Monday, November 29, 2004

Article on Enron and Antitrust

Professor Darren Bush (of the University of Houston Law Center) and Carrie Mayne (of The University of Utah Economics Department) have recently published an article in the Oregon Law Review entitled IN (RELUCTANT) DEFENSE OF ENRON: WHY BAD REGULATION IS TO BLAME FOR CALIFORNIA'S POWER WOES (OR WHY ANTITRUST LAW FAILS TO PROTECT AGAINST MARKET POWER WHEN THE MARKET RULES ENCOURAGE ITS USE) (83 Oregon Law Review 207 (2004)).

The authors' thesis is succinctly stated:

"The primary contention of this Article is that California's failed "deregulation" experiment arose largely from the failure of California to create properly functioning market rules, lack of diligence in market oversight, and the expectation that antitrust law would cure that which it was not designed to cure: market ills cultivated by regulatory rules that legitimized anticompetitive conduct and made that conduct the norm. In the context of the regulatory environment developed in California, this Article examines the merits of allegations that Enron exercised market power in violation of antitrust laws. The key question is whether the exercise of market power was unlawful under sections 1 and 2 of the Sherman Act.

"This Article concludes that while evidence for the most part is lacking thus far as to antitrust violations by Enron, the evidence does point to failures by California's regulators, utilities, and the Federal Energy Regulatory Commission (FERC) to plan for and guard against exercises of market power. Moreover, some evidence points to potential antitrust misconduct by others, although that evidence, to date, is far from conclusive. This Article then suggests methods of regulation that would minimize market abuses, and what roles market regulators and antitrust enforcers would play in such a world."

The authors make a nice point, relevant for IP and telecommunications (topics discussed in previous posts) that anti-competitive concerns should inform many regulatory schemes and not be left orphaned at the antitrust doorsteps.

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