United States of America v. Duke Energy Corporation; Proposed Final Judgment and Competitive Impact Statement, 8845-8852 [2017-02026]

Download as PDF Federal Register / Vol. 82, No. 19 / Tuesday, January 31, 2017 / Notices record are moot. The investigation is terminated in its entirety. The authority for the Commission’s determination is contained in section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, and in part 210 of the Commission’s Rules of Practice and Procedure, 19 CFR part 210. By order of the Commission. Issued: January 25, 2017. Lisa R. Barton, Secretary to the Commission. [FR Doc. 2017–02002 Filed 1–30–17; 8:45 am] BILLING CODE 7020–02–P JUDICIAL CONFERENCE OF THE UNITED STATES Hearings of the Judicial Conference Advisory Committee on the Federal Rules of Criminal Procedure Advisory Committee on the Federal Rules of Criminal Procedure, Judicial Conference of the United States. ACTION: Notice of cancellation of public hearing. AGENCY: The following public hearing on proposed amendments to the Federal Rules of Criminal Procedure has been canceled: Criminal Rules Hearing on February 24, 2017 in Washington, DC. The announcement for this meeting was previously published in 81 FR 52713. FOR FURTHER INFORMATION CONTACT: Rebecca A. Womeldorf, Rules Committee Secretary, Rules Committee Support Office, Administrative Office of the United States Courts, Washington, DC 20544, telephone (202) 502–1820. SUMMARY: Dated: January 26, 2017. Rebecca A. Womeldorf, Rules Committee Secretary. [FR Doc. 2017–02015 Filed 1–30–17; 8:45 am] BILLING CODE 2210–55–P DEPARTMENT OF JUSTICE Antitrust Division asabaliauskas on DSK3SPTVN1PROD with NOTICES Notice Pursuant to the National Cooperative Research and Production Act of 1993—R Consortium, Inc. Notice is hereby given that, on December 21, 2016, pursuant to Section 6(a) of the National Cooperative Research and Production Act of 1993, 15 U.S.C. 4301 et seq. (‘‘the Act’’), R Consortium, Inc. (‘‘R Consortium’’) has filed written notifications simultaneously with the Attorney General and the Federal Trade Commission disclosing changes in its VerDate Sep<11>2014 18:22 Jan 30, 2017 Jkt 241001 membership. The notifications were filed for the purpose of extending the Act’s provisions limiting the recovery of antitrust plaintiffs to actual damages under specified circumstances. Specifically, Moore Foundation, Palo Alto, CA; and Datacamp, Cambridge, MA, have been added as parties to this venture. No other changes have been made in either the membership or planned activity of the group research project. Membership in this group research project remains open, and R Consortium intends to file additional written notifications disclosing all changes in membership. On September 15, 2015, R Consortium filed its original notification pursuant to Section 6(a) of the Act. The Department of Justice published a notice in the Federal Register pursuant to Section 6(b) of the Act on October 2, 2015 (80 FR 59815). The last notification was filed with the Department on October 7, 2016. A notice was published in the Federal Register pursuant to Section 6(b) of the Act on November 3, 2016 (81 FR 76629). Patricia A. Brink, Director of Civil Enforcement, Antitrust Division. [FR Doc. 2017–02020 Filed 1–30–17; 8:45 am] BILLING CODE P 8845 Technology, Ltd., Petersfield, UNITED KINGDOM; NBC Universal, New York, NY; NewTek, Inc., San Antonio, TX; Synco Services, Inc., New York, NY; Brooks Harris (individual member), New York, NY; and Christine MacNeill (individual member), Aultbea, Achnasheen, UNITED KINGDOM, have withdrawn as parties to this venture. No other changes have been made in either the membership or planned activity of the group research project. Membership in this group research project remains open, and Advanced Media Workflow Association, Inc. intends to file additional written notifications disclosing all changes in membership. On March 28, 2000, Advanced Media Workflow Association, Inc. filed its original notification pursuant to Section 6(a) of the Act. The Department of Justice published a notice in the Federal Register pursuant to Section 6(b) of the Act on June 29, 2000 (65 FR 40127). The last notification was filed with the Department on September 21, 2016. A notice was published in the Federal Register pursuant to Section 6(b) of the Act on October 26, 2016 (81 FR 74480). Patricia A. Brink, Director of Civil Enforcement, Antitrust Division. [FR Doc. 2017–02016 Filed 1–30–17; 8:45 am] BILLING CODE P DEPARTMENT OF JUSTICE Antitrust Division DEPARTMENT OF JUSTICE Notice Pursuant to the National Cooperative Research and Production Act of 1993—Advanced Media Workflow Association, Inc. Antitrust Division Notice is hereby given that, on December 22, 2016, pursuant to Section 6(a) of the National Cooperative Research and Production Act of 1993, 15 U.S.C. 4301 et seq. (‘‘the Act’’), Advanced Media Workflow Association, Inc. has filed written notifications simultaneously with the Attorney General and the Federal Trade Commission disclosing changes in its membership. The notifications were filed for the purpose of extending the Act’s provisions limiting the recovery of antitrust plaintiffs to actual damages under specified circumstances. Specifically, AJA Video Systems, Inc., Grass Valley, CA; dB Broadcast Limited, Witchford, Ely, UNITED KINGDOM; DELTACAST.TV, Ans, BELGIUM; and Streampunk Media, Aultbea, UNITED KINGDOM, have been added as parties to this venture. Also, Australian Broadcasting Corp., Sydney, AUSTRALIA; InSync PO 00000 Frm 00023 Fmt 4703 Sfmt 4703 United States of America v. Duke Energy Corporation; 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. Duke Energy Corporation, Civil Action No. 1:17–cv–00116. On January 18, 2017, the United States filed a Complaint alleging that Duke Energy Corporation violated Section 7A of the Clayton Act, 15 U.S.C. 18a, by acquiring the Osprey Energy Center from Calpine Corporation before filing the required notification form and observing the required waiting period. The proposed Final Judgment, filed at the same time as the Complaint, requires Duke Energy Corporation to pay a civil penalty of $600,000. E:\FR\FM\31JAN1.SGM 31JAN1 8846 Federal Register / Vol. 82, No. 19 / Tuesday, January 31, 2017 / Notices Copies of the Complaint, proposed Final Judgment, and Competitive Impact Statement are available for inspection on the Antitrust Division’s Web site at http://www.justice.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, including the name of the submitter, and responses thereto, will be posted on the Antitrust Division’s Web site, filed with the Court, and, under certain circumstances, published in the Federal Register. Comments should be directed to Caroline E. Laise, Assistant Chief, Transportation, Energy & Agriculture Section, Antitrust Division, Department of Justice, 450 Fifth Street NW., Suite 8000, Washington, DC 20530 (telephone: (202) 353–9797). Patricia A. Brink, Director of Civil Enforcement. UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA United States of America, U.S. Department of Justice, Antitrust Division, 450 Fifth St. NW., Suite 8000, Washington, DC 20530, Plaintiff, v. Duke Energy Corporation, 550 South Tryon Street, Charlotte, NC 28202, Defendants. Case No.: 1:17–cv–00116 Judge: Beryl A. Howell Filed: 01/18/2017 asabaliauskas on DSK3SPTVN1PROD with NOTICES COMPLAINT The United States of America, acting under the direction of the Attorney General of the United States, brings this civil action to obtain monetary relief in the form of civil penalties against the Defendant, Duke Energy Corporation (‘‘Duke’’), for violating Section 7A of the Clayton Act, as amended, 15 U.S.C. 18a, also commonly known as the Hart-ScottRodino Antitrust Improvements Act of 1976 (‘‘HSR Act’’), and alleges as follows: I. NATURE OF THE ACTION 1. The HSR Act is an essential part of modern antitrust enforcement. The HSR Act and implementing regulations require purchasers to notify the Department of Justice and the Federal Trade Commission and wait for agency review before acquiring assets valued in excess of certain thresholds. A purchaser can ‘‘acquire’’ assets without taking formal legal title, for instance by obtaining operational control over the assets or otherwise obtaining ‘‘beneficial ownership.’’ The HSR Act’s notice and VerDate Sep<11>2014 18:22 Jan 30, 2017 Jkt 241001 waiting period requirements ensure that the parties to a proposed transaction continue to operate independently during review, preventing anticompetitive acquisitions from harming consumers before the government has had the opportunity to review them according to the procedures established by Congress in the Clayton Act. A purchaser that prematurely takes beneficial ownership of assets, sometimes referred to as ‘‘gun jumping,’’ is subject to statutory penalties for each day it is in violation. 2. In August 2014, Duke agreed to terms to purchase the Osprey Energy Center (‘‘Osprey’’) from its owner, Calpine Corporation (‘‘Calpine’’), a competing seller of wholesale electricity nationally and in Florida. Osprey is a combined-cycle natural gas-fired electrical generating plant located in Auburndale, Florida. Duke violated the HSR Act by obtaining beneficial ownership of Osprey before filing the required notification and observing the required waiting period. 3. Specifically, as part of the agreement to acquire the plant, Duke also entered into a ‘‘tolling agreement’’ whereby Duke immediately began exercising control over Osprey’s output, and immediately began reaping the dayto-day profits and losses from the plant’s business. Duke, for example, assumed control of purchasing all the fuel for the plant, arranging for delivery of that fuel, and arranging for transmission of all energy generated. Duke, not Calpine, retained the profit (or loss) from the difference between the price of the energy generated at Osprey and the cost to generate the energy, bearing all the risk of changes in the market price for fuel and the market price for energy. Based on these potential risks and rewards, Duke, and not Calpine, decided exactly how much energy would be generated by the plant on an hour-by-hour basis, and relayed those detailed instructions each day to plant personnel. Thus, from the moment the tolling agreement went into effect, Osprey ceased to be an independent competitive presence in the market for generating electricity for Florida consumers. 4. Duke was never interested in a tolling agreement alone—Duke was only interested in the tolling agreement as a step in the process of purchasing the plant. As a Duke executive explained in testimony to the Florida Public Service Commission, the tolling agreement reflected an effort to obtain expedited approval for the purchase of Osprey from the Federal Energy Regulatory Commission (‘‘FERC’’). When FERC reviews a proposed power plant PO 00000 Frm 00024 Fmt 4703 Sfmt 4703 acquisition, it typically employs a ‘‘screen’’ to assess how much the proposed acquisition would increase market concentration. While planning the acquisition of Osprey, Duke and Calpine anticipated the acquisition would fail the FERC screen. But with a tolling agreement in place, Duke hoped that FERC would treat Osprey as already effectively controlled by Duke, and would therefore conclude that an acquisition would lead to no change in Duke’s market share and no increase in concentration under FERC’s screen. Indeed, after entering into the tolling agreement, Duke argued to FERC that its acquisition of Osprey posed no competitive threat and did not increase concentration because Duke ‘‘already controls [Osprey] pursuant to the Tolling Agreement.’’ 5. The combination of Duke’s agreement to purchase Osprey and the contemporaneously negotiated and interdependent tolling agreement transferred beneficial ownership of Osprey’s business to Duke before Duke had fulfilled its obligations under the HSR Act. As a result, Duke and Calpine did not continue to act as independent entities during the required waiting period while the Department of Justice investigated the proposed acquisition and determined whether to challenge it. Therefore, the Court should assess a civil penalty against Duke for its violation of the HSR Act. II. JURISDICTION, VENUE, AND INTERSTATE COMMERCE 6. This Complaint is filed and these proceedings are instituted under Section 7A of the Clayton Act, 15 U.S.C. 18a, added by Title II of the HSR Act, to recover civil penalties for violations of that section. 1. 7. This Court has jurisdiction over the subject matter of this action pursuant to Section 7A(g) of the Clayton Act, 15 U.S.C. 18a(g), and pursuant to 28 U.S.C. 1331, 1337(a), 1345 and 1355. 