Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Filed Rate Doctrine, Indirect Purchaser Standing Issues Raised in Supreme Court Petition, (Jan 28, 2013)

By Jeffrey May, J.D.

The U.S. Supreme Court has been asked to review a decision of the U.S. Court of Appeals in New York City, rejecting a consumer's federal and New York antitrust claims against KeySpan Corporation—a producer of electricity in New York—and Morgan Stanley Capital Group Inc.—a financial firm that allegedly facilitated KeySpan's anticompetitive conduct. The petition for certiorari was filed by Charles Simon, a retail consumer of electricity, on January 22, 2013 (Simon v. Keyspan Corp., Dkt. 12-919).

KeySpan's alleged collusion with one of its rivals to increase installed capacity prices, as well as Morgan Stanley Capital Group's purported role, had been the subject of Department of Justice antitrust investigations. Both companies agreed to resolve antitrust actions under consent decrees (2011-1 Trade Cases ¶77,321, 2012-2 Trade Cases ¶77,997).

Simon filed a putative class action, alleging that KeySpan used a swap agreement—under which it acquired a financial interest in a competitor's capacity—to manipulate New York City electricity prices. In September 2012, the appellate court affirmed dismissal, concluding that Simon lacked standing to bring his federal antitrust claims as an indirect purchaser and that the filed rate doctrine barred the consumer's state and federal claims (694 F.3d 196, 2012-2 Trade Cases ¶78,059).

Because Simon purchased electricity from a seller of retail electricity—a customer of the wholesale provider—the consumer was an indirect purchaser barred under the Illinois Brick doctrine from pursuing an antitrust action for damages stemming from a wrongful overcharge. The retail seller was the only proper plaintiff, according to the appellate court.

The appellate court went on to say that Simon's federal and state claims were barred under the filed rate doctrine because they impermissibly sought to challenge as unreasonable the filed rates the defendant offered in wholesale auctions. The challenged rate was not directly set by the Federal Energy Regulatory Commission (FERC), it did not specifically determine that the rate was reasonable, and the challenged conduct undermined the competitive market scheme FERC and the New York Independent Service Operator had created. However, the market-based rate process established by FERC was sufficiently safeguarded such that the filed rate doctrine should apply, even through the rate arrived at was not the one FERC envisioned, according to the appellate court.

In his petition, Simon specifically asks the Court to consider whether the “filed rate doctrine” bars federal antitrust damage claims, as well as state antitrust and consumer fraud claims, against defendants who inflate market prices that are subject to the Federal Power Act, and are not required by law to be pre-filed with any agency before being charged and were not pre-filed with any agency before being charged.

In addition, Simon asks whether the “indirect purchaser” holding in Kansas v. Utilicorp, 497 U.S. 199 (1990), required dismissal of all federal antitrust damage claims by indirect purchasers who bore 100% of an illegal overcharge under a pre-existing tariff which (1) guaranteed that the direct purchaser could pass through 100% of the cost of the product at issue, (2) prohibited the direct purchaser from making any profit on the sale of the product at issue, regardless of variations in prices or quantities sold, and (3) guaranteed that the direct purchaser’s profits/losses on the sale of the product at issue would always be zero, regardless of variations in prices or quantities sold.

Simon argues that the Second Circuit’s decision entrenches error in the appellate courts regarding the filed rate doctrine as it applies to market-based rates. He asks the Supreme Court to provide clear direction on the issue. Further, Simon asks the Court to apply an exception to the indirect purchaser doctrine where consumers bear 100 percent of an overcharge.

Companies: KeySpan Corp.; Morgan Stanley Capital Group Inc.

Attorneys: Judith L. Spanier (Abbey Spanier Rodd & Abrams, LLP) for petitioner.

News: Antitrust