United States v. Exelon Corporation, et al.; Proposed Final Judgment and Competitive Impact Statement, 81528-81541 [2011-33283]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 76, Number 249 (Wednesday, December 28, 2011)]
[Notices]
[Pages 81528-81541]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33283]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Exelon Corporation, et al.; Proposed Final 
Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h) that a proposed Final Judgment, 
Stipulation and Competitive Impact Statement have been filed with the 
United States District Court for the District of Columbia in United 
States of America v. Exelon Corporation, et al., Civil Action No. 1:11-
cv-02276. On December 21, 2011, the United States filed a Complaint 
alleging that the proposed acquisition by Exelon Corporation of 
Constellation Energy Group, Inc., would violate Section 7 of the 
Clayton Act, 15 U.S.C. 18. The proposed Final Judgment, filed the same 
time as the Complaint, requires Exelon Corporation to divest three 
electric generation plants (Brandon Shores, H.A. Wagner, and C.P. Crane 
in Maryland).
    Copies of the Complaint, proposed Final Judgment and Competitive 
Impact Statement are available for inspection at the Department of 
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth 
Street, NW., Suite 1010, Washington, DC 20530 (telephone: (202) 514-
2481), on the Department of Justice's Web site at https://www.usdoj.gov/atr, and at the Office of the Clerk of the United States District Court 
for the District of Columbia. Copies of these materials may be obtained 
from the Antitrust Division upon request and payment of the copying fee 
set by Department of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, and responses thereto, will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to William H. Stallings, Chief, Transportation, Energy & Agriculture 
Section, Antitrust Division, Department of Justice, Washington, DC 
20530, (telephone: (202) 514-9323).

Patricia A. Brink,
Director of Operations.

United States District Court for the District of Columbia

United States of America, U.S. Department of Justice, Antitrust 
Division, 450 5th Street NW., Suite 8000, Washington, DC 20001, 
Plaintiff, v. Exelon Corporation, 10 South Dearborn Street, Chicago, 
IL 60603 and Constellation Energy Group Inc., 100 Constellation Way, 
Baltimore, MD 21202, Defendants.
Case: 1:11-cv-02276.
Assigned To: Sullivan, Emmet G.
Assign. Date: 12/21/2011.
Description: Antitrust.

Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, brings this civil action to 
enjoin the merger of Exelon Corporation (``Exelon'') and Constellation 
Energy Group, Inc. (``Constellation'') and alleges as follows:
    1. On April 28, 2011, Exelon entered into an Agreement and Plan of 
Merger with Constellation. The transaction would create one of the 
largest electricity companies in the United States with total assets of 
$72 billion and annual revenues of $33 billion.
    2. Exelon and Constellation sell wholesale electricity in all or 
parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New 
Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West 
Virginia and the District of Columbia.
    3. Exelon's merger with Constellation would eliminate significant 
competition between them in two smaller regions within this broad area 
and give the merged firm the incentive and the ability to raise 
wholesale electricity prices, resulting in increased retail electricity 
prices for millions of residential, commercial, and industrial 
customers in these areas.
    4. Accordingly, the merger would substantially lessen competition 
in

[[Page 81529]]

violation of Section 7 of the Clayton Act, 15 U.S.C. 18.

I. Jurisdiction and Venue

    5. The United States brings this action pursuant to Section 15 of 
the Clayton Act, as amended, 15 U.S.C. 25, to prevent and restrain 
Defendants from violating Section 7 of the Clayton Act, 15 U.S.C. 18.
    6. Exelon and Constellation are engaged in interstate commerce and 
in activities substantially affecting interstate commerce. The Court 
has subject matter jurisdiction over this action pursuant to Section 15 
of the Clayton Act, 15 U.S.C. 25, and 28 U.S.C. 1331, 1337(a), and 
1345.
    7. Exelon and Constellation transact business and are found in the 
District of Columbia. Venue is therefore proper in this District under 
Section 12 of the Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 1391(c).

II. The Defendants and the Transaction

    8. Defendant Exelon is a Pennsylvania corporation, with its 
headquarters in Chicago, Illinois. Exelon owns Exelon Generation 
Company, LLC, which owns electric generating plants located primarily 
in the Mid-Atlantic and the Midwest and has a total generating capacity 
of more than 25,000 megawatts (``MW''). Exelon also owns two 
distribution companies: PECO Energy Company, a gas and electric utility 
that serves customers in the Philadelphia area, and Commonwealth Edison 
Company, an electric utility that serves customers in the Chicago area.
    9. Defendant Constellation is a Maryland corporation, with its 
headquarters in Baltimore, MD. Constellation owns Constellation Power 
LLC, which owns electric generating plants, located primarily in 
Maryland, with a total generating capacity of more than 11,000 MW. 
Constellation also owns a distribution company, Baltimore Gas and 
Electric, an electric and gas utility that serves customers in the 
Baltimore area.
    10. Following Exelon's merger with Constellation, the combined 
company would be known as Exelon Corporation, with its corporate 
headquarters in Chicago, Illinois.