8. The Defendant has consented to personal jurisdiction and venue in the District of Columbia for purposes of this action. 9. Duke is engaged in commerce, or in activities affecting commerce, within the meaning of Section 7A(a)(1) of the Clayton Act, 15 U.S.C. 18a(a)(1). III. THE DEFENDANT 10. Defendant Duke Energy Corporation is organized under the laws of Delaware with its principal office and place of business at 550 South Tryon Street in Charlotte, North Carolina. Through various subsidiaries, Duke Energy Corporation generates and sells E:\FR\FM\31JAN1.SGM 31JAN1 Federal Register / Vol. 82, No. 19 / Tuesday, January 31, 2017 / Notices electric power on a retail and/or wholesale basis in numerous local markets throughout the United States. asabaliauskas on DSK3SPTVN1PROD with NOTICES IV. WAITING PERIOD REQUIREMENTS OF THE HSR ACT 11. The HSR Act requires parties to file a notification with the Federal Trade Commission and the Department of Justice and to observe a waiting period before consummating acquisitions of voting securities or assets that exceed certain value thresholds. The required notification gives the federal antitrust agencies prior notice of, and information about, proposed transactions. The waiting period provides the antitrust enforcement agencies with an opportunity to investigate and to seek an injunction to prevent harm from anticompetitive transactions. 12. The HSR Act requirements apply to a transaction if, as a result of the transaction, the acquirer will ‘‘hold’’ assets or voting securities valued above the thresholds. Section 801(c)(1) of the Premerger Notification Rules, 16 CFR 800 et seq., defines ‘‘hold’’ to mean to have ‘‘beneficial ownership.’’ An acquiring person may prematurely obtain beneficial ownership of assets by, among other things, assuming the risk or potential benefit of changes in the value of the relevant assets and exercising control over day-to-day business decisions of the acquired person’s business before the end of the HSR waiting period. This conduct, sometimes referred to as ‘‘gun jumping,’’ violates Section 7A of the Clayton Act. 13. Section 7A(g)(1) of the Clayton Act, 15 U.S.C. 18a(g)(1), states that any person, or any officer, director, or partner thereof, who fails to comply with any provision of the HSR Act is liable to the United States for a civil penalty for each day during which the person is in violation. Beginning February 10, 2009, the maximum amount of civil penalty was increased to $16,000 per day, pursuant to the Debt Collection Improvement Act of 1996, Pub. L. 104–134, 31001(s) (amending the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. 2461 note), and Federal Trade Commission Rule 1.98, 16 CFR 1.98, 74 FR 857 (Jan. 9, 2009). Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, Pub. L. 114– 74, 701 (further amending the Federal Civil Penalties Inflation Adjustment Act of 1990), and Federal Trade Commission Rule 1.98, 16 CFR 1.98, 81 FR 42,476 (June 30, 2016), the maximum amount of civil penalty was increased to $40,000 per day. VerDate Sep<11>2014 18:22 Jan 30, 2017 Jkt 241001 V. THE TRANSACTION AND THE DEFENDANT’S UNLAWFUL CONDUCT 14. In August 2014, Duke and Calpine reached an agreement for Duke to purchase Osprey. The parties memorialized their agreement in an August 25, 2014 term sheet. The structure of the transaction included a tolling agreement to be put into effect until the closing of the acquisition. Duke and Calpine executed the tolling agreement on September 30, 2014, and it became effective the next day. 15. Tolling agreements are relatively common in the electricity industry, but the circumstances surrounding Duke’s tolling agreement for the Osprey plant are not. Duke said in testimony to the Florida Public Service Commission that there was no separate rationale to enter this tolling agreement independent of the acquisition. Duke was only interested in the tolling agreement as a bridge to the acquisition of the plant itself. As a Duke executive testified, the tolling agreement was a ‘‘mechanism to transfer the acquisition of the plant to [Duke].’’ Duke insisted that it was only willing to enter into a tolling agreement in combination with an acquisition agreement, and only if Duke had the right to terminate the tolling agreement without penalty in the event that FERC rejected the acquisition. 16. The tolling agreement was designed to smooth approval by FERC by enabling Duke to argue that it ‘‘already controls’’ Osprey through the tolling agreement and thus that no new harm could come from permitting Duke to acquire Osprey outright. Under the tolling agreement, Duke was responsible for determining the amount of power that would be generated at Osprey, and for purchasing and delivering all the fuel necessary to produce that power. Duke was then entitled to receive all of the electricity generated by the facility. 17. After entering into the tolling agreement, Duke began to make all competitively significant decisions for the Osprey plant. Each day, Duke sent hour-by-hour instructions to Osprey personnel directing them to produce a certain amount of power. Duke also arranged to procure and deliver the necessary natural gas to Osprey— functions previously performed by Calpine. Duke also arranged for all of the power generated at Osprey to be transmitted to its destination. In other words, Duke decided when and how much natural gas would be delivered to the plant and decided when and how much energy would be produced by the plant. Duke was free to make all of these decisions based on its own business PO 00000 Frm 00025 Fmt 4703 Sfmt 4703 8847 interests, and Osprey’s function was limited to the mechanical operation of the facility consistent with Duke’s instructions. Calpine ceased to make any significant competitive decisions for Osprey. 18. The combination of the tolling agreement and the asset purchase agreement transferred market risk (or potential gain) of a change in the fortunes of Osprey’s business. Duke paid Calpine a fixed monthly fee plus a small amount to reimburse the plant’s variable operations and maintenance costs. Duke also assumed financial responsibility for procuring natural gas, the plant’s primary input cost. Thus, it was Duke who gained the profit or loss from sale of the energy, and it was Duke who assumed all the risk that fuel prices would increase or that energy market prices would fall. Calpine was no longer exposed to any risk of changes in the fuel or energy markets. 19. Months after the tolling agreement was executed and Duke had taken beneficial ownership of Osprey, Duke submitted a notification and report form pursuant to the HSR Act concerning its intent to acquire the Osprey plant, valued at approximately $166 million. On February 27, 2015, the antitrust agencies terminated the HSR waiting period. Duke had beneficial ownership of Osprey for the entire waiting period. VI. VIOLATION OF SECTION 7A OF THE CLAYTON ACT 20. Plaintiff alleges and incorporates paragraphs 1 through 19 as if set forth fully herein. 21. Duke’s acquisition of Osprey was subject to Section 7A premerger notification and waiting-period requirements. 22. Duke obtained beneficial ownership of Osprey prior to making its required premerger notification and observing the applicable waiting period in violation of Section 7A. 23. Accordingly, Defendant was continuously in violation of the requirements of the HSR Act each day beginning on October 1, 2014, until the waiting period was terminated on February 27, 2015. VII. REQUEST FOR RELIEF Wherefore, Plaintiff requests: (a) that the Court adjudge and decree that Defendant violated the HSR Act and was in violation during the period of 150 days beginning on October 1, 2014, and ending on February 27, 2015; (b) order that Defendant pay to the United States an appropriate civil penalty as provided under Section 7A(g)(1) of the Clayton Act, 15 U.S.C. 18(a)(g)(1), and 16 CFR 1.98(a); E:\FR\FM\31JAN1.SGM 31JAN1 8848 Federal Register / Vol. 82, No. 19 / Tuesday, January 31, 2017 / Notices (c) that the Court award the Plaintiff its costs of this suit; and, (d) that the Court order such other and further relief as the Court may deem just and proper. Dated: January 18, 2017. Respectfully Submitted, /s/ lllllllllllllllllll Renata B. Hesse (D.C. Bar #466107), Acting Assistant Attorney General. /s/ lllllllllllllllllll Jonathan B. Sallet, Deputy Assistant Attorney General for Litigation. /s/ lllllllllllllllllll Patricia A. Brink, Director of Civil Enforcement. /s/ lllllllllllllllllll Robert A. Potter, Chief, Legal Policy Section. /s/ lllllllllllllllllll Caroline E. Laise, Assistant Chief, Transportation, Energy & Agriculture Section. /s/ lllllllllllllllllll Robert A. Lepore, Assistant Chief, Transportation, Energy & Agriculture Section. /s/ lllllllllllllllllll Jade A. Eaton (D.C. Bar #939629) Njeri Mugure, Trial Attorneys, Transportation, Energy & Agriculture Section. /s/ lllllllllllllllllll Kara B. Kuritz, Attorney Advisor, Legal Policy Section. U.S. Department of Justice, Antitrust Division, 450 Fifth Street NW., Suite 8000, Washington, DC 20530, Phone: (202) 307– 6316, Facsimile: (202) 307–2784, Email: jade.eaton@usdoj.gov. UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA United States Of America, Plaintiff, v. Duke Energy Corporation, Defendant. Case No.: 1:17–cv–00116 Judge: Beryl A. Howell Filed: 01/18/2017 asabaliauskas on DSK3SPTVN1PROD with NOTICES COMPETITIVE IMPACT STATEMENT Plaintiff United States of America (‘‘United States’’), pursuant to Section 2(b) of the Antitrust Procedures and Penalties Act (‘‘APPA’’), 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 On January 18, 2017, the United States filed a Complaint against Defendant Duke Energy Corporation (‘‘Duke’’), related to Duke’s acquisition of the Osprey Energy Center (‘‘Osprey’’) from Calpine Corporation (‘‘Calpine’’). VerDate Sep<11>2014 18:22 Jan 30, 2017 Jkt 241001 The Complaint alleges that Duke violated Section 7A of the Clayton Act, 15 U.S.C. 18a, commonly known as the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the ‘‘HSR Act’’). The Complaint alleges that Duke acquired Osprey, through a transaction in excess of the then-applicable statutory thresholds, without making the required HSR Act filings with the agencies and without observing the required HSR Act waiting period. The HSR Act provides that ‘‘no person shall acquire, directly or indirectly, any voting securities of any person’’ exceeding certain thresholds until that person has filed pre-acquisition notification and report forms with the Department of Justice and the Federal Trade Commission (collectively, the ‘‘federal antitrust agencies’’ or ‘‘agencies’’) and the post-filing waiting period has expired. 15 U.S.C. 18a(a). A key purpose of the notification and waiting period is to protect consumers and competition from potentially anticompetitive transactions by providing the agencies an opportunity to conduct an antitrust review of proposed transactions before they are consummated. At the same time the Complaint was filed, the United States also filed a Stipulation and proposed Final Judgment. Under the proposed Final Judgment, which is explained more fully below, Duke is required to pay a civil penalty to the United States in the amount of $600,000. The proposed Final Judgment is designed to deter HSR Act violations by Duke and similarly situated acquirers. The United States and the Defendant 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 punish violations thereof. II. DESCRIPTION OF THE EVENTS GIVING RISE TO THE ALLEGED VIOLATION A. Duke’s Acquisition of Osprey Energy Center From Calpine In August 2014, Duke agreed to terms to purchase Osprey from Calpine, a competing seller of wholesale electricity nationally and in Florida. As part of the acquisition, Duke entered into a ‘‘tolling agreement’’ whereby Duke immediately began exercising control over Osprey’s output, and immediately began reaping the day-to-day profits and losses from PO 00000 Frm 00026 Fmt 4703 Sfmt 4703 the plant’s business. Duke, for example, assumed control of purchasing all the fuel for the plant, arranging for delivery of that fuel, and arranging for transmission of all energy generated. Duke retained the profit (or loss) from the difference between the price of the energy generated at Osprey and the cost to generate the energy, bearing all the risk of changes in the market price for fuel and the market price for energy. Based on these potential risks and rewards, Duke decided exactly how much energy would be generated by the plant on an hour-by-hour basis, and relayed those detailed instructions each day to plant personnel. Thus, from the moment the tolling agreement went into effect, Osprey ceased to be an independent competitive presence in the market for generating electricity for Florida consumers. The tolling agreement was entered months before Duke made its required HSR filing for the acquisition of Osprey. Duke made clear in testimony filed with federal and state regulators that it only ever considered the tolling agreement in conjunction with an agreement to acquire Osprey. As Duke explained in its application to the Federal Energy Regulatory Commission (‘‘FERC’’) for permission to acquire the plant, Duke’s negotiation with Calpine ‘‘led to an agreement in principle whereby [Duke] would purchase power from Osprey Energy Center under a twoyear power purchase agreement [the Tolling Agreement] and then purchase the facility itself.’’ B. Duke’s Alleged Violation of Section 7A Before the HSR Act was enacted, the agencies were often forced to investigate anticompetitive mergers that had already been consummated without public notice. In those situations, the agencies’ only recourse was to sue to unwind the parties’ merger. During this time, the loss of competition continued to harm consumers, and if the court ultimately found that the merger was illegal, effective relief was often impossible to achieve. The HSR Act addressed these problems and strengthened antitrust enforcement by providing the antitrust agencies the ability to investigate certain large acquisitions before they are consummated. In particular, the HSR Act prohibits certain acquiring parties from undertaking an acquisition before required filings are made with the antitrust agencies and a prescribed waiting period expires or is terminated. The HSR Act requirements apply to a transaction if, as a result of the transaction, the acquirer will ‘‘hold’’ E:\FR\FM\31JAN1.SGM 31JAN1 Federal Register / Vol. 82, No. 19 / Tuesday, January 31, 2017 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES assets or voting securities valued above the thresholds. Under HSR Rule 801.1(c), to ‘‘hold’’ assets or voting securities means ‘‘beneficial ownership, whether direct, or indirect through fiduciaries, agents, controlled entities or other means.’’ 16 CFR 801.1(c). Thus, under the Act, parties must make an HSR filing and observe a waiting period before transferring beneficial ownership of the assets or voting securities to be acquired. The Statement of Basis and Purpose accompanying the Rules explains that beneficial ownership is determined on a case-by-case basis, based on the indicia of beneficial ownership which include among others, the right to obtain the benefit of any increase in value or dividends, and the risk of loss of value. 43 FR 33,449 (July 31, 1978). The agencies have explained that a firm may also gain beneficial ownership by obtaining ‘‘operational control’’ of an asset.1 The combination of Duke’s agreement to purchase Osprey and the tolling agreement transferred beneficial ownership of Osprey’s business to Duke before Duke had fulfilled its obligations under the HSR Act. Duke’s tolling agreement with Calpine gave it significant operational control over the Osprey plant, and allowed Duke to assume the risks or potential benefits of changes in the value of Osprey’s business. Duke procured and decided how much fuel would be delivered to the plant, decided when and how much energy would be produced by the plant, and decided when and where that energy would be delivered. Calpine’s function was limited to the mechanical operation of the Osprey facility consistent with Duke’s instructions. In addition, Duke, and not Calpine, retained the margin between the cost of gas and the price of electricity. If the spread between the cost of gas and the market price of electricity increased or decreased prior to closing, Duke realized that gain or loss. A tolling agreement alone does not necessarily confer beneficial ownership. Tolling agreements are relatively common in the electricity industry, and control over output and the shift of risk and benefit to the buyer over the term 1 See, e.g., Complaint, United States v. Flakeboard Am. Ltd., No. 3:14–cv–4949 (N.D. Cal. Nov. 7, 2014), available at https://www.justice.gov/ atr/case-document/file/496511/download; Complaint, United States v. Smithfield Foods, Inc., No. 1:10–cv–00120 (D.D.C. Jan. 21, 2010), available at https://www.justice.gov/atr/case-document/ complaint-211; Complaint, United States v. Qualcomm Inc., No. 1:06CV00672 (PLF) (D.D.C. Apr. 13, 2006), available at https://www.justice.gov/ atr/case-document/complaint-civil-penaltiesviolation-premerger-reporting-requirements-hartscott-0. VerDate Sep<11>2014 18:22 Jan 30, 2017 Jkt 241001 are typical features of such agreements. However, in this instance, as Duke admitted to regulators, the tolling agreement for the Osprey plant was entered as part and parcel of a broader agreement to acquire the plant and had no economic rationale independent from the acquisition. Considering the intertwined agreements in their totality, Calpine ceased to be an independent competitive presence in the market after entering the tolling agreement, and beneficial ownership of Osprey transferred to Duke. Agreements that transfer some indicia of beneficial ownership, even if common in an industry, may violate Section 7A if entered into while the buyer intends to acquire the asset.2 Entering into such agreements before filing the required HSR notifications and before the HSR waiting period expires defeats the purpose of the HSR Act by enabling the acquiring person to direct the acquired person’s business to bring about the effects of an acquisition prior to completion of the agencies’ antitrust review. Hence, Duke’s obligation to file and observe the waiting period arose as of October 1, 2014, the effective date of the tolling agreement relating to the plant it intended to acquire. III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT The proposed Final Judgment imposes a $600,000 civil penalty for violation of the HSR Act. The United States adjusted the penalty downward from the maximum permitted under the HSR Act in part because the Defendant was willing to resolve the matter by consent decree and avoid prolonged investigation and litigation. The relief will have a beneficial effect on competition because it will deter future instances in which parties seek to immediately remove an independent competitive presence from an industry before filing required pre-acquisition notifications with the agencies and observing the required waiting period. At the same time, the penalty will not have any adverse effect on competition. IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS There is no private antitrust action for HSR Act violations; therefore, entry of 2 For example, the Department expressed this view in a 1996 speech by former Deputy Assistant Attorney General Larry Fullerton in which he discussed certain management contracts sometimes entered into by radio stations. Lawrence R. Fullerton, Deputy Assistant Attorney General, Antitrust Division, Dep’t of Justice, Address at Business Development Associates Antitrust 1997 Conference (Oct. 21, 1996), available at https:// www.justice.gov/atr/file/518686/download. PO 00000 Frm 00027 Fmt 4703 Sfmt 4703 8849 the proposed Final Judgment will neither impair nor assist the bringing of any private antitrust action. V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT The United States and the Defendant have stipulated that the proposed Final Judgment may be entered by this Court after compliance with the provisions of the APPA, provided that the United States has not withdrawn its consent. The APPA conditions entry of the decree upon this 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 this Court. In addition, comments will be posted on the U.S. Department of Justice, Antitrust Division’s internet Web site and, under certain circumstances, published in the Federal Register. Written comments should be submitted to: Caroline Laise, Assistant Chief, Transportation Energy and Agriculture Section, Antitrust Division, United States Department of Justice, 450 Fifth Street NW., Suite 8000, Washington, DC 20530, Caroline.Laise@ usdoj.gov. The proposed Final Judgment provides that this Court retains jurisdiction over this action, and the parties may apply to this Court for any order necessary or appropriate for the modification, interpretation, or enforcement of the Final Judgment. VI. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT The United States considered, as an alternative to the proposed Final Judgment, a full trial on the merits against the Defendant. The United States is satisfied, however, that the proposed relief is an appropriate remedy in this matter. Given the facts of E:\FR\FM\31JAN1.SGM 31JAN1 8850 Federal Register / Vol. 82, No. 19 / Tuesday, January 31, 2017 / Notices this case, the United States is satisfied that the proposed civil penalty is sufficient to address the violation alleged in the Complaint and to deter violations by similarly situated entities in the future, without the time, expense, and uncertainty of a full trial on the merits. VII. STANDARD OF REVIEW UNDER THE APPA FOR THE PROPOSED FINAL JUDGMENT 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, in accordance with the statute as amended in 2004, is required to consider: asabaliauskas on DSK3SPTVN1PROD with NOTICES (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. Id. § 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 (D.C. 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. U.S. Airways Group, Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (noting the court has broad discretion of the adequacy of the relief at issue); United States v. InBev N.V./S.A., No. 08–1965 (JR), 2009–2 Trade Cas. (CCH) ¶ 76,736, 2009 U.S. Dist. LEXIS 84787, 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 VerDate Sep<11>2014 18:22 Jan 30, 2017 Jkt 241001 the mechanism to enforce the final judgment are clear and manageable.’’).3 As the United States Court of Appeals for the District of Columbia Circuit has held, a court conducting an inquiry under the APPA may consider, 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) (quoting 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 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). 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’ ’’). PO 00000 Frm 00028 Fmt 4703 Sfmt 4703 match the alleged violations.’’ SBC Commc’ns, 489 F. Supp. 2d at 17; see also U.S. Airways, 38 F. Supp. 3d at 75 (noting that a court should not reject the proposed remedies because it believes others are preferable); 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 government’s prediction as to the effect of proposed remedies, its perception of the market structure, and its views of the nature of the case). 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 U.S. Airways, 38 F. Supp. 3d at 76 (noting that room must be made for the government to grant concessions in the negotiation process for settlements (citing Microsoft, 56 F.3d at 1461)); 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 evaluate the decree against that case.’’ Microsoft, 56 F.3d at 1459; see also U.S. Airways, 38 F. Supp. 3d at 75 (noting that the court must simply determine whether there is a factual foundation for the government’s decisions such that its conclusions regarding the proposed settlements are reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (concluding that ‘‘the ‘public interest’ is not to be measured by comparing the violations alleged in the complaint against those the court believes could have, or even should have, been E:\FR\FM\31JAN1.SGM 31JAN1 Federal Register / Vol. 82, No. 19 / Tuesday, January 31, 2017 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES alleged’’). Because the ‘‘court’s authority to review the decree depends entirely on the government’s exercising its prosecutorial discretion by bringing a case in the first place,’’ it follows that ‘‘the court is only authorized to review the decree itself,’’ and not to ‘‘effectively redraft the complaint’’ to inquire into other matters that the United States did not pursue. Microsoft, 56 F.3d at 1459– 60. As this Court confirmed in SBC Communications, courts ‘‘cannot look beyond the complaint in making the public interest determination unless the complaint is drafted so narrowly as to make a mockery of judicial power.’’ 489 F. Supp. 2d at 15. In its 2004 amendments, Congress made clear its intent to preserve the practical benefits of utilizing consent decrees in antitrust enforcement, adding the unambiguous instruction that ‘‘[n]othing in this section shall be construed to require the court to conduct an evidentiary hearing or to require the court to permit anyone to intervene.’’ 