# Appendix — Alabama Power Co. v. Nuclear Regulatory Commission

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1983
- **Citation:** 464 U.S. 816

## Text

S2-]7 i

~

IN THE
Supreme Court Of Che United States

OCTOBER TERM, 1982

NO.

ALABAMA POWER COMPANY,

Petitioner,
Uv.
NUCLEAR REGULATORY COMMISSION
and THE UNITED STATES OF AMERICA,
Respondents.

On Petition for a Writ of Certiorari to The United
States Court of Appeals For The Eleventh Circuit

APPENDICES C-G TO PETITION

S. EASON BALCH, Sr.*

RosBertT A. BUETTNER

ALBERT L, JORDAN

JoHN F. MANDT

Balch, Bingham, Baker,
Hawthorne, Williams & Ward

600 North 18th Street

Birmingham, Alabama 35203

(205) 251-8100

TERENCE H. BENBOW

Davip ]. LONG

Winthrop, Stimson, Putnam
& Roberts

40 Wall Street

New York, New York 10005

(212) 943-0700

Attorneys for
Alabama Power Company

May 2, 1983
*Counsel of Record

AFPFENDIX C

APPENDIX D

APPENDIX E

APPENDIX F

APPENDIX G

CONEEN TS

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APPENDIX C

UNITED STATES OF AMERICA
NUCLEAR REGULATORY COMMISSION

ATOMIC SAFETY AND LICENSING APPEAL BOARD!

Michael C. Farrar, Chairman
Richard S. Salzman

In the Matter of Docket Nos. 50-348A
50-3644

ALABAMA POWER COMPANY
(Joseph M. Farley Nuclear
Plant, Units | and 2) June 30, 1981

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DECISION

Opinion of the Board by Mr. Farrar:

This is the third antitrust case arising under Section 10Sc of the Atomic
Energy Act? to reach us on the merits. The first, Midland, involved a
nuclear plant being constructed by Consumers Power Company, which
serves most of Michigan’s lower peninsula. ALAB-452, 6 NRC 892 ( 1977).3
The second, Davis-Besse, dealt with a number of reactors proposed for
construction in Ohio and western Pennsylvania by several utility companies
serving the City of Cleveland and the rest of the “CAPCO” territory.
ALAB-560, 10 NRC 265 (1979).4 Unfortunately, our rulings in both
Midland and Davis-Besse did not come down until after the Licensing
Board’s two-step decision in the matter now before us.5 Necessanily, then,
that Board’s opinions, in general carefully and thoughtfully crafted, were
written before it had the benefit of any appellate guidance.®

*42 U.S.C. §2135(c).
ose and remanding Consumers Power Co. (Midland Units | and 2), LBP-75-39, 2 NRC
(1975).
‘Affirming as modified Toledo Edison Co. (Davis-Besse Units 1, 2 and 3), LBP-77-1, 5 NRC 133
(1977).
‘The first of the Board’s decisions (Phase I) dealt with what mught be called the question of
“lability” (LBP-77-24, 5 NRC 804 (April 8, 1977)); Phase II addressed the matter of remedies
(LBP-77-41, 5 NRC 1482 (June 24, 1977)).
*As already indicated, at that point our Midland and Davis-Besse decisions had not been
wnitten. And, to this day, neither the Commission itself nor the courts have spoken about the
merits of an NRC anutrust case: (1) Any need for further review of Midland was eliminated
when the parties reached a settlement while the case was on remand below. That settlement
was approved by the Licensing Board last August (LBP-80-21, 12 NRC 177); because the
parues were in agreement, we declined to review the matter (ALAB-610, 12 NRC 174 (August
26, 1980)). (2) In Davis-Besse, on the other hand, the Commission declined icants’ request
that it review our decision. The case was then appealed to the United States Court of Appeals
for the Third Circuit under the name Duquesne Light Co. v. NRC: the applicants later
withdrew their appeal and the case was dismissed on October 8, 1980.

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In those opinions, the Board below ruled that Alabama Power
Company’s construction and operation of the two-unit Farley nuclear
power plant would create and maintain “a situation inconsistent with the
antitrust laws” within the meaning of the statute unless certain remedial
conditions — including access for one of the intervenors by way of
purchases of “unit power”? — were included in the nuclear licenses. No
stay having been sought, the conditions imposed have been in force while
the parties’ cross-appeals have been pending before us.*

Alabama Power tells us in its appeal that none of its past conduct
warranted the finding of antitrust “liability”® and that, in any event, the
remedy selected was too drastic. Its opponents — the Alabama Electric
Cooperative (AEC), the Municipal Electric Utility Association of Alabama
(MEUA), the United States Department of Justice, and the NRC staff —
take the opposite tack. Their appeals argue that the applicant’s past conduct
was more egregious than the Board found and that a more sweeping

remedy is in order.'°

As we explain in this opinion, we find the Licensing Board’s rulings not
fully in accord with the principles laid out in decisions issued by us since
then. In terms of the positions taken by the parties here, the upshot is that
Alabama Power's opponents are entitled to a somewhat more favorable
result than they obtained below. Specifically, we find that AEC should be
afforded ownership access to the Farley units and that, while applicant
need not extend such access to MEUA, the municipals are entitled to access

to applicant's transmission system.

"The Board below defined unit power as “power purchased on a contractual basis in the form
of a percentage share of the output from a particular power plant. The cost of unit power
includes the owner’s cost of capital, costs of construction, cost of fuel and operation, and a rate

of return on investment.” 5 NRC at 1502.
*Unit | began commercial operation on December |, 1977; Unit 2 recently received its

operating license.
*That is, the finding that its activities under an unconditioned license to operate the Farley
plant would maintain a situation inconsistent with the antitrust laws specified in Section 105 of

the Atomic Energy Act.

This capsule description of the parties’ appellate positions is intended only to set the stage; it
does not, of course, even begin to hint at the precise nature of the questions presented in the
1,000 pages of briefs filed with us. In that connection, the record below consisted, inter alia, of

nearly 30,000 pages of transcribed testimony.

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I.
BACKGROUND AND SUMMARY

By amending the Atomic Energy Act in 1970, Congress gave this

Commission added duties to fulfill in connection with its licensing of
nuclear power plants. Since that time, it has had to consider, in addition to
safety and environmental matters, the antitrust ramifications of its licensing
actions.'' Specifically, as we said in Midland (6 NRC at 897, footnotes

omitted):

Under Section 105¢ of the Atomic Energy Act, it must review
applications for permits to construct commercial nuclear power
facilities to determine if the activities sought to be licensed would
create Or maintain situations inconsistent with the antitrust laws or
their underlying policies. Where such a result would follow, the
Commission may refuse a license (or rescind one previously issued) or
attempt to rectify the anticompetitive consequences by attaching
appropnate conditions to the license. As the Commission has reiterat-
ed, the Atomic Energy Act’s antitrust provisions reflect “a basic
Congressional concern over access to power produced by nuclear
facilities” and represent legislative recognition “that the nuclear
industry originated as a Government monopoly and is in great
measure the product of public funds [which] should not be permitted to
develop into a private monopoly via the [NRC] licensing process .. . .”
The governing statute provides the procedures by which this review is to

be accomplished; we have described its workings elsewhere.'? Here, the

''The Commussion’s responsibilities in the antitrust sphere pnor to 1970 were less definiuve.
See Cities of Statesville v. AEC, 441 F.2d 962 (D.C. Cir., in banc, 1969) and the history recited
in Toledo Edison Co. (Davis-Besse Unit |), ALAB-323, 3 NRC 331, 337-40 (1976).
"Kansas Gas and Elecinc Co. (Wolf Creek Unit 1), ALAB-279, | NRC 559 (1975).

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review was duly initiated when the Commission referred Alabama Power’s
construction permit application to the Attorney General of the United
States for his advice concerning its potential antitrust consequences. The
Department of Justice’s analysis led it to respond that the plant should not
receive an unconditional license and that an antitrust hearing should be
held. In that connection, petitions to intervene filed by AEC and MEUA
were granted by the Licensing Board (over the applicant’s opposition). The
entry of these two organizations alongside the statutory parties — the
Commission staff and the Attorney General — completed the lineup of
paticipants opposed to the award of an unconditional license to Alabama
Power.

For introductory purposes, the business operations of the utility parties
to the proceeding can be simply described."? The applicant, Alabama
Power, is a wholly-owned subsidiary of the Southern Company, a public
uulity holding company which also owns Georgia Power Conpany, Gulf
Power Company,'* and Mississippi Power Company, all of which function
under an interchange contract as the Southern Company Pool. Alabama
Power generates, transmits and distributes electricity in central and
southern Alabama (the eleven most northern counties in the State are
served primarily by the Tennessee Valley Authority).!’ At retail, it has
residential, commercial and industrial customers; it wholesales electricity to
sixteen municipalities with their own distribution systems (twelve of which
comprise the membership of the intervenor MEUA), to eleven rural
distribution cooperatives,"© and to the other intervenor, the Alabama
Electric Cooperative. The AEC, in turn, is a generation and transmission
cooperative whose membership is made up of four municipalities,'? two
industnal mills, and fourteen rural cooperatives.'

In terms of generating facilities, the applicant had in operation at the

"The Licensing Board's first decision contains a more complete descripuon of the parties’
Operations as well as of those of other enutes in the surrounding area. See 5 NRC at 820-33.
‘“Gulf Power operates in the Florida panhandle.

Southern's operating companies thus embrace a conuguous area covering not only the
Flonda and much of Alabama but also southeastern Mississippi and most of
Georgia. See DJ. Ex. 1008.

“Ten of these are members of the Alabama Electric Cooperative. See fn. 18, infra.

‘There are a total of 22 municipally-owned systems in the geographic area of interest — the
twelve in MEUA, the four in AEC, four others supplied at wholesale by Alabama Power but
not affiliated with either intervening organization, and two that purchase their power
requirements from TVA. The Licensing Board lists the town of Robertsdale, one of the
unaffiliated municipal systems, as purchasing wholesale power from Rivera Utiliues (see 5
NRC at 828); the town now gets its power from applicant. MEUA Bnef, 25; APCO Reply
Brief, 46-47.

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ume of tnal thirteen hydroelectne plants and eight fossil-fueled plants,
totalling over 6,000 megawatts in capacity.'? By comparison, the AEC had
two hydro and six fossil plants totalling 137 megawatts. The MEUA’s
members had no generating capacity.

We need not pause here to descnbe how the electne utility industry
generally functions, in Alabama and elsewhere, to produce a reliable
electric power supply. We went into that subject in detail in Midland,® and
the Board below — after finding that “the pnnciples of electric power
supply producton and coordination are generally applicable throughout
the electric utility industry” and “do not vary significantly among electnc
utilities regardless of differences in locations * * **” — covered the subject
quite thoroughly itself here. 5 NRC at 833-37.

The Licensing Board had to deal with numerous claims made by the
applicant’s opponents concerning alleged anticompetitive practices it was
said to have engaged in through the years. In order to evaluate those claims
in context, the Board first undertook to determine what product and
geographic markets were relevant. It concluded that the applicant's service
area constituted the relevant geographic market; the only product market it
held relevant was that for wholesale power. In this regard, the Board
rejected the notion that there was a market in either of the other suggested
products — i.e., retail power or coordination services.?! 5 NRC at 879-894.

Using its findings delineating the relevant market as a touchstone, the
Board found that the applicant possessed monopoly power in that market
(§ NRC at 896-901); it then reviewed the evidence beanng on the
applicant's alleged anticompetitive practices (5 NRC at 901-957). In all
instances but five, the Board exonerated the applicant. With respect to
those five transactions, however, it found the applicant’s conduct to have
been anticompetitive in nature and to have resulted in a situation
inconsistent with the antitrust laws. The upshot was the conclusion that the

{Throughout this decision, “_______._ Bnef™ refers to the appellate bnefs filed by the
partes on November 14, 1977; “_________ Reply Bnef™ refers to the responses filed on
Apni 14, 1978. The parties will be referred to in such citauons as APCO, AEC, MEUA,
Jusuce, and Staff.)
'*AEC supphes all the power requirements of its municipal and industnal members and three
of the rural co-ops, as well as some of the needs of five other co-ops (who are also customers of
Alabama Power); these constitute AEC’s “on-system” members. It has no direct physical
access to five co-ops in Alabama (who recerve all their power from the applicant) and to one in
Flonda (served by Gulf Power). These six are called its “off-system” members.
"Of the eight fossil-fueled plants, applicant owns six of them outnght, and shares in the
ownership and output of the two others. The capacity figure shown includes only applicant's
of the two shared facilites See 5 NRC at 821-22.

parucularly 6 NRC at 950-57.
‘\Based largely on its reyectuion of the retail power market, the Board concluded that MEUA
was not entitled to any access to the Farley units. See 5 NRC at 961.

