City of Pittsburgh v. West Penn Power Co ( 1998 )

Opinions of the United
1998 Decisions States Court of Appeals
for the Third Circuit
6-12-1998
City of Pittsburgh v. West Penn Power Co
Precedential or Non-Precedential:
Docket 98-3014
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Recommended Citation
"City of Pittsburgh v. West Penn Power Co" (1998). 1998 Decisions. Paper 141.
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Filed June 12, 1998
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 98-3014
CITY OF PITTSBURGH,
Appellant
v.
WEST PENN POWER COMP.,
d/b/a ALLEGHENY POWER;
ALLEGHENY POWER SYSTEM, INCORPORATED;
DUQUESNE LIGHT COMPANY; DQE, INC.
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 97-1772)
Argued March 20, 1998
BEFORE: BECKER, Chief Judge, RENDELL, and
HEANEY,* Circuit Judges
(Filed: June 12, 1998)
_________________________________________________________________
*The Honorable Gerald W. Heaney, Senior United States Circuit Judge
for the Eighth Circuit sitting by designation.
WENDELYNNE J. NEWTON,
ESQUIRE
THOMAS L. VAN KIRK, ESQUIRE
(ARGUED)
SHEILA S. DINARDO, ESQUIRE
DAVID J. PORTER, ESQUIRE
Buchanan Ingersoll Professional
Corporation
One Oxford Centre
301 Grant Street
20th Floor
Pittsburgh, PA 15219-1410
Counsel for the City of Pittsburgh
DAVID L. MCCLENAHAN, ESQUIRE
JAMES E. SCHEUERMANN,
ESQUIRE (ARGUED)
WENDY E. D. SMITH, ESQUIRE
Kirkpatrick & Lockhart, LLP
1500 Oliver Building
Pittsburgh, PA 15222
WILLIAM J. MURPHY, ESQUIRE
Murphy & Schaffer
100 Light Street
9th Floor
Baltimore, MD 21202-1019
Counsel for West Penn Power
Company d/b/a Allegheny Power
and Allegheny Power Systems
THOMAS L. ALLEN, ESQUIRE
(ARGUED)
DONNA MAUS, ESQUIRE
Reed Smith Shaw & McClay, LLP
P.O. Box 2009
435 Sixth Avenue
Pittsburgh, PA 15230-2009
Counsel for Duquesne Light Company
and DQE, Inc.
2
OPINION OF THE COURT
RENDELL, Circuit Judge.
Appellant, the City of Pittsburgh, filed this antitrust
action against West Penn Power Company, d/b/a Allegheny
Power, and Duquesne Light Company alleging that the two
companies entered into a pre-merger agreement in restraint
of trade and that their proposed merger would substantially
lessen competition or tend to create a monopoly. The City
claims that an agreement between Allegheny Power and
Duquesne Light to withdraw Allegheny Power's application
before the Public Utility Commission to provide electric
service to two Redevelopment Zones within the City violated
Section 1 of the Sherman Act.1 The City also seeks
injunctive relief against the proposed merger between the
two utilities arguing that it violates Section 7 of the Clayton
Act.2
The district court granted the utility companies' motions
to dismiss, finding that given the allegations of the
complaint, the City lacked standing because it had not
experienced an antitrust injury. Because we agree that the
City has failed to allege that it meets the prudential
requirements of antitrust standing, we will affirm the
decision of the district court.
_________________________________________________________________
1. Section 1 of the Sherman Act provides, in relevant part: "Every
contract, combination in the form of trust or otherwise, or conspiracy, in
restraint of trade or commerce among the several States, or with foreign
nations, is hereby declared to be illegal." 15 U.S.C. S 1.
2. Section 7 of the Clayton Act, 15 U.S.C. S 18, states the following:
No person engaged in commerce or in any activity affecting
commerce shall acquire, directly or indirectly, the whole or any
part
of the stock or other share capital and no person subject to the
jurisdiction of the Federal Trade Commission shall acquire the
whole
or any part of the assets of another person engaged also in
commerce or in any activity affecting commerce, where in any line
of commerce or in any activity affecting commerce in any section of
the country, the effect of such acquisition may be substantially to
lessen competition, or to tend to create a monopoly.
3
I.
FACTUAL BACKGROUND AND ALLEGATIONS
As an initial matter, we must determine the extent of our
consideration of the materials submitted by the parties.
When deciding a motion to dismiss, it is the usual practice
for a court to consider only the allegations contained in the
complaint, exhibits attached to the complaint and matters
of public record. See 5A Charles Alan Wright & Arthur R.
Miller, Federal Practice and Procedure S 1357 (2d ed. 1990).
However, the parties here have provided the court with
numerous documents pertaining to the regulatory
proceedings that are at the heart of the instant controversy.
We note -- as did the district court -- that it can be, and
is in this instance, proper to consider these documents in
reviewing a motion to dismiss. See Pension Benefits Guar.
Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir.
1993) (finding that "a court may consider an undisputedly
authentic document that a defendant attaches as an exhibit
to a motion to dismiss if the plaintiff 's claims are based on
the document. Otherwise, a plaintiff with a legally deficient
claim could survive a motion to dismiss simply by failing to
attach a dispositive document on which it relied."). Our
recounting of the averments of the complaint, therefore, is
informed by the context provided by these documents and
other public records of which we can take judicial notice.3
Our factual recitation will also include a short discussion of
the nature of the utility industry in Pennsylvania which
provides the regulatory context of this case.
The City of Pittsburgh, located in Allegheny County, is
currently embarking on a plan to revitalize several urban
areas, called the Redevelopment Zones, which were
formerly industrial sites.4 According to the City's plans,
these currently vacant sites will eventually be home to
industrial, commercial and residential activity. Compl.
PP 12, 13. The City believes that competition for retail
_________________________________________________________________
3. Neither party contests the authenticity of these documents and all
were submitted by the parties as the joint appendix in this case.
4. The two areas to be redeveloped are the 123 acre "South Side Works"
and the 233 acre "Nine Mile Run." Compl. P 12.
4
electric service would facilitate economic development in
these areas. Id. P 14. This desire for competition comes at
a time when the regulatory landscape for utilities in
Pennsylvania is undergoing significant change.
In Pennsylvania, the regulation of electric service
distribution has traditionally afforded utility companies
natural monopolies. See Barasch v. Pennsylvania Pub. Util.
Comm'n, 546 A.2d 1296, 1298 (Pa. Commw. Ct. 1988). The
industry operates in a comprehesive regulatory structure
supervised by the Pennsylvania Public Utility Commission
("PUC"), which is an independent administrative agency
authorized by the state to regulate public utility companies
doing business in Pennsylvania. 66 Pa. C.S.A. SS 301, 501.
