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FTC Settlement Agreement Demonstrates Commissioners’ Competing Views on Merger Non-Competes

What Happened DTE and Enbridge’s natural gas pipeline joint venture, Nexus, agreed to purchase the Generation Pipeline (Generation). Generation was owned by a group of sellers including North Coast Gas Transmission (North Coast). Generation’s primary asset is a 23-mile pipeline that serves the Toledo, Ohio, area. North Coast continues to own a competing pipeline near Toledo, Ohio. The purchase agreement contained a non-compete provision that prevented the sellers, including North Coast, from competing in three counties surrounding Toledo, Ohio, for three years. After an investigation, the FTC announced a settlement with DTE, Enbridge and Nexus to remedy the FTC’s concern with the non-compete provision by requiring the purchase agreement to be amended to remove the non-compete provision. The FTC Commissioners were unanimous in their conclusion that the challenged non-compete was unlawfully broad, though several Commissioners issued concurring statements...

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Supreme Court Finds No Pre-emption in Natural Gas Act Case

The U.S. Supreme Court recently held in ONEOK Inc. v. Learjet, Inc., that the Natural Gas Act (NGA) does not pre-empt state-law antitrust suits over manipulation of natural gas indices.  The court’s decision has important ramifications for natural gas regulation and the regulation of the energy industry more broadly. In ONEOK, a group of direct-sales natural gas customers sued gas pipelines, alleging that the pipelines violated state antitrust laws by reporting false information to privately published market-based price indices, which are used as a tool to determine prices in contracting.  The pipelines, in response, argued that the NGA subjected the conduct to federal oversight that pre-empted the lawsuits.  The justices resolved the issue 7-2 in favor of the direct-sales customers, over a spirited dissent from Justice Scalia in which the Chief Justice joined. The majority based their reasoning upon Congressional intent in regulating the natural gas...

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Despite Potential Market Manipulation, FERC Declines to Reject Power Auction Results

The Federal Energy Regulatory Commission (FERC or the Commission) recently opted not to take action to set aside the results of a power auction that was allegedly manipulated.  In the face of significant public complaints, the Commission ordered revisions to tariff provisions governing future auctions.  While it opted not to take action here, the opinions of the commissioners effectively gave notice to capacity owners that rate increases alone may be a sufficient basis for investigating auction results, even if the auction is conducted pursuant to tariff. The matter involved the impacts of actions taken by an energy provider that altered the outcome of a competitive auction.  Energy Capital Partners, a private equity firm, allegedly exercised and abused market power by announcing the impending shutdown of its coal-fired plant just prior to the auction and after the deadline for new resources to participate (thereby leaving a significant power deficit,...

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FTC Staff Comments on New York State Proposal to Transform Power Distribution

In April 2014, the New York Public Service Commission’s (NY PSC) Reforming the Energy Vision (REV) initiative “propose[d] a platform to transform New York’s electric industry . . . with the objective of creating market-based, sustainable products and services that drive an increasingly efficient, clean, reliable, and customer-oriented industry.”  In August 2014, the NY PSC staff submitted for public comment a straw proposal that built on the April proposal, “incorporating subsequent party working group efforts, party comments, and further deliberation by Staff.” The straw proposal authorizes the establishment of Distributed System Platform (DSP) operators that would be responsible for balancing electricity supply and demand on local, lower-voltage distribution lines.  The NY PSC expects this new structure to lead to innovations such as customer-owned solar arrays, energy storage units and demand reductions offered by customers.  “Distributed energy resources”...

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Chinese Magnesite Producers Antitrust Class Action Complaint Dismissed

On July 24, 2014, the district court in Animal Sci. Prod., Inc. et al. v. China Nat’l Metals & Minerals Imp. and Exp. Corp. et al., Case No. 2:05-cv-04376 (D.N.J.), dismissed direct purchaser plaintiff’s Amended Complaint without prejudice in favor of magnesite producers accused of engaging in a price fixing scheme for magnesite and magnesite products sold in the United States.  The court found that the direct purchaser plaintiff, Resco, did not plausibly plead facts to establish antitrust standing as a direct purchaser.  The analysis was complicated by the fact that Resco inherited its claim from an assignor, Possehl (US), and the Amended Complaint contained no facts supporting the allegation that Possehl made direct purchases from the defendants.  The court recommended amending the complaint to identify specific transactions and the governing agreements for those purchases. The dismissal is another setback for the plaintiffs, who filed suit in 2005...

