City of Pittsburgh v. West Penn Power Co

Opinions of the United

1998 Decisions States Court of Appeals

for the Third Circuit

6-12-1998

City of Pittsburgh v. West Penn Power Co

Precedential or Non-Precedential:

Docket 98-3014

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1998

Recommended Citation

"City of Pittsburgh v. West Penn Power Co" (1998). 1998 Decisions. Paper 141.

http://digitalcommons.law.villanova.edu/thirdcircuit_1998/141

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 1998 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

Filed June 12, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 98-3014

CITY OF PITTSBURGH,

Appellant

v.

WEST PENN POWER COMP.,

d/b/a ALLEGHENY POWER;

ALLEGHENY POWER SYSTEM, INCORPORATED;

DUQUESNE LIGHT COMPANY; DQE, INC.

On Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. No. 97-1772)

Argued March 20, 1998

BEFORE: BECKER, Chief Judge, RENDELL, and

HEANEY,* Circuit Judges

(Filed: June 12, 1998)

_________________________________________________________________

*The Honorable Gerald W. Heaney, Senior United States Circuit Judge

for the Eighth Circuit sitting by designation.

WENDELYNNE J. NEWTON,

ESQUIRE

THOMAS L. VAN KIRK, ESQUIRE

(ARGUED)

SHEILA S. DINARDO, ESQUIRE

DAVID J. PORTER, ESQUIRE

Buchanan Ingersoll Professional

Corporation

One Oxford Centre

301 Grant Street

20th Floor

Pittsburgh, PA 15219-1410

Counsel for the City of Pittsburgh

DAVID L. MCCLENAHAN, ESQUIRE

JAMES E. SCHEUERMANN,

ESQUIRE (ARGUED)

WENDY E. D. SMITH, ESQUIRE

Kirkpatrick & Lockhart, LLP

1500 Oliver Building

Pittsburgh, PA 15222

WILLIAM J. MURPHY, ESQUIRE

Murphy & Schaffer

100 Light Street

9th Floor

Baltimore, MD 21202-1019

Counsel for West Penn Power

Company d/b/a Allegheny Power

and Allegheny Power Systems

THOMAS L. ALLEN, ESQUIRE

(ARGUED)

DONNA MAUS, ESQUIRE

Reed Smith Shaw & McClay, LLP

P.O. Box 2009

435 Sixth Avenue

Pittsburgh, PA 15230-2009

Counsel for Duquesne Light Company

and DQE, Inc.

2

OPINION OF THE COURT

RENDELL, Circuit Judge.

Appellant, the City of Pittsburgh, filed this antitrust

action against West Penn Power Company, d/b/a Allegheny

Power, and Duquesne Light Company alleging that the two

companies entered into a pre-merger agreement in restraint

of trade and that their proposed merger would substantially

lessen competition or tend to create a monopoly. The City

claims that an agreement between Allegheny Power and

Duquesne Light to withdraw Allegheny Power's application

before the Public Utility Commission to provide electric

service to two Redevelopment Zones within the City violated

Section 1 of the Sherman Act.1 The City also seeks

injunctive relief against the proposed merger between the

two utilities arguing that it violates Section 7 of the Clayton

Act.2

The district court granted the utility companies' motions

to dismiss, finding that given the allegations of the

complaint, the City lacked standing because it had not

experienced an antitrust injury. Because we agree that the

City has failed to allege that it meets the prudential

requirements of antitrust standing, we will affirm the

decision of the district court.

_________________________________________________________________

1. Section 1 of the Sherman Act provides, in relevant part: "Every

contract, combination in the form of trust or otherwise, or conspiracy, in

restraint of trade or commerce among the several States, or with foreign

nations, is hereby declared to be illegal." 15 U.S.C. S 1.

2. Section 7 of the Clayton Act, 15 U.S.C. S 18, states the following:

No person engaged in commerce or in any activity affecting

commerce shall acquire, directly or indirectly, the whole or any

part

of the stock or other share capital and no person subject to the

jurisdiction of the Federal Trade Commission shall acquire the

whole

or any part of the assets of another person engaged also in

commerce or in any activity affecting commerce, where in any line

of commerce or in any activity affecting commerce in any section of

the country, the effect of such acquisition may be substantially to

lessen competition, or to tend to create a monopoly.

3

I.

FACTUAL BACKGROUND AND ALLEGATIONS

As an initial matter, we must determine the extent of our

consideration of the materials submitted by the parties.

When deciding a motion to dismiss, it is the usual practice

for a court to consider only the allegations contained in the

complaint, exhibits attached to the complaint and matters

of public record. See 5A Charles Alan Wright & Arthur R.

Miller, Federal Practice and Procedure S 1357 (2d ed. 1990).

However, the parties here have provided the court with

numerous documents pertaining to the regulatory

proceedings that are at the heart of the instant controversy.

We note -- as did the district court -- that it can be, and

is in this instance, proper to consider these documents in

reviewing a motion to dismiss. See Pension Benefits Guar.

Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir.

1993) (finding that "a court may consider an undisputedly

authentic document that a defendant attaches as an exhibit

to a motion to dismiss if the plaintiff 's claims are based on

the document. Otherwise, a plaintiff with a legally deficient

claim could survive a motion to dismiss simply by failing to

attach a dispositive document on which it relied."). Our

recounting of the averments of the complaint, therefore, is

informed by the context provided by these documents and

other public records of which we can take judicial notice.3

Our factual recitation will also include a short discussion of

the nature of the utility industry in Pennsylvania which

provides the regulatory context of this case.

The City of Pittsburgh, located in Allegheny County, is

currently embarking on a plan to revitalize several urban

areas, called the Redevelopment Zones, which were

formerly industrial sites.4 According to the City's plans,

these currently vacant sites will eventually be home to

industrial, commercial and residential activity. Compl.

PP 12, 13. The City believes that competition for retail

_________________________________________________________________

3. Neither party contests the authenticity of these documents and all

were submitted by the parties as the joint appendix in this case.

4. The two areas to be redeveloped are the 123 acre "South Side Works"

and the 233 acre "Nine Mile Run." Compl. P 12.

4

electric service would facilitate economic development in

these areas. Id. P 14. This desire for competition comes at

a time when the regulatory landscape for utilities in

Pennsylvania is undergoing significant change.

In Pennsylvania, the regulation of electric service

distribution has traditionally afforded utility companies

natural monopolies. See Barasch v. Pennsylvania Pub. Util.

Comm'n, 546 A.2d 1296, 1298 (Pa. Commw. Ct. 1988). The

industry operates in a comprehesive regulatory structure

supervised by the Pennsylvania Public Utility Commission

("PUC"), which is an independent administrative agency

authorized by the state to regulate public utility companies

doing business in Pennsylvania. 66 Pa. C.S.A. SS 301, 501.

The Pennsylvania Public Utility Code gives the PUC broad

power to "supervise and regulate" public utilities. Id.

