Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Justice Department Does Not Intend to Challenge Procurement Arrangement Between Nuclear Power Plant Operators, (Dec 27, 2012)

By Tobias J. Gillett, J.D., LLM.

The Department of Justice Antitrust Division does not intend to challenge a proposed joint procurement arrangement between the seven nuclear power plant operators that make up the STARS Alliance LLC, the Department has announced. Renata B. Hesse, Acting Assistant Attorney General, has sent the counsel for the Alliance a business review letter, setting forth the Department’s view that the arrangement falls into the “antitrust safety zone” provided in its Antitrust Guidelines for Collaborations Among Competitors (“Guidelines”).

The STARS Alliance comprises seven operators of pressurized water nuclear reactors for electricity generation. On July 3, 2012, Joseph F. Wayland, then Acting Assistant Attorney General, had sent the Alliance a business review letter approving the Alliance as a “resource sharing organization” that “shar[ed] existing resources including personnel, parts, equipment, tools, and expertise” and “coordinat[ed] joint planning and operating activities.” The present request for review concerned a proposal to jointly procure a variety of goods and services necessary to operation of nuclear power plants.

The Alliance promoted the proposed arrangement as a means for the Alliance’s smaller operators to leverage some of the same economies of scale available to utilities with several reactors, and the Antitrust Division appeared to accept this rationale.

“The proposed conduct may allow the joint venture to increase efficiencies that result in lower costs for electricity, benefitting consumers,” said Hesse.

Section 4.2 of the Guidelines provides for an “antitrust safety zone” under which, absent extraordinary circumstances, the Antitrust Division and the Federal Trade Commission will not challenge a proposed collaboration between competitors. The Guidelines specify that collaboration between competitors where the market shares of the participants “collectively account for no more than 20 percent of each relevant market” will generally not be challenged.

The members of the Alliance comprise less than 20 percent of each of the markets for the goods and services covered by the proposed arrangement. Importantly, the goods and services neither involve the purchase or sale of electricity, nor the purchase of fuel fabrication products or services or control rod products or services. Moreover, the Alliance members generally do not compete with each other in the same geographic markets for the sale of electricity. In the two markets where members do compete, the members likely would not affect prices for electricity.

Other factors the Antitrust Division considered important included the fact that participation in any of the procurement activities would be voluntary and the Alliance’s proposed efforts to prevent antitrust violations. These efforts would include prohibitions on discussion or information exchange regarding downstream electricity prices, prohibitions on discussion or information exchange regarding upstream goods and services other than for purposes of the Alliance’s joint procurement program, and required training concerning antitrust compliance.

In a press release, the STARS Alliance expressed its enthusiasm regarding the Antitrust Division’s decision.

“We are pleased with the outcome of the DOJ review, and look forward to engaging with suppliers to strengthen their relationship with the STARS Alliance,” said STARS Alliance President Jim Becker. “We believe that the joint procurement activities will play a significant role in enhancing the operations of the STARS Alliance, while also benefitting our customers by reducing costs.”

News: Antitrust AntitrustDivisionNews