The Pennsylvania Public Utility Code gives the PUC broad
power to "supervise and regulate" public utilities. Id.S 501(b). The PUC is mandated to act in the public interest
in overseeing public utilities. A utility company must obtain
a certificate of public convenience from the PUC in order to
provide retail electric service to a particular area. Id. S 1101.5
Each certificate describes the geographic territory in which
the holder is permitted to supply electric service. Id. A
certificate may be amended only with permission from the
PUC, pursuant to 66 Pa.C.S.A. S 1102. Historically, a utility
is able to enter another's service area only if it
demonstrates that the area's certificated utility is providing
inadequate service to customers in the proposed new
territory. See Lansberry, Inc. v. Pennsylvania Pub. Util.
Comm'n, 444 A.2d 832, 834-35 (Pa. Commw. Ct. 1982)
(discussing requirement of demonstrating inadequacy of
service in context of PUC certificate to transport). In
addition, generally, the retail rates that a utility charges
must be approved by the PUC. 66 Pa. C.S.A. S 1303. For
example, the rates of both Allegheny Power and Duquesne
Light are now, and have always been, subject to regulatory
_________________________________________________________________
5. A certificate of public convenience "makes it lawful for [a] public
utility
to provide service within a defined territory, and imposes on the public
utility an obligation to provide service in that territory." Lukens Steel
Co.
v. Pennsylvania Pub. Util. Comm'n, 499 A.2d 1134, 1136 n.1 (Pa.
Commw. Ct. 1985).
5
approval by the PUC. Further, the PUC reviews all proposed
utility mergers. Id. SS 1102, 2811.6
Recently, the Pennsylvania legislature passed the
Electricity Generation Customer Choice and Competition
Act. Id. S 2801 et seq. The Competition Act sets forth a plan
that will gradually introduce competition within the retail
generation function of the electric utility industry.7 This
legislation envisions a transition from an industry which is
largely regulated to one where there is a competitive
market. This statute recognizes continued PUC oversight of
electricity generation during the "transition" period from
January 1, 1997 to January 1, 2001. Id. SS 2804, 2806.
While the Competition Act will introduce some competition
among electric service providers in Pennsylvania, it does
not entirely displace the regulatory function of the PUC.
Because the Competition Act did not alter the statutory
requirement that Allegheny Power petition the PUC to
amend its certificate, that Act's passage does not alter our
analysis of this case. At all times relevant to the events
recounted in the City's complaint, Allegheny Power and
Duquesne Light were operating under the regulated
industry conditions.8
In the summer of 1996, Allegheny Power and Duquesne
Light were the only electric utilities possessing certificates
of public convenience from the PUC to provide electric
service in Allegheny County. Compl. P 17. It is uncontested
that Allegheny Power's certificate does not permit it to
_________________________________________________________________
6. During the pendency of this litigation, the Allegheny Power and
Duquesne Light merger was conditionally approved by the PUC. See 66
U.S.L.W. 2689, 2696-97 (U.S. May 19, 1998) (discussing PUC decision In
Re Joint Application of DQE Inc., Pa. P.U.C., No. A-110150F.0015,
4/30/98).
7. In its plans for the restructuring of the electric utility industry in
Pennsylvania, the legislature distinguishes between the functions of
generation, transmission, and distribution of electricity. Under the new
statutory provisions, the transmission and distribution of electricity
will
continue to be treated as a natural monopoly and will still be subject to
the supervision of the PUC. 66 Pa. C.S.A. S 2801 et seq.
8. While the statute authorizes the initiation of "pilot programs" in
1997,
the parties in the present case have not contended that they were
participants in this program. 66 Pa. C.S.A. S 2806 et seq.
6
provide electric service to the area of the City in which the
Redevelopment Zones are located. JA at 197 (P 11).
Duquesne Light is the only utility with a certificate to
provide electric service to this area of the City. JA at 195
(P 1). Duquesne Light claims that its certificate grants it the
exclusive right to provide power to the Redevelopment
Zones. Compl. P 28. Because of its belief that competition
for retail electric power was "essential" to the success of
this redevelopment effort, and because Allegheny Power's
tariff rates are substantially lower than those of Duquesne
Light, the City entered into discussions with Allegheny
Power regarding the possibility of having Allegheny Power
submit a proposal to provide electric service to the
Redevelopment Zones. Id. PP 18, 20, 26. In furtherance of
its goal of obtaining competitive utilities for the area, the
City filed a "Petition in Support of Choice for Retail Electric
Service Within Certain Redevelopment Zones Within the
City of Pittsburgh" with the PUC in September of 1996. Id.P 22. Allegheny Power intervened in support of this petition
and also filed a separate application with the PUC
for permission to supply electrical service to the
Redevelopment Zones. Id. PP 24, 30. Duquesne Light
opposed both of these petitions. Id. PP 27, 32.
In their petitions before the PUC both the City and
Allegheny Power contested Duquesne Light's assertion of
exclusive rights. A review of the applications made to the
PUC is useful to clarify exactly what the City and Allegheny
Power were seeking with respect to Allegheny Power's ability
to offer electric service in the Redevelopment Zones. In its
filing, the City requested that the PUC "take actions
necessary to allow choice and competition for retail electric
service in two discrete areas in the City undergoing
redevelopment . . . wherein Duquesne Light Company .. .
and [Allegheny Power Company] . . . would compete for new
customers and new electric load." JA at 194 (emphasis
added). Further, the City stated in this petition that "[t]o
the best of the City's knowledge, Duquesne is at the present
the only electric utility possessing a certificate of public
convenience ("certificate") from the Commission to serve the
City and its citizens." JA at 195 (P 1). In its reply to
Duquesne Light's Answer to the City's Petition, the City
states that it is requesting that the "two utilities, Duquesne
7
and [Allegheny Power], upon the latter's application and
grant therefor, hold overlapping certificates to provide retail
electric service in the two discrete Redevelopment Zones
. . ." JA at 223 (P 24).
In its filing to intervene in support of the City's petition,
Allegheny Power asserted that it would "apply for authority
to provide retail electric service in the Redevelopment Areas
and that subject to approval of the Commission, [Allegheny
Power] will provide retail electric service to the
Redevelopment Areas pursuant to [Allegheny Power's] tariff
rates and terms." JA at 200 (P 3). In its own application to
the PUC, Allegheny Power requested approval for the utility
"to begin to offer, render, furnish or supply electric service
in two specific additional territories within the boundaries
of the City of Pittsburgh." JA at 235 (emphasis added).
These documents make clear that both the City and
Allegheny Power were applying to the PUC so that Allegheny
Power would be given the regulatory permission to begin to
supply electric power in the area of the Redevelopment
Zones.
In November of 1996, the Urban Redevelopment
Authority of Pittsburgh9 issued a Request for Proposals
("RFP") soliciting bids for the provision of the "electric utility
infrastructure development" of the Redevelopment Zones.
Compl. P 33. Both Allegheny Power and Duquesne Light
responded to the RFP with significantly different bids,
Allegheny Power's being the lower of the two. Id. P 35. On
February 25, 1997, an Administrative Law Judge ("ALJ")
held a prehearing conference on Allegheny Power's PUC
application. At this hearing the ALJ set a schedule for the
submission of testimony regarding Allegheny Power's
application and scheduled further hearings for the week of
June 9, 1997. Id. P 39. In March of 1997, the PUC
consolidated the proceedings involving the City's petition
with those of Allegheny Power's application. Id. P 40.