S 501(b). The PUC is mandated to act in the public interest

in overseeing public utilities. A utility company must obtain

a certificate of public convenience from the PUC in order to

provide retail electric service to a particular area. Id. S 1101.5

Each certificate describes the geographic territory in which

the holder is permitted to supply electric service. Id. A

certificate may be amended only with permission from the

PUC, pursuant to 66 Pa.C.S.A. S 1102. Historically, a utility

is able to enter another's service area only if it

demonstrates that the area's certificated utility is providing

inadequate service to customers in the proposed new

territory. See Lansberry, Inc. v. Pennsylvania Pub. Util.

Comm'n, 444 A.2d 832, 834-35 (Pa. Commw. Ct. 1982)

(discussing requirement of demonstrating inadequacy of

service in context of PUC certificate to transport). In

addition, generally, the retail rates that a utility charges

must be approved by the PUC. 66 Pa. C.S.A. S 1303. For

example, the rates of both Allegheny Power and Duquesne

Light are now, and have always been, subject to regulatory

_________________________________________________________________

5. A certificate of public convenience "makes it lawful for [a] public

utility

to provide service within a defined territory, and imposes on the public

utility an obligation to provide service in that territory." Lukens Steel

Co.

v. Pennsylvania Pub. Util. Comm'n, 499 A.2d 1134, 1136 n.1 (Pa.

Commw. Ct. 1985).

5

approval by the PUC. Further, the PUC reviews all proposed

utility mergers. Id. SS 1102, 2811.6

Recently, the Pennsylvania legislature passed the

Electricity Generation Customer Choice and Competition

Act. Id. S 2801 et seq. The Competition Act sets forth a plan

that will gradually introduce competition within the retail

generation function of the electric utility industry.7 This

legislation envisions a transition from an industry which is

largely regulated to one where there is a competitive

market. This statute recognizes continued PUC oversight of

electricity generation during the "transition" period from

January 1, 1997 to January 1, 2001. Id. SS 2804, 2806.

While the Competition Act will introduce some competition

among electric service providers in Pennsylvania, it does

not entirely displace the regulatory function of the PUC.

Because the Competition Act did not alter the statutory

requirement that Allegheny Power petition the PUC to

amend its certificate, that Act's passage does not alter our

analysis of this case. At all times relevant to the events

recounted in the City's complaint, Allegheny Power and

Duquesne Light were operating under the regulated

industry conditions.8

In the summer of 1996, Allegheny Power and Duquesne

Light were the only electric utilities possessing certificates

of public convenience from the PUC to provide electric

service in Allegheny County. Compl. P 17. It is uncontested

that Allegheny Power's certificate does not permit it to

_________________________________________________________________

6. During the pendency of this litigation, the Allegheny Power and

Duquesne Light merger was conditionally approved by the PUC. See 66

U.S.L.W. 2689, 2696-97 (U.S. May 19, 1998) (discussing PUC decision In

Re Joint Application of DQE Inc., Pa. P.U.C., No. A-110150F.0015,

4/30/98).

7. In its plans for the restructuring of the electric utility industry in

Pennsylvania, the legislature distinguishes between the functions of

generation, transmission, and distribution of electricity. Under the new

statutory provisions, the transmission and distribution of electricity

will

continue to be treated as a natural monopoly and will still be subject to

the supervision of the PUC. 66 Pa. C.S.A. S 2801 et seq.

8. While the statute authorizes the initiation of "pilot programs" in

1997,

the parties in the present case have not contended that they were

participants in this program. 66 Pa. C.S.A. S 2806 et seq.

6

provide electric service to the area of the City in which the

Redevelopment Zones are located. JA at 197 (P 11).

Duquesne Light is the only utility with a certificate to

provide electric service to this area of the City. JA at 195

(P 1). Duquesne Light claims that its certificate grants it the

exclusive right to provide power to the Redevelopment

Zones. Compl. P 28. Because of its belief that competition

for retail electric power was "essential" to the success of

this redevelopment effort, and because Allegheny Power's

tariff rates are substantially lower than those of Duquesne

Light, the City entered into discussions with Allegheny

Power regarding the possibility of having Allegheny Power

submit a proposal to provide electric service to the

Redevelopment Zones. Id. PP 18, 20, 26. In furtherance of

its goal of obtaining competitive utilities for the area, the

City filed a "Petition in Support of Choice for Retail Electric

Service Within Certain Redevelopment Zones Within the

City of Pittsburgh" with the PUC in September of 1996. Id.

P 22. Allegheny Power intervened in support of this petition

and also filed a separate application with the PUC

for permission to supply electrical service to the

Redevelopment Zones. Id. PP 24, 30. Duquesne Light

opposed both of these petitions. Id. PP 27, 32.

In their petitions before the PUC both the City and

Allegheny Power contested Duquesne Light's assertion of

exclusive rights. A review of the applications made to the

PUC is useful to clarify exactly what the City and Allegheny

Power were seeking with respect to Allegheny Power's ability

to offer electric service in the Redevelopment Zones. In its

filing, the City requested that the PUC "take actions

necessary to allow choice and competition for retail electric

service in two discrete areas in the City undergoing

redevelopment . . . wherein Duquesne Light Company .. .

and [Allegheny Power Company] . . . would compete for new

customers and new electric load." JA at 194 (emphasis

added). Further, the City stated in this petition that "[t]o

the best of the City's knowledge, Duquesne is at the present

the only electric utility possessing a certificate of public

convenience ("certificate") from the Commission to serve the

City and its citizens." JA at 195 (P 1). In its reply to

Duquesne Light's Answer to the City's Petition, the City

states that it is requesting that the "two utilities, Duquesne

7

and [Allegheny Power], upon the latter's application and

grant therefor, hold overlapping certificates to provide retail

electric service in the two discrete Redevelopment Zones

. . ." JA at 223 (P 24).

In its filing to intervene in support of the City's petition,

Allegheny Power asserted that it would "apply for authority

to provide retail electric service in the Redevelopment Areas

and that subject to approval of the Commission, [Allegheny

Power] will provide retail electric service to the

Redevelopment Areas pursuant to [Allegheny Power's] tariff

rates and terms." JA at 200 (P 3). In its own application to

the PUC, Allegheny Power requested approval for the utility

"to begin to offer, render, furnish or supply electric service

in two specific additional territories within the boundaries

of the City of Pittsburgh." JA at 235 (emphasis added).

These documents make clear that both the City and

Allegheny Power were applying to the PUC so that Allegheny

Power would be given the regulatory permission to begin to

supply electric power in the area of the Redevelopment

Zones.

In November of 1996, the Urban Redevelopment

Authority of Pittsburgh9 issued a Request for Proposals

("RFP") soliciting bids for the provision of the "electric utility

infrastructure development" of the Redevelopment Zones.