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activities under the nuclear licenses would maintain that situation (5 NRC
at 957-961).

In other words, the Board held that the nuclear licenses had to be
conditioned to ameliorate the effects of the anticompetitive situation then
existing. The heanng then moved into its second phase, having to do with
the appropnate remedy. The Board heard additional evidence on that score
(but did not allow MEUA to participate”) and then rendered its second
and final decision. It imposed a number of conditions upon the license, but
rejected others which the applicant's opponents believed were necessary. In
terms of access to the nuclear facility itself, the Board held that allowing
AEC to purchase unit power was sufficient and that no ownership
participation was Called for.

As already indicated, ali parties appealed. Among them, they manage to
challenge — from both sides — nearly every significant holding made by
the Board below.»

In deciding the matter, we take up first — and reject — certain broad
arguments the applicant makes that, if accepted, would largely insulate its
actions from antitrust scrutiny (Part II). In Part III, we then consider the
questions raised as to the nature of the relevant markets. Although we are in
total agreement with the Board below on its determination of the market
for firm wholesale power, the principles we set out in Midland and Davis-
Besse — both handed down after the decision below — lead us to disagree
with the Licensing Board's rejection of the proposed markets for coordina-
tion services and retail power.

We proceed in Part IV to hold that the applicant has monopoly power in
these other markets as well as in the wholesale market. We turn then to that
aspect of the appeals which gives us the most difficulty: to what extent
the applicant has used its monopoly power in violation of the antitrust laws
or their underlying policies. The Licensing Board found it had done so only
in certain respects; we believe that in reaching that conclusion it cast the
applicant's activities in too favorable a light. With respect to MEUA, we
also had to reassess the findings below in light of our holding expanding the
relevant markets in the case. The additional violations we perceive and our
findings relating to MEUA are discussed in Part V. Finally, we turn in Part
VI to the question of what remedies are appropnate in light of our
additional findings on “liability” together with those violations already

perceived by the Board below.

“See 5 NRC at 1484 n. 5

As previously intimated (see fn. 17, supra), all parties filed concurrent brefs as appellants on
November 14, 1977 Betore their responsive briefs were due, we handed down Midland The
tume for filing the second set of brnefs was then extended to allow the pares to adjust ther
thinking to take Midland into account. Oral argument was held on March 8, 1979.

APPLICANTS ARGUMENTS AGAINST ANTITRUST SCRUTINY

The applicant raised three broad arguments against antitrust scrutiny.
First, it argues that there is no room here for any finding of “liability”
because it is so “pervasively regulated” that it cannot be held to possess
monopoly power in the relevant market. It next contends that Section 10Sc
of the Atomic Energy Act forbids a broad inquiry into its past activities for
findings of liability — that any remedial action taken against it must be
based solely on its predicted or potential future activities. Finally, it argues
that the Licensing Board was wrong in basing its findings of liability on
“anucompetitive conduct.” According to the applicant, Section 10Sc
requires that actual violations of the antitrust laws or the clear policy
underlying them be found. We deal with these arguments in order.

A. Pervasive Regulation
As noted by the Licensing Board,™ this proceeding arises under Section

l0Sc of the Atomic Energy Act, which requires the Commission to
determine in connection with its licensing of the Farley plant “whether the
activities under the license would create or maintain a situation inconsistent
with the antitrust laws as specified in subsection 10Sc.” The specified
antitrust laws are the Sherman Act,* Wilson Tariff Act,* Clayton Act,?’
and the Federal Trade Commission Act,* For the purpose of making the
required finding, the Licensing Board conducted an inquiry into the
applicant's activities. Measuring these activities principally against three of
the specified antitrust laws — the Sherman, Clayton and the Federal Trade
Commission Acts — and the policies underlying them, the Board found
that in five instances the activities engaged in by the applicant came within
the proscription of those laws and their policies. In reaching these
conclusions, the Board first conducted a market analysis (applying
recognized antitrust principles) and found that a market for wholesale
power existed in the applicant's area of operations. Proceeding further, it
then found that the applicant enjoyed monopoly power in that market.

#5 NRC at 812.

®15 U.S.C. §§ 1-7.

*ISUS.C §§ 8-11.

"15 U.S.C. §§ 12-27, 44; 18 U.S.C. § 402; 29 U.S.C. §§ 52-53.

#15 US.C. §§ 41-49.

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The applicant vigorously objects to the finding that it possesses
monopoly power in the relevant market. In the portion of its brief devoted
to this issue,” applicant argues that to have monopoly power it must first
be shown that it has the power to control prices or to exclude competitors
from the relevant market. Detailing the extent to which it purportedly is
regulated, it insists that this “pervasive regulation” by the state and federal
governments precludes it from having either of the necessary powers.”

Applicant's contention is not new. We find that it merely attempts to put
in different clothing a ume-worn and discredited argument that seeks to
justify immunity from the antitrust laws. It is too late in the day for the
argument that state and federal regulation — even with respect to electric
utilities — bring with them a form of dispensation from the antitrust laws.
If any earlier doubt existed on this score, it was put to rest by the Supreme
Court several years ago. As observed by the Court of Appeals for the
Seventh Circuit in City of Mishawaka, Ind. v. Indiana & Michigan Electric
Co. (Mishawaka 1,pP' citing Cantor v. Detroit Edison Co.” it is a “now
settled axiom that after Otter Tail Power Co. v. United States, 410 U.S. 366,
93 S. Ct. 1022, 35 L. Ed. 2d 359, ‘there can be no doubt about the
proposition that the federal antitrust laws are applicable to electric

+

utilities.”
In recognition of this proposition, the applicant urges that it is not
arguing for immunity from the antitrust laws.” Rather, as we understand it,

*APCO Bnef, 5-13.
“In applicant's words: “Applicant will demonstrate that state and federal regulauon to a

substanual degree control all aspects of Applicant's growth and development, its markeung
practices, its operations, and its wholesale and retail rates. The existence of this regulauon
negates the inference of the Board that Applicant possesses either the power to control prices
or exclude competitors.” /d at 2. According to the applicant, the acuviues which are regulated
include: rates and charges, finance, entry into service area, withdrawal from service and
abandonment of facilities, acquisiton, merger and consolidauon, system extensions,
transmission and interconnections, coordination reliability and quantity of service,
arrangements with service organizauon and suppliers, accountng, and competition. /d at 5-13.
560 F.2d, 1314, 1321 (1977), cert. denied, 436 U.S. 922 (1978).

2428 U.S. 579, 596 n. 35 (1976).

*At oral argument before us, applicant's counsel was asked whether the applicant's assertion
that the Alabama Public Service Commission considered anucompetitive matters in dealing
with matters before it insulated the applicant from anutrust lability. Mr. Balch, applicant's

counsel, answered as follows:

“I don't believe we are contending that Applicant is immune from anti-trust liability. If
the board has the impression that we are considering that, | would like to state here and
now we are not contending that.”

App. Tr. 21-22. (“App. Tr.” refers to the transcript of the oral argument held before us on
March 8, 1979; “Tr.” refers to the transcnpt below.]

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the applicant is relying upon a facially different argument: that it cannot
be found to possess monopoly power. In the words of its counsel:

I am suggesting that if there is a federal agency or a state agency which
has the ultimate control over prices, that Alabama Power Company
cannot, as a matter of definition, have the power to control its prices.

This formulation of applicant’s argument does not aid its case. In
Midland, we were confronted with essentially the same argument and found
ourselves compelled to reject it. The applicant for a nuclear power license
there, like the applicant here, was seeking to avoid antitrust scrutiny of its
activities. One of the bases on which it attempted to do so was the
regulation to which some of its activities were subjected under the Federal
Power Act. Rather than claiming immunity from the antitrust laws because
of this regulation, it had argued that because the Federal Power Commis-
sion?’ might order it to interconnect with other utilities, the company ipso
facto lacked monopoly power. To that we responded.

We fail to perceive how a regulatory scheme that admittedly grants no
immunity from the antitrust laws, by its mere existence, alters the
character of what is otherwise monopoly power. Consumers’ argument
is an attempt to slip in via the back door a proposition the courts have
barred at the front, namely, that regulation for other purposes can
attenuate the antitrust laws. That argument has been rejected. Mt.
Hood Stages, Inc. v. Greyhound Corp. 555 F.2d 687, 691-92 (9th Cir.
1977); International T. & T Corp. v. General T. & E. Corp., 518 F.2d
913, 935-36 (9th Cir. 1975), and cases cited. The best that can be said
for it is that “the impact of regulation must be assessed simply as
another fact of market life.” /d at 936.

6 NRC at 1008.%
We know of no reason why that same response is not dispositive of the

applicant’s “pervasive regulation” argument here.” To be sure, the

*App. Tr. 34.
**Now the Federal Energy Regulatory Commission (FERC).
*Moreover, as noted in the margin of our Midland decision, “it is settled that even conduct

formally approved by a regulatory agency may be the basis of an antitrust violation where
agency approval conveys no exemption from the antitrust laws. United States v. Radio Corp. of
America, supra, 358 U.S. at 350-51; Cantor v. Detroit Edison Co., supra, 428 U.S. at 596-98;
California v. FPC, 369 U.S. 482, 489 (1967); United States v. Philadelphia Bank, supra, 374 U.S.
at 350-52; Litton Systems, Inc. v. Southwestern Bell Tel. Co., 539 F.2d 418, 422-24 (Sth Cir.
1976); City of Mishawaka v. Indiana and Michigan Electric Co., supra; Almeda Mall, Inc. v.
Houston Power and Light Co., supra, Trade Reg. Rep. par. 61,485 (S.D. Tex. 1977).” 6 NRC at .
1008 fn. 447.

In conjunction with its “pervasive regulation” argument, the applicant stresses that “the

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argument in Midland was made in terms of the Federal Power Commission,
while the asserted justification here is the increased restriction on the
activities of applicant as a result of both state and federal regulation. But we
see no significant difference in the two situations. What the argument boils
down to in either case is that government regulation somehow serves to
relieve the activities from close scrutiny under the antitrust laws. The law
on this point is well-settled against the applicant’s position. As Midland
makes clear, the applicant’s claim of the impact “pervasive regulation” has
on its activities is simply another factor which must be assessed in
examining applicant’s activities for conformance to the antitrust laws.

B. Scope of Inquiry

We turn now to the applicant’s second broad argument against granting
any antitrust relief. Specifically, it would have us set aside the Licensing
Board’s findings of liability — which formed the basis for that Board’s
remedial action — as founded upon a number of critical errors. Applicant’s
point seems to be that the Board roamed so far afield and delved so deeply
in conducting its inquiry into applicant’s activities that it went beyond the
permissible reaches of Section 105c of the Act. According to this argument,
the Act allows inquiry only into activities likely to occur in the penod after
the license is issued and not (as was done here) into the applicant’s past
activities.

The applicant argues that a rule barring consideration of past activities is
compelled by the narrow scope of Section 105c¢ inquiry intended by the
Joint Committee on Atomic Energy. Alluding to the Joint Committee's
statement that the licensing process should be used to “nip in the bud any

electnc utility industry, in its historical development, has been recognized as a natural
monopoly.” APCO Bnef, 19. Without ruling on the validity of the applicant’s statement, we
fail to see how a natural monopoly status aids the applicant’s central argument that it cannot
be found to possess monopoly power because the power to set prices or exclude competitors
lies elsewhere, in the state and federal regulatory agencies. By definition, a natural monopolist
has the power to exercise requisite control over prices or potential competitors. If anything, the
applicant's argument on this score is self-defeating.

**Accord, Davis-Resse, supra, ALAB-560, 10 NRC at 282-86.

Brief mention should be made here of the Public Utility Regulatory Policies Act of 1978
(PURPA) (Pub. L. No. 95-617, 92 Stat. 3117). Counsel for applicant sought to inject PURPA
into the proceeding at the oral argument before us (App. Tr. 242-45, 256); we declined to
consider the Act at that time but invited applicant to submit a written memorandum on its
importance to the case. Applicant sent us a memorandum on March 16, 1979; all the other
parties submitted responses. According to the applicant, the existence of PURPA should have
a “substantial impact on this Board’s deliberations,” including our decision on the existence of
monopoly power. APCO Memorandum, 4. We think otherwise. We have carefully reviewed all
the submitted materials; we are in complete agreement with the basic position of the
applicant’s opponents on this point. Nothing in PURPA causes us to change our findings on
monopoly power, applicant’s past conduct, or the appropriate remedies in this case.