_________________________________________________________________
9. According to the City, the Redevelopment Authority "works closely
with the City to implement redevelopment plans that support and are
consistent with the City's economic development objectives." Compl.
P 33.
8
On April 7, 1997, Duquesne Light and Allegheny Power
announced their intention to merge. Id. P 42. The City
alleges that under the terms of the premerger agreement,
the two utilities agreed that they would not file any
applications with the government without prior
consultation and would not make any changes with respect
to rates without first consulting each other. Id. P 45. The
City avers that these agreements constitute impermissible
premerger coordination. Id. P 46. Later in April, Duquesne
Light requested a stay of the PUC proceedings before the
ALJ, which was denied. Id. P 48, 50. On June 6, 1997,
Allegheny Power filed a petition to withdraw its PUC
application and to withdraw as an intervenor in the City's
pending PUC petition. Id. P 52. The ALJ granted these
petitions. Id. P 54. After filing this complaint in federal
court, the City petitioned the PUC for a stay of the
regulatory proceedings. JA at 445. When this petition was
denied, the City withdrew its petition seeking choice for
retail electric service. JA at 523-28. Because the City's
petition and Allegheny Power's application were withdrawn,
the PUC never made a determination as to whether
Duquesne Light's certificate gave it exclusive rights to serve
the Redevelopment Zones or whether the Commission could
or would amend Allegheny Power's certificate in order to
permit it to provide electric service in these areas.
In its complaint, the City contends that the actions of
Allegheny Power and Duquesne Light violated 15 U.S.C. S 1
("the Sherman Act") and 15 U.S.C. S 18 ("the Clayton Act").
The City asserts that it has suffered the following damage
as a result of the alleged Sherman Act violations:
"expending significant efforts to bring competition to the
Redevelopment Zones; paying higher, non-competitive rates
for electric utility service generally; and losing the
opportunity to have lower electric service charges .. . ."
Compl. P 59. The City seeks treble damages for the alleged
Sherman Act violation.10 The City further argues that a
_________________________________________________________________
10. Section 4 of the Clayton Act, which provides for treble damages
based on antitrust violations, states as follows:
[A]ny person who shall be injured in his business or property by
reason of anything forbidden in the antitrust laws may sue therefor
9
merger between the two utility companies violates the
Clayton Act in that it would have anticompetitive effects,
and thus seeks injunctive relief to prevent the proposed
merger.11 Id. P 66. The City also raises the related state law
claims of restraint of trade, civil conspiracy, breach of
contract, tortious interference, breach of good faith and fair
dealing, and detrimental reliance.
Allegheny Power and Duquesne Light each moved to
dismiss the City's complaint pursuant to Fed. R. Civ. P.
12(b)(6). This motion was referred to a Magistrate Judge
who issued a report recommending that the motions be
granted. On January 6, 1998, the district court adopted
this report thereby granting defendants' motions to dismiss
and declining to exercise jurisdiction over the City's state
law claims. The City filed this timely appeal. Our
jurisdiction is founded on 28 U.S.C. S 1291.12
_________________________________________________________________
in any district court of the United States in the district in which
the
defendant resides or is found or has an agent, without respect to
the
amount in controversy, and shall recover threefold the damages by
him sustained, and the cost of suit, including a reasonable
attorney's fee.
15 U.S.C. S 15.
11. Section 16, which provides for injunctive relief, states, in pertinent
part:
Any person, firm, corporation, or association shall be entitled to
sue
for and have injunctive relief, in any court of the United States
having jurisdiction over the parties, against threatened loss or
damage by a violation of the antitrust laws . . . when and under
the
same conditions and principles as injunctive relief against
threatened conduct that will cause loss or damage is granted by
courts of equity . . . .
15 U.S.C. S 26.
12. We exercise plenary review over the district court's grant of
defendants' motions to dismiss. Jeremy H. v. Mount Lebanon Sch. Dist.,
95 F.3d 272, 277 (3d Cir. 1996). In so doing, we accept as true all
factual allegations in the complaint and will not affirm the motion to
dismiss "unless it is certain that no relief can be granted under any set
of facts which could be proved." Fuentes v. South Hills Cardiology, 946
F.2d 196, 201 (3d Cir. 1991) (citation omitted).
10
II.
THE DISTRICT COURT'S RULING
The district court granted the defendants' motions to
dismiss because the City lacked standing to bring an
antitrust claim. It reasoned that there had been no
antitrust injury to the City for two reasons:
First, since Allegheny Power and Duquesne Light had not
engaged in competition in light of their regulated provision
of services, the agreement between Duquesne Light and
Allegheny Power to withdraw Allegheny Power's bid, as well
as the proposed merger, did not lessen competition. City of
Pittsburgh v. West Penn Power Co., ___ F. Supp. ___, 1998
WL 64074, at * 4 (W.D. Pa. Jan. 6, 1998). As to the City's
claim that the proposed merger would eliminate prospective
competition, the court found this claim to be too
speculative to be actionable. Id.Second, the court found that the City was denied an
opportunity that was contingent on the decision of the PUC
and thus, the fact that no competition existed was the
result of the regulatory structure. Id. at *5. The district
court found that as the City's alleged damages were not the
result of harm to competition, they did not constitute the
type of injury the antitrust laws were intended to prevent.
Id. at *4-5. The district court therefore concluded that,
because any injury that was experienced or threatened was
not an antitrust injury, the City lacked standing to pursue
its claims under the Sherman and Clayton Acts. Id. at *5.
III.
ISSUES ON APPEAL
The City contests the district court's conclusion, arguing
that the allegations of the complaint regarding the loss of
competition are sufficient to allege the type of injury the
antitrust laws are designed to prevent. It contends that the
district court's ruling that the City did not have standing
due to lack of antitrust injury fails to properly consider not
only its allegations but also the applicable law regarding
11
antitrust injury. We review plaintiff 's complaint not to
determine whether the City has averred harm to
competition -- which it has -- but, rather, to determine
whether the injury the City alleges can legally form the
basis for relief under the antitrust laws.
The City contends that the district court ignored the
allegations of the elimination of competition, arguing that
the court should have taken the allegations of its complaint
at face value. Yet our courts have an obligation in matters
before them to view the complaint as a whole and to base
rulings not upon the presence of mere words but, rather,
upon the presence of a factual situation which is or is not
justiciable. We do draw on the allegations of the complaint,
but in a realistic, rather than a slavish, manner.13 In
scrutinizing plaintiff's claim in this way at the outset, we
are mindful of the balance that must be struck in assessing
antitrust claims. As the Supreme Court stated, referring to
standing in the context of S 4 of the Clayton Act:
[N]either the statutory language nor the legislative
history of S 4 offers any focused guidance on the
question of which injuries are too remote from the
violation and the purposes of the antitrust laws to form
the predicate for a suit under S 4; indeed, the
unrestrictive language of the section, and the avowed
breadth of the congressional purpose, cautions us not
to cabin S 4 in ways that will defeat its broad remedial
objective. But the potency of the remedy implies the
need for some care in its application.
