Friday, May 25, 2007

FTC Denied Injunction Barring Combination of Gas Suppliers Pending Appeal

This posting was written by Jeffrey May, editor of CCH Trade Regulation Reporter.

One week after dismissing an FTC challenge to the proposed combination of natural gas suppliers serving Allegheny County, Pennsylvania, on state action immunity grounds, the federal district court in Pittsburgh denied the FTC’s request for an injunction pending appeal to the Third Circuit, pursuant to Rule 62(c) of the Federal Rules of Civil Procedure.

On May 14, the federal district court had ruled that the combination of Equitable Resources Inc. and The People’s Natural Gas Co. was immune from antitrust laws, under the state action doctrine, based on the April 13 approval of the transaction by the Pennsylvania Public Utilities Commission (see the Trade Regulation Talk posting of May 17, 2007 and 2007-1 Trade Cases ¶75,702).

Following this setback, the FTC brought a motion for an injunction pending appeal or—in the alternative—an injunction pending resolution by the appeals court of an emergency motion for an injunction.

Deference to State Assembly, Utilities Commission

The district court again rejected the FTC’s motion, holding that “the practical effect of granting the pending Motion for an Injunction . . . would be to grant the FTC's initial request for preliminary injunction to stop the merger transaction which the Pennsylvania PUC [Public Utilities Commission] has determined is in the public interest. The FTC has not met its heavy burden of convincing this Court that it should not defer to the Pennsylvania General Assembly and its PUC, and let the approved merger-acquisition transaction take its course.”

According to the court, “the FTC continually and inaccurately labels the merger as ‘anti-competitive,’ which it is not.”

Probability of Success, Irreparable Harm Standards

Rejected was the FTC's argument that it needed only to show that its appeal demonstrated a “substantial case on the merits,” rather than “a probability of success” on the merits. The FTC could not demonstrate a substantial issue on the merits of the state action immunity doctrine and did not demonstrate with any specificity that, if the injunction were not granted, it would suffer or the utilities' customers would suffer irreparable harm.

The agency unsuccessfully argued that if the transaction were substantially completed before the appellate court resolved its appeal, it would be difficult to “unscramble the eggs” of the merger transaction.

The decision is Federal Trade Commission v. Equitable Resources, Inc., Dominion Resources, Inc., Consolidated Natural Gas Co., The People's Natural Gas Co., No. 07cv0490, May 21, 2007. Text of the decision will appear in CCH Trade Regulation Reports.

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