15 U.S.C. 16(e)(2); see also U.S. Airways, 38 F. Supp. 3d at 76 (indicating that a court is not required to hold an evidentiary hearing or to permit intervenors as part of its review under the Tunney Act). This language codified what Congress intended when it enacted the Tunney Act in 1974, as the author of this legislation, Senator Tunney, explained: ‘‘The court is nowhere compelled to go to trial or to engage in extended proceedings which might have the effect of vitiating the benefits of prompt and less costly settlement through the consent decree process.’’ 119 Cong. Rec. 24,598 (1973) (statement of Sen. Tunney). Rather, the procedure for the public interest determination is left to the discretion of the court, with the recognition that the court’s ‘‘scope of review remains sharply proscribed by precedent and the nature of Tunney Act proceedings.’’ SBC Commc’ns, 489 F. Supp. 2d at 11.5 A court can make its public interest determination based on the competitive 5 See also United States v. Enova Corp., 107 F. Supp. 2d 10, 17 (D.D.C. 2000) (noting that the ‘‘Tunney Act expressly allows the court to make its public interest determination on the basis of the competitive impact statement and response to comments alone’’); United States v. Mid-Am. Dairymen, Inc., No. 73–CV–681–W–1, 1977–1 Trade Cas. (CCH) ¶ 61,508, at 71,980, *22 (W.D. Mo. 1977) (‘‘Absent a showing of corrupt failure of the government to discharge its duty, the Court, in making its public interest finding, should . . . carefully consider the explanations of the government in the competitive impact statement and its responses to comments in order to determine whether those explanations are reasonable under the circumstances.’’); S. Rep. No. 93–298, at 6 (1973) (‘‘Where the public interest can be meaningfully evaluated simply on the basis of briefs and oral arguments, that is the approach that should be utilized.’’). VerDate Sep<11>2014 18:22 Jan 30, 2017 Jkt 241001 impact statement and response to public comments alone. U.S. Airways, 38 F. Supp. 3d at 76. VIII. DETERMINATIVE DOCUMENTS There are no determinative materials or documents within the meaning of the APPA that were considered by the United States in formulating the proposed Final Judgment. Date: January 18, 2017. Respectfully Submitted, lll /s/ lll Robert A. Lepore, U.S. Department of Justice, Antitrust Division, 450 Fifth Street NW., Suite 8000, Washington, DC 20530, Phone: (202) 532– 4928, Facsimile: (202) 307–2784, Email: robert.lepore@usdoj.gov. IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA United States of America, Plaintiff, v. Duke Energy Corporation, Defendant. Case No.: 1:17–cv–00116 Judge: Beryl A. Howell Filed: 01/18/2017 [PROPOSED] FINAL JUDGMENT WHEREAS, Plaintiff, United States of America, filed this action on January 18, 2017, alleging that Defendant, Duke Energy Corporation, violated Section 7A of the Clayton Act, 15 U.S.C. 18a, commonly known as the Hart-ScottRodino Antitrust Improvements Act of 1976, and the United States and Defendant, by their respective attorneys, have consented to the entry of this Final Judgment without trial or adjudication of any issue of fact or law and without this Final Judgment constituting any evidence against or an admission by the Defendant with respect to any issue of fact or law; NOW THEREFORE, before any testimony is taken, without trial or adjudication of any issue of fact or law, and upon consent of the parties, it is ORDERED, ADJUDGED, AND DECREED: I. JURISDICTION The Court has jurisdiction over the subject matter of and each of the parties to this action. The Complaint states a claim upon which relief may be granted against the Defendant under Section 7A of the Clayton Act, 15 U.S.C. § 18a. II. CIVIL PENALTY Judgment is hereby entered in this matter in favor of Plaintiff United States of America and against Defendant Duke Energy Corporation, and pursuant to Section 7A(g)(1) of the Clayton Act, 15 U.S.C. 18a(g)(1), the Debt Collection Improvement Act of 1996, Pub. L. 104– PO 00000 Frm 00029 Fmt 4703 Sfmt 4703 8851 134 § 31001(s) (amending the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. 2461), and Federal Trade Commission Rule 1.98, 16 CFR 1.98, 61 FR 54549 (Oct. 21, 1996), and 74 FR 857 (Jan. 9, 2009), and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, Pub. L. 114– 74, 701 (further amending the Federal Civil Penalties Inflation Adjustment Act of 1990), and Federal Trade Commission Rule 1.98, 16 CFR 1.98, 81 FR 42,476 (June 30, 2016). Defendant is hereby ordered to pay a civil penalty in the amount of six hundred thousand dollars ($600,000). Payment of the civil penalty ordered shall be made by wire transfer of funds or cashier’s check. If the payment is made by wire transfer, Defendant shall contact Janie Ingalls of the Antitrust Division’s Antitrust Documents Group at (202) 514–2481 for instructions before making the transfer. If the payment is made by cashier’s check, the check shall be made payable to the United States Department of Justice and delivered to: Janie Ingalls, United States Department of Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth Street NW., Suite 1024, Washington, DC 20530. Defendant shall pay the full amount of the civil penalty within thirty (30) days of entry of this Final Judgment. In the event of a default or delay in payment, interest at the rate of eighteen (18) percent per annum shall accrue thereon from the date of default to the date of payment. III. COSTS Each party shall bear its own costs of this action. IV. PUBLIC INTEREST DETERMINATION The entry of this Final Judgment is in the public interest. The parties have complied with the requirements of the Antitrust Procedures and Penalties Act, 15 U.S.C. 16, including making copies available to the public of this Final Judgment, the Competitive Impact Statement, and any comments thereon and the United States’ responses to comments. Based upon the record before the Court, which includes the Competitive Impact Statement and any comments and response to comments filed with the Court, entry of this Final Judgment is in the public interest. Date: llllllllllllllllll Court approval subject to procedures of Antitrust Procedures and Penalties Act, 15 U.S.C. 16 llllllllllllllllll l E:\FR\FM\31JAN1.SGM 31JAN1 8852 Federal Register / Vol. 82, No. 19 / Tuesday, January 31, 2017 / Notices Pennsylvania Ave., N.W., Suite 800W, Washington, D.C. 20037, Defendant. Case No.: 1:17–cv–00103, Judge: Christopher R. Cooper, Filed: 01/17/2017 United States District Judge [FR Doc. 2017–02026 Filed 1–30–17; 8:45 am] BILLING CODE 4410–11–P COMPLAINT FOR CIVIL PENALTIES FOR FAILURE TO COMPLY WITH THE PREMERGER REPORTING AND WAITING REQUIREMENTS OF THE HART-SCOTT-RODINO ACT DEPARTMENT OF JUSTICE Antitrust Division asabaliauskas on DSK3SPTVN1PROD with NOTICES United States v. Mitchell P. Rales; 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. Mitchell P. Rales, Civil Action No. 1:17– cv–00103. On January 17, 2017, the United States filed a Complaint alleging that Mitchell P. Rales violated the notice and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. 18a, with respect to his acquisitions of voting securities of Colfax Corporation and Danaher Corporation. The proposed Final Judgment, filed at the same time as the Complaint, requires Mitchell P. Rales to pay a civil penalty of $720,000. Copies of the Complaint, proposed Final Judgment, and Competitive Impact Statement are available for inspection on the Antitrust Division’s Web site at http://www.justice.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, including the name of the submitter, and responses thereto, will be posted on the Antitrust Division’s Web site, filed with the Court, and, under certain circumstances, published in the Federal Register. Comments should be directed to Daniel P. Ducore, Special Attorney, United States, c/o Federal Trade Commission, 600 Pennsylvania Avenue NW., CC–8416, Washington, DC 20580 (telephone: 202–326–2526; email: dducore@ftc.gov). Patricia A. Brink, Director of Civil Enforcement. UNITED STATES OF AMERICA, c/o Department of Justice, Washington, D.C. 20530, Plaintiff, v. Mitchell P. Rales, 2200 18:22 Jan 30, 2017 Jkt 241001 NATURE OF THE ACTION 1. Rales violated the notice and waiting period requirements of the HartScott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. 18a (‘‘HSR Act’’ or ‘‘Act’’), with respect to the acquisitions of voting securities of Colfax Corporation (‘‘Colfax’’) and Danaher Corporation (‘‘Danaher’’). JURISDICTION AND VENUE 2. This Court has jurisdiction over the subject matter of this action pursuant to Section 7A(g) of the Clayton Act, 15 U.S.C. 18a(g), and pursuant to 28 U.S.C. 1331, 1337(a), 1345, and 1355, and over the Defendant by virtue of Defendant’s consent, in the Stipulation relating hereto, to the maintenance of this action and entry of the Final Judgment in this District. 3. Venue is properly based in this District by virtue of Defendant’s principal office and place of business and Defendant’s consent, in the Stipulation relating hereto, to the maintenance of this action and entry of the Final Judgment in this District. THE DEFENDANT 4. Defendant Rales is a natural person with his principal office and place of business at 2200 Pennsylvania Avenue, N.W., Suite 800W, Washington, D.C. 20037. Rales is engaged in commerce, or in activities affecting commerce, within the meaning of Section 1 of the Clayton Act, 15 U.S.C. 12, and Section 7A(a)(1) of the Clayton Act, 15 U.S.C. 18a(a)(1). At all times relevant to this complaint, Rales had sales or assets in excess of $15.6 million. OTHER ENTITIES UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA VerDate Sep<11>2014 The United States of America, Plaintiff, by its attorneys, acting under the direction of the Attorney General of the United States and at the request of the Federal Trade Commission, brings this civil antitrust action to obtain monetary relief in the form of civil penalties against Defendant Mitchell P. Rales (‘‘Rales’’). Plaintiff alleges as follows: 5. Colfax is a corporation organized under the laws of Delaware with its principal place of business at 420 National Business Parkway, 5th Floor, PO 00000 Frm 00030 Fmt 4703 Sfmt 4703 Annapolis Junction, MD 20701. Colfax is engaged in commerce, or in activities affecting commerce, within the meaning of Section 1 of the Clayton Act, 15 U.S.C. 12, and Section 7A(a)(1) of the Clayton Act, 15 U.S.C. 18a(a)(1). At all times relevant to this complaint, Colfax had sales or assets in excess of $156.3 million. 6. Danaher is a corporation organized under the laws of Delaware with its principal place of business at 2200 Pennsylvania Avenue, N.W., Suite 800W, Washington, D.C. 20037. Danaher is engaged in commerce, or in activities affecting commerce, within the meaning of Section 1 of the Clayton Act, 15 U.S.C. 12, and Section 7A(a)(1) of the Clayton Act, 15 U.S.C. 18a(a)(1). At all times relevant to this complaint, Danaher had sales or assets in excess of $156.3 million. THE HART-SCOTT-RODINO ACT AND RULES 7. The HSR Act requires certain acquiring persons and certain persons whose voting securities or assets are acquired to file notifications with the federal antitrust agencies and to observe a waiting period before consummating certain acquisitions of voting securities or assets. 15 U.S.C. 18a(a) and (b). These notification and waiting period requirements apply to acquisitions that meet the HSR Act’s thresholds. As of February 1, 2001, the size of transaction threshold was $50 million. In addition, there is a separate filing requirement for transactions in which the acquirer will hold voting securities in excess of $100 million, and for transactions in which the acquirer will hold voting securities in excess of $500 million. One person involved in the transaction had to have sales or assets in excess of $10 million, and the other person had to have sales or assets in excess of $100 million. Since 2004, the size of transaction and size of person thresholds have been adjusted annually. 8. The HSR Act’s notification and waiting period requirements are intended to give the federal antitrust agencies prior notice of, and information about, proposed transactions. The waiting period is also intended to provide the federal antitrust agencies with an opportunity to investigate a proposed transaction and to successfully seek an injunction to prevent the consummation of a transaction that may violate the antitrust laws. 9. Pursuant to Section (d)(2) of the HSR Act, 15 U.S.C. 18a(d)(2), rules were promulgated to carry out the purposes of the HSR Act (the ‘‘HSR Rules’’). See 16 CFR 801–03. The HSR Rules, among E:\FR\FM\31JAN1.SGM 31JAN1