Blue Shield of Virginia v. McCready, 457 U.S. 465, 477
(1982).
Regulatory Framework
The present case arises in a factual context which is
_________________________________________________________________
13. For example, we need not accept as true "unsupported conclusions
and unwarranted inferences." Schuylkill Energy Resources, Inc. v.
Pennsylvania Power & Light Co., 113 F.3d 405, 417 (3d Cir.), cert.
denied, 118 S. Ct. 435 (1997). Nor can we "assume that the [plaintiff]
can prove facts that it has not alleged . . . ." Associated Gen.
Contractors
of California v. California State Council of Carpenters, 459 U.S. 519, 526
(1983).
12
substantially different from that of most antitrust cases.
The plaintiff has alleged anticompetitive behavior in an
industry which is highly regulated: those who wish to
compete to provide their services must obtain a certificate
from the PUC to do so. As the First Circuit has explained,
"[f]ull price regulation dramatically alters the calculus of
antitrust harms and benefits." Town of Concord, Mass. v.
Boston Edison Co., 915 F.2d 17, 25 (1st Cir. 1990) (holding
that alleged price squeeze did not violate Sherman Act
because utility's rates were regulated). Similarly, here, the
regulation which frames the issue is the statutory
requirement that a utility obtain permission from the PUC,
in the form of a certificate, in order to provide electric
service to a particular geographic region.
The Supreme Court has made clear that regulated
industries -- even those that historically have been treated
as natural monopolies -- are not exempt from the antitrust
laws. See Otter Tail Power Co. v. United States , 410 U.S.
366 (1973). However, in this case, the comprehensive
regulatory framework significantly restricts the nature of
the competition which is permitted. While it is true that the
regulatory landscape of the electric power industry is in the
process of changing, even the Competition Act does not
anticipate a completely "free market" for electric services.
Rather, the changes will result in a form of regulated
competition. Further, in the words of the Schuylkill Energy
court, "We will not attempt to predict the future of
competitive retail access in Pennsylvania." Schuylkill Energy
Resources, Inc. v. Pennsylvania Power & Light Co., 113 F.3d
405, 416 (3d Cir.), cert. denied, 118 S. Ct. 435 (1997). We
cannot know whether these two utilities will ever be
permitted to compete for retail customers in a particular
geographic region.
Antitrust Standing
The question of standing is a threshold inquiry in all
actions. However, the constitutional and prudential
requirements of standing take on particular significance in
the context of the antitrust laws, where a balance must be
struck between encouraging private actions and deterring
legitimate competitive activity through overly vigorous
enforcement. See, e.g., Capital Imaging Assoc. v. Mohawk
13
Valley Med. Assoc., 996 F.2d 537, 539 (2d Cir. 1993)
(cautioning that were the "heavy power [of antitrust law]
brought into play too readily it would not safeguard
competition, but destroy it"). Thus, in undertaking this
standing analysis, we must remain mindful of the purposes
and goals of the antitrust laws at issue -- to preserve and
promote competition.
The constitutional standing inquiry -- namely, whether
there is a "case" or "controversy" within the meaning of
Article III, S 2 of the Constitution -- is augmented by
consideration of prudential limitations. Without these
prudential considerations, "the courts would be called upon
to decide abstract questions of wide public significance
even though other governmental institutions may be more
competent . . . and judicial intervention may be
unnecessary to protect individual rights." Warth v. Seldin,
422 U.S. 490, 500 (1975).
Thus, the crux of the issue in this case is whether the
City satisfies the "prudential" requirements of standing;
that is, does the City have "antitrust standing," and is the
plaintiff a proper party to bring a private antitrust action?
In Associated General, the Supreme Court outlined the
factors that courts should consider when determining
whether a party has standing to bring a private action
under the antitrust laws. Associated Gen. Contractors of
California v. California State Council of Carpenters, 459 U.S.
519, 537-45 (1983). Its approach to the standing inquiry
has been interpreted as requiring a narrowing view, as
opposed to the broad remedial purpose approach of cases
that preceded it. See Barton & Pittinos, Inc. v. SmithKline
Beecham Corp., 118 F.3d 178, 181 (3d Cir. 1997). The
Associated General test has been regularly and consistently
applied as the passageway through which antitrust
plaintiffs must advance, and we have recently restated the
factors we are to examine:
(1) the causal connection between the antitrust
violation and the harm to the plaintiff and the intent by
the defendant to cause that harm, with neither factor
alone conferring standing; (2) whether the plaintiff's
alleged injury is of the type for which the antitrust laws
14
were intended to provide redress;14 (3) the directness of
the injury, which addresses the concerns that liberal
application of standing principles might produce
speculative claims; (4) the existence of more direct
victims of the alleged antitrust violations; and (5) the
potential for duplicative recovery or complex
apportionment of damages.
Barton & Pittinos, 118 F.3d at 181 (citing In re Lower Lake
Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1165-66 (3d
Cir. 1993)). The antitrust standing inquiry is essentially the
same under both S 4 and S 7 of the Clayton Act, except that
when seeking injunctive relief, "the complainant need only
demonstrate a significant threat of injury from an
impending violation of the antitrust laws." Mid-West Paper
Products Co. v. Continental Group, Inc., 596 F.2d 573, 591
(3d Cir. 1979) (quotation omitted); see also Cargill, Inc. v.
Monfort of Colorado, Inc., 479 U.S. 104, 111-112 (1986).
Furthermore, this court has emphasized that the antitrust
standing inquiry is not a black-letter rule, but rather, is
"essentially a balancing test comprised of many constant
and variable factors . . . ." Merican, Inc. v. Caterpillar
Tractor Co., 713 F.2d 958, 964-65 (3d Cir. 1983) (citing
Bravman v. Bassett Furniture Indus., 552 F.2d 90, 99 (3d
Cir. 1977)).
We conclude that, balancing all of the relevant facts in
the instant case, the City's claims fail to meet the standing
requirements we have set forth, due to the lack of causal
connection between the defendants' actions and the alleged
harm and because of the absence of antitrust injury. We
will combine our discussion of causation and injury as the
two issues are inextricable in this case. Further, we find
that because there is no causal connection and no antitrust
injury, we need not examine the other Associated General
standing factors.
_________________________________________________________________
14. This element of the standing test is the"antitrust injury"
requirement.
15
IV.
CAUSAL CONNECTION AND ANTITRUST INJURY
In evaluating the factors necessary for standing, we have
stated that a showing of "[a]ntitrust injury is a necessary
but insufficient condition of antitrust standing." Barton &
Pittinos, 118 F.3d at 182. By this we mean that the district
court should first address the issue of whether the plaintiff
suffered an antitrust injury. If antitrust injury is not found,
further inquiry is unnecessary.