III. Trade and Commerce

A. Background

    11. Electricity supplied to retail customers is generated at 
electric generating plants, which consist of one or more generating 
units. An individual generating unit uses any one of several types of 
generating technologies (including hydroelectric turbine, wind turbine, 
steam turbine, combustion turbine, or combined cycle) to transform the 
energy in fuels or the force of wind or flowing water into electricity. 
The fuels used by a generating unit include uranium, coal, oil, or 
natural gas.
    12. Generating units vary considerably in their operating costs, 
which are determined primarily by the cost of fuel and the efficiency 
of the technology in transforming the energy in fuel into electricity. 
``Baseload'' units--which typically include nuclear and very efficient 
coal-fired steam turbine units--have relatively low operating costs. 
``Peaking'' units--which typically include oil- and gas-fired 
combustion turbine units--have relatively high operating costs. ``Mid-
merit'' units--which typically include combined-cycle and less 
efficient and thus higher-cost coal-fired steam turbine units--have 
costs lower than those of peaking units but higher than those of 
baseload units.
    13. Once electricity is generated at a plant, an extensive set of 
interconnected high-voltage lines and equipment, known as the 
transmission grid, transports the electricity to lower voltage 
distribution lines that relay the power to homes and businesses. 
Transmission grid operators must closely monitor the grid to prevent 
too little or too much electricity from flowing over the grid, either 
of which might damage lines or generating units connected to the grid. 
For example, to prevent such damage and to prevent widespread blackouts 
from disrupting electricity service, a grid operator will manage the 
grid to prevent additional electricity from flowing over a transmission 
line as that line approaches its operating limit (a ``transmission 
constraint'').
    14. In the Mid-Atlantic, the transmission grid is overseen by PJM 
Interconnection, LLC (``PJM''), a private, non-profit organization 
whose members include transmission line owners, generation owners, 
distribution companies, retail customers, and wholesale and retail 
electricity suppliers. The transmission grid administered by PJM is the 
largest in the United States, providing electricity to approximately 58 
million people in all or parts of Delaware, Illinois, Indiana, 
Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, 
Pennsylvania, Tennessee, Virginia, West Virginia and the District of 
Columbia (the ``PJM control area'').
    15. PJM oversees two auctions for the sale and purchase of 
wholesale electricity: a day-ahead auction that clears the day before 
the electricity is required, and a real-time auction that clears the 
day the electricity is required. Generation owners sell through these 
auctions to electricity retailers that provide retail electric service 
in the PJM control area. Buyers and sellers of wholesale electricity 
may also enter into contracts for the sale and purchase of electricity 
with each other, or third parties, outside of the PJM auction process; 
prices for these bilateral contracts generally reflect expected auction 
prices.
    16. In the day-ahead auction, each buyer typically submits to PJM 
the amount of electricity the buyer expects to need each hour of the 
next day. PJM then adds up the amount of electricity buyers will need 
to determine how much electricity will be demanded each hour. Each 
seller submits to PJM an offer to sell electricity indicating the 
amount of electricity it is willing to sell the next day and the price 
at which it is willing to sell. PJM then sorts the offers to sell from 
lowest to highest offer price to determine how much electricity will be 
supplied each hour at any given price.
    17. Subject to the physical limitations of the transmission grid, 
PJM seeks to have generating units operated in ``merit'' order, from 
lowest to highest offer. In the day-ahead auction, as long as 
transmission constraints are not expected, PJM takes the least 
expensive offer first and then continues to accept offers to sell at 
progressively higher prices until the needs for each hour the next day 
are covered. In this way, PJM minimizes the total cost of generating 
electricity required for the next day. The clearing price for any given 
hour essentially is determined by the generating unit with the highest 
offer price that is needed for that hour, and all sellers for that hour 
receive that price regardless of their offer price or their units' 
costs. In the real-time auction, which accounts for differences between 
anticipated and actual supply and demand, PJM accepts sellers' offers 
in merit order, subject to the physical and engineering limitations of 
the transmission grid, until there is a sufficient quantity of 
electricity to meet actual demand.
    18. At times, transmission constraints prevent the generating units 
with the lowest offers from meeting demand in a particular area within 
the PJM control area. A particular geographic area within the PJM 
control area may be affected by more than one set of transmission 
constraints. When that happens, PJM's primary response is to call on 
more expensive units located within the smaller area bounded by the 
transmission constraints (a ``constrained area''), and prices to the 
buyers in that

[[Page 81530]]

area adjusts accordingly. Because more expensive units are required to 
meet demand, prices in a constrained area will be higher than they 
would be absent the transmission constraints.
    19. PJM Mid-Atlantic North. One historically constrained area 
within the PJM control area includes the densely populated areas of 
eastern Pennsylvania, eastern Maryland, Delaware, and the District of 
Columbia. This area (``PJM Mid-Atlantic North'') is defined by a set of 
major transmission lines that divides this area from the rest of the 
PJM control area. The most important of these lines is the ``5004/5005 
Interface,'' which includes the Keystone-Juniata 5004 line and the 
Conemaugh-Juniata 5005 line.
    20. When these transmission lines are constrained, PJM has limited 
ability to supply additional demand located east of the constraints 
with electricity from generating units located west of the constraints. 
PJM often responds to constraints on these lines by calling on 
additional generating units east of the constraint to run. When the 
units east of the constraint are called to run, prices in PJM Mid-
Atlantic North rise.
    21. In PJM Mid-Atlantic North during 2010, more than $11 billion of 
wholesale electricity was sold to over 20 million people.
    22. PJM Mid-Atlantic South. A second constrained area in PJM also 
includes eastern Pennsylvania and eastern Maryland as well as the 
District of Columbia, Delaware, and most of Virginia. This area (``PJM 
Mid-Atlantic South'') is defined by a set of major transmission lines 
that divides this area from the rest of the PJM control area. The most 
important of these lines is the ``AP South Interface,'' which includes 
the Mt. Storm-Doubs 512 line, the Greenland Gap-Meadowbrook 540 line, 
the Mt. Storm-Valley 550 line, and the Mt. Storm-Meadowbrook (TrAIL) 
line.
    23. When these transmission lines are constrained, PJM is limited 
in its ability to supply additional demand located east of the 
constraints with electricity from generating units located west of the 
constraints. PJM often responds to constraints on these lines by 
calling on additional generating units east of the constraints to run. 
When the units east of the constraint are called to run, prices in PJM 
Mid-Atlantic South rise.
    24. In PJM Mid-Atlantic South during 2010, more than $13 billion of 
wholesale electricity was sold to over 30 million people.

B. Relevant Product Market

    25. Wholesale electricity is a relevant product market and a line 
of commerce within the meaning of Section 7 of the Clayton Act. In the 
event of a small but significant increase in the price of wholesale 
electricity, insufficient purchasers would switch away to make that 
increase unprofitable.

C. Relevant Geographic Markets

    26. When the 5004-5005 Interface is constrained, purchasers of 
wholesale electricity for use in PJM Mid-Atlantic North have limited 
ability to turn to generation outside of PJM Mid-Atlantic North. At 
such times, the amount of electricity that could be obtained by 
consumers from outside PJM Mid-Atlantic North is insufficient to deter 
generators located in PJM Mid-Atlantic North from seeking a small but 
significant price increase.
    27. PJM Mid-Atlantic North is a relevant geographic market and a 
section of the country within the meaning of Section 7 of the Clayton 
Act.
    28. When the AP South Interface is constrained, purchasers of 
wholesale electricity in PJM Mid-Atlantic South have limited ability to 
turn to generation outside of PJM Mid-Atlantic South. At such times, 
the amount of electricity that could be obtained by consumers from 
areas outside PJM Mid-Atlantic South is insufficient to deter 
generators located in PJM Mid-Atlantic South from seeking a small but 
significant price increase.
    29. PJM Mid-Atlantic South is a relevant geographic market and a 
section of the country within the meaning of Section 7 of the Clayton 
Act.

