenue Towne House Apartments Pittsburgh, PA 15219 Harrisburg, PA 17105 David Olds, Esq.
| |
| Mr. Raymond Kudukis William S. Lerach, Esq.
| |
| ,
| |
| Director of Public Utilities Reed Smith Shaw & McClay City of Cleveland Union Trust Building
| |
| { 1201 Lakeside Avenue Box 2009 Cleveland, Ohio 44114 Pittsburgh, PA 15230 James B. Davis, Director Lee A. Rau, Esq.
| |
| Robert D. Hart, Esq. Joseph A. Rieser, Jr., Esq.
| |
| Department of Law Reed Smith Shaw & McClay 1201 Lakeside Avenue Madison Building - Rm. 404 Cleveland, Ohio 44114 1155 15th Street, N.W.
| |
| Washington, D. C. 20005 Donald H. Hauser, Esq.
| |
| . Victor A. Greenslade, Jr., Esq. Edward A. Matto, Esq.
| |
| The Cleveland Electric Richard M. Firestone, Esq.
| |
| Illuminating Company Karen H. Adkins, Esq.
| |
| 55 Public Square Antitrust Section Cleveland, Ohio 44101 30 E. Broad Street, 15th Floor Columbus, Ohio 43215 John Lansdale, Esq.
| |
| -
| |
| Cox, Langford & Brown Christopher R. Schraff, Esq.
| |
| 21 Dupont Circle, N.W. Assistant Attorney General Washington, D. C. 20036 Envircnmental Law Section l_ 361 E. Broad Street, 8th Floor l Leslie Henry, Esq. Columbus, Ohio 43215 ll Michael M. Briley, Esq.
| |
| Roger P. Klee, Esq. James R. Edgerly, Esq.
| |
| ; [-
| |
| Fuller, Henry, Hodge & Snyder Secretary and General Counsel P. O. Box 2088 Pennsylvania Power Company l!
| |
| , Toledo, Ohio 43603 One East Washington Street
| |
| !l New Castle, PA 16103 lLl
| |
| :
| |
| -}}
| |
