[Code of Federal Regulations]
[Title 18, Volume 1]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 18CFR33.4]

[Page 236-237]
 
           TITLE 18--CONSERVATION OF POWER AND WATER RESOURCES
 
  CHAPTER I--FEDERAL ENERGY REGULATORY COMMISSION, DEPARTMENT OF ENERGY
 
PART 33_APPLICATION FOR ACQUISITION, SALE, LEASE, OR OTHER DISPOSITION, 
 
Sec. 33.4  Additional information requirements for applications involving 
vertical competitive impacts.

    (a)(1) The applicant must file the vertical Competitive Analysis 
described in paragraphs (b) through (e) of this section if, as a result 
of the proposed transaction, a single corporate entity has ownership or 
control over one or more merging entities that provides inputs to 
electricity products and one or more merging entities that provides 
electric generation products (for purposes of this section, merging 
entities means any party to the proposed transaction or its parent 
companies, energy subsidiaries or energy affiliates).
    (2) A vertical Competitive Analysis need not be filed if the 
applicant can affirmatively demonstrate that:
    (i) The merging entities currently do not provide inputs to 
electricity products (i.e., upstream relevant products) and electricity 
products (i.e., downstream relevant products) in the same geographic 
markets or that the extent of the business transactions in the same 
geographic market is de minimis; and no intervenor has alleged that one 
of the merging entities is a perceived potential competitor in the same 
geographic market as the other.
    (ii) The extent of the upstream relevant products currently provided 
by the merging entities is used to produce a de minimis amount of the 
relevant downstream products in the relevant destination markets, as 
defined in paragraph (c)(2) of Sec. 33.3.
    (b) All data, assumptions, techniques and conclusions in the 
vertical Competitive Analysis must be accompanied by appropriate 
documentation and support.

[[Page 237]]

    (c) The vertical Competitive Analysis must be completed using the 
following steps:
    (1) Define relevant products--(i) Downstream relevant products. The 
applicant must identify and define as downstream relevant products all 
products sold by merging entities in relevant downstream geographic 
markets, as outlined in paragraph (c)(1) of Sec. 33.3.
    (ii) Upstream relevant products. The applicant must identify and 
define as upstream relevant products all inputs to electricity products 
provided by upstream merging entities in the most recent two years.
    (2) Define geographic markets--(i) Downstream geographic markets. 
The applicant must identify all geographic markets in which it or any 
merging entities sell the downstream relevant products, as outlined in 
paragraphs (c)(2) and (c)(3) of Sec. 33.3.
    (ii) Upstream geographic markets The applicant must identify all 
geographic markets in which it or any merging entities provide the 
upstream relevant products.
    (3) Analyze competitive conditions--(i) Downstream geographic 
market.
    (A) The applicant must compute market share for each supplier in 
each relevant downstream geographic market and the HHI statistic for the 
downstream market. The applicant must provide a summary table with the 
following information for each relevant downstream geographic market:
    (1) The economic capacity of each downstream supplier (specify the 
amount of such capacity served by each upstream supplier);
    (2) The total amount of economic capacity in the downstream market 
served by each upstream supplier;
    (3) The market share of economic capacity served by each upstream 
supplier; and
    (4) The HHI statistic for the downstream market.
    (B) A similar table must be provided for available economic capacity 
and for any other measure used by the applicant.
    (ii) Upstream geographic market. The applicant must provide a 
summary table with the following information for each upstream relevant 
product in each relevant upstream geographic market:
    (A) The amount of relevant product provided by each upstream 
supplier;
    (B) The total amount of relevant product in the market;
    (C) The market share of each upstream supplier; and
    (D) The HHI statistic for the upstream market.
    (d) Mitigation. Any mitigation measures proposed by the applicant 
(including, for example, divestiture or participation in an Regional 
Transmission Organization) which are intended to mitigate the adverse 
effect of the proposed transaction must, to the extent possible, be 
factored into the vertical competitive analysis as an additional post-
transaction analysis. Any mitigation measures that involve facilities 
must identify the facilities affected by the commitment.
    (e) Additional factors.
    (1) If the applicant does not propose mitigation measures, the 
applicant must address:
    (i) The potential adverse competitive effects of the transaction.
    (ii) The potential for entry in the market and the role that entry 
could play in mitigating adverse competitive effects of the transaction;
    (iii) The efficiency gains that reasonably could not be achieved by 
other means; and
    (iv) Whether, but for the proposed transaction, one or more of the 
parties to the transaction would be likely to fail, causing its assets 
to exit the market.
    (2) The applicant must address each of the additional factors in the 
context of whether the proposed transaction is likely to present 
concerns about raising rivals' costs or anticompetitive coordination.