Competition Policy and Merger Analysis in Deregulated and Newly Competitive Industries
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Competition Policy and Merger Analysis in Deregulated and Newly Competitive Industries

Edited by Peter C. Carstensen and Susan Beth Farmer

This comprehensive book contains case studies on the evolution of competition policy, with an emphasis on merger policy, for seven major US industries that have experienced substantial deregulation in the past forty years – electricity, natural gas, telecommunications, railroads, airlines, hospitals and banking. Also included is a comparison of the EU’s experience in attempting to bring about competition in the energy, finance, and airline industries.
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Chapter 2: Mergers in the US Electric Power Industry

Richard J. Pierce


Richard J. Pierce It is extraordinarily difficult to devise and implement a socially-beneficial merger policy in a network industry that is the subject of an ongoing restructuring process intended to increase reliance on market forces to obtain socially-desirable results. In order to decide which proposed mergers to approve or disapprove, antitrust agencies and regulatory agencies must know that which no one can know – how the restructuring process will evolve over the typical multi-decade period. This knowledge is required to complete a restructuring of a network industry. The agency responsible for announcing and applying a merger policy applicable to an industry that is in the process of restructuring must make a series of difficult, recurrent decisions. First, should the policy be designed to fit the present industry structure or should it instead be designed to fit some expected future structure? If the latter, which of the many potential future structures should the agency use as its baseline for evaluating the expected effects of a proposed merger? Finally, should the agency use its merger policy only as a means of reacting to changes in industry structure proposed by private market participants, or should the agency use its merger policy proactively as a means of encouraging the types of restructuring activities that it considers critical to the success of the agency’s restructuring program? The US electric power industry illustrates well the daunting nature of the task. The following brief summary of the process of restructuring the US electricity market...

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