Compl. P 33. Both Allegheny Power and Duquesne Light

responded to the RFP with significantly different bids,

Allegheny Power's being the lower of the two. Id. P 35. On

February 25, 1997, an Administrative Law Judge ("ALJ")

held a prehearing conference on Allegheny Power's PUC

application. At this hearing the ALJ set a schedule for the

submission of testimony regarding Allegheny Power's

application and scheduled further hearings for the week of

June 9, 1997. Id. P 39. In March of 1997, the PUC

consolidated the proceedings involving the City's petition

with those of Allegheny Power's application. Id. P 40.

_________________________________________________________________

9. According to the City, the Redevelopment Authority "works closely

with the City to implement redevelopment plans that support and are

consistent with the City's economic development objectives." Compl.

P 33.

8

On April 7, 1997, Duquesne Light and Allegheny Power

announced their intention to merge. Id. P 42. The City

alleges that under the terms of the premerger agreement,

the two utilities agreed that they would not file any

applications with the government without prior

consultation and would not make any changes with respect

to rates without first consulting each other. Id. P 45. The

City avers that these agreements constitute impermissible

premerger coordination. Id. P 46. Later in April, Duquesne

Light requested a stay of the PUC proceedings before the

ALJ, which was denied. Id. P 48, 50. On June 6, 1997,

Allegheny Power filed a petition to withdraw its PUC

application and to withdraw as an intervenor in the City's

pending PUC petition. Id. P 52. The ALJ granted these

petitions. Id. P 54. After filing this complaint in federal

court, the City petitioned the PUC for a stay of the

regulatory proceedings. JA at 445. When this petition was

denied, the City withdrew its petition seeking choice for

retail electric service. JA at 523-28. Because the City's

petition and Allegheny Power's application were withdrawn,

the PUC never made a determination as to whether

Duquesne Light's certificate gave it exclusive rights to serve

the Redevelopment Zones or whether the Commission could

or would amend Allegheny Power's certificate in order to

permit it to provide electric service in these areas.

In its complaint, the City contends that the actions of

Allegheny Power and Duquesne Light violated 15 U.S.C. S 1

("the Sherman Act") and 15 U.S.C. S 18 ("the Clayton Act").

The City asserts that it has suffered the following damage

as a result of the alleged Sherman Act violations:

"expending significant efforts to bring competition to the

Redevelopment Zones; paying higher, non-competitive rates

for electric utility service generally; and losing the

opportunity to have lower electric service charges .. . ."

Compl. P 59. The City seeks treble damages for the alleged

Sherman Act violation.10 The City further argues that a

_________________________________________________________________

10. Section 4 of the Clayton Act, which provides for treble damages

based on antitrust violations, states as follows:

[A]ny person who shall be injured in his business or property by

reason of anything forbidden in the antitrust laws may sue therefor

9

merger between the two utility companies violates the

Clayton Act in that it would have anticompetitive effects,

and thus seeks injunctive relief to prevent the proposed

merger.11 Id. P 66. The City also raises the related state law

claims of restraint of trade, civil conspiracy, breach of

contract, tortious interference, breach of good faith and fair

dealing, and detrimental reliance.

Allegheny Power and Duquesne Light each moved to

dismiss the City's complaint pursuant to Fed. R. Civ. P.

12(b)(6). This motion was referred to a Magistrate Judge

who issued a report recommending that the motions be

granted. On January 6, 1998, the district court adopted

this report thereby granting defendants' motions to dismiss

and declining to exercise jurisdiction over the City's state

law claims. The City filed this timely appeal. Our

jurisdiction is founded on 28 U.S.C. S 1291.12

_________________________________________________________________

in any district court of the United States in the district in which

the

defendant resides or is found or has an agent, without respect to

the

amount in controversy, and shall recover threefold the damages by

him sustained, and the cost of suit, including a reasonable

attorney's fee.

15 U.S.C. S 15.

11. Section 16, which provides for injunctive relief, states, in pertinent

part:

Any person, firm, corporation, or association shall be entitled to

sue

for and have injunctive relief, in any court of the United States

having jurisdiction over the parties, against threatened loss or

damage by a violation of the antitrust laws . . . when and under

the

same conditions and principles as injunctive relief against

threatened conduct that will cause loss or damage is granted by

courts of equity . . . .

15 U.S.C. S 26.

12. We exercise plenary review over the district court's grant of

defendants' motions to dismiss. Jeremy H. v. Mount Lebanon Sch. Dist.,

95 F.3d 272, 277 (3d Cir. 1996). In so doing, we accept as true all

factual allegations in the complaint and will not affirm the motion to

dismiss "unless it is certain that no relief can be granted under any set

of facts which could be proved." Fuentes v. South Hills Cardiology, 946

F.2d 196, 201 (3d Cir. 1991) (citation omitted).

10

II.

THE DISTRICT COURT'S RULING

The district court granted the defendants' motions to

dismiss because the City lacked standing to bring an

antitrust claim. It reasoned that there had been no

antitrust injury to the City for two reasons:

First, since Allegheny Power and Duquesne Light had not

engaged in competition in light of their regulated provision

of services, the agreement between Duquesne Light and

Allegheny Power to withdraw Allegheny Power's bid, as well

as the proposed merger, did not lessen competition. City of

Pittsburgh v. West Penn Power Co., ___ F. Supp. ___, 1998

WL 64074, at * 4 (W.D. Pa. Jan. 6, 1998). As to the City's

claim that the proposed merger would eliminate prospective

competition, the court found this claim to be too

speculative to be actionable. Id.

Second, the court found that the City was denied an

opportunity that was contingent on the decision of the PUC

and thus, the fact that no competition existed was the

result of the regulatory structure. Id. at *5. The district

court found that as the City's alleged damages were not the

result of harm to competition, they did not constitute the

type of injury the antitrust laws were intended to prevent.

Id. at *4-5. The district court therefore concluded that,

because any injury that was experienced or threatened was

not an antitrust injury, the City lacked standing to pursue

its claims under the Sherman and Clayton Acts. Id. at *5.

III.

ISSUES ON APPEAL

The City contests the district court's conclusion, arguing

that the allegations of the complaint regarding the loss of

competition are sufficient to allege the type of injury the

antitrust laws are designed to prevent. It contends that the

district court's ruling that the City did not have standing

due to lack of antitrust injury fails to properly consider not

only its allegations but also the applicable law regarding

11

antitrust injury. We review plaintiff 's complaint not to

determine whether the City has averred harm to

competition -- which it has -- but, rather, to determine

whether the injury the City alleges can legally form the

basis for relief under the antitrust laws.

The City contends that the district court ignored the

allegations of the elimination of competition, arguing that

the court should have taken the allegations of its complaint

at face value. Yet our courts have an obligation in matters

before them to view the complaint as a whole and to base

rulings not upon the presence of mere words but, rather,

upon the presence of a factual situation which is or is not

justiciable. We do draw on the allegations of the complaint,

but in a realistic, rather than a slavish, manner.13 In

scrutinizing plaintiff's claim in this way at the outset, we

are mindful of the balance that must be struck in assessing

antitrust claims. As the Supreme Court stated, referring to

standing in the context of S 4 of the Clayton Act:

[N]either the statutory language nor the legislative

history of S 4 offers any focused guidance on the

question of which injuries are too remote from the

violation and the purposes of the antitrust laws to form

the predicate for a suit under S 4; indeed, the

unrestrictive language of the section, and the avowed

breadth of the congressional purpose, cautions us not

to cabin S 4 in ways that will defeat its broad remedial

objective. But the potency of the remedy implies the

need for some care in its application.