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incipient antitrust situation,” the applicant contends that this “clearly
focuses on future, not past, activities.”2® In this same vein, the applicant
intimates that this is what the Joint Committee intended when it “made it
clear that the standard it was expecting a board to apply was that ‘it is
reasonably probable that the activities under the license would, when the
license is issued or thereafter, be inconsistent with any of the antitrust laws or
the policy clearly underlying these laws.’ ” (Emphasis supplied by the
applicant.)

In our judgment, the applicant has misapprehended the thrust of the
Joint Committee’s statements. It derives from them an intent which does
not give consideration to the statements in their entirety; nor does it give
recognition to the words of the statute to which the statements relate.
Properly considered, the statute could not reasonably support the position
the applicant advocates.

As already seen, Section 105c requires the Commission, in conjunction
with its review of a license application for a nuclear power plant, to “make a
finding as to whether the activities under the license would create or
maintain a situation inconsistent with the antitrust laws.” It is significant
that Section 105c is concerned with both a situation which would be created
when the license issued and a situation which would be maintained by the
license issuance. Although this latter finding does require an assessment of
the future, it equally clearly requires a review of the situation which
preceded the license. In other words, as we held in Wolf Creek,*! a
determination of the antitrust effects of granting a license can be made only
after the situation leading up to the grant has been ascertained.

Read with these words and meaning of Section 105c in mind, the
Statements of the Joint Committee take on a far different hue than that
painted by the applicant. The Joint Committee’s statement that the
licensing process should be used to “nip in the bud any incipient antitrust
Situation” can thus be seen as a endeavor to explain Section 105c’s
injunction against the use of a nuclear license to “create” a situation
inconsistent with the antitrust laws, and not, as the applicant insists, as a
limitation on the scope and level of antitrust inquiry. Similarly, the Joint
Committee’s statement that a “reasonably probable” standard shall apply
in making the antitrust determination called for by Section 105c, deals with

%APCO Brief, 44.
“/bid

“'Kansas Gas and Electric Co. et al. (Wolf Creek Station Unit No. 1), ALAB-279, 1 NRC 559,
567 (1975).

24d, 1 NRC at 572-73.

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the degree of probability which governs that determination.” Neither the
Joint Committee’s words nor any reasonable inferences from their context
fairly support the applicant’s suggestion that there exists a ban against
looking other than forward at the applicant’s projected activities under the
license. Indeed, both the statute and the Joint Committee’s statements
Strongly suggest otherwise. As we recognized in Wolf Creek, their
requirement of Commission assessment of the antitrust implications of
future activities of the applicant cannot be made in vacuo.“ Here, as
elsewhere, the past is prologue. Past conduct, good or bad, often indicates
what future conduct might be. This was recognized by no less than the
Supreme Court when it warned that “size carries with it an opportunity for
abuse that is not to be ignored when the opportunity is proved to have been
utilized in the past.”** This indicates that a meaningful assessment of the
issue before us — i.e., whether issuance of a license for construction and
operation of a nuclear power plant would create or mainiain a situation
inconsistent with the antitrust laws — cannot be made without first
considering the current and past activities of the license applicant. We have
little hesitance in construing Section 105c as permitting inquiry into the past
activities of the applicant; indeed, the statute and Commission decisions
require it. Wolf Creek, supra, 1 NRC at 573 and authorities there cited.

C. Standard for Finding of Liability

Applicant’s third broad argument concerns the standard utilized by the
Licensing Board in arriving at its finding on monopolization. As we
understand its position, the applicant seems to advance three grounds for
faulting the way in which the Board reached its findings. First, it says that
“the Board concluded that it need not find a violation of the antitrust laws,
but could be satisfied with a showing of ‘anticompetitive’ conduct which
need not have been bottomed on a specific violation.’ " It next states that
the Board considered not only “anticompetitive” conduct but conduct
which “tended” to be anticompetitive.” It then argues that in proceeding
on these premises the Board failed to base its conclusions on the antitrust
laws. In short, the applicant seems to be arguing that (assuming it is
wrong in its position that consideration of past activities is barred) under
Section 105c all that is cognizable are actual violations of the antitrust laws.

“Midland, supra, 6 NRC at 927 (quoting the Joint Committee Report); Wolf Creek, supra, |

NRC at 569-70.

“Wolf Creek, supra, 1 NRC at 572-73.

“United States v. Swift & Co., 286 U.S. 106, 116 (1932) (Cardozo, J.).
“APCO Brief, 44.

“Ibid.

“Id at 47.

1 ade

A-32

As we understand applicant’s argument, it believes this standard was
contemplated when “the Joint Committee made it clear that the standard it
was expecting a board to apply was that ‘it is reasonably probable that the
activities under the license would, when the license is issued or thereafter,
be inconsistent with any of the antitrust laws or the policy clearly
underlying these laws.’ "4

We find this argument without merit. In Midland, we addressed the
question, inter alia, of whether finding a “situation inconsistent with the
antitrust laws” necessanly depended upon a finding of actual violations of
those laws. We there ruled that Section 105c was not restricted to actual

violations:

The Licensing Board was correct in holding that proof of an actual
violation of the antitrust laws is not required to show the existence of a
situation “inconsistent with” them for Section 105c purposes. The
Congressional framers of the section (the members of the Joint
Congressional Committee on Atomic Energy) were onginally divided
between those who favored proof of an antitrust violation before
allowing Section 105c remedies to be imposed and those who thought a
showing of circumstances merely “tending” to such a violation should
suffice to allow that relief. An accommodation between the two views
was eventually reached. The members of the Joint Committee agreed
that proof of conditions which ran counter to the policies (underlying
those laws, even where no actual violation of statute was made out,
would warrant remedial license conditions under Section 105c. We
need not linger over the matter; this compromise is expressly
manifested in the report of the Joint Committee and is reflected in the

Commission’s decisions.°*!

These observations apply to applicant’s argument here as well. In this
respect, we find no evidence to support applicant's charge that the
Licensing Board considered conduct which “tended to be anticompetitive”
in making its five findings of monopolization. Our analysis of the Licensing
Board’s decision reveals that each of its findings of monopolization was
made on the basis that the acts in question were “anucompetitive.”

Finally, we turn again to Midland for the answer to the applicant’s
argument that the Licensing Board erroneously based its findings on mere
anticompettive conduct. The Licensing Board there had reasoned that a
“situation inconsistent with the antitrust laws” within the meaning of

“Jd. at 44 (emphasis deleted).

See 6 NRC at 907-14
*Id, 6 NRC at 908-09 (footnotes omitted). Accord, Wolf Creek, supra, 1 NRC at 570.

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Section 105c amounts to “anticompetitive conduct.” The Department of
Justice criticized that analysis, claiming that a focus solely upon conduct
without consideration of market structure would ignore essential elements
in such a situation. We rejected the Department’s argument:

We do not agree that the Licensing Board’s determination to
concentrate on the applicant’s conduct necessanly caused it to go
astray in the manner suggested by the Department. What an inquiry is
labelled is of lesser moment than how it is carned out. In our
judgment, evaluation of business “conduct” in a case like this one,
exploring charges essentially bottomed on Section 2 of the Sherman
Act and its underlying policies, requires the application of the same
monopolization and policy concepts as an investigation of an anticom-
petitive “situation.” This is so because, as with other statutes, actions
permissible under the antitrust laws in one situation may be proscribed
in another. An antitrust analysis of an applicant’s conduct must
therefore be undertaken in the context of the “situation” in which that
conduct occurred — in other words, against the background structure
of the relevant market. Of course that analysis of a utility’s conduct
must (among other things) be sensitive to judicial and FTC anttrust
rulings that the actions of a dominant business enterprise have to be
tested against a more stringent standard than applies to actions of
smaller concerns in highly competitive markets, and must also take
account of the general rule that electnc utilities are not exempt from
the Federal antitrust laws, particularly where they voluntarily enter
into commercial relationships governed in the first instance by business

judgment and not regulatory coercion.”

This analysis is dispositive of applicant’s argument here. We hold that, in
applying Section 105c to the instant case, the Licensing Board did not err in
the manner suggested by the applicant; our own antitrust scrutiny must go

forward.
Ill.
RELEVANT MARKETS
At the outset, we endorse — over the applicant’s objection — that

portion of the Licensing Board’s analysis which led it to conclude that the
market for wholesale power in the applicant's service area was a relevant

24d. 6 NRC at 912-13 (footnotes omitted).

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market for the purposes of this proceeding. For the reasons which follow,
however, we disagree with that Board’s holding that there are no other
relevant markets. As we explain, there are relevant markets both for
coordination services and retail power; the geographic bounds of both
markets also correspond to the applicant's service area.

A. Coordination Services Market

1. The Product Market. In the electric utility business, there is a common
practice among the companies of interchanging power and energy and
sharing responsibility for building new generating facilities to achieve
economic benefits unattainable by an individual utility acting alone.
Generally known as “coordination,” the practice includes various arrange-
ments among utilities for reserve sharing, emergency exchange of power
and energy, economy exchange of power and energy, maintenance
scheduling, seasonal capacity exchange, and Staggered construction. The
simple purpose of these arrangements is to allow producers of firm power®
to lower their costs of production.

In the proceeding below, Justice, AEC and MEUA claimed that the sale
or exchange of such power and energy and associated services compnised a
relevant market for antitrust purposes — namely, a “coordination services”
market separate from the wholesale and retail power markets.* Although
taking a somewhat different position, the staff also claimed that there was a
market for such services.** Not surprisingly, the applicant denied the

existence of such a market.»
The Licensing Board rejected the proffered coordination services market

on the ground that it “clearly would include a vanety of factors that in no
way could be close substitutes for one another.” 5 NRC at 886. Although

“We defined firm power in Midland as “essenually a uulity commitment to supply electric
energy to a customer on demand for as long as needed. One contracung for firm power
(whether at retail or wholesale) is buying not merely energy, but assurance that (barring some
extraordinary unforeseen circumstance) the utility will make that power availatte without
interruption when called for.” 6 NRC at 950.

“Justice and MEUA referred to it as a “regional power exchange” market. Justice Prehearing
Brief Below, 55-58; MEUA Prehearing Brief Below, 28-31. AEC denominated it as the “bulk
power supply services market.” AEC Prehearing Brief Below, 24. We first adopted use of the
term “coordination services” market in our Midland decision. We use that term here as we
think it best describes the practice which makes up that market. For a detailed discussion of
the factors which make up the coordination services market, see Midland 6 NRC at 902-03,
949-77.

**The staff's original position was that the elements of the coordination services market
combined with the market for firm wholesale power to form a single bulk power services
market. Staff Prehearing Brief Below, 52-54. However, it no longer adheres to this position. In
view of our Midland decision, the staff now concedes that a separate market for coordination
services exists. Staff Reply Bnef, 43-44.

**See APCO Proposed Findings, 447-57.

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the Licensing Board expressly recognized that in some cases a number of
diverse services could be clustered and treated as a single market (citing
United States v. Philadelphia National Bank,*” it apparently thought that
United States v. Grinnell Corporation precluded that treatment here.
Interpreting Grinnell as requiring the factors making up the proffered
market to be “reasonably interchangeable” with each other, the Board
found that they were “not usually close substitutes for one another” and,
hence, “not in the same market.” Jd. at 887.

On appeal, the parties essentially adhere to their original positions. The
applicant supports the Licensing Board’s decision, its principal
post-Midland argument being that the existence of a coordination services
market in the area involved here lacks evidentiary support.*® The other
parties oppose the conclusion reached by the Licensing Board. Their
argument basically is that not only is there evidence indicating the existence
of such a market, but that a finding to that effect is required by Midland
and applicable judicial decisions. We agree with this position.

a. Because the Licensing Board decision turned on what it
considered to be the teaching of Grinnell, we begin our analysis with a
detailed review of that case. Grinnell involved the question of whether the
defendant company had monopolized the market for accredited central
station service®! in violation of Section 2 of the Sherman Act. The District
Court had treated the entire accredited central station service business as a
single market.* The company argued, however, that the individual central

97374 U.S. 321 (1963).

$8384 U.S. 563 (1966).

%APCO Reply Bnef, 23-38.

“Justice Bnef, 135-149; Jusuce Reply Bnef, 14-20; Staff Bnef, 10-20; Staff Reply Brief, 42-44;
AEC Bnef, 83; AEC Reply Bnef, 11-13; MEUA Bnef, 41-46.

*'Central station service, simply put, protects premises by installing thereon fire or burglary (or
both) detection devices which automatically transmit an electric signal to a central station
which is manned 24 hours a day. Upon receipt of a signal, the central station, where
appropnate, dispatches guards to the protected premises and notifies the police or fire
department directly. An accredited central station service is one which has been approved by
insurance underwriters. 384 U.S. at 566-67.