In explaining its reasoning, the district court cited the
following passage from Brunswick, which defines "antitrust
injury":
Plaintiffs must prove antitrust injury, which is to say
injury of the type the antitrust laws were intended to
prevent and that flows from that which makes
defendants' acts unlawful. The injury should reflect the
anticompetitive effect either of the violation or of
anticompetive acts made possible by the violation.
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477,
489 (1977).
From the Court's description of antitrust injury, we learn
that the question of whether the plaintiff has experienced
antitrust injury depends in part on its source -- did the
injury flow from that which makes the defined acts
unlawful. To answer this question, we must examine the
causal connection between the purportedly unlawful
conduct and the injury.15 In this case, we find that
_________________________________________________________________
15. As many commentators and courts have noted, the questions of
antitrust injury and antitrust standing are difficult to disentangle. We
believe that, similarly, in the present case, there is no bright line
distinction between the two concepts. See, e.g., Greater Rockford Energy
& Tech. Corp. v. Shell Oil Co., 998 F.2d 391, 394-95 (7th Cir. 1993);
Triple M Roofing Corp. v. Tremco, Inc., 753 F.2d 242, 247 (2d Cir. 1985);
see also Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law P 360(e),
at 200 (1995); William Page, The Scope of Liability for Antitrust
Violations,
37 Stan. L. Rev. 1445, 1484-85 (1985); Nat Stern & Kevin Getzendanner,
Comment, Gauging the Impact of Associated General Contractors on
Antitrust Standing Under Section 4 of the Clayton Act, 20 U.C. Davis L.
Rev. 159, 175-179 (1986); Daniel Richman, Note, Antitrust Standing,
Antitrust Injury, and the Per Se Standard, 93 Yale L.J. 1309 (1984).
16
determining whether antitrust injury is present necessarily
involves examining whether there is a causal connection
between the violation alleged and the injury.
Accordingly, rather than trying to separate these two
factors of causation and injury, we will treat them together.
The facts which form the basis for the district court's
conclusion, and ours as well, are central to both tests.
These facts include the following: Allegheny Power and
Duquesne Light were never competitors; the regulatory
scheme mandated that they not compete; attempts by the
City and Allegheny Power to bring about competition were
no more than attempts, with no assurance that competition
would be permitted; and any injury suffered by the City did
not flow from the defendants' conduct, but, rather, from the
realities of the regulated environment in which all three
were actors. Here, both the lack of any antitrust injury --
in the sense of its total absence as defined by the district
court -- and the attenuated nature of the causation, defeat
the City's standing.
We should note at the outset that we disagree with the
City's argument that Brunswick and the other cases
discussing antitrust injury cited by the district court are
inapposite because they involved suits by competitors, not
by consumers.16 The City urges that as long as the City is
a consumer -- as it contends it is -- harm to it constitutes
antitrust injury.17 However, we do not find the City's status
as a consumer to be dispositive. We read the cited passage
_________________________________________________________________
16. In Brunswick, several smaller operators of bowling alleys sued a
larger operator who was also a bowling equipment manufacturer.
According to the plaintiffs, Brunswick's activity of acquiring failing
alleys
and providing cash to keep them afloat violated Section 7 of the Clayton
Act. They argued this continued competition reduced their profits. Using
the test set forth above, the Supreme Court held these lost profits did
not constitute "antitrust injury." Brunswick, 429 U.S. at 489.
17. In its complaint, the City alleged that it was bringing this action
"on
its own behalf as a purchaser of electric utility service" and "on behalf
of its citizens and to protect the economy of Pittsburgh." Compl. P 4.
Defendants contest the City's ability to bring this action on behalf of
its
citizens. It is, however, uncontested that the City will be a purchaser of
electricity -- for streets, public works, and other infrastructure -- in
the
Redevelopment Zones though it is not now a purchaser in these areas.
17
from Brunswick, and the opinion itself, to have broader
application. Brunswick tells us to intensify our focus and
consider not only the fact that there may be an agreement
which is harming others in the marketplace, but to also ask
first whether the alleged injury is really of the type that the
antitrust laws were intended to prevent, and, as part of that
assessment, whether the injury flows from that which
makes defendants' acts unlawful.
The key sentence in Brunswick, cited above, is the last:
"The injury should reflect the . . . anticompetitive acts made
possible by the violation." 429 U.S. at 489. It directs us to
look back from the vantagepoint of the injury to test the
nature of the cause, rather than to presume antitrust
injury wherever there is an agreement or merger that
results in harm. This inquiry led to a conclusion of that the
plaintiff lacked standing in Brunswick. Although the
analysis is slightly different, the same result follows on the
facts of this case. The purported lessening of competition
was not caused by the premerger agreement and proposed
merger between Allegheny Power and Duquesne Light. The
City's inability to choose to buy from either Allegheny Power
or Duquesne Light for the Redevelopment Zones is an
injury visited upon it by the regulated nature of utility
services, not caused by an agreement between Duquesne
Light and Allegheny Power to withdraw Allegheny Power's
application to be able to compete.
The City's position that it has suffered an antitrust injury
is an attempt to equate the submission of bids andfiling of
petitions with actual competition. The City's complaint
states that the City engaged in "negotiations with Allegheny
Power for the provision of electric utility service to the
Redevelopment Zones, subject to Allegheny Power obtaining
a certificate from the PUC." Compl. P 41. The City
acknowledges that competition was not possible without
PUC approval when it requested that the PUC "take actions
necessary to allow choice and competition for retail electric
service" in the Redevelopment Zones. JA at 194. Thus, we
need not resolve the issue of whether Duquesne Light's
certificate to provide electricity to the Redevelopment Zones
was exclusive. Rather, it is sufficient that we can determine
from the face of the complaint that Allegheny Power never
18
had the certificate from the PUC necessary to permit it to
provide power in the Redevelopment Zones. It never did
compete, and, therefore, any injury to the City did not
result from a lessening of competition. In fact, as the
district court correctly points out, the actions of the utilities
merely maintained the status quo. Thus, the utilities'
purported antitrust violation can only be said to have been
competition-neutral and as such, is not actionable. See
Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328,
344 (1990) (stating that "[t]he antitrust injury requirement
ensures that a plaintiff can recover only if the loss stems
from a competition-reducing aspect or effect of the
defendant's behavior").
The district court concluded that because neither the
agreement nor the proposed merger had brought about the
lessening of competition in a "marketplace" where there was
no competition, there was no antitrust injury. Wefind this
conclusion of the district court to be well founded,
notwithstanding the City's bold averments as to loss of
competition. Without demonstrating that there was
competition, a plaintiff cannot show that the defendants'
actions have had or will have anticompetitive effects. See,
e.g., Continental Cablevision of Ohio, Inc. v. American Elec.
Power Co., 715 F.2d 1115, 1119-20 (6th Cir. 1983) (finding
that without competition, there can be no injury to
competition).