Blue Shield of Virginia v. McCready, 457 U.S. 465, 477

(1982).

Regulatory Framework

The present case arises in a factual context which is

_________________________________________________________________

13. For example, we need not accept as true "unsupported conclusions

and unwarranted inferences." Schuylkill Energy Resources, Inc. v.

Pennsylvania Power & Light Co., 113 F.3d 405, 417 (3d Cir.), cert.

denied, 118 S. Ct. 435 (1997). Nor can we "assume that the [plaintiff]

can prove facts that it has not alleged . . . ." Associated Gen.

Contractors

of California v. California State Council of Carpenters, 459 U.S. 519, 526

(1983).

12

substantially different from that of most antitrust cases.

The plaintiff has alleged anticompetitive behavior in an

industry which is highly regulated: those who wish to

compete to provide their services must obtain a certificate

from the PUC to do so. As the First Circuit has explained,

"[f]ull price regulation dramatically alters the calculus of

antitrust harms and benefits." Town of Concord, Mass. v.

Boston Edison Co., 915 F.2d 17, 25 (1st Cir. 1990) (holding

that alleged price squeeze did not violate Sherman Act

because utility's rates were regulated). Similarly, here, the

regulation which frames the issue is the statutory

requirement that a utility obtain permission from the PUC,

in the form of a certificate, in order to provide electric

service to a particular geographic region.

The Supreme Court has made clear that regulated

industries -- even those that historically have been treated

as natural monopolies -- are not exempt from the antitrust

laws. See Otter Tail Power Co. v. United States , 410 U.S.

366 (1973). However, in this case, the comprehensive

regulatory framework significantly restricts the nature of

the competition which is permitted. While it is true that the

regulatory landscape of the electric power industry is in the

process of changing, even the Competition Act does not

anticipate a completely "free market" for electric services.

Rather, the changes will result in a form of regulated

competition. Further, in the words of the Schuylkill Energy

court, "We will not attempt to predict the future of

competitive retail access in Pennsylvania." Schuylkill Energy

Resources, Inc. v. Pennsylvania Power & Light Co., 113 F.3d

405, 416 (3d Cir.), cert. denied, 118 S. Ct. 435 (1997). We

cannot know whether these two utilities will ever be

permitted to compete for retail customers in a particular

geographic region.

Antitrust Standing

The question of standing is a threshold inquiry in all

actions. However, the constitutional and prudential

requirements of standing take on particular significance in

the context of the antitrust laws, where a balance must be

struck between encouraging private actions and deterring

legitimate competitive activity through overly vigorous

enforcement. See, e.g., Capital Imaging Assoc. v. Mohawk

13

Valley Med. Assoc., 996 F.2d 537, 539 (2d Cir. 1993)

(cautioning that were the "heavy power [of antitrust law]

brought into play too readily it would not safeguard

competition, but destroy it"). Thus, in undertaking this

standing analysis, we must remain mindful of the purposes

and goals of the antitrust laws at issue -- to preserve and

promote competition.

The constitutional standing inquiry -- namely, whether

there is a "case" or "controversy" within the meaning of

Article III, S 2 of the Constitution -- is augmented by

consideration of prudential limitations. Without these

prudential considerations, "the courts would be called upon

to decide abstract questions of wide public significance

even though other governmental institutions may be more

competent . . . and judicial intervention may be

unnecessary to protect individual rights." Warth v. Seldin,

422 U.S. 490, 500 (1975).

Thus, the crux of the issue in this case is whether the

City satisfies the "prudential" requirements of standing;

that is, does the City have "antitrust standing," and is the

plaintiff a proper party to bring a private antitrust action?

In Associated General, the Supreme Court outlined the

factors that courts should consider when determining

whether a party has standing to bring a private action

under the antitrust laws. Associated Gen. Contractors of

California v. California State Council of Carpenters, 459 U.S.

519, 537-45 (1983). Its approach to the standing inquiry

has been interpreted as requiring a narrowing view, as

opposed to the broad remedial purpose approach of cases

that preceded it. See Barton & Pittinos, Inc. v. SmithKline

Beecham Corp., 118 F.3d 178, 181 (3d Cir. 1997). The

Associated General test has been regularly and consistently

applied as the passageway through which antitrust

plaintiffs must advance, and we have recently restated the

factors we are to examine:

(1) the causal connection between the antitrust

violation and the harm to the plaintiff and the intent by

the defendant to cause that harm, with neither factor

alone conferring standing; (2) whether the plaintiff's

alleged injury is of the type for which the antitrust laws

14

were intended to provide redress;14 (3) the directness of

the injury, which addresses the concerns that liberal

application of standing principles might produce

speculative claims; (4) the existence of more direct

victims of the alleged antitrust violations; and (5) the

potential for duplicative recovery or complex

apportionment of damages.

Barton & Pittinos, 118 F.3d at 181 (citing In re Lower Lake

Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1165-66 (3d

Cir. 1993)). The antitrust standing inquiry is essentially the

same under both S 4 and S 7 of the Clayton Act, except that

when seeking injunctive relief, "the complainant need only

demonstrate a significant threat of injury from an

impending violation of the antitrust laws." Mid-West Paper

Products Co. v. Continental Group, Inc., 596 F.2d 573, 591

(3d Cir. 1979) (quotation omitted); see also Cargill, Inc. v.

Monfort of Colorado, Inc., 479 U.S. 104, 111-112 (1986).

Furthermore, this court has emphasized that the antitrust

standing inquiry is not a black-letter rule, but rather, is

"essentially a balancing test comprised of many constant

and variable factors . . . ." Merican, Inc. v. Caterpillar

Tractor Co., 713 F.2d 958, 964-65 (3d Cir. 1983) (citing

Bravman v. Bassett Furniture Indus., 552 F.2d 90, 99 (3d

Cir. 1977)).

We conclude that, balancing all of the relevant facts in

the instant case, the City's claims fail to meet the standing

requirements we have set forth, due to the lack of causal

connection between the defendants' actions and the alleged

harm and because of the absence of antitrust injury. We

will combine our discussion of causation and injury as the

two issues are inextricable in this case. Further, we find

that because there is no causal connection and no antitrust

injury, we need not examine the other Associated General

standing factors.

_________________________________________________________________

14. This element of the standing test is the"antitrust injury"

requirement.

15

IV.

CAUSAL CONNECTION AND ANTITRUST INJURY

In evaluating the factors necessary for standing, we have

stated that a showing of "[a]ntitrust injury is a necessary

but insufficient condition of antitrust standing." Barton &

Pittinos, 118 F.3d at 182. By this we mean that the district

court should first address the issue of whether the plaintiff

suffered an antitrust injury. If antitrust injury is not found,

further inquiry is unnecessary.

