Transaction Would Result in Merger to Monopoly in Southwestern Pennsylvania
The Federal Trade Commission has approved a complaint challenging Equitable Resources, Inc.’s (Equitable) proposed acquisition of The Peoples Natural Gas Company (Dominion Peoples), a subsidiary of Dominion Resources, Inc. Equitable and Dominion Peoples are each other’s sole competitors in the distribution of natural gas to nonresidential customers in certain areas of Allegheny County, Pennsylvania, which includes Pittsburgh. The complaint alleges that the proposed transaction would result in a monopoly for many customers that now enjoy competition. The transaction, valued at $970 million, includes Equitable’s purchase of Hope Gas, Inc., another subsidiary of Dominion. The complaint does not challenge the acquisition of Hope Gas, Inc.
Through the proposed acquisition, Equitable would acquire: 1) Dominion Peoples’ natural gas distribution system, which covers 9,400 square miles in southwest Pennsylvania, where it serves more than 350,000 customers; 2) Dominion Peoples’ midstream natural gas system, which covers 861 gathering miles and has 44.6 billion cubic feet (Bcf) of throughput capacity; and 3) storage facilities, which include 33.2 Bcf of on-system storage and 10.8 Bcf of off-system storage.
“By removing Dominion Peoples as a competitor through this transaction, Equitable obtains a monopoly in the distribution of natural gas to many nonresidential customers in the Pittsburgh area,” said Jeffrey Schmidt, Director of the FTC’s Bureau of Competition. “The transaction will thus result in higher prices for these nonresidential customers, including hospitals, schools, churches and apartment buildings, and likely increase the prices these customers charge consumers for their important services.”
The Commission’s Complaint
Equitable and Dominion Peoples compete in the pipeline delivery of natural gas to nonresidential customers in the greater Pittsburgh area, in other areas of Allegheny County, and in surrounding counties. While the Pennsylvania Public Utilities Commission (PUC) establishes maximum delivery rates the companies can charge, the companies can provide customers with discounts below the maximum. Equitable and Dominion Peoples compete by offering discounts to customers that have a choice between the two companies for receiving their natural gas.
Accordingly, one important result of the merger would be the elimination of discounts. In addition, according to the complaint, the transaction would eliminate the prospect of expanded competition between Equitable and Dominion Peoples in the future, resulting in additional consumer harm following the acquisition. Entry into the relevant market is not likely to be timely or sufficient to offset the alleged anticompetitive impacts of the transaction.
The complaint charges that the agreement for Equitable’s purchase of the capital stock of Dominion Peoples violates Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, and that the acquisition, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45.
Commission Authorization to Seek Preliminary Injunction
Equitable’s proposed acquisition of Dominion Peoples must be approved by the PUC, which is expected to announce its decision later this month or in early April. As the companies cannot consummate the transaction until after the PUC issues its decision, the FTC has not, at this time, filed for a preliminary injunction in federal district court to block the proposed transaction, pending trial. However, the Commission has voted to authorize the staff to seek such an injunction, should it become necessary to preserve its ability to obtain effective relief while the administrative trial process proceeds.
The Commission voted 4-1 to issue the administrative complaint and to authorize the staff to seek a preliminary injunction, with Commissioner Pamela Jones Harbour voting no. Pending further Commission order, the Commission will retain adjudicative responsibility for this matter. The administrative complaint approved by the Commission is available now on the FTC’s Web site and as a link to this press release.
NOTE: The Commission issues or files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the named parties have violated the law.
Copies of the complaint are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC’s Bureau of Competitionseeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail: email@example.com; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.
Mitchell J. Katz,
Office of Public Affairs
Phillip L. Broyles,
Bureau of Competition
(FTC File No.: 061-0140)