IV. Market Structure and Anticompetitive Effects

A. Market Shares and Concentration

    30. The relevant markets are moderately concentrated and would 
become more concentrated as a result of the proposed transaction.
    31. As articulated in the 2010 Horizontal Merger Guidelines issued 
by the Department of Justice and the Federal Trade Commission 
(``Guidelines''), the Herfindahl-Hirschman Index (``HHI'') is a measure 
of market concentration. Market concentration is often one useful 
indicator of the likely competitive effects of a merger. The more 
concentrated a market, and the more a transaction would increase 
concentration in a market, the more likely it is that a transaction 
would result in a meaningful reduction in competition harming 
consumers. The Guidelines consider markets in which the HHI is between 
1,500 and 2,500 points to be moderately concentrated. Under the 
Guidelines, transactions that increase the HHI by more than 100 points 
in moderately concentrated markets potentially raise significant 
competitive concerns.
    32. Exelon owns or controls approximately 18 percent of the 
generating capacity in PJM Mid-Atlantic North. Constellation owns or 
controls approximately 10 percent of the generating capacity in PJM 
Mid-Atlantic North. After the merger, Exelon would own or control 
approximately 28 percent of the total generating capacity in PJM Mid-
Atlantic North. Exelon's merger with Constellation would yield a post-
merger HHI in PJM Mid-Atlantic North of about 1,600, representing an 
increase of almost 400.
    33. Exelon owns or controls approximately 14 percent of the 
generating capacity in PJM Mid-Atlantic South. Constellation owns or 
controls approximately 9 percent of the generating capacity in PJM Mid-
Atlantic South. After the merger, Exelon would own or control over 22 
percent of the total generating capacity in PJM Mid-Atlantic South. 
Exelon's merger with Constellation would yield a post-merger HHI in PJM 
Mid-Atlantic South of approximately 1,800, representing an increase of 
approximately 250.

B. Effect of Transaction

    34. In addition to owning or controlling a significant share of 
overall generating capacity in PJM Mid-Atlantic North and PJM Mid-
Atlantic South, the merged firm will own or control generating units 
with a wide range of operating costs, including low-cost baseload units 
that provide the incentive to exercise market power and higher-cost 
units that provide the ability and incentive to exercise market power. 
The combination of Exelon's and Constellation's generating units would 
enhance Exelon's ability and incentive to reduce output and raise 
prices in PJM Mid-Atlantic North and PJM Mid-Atlantic South.
    35. The merger would enhance Exelon's ability to reduce output and 
raise price in PJM Mid-Atlantic North and PJM Mid-Atlantic South by 
increasing its share of higher-cost capacity in those markets. With a 
greater share of higher-cost capacity, Exelon would more often be able 
to reduce output and raise clearing prices by withholding capacity. 
Exelon could withhold capacity in several ways, such as by submitting 
high offers in the PJM auctions for some of the capacity from its 
higher-cost units such that they are not called on to produce 
electricity. By reducing its output, Exelon could force PJM to turn to 
more expensive units to meet demand, resulting in higher

[[Page 81531]]

clearing prices in PJM Mid-Atlantic North and PJM Mid-Atlantic South.
    36. The merger would enhance Exelon's incentive to reduce output 
and raise price in PJM Mid-Atlantic North and PJM Mid-Atlantic South by 
increasing the amount of baseload capacity it owns or controls in these 
markets. With a greater amount of baseload capacity, Exelon would more 
often find it profitable to reduce output and raise market-clearing 
prices by withholding capacity. For example, as clearing prices 
increased due to its withholding of its higher-cost capacity, Exelon 
would earn those higher prices on its expanded post-merger baseload 
capacity, making it more likely that the benefit of increased revenues 
on its baseload capacity would outweigh the cost of withholding higher-
cost capacity.
    37. Increasing Exelon's incentive and ability to profitably 
withhold output increases the likelihood that Exelon will exercise 
market power after its merger with Constellation, resulting in 
significant harm to competition and increased prices. Thus, the effect 
of the merger may be substantially to lessen competition in violation 
of Section 7 of the Clayton Act.

V. Entry

    38. Entry into the wholesale electricity market through the 
addition of new generating capacity in PJM Mid-Atlantic North or PJM 
Mid-Atlantic South or the addition of new transmission capacity that 
would relieve the constraints that limit the flow of electricity into 
PJM Mid-Atlantic North or PJM Mid-Atlantic South would generally take 
many years, especially considering the necessary environmental, safety, 
and zoning approvals.
    39. Entry into the PJM Mid-Atlantic North or PJM Mid-Atlantic South 
wholesale electricity market would not be timely, likely, and 
sufficient in its magnitude, character, and scope to deter or 
counteract an anticompetitive price increase resulting from the merger.

VI. Violation Alleged

    40. The effect of Exelon's proposed merger with Constellation, if 
it were consummated, may be substantially to lessen competition for 
wholesale electricity in PJM Mid-Atlantic North and PJM Mid-Atlantic 
South in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. 
Unless restrained, the transaction would likely have the following 
effects, among others:
    (a) competition in the market for wholesale electricity in PJM Mid-
Atlantic North would be substantially lessened;
    (b) prices for wholesale electricity in PJM Mid-Atlantic North 
would increase;
    (c) competition in the market for wholesale electricity in PJM Mid-
Atlantic South would be substantially lessened; and
    (d) prices for wholesale electricity in PJM Mid-Atlantic South 
would increase.

VII. Requested Relief

    41. Plaintiff requests that this Court:
    (a) Adjudge Exelon's proposed merger with Constellation to violate 
Section 7 of the Clayton Act, 15 U.S.C. 18;
    (b) Permanently enjoin and restrain Defendants from consummating 
the proposed merger of Exelon and Constellation or from entering into 
or carrying out any contract, agreement, plan, or understanding, the 
effect of which would be to combine Exelon and Constellation;
    (c) Award the United States its costs for this action; and
    (d) Award the United States such other and further relief as the 
Court deems just and proper.
Dated: December 21, 2011.

Respectfully submitted,

For Plaintiff United States:

/s/Sharis A. Pozen
Sharis A. Pozen
(DC Bar #446732).
Acting Assistant Attorney General.

/s/Leslie C. Overton/
Leslie C. Overton
(DC Bar #454493)
Deputy Assistant Attorney General.