In explaining its reasoning, the district court cited the

following passage from Brunswick, which defines "antitrust

injury":

Plaintiffs must prove antitrust injury, which is to say

injury of the type the antitrust laws were intended to

prevent and that flows from that which makes

defendants' acts unlawful. The injury should reflect the

anticompetitive effect either of the violation or of

anticompetive acts made possible by the violation.

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477,

489 (1977).

From the Court's description of antitrust injury, we learn

that the question of whether the plaintiff has experienced

antitrust injury depends in part on its source -- did the

injury flow from that which makes the defined acts

unlawful. To answer this question, we must examine the

causal connection between the purportedly unlawful

conduct and the injury.15 In this case, we find that

_________________________________________________________________

15. As many commentators and courts have noted, the questions of

antitrust injury and antitrust standing are difficult to disentangle. We

believe that, similarly, in the present case, there is no bright line

distinction between the two concepts. See, e.g., Greater Rockford Energy

& Tech. Corp. v. Shell Oil Co., 998 F.2d 391, 394-95 (7th Cir. 1993);

Triple M Roofing Corp. v. Tremco, Inc., 753 F.2d 242, 247 (2d Cir. 1985);

see also Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law P 360(e),

at 200 (1995); William Page, The Scope of Liability for Antitrust

Violations,

37 Stan. L. Rev. 1445, 1484-85 (1985); Nat Stern & Kevin Getzendanner,

Comment, Gauging the Impact of Associated General Contractors on

Antitrust Standing Under Section 4 of the Clayton Act, 20 U.C. Davis L.

Rev. 159, 175-179 (1986); Daniel Richman, Note, Antitrust Standing,

Antitrust Injury, and the Per Se Standard, 93 Yale L.J. 1309 (1984).

16

determining whether antitrust injury is present necessarily

involves examining whether there is a causal connection

between the violation alleged and the injury.

Accordingly, rather than trying to separate these two

factors of causation and injury, we will treat them together.

The facts which form the basis for the district court's

conclusion, and ours as well, are central to both tests.

These facts include the following: Allegheny Power and

Duquesne Light were never competitors; the regulatory

scheme mandated that they not compete; attempts by the

City and Allegheny Power to bring about competition were

no more than attempts, with no assurance that competition

would be permitted; and any injury suffered by the City did

not flow from the defendants' conduct, but, rather, from the

realities of the regulated environment in which all three

were actors. Here, both the lack of any antitrust injury --

in the sense of its total absence as defined by the district

court -- and the attenuated nature of the causation, defeat

the City's standing.

We should note at the outset that we disagree with the

City's argument that Brunswick and the other cases

discussing antitrust injury cited by the district court are

inapposite because they involved suits by competitors, not

by consumers.16 The City urges that as long as the City is

a consumer -- as it contends it is -- harm to it constitutes

antitrust injury.17 However, we do not find the City's status

as a consumer to be dispositive. We read the cited passage

_________________________________________________________________

16. In Brunswick, several smaller operators of bowling alleys sued a

larger operator who was also a bowling equipment manufacturer.

According to the plaintiffs, Brunswick's activity of acquiring failing

alleys

and providing cash to keep them afloat violated Section 7 of the Clayton

Act. They argued this continued competition reduced their profits. Using

the test set forth above, the Supreme Court held these lost profits did

not constitute "antitrust injury." Brunswick, 429 U.S. at 489.

17. In its complaint, the City alleged that it was bringing this action

"on

its own behalf as a purchaser of electric utility service" and "on behalf

of its citizens and to protect the economy of Pittsburgh." Compl. P 4.

Defendants contest the City's ability to bring this action on behalf of

its

citizens. It is, however, uncontested that the City will be a purchaser of

electricity -- for streets, public works, and other infrastructure -- in

the

Redevelopment Zones though it is not now a purchaser in these areas.

17

from Brunswick, and the opinion itself, to have broader

application. Brunswick tells us to intensify our focus and

consider not only the fact that there may be an agreement

which is harming others in the marketplace, but to also ask

first whether the alleged injury is really of the type that the

antitrust laws were intended to prevent, and, as part of that

assessment, whether the injury flows from that which

makes defendants' acts unlawful.

The key sentence in Brunswick, cited above, is the last:

"The injury should reflect the . . . anticompetitive acts made

possible by the violation." 429 U.S. at 489. It directs us to

look back from the vantagepoint of the injury to test the

nature of the cause, rather than to presume antitrust

injury wherever there is an agreement or merger that

results in harm. This inquiry led to a conclusion of that the

plaintiff lacked standing in Brunswick. Although the

analysis is slightly different, the same result follows on the

facts of this case. The purported lessening of competition

was not caused by the premerger agreement and proposed

merger between Allegheny Power and Duquesne Light. The

City's inability to choose to buy from either Allegheny Power

or Duquesne Light for the Redevelopment Zones is an

injury visited upon it by the regulated nature of utility

services, not caused by an agreement between Duquesne

Light and Allegheny Power to withdraw Allegheny Power's

application to be able to compete.

The City's position that it has suffered an antitrust injury

is an attempt to equate the submission of bids andfiling of

petitions with actual competition. The City's complaint

states that the City engaged in "negotiations with Allegheny

Power for the provision of electric utility service to the

Redevelopment Zones, subject to Allegheny Power obtaining

a certificate from the PUC." Compl. P 41. The City

acknowledges that competition was not possible without

PUC approval when it requested that the PUC "take actions

necessary to allow choice and competition for retail electric

service" in the Redevelopment Zones. JA at 194. Thus, we

need not resolve the issue of whether Duquesne Light's

certificate to provide electricity to the Redevelopment Zones

was exclusive. Rather, it is sufficient that we can determine

from the face of the complaint that Allegheny Power never

18

had the certificate from the PUC necessary to permit it to

provide power in the Redevelopment Zones. It never did

compete, and, therefore, any injury to the City did not

result from a lessening of competition. In fact, as the

district court correctly points out, the actions of the utilities

merely maintained the status quo. Thus, the utilities'

purported antitrust violation can only be said to have been

competition-neutral and as such, is not actionable. See

Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328,

344 (1990) (stating that "[t]he antitrust injury requirement

ensures that a plaintiff can recover only if the loss stems

from a competition-reducing aspect or effect of the

defendant's behavior").

The district court concluded that because neither the

agreement nor the proposed merger had brought about the

lessening of competition in a "marketplace" where there was

no competition, there was no antitrust injury. Wefind this

conclusion of the district court to be well founded,

notwithstanding the City's bold averments as to loss of

competition. Without demonstrating that there was

competition, a plaintiff cannot show that the defendants'

actions have had or will have anticompetitive effects. See,

e.g., Continental Cablevision of Ohio, Inc. v. American Elec.

Power Co., 715 F.2d 1115, 1119-20 (6th Cir. 1983) (finding

that without competition, there can be no injury to

competition).