*Among the various central stauon services offered were the following:

(1) automatic burglar alarms;

(2) automatic fire alarms;

(3) sprinkler supervisory service (any malfunctions in the fire sprinkler system — e.g.,
changes in water pressure, dangerously low water temperatures, etc. — are reported
to the central station); and

(4) watch signal service (night watchmen, by operating a key-triggered device on the
protected premises, indicate to the central station that they are making their rounds
and that all is well; the failure of a watchman to make his electrical report alerts the

central station thai something may be amiss).

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Station services are so diverse that, under du Pont,® they cannot be lumped

together to make up the relevant market.
In upholding the lower court’s decision, the Supreme Court declared:

But there is here a single use, i.e., the protection of property, through
a central station that receives signals. It is that service, accredited, that
is unique and that competes with all the other forms of property
protection. We see no barrier to combining in a single market a
number of different products or services where that combination
reflects commercial realities. To repeat, there is here a single basic
service — the protection of property through use of a central service
station — that must be compared with all other forms of property

protection.

384 U.S. at 572.
The Court went on to say:

Burglar alarm service is in a sense different from fire alarm service;
from waterflow alarms; and so on. But it would be unrealistic on this
record to break down the market into the various kinds of central
station protective services that are available. Central station companies
recognize that to compete effectively, they must offer all or nearly all
types of service. * * * We held in United States v. Philadelphia Nat.
Bank, 374 U.S. 321, 356, that “the cluster of services denoted by the
term ‘commercial banking’ is a distinct line of commerce.” There is, in
our view a comparable cluster of services here.

Then, specifically addressing du Pont, the Court explained:

There are, to be sure, substitutes for the accredited central station
service. But none of them appears to operate on the same level as the
central station service so as to meet the interchangeability test of the du
Pont case. Non-automatic and automatic local alarm systems appear
on this record to have marked differences, not the low degree of
differentiation required of substitute services as well as substitute

articles.

Id. at 572-73.
The Supreme Court in Grinnell did not, as the Licensing Board

apparently thought, lay down a rule that a market could never be

Id. at 566 n.4.
© United States v. E.1. du Pont de Nemours & Co., 351 U.S. 377 (1956) (the cellophane case).

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comprised of products and services which were not interchangeable with
each other. For, in holding that the combination of services comprising the
central station service constituted a relevant market, the Court expressly
indicated that it was following the course it had adopted in Philadelphia
National Bank. In that case, the Court found that the cluster of clearly
diverse products (vanous kinds of credit) and services (such as checking
accounts and trust administration) denoted by the term “commercial
banking”* comprised a product market “sufficiently inclusive to be
meaningful in terms of trade realities.” 374 U.S. at 356-57.

To be sure, the Court in Grinnell did take note of its ruling in du Pont
that products and services which consumers may reasonably interchange
for the same purposes make up a relevant market. But in Grinnell, the
“interchangeability” with which the Court was concerned related to
whether there were in the market place available alternatives to overall
central station service itself; the Licensing Board’s application of the
“interchangeability” test here would indicate a contrary belief that the
individual products and services making up the central station service had
to be interchangeable with each other. In other words, the fact that central
Station service was made up of various products and services which were
not interchangeable did not prevent the Court from holding the central
Service itself to be a relevant market. In this respect, the Court’s action was
not novel. It did no more than follow an avenue it had opened up in
Philadelphia National Bank some three years earlier.®

b. Owing to the erroneous view it took of Grinnell, the Board below
rejected the proffered coordination services market on grounds we cannot
uphold. We must then take the next step and ascertain for ourselves
whether such a market exists in terms of “commercial or trade realities”
and, if so, what that market’s dimensions are. Fortunately, that work has
been made easier by our prior decision in Midland. Notwithstanding the

“More specific examples of banking “products” identified by the Court were: unsecured
personal and business loans, mortgage loans, loans secured by securities or accounts
receivable, automobile installment and consumer goods installment loans, tuition financing,
bank credit cards, revolving credit funds. Examples of banking services included: acceptance
of demand deposits from individuals, corporations, governmental agencies, and other banks;
acceptance of time and savings deposits; estate and trust planning and trusteeship services;
lock boxes and safety deposit boxes; account reconciliation services; foreign department
services (acceptances and letters of credit); correspondent services; and investment advice. 374
U.S. at 326 1.5.

**For other cases holding that a bundle of products and services can constitute a relevant
market, see United States v. Connecticut National Bank, 418 U.S. 656 (1974); United States v.
Marine Bancorporation, Inc., 418 U.S. 602 (1974); United States v. Phillipsburg National Bank,
399 U.S. 350 (1970); United States v. United Shoe Machinery Corp., 110 F. Supp. 295 (D. Mass.
1953), aff'd per curiam, 347 U.S. 521 (1954); Credit Bureau Reports, Inc. v. Retail Credit Co., 358
F. Supp. 780 (S.D. Texas 1971), aff'd 476 F.2d 989 (Sth Cir. 1973).

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fact that Midland involved other utilities in a different part of the country,
we find its teachings useful here for the reason expressed by the Licensing
Board based on its analysis of the evidence in this case:

The principles of electric power supply production and coordination
are generally applicable throughout the electric utility industry
(Mayben, Direct, pp. 3-9). These principles do not vary significantly
among electne uulities regardless of differences in locations, although
they may change to a certain extent depending on corporate policy and
financial requirements (Mayben, Direct pp. 8-9; Tr. 5,576-5,586; FPC
National Power Survey, Part 1, Chapter 17 “Coordination for Reliabili-
ty and Economy,” December 1971).

5 NRC at 834.

In Midland, we traced in painstaking detail the operations of the electric
uulity industry. We discussed the manner in which utilities interact with
each other in planning for and constructing the necessary transmission and
distribution facilities and in Operating them. We explained how, because of
the peculiar characteristics of electnicity, utilities buy, sell and exchange
surplus bulk power and associated services to improve the efficiency and
reliability of their operations. For reasons there discussed, we concluded
that there existed a separate coordination services market consisting of
these types of transactions. We stated:

[Cjoordination arrangements usually compnise several differing types
of surplus power transactions and associated services... . [ T]}hese
various power transactions are not reasonably interchangeable with
wholesale power. But neither are they necessarily interchangeable with
one another. All, however, serve an essentially similar function. That
function is facilitating production of firm bulk power at lower cost and
with greater reliability by making profitable use of otherwise surplus
generating capacity. These arrangements constitute a “bundle of
services” which merits recognition as a distinct market similar to the
way various services offered by commercial banks fall in one and the
same product market. United States v. Philadelphia National Bank,
supra, 374 U.S. at 356.

6 NRC at 975.
We know of no compelling reason for reaching a different conclusion

here. As will be seen, the evidence in this proceeding reveals that the same

*See 6 NRC at 949-74.

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kinds of transactions found to occur in Michigan take place in Alabama as
well.°’

The Southern Company Power Pool Intercompany Interchange Contract
(D.J. 3009), to which applicant is a party, provides the contractual
framework within which the members of the Pool engage in coordination
services transactions. Although not every type of service available under the
agreement is specifically identified, the terms of the agreement, viewed in
light of the manner in which the utility industry generally operates, leave
little room to doubt that the various coordination services activities are
actively pursued by the utilities involved.

For proof of the validity of this observation, we need but cite applicant’s
own admission contained in the power pool agreement:

* * *

WHEREAS, each of the POWER COMPANIES and their respective
customers achieve substantial economies through the common planning,
development, and coordination of their operations which they have
successfully practiced for many years, and

WHEREAS, such common planning, development, and coordination
provides certain advantages to POWER COMPANIES and their

respective customers including:

(a) The staggering of the construction of new generating facilities so
that each of the respective POWER COMPANIES can construct and
install for their respective territorial loads the opumum size generating
facilities which produce maximum economies of scale;

(b) An opportunity for each of the respective POWER COMPA-
NIES to dispose of surplus energy and capacity that may be available
from time to ume due to the staggered construction of generating units,
seasonal vanations in demands for electric power, and vanations in
patterns of the diversity of loads imposed from time to time on the
respective POWER COMPANIES;

(c) An opportunity to utilize the seasonal and diversity patterns of
other utilities not contiguous to each of the respective POWER
COMPANIES for the outlet of surplus capacity and energy which may

*’We found in our Davis-Besse decision a similar market to exist in the terntones served by the

utilities there involved. 10 NRC at 287, 301-02.
“in referring to the exhibits and tesumony submitted below, we have followed the system of

notation used by the Licensing Board. See 5 NRC at 820 n.4.

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be available from time to time, together with the opportunity, because
of such variation in seasons and diversity of loads, to acquire from
other utilities energy at a low cost and thus avoid or defer the
construction of generating capacity to meet seasonal loads;

(d) The opportunity to pool reserves thus reducing the magnitude of
reserve Capacity required by the respective POWER COMPANIES in
order to assure reliable service to their respective customers and

(e) Improvements in the reliability of electric service through the use
of transmission interconnections which provide the respective POWER
COMPANIES with the opportunity to call upon one another as well as
other utilities with which they, or any of them, are interconnected to
provide backup service in case of emergencies or breakdowns in excess
of the reserves carried by the respective POWER COMPANY:

« * *

D.J. 3009, pp. 2-3 (emphasis supplied).

Other evidence confirms that the applicant engages in various “coordina-
tion services” transactions. It participates in Joint ownership arrangements
as, for example, with the Georgia Power Co. over the Gaston coal-fired
generating plant (D.J. 1002); it shares reserves with the other companies in
the Southern Pool (D.J. 603, 604, 605, and 3009); it engages in short-term
capacity exchanges with neighboring utilities ‘Mississippi Power and Light,
D.J. 3002; Duke Power Co., D.J. 3003; South Carolina Electric & Gas Co.,
D.J. 3004; Tennessee Valley Authority, D.J. 3007; and Florida Power
Corporation, D.J. 3008); it participates in seasonal capacity exchanges with
TVA and with the Florida Power Corporation (D.J. 3007, 3008, 3009, 603,
604, and 605); and it exchanges emergency, maintenance and economy
energy with other utilities (D.J. 3002, 3003, 3004, 3007, 3008, 3009, 603, 604,
and 605),

Even without our Midland decision as precedent, we would reach the
same conclusion here. As we have emphasized, court decisions teach that,
for antitrust analysis purposes, a relevant market must reflect commercial
or trade realities.” Guided by that rule, our review of the record in this
proceeding persuades us that there exists a coordination services market

“See, ¢.g., Phillipsburg National Bank, supra, 399 U.S. at 360; Grinnell, supra, 384 U.S. at 571-
16; Philadelphia National Bank, supra, 374 U.S. at 356-57.

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comprised of the types of transactions for the sale and exchange of power
and energy and associated services discussed above.”

c. The applicant does not disagree with the applicability of the
“trade realities” rule to the matter at hand. Indeed, it specifically endorses
that rule’s controlling effect here.”' It does, however, dispute the conclusion
advocated by its opponents. Its position essenually is that, whatever may be
said of the electric utility industry generally, the evidence in this record
simply is insufficient to show a coordination services market exists in the
area of interest here.”

To support this position, the applicant challenges the testimony of Mr.
Mayben and Dr. Wein, Justice’s two principal witnesses. At the core of its
attack is the proposition that these witnesses possess no factual knowledge
of the operations of the utilities in Alabama (beyond the terms of certain
contracts and rate schedules furnished them) and that, consequently, their
testimony lacks foundation and is entitled to no weight.”

We cannot accept applicant’s position. To begin with, we disagree with
its thesis regarding the state of the witnesses’ factual knowledge of the
operations of the utilities involved. Both Mr. Mayben and Dr. Wein have
expertise in the utlity field.* Beyond that, Mr. Mayben had studied not

“In Midland, we excluded from the coordination services market there involved
“developmental coordination” — i.e., the construction of power plants on a staggered basis or
as joint ventures by two or more uulities with the intention of sharing the power generated by
them — but included within that market the purchase and sale of “unit power” from such
plants. 6 NRC at 976. Similarly, we do not include “developmental coordination” within the
coordination services market held to exist here.

"In applicant's own words:

“The touchstone of market analysis is idenufying patterns of trade and commercial
realities in a designated area.”

APCO Reply Brief, 37.
“Applicant also advances another argument. Avowedly to show the “lack of commercial

reality” of the coordination services market, the applicant explains in detail how it is part of an
“untegrated public uulity system” with three other utilities which form the Southern Company,
a holding company approved by the SEC; and how AEC gained by obtaining its deficit power
and energy requirements from applicant rather than from the four-company power pool.
APCO Reply Brief, 32-37; see also App. Tr. 79-92. Far from showing a lack of commercial
reality, the fact that AEC and the applicant engage in such arrangements and that AEC finds it
economical to do so indicates the very opposite — that there is a market for bulk power to

meet deficit requirements.