/s/Patricia A. Brink
Patricia A. Brink,
Director of Civil Enforcement.

/s/William H. Stallings
William H. Stallings
(DC Bar #444924)
Chief, Transportation, Energy &
Agriculture Section.

/s/Tracy Fisher
Tracy Fisher
Michele B. Cano
J. Chandra Mazumdar
Janet R. Urban
Trial Attorneys, U.S. Department of Justice, Antitrust Division, 
Transportation, Energy & Agriculture Section, 450 5th Street NW., 
Suite 8000, Washington, DC 20001. Telephone: (202) 616-1650. 
Facsimile: (202) 616-2441.

United States District Court for the District Of Columbia

    United States of America, Plaintiff, v. Exelon Corporation and 
Constellation Energy Group, Inc., Defendants.
Case: 1:11-cv-02276.
Assigned to: Sullivan, Emmet G.
Assign. Date: 12/21/2011.
Description: Antitrust.

Competitive Impact Statement

    Plaintiff United States of America (``United States''), pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or 
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact 
Statement relating to the proposed Final Judgment submitted for entry 
in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    Defendant Exelon Corporation (``Exelon'') and Defendant 
Constellation Energy Group, Inc. (``Constellation'') entered into an 
Agreement and Plan of Merger, dated April 28, 2011, under which Exelon 
would merge with Constellation. The United States filed a civil 
antitrust Complaint on December 21, 2011 seeking to enjoin the proposed 
merger. The Complaint alleges that the likely effect of this merger 
would be to lessen competition substantially for wholesale electricity 
in sections of the United States in violation of Section 7 of the 
Clayton Act, 15 U.S.C. 18. This loss of competition likely would 
increase wholesale electricity prices, raising retail electricity 
prices for millions of residential, commercial, and industrial 
customers in parts of the Mid-Atlantic states.
    At the same time the Complaint was filed, the United States also 
filed a Hold Separate Stipulation and Order (``Stipulation'') and 
proposed Final Judgment, which are designed to eliminate the 
anticompetitive effects of the merger. Under the proposed Final 
Judgment, which is explained more fully below, Defendants are required 
to divest three electric generating plants (collectively the 
``Divestiture Assets''). The Stipulation and proposed Final Judgment 
require Defendants to take certain steps to ensure that these assets 
are preserved and maintained and that competition is maintained during 
the pendency of the ordered divestiture.
    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the proposed Final Judgment would terminate this action, except that 
the Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof. Defendants have also stipulated that they will comply with the 
terms of the Stipulation and the proposed Final Judgment from the date 
of the signing of the Stipulation, pending entry of the proposed Final 
Judgment by the Court and the required divestiture. Should the Court 
decline to enter the proposed

[[Page 81532]]

Final Judgment, Defendants have also committed to abide by its 
requirements and those of the Stipulation until the expiration of the 
time for appeal.

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction

    Defendant Exelon is a Pennsylvania corporation, with its 
headquarters in Chicago, Illinois; it owns Exelon Generation Company, 
LLC, which owns electric generating plants located primarily in the 
Mid-Atlantic and the Midwest with a total generating capacity of more 
than 25,000 megawatts (``MW'') and annual revenues in 2010 of about 
$18.6 billion. Defendant Constellation is a Maryland corporation, with 
its headquarters in Baltimore, MD; it owns Constellation Power LLC, 
which owns electric generating plants located primarily in Maryland 
with a total generating capacity of more than 11,000 MW and annual 
revenues in 2010 of about $14.3 billion. By combining the generating 
plants owned by Exelon and Constellation, the proposed merger would 
enhance the ability and incentive of the merged firm to reduce output 
and raise wholesale electricity prices in areas of the Mid-Atlantic 
where Defendants are significant generators of electricity. Thus, the 
transaction as originally proposed would lessen competition 
substantially in violation of Section 7 of the Clayton Act, 15 U.S.C. 
18.

B. Wholesale Electricity in the Mid-Atlantic

    Electricity supplied to retail customers is generated at electric 
generating plants, which consist of one or more generating units. An 
individual generating unit uses any one of several types of generating 
technologies (including hydroelectric turbine, wind turbine, steam 
turbine, combustion turbine, or combined cycle) to transform the energy 
in fuels or the force of wind or flowing water into electricity. 
Generating units typically are fueled by uranium, coal, oil, or natural 
gas.
    Generating units vary considerably in their operating costs, which 
are determined primarily by the cost of fuel and the efficiency of the 
unit's technology in transforming the energy in fuel into electricity. 
``Baseload'' units--which typically include nuclear and very efficient 
coal-fired steam turbine units--have relatively low operating costs. 
``Peaking'' units--which typically include oil- and gas-fired 
combustion turbine units--have relatively high operating costs. ``Mid-
merit'' units--which typically include combined cycle and less 
efficient and thus higher-cost coal-fired steam turbine units--have 
costs lower than those of peaking units but higher than those of 
baseload units.
    Once electricity is generated at a plant, an extensive set of 
interconnected high-voltage lines and equipment, known as the 
transmission grid, transports the electricity to lower voltage 
distribution lines that relay the power to homes and businesses. 
Transmission grid operators must closely monitor the grid to prevent 
too little or too much electricity from flowing over the grid, either 
of which might damage lines or generating units connected to the grid. 
For example, to prevent such damage and to prevent widespread blackouts 
from disrupting electricity service, a grid operator will manage the 
grid to prevent additional electricity from flowing over a transmission 
line as that line approaches its operating limit (a ``transmission 
constraint'').
    In the Mid-Atlantic, the transmission grid is overseen by PJM 
Interconnection, LLC (``PJM''), a private, non-profit organization 
whose members include transmission line owners, generation owners, 
distribution companies, retail customers, and wholesale and retail 
electricity suppliers. The transmission grid administered by PJM is the 
largest in the United States, providing electricity to approximately 58 
million people in an area encompassing all or parts of Delaware, 
Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North 
Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and 
the District of Columbia (the ``PJM control area'').
    PJM oversees two auctions for the sale and purchase of wholesale 
electricity: (1) a day-ahead auction that clears the day before 
electricity is to be generated and delivered and (2) a real-time 
auction that clears the day electricity is delivered. In these 
auctions, generation owners submit offers to sell electricity and 
electricity retailers submit bids to purchase electricity. Buyers 
submit bids that indicate the amount of electricity they are willing to 
buy at different prices. Sellers submit offers that indicate the amount 
of electricity they are willing to sell at different prices. PJM adds 
up the bids and offers to determine the total demand and supply for 
electricity. The amount of electricity that actually is generated and 
delivered is determined by the PJM auctions. Buyers and sellers of 
wholesale electricity may also enter into contracts with each other or 
with third parties, outside of the PJM auction process; the prices of 
these contracts generally reflect expected auction prices.
    Subject to the physical limitations of the transmission grid, PJM 
generally attempts to minimize the total cost of generating electricity 
required for the next day by operating generation in ``merit'' order. 
As a result, PJM ``calls'' the generation with the lowest offers in the 
day-ahead auction, accepting the least expensive offer first and then 
continuing to accept offers to sell generation output at progressively 
higher prices until PJM has called enough generation to meet 
anticipated demand for each hour of the next day. The ``clearing 
price'' for any given hour is essentially determined by the highest-
priced generation offer that is accepted by PJM for that hour, and all 
sellers for that hour receive that price, regardless of their offer or 
their costs. In PJM's real-time auction, which accounts for differences 
between the generation called to meet the day-ahead projections and 
that needed to meet actual demand, PJM likewise accepts additional 
sellers' offers in merit order until there is a sufficient quantity of 
additional electricity to meet actual demand. If generation is withheld 
from the auctions, such as by submitting a significantly higher offer 
than is warranted by the generation's costs, additional generation with 
higher offers must be called by PJM, leading to higher overall prices 
for the PJM system.
    At times when transmission constraints prevent the generation with 
the lowest offers from meeting demand in a particular area, PJM calls 
additional generation in that area that is not already running. In 
addition to satisfying demand, the additional energy from this 
generation also acts to relieve the constraints by helping to limit the 
amount of energy that otherwise would have to flow across the 
constraints. The effectiveness of a particular generating unit for 
relieving a constraint is a function of where the generating unit is 
located on the transmission grid in relation to that constraint and is 
measured by the ``shift factor'' of that generating unit with respect 
to that constraint. Generally, generating units with the highest shift 
factors and thus the greatest impact for relieving the constraint 
receive the highest prices. In the mid-Atlantic area of PJM, for 
example, electricity generally flows from west to east. This means that 
generation to the east of the major transmission constraints tends to 
relieve congestion and receives relatively high prices, whereas 
generation to the west of the major transmission constraints tends to 
exacerbate congestion and receives