It is telling that nowhere in the complaint does the City

directly aver that there had ever been competition between

Duquesne Light and Allegheny Power.18 The City argues

that it is the competitive process that antitrust laws are

designed to protect -- and that the submission of bids in

response to the RFP constitutes a "competitive process."

However, this argument does little to further the City's

position because, in the present case, the competitive

process does not even exist because of regulatory

restraints.

_________________________________________________________________

18. Paragraphs 9 & 10 of the City's complaint contain nearly identical

statements regarding the business of each utility, but contains no

averment that the two companies compete. Elsewhere in the complaint,

harm to competition is averred in broad, conclusory terms. See Compl.

P 66.

19

The City's first claim is brought under the Sherman Act,

which prohibits contracts, combinations or conspiracies "in

restraint of trade." 15 U.S.C. S 1. However, under the

Sherman Act agreements can only restrain that which has

occurred, is occurring, or is reasonably likely to occur.

Since the realization of competition is in the hands of

regulators there is no way that the City can show that

competition would have occurred absent the concerted

activity between the two utilities.

The City's Clayton Act claim fails under a similar

analysis. Section 7 of the Clayton Act prohibits all mergers

"where in any line of commerce, or in any activity affecting

commerce in any section of the country, the effect may be

substantially to lessen competition, or to tend to create a

monopoly." 15 U.S.C. S 18. The complaint avers that the

relevant "line of commerce" for the Clayton Act claim is the

"provision of retail electric utility service in the

Redevelopment Zones." Compl. P 62. The City argues that

the proposed merger will lessen competition by "eliminating

actual and prospective competition between Allegheny

Power and Duquesne Light in the relevant line of commerce

. . ." Id. P 66(a). The only "actual competition" that the City

alleges in its complaint is the competition to be able to

provide electric power to the Redevelopment Zones, which

does not constitute actual competition.

Section 16 of the Clayton Act does permit injunctive relief

"against threatened loss or damage." 15 U.S.C.S 26; see

Mid-West Paper Products Co., 596 F.2d at 590-91. 19 The

City argues that the fact that the proposed merger will

lessen "prospective competition" should be sufficient to

state a claim. However, we agree with the reasoning of the

district court that the threatened loss "is contingent on the

PUC permitting competition within the City in thefirst

instance." Thus, with respect to the "prospective injury"

_________________________________________________________________

19. The City has not explicitly argued this case under a "potential

competition" theory and therefore we will not address that issue here.

We do note, however, that the cases articulating this theory would be of

doubtful support to the City. See, e.g. , United States v. El Paso Natural

Gas Co., 376 U.S. 651 (1964); United States v. Falstaff Brewing Corp.,

410 U.S. 526 (1973).

20

argument, the issue turns not on whether Allegheny Power

and Duquesne Light did compete -- but whether they were

going to compete for the ability to provide power in the

Redevelopment Zones. Allegheny Power was not legally able

to provide power in the Redevelopment Zones and we do

not know whether the PUC would ever have granted the

permission for it to do so. Thus, as a matter of law, the

court cannot conclude that the loss of potential competition

was causally related to the decision of the two power

companies to merge. The City is really claiming that it

would have benefited from competition it hoped would

occur. However, the appellants cannot foist their version of

what might have been on the court under the rubric of

antitrust injury. The presence of the regulatory scheme and

need for approval in connection with the choice of utilities

to serve the Redevelopment Zones cuts the causal chain

and converts what might have been deemed antitrust injury

in a free market into only a speculative exercise.

There are no facts averred in the complaint which even

permit us to speculate as to the likelihood of the PUC

granting certification to Allegheny Power. Further, the City

does not allege, and there is nothing in the record to

indicate, that any parties considered these applications to

be mere administrative formalities. To the contrary, the

PUC applications filed by the City and Allegheny Power --

and the responses to them by Duquesne Light -- make

clear that PUC proceedings to amend Allegheny Power's

certificate were already being vigorously contested. See,

e.g., JA at 267-287. Thus, we simply cannot know whether

there is any causal connection between the harm which has

arguably been suffered by the City and the alleged Sherman

Act violation.

As the Supreme Court stated in Brunswick, antitrust

injury must be caused by the antitrust violation-- not a

mere causal link, but a direct effect. 429 U.S. at 489. Here,

the interposition of the regulatory scheme and actions of

the parties -- both defendants and plaintiff -- interferes

with the chain of causation. The statutory scheme

precluded competition without the requisite regulatory

permission. As Professors Areeda & Hovenkamp describe,

"a plaintiff cannot be injured in fact by private conduct

21

excluding him from the market when a statute prevents

him from entering that market in any event." Phillip E.

Areeda & Herbert Hovenkamp, Antitrust Law P 363(b), at

222 (1995) (citing Axis S.p.A. v. Micafil, Inc., 870 F.2d 1105

(6th Cir. 1989)).

As Areeda & Hovenkamp explain, the Section 4 plaintiff

"must establish that he actually `sustained' injury-in-fact to

`business or property,' and the `by reason of ' language [of

S 4] insists that such injury be caused by the violation." Id.

P 360, at 192. The requirements for injunctive relief are

similar except that the statutory language of Section 16

permits relief upon a showing of "threatened loss."

However, the plaintiff must still demonstrate that this

"threatened injury would be caused by the alleged antitrust

violation . . . ." Id. P 360(b), at 193 (emphasis added). Thus,

the City will never be able to prove a direct link between the

alleged antitrust violation and their purported injury. The

absence of antitrust injury and causal connection clearly

defeat the City's standing.

The lack of causal connection between the violation

alleged and the City's injuries is further demonstrated when

we examine the damages alleged by the City. The injury is

not only "speculative" because it is difficult to measure;

rather, it is speculative because the injury claimed may

never occur. An examination of the following damages listed

in the City's complaint reveals no direct link between the

purported antitrust violations and the harm alleged to have

been suffered by the City: "expending significant efforts to

bring competition to the Redevelopment Zones; paying

higher, non-competitive rates for electric utility service

generally; and losing the opportunity to have lower electric

service charges in the Redevelopment Zones necessary to

attract the maximum intended economic development to

the Zones and foster full economic growth." Compl. P 59.

The City has failed to offer any support for the proposition

that the first alleged harm -- the fact that the City spent

money to bring competition to the Redevelopment Zones --

is a cognizable antitrust injury.20 The other damages are

_________________________________________________________________

20. The proper measure of damages for a price-fixing violation under the

Sherman Act is the difference between the prices actually paid and those

22

precisely the type which cannot be directly connected to the

alleged agreement. There is no way to determine whether

the rates the City will pay for electric service are or will be

affected by the alleged actions of Allegheny Power and

Duquesne Light. A consumer alleging antitrust violations

"cannot obtain damages without showing that he actually

paid more than he would have paid in the absence of the

violation." Areeda & Hovenkamp, supra, P 370, at 253.