?APCO Reply Brief, 23-38.
“Mr. Mayben is a professional engineer registered in some thirteen states. Since 1965, he has

been a partner and supervising executive engineer with R. W. Beck and Associates unvo'ved in
providing consultant engineenng services to vanous utilities. His work expenence has included
the design of power generating stations, high-voltage transmussion lines and substations; and
power supply planning with particular concern with power pooling and coordinated supply.
He has served as the pnncipal Systems Engineer to the Missoun Basin Systems Group
(MBSG), a power planning and power pooling Organization, whose electne utility members

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only the terms of the power pool and other agreements entered into by the
utilities in Alabama and in the neighboring areas, but the rate schedules on
file with the Federal Power Commission (now Federal Energy Regulatory
Commission); in addition, and perhaps most important, he had analyzed
the pool operating minutes — which detail the actual transactions that take
place.’*> Dr. Wein, in turn, based his testimony on the existence of a

have generation and transmission facilities covering a multi-state area in the Upper Missoun
River Basin. Since 1967, he has also worked extensively in the development and
implementation of an ongoing bulk power supply program for the Nebraska Public Power
Distnct, a uulity which has the bulk power responsibility for a major portion of the State of

Nebraska. Mayben, Direct, 1-5.

Dr. Wein’s background 1s equally impressive. He is a professor at the Graduate School of
Business Admunistrauion at Michigan State University, a position he has held since 1959. From
1961 through 1963 he was on leave while serving as Chief Economist and Head of the Office of
Economucs of the Federal Power Commission (now Federal Energy Regulatory Commission).
Thereafter, he, along with others, established the Insutute of Public Utilities at Michigan State
University in 1965. Before becoming a professor at Michigan, he was Associate Professor of
Economics and Industnal Administration at the Carnegie Institute of Technology, a
consulting economist for industry, pnncipal economist of the Antitrust Division of the Justice
Department (where he also served as special advisor to the Attorney General on antitrust
problems in the steel industry), pnncipal economust in the Office of Price Administration, a
semor staustician with the Army Aur Forces, a principal economist in the War Production
Board and a junior economist in the U.S. Commerce Department. He holds a masters degree
in economics from Columbia University and 2 Ph.D. in economics from the University of
Pittsburgh. Wein, Direct, 1-16.

*On cross-examination, Mr. Mayben explained the basis for his knowledge of the operations

of APCO in the following manner:

Q. Mr. Mayben, am I correct in my understanding that the knowledge which you have
of such portion of the so-called regional power exchange market denominated by you is
based upon transactions reflected in certain rate schedules on file with the Federal Power

Commission which were furnished to you by the Department of Justice?
A. Yes, that information was used in my preparation of this proposed Exhibit 101.

Q. Does your knowledge of such portion of the regional exchange market come from
any other source of information which you can specify?

A. Yes. It comes from my expenence in working with clients who are engaged in
regional exchange acuviues and my ability to interpret contracts as to the types of
transactions which customanly occur under interconnection agreements which have

interchange type service schedules to them.

Q. Other than this general knowledge, Mr. Mayben, is there any other source for the
particular regional power exchange market which you assert here?

A. Well, of course, | did examine the pool Operaung Committee Minutes, and
informauon there led me to believe that in fact there were transactions taking place

pursuant to the contracts that the Department of Jusuce provided to me.

Tr. 1721-22.

A-43

coordination services market in large part on what he learned from Mr.
Mayben concerning the manner in which utilities operated.”* Considering

”*Dr. Wein explained the basis for his testimony as follows:
MR. MILLER: Just a minute. Your were asked about Mr. Mayben.

THE WITNESS: That's right. I asked him then whether the structure of the
industry — of course I know some of that myself, but I wanted to get his view, as to
whether wholesale power was a reasonable type of transaction, one which occurs in
Alabama, and of course I asked about the [Midland] case, because we were both

associated there, too.

Yes. He thought that there are wholesale transactions and he described the kinds
of conditions under which wholesale transactions take place.

Of course, there was a question of retail, where does wholesale leave off and retail
begin. That sort of thing. That’s the sort of thing I asked Mr. Mayben to do.

In the [Midland] case, I asked him to do another.
MR. MILLER: I don’t think you were asked about that.
THE WITNESS: I'm sorry. I sort of mix these things up.

BY MR. BALCH:

Q. Did you ask Mr. Mayben to undertake this analysis or investigation without
any further delineation or instructions?

A. Which analysis and investigation?
Q. You said you asked him to find out what kind of transactions take place.

A. He didn’t have to make any analysis or investigations. He knew. He just told
me and explained to me what they meant. Then I read up about it.

CHAIRMAN GLASER: Well, did he tell you what the source of his knowledge
was?

THE WITNESS: Well, he said the source of his knowledge was, he was an
engineer, had negotiated many contracts and he knows the business. I didn’t know

beyond that.

BY MR. BALCH:

Q. Did you assume that the same kind of transactions would take place in the
southeast as have taken place perhaps in the northeast or the Missouri Basin?

A. All I asked him were the kinds of things that would take place in a power pool.
Then | asked him, did it make much difference whether it would be in Alabama or
any other place and he said, the importance might change. Some might have more
sorts of transactions. Some might have less sorts of transactions. But in effect, the
transactions, all could be classified under very common classification.

Q. Dhd he choose the transactions from which his analysis would be made, or did
you choose the transactions from which the analysis would be made?

A-44

the universality of these utility practices, confirmed by the Board below and
by us in Midland,” we find no merit to the applicant’s position that the
testumony of Mr. Mayben and Dr. Wein lacks factual foundation.

An even more compelling reason requires rejection of applicant's
argument. Although expressed in terms of a failure of the other side’s proof,
the unstated premise underlying the argument is that applicant in fact does
not engage in the kind of coordination activities to which Mr. Mayben and
Dr. Wein testified. The critical failing of this premise is that it runs directly
counter to the very words subscribed to by the applicant and the other
parties to the Southern Company power pool agreement — an agreement
which has continued in effect for some 30 years.” In that agreement, the
signatonies not only specifically admitted to having “successfully practiced
for many years . . . common planning, development, and coordination of
their operations,” but also to a desire to “continufe] . . . coordinated
operation.””? Applicant would now have us disregard those words as no
more than wasted ink. This we cannot do.

To sum up, we are satisfied from our review of the record that, for
purposes of this proceeding, a coordination services market exists in the
general area of applicant’s operation. We need only to determine its
geographic dimensions to complete our analysis of that market. We turn
now to that task.

2. The Geographic Market. In the proceeding below, Justice took the
position that a coordination services market “by its very nature does not
lend itself to precise geographic market definition. Electric utilities with
access to this market range far and wide in search of useful power exchange
transactions; they are not restricted to specific geographic limits or certain
identified utiliues with whom they may deal.”® For these reasons, Justice
maintained that precise definition of the geographic boundaries of this
entire market is not necessary to a consideration of monopolization
charges; it suffices to focus attention on a separate economic entity or
submarket within the broader market.®!

In Midland, Justice took a similar position. On that occasion, we said:

A. I think we sort of jointly agreed on what the transactions were.

Tr. 13,358-60.
"See 5 NRC at 833-37 (Farley below); 6 NRC at 1066-67 (Midland); see also pp. 1050-1051,

supra.
"The power pool agreement bears an onginal date of October 16, 1950. This gives an
indication of the extended penod dunng which applicant has been involved in coordination
activities. See DJ. 3009.

"Id. at pp. 2-4.

“Justice Preheanng Bnef Below, 57.

"Id at 58.

1057

A-45

We agree with Justice’s legal position. Where a discrete submarket
exists within an overall geographic market, monopolization of the
submarket is itself an antitrust violation. Brown Shoe Co. v. United
States, supra, 370 U.S. at 336-37; Case-Swayne Co. v. Sunkist Growers,
Inc., supra, 360 F.2d at 455-59; In re Luria Brothers and Co., supra, 62
FTC at 612-14. A submarket must correspond to commercial realities
and be economically significant, Brown Shoe, supra, and its existence is
a question of fact that must be “charted by a careful selection of the
market area in which the seller operates and to which the purchaser
can practicably turn for suppliers.” United States v. Philadelphia

National Bank, supra, 374 U.S. at 359.

6 NRC at 977.
Those same observations guide us here. The record in this proceeding

discloses that the applicant engages in exchanges of power directly or
through other Southern Pool members with surrounding electric utilities,
including Mississippi Power & Light Co., Florida Power Corp., Duke Power
Co., South Carolina Electric & Gas Co., and TVA (Mayben, Direct, 54-55;
D.J. 101, 3002, 3003, 3004, 3007, 3008; Wein, Direct, 62-64). Thus, at first
impression there might seem to be support for a finding of a broad
geographic market encompassing the areas in which these utilities operate.

But we need not pause to look for a precise definition of the geographic
boundanies of such an overall market. For that is not the market relevant to
our inquiry. For purposes of this proceeding, we must focus on that market
area, within the overall market, to which the smaller utilities in Alabama
can practically turn for suppliers.

The record in this proceeding discloses that the area within which AEC
and the other utilities comprising MEUA® may seek coordination services
is limited to applicant’s service territory and nearby environs — central and
south Alabama. Applicant owns all transmission lines in the area over 115
kv and controls all transmission facilities to utilities outside that area. 5
NRC at 900-01; D.J. 1000; D.J. 1006; D.J. 1008; AEC X CRL-IA; St.
John, Direct, 7, 39; Harris Tr. 25,455-59. As a result, it has the power to
grant or deny access by AEC and the other utilities to the kind of
coordination services engaged in by APCO. For these reasons, we conclude

“While MEUA mught arguably be considered a participant (or potential participant) in the
coordination services market, we think it worth repeating a point we made in Midland: for a
uulity without any generating capacity of its own, “{cloordination power services are not useful
to it and for its purposes are not functionally interchangeable with wholesale power. In short,
@ven the nature of coordinauon power, [non-generators) literally cannot substitute
coordination power for wholesale power as a long-term source of firm electnc power.” 6 NRC
at 963. As the Board below noted, none of the members of MEUA owns or operates any

generating faciliues. 5 NRC at 827.

A-46

there exists, for purposes of our antitrust analysis, a re/evant coordination
services market in central and south Alabama, the area within which AEC
and the other smaller utilities are confined tor access to that market in
terms of “commercial or trade realities.”

B. Retail Market

In the proceeding below, Justice and both intervenors submitted that the
retail market for firm power constituted a relevant market within which to
examine applicant’s conduct. The product market was defined as the
supply of firm power to the ultimate consumer;* the geographic market
was seen as corresponding to central and southern Alabama, “the area
where applicant sells or could reasonably compete to sell at retail.’8

The Licensing Board agreed that “[rJetail firm power is clearly a distinct
product market.” 5 NRC at 887. Citing Oster Tail Power Co. v. United
States,* the Board further found that the economic viability of retail
distribution systems is worthy of antitrust protection. /d. at 889. It
nevertheless rejected the proposed market. While conceding that some
competition exists “in the interstices of the service areas of retail
distribution systems,” the Board found that the local distribution of retail
power is a natural monopoly and that the rivalry among retail sellers is
insufficient to bind all of central and south Alabama into one geographic
market. /d. at 888. And, while it determined that the hundreds of individual
local markets would have been proper subjects for examination, the Board
Saw no purpose in examining such “natural monopoly” situations for
antitrust violations. The Board concluded: “Competition berween retail
distribution systems, if it is of only infra-marginal proportions, is presum-
ably outside of the scope of antitrust remedy.” /d. at 889 (emphasis in
onginal).

The Board sought to bolster its conclusion by referring to Otter Tail. In
that case, the Board wrote, “the focus [was] upon the retail distribution
entity as a buyer (or potential buyer) in the wholesale power market.” Every
anticompetitive practice in the case was said to have taken place at the
wholesale level. The relief decree “in every facet, affected retail distribution
systems in their access to and role as buyers in the market for bulk
wholesale power.” This led the Board to wnite that there is a “market which

“The NRC staff argued below the relevance of only one market — that for “bulk power supply
and bulk power supply services.” Staff Proposed Findings, 27 (43.02). On appeal, the staff
changed its position in light of our decision in Midland, it now maintains that separate markets
exist for coordinated services and for wholesale power. Staff Reply Bnef, 42-45; see also, fn. 55
supra. The staff made no mention of the retail market either below or on appeal.

“See, ¢.g., Jusuce Proposed Findings, 62 (44.01).

See, e.g., Justice Proposed Findings, 65 (44.07).

410 U.S. 366 (1973), affirrung in part and remanding in pari, 33\ F. Supp. 54 (D. Manan. 1971).

A-47

is singularly relevant for the licensing of nuclear facilities to generate
electricity: the market for wholesale power.” /d. at 889-890.