[[Page 81533]]

relatively low prices. A particular geographic area within the PJM 
control area may be affected by more than one set of transmission 
constraints.
    PJM Mid-Atlantic North. One historically constrained area within 
the PJM control area includes the densely populated areas of eastern 
Pennsylvania, eastern Maryland, Delaware, and Washington DC This area, 
referred to in the Complaint as ``PJM Mid-Atlantic North,'' is defined 
by a set of major transmission lines that divides this area from the 
rest of the PJM control area. The most important of these lines is the 
``5004/5005 Interface,'' which includes the Keystone-Juniata 5004 line 
and the Conemaugh-Juniata 5005 line. The Exelon generation in eastern 
Pennsylvania is particularly well suited to relieve congestion on these 
transmission lines, though the Constellation generation in Maryland 
also provides some relief to these transmission lines. When these 
transmission lines are constrained, PJM is limited in its ability to 
meet additional demand located east of the constraint with electricity 
from generation located west of the constraint. PJM often responds to 
constraints on these transmission lines by calling on additional 
generation east of the constraint to run, generally resulting in higher 
prices in PJM Mid-Atlantic North.
    PJM Mid-Atlantic South. Another constrained area in PJM also 
includes eastern Pennsylvania, eastern Maryland, Washington DC, 
Delaware, and most of Virginia. This area is defined by a set of major 
transmission lines that divides this area from the rest of the PJM 
control area. The most important of these lines is the ``AP South 
Interface,'' which includes the Mt. Storm-Doubs 512 line, the Greenland 
Gap-Meadowbrook 540 line, the Mt. Storm-Valley 550 line, and the Mt. 
Storm-Meadowbrook (TrAIL) line. The Constellation generation in eastern 
Maryland is particularly well suited to relieve congestion on these 
transmission lines, though the Exelon generation in Pennsylvania also 
provides some relief to these transmission lines. When these 
transmission lines are constrained, PJM is limited in its ability to 
supply additional demand located east of the constraint with 
electricity from generation located west of the constraint. PJM often 
responds to constraints on these lines by calling on additional 
generation east of the constraint to run, generally resulting in higher 
prices in PJM Mid-Atlantic South.

C. Product Market

    The Complaint alleges that wholesale electricity, electricity that 
is generated and sold for resale, is a relevant antitrust product 
market. Wholesale electricity demand is a function of retail 
electricity demand: electricity retailers, who buy wholesale 
electricity to serve their customers, must provide exactly the amount 
of electricity their customers require. Retail electricity consumers' 
demand, however, is largely insensitive to changes in retail price; 
thus, an increase in retail prices due to an increase in wholesale 
prices will have little effect on the quantity of retail electricity 
demanded and little effect on the quantity of wholesale electricity 
demanded. As a result, a small but significant increase in the 
wholesale price of electricity would not cause a significant number of 
retail electricity consumers to substitute other energy sources for 
electricity or otherwise reduce their consumption of electricity.

D. Geographic Markets

    The Complaint alleges that ``PJM Mid-Atlantic North'' and ``PJM 
Mid-Atlantic South'' are relevant antitrust geographic markets defined 
by transmission lines in the PJM control area: PJM Mid-Atlantic North 
is defined by transmission lines that include the 5004-5005 Interface, 
and PJM Mid-Atlantic South is defined by transmission lines that 
include the AP South Interface. When these lines approach their 
operating limits, purchasers of electricity have limited ability to 
purchase electricity generated outside the relevant geographic market 
to meet their needs. Shift factors affect which generating units on the 
transmission grid are likely to be called when constraints occur. At 
such times, the amount of electricity that could be obtained from 
outside PJM Mid-Atlantic North or PJM Mid-Atlantic South by consumers 
located within those areas is insufficient to deter generators located 
in PJM Mid-Atlantic North or PJM Mid-Atlantic South from seeking a 
small but significant price increase. Thus, PJM Mid-Atlantic North and 
PJM Mid-Atlantic South are relevant antitrust geographic markets.