Agencies

[Federal Register Volume 82, Number 19 (Tuesday, January 31, 2017)]
[Notices]
[Pages 8845-8852]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02026]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States of America v. Duke Energy Corporation; 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. Duke Energy Corporation, Civil Action No. 1:17-cv-
00116. On January 18, 2017, the United States filed a Complaint 
alleging that Duke Energy Corporation violated Section 7A of the 
Clayton Act, 15 U.S.C. 18a, by acquiring the Osprey Energy Center from 
Calpine Corporation before filing the required notification form and 
observing the required waiting period. The proposed Final Judgment, 
filed at the same time as the Complaint, requires Duke Energy 
Corporation to pay a civil penalty of $600,000.

[[Page 8846]]

    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection on the Antitrust 
Division's Web site at http://www.justice.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, including the name of the submitter, and 
responses thereto, will be posted on the Antitrust Division's Web site, 
filed with the Court, and, under certain circumstances, published in 
the Federal Register. Comments should be directed to Caroline E. Laise, 
Assistant Chief, Transportation, Energy & Agriculture Section, 
Antitrust Division, Department of Justice, 450 Fifth Street NW., Suite 
8000, Washington, DC 20530 (telephone: (202) 353-9797).

Patricia A. Brink,
Director of Civil Enforcement.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

    United States of America, U.S. Department of Justice, Antitrust 
Division, 450 Fifth St. NW., Suite 8000, Washington, DC 20530, 
Plaintiff, v. Duke Energy Corporation, 550 South Tryon Street, 
Charlotte, NC 28202, Defendants.

Case No.: 1:17-cv-00116
Judge: Beryl A. Howell
Filed: 01/18/2017

COMPLAINT

    The United States of America, acting under the direction of the 
Attorney General of the United States, brings this civil action to 
obtain monetary relief in the form of civil penalties against the 
Defendant, Duke Energy Corporation (``Duke''), for violating Section 7A 
of the Clayton Act, as amended, 15 U.S.C. 18a, also commonly known as 
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (``HSR Act''), 
and alleges as follows:

I. NATURE OF THE ACTION

    1. The HSR Act is an essential part of modern antitrust 
enforcement. The HSR Act and implementing regulations require 
purchasers to notify the Department of Justice and the Federal Trade 
Commission and wait for agency review before acquiring assets valued in 
excess of certain thresholds. A purchaser can ``acquire'' assets 
without taking formal legal title, for instance by obtaining 
operational control over the assets or otherwise obtaining ``beneficial 
ownership.'' The HSR Act's notice and waiting period requirements 
ensure that the parties to a proposed transaction continue to operate 
independently during review, preventing anticompetitive acquisitions 
from harming consumers before the government has had the opportunity to 
review them according to the procedures established by Congress in the 
Clayton Act. A purchaser that prematurely takes beneficial ownership of 
assets, sometimes referred to as ``gun jumping,'' is subject to 
statutory penalties for each day it is in violation.
    2. In August 2014, Duke agreed to terms to purchase the Osprey 
Energy Center (``Osprey'') from its owner, Calpine Corporation 
(``Calpine''), a competing seller of wholesale electricity nationally 
and in Florida. Osprey is a combined-cycle natural gas-fired electrical 
generating plant located in Auburndale, Florida. Duke violated the HSR 
Act by obtaining beneficial ownership of Osprey before filing the 
required notification and observing the required waiting period.
    3. Specifically, as part of the agreement to acquire the plant, 
Duke also entered into a ``tolling agreement'' whereby Duke immediately 
began exercising control over Osprey's output, and immediately began 
reaping the day-to-day profits and losses from the plant's business. 
Duke, for example, assumed control of purchasing all the fuel for the 
plant, arranging for delivery of that fuel, and arranging for 
transmission of all energy generated. Duke, not Calpine, retained the 
profit (or loss) from the difference between the price of the energy 
generated at Osprey and the cost to generate the energy, bearing all 
the risk of changes in the market price for fuel and the market price 
for energy. Based on these potential risks and rewards, Duke, and not 
Calpine, decided exactly how much energy would be generated by the 
plant on an hour-by-hour basis, and relayed those detailed instructions 
each day to plant personnel. Thus, from the moment the tolling 
agreement went into effect, Osprey ceased to be an independent 
competitive presence in the market for generating electricity for 
Florida consumers.
    4. Duke was never interested in a tolling agreement alone--Duke was 
only interested in the tolling agreement as a step in the process of 
purchasing the plant. As a Duke executive explained in testimony to the 
Florida Public Service Commission, the tolling agreement reflected an 
effort to obtain expedited approval for the purchase of Osprey from the 
Federal Energy Regulatory Commission (``FERC''). When FERC reviews a 
proposed power plant acquisition, it typically employs a ``screen'' to 
assess how much the proposed acquisition would increase market 
concentration. While planning the acquisition of Osprey, Duke and 
Calpine anticipated the acquisition would fail the FERC screen. But 
with a tolling agreement in place, Duke hoped that FERC would treat 
Osprey as already effectively controlled by Duke, and would therefore 
conclude that an acquisition would lead to no change in Duke's market 
share and no increase in concentration under FERC's screen. Indeed, 
after entering into the tolling agreement, Duke argued to FERC that its 
acquisition of Osprey posed no competitive threat and did not increase 
concentration because Duke ``already controls [Osprey] pursuant to the 
Tolling Agreement.''
    5. The combination of Duke's agreement to purchase Osprey and the 
contemporaneously negotiated and interdependent tolling agreement 
transferred beneficial ownership of Osprey's business to Duke before 
Duke had fulfilled its obligations under the HSR Act. As a result, Duke 
and Calpine did not continue to act as independent entities during the 
required waiting period while the Department of Justice investigated 
the proposed acquisition and determined whether to challenge it. 
Therefore, the Court should assess a civil penalty against Duke for its 
violation of the HSR Act.

II. JURISDICTION, VENUE, AND INTERSTATE COMMERCE

    6. This Complaint is filed and these proceedings are instituted 
under Section 7A of the Clayton Act, 15 U.S.C. 18a, added by Title II 
of the HSR Act, to recover civil penalties for violations of that 
section.
    1.
    7. This Court has jurisdiction over the subject matter of this 
action pursuant to Section 7A(g) of the Clayton Act, 15 U.S.C. 18a(g), 
and pursuant to 28 U.S.C. 1331, 1337(a), 1345 and 1355.
    8. The Defendant has consented to personal jurisdiction and venue 
in the District of Columbia for purposes of this action.
    9. Duke is engaged in commerce, or in activities affecting 
commerce, within the meaning of Section 7A(a)(1) of the Clayton Act, 15 
U.S.C. 18a(a)(1).

III. THE DEFENDANT

    10. Defendant Duke Energy Corporation is organized under the laws 
of Delaware with its principal office and place of business at 550 
South Tryon Street in Charlotte, North Carolina. Through various 
subsidiaries, Duke Energy Corporation generates and sells

[[Page 8847]]

electric power on a retail and/or wholesale basis in numerous local 
markets throughout the United States.

IV. WAITING PERIOD REQUIREMENTS OF THE HSR ACT

    11. The HSR Act requires parties to file a notification with the 
Federal Trade Commission and the Department of Justice and to observe a 
waiting period before consummating acquisitions of voting securities or 
assets that exceed certain value thresholds. The required notification 
gives the federal antitrust agencies prior notice of, and information 
about, proposed transactions. The waiting period provides the antitrust 
enforcement agencies with an opportunity to investigate and to seek an 
injunction to prevent harm from anticompetitive transactions.
    12. The HSR Act requirements apply to a transaction if, as a result 
of the transaction, the acquirer will ``hold'' assets or voting 
securities valued above the thresholds. Section 801(c)(1) of the 
Premerger Notification Rules, 16 CFR 800 et seq., defines ``hold'' to 
mean to have ``beneficial ownership.'' An acquiring person may 
prematurely obtain beneficial ownership of assets by, among other 
things, assuming the risk or potential benefit of changes in the value 
of the relevant assets and exercising control over day-to-day business 
decisions of the acquired person's business before the end of the HSR 
waiting period. This conduct, sometimes referred to as ``gun jumping,'' 
violates Section 7A of the Clayton Act.
    13. Section 7A(g)(1) of the Clayton Act, 15 U.S.C. 18a(g)(1), 
states that any person, or any officer, director, or partner thereof, 
who fails to comply with any provision of the HSR Act is liable to the 
United States for a civil penalty for each day during which the person 
is in violation. Beginning February 10, 2009, the maximum amount of 
civil penalty was increased to $16,000 per day, pursuant to the Debt 
Collection Improvement Act of 1996, Pub. L. 104-134, 31001(s) (amending 
the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. 
2461 note), and Federal Trade Commission Rule 1.98, 16 CFR 1.98, 74 FR 
857 (Jan. 9, 2009). Pursuant to the Federal Civil Penalties Inflation 
Adjustment Act Improvements Act of 2015, Pub. L. 114-74, 701 (further 
amending the Federal Civil Penalties Inflation Adjustment Act of 1990), 
and Federal Trade Commission Rule 1.98, 16 CFR 1.98, 81 FR 42,476 (June 
30, 2016), the maximum amount of civil penalty was increased to $40,000 
per day.

V. THE TRANSACTION AND THE DEFENDANT'S UNLAWFUL CONDUCT

    14. In August 2014, Duke and Calpine reached an agreement for Duke 
to purchase Osprey. The parties memorialized their agreement in an 
August 25, 2014 term sheet. The structure of the transaction included a 
tolling agreement to be put into effect until the closing of the 
acquisition. Duke and Calpine executed the tolling agreement on 
September 30, 2014, and it became effective the next day.
    15. Tolling agreements are relatively common in the electricity 
industry, but the circumstances surrounding Duke's tolling agreement 
for the Osprey plant are not. Duke said in testimony to the Florida 
Public Service Commission that there was no separate rationale to enter 
this tolling agreement independent of the acquisition. Duke was only 
interested in the tolling agreement as a bridge to the acquisition of 
the plant itself. As a Duke executive testified, the tolling agreement 
was a ``mechanism to transfer the acquisition of the plant to [Duke].'' 
Duke insisted that it was only willing to enter into a tolling 
agreement in combination with an acquisition agreement, and only if 
Duke had the right to terminate the tolling agreement without penalty 
in the event that FERC rejected the acquisition.
    16. The tolling agreement was designed to smooth approval by FERC 
by enabling Duke to argue that it ``already controls'' Osprey through 
the tolling agreement and thus that no new harm could come from 
permitting Duke to acquire Osprey outright. Under the tolling 
agreement, Duke was responsible for determining the amount of power 
that would be generated at Osprey, and for purchasing and delivering 
all the fuel necessary to produce that power. Duke was then entitled to 
receive all of the electricity generated by the facility.
    17. After entering into the tolling agreement, Duke began to make 
all competitively significant decisions for the Osprey plant. Each day, 
Duke sent hour-by-hour instructions to Osprey personnel directing them 
to produce a certain amount of power. Duke also arranged to procure and 
deliver the necessary natural gas to Osprey--functions previously 
performed by Calpine. Duke also arranged for all of the power generated 
at Osprey to be transmitted to its destination. In other words, Duke 
decided when and how much natural gas would be delivered to the plant 
and decided when and how much energy would be produced by the plant. 
Duke was free to make all of these decisions based on its own business 
interests, and Osprey's function was limited to the mechanical 
operation of the facility consistent with Duke's instructions. Calpine 
ceased to make any significant competitive decisions for Osprey.
    18. The combination of the tolling agreement and the asset purchase 
agreement transferred market risk (or potential gain) of a change in 
the fortunes of Osprey's business. Duke paid Calpine a fixed monthly 
fee plus a small amount to reimburse the plant's variable operations 
and maintenance costs. Duke also assumed financial responsibility for 
procuring natural gas, the plant's primary input cost. Thus, it was 
Duke who gained the profit or loss from sale of the energy, and it was 
Duke who assumed all the risk that fuel prices would increase or that 
energy market prices would fall. Calpine was no longer exposed to any 
risk of changes in the fuel or energy markets.
    19. Months after the tolling agreement was executed and Duke had 
taken beneficial ownership of Osprey, Duke submitted a notification and 
report form pursuant to the HSR Act concerning its intent to acquire 
the Osprey plant, valued at approximately $166 million. On February 27, 
2015, the antitrust agencies terminated the HSR waiting period. Duke 
had beneficial ownership of Osprey for the entire waiting period.

VI. VIOLATION OF SECTION 7A OF THE CLAYTON ACT

    20. Plaintiff alleges and incorporates paragraphs 1 through 19 as 
if set forth fully herein.
    21. Duke's acquisition of Osprey was subject to Section 7A 
premerger notification and waiting-period requirements.
    22. Duke obtained beneficial ownership of Osprey prior to making 
its required premerger notification and observing the applicable 
waiting period in violation of Section 7A.
    23. Accordingly, Defendant was continuously in violation of the 
requirements of the HSR Act each day beginning on October 1, 2014, 
until the waiting period was terminated on February 27, 2015.

VII. REQUEST FOR RELIEF

Wherefore, Plaintiff requests:

    (a) that the Court adjudge and decree that Defendant violated the 
HSR Act and was in violation during the period of 150 days beginning on 
October 1, 2014, and ending on February 27, 2015;
    (b) order that Defendant pay to the United States an appropriate 
civil penalty as provided under Section 7A(g)(1) of the Clayton Act, 15 
U.S.C. 18(a)(g)(1), and 16 CFR 1.98(a);

[[Page 8848]]

    (c) that the Court award the Plaintiff its costs of this suit; and,
    (d) that the Court order such other and further relief as the Court 
may deem just and proper.