Justice, AEC, and MEUA all excepted to the Board’s rejection of the
proffered retail market.” On appeal, they argue that the Board was
factually incorrect when it failed to find sufficient compeution at retail to
jusufy grouping central and south Alabama into one geographic market.
Moreover, they cite both Otter Tail and our decision in Midland as
requiring reversal of the rejection below of the retail market.

1. The Market in Otter Tail. We begin our analysis by taking issue with
the Licensing Board’s interpretation of Otter Tail. As the Board stated, the
violations in that case took place at the bulk power level; the remedies were
applied at that level as well. But the marker involved in the case was the
retail market. It was this market that the defendant was attempting to
monopolize; the remedies were designed to effectuate competition at the
retail level, not the wholesale level. The district court’s decision in Orter Tail
puts any doubt about this to rest. See 331 F.Supp. 54, 58, 61 (D. Minn.
1971).

In the case now before us, applicant is allegedly attempting to
monopolize (or has succeeded in monopolizing) three separate markets. It is
further claimed that an unconditional license to operate the Farley facility
assertedly will have anticompetitive effects on all three markets. In such a
situation, we do not read Oster Tail as mandating that we restrict ourselves
to an analysis of the wholesale market. To the contrary, we see that case as
standing for the proposition that the markets relevant for analysis are all
those in which anticompetitive effects may be felt.

2. The Product Market. Beyond its espousal of the view that the bulk-
power market is the “singularly relevant” market in NRC antitrust
actions,® the Licensing Board appeared to have one fundamental problem
with the proposed retail market: it simply did not believe there was
sufficient actual (or potential) competition at retail to jusufy antitrust
analysis. The advocates of the market contend that the Board was factually
incorrect in its assessment of the amount of competition at retail; they see
the retail situation in Alabama as nearly identical with the situation we
found in Midland to exist in Michigan.” Applicant, on the other hand,
argues that the potential for retail competition in Michigan was far greater

"Jusuce Excepuons, pp. 2-3 (Exceptions 6 and 7); AEC Exceptions, pp. 2-3 (Excepuons 5 and

6); MEUA Exceptions, pp. 1-2 (Exceptions 4, 5 and 6).
“A view not shared by us in Midland (6 NRC at 949-97) and Davis- Besse (10 NRC at 270, 301-

02); in both cases all three markets offered here were found relevant.
“Jusuce Brief, 148-49; Justice Reply Bnef, 24-28; MEUA Brief, 6-17.

A-48

than in Alabama; it sees no inconsistency between the Licensing Board’s
decision and Midland.™

In assessing the extent of retail competition, it is important to consider
the nature of the industry involved. Most retail consumers of electricity are
locked into a particular supplier; the residents of Birmingham, for example,
must currently look to applicant for their electric needs. As the Supreme
Court said in Otter Tail (410 U.S. at 369): “[eJach town . . . generally can
accommodate only one distribution system, . .. making each town a natural
monopoly market for the distribution and sale of electric power at retail.”
Clearly we are not dealing with a product that is susceptible to intense
competition for every sale.

This is not to say that retail competition is either impossible or
unprotected by the antitrust laws; Oster Tail, Midland, and City of
Mishawaka v. American Electric Power Co. (Mishawaka I1)*' are cases that
all hold otherwise. Although competition for individual users already taking
electric service from a supplier may be unlikely to occur,” competition can
take place for certain new loads or for the right to be sole distributor in a
municipal area. There can also be “yardstick competition”;™ the
existence of a potential competitor may have an effect on the actions of
another distnbutor.

In Alabama, franchise, individual load, and yardstick competition are all
present to some degree. In terms of franchise competition, Alabama law
prohibits utilities from serving within municipal cOrporate limits without
the permission of the municipal government.*% An examination of a list of
applicant's franchises (prepared in 1973) reveals that applicant had 313

®APCO Reply Brief, 38-44.

*'465 F. Supp. 1320 (N.D. Ind. 1979), aff'd in part and remanded on other grounds, 616 F.2d 976
(7th Cir. 1980), cert. denied, 449 U.S. 1096, 66 L.Ed. 2d 824 (1981).

™ Although such competition is rare, we found in our Davis-Besse decision that street-to-street,
head-to-head competition took place in a good part of the City of Cleveland. 10 NRC at 274.
While there is less of it in Alabama, the Board below found such competition in the Town of
Samson. 5 NRC at 888.

"The fact that local distribution may be a natural monopoly does not mean the identity of the
monopolist cannot change. In Orter Tail, for example, the sole competition found by the Court
was for the control of local distribution ;

““Yardstick competition” is a form of competiuon in which two sellers (in this case,
distributors of retail power), not directly competing against each other for sales, have their
pricing policies (and any other practices deemed relevant by purchasers) compared. As it
relates to the retail distribution of electricity, a local distributor's performance is measured
against that of other nearby utilities. I" yardstick competition exists in the area, the local
distnbutor will have to compare favorabi’ with the other utilities or it will be replaced. If this
form of compeuuon is not present, the loc: | distributor need not be concerned about meeting
the price and services of other utulites.

Farley Direct, 46; 562-64; Alabama Constitution of 1901, § 220.

A-49

different franchises in 273 municipalities. Of those, only 26 franchises in 24
locations are terminable; the balance are perpetual.*

In terms of its retail sales, in 1973 applicant made 51% of such sales in
municipalities where it holds perpetual franchises, 9% in muncipalities
where it has terminable franchises, and 40% outside of municipalities
(where no franchises are required).%” Perpetual franchises in Alabama are
not exculsive;* municipalities may offer competing franchises to other
utilities. Under the terms of the Booth Act,” however, municipalities may
not establish a municipally-owned system without first offering to purchase
the facilities of the existing franchisee. Should the franchisee decline the
offer, the municipality may establish its own competing system, but the
onginal franchise (unlike in Michigan and in the states served by Otter Tail)
would still be in effect.! Thus, in the vast majority of its service area,
applicant can be subjected to head-to-head competition, but it cannot
necessanly be replaced. Due in no small part to the economic difficulties
inherent in establishing a competing system, no municipality in applicant's
service area has ever set up a distribution system to compete against one of
applicant’s franchises. !?!

Alabama Power has acquired some other distribution systems since 1950,
but it takes pains to point out that none of these acquisitions has been at the
expense of municipally-owned systems.'® The primary acquisition was that
of the Birmingham Electric Company (by merger) in 1952.'® Other
acquisitions included Liddell Power Company (a privately-owned utility
largely operating in Camden, Alabama) in 1955,! the electric facilities of
West Point Manufacturing Company (a textile company that previously
provided electric service to its former “mill villages”) in 1960,'% and the

*APP.X JMF-82. Of the terminable franchises, three ( Bay Minette, Brewton, and the
transmission franchise in Dothan) are listed as “terminable;” the other franchises expire in a
certain number of years (usually thirty years after issuance). While our arithmetic does not
Square with applicant's tesumony that it holds franchises in only 261 municipaliues (Crawford
Dnrect, 30), the discrepancy may be based on the limited nature of some of the franchises listed
un JMF-82.

"Crawford Direct, 119. In comparison, 45% of Consumers Power’s retail sales were made
under perpetual franchises. Midland, 6 NRC at 933.

“See Bessemer v. Birmingham Electric Co., 248 Ala. 345, 27 So. 2d. 565 (1946).

“Title 48, Alabama Code §§ 342-347.

‘There is some quesuon as to whether a municipality possesses the authority to condemn an
established distnbutor's property. See App. Tr. 151.

''The town of Ozark miuated a proceeding under the Booth Act in 1956 in an attempt to
establish its own distnbution system. Applicant elected not to sell its facilities and the town
never constructed a competing system. See Alabama Power Co. v. Alabama Public Service
Commussion, 267 Ala. 474, 103 So. 2d 14 (1958).

®@APCO Reply Bnef, 39

Farley Direct, 227-32.

Id at 246-47.

id at 270-71

A-50

electric facilities of Mount Vernon Mills (another textile company) in
1968.'% Dunng this same ume period, the company sold small amounts of
its distnbution system in areas into which the cities of Bessemer, Sylacauga, :
and Opelika extended their corporate limits.'” In addition to these
transactions, applicant has been approached at times by towns requesting
that it supply retail service in lieu of the service then being provided by ;
cooperatives.'* In other instances, unincorporated rural communities
presently served by cooperatives have considered incorporating and
extending a franchise to applicant.'®

As menuoned earlier (see pp. 1062, supra), there is no head-to-head
competition for most electric loads. Nonetheless, all the parties agree that
there is some competition for individual loads.""° This competition occurs
in: (1) the town of Samson (served by both applicant and Covington
Electric Cooperative, which compete on a house-by-house basis); (2)
outlying areas annexed by a municipality where another supplier currently
serves at retail;'!' (3) rural areas either where competition for individual
loads 1s permitted (in certain circumstances) by non-duplication agreements
or where rural systems are located near each other and have not signed any
such agreements; and (4) outlying areas where a municipally-owned system
wishes to expand.' Applicant argues that the opportunities for such head-
to-head competition are “minimal.”'? While we can agree that there 1s not
head-to-head competition for the great percentage of retail sales in the area, ‘
we do not believe such competition can be ignored.!"4

Jd. at 322-23.

Id at 247-51.

‘See, e.g, DIX 4012-24 (Town of Samson); DJX 4205-16 (Fulton); DIX 4319 (Cho); DJX
4320 (Red Level); DJX 4321 (Goshen).

'™See, e.g., DIX 4185 (Pennington); DJX 4317-4318 D (Rivernew).

See, e.g., APCO Reply Bnef Below, 228; Justice Proposed Findings, 41-45 ($92.35-2.45).
{“______—. Reply Bnef Below” refers to the parties’ responses below to the proposed
findings of fact.}

‘In such a situauon, the system franchised by the municipality (or, uf the case may be, a
municipally-owned system) can compete in the annexed area with the preexisting distnbutor.
Head-to-head competition can result or the nonfranchised system can sell its facilities to the
other system.

‘Vin Alabama, there does not appear to be any legal limit to the extent mumcipally-owned
systems may expand outside municipal corporate limits, subject to the grant of a franchise
should the system wish to provide service in another incorporated area. In Michigan, by
contrast, the expansion of municipal systems beyond municipal corporate boundaries is
lumuted, Midland, 6 NRC at 940. ;
'MAPCO Reply Bref Below, 228.

‘In this context, we note the following dialogue between applicant's president, Joseph Farley,
and counsel for the Department of Jusuce (at Tr. 20,804-05)

Q: Don't your franchises substanually protect you against the loss of your retail
business”

1063

A-51]

There is also yardstick competition taking place in Alabama. The
Licensing Board wrote: “possibly the yardstick most often used in
measuring the performance of any retail distribution system in central and
south Alabama is that of another distribution entity in the same area.”!!5
The presence of yardstick competition plays a significant role in franchise
and individual load competition; when one utility cannot meet another’s
rates or service, it can lose customers.!!6

In sum, retail competition is not completely absent from central and
southern Alabama. Nor has applicant shown us any legal prohibitions
barring greater competition. To be sure, the economic barriers to increased
competition are substanual. The same was true in Midland where we found
the retail market relevant. We repeat what we said there:

This is not to suggest that competition to distribute electric power in
lower Michigan is totally free and open, or even that major market
changes are in the offing. But because this potential competition
manifests itself only periodically and is more limited than that found in
some unregulated markets, it is not for those reasons less deserving of
antitrust protection. To accept Consumers’ position on the relevant

[Mr. Farley}: No sir, they are non-exclusive and there is an awful lot of load that is
outside of municipal corporate boundanes, parucularly industnal business today tends to
locate outside the municipaliues rather than in the middle of urban areas.

Q: So the fact that you have franchises that are to a great extent perpetual to serve in
municipaliues doesn’t give you the feeling of being protected against losing business in
those areas where you are franchised, Mr. Farley?

A: No sur, they are perhaps of some protection but as I have pointed out to you in the
first place we expenenced all the 1! counties of northern Alabama in which we had
franchises and municipalities and we saw what happened there, that we were not
protected there in any sense. We also know that a great deal of growth, industrial and
commercial growth at this point in ume tends to be outside of municipal corporate
boundanes. Municipalities are finding it at least in our area harder and harder to extend
thew corporate limits and the tendency, as | said, is for a lot of the major industrial
growth and some of the commercial growth to be outside of the municipal franchised

arcas.

Q: Are you saying there is a possibility of compeuuon for such growth to serve such
growth electncally, us that nght?

A: Well, yes, sir, even when both systems are there. At retail if a load is over a certain
size, 200 megawatts, under the tanffs that have been filed without, | might add, protest
from the cooperatives, it's either party's business.