E. Market Shares and Concentration

    The Complaint alleges that Exelon's proposed merger with 
Constellation would eliminate competition between them and give the 
merged firm the incentive and ability profitably to raise wholesale 
electricity prices, resulting in increased retail prices for millions 
of residential, commercial, and industrial customers in the PJM control 
area. In PJM Mid-Atlantic North during 2010, more than $11 billion of 
wholesale electricity was sold; in PJM Mid-Atlantic South during 2010, 
more than $13 billion of wholesale electricity was sold. In PJM Mid-
Atlantic North and PJM Mid-Atlantic South, the merged firm would own or 
control a substantial share of total generating capacity in markets 
that would be moderately concentrated after the merger. More 
importantly, in both geographic markets the merged firm would own or 
control low-cost baseload units that provide incentive to raise prices 
and higher-cost units that provide ability to raise prices.
    Market shares in PJM Mid-Atlantic North and PJM Mid-Atlantic South. 
In PJM Mid-Atlantic North, Exelon currently owns or controls 
approximately 18 percent of the generating capacity and Constellation 
currently owns or controls approximately 10 percent of the generating 
capacity. After the merger, Exelon would own or control approximately 
28 percent of the total generating capacity in PJM Mid-Atlantic North. 
In PJM Mid-Atlantic South, Exelon currently owns or controls 
approximately 14 percent of the generating capacity and Constellation 
currently owns or controls approximately 9 percent of the generating 
capacity. After the merger, Exelon would own or control over 22 percent 
of the total generating capacity in PJM Mid-Atlantic South.
    Concentration in PJM Mid-Atlantic North and PJM Mid-Atlantic South. 
As articulated in the 2010 Horizontal Merger Guidelines issued by the 
Department of Justice and the Federal Trade Commission 
(``Guidelines''), the Herfindahl-Hirschman Index (``HHI'') is a measure 
of market concentration.\1\ Market concentration is often one useful 
indicator of the likely competitive effects of a merger. The more 
concentrated a market, and the more a transaction would increase 
concentration in a market, the more likely it is that a transaction 
would result in a meaningful reduction in

[[Page 81534]]

competition harming consumers. The Guidelines consider markets in which 
the HHI is between 1,500 and 2,500 points to be moderately 
concentrated. Under the Guidelines, transactions that increase the HHI 
by more than 100 points in moderately concentrated markets potentially 
raise significant competitive concerns. Exelon's merger with 
Constellation would yield a post-merger HHI in PJM Mid-Atlantic North 
of approximately 1,600 points, representing an increase of almost 400. 
Exelon's merger with Constellation would yield a post-merger HHI in PJM 
Mid-Atlantic South of approximately 1,800 points, representing an 
increase of approximately 250 points. Thus, the proposed merger 
potentially raises significant competitive concerns in PJM Mid-Atlantic 
North and PJM Mid-Atlantic South.
---------------------------------------------------------------------------

    \1\ See U.S. Dep't of Justice and Federal Trade Commission, 
Horizontal Merger Guidelines 5.3 (2010), available at https://www.justice.gov/atr/public/guidelines/hmg-2010.html The HHI is 
calculated by squaring the market share of each firm competing in 
the market and then summing the resulting numbers. For example, for 
a market consisting of four firms with shares of 30, 30, 20, and 20 
percent, the HHI is 2,600 (302 + 302 + 202 + 202 = 2,600). The HHI 
takes into account the relative size distribution of the firms in a 
market. It approaches zero when a market is occupied by a large 
number of firms of relatively equal size and reaches its maximum of 
10,000 points when a market is controlled by a single firm. The HHI 
increases both as the number of firms in the market decreases and as 
the disparity in size between those firms increases.
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F. Competitive Effects of the Transaction

    The Complaint alleges that the proposed merger would substantially 
lessen competition. The combination of Constellation and Exelon's 
generation would increase the merged firm's ability and incentive to 
withhold selected output, forcing PJM to turn to more expensive 
generation to meet demand, resulting in higher clearing prices in 
PJM.\1\
---------------------------------------------------------------------------

    \1\ The competitive effects described in this section are 
closely analogous to the competitive effects described in the 
Horizontal Merger Guidelines, 6.3, Example 20.
---------------------------------------------------------------------------

    In determining the competitive effects of a firm potentially 
withholding electricity, we consider the operating cost, offer, 
technology, and shift factor of generating units.\2\ Specifically, 
these concepts impact (1) the cost to the PJM system of PJM calling 
substitute generation when there is withholding and (2) the benefits 
and losses to the post-merger firm from the potential withholding 
strategy.
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    \2\ Shift factors inform both the substitutability of generation 
and the price increases the merging parties receive from withholding 
at times of constraint. The cost to the PJM system of using a unit 
to relieve a constraint is a function of both the generating unit's 
shift factor with respect to the constraint and the unit's offer as 
submitted by the unit owner. In general, and holding constant for 
the offer, the greater a generating unit's shift factor with respect 
to relieving a transmission constraint, the greater the economic 
effect of withholding a generating unit when that transmission line 
is constrained. This is because, if the most effective generation is 
not available, PJM must call more generation, at a greater overall 
cost to the system, in order to limit the amount of energy that 
flows across the constraint. Thus mergers may be more problematic 
where the shift factors of the parties' generation indicate that one 
party's generation is a meaningful substitute for the other party's 
generation with respect to a given major constraint.
---------------------------------------------------------------------------

    Baseload units, such as nuclear and efficient coal-fired steam, 
typically generate electricity around the clock during most of the 
year; certain lower-cost mid-merit units, including some coal-fired 
steam units, generate electricity for a substantial number of hours 
during the year. When they are running, such baseload and mid-merit 
units are positioned to benefit from an increase in wholesale 
electricity prices. Because they run so frequently, these units provide 
a relatively significant incentive to withhold output and raise prices.
    Higher-cost units provide ability to withhold output to increase 
the market-clearing price. Higher-cost units can have costs that are 
close to clearing prices for a substantial number of hours during the 
year. Where their costs are close to clearing prices, the opportunity 
cost of withholding output from these units--the lost profit on the 
withheld output--is smaller than it would be for low-cost baseload 
units.
    Here, by giving post-merger Exelon an increased amount of 
relatively lower-cost capacity, combined with an increased share of 
higher-cost capacity, the merger substantially increases the likelihood 
that Exelon would find it profitable to withhold output and raise 
price. With its increased share of higher-cost capacity, the merged 
firm would more often be able to reduce output and raise market-
clearing prices at relatively low cost to it. And with its increased 
amount of lower-cost capacity, the merger would make it more likely 
that the increased revenue on this capacity would outweigh the cost of 
withholding its higher-cost capacity. In other words, as clearing 
prices increased due to its withholding of its higher-cost capacity, 
Exelon would earn those higher prices on its expanded post-merger 
baseload capacity, making it more likely that the benefit of increased 
revenues on its baseload capacity would outweigh the cost of 
withholding higher-cost capacity. Thus the merger increases Exelon's 
incentive and ability to reduce output and raise market prices.