In its complaint, the City alleges a violation of Section 1

of the Sherman Act and requests that "defendants be

ordered to pay the City damages sustained by it and the

citizens it represents, trebled . . ." Compl. P 93. However,

there is no way for the court to determine what "damages"

were sustained. We cannot assume the existence of a PUC

certificate for the purposes of assessing damages. Thus, the

damages alleged by the City are not simply difficult to

measure, but their occurrence would, in fact, be impossible

to prove. The injury averred by the City is simply too

speculative to permit relief under the antitrust laws.

With respect to injunctive relief, the City cannot show a

significant threat of injury from an impending antitrust

violation. The City cannot prove that harm is threatened

because it cannot demonstrate that it has lost anything --

namely, competition among electric utilities -- that would

have existed but for the actions of the defendants. Further,

now that all parties, including the City, have withdrawn

_________________________________________________________________

that would have been paid absent the conspiracy. See, e.g., State of N.Y.

v. Hendrickson Bros., Inc., 840 F.2d 1065, 1077 (2d Cir. 1988); see also

Robert Blair & William Page, "Speculative" Antitrust Damages, 70 Wash.

L. Rev. 423, 426 (1995) (Plaintiff must project a "hypothetical or `but-

for'

condition that excludes only the effects of the defendant's illegal

conduct." Damages are measured by "[t]he difference between that

projected condition and the plaintiff's actual condition."). The injury

alleged by the City here is purportedly separate from the injury of having

to pay higher prices for electric service. In fact, the language of this

claim merely underscores the fact that no competition existed between

the two utilities. When a market participant expends resources to

encourage competition, the participant risks that such expenditure will

not result in lower prices. Despite this risk, the City chose to pursue

its

"efforts" with Allegheny Power.

23

from the regulatory proceedings, an injunction would not

alter the City's current situation. That is, the question of

whether the PUC would amend Allegheny Power's certificate

and permit it to provide electric service to the

Redevelopment Zones would remain unresolved.

We affirm the district court's conclusion that because

there had previously been no competition in the market for

electricity, "neither the proposed merger nor the withdrawal

of Allegheny Power's application has lessened the

competition within the City or the choices of utility

companies available to the City." City of Pittsburgh, 1998

WL 64074, at * 4. Thus, as the district court notes, it is the

structure of the regulated industry, not the defendants'

conduct, which creates the lack of competition -- and

under these facts -- the lack of antitrust standing. That

does not mean that utilities are immune from antitrust

liability.21 However, in the present case, the remedy that

appellant seeks would require this court to assume the

existence of a competitive situation. This we cannot do.

The City argues that if the antitrust laws are not

diligently enforced during the transition to deregulation

under the Competition Act, there is a risk that regulated

electric utility monopolies will simply be replaced by

unregulated ones who would also enjoy immunity from the

antitrust laws. We make clear that this ruling is fact-

specific to the current climate in which the instant facts

developed, namely, in the era of "regulated electric utility

monopolies" as the City terms it. The very essence of our

ruling is that the advent of deregulation will likely remove

the break in the causal chain so that future utility

arrangements in the free market atmosphere may well pass

muster for purposes of standing under the antitrust laws.

Had the ability of the utilities to serve various customers in

various regions not been subject to approval of the PUC,

our standing analysis would be radically different.

_________________________________________________________________

21. Further, this decision does not affect the City's ability to proceed

in

state court on its state law claims for restraint of trade, civil

conspiracy,

breach of contract, tortious interference, breach of good faith and fair

dealing, and detrimental reliance.

24

In conclusion, because we believe that the City cannot

establish the necessary antitrust injury and causal

connection between the alleged antitrust violation and its

injury, we will affirm the district court's grant of

defendants' motions to dismiss.

25

HEANEY, Senior Circuit Judge, dissenting.

I cannot agree with the majority that there is no antitrust

injury or no causal connection between the City's injury

and the defendants' conduct. The defendants conspired to

deprive the City of the opportunity to obtain less expensive

electricity to assist in bringing new jobs to the City. In my

view, the majority opinion opens the door for similar anti-

competitive practices to go unpunished.

I accept the statement of facts set forth by the majority,

but supplement it in order to underscore the bad faith

exhibited by Allegheny Power and Duquesne Light Company.1

Attempting to create new jobs in the Redevelopment Zones,

the City recognized that high-cost electricity was a

detriment to attracting new businesses. Estimating that the

Redevelopment Zones would support up to 7,300 new jobs

and approximately 1,400 new residences, the City began

negotiating with Allegheny Power to provide less expensive

electricity.

The City and Allegheny Power negotiated for several

months and Allegheny Power assured the City that it would

provide less expensive electricity than Duquesne Light

Company to the Redevelopment Zones. Both Allegheny

Power and the City knew that the permission of the PUC

was required before Allegheny Power could furnish

electricity. In July 1996, both the City and Allegheny Power

agreed to apply to the PUC for the latter to provide

electricity to the Redevelopment Zones. On September 4,

1996, the City filed a petition supporting Allegheny Power's

provision of electricity to the Redevelopment Zones. On

September 9, 1996, Allegheny Power filed its own petition

in this matter and represented to the PUC that an

"alternative electric supply would attract economic

development to the Redevelopment Areas and would foster

economic growth[.]" (J.A. at 6.)

Claiming that it had the exclusive right to provide

electricity to the City, Duquesne Light Company intervened

_________________________________________________________________

1. We accept all of the City's allegations as true in reviewing the motion

to dismiss. Fuentes v. South Hills Cardiology, 946 F.2d 196, 201 (3d Cir.

1991) (citation omitted).

26

on September 27, 1996, opposing the petitions filed by the

City and Allegheny Power. On October 21, 1996, Allegheny

Power filed an answer, claiming that it also had the right to

provide electricity to the Redevelopment Zones. After these

preliminary matters had been addressed, on October 28,

1996, Allegheny Power formally applied for a certificate of

need, which would enable it to provide electricity to the

Redevelopment Zones. In its application, Allegheny Power

claimed that its prices would be substantially lower than

Duquesne Light Company's, stating: "It is certain that the

potential for developing new, incremental electrical load in

the Redevelopment Zones will be enhanced substantially if

electricity prices therein are as low as possible." (Id.)

On November 18, 1996, the City solicited bids from

Allegheny Power and Duquesne Light Company to provide

power to the Redevelopment Zones. As the majority points

out, Allegheny Power significantly under-bid Duquesne

Light Company. While the ALJ received testimony on the

application in late March 1997, further hearings were

scheduled for June 9, 1997.

Less than two weeks later, on April 7, 1997, Duquesne

Light Company and Allegheny Power announced that they

had agreed to merge. Two days earlier, on April 5, 1997,

Allegheny Power and Duquesne Light Company agreed not

to make any filings with governmental entities until they

consulted with each other; not to change their regulated

charges or rates without first discussing it with each other;

and not to make any agreement or filing with respect to a

rate change or charge without first consulting each other.