It is telling that nowhere in the complaint does the City
directly aver that there had ever been competition between
Duquesne Light and Allegheny Power.18 The City argues
that it is the competitive process that antitrust laws are
designed to protect -- and that the submission of bids in
response to the RFP constitutes a "competitive process."
However, this argument does little to further the City's
position because, in the present case, the competitive
process does not even exist because of regulatory
restraints.
_________________________________________________________________
18. Paragraphs 9 & 10 of the City's complaint contain nearly identical
statements regarding the business of each utility, but contains no
averment that the two companies compete. Elsewhere in the complaint,
harm to competition is averred in broad, conclusory terms. See Compl.
P 66.
19
The City's first claim is brought under the Sherman Act,
which prohibits contracts, combinations or conspiracies "in
restraint of trade." 15 U.S.C. S 1. However, under the
Sherman Act agreements can only restrain that which has
occurred, is occurring, or is reasonably likely to occur.
Since the realization of competition is in the hands of
regulators there is no way that the City can show that
competition would have occurred absent the concerted
activity between the two utilities.
The City's Clayton Act claim fails under a similar
analysis. Section 7 of the Clayton Act prohibits all mergers
"where in any line of commerce, or in any activity affecting
commerce in any section of the country, the effect may be
substantially to lessen competition, or to tend to create a
monopoly." 15 U.S.C. S 18. The complaint avers that the
relevant "line of commerce" for the Clayton Act claim is the
"provision of retail electric utility service in the
Redevelopment Zones." Compl. P 62. The City argues that
the proposed merger will lessen competition by "eliminating
actual and prospective competition between Allegheny
Power and Duquesne Light in the relevant line of commerce
. . ." Id. P 66(a). The only "actual competition" that the City
alleges in its complaint is the competition to be able to
provide electric power to the Redevelopment Zones, which
does not constitute actual competition.
Section 16 of the Clayton Act does permit injunctive relief
"against threatened loss or damage." 15 U.S.C.S 26; see
Mid-West Paper Products Co., 596 F.2d at 590-91. 19 The
City argues that the fact that the proposed merger will
lessen "prospective competition" should be sufficient to
state a claim. However, we agree with the reasoning of the
district court that the threatened loss "is contingent on the
PUC permitting competition within the City in thefirst
instance." Thus, with respect to the "prospective injury"
_________________________________________________________________
19. The City has not explicitly argued this case under a "potential
competition" theory and therefore we will not address that issue here.
We do note, however, that the cases articulating this theory would be of
doubtful support to the City. See, e.g. , United States v. El Paso Natural
Gas Co., 376 U.S. 651 (1964); United States v. Falstaff Brewing Corp.,
410 U.S. 526 (1973).
20
argument, the issue turns not on whether Allegheny Power
and Duquesne Light did compete -- but whether they were
going to compete for the ability to provide power in the
Redevelopment Zones. Allegheny Power was not legally able
to provide power in the Redevelopment Zones and we do
not know whether the PUC would ever have granted the
permission for it to do so. Thus, as a matter of law, the
court cannot conclude that the loss of potential competition
was causally related to the decision of the two power
companies to merge. The City is really claiming that it
would have benefited from competition it hoped would
occur. However, the appellants cannot foist their version of
what might have been on the court under the rubric of
antitrust injury. The presence of the regulatory scheme and
need for approval in connection with the choice of utilities
to serve the Redevelopment Zones cuts the causal chain
and converts what might have been deemed antitrust injury
in a free market into only a speculative exercise.
There are no facts averred in the complaint which even
permit us to speculate as to the likelihood of the PUC
granting certification to Allegheny Power. Further, the City
does not allege, and there is nothing in the record to
indicate, that any parties considered these applications to
be mere administrative formalities. To the contrary, the
PUC applications filed by the City and Allegheny Power --
and the responses to them by Duquesne Light -- make
clear that PUC proceedings to amend Allegheny Power's
certificate were already being vigorously contested. See,
e.g., JA at 267-287. Thus, we simply cannot know whether
there is any causal connection between the harm which has
arguably been suffered by the City and the alleged Sherman
Act violation.
As the Supreme Court stated in Brunswick, antitrust
injury must be caused by the antitrust violation-- not a
mere causal link, but a direct effect. 429 U.S. at 489. Here,
the interposition of the regulatory scheme and actions of
the parties -- both defendants and plaintiff -- interferes
with the chain of causation. The statutory scheme
precluded competition without the requisite regulatory
permission. As Professors Areeda & Hovenkamp describe,
"a plaintiff cannot be injured in fact by private conduct
21
excluding him from the market when a statute prevents
him from entering that market in any event." Phillip E.
Areeda & Herbert Hovenkamp, Antitrust Law P 363(b), at
222 (1995) (citing Axis S.p.A. v. Micafil, Inc., 870 F.2d 1105(6th Cir. 1989)).
As Areeda & Hovenkamp explain, the Section 4 plaintiff
"must establish that he actually `sustained' injury-in-fact to
`business or property,' and the `by reason of ' language [of
S 4] insists that such injury be caused by the violation." Id.P 360, at 192. The requirements for injunctive relief are
similar except that the statutory language of Section 16
permits relief upon a showing of "threatened loss."
However, the plaintiff must still demonstrate that this
"threatened injury would be caused by the alleged antitrust
violation . . . ." Id. P 360(b), at 193 (emphasis added). Thus,
the City will never be able to prove a direct link between the
alleged antitrust violation and their purported injury. The
absence of antitrust injury and causal connection clearly
defeat the City's standing.
The lack of causal connection between the violation
alleged and the City's injuries is further demonstrated when
we examine the damages alleged by the City. The injury is
not only "speculative" because it is difficult to measure;
rather, it is speculative because the injury claimed may
never occur. An examination of the following damages listed
in the City's complaint reveals no direct link between the
purported antitrust violations and the harm alleged to have
been suffered by the City: "expending significant efforts to
bring competition to the Redevelopment Zones; paying
higher, non-competitive rates for electric utility service
generally; and losing the opportunity to have lower electric
service charges in the Redevelopment Zones necessary to
attract the maximum intended economic development to
the Zones and foster full economic growth." Compl. P 59.
The City has failed to offer any support for the proposition
that the first alleged harm -- the fact that the City spent
money to bring competition to the Redevelopment Zones --
is a cognizable antitrust injury.20 The other damages are
_________________________________________________________________
20. The proper measure of damages for a price-fixing violation under the
Sherman Act is the difference between the prices actually paid and those
22
precisely the type which cannot be directly connected to the
alleged agreement. There is no way to determine whether
the rates the City will pay for electric service are or will be
affected by the alleged actions of Allegheny Power and
Duquesne Light. A consumer alleging antitrust violations
"cannot obtain damages without showing that he actually
paid more than he would have paid in the absence of the
violation." Areeda & Hovenkamp, supra, P 370, at 253.