G. Entry

    The Complaint alleges that entry through the construction of new 
generation or transmission capacity would not be timely, likely, and 
sufficient to deter or counteract an anticompetitive price increase. 
Given the necessary environmental, safety, and zoning approvals 
required, it would generally take many years for sufficient new entry 
to take place.

III. Explanation of the Proposed Final Judgment

    The proposed Final Judgment would preserve the competition that 
would have been lost in PJM Mid-Atlantic North and PJM Mid-Atlantic 
South had Exelon's merger with Constellation gone forward as proposed 
without divestitures. Within 150 days after consummation of their 
merger, subject to two thirty-day extensions of that period of time by 
the United States, Defendants must sell all of their rights, titles, 
and interests in the Divestiture Assets. The assets and interests will 
be sold to purchasers acceptable to the United States in its sole 
discretion. In addition, the Final Judgment prohibits the merged 
company from reacquiring or controlling any of the Divestiture Assets.

A. Divestiture

    The Complaint alleges that the merger would significantly enhance 
the merged firm's ability and incentive profitably to reduce output and 
raise prices in PJM Mid-Atlantic North and PJM Mid-Atlantic South. The 
divestiture requirements of the proposed Final Judgment will maintain 
competition for wholesale energy in these geographic markets by 
allowing one or more independent competitors to acquire the Divestiture 
Assets. The Divestiture Assets are three generating plants located in 
PJM Mid-Atlantic North and PJM Mid-Atlantic South:
     Brandon Shores Power Plant, 2030 Brandon Shores Road, 
Baltimore, MD 21226
     H.A. Wagner Power Plant, 3000 Brandon Shores Road, 
Baltimore MD 21226
     CP Crane Power Plant, 1001 Carroll Island Road, Baltimore, 
MD 21220
    Effect of divestiture on ability and incentive profitably to 
withhold output and raise prices. Although the divestiture will reduce 
market shares and concentration levels compared to the levels that 
would have prevailed absent divestiture, the purpose of the divestiture 
is to preserve competition, not merely maintain HHIs or market shares 
at their pre-merger levels.\2\ Accordingly, the proposed Final Judgment 
seeks to restore effective competition by depriving Exelon of key 
assets that would have made it profitable for it to withhold output and 
raise prices in PJM Mid-Atlantic North and PJM Mid-Atlantic South. 
Capacity at all three divestiture plants consists primarily of coal-
fired units which, depending on demand levels, would have increased 
either the incentive or

[[Page 81535]]

the ability of Exelon to exercise market power. Divestiture of the 
three plants eliminates that increased ability and incentive. In this 
way, the proposed Final Judgment assures that the merger is not likely 
to lead to consumer harm.
---------------------------------------------------------------------------

    \2\ U.S. Department of Justice, Antitrust Division Policy Guide 
to Merger Remedies I (June 2011), available at https://www.usdoj.gov/atr/public/guidelines/272350.htm (``[E]ffectively preserving 
competition is the key [principle] to an appropriate merger 
remedy.'').
---------------------------------------------------------------------------

    Requirements regarding divestiture. Defendants must take all 
reasonable steps necessary to accomplish the divestiture quickly and 
shall cooperate with prospective purchasers. Defendants must also 
provide acquirers information relating to personnel that are or have 
been involved, at any time since July 1, 2011, in the operation of, or 
provision of generation services by, the Divestiture Assets. Defendants 
further must refrain from interfering with any negotiations by the 
acquirer or acquirers to employ any of the personnel that are or have 
been involved in the operation of any of the Divestiture Assets. 
Moreover, the proposed Final Judgment restricts Defendants from 
reacquiring any of the Divestiture Assets during the term of the 
proposed Final Judgment.

B. Use of a Divestiture Trustee

    In the event that Defendants do not accomplish the divestiture 
within the periods prescribed in the proposed Final Judgment, the 
proposed Final Judgment provides that the Court will appoint a trustee 
selected by the United States to effect the divestiture. If a trustee 
is appointed, the proposed Final Judgment provides that Defendants will 
pay all the costs and expenses of the trustee. The trustee's commission 
will be structured so as to provide an incentive for the trustee based 
on the price obtained and the speed with which the divestiture is 
accomplished. After his or her appointment becomes effective, the 
trustee will file monthly reports with the Court and the United States 
setting forth his or her efforts to accomplish the divestiture. If 
either (1) the trustee has not entered into definitive contracts for 
sale of the Divestiture Assets within ninety (90) days after the 
appointment of the trustee or (2) the trustee has not accomplished the 
divestitures within six (6) months after the appointment of the 
trustee, the trustee and the United States will make recommendations to 
the Court, which shall enter such orders as appropriate to carry out 
the purpose of the trust, including extending the trust or the term of 
the trustee's appointment.
    The divestiture provisions will eliminate the anticompetitive 
effects of the merger in wholesale electricity markets in PJM Mid-
Atlantic North and PJM Mid-Atlantic South.