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European Commission Investigates Exemption from Renewable Energy Surcharge for Energy-Intensive Companies in Germany

The European Commission today opened a State aid investigation into the German Renewable Energy Source Act (the EEG), claiming that the EEG may have given unlawful advantages to energy-intensive companies in Germany. These companies now face the potential risk that benefits totalling billions of euros may have to be repaid. The European Commission (Commission) today opened a State aid investigation into the German Renewable Energy Source Act (the EEG). In its preliminary assessment, the Commission has come to the conclusion that the EEG may have given unlawful advantages to energy-intensive companies in Germany. The EEG aims to support renewable energy by fixing the tariffs that electricity providers must pay for energy from renewable sources such as solar panels or wind turbines. This is known as the EEG Surcharge and electricity providers are entitled to charge their customers to finance these fixed feed-in tariffs for renewable energy. These tariffs are...

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FTC Focuses Enforcement Efforts on Health Care, Technology and Energy Sectors

On November 15, 2013, Chairwoman Edith Ramirez testified on behalf of the Federal Trade Commission (FTC) before the House Subcommittee on Regulatory Reform on the topic of antitrust oversight and enforcement.  Ramirez explained that the FTC “focuses its enforcement efforts on sectors that most directly affect consumers, such as health care, technology and energy.” The FTC has identified health care provider consolidation as a significant component of increasing health care costs, and overseeing provider combinations has remained a key priority for the agency.  The FTC has also undertaken efforts to promote competition between manufacturers of generic and brand-name drugs.  In addition to litigating “pay-for-delay” settlements, the Commission has filed amicus briefs to advocate against other practices it considers anticompetitive, such as “product hopping,” the practice of altering the formula of a brand-name drug in a minor, non-therapeutic way in order to...

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Department of Justice Launches an Antitrust Investigation into Pressure Pumping Services Used in Hydraulic Fracturing

by Nicole Castle On July 24, 2013, Baker Hughes, Inc., the owner of the third-largest pressure pumping fleet in the United States, disclosed as part of its filing with the Securities and Exchange Commission that it had received a civil investigative demand (CID) from the Department of Justice (DOJ) on May 30, 2013.  The CID requests information and documents relating to U.S. pressure pumping services for the period from May 29, 2011, through May 30, 2013.   Baker Hughes stated in its filing that it was “not able to predict what action, if any, might be taken in the future by the DOJ or other governmental authorities as a result of the investigation.” Pressure pumping services generally refers to the process of pumping water and other materials into a well to break apart rock formations and increase the well’s oil or gas production.   Pressure pumping is the main step in the hydraulic fracturing process, and has in recent years...

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On Heels of European Raids, Energy Companies Face U.S. Class Actions

by Megan Morley White Oaks Fund LP, an Illinois private placement fund, filed a class action suit last week against BP PLC, Royal Dutch Shell PLC and Statoil ASA in the Southern District of New York.  White Oaks Fund v. BP PLC, et al., case number 1:13-cv-04553.  The complaint alleges that the energy companies colluded to distort the price of crude oil by supplying false pricing information to Platts, a publisher of benchmark prices in the energy industry, in violation of the Sherman and Commodity Exchange Acts.  Plaintiffs claim that defendant companies are sophisticated market participants who knew that the incorrect information they provided to Platts would impact crude oil futures and derivative contracts prices traded in the U.S. This action follows at least six civil litigations that have been filed against BP, Shell and Statoil after the European Commission (EC) and Norwegian Competition Authority raided the companies in May.  The...

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EU State Aid Investigation into German Renewable Energy Law

 by Martina Maier and Philipp Werner The European Commission (Commission) is likely to open a formal EU State aid investigation into the German Renewable Energy Source Act. According to the Commission, the Act may have given unlawful advantages to renewable energy producers and energy-intensive companies (those producing chemicals or steel) in Germany. Producers and companies that benefited from the Act are therefore exposed to the risk of the alleged benefit being recovered, which is likely to amount to a figure in at least the tens of billions of Euros. The European Commission is currently examining whether or not the German Renewable Energy Source Act infringes EU State aid law. The Commission is expected to reach a decision on whether or not to open a formal investigation procedure in autumn 2013, following its summer break. The German Renewable Energy Source Act aims to support renewable energy by fixing the tariffs that electricity...

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