"5 NRC at 888.
‘See, eg, DJX-4329E (Vanity Fair Mills chooses service from Clark-Washington

Cooperative because its bid was lower than applicant's); DJX-4319 (town of Cho
interest in service from APCO because cooperative service is more ve); DJX-203 (City
of Dothan challenges applicant's service to the town of Taylor by clauming Dothan’s mumcipal

system could provide better and cheaper service).

A-52

retail geographic market would in effect nullify that protection. That
result is simply out of line with the recent Supreme Court decisions in

this area.

It must also be kept in mind that Consumers was not born with a 77%

or 100% portion of that retail market. Rather, it acquired its large share ‘
in no small part by the same slow competitive processes that it now
Suggests are too unlikely and remote for us to consider.

6 NRC at 988-89 (footnotes omitted).

We note too that, in similar circumstances involving the wholesale
market in this case, the Licensing Board found the proposed market
relevant for antitrust analysis. The Board recognized the obstacles to

wholesale competition:

A municipality served by Applicant under a franchise cannot shift
easily to AEC; an AEC member cannot shift readily to Applicant for
wholesale power. Clearly we are talking about competition at the
margin here. As Applicant’s witness Crawford testified in response to a
question as to whether there was competition for wholesale loads:
“The answer to that question is a qualified yes.” (APP.X BJC-A

(Crawford) p. 131). :

5 NRC at 895.
The Board nonetheless concluded the market was relevant:

Yet one of the lessons of economics is the importance and efficacy of
marginal adjustments. In economic matters, tails often do wag dogs. In
this market setting, it is precisely because buyers are often locked into
one seller, and a selier limited to a definite geographic area for its retail
customers, that the “tail wag” should be preserved. It represents one
outlet for the limited competition possible in electric power supply. It is
the very type of competition that, in regulated or quasinatural
monopoly settings, the antitrust laws should be especially zealous to
maintain, either to mitigate any undesirable effects of the market
structure or the shortcomings of regulatory authonties. The preserva-
tion of this nvalry would seem to require the existence of a number of
different buyers and sellers (although not at the expense of economic

efficiency).

Id. at 895-96. °

A-53

We think the same analysis holds true for the retail market. Competition
in the market may be limited, but it is nevertheless entitled to protection
under the antitrust laws,!!”

3. The Geographic Market. There remains the task of defining the
geographic boundanes of the retail market. The Licensing Board concluded
that no relevant geographic market could be found; it specifically rejected
applicant's service area as the relevant market. (5 NRC at 888-89), We
disagree.

In determining relevant markets, courts must “delineate markets which
conform to areas of effective competition and to the realities of competiuve
pracuce.” Sargent-Welch Scientific Co. v. Ventron Corp., 567 F.2d 701, 710
(7th Cir. 1977), cert. denied, 439 U.S. 822 (1978), quoung L.G. Balfour Co. v.
F.T.C., 442 F.2d 1, 11 (7th Cir. 1971). The District Court in Mishawaka /1,
Supra, 4 monopolization case involving a large Midwestern uulity, found the
application of this “practical approach” to be “relatively simple.” The court
explained its determination that defendant’s service area constituted the
relevant market:

“The geographic location of the market is usually determined by an
examination of the areas in which the particular firm actually competes
or operates. If it concentrates its sales and service in one area, this area
will normally be the relevant market.” E. Kintner, An Antitrust Primer,
A Guide To Antitrust And Trade Regulation Laws For Businessmen, pp.
102-103 (2d Ed. 1973).

Here, defendant | & M has a clearly defined service area in Indiana
and Michigan within which it sells electnc power and energy at retail
pursuant to franchises granted by the municipalities and townships. I
& M has tanffs on file for those areas in the Public Service
Commussions of Indiana and Michigan, pursuant to which it offers to
sell electricity at retail to all interested buyers. Moreover, as the
defendants have stated, no other public uulity 1s allowed to sell electric
energy at retail within this area.

465 F. Supp. at 1325.

Applicant protests the use of its service area to denote the geographic
scope of the retail market. Its argument is two-pronged: __if the test is “the
area where applicant sells or can reasonably extend its retail sales,” the
whole state should be included in the market. If, on the other hand,

"See, Muliand, supra, 6 NRC at 968

A-54

“commercial reality” is used as a guidepost, the market should be broken
down into small submarikets where competitive conditions are simular.''*

We have no trouble in rej:cting the contention that the whole state
constitutes the appropriate geographic market. We think the Board below
applied the correct pnnciple in rejecting the same argument applied to the
wholesale market:

The entire state of Alabama would be an appropnate geographic
market area only if wholesale suppliers in northern Alabama (TVA is
the obvious entity involved here) could compete for retail loads in
central and southern Alabama and Applicant could sell in the eleven
northernmost counties of the state as well. Such is not the case.

5 NRC at 893. The Board noted that applicant does not attempt to sell
power in the northern counties and that TVA is legally prohibited from
selling power in most of the rest of the state. /bid'' Given these
circumstances, we see no reason to utilize the political boundanes of the
state as the geographic limits for the retail market.

It is certainly true, as the applicant points out,’ that the competiuve
situation differs in vanous parts of applicant's service area. But the same
was true in Otter Tail; the different states involved had different franchise
limitations and regulatory requirements, and certain municipalities had
greater access than others to alternative transmission lines.'?! Nonetheless,
the Distnct Court in that case rejected the argument that each town in the
defendant's service area be regarded as a separate geographic market.'”

In Midland as well, the applicant argued that its service area could not be
considered a relevant geographic market. In that case, the applicant
proposed that an “open/closed” distinction be made; areas where compet-
tion was considered highly improbable were to be excluded from consider-
ation." The applicant here offered the same argument to the Board
below." We need not rehearse in detail the reasons why we rejected this
argument in Midland.'* We do think it worth repeating that, although

'MAPCO Reply Bref, 42-44. See also, APCO Reply Bnef Below, 209-34.

'"TVA is prevented by statute (16 U.S.C. § 831n-4(a)) from supplying power in areas not

receiving power from TVA before July |, 1957. Pror to that date, the only systems receiving

power from TVA in south and central Alabama were the municipally-owned ones operating in

the cities of Bessemer and Tarrant City. 5 NRC at 828, 829, 893.

‘®See APCO Reply Brief, 43.

"See 410 U.S. at 371.

‘2331 F. Supp. at 58-59. The Distnct Court's market definiuon was apparently accepted by the
Court. See 410 U.S. at 369-70.

‘See 6 NRC at 978-79.

‘See APCO Reply Bnef Below, 228.

‘See 6 NRC at 963-90

A-55

different competitive factors might justify the division of a market into
various submarkets:

“submarkets are not a basis for the disregard of a broader line of
commerce that has economic significance.” This is especially true
where the charge is that a firm has monopolized that broader line of
commerce. [Applicant’s] arguments in effect seek to focus our attention
on those areas where door-to-door competition is now taking place and
to have us ignore those areas where the company has already acquired
dominance. To do so would be to manifest tacit acceptance of
[applicant’s}] present market position as sacrosanct. This is simply not
the case, legally or factually. '%

We adhere to the approach taken in Outer Tail, Midland, and Mishawaka
11. Those cases indicate that where a firm operates in a discrete service area
and is charged with monopolizing retail sales in that same area, the service
area may constitute the relevant geographic market for the purpose of
antitrust analysis.

We add one last point. In many cases, the identification of a relevant
geographic market is a crucial factor in the case because of its importance
in determining a firm’s market share (and hence, whether the firm possesses
monopoly power). Although we find applicant’s service area to be the
relevant geographic market for the retail product market, our finding of
monopoly power in the retail market is not solely dependent on market

shares. See pp. 1071-1074, infra.

IV.

MONOPOLY POWER

Our determination that there are three relevant markets involved here
must be followed by consideration of whether the applicant possesses
monopoly power in these markets. This is so because business practices
undertaken by those with dominance in the market may not be acceptable
even though they would be legitimate if undertaken by those less

powerful. '?’

"6 NRC at 990, quotung United States v. Greater Buffalo Press, 402 U.S. 549, $53 (1971) and
United States v. Phillipsburg National Bank, 399 U.S. 350, 360 (1970).

'" Midland, supra, 6 NRC at 913, citung United States v. Alurunum Co. of America, 148 F.2d 416
(2ad Cw. 1945); American Tobacco Co. v. United Siates, 328 US. 781, 812-14 (1946); United
States v. United Shoe Machinery Corp, \10 F. Supp. 295, 342-46 (D. Mass. 1953),

curiam, 347 U.S. 521 (1954); of US. Steel Corp. v. Fortner Enterprises, 429 US. 610, 612 fa. |
(1977).

A-56

As we did with the Licensing Board’s decision that the wholesale market
is a relevant one (see pp. 1046-1047, supra), we adopt as our own that
Board’s decision that the applicant does indeed have monopoly power in
the wholesale market.'28 Because, however, that Board believed no other
markets to be relevant, it had no occasion to examine the extent of the
applicant’s control of those markets. We do so now.

A. Coordination Services Market

Once again we look to the teachings of Midland to help us determine
whether the applicant here possesses monopoly power in the coordination
services market. As we there explained (6 NRC at 998):

The nature of the coordination services market does not. . . lend itself
to an easy calculation of market shares. A utility is both buyer and
seller in this market. Whether in any given time period it is a net buyer
or a net seller is in part fortuitous, depending on operating conditions
in its own and its neighboring power supply systems. Justice therefore
undertook to show Consumers’ possession of monopoly power in this
market directly, by proving that its control of access to the market and
its domination of power generation and transmission within it gives the
company that power. This is a valid approach. (Emphasis in original).

Applicant’s domination of power generation and transmission in its area
of service is evident. The applicant is a vertically and horizontally
integrated electric utility engaged in the generation, transmission and
distnbution of electricity.'22 As observed by the Board below, applicant’s
generating capacity in 1974 was 6,246 MW; it had additional planned
capacity scheduled to be operative in 1979 of 2,380 MW.'™ It generates all
of the power for its retail power needs. Disregarding the federally-owned
capacity utilized in central and southern Alabama, applicant in 1974 held
approximately 98% of the generating capacity in that area.'?!

In contrast, AEC had generating capacity in 1974 of only 137 MW, and
a total planned capacity, scheduled for 1979, of 557 MW. It generates only
a portion of the power requirements of its members.'? As mentioned

'8Applicant has excepted to the Licensing Board's treatment of its in-house distnbution of
bulk power as sales in the wholesale market. APCO Brief, 38-40. For the reasons given by the
Board below (5 NRC at 890-92, 894-96) and by us in Midland (6 NRC at 990-97), we agree that
such in-house distribution properly belongs in the market.

'295 NRC at 820.

'Jd at 821-22, 898.

31d at 898-99.

'2Jd. at 824-27, 898-99.

1069

A-57

previously (see p. 1037, supra), none of the members of MEUA owns or
operates any generating facilities. !33

As for transmission, the applicant owns all transmission lines in the
market over |15kv and controls all transmission facilities providing access
to utilities outside the market area. With respect to lower voltages, applicant
is also dominant. AEC owns 995 miles of generally low voltage transmission
lines, only 15% of the amount owned by the applicant.'* For their part, the
members of MEUA own only 71 mules of low voltage lines."

Although the above is only a rough description of the generating and
transmission facilities in central and south Alabama, the dominant position
of the applicant in either activity is readily apparent. Its dominance,
particularly over the transmission facilities in south and central Alabama,
places the applicant in a unique position to controi access to the market for
coordination services. By refusing to “wheel” power,'% it is able as a
practical matter to prevent the other utilities operating in the area from
coordinating with the larger utilities outside it. This was aptly demonstrated
at the hearing below.

During the course of the hearing, the question of how AEC might best
coordinate its power generating expansion plans with the purchase of power
from the applicant to meet AEC’s projected power needs came up for
consideration. In this connection, it was brought out that AEC was in the
process of installing two 210 MW generating units on the Tombigbee River.
This prompted the question of how the surplus capacity in those units, were
they to be completed, could be disposed of by AEC if the applicant did not
purchase it. The possibility of some third utility was suggested. But to
dispose of the surplus capacity, it was conceded by applicant's witness that
the transmission facilities of the applicant would have to be used.""” If, for
whatever reason, the applicant decided not to accommodate AEC, the
cooperative would not be able to dispose of its Surplus generaung
capacity. !38

The applicani, however, claims in its brief that AEC is already connected
to the system of the Georgia Power Company at the Walter F. George Lock
and Dam. It argues that “there is no reason why AEC cannot, if it so
desires, engage in power supply transactions with Georgia Power or
through Georgia Power's system with Duke Power Company, South

'3Id. at 827.

41d at 900-01.

94d at 827.