    Dated: January 18, 2017.

    Respectfully Submitted,

/s/--------------------------------------------------------------------

Renata B. Hesse (D.C. Bar #466107),
Acting Assistant Attorney General.

/s/--------------------------------------------------------------------

Jonathan B. Sallet,
Deputy Assistant Attorney General for Litigation.

/s/--------------------------------------------------------------------

Patricia A. Brink,
Director of Civil Enforcement.

/s/--------------------------------------------------------------------

Robert A. Potter,
Chief, Legal Policy Section.

/s/--------------------------------------------------------------------

Caroline E. Laise,
Assistant Chief, Transportation, Energy & Agriculture Section.

/s/--------------------------------------------------------------------

Robert A. Lepore,
Assistant Chief, Transportation, Energy & Agriculture Section.

/s/--------------------------------------------------------------------

Jade A. Eaton (D.C. Bar #939629)
Njeri Mugure,
Trial Attorneys, Transportation, Energy & Agriculture Section.

/s/--------------------------------------------------------------------

Kara B. Kuritz,
Attorney Advisor, Legal Policy Section.

U.S. Department of Justice, Antitrust Division, 450 Fifth Street 
NW., Suite 8000, Washington, DC 20530, Phone: (202) 307-6316, 
Facsimile: (202) 307-2784, Email: jade.eaton@usdoj.gov.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

United States Of America, Plaintiff,
    v.
Duke Energy Corporation, Defendant.

Case No.: 1:17-cv-00116
Judge: Beryl A. Howell
Filed: 01/18/2017

COMPETITIVE IMPACT STATEMENT

    Plaintiff United States of America (``United States''), pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA''), 
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

    On January 18, 2017, the United States filed a Complaint against 
Defendant Duke Energy Corporation (``Duke''), related to Duke's 
acquisition of the Osprey Energy Center (``Osprey'') from Calpine 
Corporation (``Calpine''). The Complaint alleges that Duke violated 
Section 7A of the Clayton Act, 15 U.S.C. 18a, commonly known as the 
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the ``HSR Act'').
    The Complaint alleges that Duke acquired Osprey, through a 
transaction in excess of the then-applicable statutory thresholds, 
without making the required HSR Act filings with the agencies and 
without observing the required HSR Act waiting period. The HSR Act 
provides that ``no person shall acquire, directly or indirectly, any 
voting securities of any person'' exceeding certain thresholds until 
that person has filed pre-acquisition notification and report forms 
with the Department of Justice and the Federal Trade Commission 
(collectively, the ``federal antitrust agencies'' or ``agencies'') and 
the post-filing waiting period has expired. 15 U.S.C. 18a(a). A key 
purpose of the notification and waiting period is to protect consumers 
and competition from potentially anticompetitive transactions by 
providing the agencies an opportunity to conduct an antitrust review of 
proposed transactions before they are consummated.
    At the same time the Complaint was filed, the United States also 
filed a Stipulation and proposed Final Judgment. Under the proposed 
Final Judgment, which is explained more fully below, Duke is required 
to pay a civil penalty to the United States in the amount of $600,000. 
The proposed Final Judgment is designed to deter HSR Act violations by 
Duke and similarly situated acquirers.
    The United States and the Defendant 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 punish 
violations thereof.

II. DESCRIPTION OF THE EVENTS GIVING RISE TO THE ALLEGED VIOLATION

A. Duke's Acquisition of Osprey Energy Center From Calpine

    In August 2014, Duke agreed to terms to purchase Osprey from 
Calpine, a competing seller of wholesale electricity nationally and in 
Florida. As part of the acquisition, Duke entered into a ``tolling 
agreement'' whereby Duke immediately began exercising control over 
Osprey's output, and immediately began reaping the day-to-day profits 
and losses from the plant's business. Duke, for example, assumed 
control of purchasing all the fuel for the plant, arranging for 
delivery of that fuel, and arranging for transmission of all energy 
generated. Duke retained the profit (or loss) from the difference 
between the price of the energy generated at Osprey and the cost to 
generate the energy, bearing all the risk of changes in the market 
price for fuel and the market price for energy. Based on these 
potential risks and rewards, Duke decided exactly how much energy would 
be generated by the plant on an hour-by-hour basis, and relayed those 
detailed instructions each day to plant personnel. Thus, from the 
moment the tolling agreement went into effect, Osprey ceased to be an 
independent competitive presence in the market for generating 
electricity for Florida consumers. The tolling agreement was entered 
months before Duke made its required HSR filing for the acquisition of 
Osprey.
    Duke made clear in testimony filed with federal and state 
regulators that it only ever considered the tolling agreement in 
conjunction with an agreement to acquire Osprey. As Duke explained in 
its application to the Federal Energy Regulatory Commission (``FERC'') 
for permission to acquire the plant, Duke's negotiation with Calpine 
``led to an agreement in principle whereby [Duke] would purchase power 
from Osprey Energy Center under a two-year power purchase agreement 
[the Tolling Agreement] and then purchase the facility itself.''

B. Duke's Alleged Violation of Section 7A

    Before the HSR Act was enacted, the agencies were often forced to 
investigate anticompetitive mergers that had already been consummated 
without public notice. In those situations, the agencies' only recourse 
was to sue to unwind the parties' merger. During this time, the loss of 
competition continued to harm consumers, and if the court ultimately 
found that the merger was illegal, effective relief was often 
impossible to achieve. The HSR Act addressed these problems and 
strengthened antitrust enforcement by providing the antitrust agencies 
the ability to investigate certain large acquisitions before they are 
consummated. In particular, the HSR Act prohibits certain acquiring 
parties from undertaking an acquisition before required filings are 
made with the antitrust agencies and a prescribed waiting period 
expires or is terminated.
    The HSR Act requirements apply to a transaction if, as a result of 
the transaction, the acquirer will ``hold''

[[Page 8849]]

assets or voting securities valued above the thresholds. Under HSR Rule 
801.1(c), to ``hold'' assets or voting securities means ``beneficial 
ownership, whether direct, or indirect through fiduciaries, agents, 
controlled entities or other means.'' 16 CFR 801.1(c). Thus, under the 
Act, parties must make an HSR filing and observe a waiting period 
before transferring beneficial ownership of the assets or voting 
securities to be acquired. The Statement of Basis and Purpose 
accompanying the Rules explains that beneficial ownership is determined 
on a case-by-case basis, based on the indicia of beneficial ownership 
which include among others, the right to obtain the benefit of any 
increase in value or dividends, and the risk of loss of value. 43 FR 
33,449 (July 31, 1978). The agencies have explained that a firm may 
also gain beneficial ownership by obtaining ``operational control'' of 
an asset.\1\
---------------------------------------------------------------------------

    \1\ See, e.g., Complaint, United States v. Flakeboard Am. Ltd., 
No. 3:14-cv-4949 (N.D. Cal. Nov. 7, 2014), available at https://www.justice.gov/atr/case-document/file/496511/download; Complaint, 
United States v. Smithfield Foods, Inc., No. 1:10-cv-00120 (D.D.C. 
Jan. 21, 2010), available at https://www.justice.gov/atr/case-document/complaint-211; Complaint, United States v. Qualcomm Inc., 
No. 1:06CV00672 (PLF) (D.D.C. Apr. 13, 2006), available at https://www.justice.gov/atr/case-document/complaint-civil-penalties-violation-premerger-reporting-requirements-hart-scott-0.
---------------------------------------------------------------------------

    The combination of Duke's agreement to purchase Osprey and the 
tolling agreement transferred beneficial ownership of Osprey's business 
to Duke before Duke had fulfilled its obligations under the HSR Act. 
Duke's tolling agreement with Calpine gave it significant operational 
control over the Osprey plant, and allowed Duke to assume the risks or 
potential benefits of changes in the value of Osprey's business. Duke 
procured and decided how much fuel would be delivered to the plant, 
decided when and how much energy would be produced by the plant, and 
decided when and where that energy would be delivered. Calpine's 
function was limited to the mechanical operation of the Osprey facility 
consistent with Duke's instructions. In addition, Duke, and not 
Calpine, retained the margin between the cost of gas and the price of 
electricity. If the spread between the cost of gas and the market price 
of electricity increased or decreased prior to closing, Duke realized 
that gain or loss.
    A tolling agreement alone does not necessarily confer beneficial 
ownership. Tolling agreements are relatively common in the electricity 
industry, and control over output and the shift of risk and benefit to 
the buyer over the term are typical features of such agreements. 
However, in this instance, as Duke admitted to regulators, the tolling 
agreement for the Osprey plant was entered as part and parcel of a 
broader agreement to acquire the plant and had no economic rationale 
independent from the acquisition. Considering the intertwined 
agreements in their totality, Calpine ceased to be an independent 
competitive presence in the market after entering the tolling 
agreement, and beneficial ownership of Osprey transferred to Duke.
    Agreements that transfer some indicia of beneficial ownership, even 
if common in an industry, may violate Section 7A if entered into while 
the buyer intends to acquire the asset.\2\ Entering into such 
agreements before filing the required HSR notifications and before the 
HSR waiting period expires defeats the purpose of the HSR Act by 
enabling the acquiring person to direct the acquired person's business 
to bring about the effects of an acquisition prior to completion of the 
agencies' antitrust review. Hence, Duke's obligation to file and 
observe the waiting period arose as of October 1, 2014, the effective 
date of the tolling agreement relating to the plant it intended to 
acquire.
---------------------------------------------------------------------------

    \2\ For example, the Department expressed this view in a 1996 
speech by former Deputy Assistant Attorney General Larry Fullerton 
in which he discussed certain management contracts sometimes entered 
into by radio stations. Lawrence R. Fullerton, Deputy Assistant 
Attorney General, Antitrust Division, Dep't of Justice, Address at 
Business Development Associates Antitrust 1997 Conference (Oct. 21, 
1996), available at https://www.justice.gov/atr/file/518686/download.
---------------------------------------------------------------------------

III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT

    The proposed Final Judgment imposes a $600,000 civil penalty for 
violation of the HSR Act. The United States adjusted the penalty 
downward from the maximum permitted under the HSR Act in part because 
the Defendant was willing to resolve the matter by consent decree and 
avoid prolonged investigation and litigation. The relief will have a 
beneficial effect on competition because it will deter future instances 
in which parties seek to immediately remove an independent competitive 
presence from an industry before filing required pre-acquisition 
notifications with the agencies and observing the required waiting 
period. At the same time, the penalty will not have any adverse effect 
on competition.

IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS

    There is no private antitrust action for HSR Act violations; 
therefore, entry of the proposed Final Judgment will neither impair nor 
assist the bringing of any private antitrust action.

V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT

    The United States and the Defendant have stipulated that the 
proposed Final Judgment may be entered by this Court after compliance 
with the provisions of the APPA, provided that the United States has 
not withdrawn its consent. The APPA conditions entry of the decree upon 
this 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 this Court. In 
addition, comments will be posted on the U.S. Department of Justice, 
Antitrust Division's internet Web site and, under certain 
circumstances, published in the Federal Register. Written comments 
should be submitted to: Caroline Laise, Assistant Chief, Transportation 
Energy and Agriculture Section, Antitrust Division, United States 
Department of Justice, 450 Fifth Street NW., Suite 8000, Washington, DC 
20530, Caroline.Laise@usdoj.gov.
    The proposed Final Judgment provides that this Court retains 
jurisdiction over this action, and the parties may apply to this Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against the Defendant. The 
United States is satisfied, however, that the proposed relief is an 
appropriate remedy in this matter. Given the facts of

[[Page 8850]]

this case, the United States is satisfied that the proposed civil 
penalty is sufficient to address the violation alleged in the Complaint 
and to deter violations by similarly situated entities in the future, 
without the time, expense, and uncertainty of a full trial on the 
merits.

VII. STANDARD OF REVIEW UNDER THE APPA FOR THE PROPOSED FINAL JUDGMENT

    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, in accordance with 
the statute as amended in 2004, is required to 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.

Id. Sec.  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 (D.C. 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. U.S. Airways 
Group, Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (noting the court has 
broad discretion of the adequacy of the relief at issue); United States 
v. InBev N.V./S.A., No. 08-1965 (JR), 2009-2 Trade Cas. (CCH) ] 76,736, 
2009 U.S. Dist. LEXIS 84787, 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 mechanism 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, a court conducting an inquiry under the APPA may 
consider, 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) (quoting 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 U.S. Airways, 38 F. Supp. 3d 
at 75 (noting that a court should not reject the proposed remedies 
because it believes others are preferable); 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 government's 
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 
U.S. Airways, 38 F. Supp. 3d at 76 (noting that room must be made for 
the government to grant concessions in the negotiation process for 
settlements (citing Microsoft, 56 F.3d at 1461)); 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 evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways, 
38 F. Supp. 3d at 75 (noting that the court must simply determine 
whether there is a factual foundation for the government's decisions 
such that its conclusions regarding the proposed settlements are 
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (concluding 
that ``the `public interest' is not to be measured by comparing the 
violations alleged in the complaint against those the court believes 
could have, or even should have, been

[[Page 8851]]

alleged''). Because the ``court's authority to review the decree 
depends entirely on the government's exercising its prosecutorial 
discretion by bringing a case in the first place,'' it follows that 
``the court is only authorized to review the decree itself,'' and not 
to ``effectively redraft the complaint'' to inquire into other matters 
that the United States did not pursue. Microsoft, 56 F.3d at 1459-60. 
As this Court confirmed in SBC Communications, courts ``cannot look 
beyond the complaint in making the public interest determination unless 
the complaint is drafted so narrowly as to make a mockery of judicial 
power.'' 489 F. Supp. 2d at 15.
    In its 2004 amendments, Congress made clear its intent to preserve 
the practical benefits of utilizing consent decrees in antitrust 
enforcement, adding the unambiguous instruction that ``[n]othing in 
this section shall be construed to require the court to conduct an 
evidentiary hearing or to require the court to permit anyone to 
intervene.'' 15 U.S.C. 16(e)(2); see also U.S. Airways, 38 F. Supp. 3d 
at 76 (indicating that a court is not required to hold an evidentiary 
hearing or to permit intervenors as part of its review under the Tunney 
Act). This language codified what Congress intended when it enacted the 
Tunney Act in 1974, as the author of this legislation, Senator Tunney, 
explained: ``The court is nowhere compelled to go to trial or to engage 
in extended proceedings which might have the effect of vitiating the 
benefits of prompt and less costly settlement through the consent 
decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of Sen. 
Tunney). Rather, the procedure for the public interest determination is 
left to the discretion of the court, with the recognition that the 
court's ``scope of review remains sharply proscribed by precedent and 
the nature of Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d 
at 11.\5\ A court can make its public interest determination based on 
the competitive impact statement and response to public comments alone. 
U.S. Airways, 38 F. Supp. 3d at 76.
---------------------------------------------------------------------------

    \5\ See also United States v. Enova Corp., 107 F. Supp. 2d 10, 
17 (D.D.C. 2000) (noting that the ``Tunney Act expressly allows the 
court to make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); 
United States v. Mid-Am. Dairymen, Inc., No. 73-CV-681-W-1, 1977-1 
Trade Cas. (CCH) ] 61,508, at 71,980, *22 (W.D. Mo. 1977) (``Absent 
a showing of corrupt failure of the government to discharge its 
duty, the Court, in making its public interest finding, should . . . 
carefully consider the explanations of the government in the 
competitive impact statement and its responses to comments in order 
to determine whether those explanations are reasonable under the 
circumstances.''); S. Rep. No. 93-298, at 6 (1973) (``Where the 
public interest can be meaningfully evaluated simply on the basis of 
briefs and oral arguments, that is the approach that should be 
utilized.'').
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VIII. DETERMINATIVE DOCUMENTS

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

Date: January 18, 2017.

    Respectfully Submitted,

___ /s/ ___

Robert A. Lepore,

U.S. Department of Justice, Antitrust Division, 450 Fifth Street 
NW., Suite 8000, Washington, DC 20530, Phone: (202) 532-4928, 
Facsimile: (202) 307-2784, Email: robert.lepore@usdoj.gov.

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

    United States of America, Plaintiff, v. Duke Energy Corporation, 
Defendant.

Case No.: 1:17-cv-00116
Judge: Beryl A. Howell
Filed: 01/18/2017

[PROPOSED] FINAL JUDGMENT

    WHEREAS, Plaintiff, United States of America, filed this action on 
January 18, 2017, alleging that Defendant, Duke Energy Corporation, 
violated Section 7A of the Clayton Act, 15 U.S.C. 18a, commonly known 
as the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the 
United States and Defendant, by their respective attorneys, have 
consented to the entry of this Final Judgment without trial or 
adjudication of any issue of fact or law and without this Final 
Judgment constituting any evidence against or an admission by the 
Defendant with respect to any issue of fact or law;
    NOW THEREFORE, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is ORDERED, ADJUDGED, AND DECREED:

I. JURISDICTION

    The Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states a claim upon which 
relief may be granted against the Defendant under Section 7A of the 
Clayton Act, 15 U.S.C. Sec.  18a.

II. CIVIL PENALTY

    Judgment is hereby entered in this matter in favor of Plaintiff 
United States of America and against Defendant Duke Energy Corporation, 
and pursuant to Section 7A(g)(1) of the Clayton Act, 15 U.S.C. 
18a(g)(1), the Debt Collection Improvement Act of 1996, Pub. L. 104-134 
Sec.  31001(s) (amending the Federal Civil Penalties Inflation 
Adjustment Act of 1990, 28 U.S.C. 2461), and Federal Trade Commission 
Rule 1.98, 16 CFR 1.98, 61 FR 54549 (Oct. 21, 1996), and 74 FR 857 
(Jan. 9, 2009), and the Federal Civil Penalties Inflation Adjustment 
Act Improvements Act of 2015, Pub. L. 114-74, 701 (further amending the 
Federal Civil Penalties Inflation Adjustment Act of 1990), and Federal 
Trade Commission Rule 1.98, 16 CFR 1.98, 81 FR 42,476 (June 30, 2016). 
Defendant is hereby ordered to pay a civil penalty in the amount of six 
hundred thousand dollars ($600,000). Payment of the civil penalty 
ordered shall be made by wire transfer of funds or cashier's check. If 
the payment is made by wire transfer, Defendant shall contact Janie 
Ingalls of the Antitrust Division's Antitrust Documents Group at (202) 
514-2481 for instructions before making the transfer. If the payment is 
made by cashier's check, the check shall be made payable to the United 
States Department of Justice and delivered to: Janie Ingalls, United 
States Department of Justice, Antitrust Division, Antitrust Documents 
Group, 450 Fifth Street NW., Suite 1024, Washington, DC 20530.
    Defendant shall pay the full amount of the civil penalty within 
thirty (30) days of entry of this Final Judgment. In the event of a 
default or delay in payment, interest at the rate of eighteen (18) 
percent per annum shall accrue thereon from the date of default to the 
date of payment.

III. COSTS

    Each party shall bear its own costs of this action.

IV. PUBLIC INTEREST DETERMINATION

    The entry of this Final Judgment is in the public interest. The 
parties have complied with the requirements of the Antitrust Procedures 
and Penalties Act, 15 U.S.C. 16, including making copies available to 
the public of this Final Judgment, the Competitive Impact Statement, 
and any comments thereon and the United States' responses to comments. 
Based upon the record before the Court, which includes the Competitive 
Impact Statement and any comments and response to comments filed with 
the Court, entry of this Final Judgment is in the public interest.

Date:------------------------------------------------------------------

Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16

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[[Page 8852]]

United States District Judge

[FR Doc. 2017-02026 Filed 1-30-17; 8:45 am]
 BILLING CODE 4410-11-P