Sherman Act powers Trigen suit

More than finger-pointing and name-calling, Trigen's $27 million lawsuit against OG&E involves issues at the heart of capitalism.

Trigen's complaint is complex, but at its core is the contention that OG&E violated the Sherman Act, a 106-year-old federal statute vital to a competitive economic system.

Essentially, the Sherman Act prohibits big companies from using their power to monopolize markets where they hold a majority of the market share. Though mere status as a majority holder of market power does not violate the Sherman Act, using the power to squeeze out competition is forbidden, says James C. Thomas, Professor of Law at the University of Tulsa. That is Trigen's argument. Crucial to Trigen's case is the actual percent of majority power that OG&E holds. If OG&E isn't the biggest kid on the block, Trigen can't come forward with a Sherman Act claim. According to Trigen's petition, OG&E has 90 percent of the electrical market share in Oklahoma City, Trigen has 9 percent, and ONG carries one percent. Under federal case law, monopoly power has been found in situations where firms possessed as low as 60 percent of the market. Though the extent of OG&E's prevalence in the market is of little debate, how it uses that power is critical. In addition to a substantial share of the market, OG&E must engage in a "purposeful act" to eliminate competition, says Professor Thomas. For example, a company's invention and innovation is not a purposeful act, in the eyes of the court, which is prohibited by the Sherman Act. Courts have made a distinction between smart business practices and predatory conduct and found that business acumen, skill and foresight do not constitute willful maintenance of monopoly power. "If all you are facing is strong business decisions, there's no Sherman Act violation," says Thomas. "It's when you start using grossly unfair practices such as selling below cost where the Sherman Act violation occurs." And grossly unfair practices is what Trigen alleges. "We grew up competing against the largest utility monopolies in the country," says Trigen -- Oklahoma City President Vic DeJong. "But in Oklahoma City, something was very, very different. The planting and engineering of bad information was rampant." "We were shocked at how low a billion dollar monopoly had sunk," says DeJong. First, Trigen says OG&E's motive to squeeze out Trigen is a direct result of the Oklahoma Corporation Commission's regulation of their profits. The petition reads, "Because OG&E is subject to cost-based regulation, which constrains its profits, it has the incentive to engage in predatory conduct to impede or eliminate competition in the cooling services market." Trigen feels this motive is underscored by the fact that Trigen is part of a "growing national movement to introduce competition into the electrical power industry." In short, Trigen believes OG&E's conduct is an illegal rescue effort to save a dying breed. "The electrical industry is the only remaining monopoly where customers don't have a choice," says DeJong. The regulations by the Corporation Commission and the growth of alternatives, says Trigen's petition, have spurred OG&E to engage in predatory conduct. Specifically, Trigen claims OG&E has interfered with Trigen's contracts to supply cooling services to the Oklahoma County Jail and the County Building Complex by hiring Richard Buchanan "as a vehicle to bribe County officials" by paying him $134,000 with checks marked "Trigen Competition." Trigen further contends that OG&E interfered with their Myriad contract, a current Trigen customer accounting for about 10 percent of its revenues. OG&E's failure to act in accordance with bidding procedures, says Trigen, amounted to predatory conduct. Finally, Trigen argues that OG&E used its monopoly electrical power services to provide an attractive, but illegal bid to the Myriad. Trigen claims that OG&E offered below market prices to the Myriad by shifting that loss to ratepayers. As Thomas notes, "Selling products below cost is an example of unfair practices." It is a combination of these incidents which Trigen says led them to file the lawsuit. Though OG&E claims the suit is a ploy to create ill will against their company, DeJong flatly denies that charge. "If it were a single incident, I would see merit in that (OG&E's) comment." While the two powerhouses fight it out, one thing is certain -- a century-old federal law which has given us more college ballgames to watch on television, more long distance services to choose from, and a cheaper cup of coffee will be the guidepost in determining who prevails.

Copyright 1996
Provided by ProQuest Information and Learning Company. All rights Reserved.