In its complaint, the City alleges a violation of Section 1
of the Sherman Act and requests that "defendants be
ordered to pay the City damages sustained by it and the
citizens it represents, trebled . . ." Compl. P 93. However,
there is no way for the court to determine what "damages"
were sustained. We cannot assume the existence of a PUC
certificate for the purposes of assessing damages. Thus, the
damages alleged by the City are not simply difficult to
measure, but their occurrence would, in fact, be impossible
to prove. The injury averred by the City is simply too
speculative to permit relief under the antitrust laws.
With respect to injunctive relief, the City cannot show a
significant threat of injury from an impending antitrust
violation. The City cannot prove that harm is threatened
because it cannot demonstrate that it has lost anything --
namely, competition among electric utilities -- that would
have existed but for the actions of the defendants. Further,
now that all parties, including the City, have withdrawn
_________________________________________________________________
that would have been paid absent the conspiracy. See, e.g., State of N.Y.
v. Hendrickson Bros., Inc., 840 F.2d 1065, 1077 (2d Cir. 1988); see also
Robert Blair & William Page, "Speculative" Antitrust Damages, 70 Wash.
L. Rev. 423, 426 (1995) (Plaintiff must project a "hypothetical or `but-
for'
condition that excludes only the effects of the defendant's illegal
conduct." Damages are measured by "[t]he difference between that
projected condition and the plaintiff's actual condition."). The injury
alleged by the City here is purportedly separate from the injury of having
to pay higher prices for electric service. In fact, the language of this
claim merely underscores the fact that no competition existed between
the two utilities. When a market participant expends resources to
encourage competition, the participant risks that such expenditure will
not result in lower prices. Despite this risk, the City chose to pursue
its
"efforts" with Allegheny Power.
23
from the regulatory proceedings, an injunction would not
alter the City's current situation. That is, the question of
whether the PUC would amend Allegheny Power's certificate
and permit it to provide electric service to the
Redevelopment Zones would remain unresolved.
We affirm the district court's conclusion that because
there had previously been no competition in the market for
electricity, "neither the proposed merger nor the withdrawal
of Allegheny Power's application has lessened the
competition within the City or the choices of utility
companies available to the City." City of Pittsburgh, 1998
WL 64074, at * 4. Thus, as the district court notes, it is the
structure of the regulated industry, not the defendants'
conduct, which creates the lack of competition -- and
under these facts -- the lack of antitrust standing. That
does not mean that utilities are immune from antitrust
liability.21 However, in the present case, the remedy that
appellant seeks would require this court to assume the
existence of a competitive situation. This we cannot do.
The City argues that if the antitrust laws are not
diligently enforced during the transition to deregulation
under the Competition Act, there is a risk that regulated
electric utility monopolies will simply be replaced by
unregulated ones who would also enjoy immunity from the
antitrust laws. We make clear that this ruling is fact-
specific to the current climate in which the instant facts
developed, namely, in the era of "regulated electric utility
monopolies" as the City terms it. The very essence of our
ruling is that the advent of deregulation will likely remove
the break in the causal chain so that future utility
arrangements in the free market atmosphere may well pass
muster for purposes of standing under the antitrust laws.
Had the ability of the utilities to serve various customers in
various regions not been subject to approval of the PUC,
our standing analysis would be radically different.
_________________________________________________________________
21. Further, this decision does not affect the City's ability to proceed
in
state court on its state law claims for restraint of trade, civil
conspiracy,
breach of contract, tortious interference, breach of good faith and fair
dealing, and detrimental reliance.
24
In conclusion, because we believe that the City cannot
establish the necessary antitrust injury and causal
connection between the alleged antitrust violation and its
injury, we will affirm the district court's grant of
defendants' motions to dismiss.
25
HEANEY, Senior Circuit Judge, dissenting.
I cannot agree with the majority that there is no antitrust
injury or no causal connection between the City's injury
and the defendants' conduct. The defendants conspired to
deprive the City of the opportunity to obtain less expensive
electricity to assist in bringing new jobs to the City. In my
view, the majority opinion opens the door for similar anti-
competitive practices to go unpunished.
I accept the statement of facts set forth by the majority,
but supplement it in order to underscore the bad faith
exhibited by Allegheny Power and Duquesne Light Company.1
Attempting to create new jobs in the Redevelopment Zones,
the City recognized that high-cost electricity was a
detriment to attracting new businesses. Estimating that the
Redevelopment Zones would support up to 7,300 new jobs
and approximately 1,400 new residences, the City began
negotiating with Allegheny Power to provide less expensive
electricity.
The City and Allegheny Power negotiated for several
months and Allegheny Power assured the City that it would
provide less expensive electricity than Duquesne Light
Company to the Redevelopment Zones. Both Allegheny
Power and the City knew that the permission of the PUC
was required before Allegheny Power could furnish
electricity. In July 1996, both the City and Allegheny Power
agreed to apply to the PUC for the latter to provide
electricity to the Redevelopment Zones. On September 4,
1996, the City filed a petition supporting Allegheny Power's
provision of electricity to the Redevelopment Zones. On
September 9, 1996, Allegheny Power filed its own petition
in this matter and represented to the PUC that an
"alternative electric supply would attract economic
development to the Redevelopment Areas and would foster
economic growth[.]" (J.A. at 6.)
Claiming that it had the exclusive right to provide
electricity to the City, Duquesne Light Company intervened
_________________________________________________________________
1. We accept all of the City's allegations as true in reviewing the motion
to dismiss. Fuentes v. South Hills Cardiology, 946 F.2d 196, 201 (3d Cir.
1991) (citation omitted).
26
on September 27, 1996, opposing the petitions filed by the
City and Allegheny Power. On October 21, 1996, Allegheny
Power filed an answer, claiming that it also had the right to
provide electricity to the Redevelopment Zones. After these
preliminary matters had been addressed, on October 28,
1996, Allegheny Power formally applied for a certificate of
need, which would enable it to provide electricity to the
Redevelopment Zones. In its application, Allegheny Power
claimed that its prices would be substantially lower than
Duquesne Light Company's, stating: "It is certain that the
potential for developing new, incremental electrical load in
the Redevelopment Zones will be enhanced substantially if
electricity prices therein are as low as possible." (Id.)
On November 18, 1996, the City solicited bids from
Allegheny Power and Duquesne Light Company to provide
power to the Redevelopment Zones. As the majority points
out, Allegheny Power significantly under-bid Duquesne
Light Company. While the ALJ received testimony on the
application in late March 1997, further hearings were
scheduled for June 9, 1997.
Less than two weeks later, on April 7, 1997, Duquesne
Light Company and Allegheny Power announced that they
had agreed to merge. Two days earlier, on April 5, 1997,
Allegheny Power and Duquesne Light Company agreed not
to make any filings with governmental entities until they
consulted with each other; not to change their regulated
charges or rates without first discussing it with each other;
and not to make any agreement or filing with respect to a
rate change or charge without first consulting each other.