After deciding to merge, on April 28, 1997, Allegheny

Power and Duquesne Light Company requested a stay of

the proceedings on Allegheny Power's application for a

certificate of need. The ALJ denied the stay, noting the need

for an expeditious decision. On June 6, 1997, Allegheny

Power petitioned the ALJ for leave to withdraw its

application. The ALJ granted the petition on June 24, 1997.

The City then commenced this action alleging, in

substance, that Allegheny Power and Duquesne Light

Company conspired to deprive the City of the opportunity

to obtain less expensive electricity in violation of Section 1

of the Sherman Act and Section 7 of the Clayton Act.

27

The facts alleged by the City are sufficient to show that

Allegheny Power and Duquesne Light Company conspired

to deprive the City of an opportunity to obtain less

expensive electricity. In my view, this conspiracy violated

both the Sherman and Clayton Acts. Unlike the majority, I

am not persuaded that the PUC's failure to act on

Allegheny Power's application immunizes these conspirators

from antitrust liability. After all, the conspiracy deprived

the PUC of an opportunity to review the application. 2 As the

Seventh Circuit aptly pointed out, "[w]e know of no rule

that states that the parties must be in head-to-head

competition in the relevant market (as opposed to head-to-

head competition for the relevant market) before the

antitrust laws will apply." Fishman v. Estate of Wirtz, 807

F.2d 520, 531 (7th Cir. 1986) (emphasis in original).

The Clayton Act prohibits mergers that substantially

lessen competition or tend to create monopolies in any line

of commerce in any section of the country. There can be no

doubt that the proposed merger in this case violates the

Clayton Act. Allegheny Power and Duquesne Light

Company are the only utility companies that could feasibly

provide electricity to the Redevelopment Zones.

Consequently, the proposed merger substantially lessens

competition and creates a monopoly in the relevant market.

_________________________________________________________________

2. The majority, however, argues "now that all parties, including the

City,

have withdrawn from the regulatory proceedings, an injunction would

not alter the City's current situation." In essence, the majority argues

that because the City withdrew from the PUC proceedings, the issue is

moot as to whether an injunction should be granted. However, once

Allegheny withdrew its application, there was no point for the City to

continue with its application. As the appellees point out themselves,

Allegheny had to obtain approval from the PUC to enlarge its certificate

of convenience. See Makovsky Bros., Inc. v. Pennsylvania Public Utility

Comm., 423 A.2d 1089, 1092 (Pa. Commw. 1980). The City alone, as the

consumer, could not petition the PUC to obtain lower utility prices.

Lukens Steel Co. v. Pennsylvania Public Utility Comm., 499 A.2d 1134,

1140 (Pa. Commw. 1985). Thus, once Allegheny withdrew, under

Pennsylvania law, there was no point for the City to continue with its

application. Instead, the City filed suit in federal district court.

Although

the law is changing in Pennsylvania as utility competition becomes a

reality, there is no indication that the City could have proceeded ex

parte

before the PUC to ensure that Allegheny provide lower electricity rates.

28

The Sherman Act addresses agreements in restraint of

trade. In this case, there was such a restraint. The merger

agreement destroyed the City's opportunity to obtain less

expensive electricity. In this case, the City's allegations

support the view that there was such a restraint. According

to these allegations, the merger agreement destroyed the

opportunity to obtain less expensive electricity. A factfinder

might well determine that this opportunity was more than

speculative; it was real enough to cause Allegheny Power to

file its application; it was real enough to cause Duquesne

Light Company to oppose the application; and it was real

enough to convince Allegheny Power and Duquesne Light

Company that a merger was the most effective way of

avoiding cost competition.3 In short, "the injury alleged by

[the City] was precisely the type of loss that the claimed

violations of the antitrust laws would be likely to cause."

Zenith Radio Corp. v. Hazeltine Research, 395 U.S. 100, 125

(1969).

I am concerned that today's decision sends the wrong

message that similarly situated conspirators will not be

held accountable for their anti-competitive activities. After

submitting bids, both Allegheny Power and Duquesne Light

Company knew the price at which each company would

provide electricity to the City. When Allegheny Power

withdrew its bid, Duquesne Light Company was assured

that competition would be lessened and that its higher

price would prevail.

In my view, the majority does not sufficiently distinguish

between the City's S 4 and S 16 claims under the Clayton

Act. Even if one concedes that the claim for monetary

damages under the Clayton and Sherman Acts presents a

close question, there can be no doubt that the City has

standing to pursue its requested injunctive relief under S 16

of the Clayton Act. It is well settled in the Third Circuit

that, unlike a claim under S 4 of the Clayton Act for

_________________________________________________________________

3. Certainly the amount of damages that the City might recover may be

limited by the fact that the PUC would not have approved the

application, but this fact goes to the amount of damages that can be

recovered rather than whether an antitrust violation has been

committed.

29

monetary damages, "a claim for injunctive relief does not

present the countervailing considerations--such as the risk

of duplicative or ruinous recoveries and the spectre of a

trial burdened with complex and conjectural economic

analyses--that the Supreme Court emphasized when

limiting the availability of treble damages" in a S 4 Clayton

Act claim. Mid-West Paper Prods. Co. v. Continental Group,

596 F.2d 573, 591 (3d Cir. 1979). Consequently,

In contradistinction to S 4, S 16 does not ground

injunctive relief upon a showing that "injury" has been

already sustained, but instead makes it available

"against threatened loss or damage." Furthermore, S 16

does not state that the threat must be to the plaintiff's

"business or property," and courts accordingly have

held that non-commercial interests are also protected.

. . . [C]ourts have held that for purposes of S 16 the

complainant "need only demonstrate a significant

threat of injury from an impending violation of the

antitrust laws or from a contemporary violation likely

to continue or recur," and that a person may have

standing to obtain injunctive relief even when he is

denied standing to sue for treble damages. Indeed, the

test for standing under S 16 has been framed in terms

of a proximate cause standard that is "less

constrained" than that under S 4 and which might in

fact be no more rigorous than the general rule of

standing.

Mid-West Paper Prod. Co. v. Continental Group, 596 F.2d

573, 591-92 (3d Cir. 1979) (emphasis in original) (footnotes

omitted). Therefore, the district court can still fashion

injunctive relief that will bar the merger, require Allegheny

Power to reinstate its application to the PUC to furnish

power to the City's Redevelopment Zones, even if the

merger is permitted to go through,4 or alternatively, to give

_________________________________________________________________

4. In an October 17, 1997 letter from Allegheny Power's president, Alan

Noia, to Pittsburgh Mayor Thomas Murphy, Noia states: "I am, therefore,

committing to you that, if the . . . PUC grants the City's request . . .

to

allow utilities other than Duquesne Light Company to provide electric

service to the two economic development zones, subject to PUC approval,

. . . [Allegheny Power] will expand its service territory to include the

economic development zones." (J.A. at 499a.) This letter was sent after

the proposed merger.

30

such other relief as will ensure that the City obtains the

advantage of competitive pricing.

For the reasons stated above, I respectfully dissent.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

31