Antitrust Lawyer Blog Commentary on Current Developments

FTC Sues to Block Acquisition of The Peoples Natural Gas Company from Dominion Resources

On March 15, the FTC 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., on the basis that the merger would create a monopoly in the sale of natural gas in Southwestern Pennsylvania. The complaint alleged that 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. It also alleged that the proposed transaction would result in a monopoly for many customers in the Pittsburgh area resulting in higher prices. The transaction that includes Equitable’s purchase of Hope Gas, Inc., another subsidiary of Dominion, is valued at $970 million. The complaint did not challenge the acquisition of Hope Gas, Inc.

The Commission’s Complaint

The FTC’s complaint alleged that Equitable and Dominion Peoples compete in the pipeline delivery of natural gas to nonresidential customers in the greater Pittsburgh area, and in other 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 alleged anticompetitive 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 FTC Act.

Commission Authorization to Seek Preliminary Injunction

Equitable’s proposed acquisition of Dominion Peoples must be approved by the PUC, which was expected to announce its decision in late March or early April. As the companies cannot consummate the transaction until after the PUC issues its decision, the FTC did not file for a preliminary injunction in federal district court to block the proposed transaction. However, the Commission 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.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com