“Wheeling” is a term of art in the electnc power industry, defined as the “transfer by direct
transmission or displacement [of] electnc power from one uulity to another over the facilues
of an intermediate utility.” Oster Tail Power Co. v. United States, supra, 410 U.S. at 368.
'Harmns, Tr. 25,443-44.

81d, 25,444-45.

1070

A-58

Carolina Electric and Gas, Savannah Electric or Flonda Power Corpora-
tion, all of which are interconnected with Georgia Power's system.” It
also claims that AEC owns major transmission lines in close proximity to
existing lines of Gulf Power Company and has other lines only a short
distance from the South Mississippi Electric Power Association’s system.
The applicant suggests AEC can interconnect with these utilities and
through them with others.'© On the other side, Justice points out that
“AEC has no interconnection to any utility other than Applicant.”'*! This
means that without the use of applicant’s facilities, additional costly
transmission lines would have to be built before AEC is able to coordinate
power supply activities with Georgia Power.'*? From the standpoint of the
nation’s resources and the economy of the ratepayers that would be
affected, constructing new lines when adequate facilities exist results in
waste and places an additional, unnecessary burden upon ratepayers. In
any event, there is no assurance that the other utilities mentioned would
engage in the arrangements for the different type of coordination services
which would be made possible were interconnection physically avail-
able.' We reject the applicant’s position. [t simply has failed to rebut the
showing that its predominant control of transmission and generation gives
it monopoly power over the sale of coordinated services in the relevant
market area.

B. Retail Market
We wrote in Midland that the retail market lends itself to traditional

market share analysis, with market shares being determined by calculating
the amount of electric energy in megawatt hours (MWh) each utility sold to
its retail customers. 6 NRC at 1009-1010. Applying these methods of
determining market shares to the case at bar, the retail market in southern
and central Alabama was divided (in 1972) as follows:

9A PCO Bref, 29.

Ibid
‘\Jusuce Reply Bnet, 30. We accept the validity of this statement inasmuch as applicant's own

witness has testified that in any disposition of surplus power by AEC from its planned
Tombigbee units, the transmission facilities of the applicant will have to be used. Harns, Tr.
25,444.

'?An eight-mile extension of a 115 kv line with switching and other equipment to permit
interconnection would cost from about $500,000 to $750,000. Brownlee, Tr. 25,663.
‘According to AEC’s counsel, AEC has “no idea whether Georgia [Power] would be willing
to engage in it.” App. Tr. 106.

'“Wein, Direct, 67; Foltz, Tr. 12,841-43.

1071

A-59
MWh sold (x 1000) % of market

Alabama Power 21,657 88
Company

Municipal Systems 1,610 7
Distribution Coopera- 1,335 5
tives

Alabama Electric Co- 62 0
operative

Applicant’s share of 88% is clearly sufficient in normal circumstances to
warrant the inference of monopoly power.'* Applicant argues, however,
that reliance on market shares is misplaced in this case. It claims that the
economic characteristics of the industry (and its attendant regulauon) result
in higher market shares than would be found in a more conventional
industry. Moreover, we are told, state and federal regulation of applicant's
activities prevent it from possessing monopoly power.'®

These arguments are nearly identical to those made by Consumers
Power, and rejected by us, in Midland.” We have carefully reviewed that
earlier ruling and its application to the facts of this case. We conclude that
applicant’s argument must fail; we find it possesses monopoly power in the

retail market.
In the first place, the economic setting of the industry supports the

finding that applicant possesses monopoly power. We have noted earlier

that, while competition is legally permitted in Alabama, the economic
indeed.'*

barriers to the entry of new competitors in the industry are high
As we pointed out in Midland, high entry barriers reinforce the inference of

monopoly power suggested by high market shares.'”
More importantly, applicant’s dominance of transmission and genera-

tion facilities further bolsters the finding of monopoly power. As the Board
below noted, this dominance enables applicant to influence its present and

45See Midland, 6 NRC at 1010-11 and cases there cited.
\APCO Brief, 35-37; APCO Reply Bnef, 52-53. Applicant advanced these arguments in the
context of monopoly power in the wholesale market (no retail market having been found
below). Although we deal with them here in the context of the retail market, our discussion
and the arguments themselves apply with equal force to both markets.

476 NRC at 1011-19.

\“4#See p. 1062, supra.

16 NRC at 1012-13, ciung Weber v. Wynne, 431 F. Supp. 1048, 1054-56 (D.NJ. 1977); United
States v. United Shoe Machinery Corp., supra, 110 F. Supp. at 343-44, Golden Grain Macaron
Co., 78 FTC 63, 163 n. 9, 180(1971).

1072

IME? (eet whulesale power
Foros: | NRC at 42-46 fh
Tae ae creas such &

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TERRES eo ee we anutrust laws Come
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meskes ee ee ht hucwer -&

AGS
We DANS TART W_ VE HOT somewhat different perspectee dram Ghat af
the Larenniag Banned TR MRS principally from two faesers. Tite Gis =
that BARKS WS ERcanry Board — which found the appikcame ap pemeerss
ROROPRY PORTE DA wre market for wholesale power — we Eawe Gaund
LRAT AARROWK NW @engpy power in the coordination serwaes ami seta
POWRE RNAS HW watt, PS means that we must look apeom Ge appiucent’s
CORRE BF BAT AF A AQAA business enterprise wieidime cummapaily
POWNT QLNE WAS GAEL saage of acuvities in which it engages amd gudier =
WRT & WORE J Be wat ofa less dominant bussmess comee=m As we
SRARAT OB BRN ANea paiokal and FTC rulings tesck tac “wie aus
Of a BORAWAR PARRA VAOEPAWE have lO be tested agasmst 2 mare start
SLARRATG VAR VVRAVS & ACHR of smaller concerns as lugitiy commeinee
markes.S |

TRE ANT HAAN AANLLAY, CUL view of the record is taze Ge comfiemoe
PAWAT NE VRE SE aa SRW atl BOL with the eye focused oniy am saaizaed
SEQIRONT AY BRAT VO} were undependent of each other. For Ge cours
RAVE LWEONE

he AVANT VE VARY the evidence 45 4 whole to gue tie zanias

> de Rah Ravale of has proof, rather than mgndy com — se
ans NNO QASS WNT WANG the slate clean after conssdermg each peex=

oferta
Tr BAY CARRRAAA,_ BL applicant's opponents accuse Ge Lerman
Board, & GaAneag NE We Ae oF their claims of misuse by Ge appicenn af
JS PRORQDA PORTE ab gang: thadequate aliention te Ge pattems af
ANIOOAVRAAT LANTHAE wateated by the record. We apee wah Ger

PONOR OB ACP
Oat OWR CARN af tae record With these two pruseagies 2c Ge Game
BUBAROT WHOA GATE T woadd de permissible for us to frac amy cumin af
QRORAT AIRGRT VASHNTS af misconduct to have Geem gart of ap
ARLRORPRNS_ PACT aad tas subject (0 obloguy. Bat waging Ge
PeCONE AS RD SRT PART & BALL of judgment. We must coop and
Board heard the witnesses anc evaluzcet ther

AOTNPT WAT AS ERRAGKE ,
dank we Dave Only the printed word om He cake Tae

ae,

GERMAAMT aL HK
before WS. BA VRS CECUAARTES, we are unpersuaded thas Giese = sound
most Of the comciusuems seacined

CALS WH DAWA VE OW jadgmeat on |
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TaNndtand See SNATR RT
ead ak DER Vang, CE Sees © Bape Gar Corp, $37 F.2d 196, 19? Ge Cx. FG
dad WLS | ita

1076

A-64

principal fact finders." We thus accept the Licensing Board's findings
except in two areas where the record compels findings of a ctuation
inconsistent with the antitrust laws: the first deals with the 2pphcant’s
selective use of low wholesale rates to discourage AEC from comstructing its
own generating stations; the second concerns the applicant's refusal to
extend an ownership interest in the Farley plant to AEC. We now deal with
these matters in order.

1. Low Wholesale Rates. The Licensing Board examined four instances in
which APCO was alleged to have lowered its wholesale rates for the
purpose of preventing AEC from installing generating units. The Board
rejected the allegations, finding no anticompetitive conduct in each
instance. Specifically, the Board concluded:

(1) A 1941 rate reduction to a number of utilities, which came at a
time when certain distnibution cooperatives were formine AFC
and were seeking an REA loan to construct new zeneraton and
transmission facilities, was legitimately motivated by applicant’s
desire to reduce its number of different wholesale rates and not to
forestall self-generation by AEC. 5 NRC at 38-09.

(2) A 1946 rate reduction offer to AEC, made after APC apphed for
an REA loan to construct a new steam plant and seneaated
transmission lines, was to allow applicant to continue sell 2
wholesale power to AEC and “to dissuade AEC from proceeding
with its plans to construct [a generating plant and transmission]
which applicant considered uneconomical and wasteful duplica-
tion of its existing facilities;” was made im good faith with the
encouragement of REA; and was not anticompetitive in intent or
motive. /d. at 910.

(3) A 1950 offer to AEC of a rate reduction, after AFC had azain
taken action to obtain REA funds for the construction of another
version of its earlier planned steam plant “had the distinct
purpose of improving the reliability of ABCs electric system.” and
did not represent “anticompetitive conduct with the clear purpose
of maintaining a monopoly in self-generation.” Jd at 911.

(4) A 1958 rate reduction to cooperatives and mumicipals (the so
called “Coosa” reduction) was essentially forced upon applicant as
a condition of applicant’s receiving licenses to develop bydroelec-

‘See Catawba, supra, 4 NRC at 404.

1077

A-65

tne projects on the Coosa River, and was not anticompetitive. Jd
at 912-13.

With respect to the Coosa rate reduction, we are saushed with the
findings made below. We do, however, take a different view of the three
earlier reducnons. We believe they were insututed for the purpose of
prevenung AEC trom developing its own generation, and as such were
inconsistent with the anutrust laws.

As @ preliminary matter, we address the Licensing Board's treatment of
the Noerr-Penningion doctnne. That doctrine, established by the Supreme
Court in Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc,
365 U.S. 127 (1961); and United Mine Workers of America v. Pennington,
381 U.S. 657 (1965), essentially renders immune from anutrust: hability
acuons which seek to influence legislatures, courts, and other governmental
bodies even though they are undertaken for anucompetinve Purposes, A
third case, Califorma Motor Transport Co. v. Trucking Uniimited, 404 U.S.
508 (1972), hmuted the doctnine somewhat by providing that sham attempts
to influence official action are not immune.'*! As the Board below
recognized in an order issued during the Phase | heaning,'* evidence of
conduct designed to influence governmental action can be used for two
purposes. First, a party 1s always free to show that the conduct falls Within
the sham exception to Noerr-Pennington. Second, according to the princi.
ples set out in Pennington footnote 3, a party Can USE EXemMpt activities as
evidence of general anticompetitive intent in order to shed hight on
nonexempt actvities. "©

In thas case, there is no question that applicant actively used legal and
administrative proceedings in attempts to prevent AEC trom installing its
own generation.“ Applicant's opponents argued below that this use of the
legal process fell within the sham exception (and thus was itself inconsistent
with the antutrust laws), and that, even if such activity is exempt from

‘For example, good-faith hugatuon may be exempt from anutrust Hability, but the repetiuve
filing of trvolous legal claums for the sole purpose of harming a compeutor is not, See. ¢ a, 404
U.S. at SU3: Oerer Taud, supra, 410 U.S. at 380.

‘SL BP-?S-69, 2 NRC 822 (1975).

381 LS. at 670 a. 3. The footnote reads as follows:

“tt would of course sull be within the province of the tnal Judge to admit this evidence,
if he deemed ut probauve and not unduly prejudicial, under the “established judicial rule
of evadence that tesumony of pnor or subsequent transactions, which for SOME reason are
barred trom forming the basis for a suit, may nevertheless be introduced if it sor
reasonably to show the purpose and character of the particular Wransaction under
scruuny.”

See S NRC at 90248.

1078

A-66

antitrust liability, the Board should denve trom it evidence of applicant’s
antucompetitive intent. The Board found the activity protected.'6 It further
ruled that “there is no room for application of Penningion footnote 3
regarding the admissibility of immunized transactions to shed light on the
‘purpose and character’ of nonimmunuized transactions, because the
challenged litigation was both immunized and itself not anticompetitive
under the antitrust laws,”

We can readily agree with the Board's determination that the use the
applicant made of administrative and judicial process is protected under
Noerr-Pennington, The Board's handhng of Pennington footnote 3 is quite
another matter. We read that footnote as plainly allowing the admission of
evidence concerning “immunized” transactions where such evidence sheds
light on nonimmunized

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_0889%3A2. Public record. Not legal advice.