After deciding to merge, on April 28, 1997, Allegheny
Power and Duquesne Light Company requested a stay of
the proceedings on Allegheny Power's application for a
certificate of need. The ALJ denied the stay, noting the need
for an expeditious decision. On June 6, 1997, Allegheny
Power petitioned the ALJ for leave to withdraw its
application. The ALJ granted the petition on June 24, 1997.
The City then commenced this action alleging, in
substance, that Allegheny Power and Duquesne Light
Company conspired to deprive the City of the opportunity
to obtain less expensive electricity in violation of Section 1
of the Sherman Act and Section 7 of the Clayton Act.
27
The facts alleged by the City are sufficient to show that
Allegheny Power and Duquesne Light Company conspired
to deprive the City of an opportunity to obtain less
expensive electricity. In my view, this conspiracy violated
both the Sherman and Clayton Acts. Unlike the majority, I
am not persuaded that the PUC's failure to act on
Allegheny Power's application immunizes these conspirators
from antitrust liability. After all, the conspiracy deprived
the PUC of an opportunity to review the application. 2 As the
Seventh Circuit aptly pointed out, "[w]e know of no rule
that states that the parties must be in head-to-head
competition in the relevant market (as opposed to head-to-
head competition for the relevant market) before the
antitrust laws will apply." Fishman v. Estate of Wirtz, 807
F.2d 520, 531 (7th Cir. 1986) (emphasis in original).
The Clayton Act prohibits mergers that substantially
lessen competition or tend to create monopolies in any line
of commerce in any section of the country. There can be no
doubt that the proposed merger in this case violates the
Clayton Act. Allegheny Power and Duquesne Light
Company are the only utility companies that could feasibly
provide electricity to the Redevelopment Zones.
Consequently, the proposed merger substantially lessens
competition and creates a monopoly in the relevant market.
_________________________________________________________________
2. The majority, however, argues "now that all parties, including the
City,
have withdrawn from the regulatory proceedings, an injunction would
not alter the City's current situation." In essence, the majority argues
that because the City withdrew from the PUC proceedings, the issue is
moot as to whether an injunction should be granted. However, once
Allegheny withdrew its application, there was no point for the City to
continue with its application. As the appellees point out themselves,
Allegheny had to obtain approval from the PUC to enlarge its certificate
of convenience. See Makovsky Bros., Inc. v. Pennsylvania Public Utility
Comm., 423 A.2d 1089, 1092 (Pa. Commw. 1980). The City alone, as the
consumer, could not petition the PUC to obtain lower utility prices.
Lukens Steel Co. v. Pennsylvania Public Utility Comm., 499 A.2d 1134,
1140 (Pa. Commw. 1985). Thus, once Allegheny withdrew, under
Pennsylvania law, there was no point for the City to continue with its
application. Instead, the City filed suit in federal district court.
Although
the law is changing in Pennsylvania as utility competition becomes a
reality, there is no indication that the City could have proceeded ex
parte
before the PUC to ensure that Allegheny provide lower electricity rates.
28
The Sherman Act addresses agreements in restraint of
trade. In this case, there was such a restraint. The merger
agreement destroyed the City's opportunity to obtain less
expensive electricity. In this case, the City's allegations
support the view that there was such a restraint. According
to these allegations, the merger agreement destroyed the
opportunity to obtain less expensive electricity. A factfinder
might well determine that this opportunity was more than
speculative; it was real enough to cause Allegheny Power to
file its application; it was real enough to cause Duquesne
Light Company to oppose the application; and it was real
enough to convince Allegheny Power and Duquesne Light
Company that a merger was the most effective way of
avoiding cost competition.3 In short, "the injury alleged by
[the City] was precisely the type of loss that the claimed
violations of the antitrust laws would be likely to cause."
Zenith Radio Corp. v. Hazeltine Research, 395 U.S. 100, 125
(1969).
I am concerned that today's decision sends the wrong
message that similarly situated conspirators will not be
held accountable for their anti-competitive activities. After
submitting bids, both Allegheny Power and Duquesne Light
Company knew the price at which each company would
provide electricity to the City. When Allegheny Power
withdrew its bid, Duquesne Light Company was assured
that competition would be lessened and that its higher
price would prevail.
In my view, the majority does not sufficiently distinguish
between the City's S 4 and S 16 claims under the Clayton
Act. Even if one concedes that the claim for monetary
damages under the Clayton and Sherman Acts presents a
close question, there can be no doubt that the City has
standing to pursue its requested injunctive relief under S 16
of the Clayton Act. It is well settled in the Third Circuit
that, unlike a claim under S 4 of the Clayton Act for
_________________________________________________________________
3. Certainly the amount of damages that the City might recover may be
limited by the fact that the PUC would not have approved the
application, but this fact goes to the amount of damages that can be
recovered rather than whether an antitrust violation has been
committed.
29
monetary damages, "a claim for injunctive relief does not
present the countervailing considerations--such as the risk
of duplicative or ruinous recoveries and the spectre of a
trial burdened with complex and conjectural economic
analyses--that the Supreme Court emphasized when
limiting the availability of treble damages" in a S 4 Clayton
Act claim. Mid-West Paper Prods. Co. v. Continental Group,
596 F.2d 573, 591 (3d Cir. 1979). Consequently,
In contradistinction to S 4, S 16 does not ground
injunctive relief upon a showing that "injury" has been
already sustained, but instead makes it available
"against threatened loss or damage." Furthermore, S 16
does not state that the threat must be to the plaintiff's
"business or property," and courts accordingly have
held that non-commercial interests are also protected.
. . . [C]ourts have held that for purposes of S 16 the
complainant "need only demonstrate a significant
threat of injury from an impending violation of the
antitrust laws or from a contemporary violation likely
to continue or recur," and that a person may have
standing to obtain injunctive relief even when he is
denied standing to sue for treble damages. Indeed, the
test for standing under S 16 has been framed in terms
of a proximate cause standard that is "less
constrained" than that under S 4 and which might in
fact be no more rigorous than the general rule of
standing.
Mid-West Paper Prod. Co. v. Continental Group, 596 F.2d
573, 591-92 (3d Cir. 1979) (emphasis in original) (footnotes
omitted). Therefore, the district court can still fashion
injunctive relief that will bar the merger, require Allegheny
Power to reinstate its application to the PUC to furnish
power to the City's Redevelopment Zones, even if the
merger is permitted to go through,4 or alternatively, to give
_________________________________________________________________
4. In an October 17, 1997 letter from Allegheny Power's president, Alan
Noia, to Pittsburgh Mayor Thomas Murphy, Noia states: "I am, therefore,
committing to you that, if the . . . PUC grants the City's request . . .
to
allow utilities other than Duquesne Light Company to provide electric
service to the two economic development zones, subject to PUC approval,
. . . [Allegheny Power] will expand its service territory to include the
economic development zones." (J.A. at 499a.) This letter was sent after
the proposed merger.
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such other relief as will ensure that the City obtains the
advantage of competitive pricing.
For the reasons stated above, I respectfully dissent.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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