IV. Explanation of the Hold Separate Stipulation and Order

    The Stipulation entered into by the United States and Defendants 
ensures that the Divestiture assets are preserved and maintained and 
that competition is maintained during the pendency of the ordered 
divestiture. First, the Stipulation includes terms requiring that 
Defendants maintain the Divestiture Assets as economically viable and 
competitive facilities. Second, the Stipulation includes terms ensuring 
that Defendants do not withhold output from the wholesale electricity 
market. In particular, the Stipulation requires that Defendants offer 
the output from certain generating units into the PJM auctions at no 
more than specified price levels until the Divestiture Assets are sold. 
The Stipulation also requires the Defendants (1) to submit certain data 
about their offers to the Division, (2) to grant permission for the 
Division to discuss that data and related information with PJM and the 
PJM Market Monitor, (3) to submit certain proposed contracts for the 
output of generating assets not owned by the Defendants to the United 
States for review, and (4) if required to do so by the Division in its 
sole discretion, to hire an auditor to ensure that Defendants are 
offering their units at the specified price levels and are not 
withholding generation to raise prices. These requirements seek to 
ensure that Defendants will not offer their generation into the PJM 
auctions in ways that allows Defendants to raise market prices.
    Requiring Defendants to hold the Divestiture Assets separate and 
distinct, a typical requirement in Antitrust Division hold separate 
stipulation and orders, would not have prevented competitive harm in 
the interim period from consummation to divestiture. The operator of 
the Divestiture Assets would have recognized that reducing their output 
would increase the clearing price and benefit Defendants' remaining 
generating units. Therefore, the Stipulation requires that Defendants 
maintain offers for output of the Divestiture Assets at the specified 
levels. Defendants are relieved of the requirement to offer their units 
at no more than specified levels if they transfer to a third party the 
rights to offer and receive the revenues from the sale of the complete 
output of the Divestiture Assets.

V. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys' fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
16(a), the proposed Final Judgment has no prima facie effect in any 
subsequent private lawsuit that may be brought against Defendants.

VI. Procedures Available for Modification of the Proposed Final 
Judgment

    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register, or the last date of 
publication in a newspaper of the summary of this Competitive Impact 
Statement, whichever is later. All comments received during this period 
will be considered by the United States Department of Justice, which 
remains free to withdraw its consent to the proposed Final Judgment at 
any time prior to the Court's entry of judgment. The comments and the 
response of the United States will be filed with the Court and 
published in the Federal Register.
    Written comments should be submitted to: William H. Stallings, 
Chief, Transportation, Energy & Agriculture Section, Antitrust 
Division, United States Department of Justice, 450 Fifth Street, NW., 
Suite 8000, Washington, DC 20001.
    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VII. Alternatives to the Proposed Final Judgment

    The United States considered, as an alternative to the proposed 
Final

[[Page 81536]]

Judgment, a full trial on the merits against Defendants. The United 
States could have continued the litigation and sought preliminary and 
permanent injunctions against Exelon's acquisition of certain 
Constellation assets. The United States is satisfied, however, that the 
divestiture of assets described in the proposed Final Judgment will 
preserve competition in the market for wholesale electricity in PJM 
Mid-Atlantic North and PJM Mid-Atlantic South. Thus, the proposed Final 
Judgment would achieve all or substantially all of the relief the 
United States would have obtained through litigation, but avoids the 
time, expense, and uncertainty of a full trial on the merits of the 
Complaint.

VIII. Standard of Review Under the APPA for the Proposed Final Judgment

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a sixty (60)-day comment period, after which the Court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest.'' 15 U.S.C. 16(e)(1). In making that determination, 
the Court shall consider:

    (A) the competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) the impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.

15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory factors, 
the court's inquiry is necessarily a limited one as the government is 
entitled to ``broad discretion to settle with the defendant within the 
reaches of the public interest.'' United States v. Microsoft Corp., 56 
F.3d 1448, 1461 (DC Cir. 1995); see generally United States v. SBC 
Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public 
interest standard under the Tunney Act); United States v. InBev N.V./
S.A., 2009-2 Trade Cas. (CCH) ] 76,736, 2009 U.S. Dist. LEXIS 84787, 
No. 08-1965 (JR), at *3, (D.D.C. Aug. 11, 2009) (noting that the 
court's review of a consent judgment is limited and only inquires 
``into whether the government's determination that the proposed 
remedies will cure the antitrust violations alleged in the complaint 
was reasonable, and whether the mechanisms to enforce the final 
judgment are clear and manageable.'').\3\
---------------------------------------------------------------------------

    \3\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for court to consider and amended the 
list of factors to focus on competitive considerations and to 
address potentially ambiguous judgment terms. Compare 15 U.S.C. 
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns, 
489 F. Supp. 2d at 11 (concluding that the 2004 amendments 
``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------

    As the United States Court of Appeals for the District of Columbia 
Circuit has held, under the APPA a court considers, among other things, 
the relationship between the remedy secured and the specific 
allegations set forth in the government's complaint, whether the decree 
is sufficiently clear, whether enforcement mechanisms are sufficient, 
and whether the decree may positively harm third parties. See 
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the 
relief secured by the decree, a court may not ``engage in an 
unrestricted evaluation of what relief would best serve the public.'' 
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (citing 
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see 
also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 
F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787, 
at *3. Courts have held that:

    [t]he balancing of competing social and political interests 
affected by a proposed antitrust consent decree must be left, in the 
first instance, to the discretion of the Attorney General. The 
court's role in protecting the public interest is one of insuring 
that the government has not breached its duty to the public in 
consenting to the decree. The court is required to determine not 
whether a particular decree is the one that will best serve society, 
but whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\4\ In 
determining whether a proposed settlement is in the public interest, a 
district court ``must accord deference to the government's predictions 
about the efficacy of its remedies, and may not require that the 
remedies perfectly match the alleged violations.'' SBC Commc'ns, 489 F. 
Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 (noting the need 
for courts to be ``deferential to the government's predictions as to 
the effect of the proposed remedies''); United States v. Archer-
Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that 
the court should grant due respect to the United States' prediction as 
to the effect of proposed remedies, its perception of the market 
structure, and its views of the nature of the case).
---------------------------------------------------------------------------

    \4\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the 
court is constrained to ``look at the overall picture not 
hypercritically, nor with a microscope, but with an artist's 
reducing glass''). See generally Microsoft, 56 F.3d at 1461 
(discussing whether ``the remedies [obtained in the decree are] so 
inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest''').
---------------------------------------------------------------------------

    Courts have greater flexibility in approving proposed consent 
decrees than in crafting their own decrees following a finding of 
liability in a litigated matter. ``[A] proposed decree must be approved 
even if it falls short of the remedy the court would impose on its own, 
as long as it falls within the range of acceptability or is 'within the 
reaches of public interest.''' United States v. Am. Tel. & Tel. Co., 
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United 
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd 
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also 
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 
1985) (approving the consent decree even though the court would have 
imposed a greater remedy). To meet this standard, the United States 
``need only provide a factual basis for concluding that the settlements 
are reasonably adequate remedies for the alleged harms.'' SBC Commc'ns, 
489 F. Supp. 2d at 17.
    Moreover, the court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its Complaint, and does not authorize the court to 
``construct [its] own hypothetical case and then evaluat