Feds oppose Duke Energy’s SCOTUS appeal in anti-monopoly case

The US solicitor general opposes Duke Energy’s request to have the nation’s highest court review an anti-monopoly lawsuit against the utility company. A federal Appeals court ruled in 2024 that competitor NTE Carolinas could move forward with its suit against Duke.

The suit claims that Duke attempted to block Florida-based NTE from competing to provide electricity for the city of Fayetteville.

Duke filed a petition in February asking the US Supreme Court to take the case. The high court issued a June order inviting Solicitor General John Sauer to submit a brief expressing the federal government’s view of the case.

“This appeal arises out of a campaign by an established monopolist to stop a more efficient rival from disturbing its long-dominant hold over a regional energy market,” according to the brief Sauer’s office filed Monday. “Applying the established summary-judgment standard, the court of appeals concluded that this exclusionary campaign did not involve competition ‘on the merits,’ because petitioner could not compete with respondent on the basis of efficiency. And the court found that this campaign produced the very harms the federal antitrust laws are designed to prevent — ‘reduced consumer choice, higher prices in the long term, and market foreclosure.’”

The 4th US Circuit Court of Appeals “properly held” that Duke was not entitled to summary judgment in the case. “That fact-bound decision does not warrant further review,” Sauer’s brief argued. “Nor is this case a suitable vehicle to announce any broader rule of antitrust law.”

The solicitor general labeled Duke Energy the “beneficiary of a government grant more than a century ago.”  Duke “has controlled the wholesale-power market in the Carolinas for generations. It has maintained that position in part because many barriers to entry exist in this industry.”

“Power plants have high startup costs, and ‘anchor’ clients sizable enough to cover those costs are rare,” the solicitor general argued. “By dissuading such customers from switching to a potential competitor, an entrenched monopolist can prevent new entrants from gaining a foothold in the region — without creating a better product, producing a better service, or implementing a general price cut.”

The record in the case “would support a finding that that is exactly what happened here,” according to the brief.

“Petitioner’s older plants were ‘not competitive’ with respondent’s plants, which used superior technology to produce cleaner power at a far cheaper rate,” Sauer’s brief argued. “So when respondent sought to build a new facility in the Carolinas, petitioner sought to target the competition itself. Petitioner recognized that this new plant would be viable only if respondent could sell power to the City of Fayetteville, the one sizable customer in the area whose contract was coming due. Petitioner therefore took a variety of steps intended to deter Fayetteville from switching to a new supplier.”

“Petitioner succeeded — and respondent presented sufficient evidence for a jury to conclude that petitioner did so through means ‘other than efficiency,’” the brief continued. “For instance, petitioner ‘manufactured’ a ‘sham breach’ of an interconnection agreement to make it appear that respondent’s plant would be ‘unable to transmit its power.’”

“Likewise, petitioner restructured Fayetteville’s contract to give the City a short-term discount and lump-sum payment, which petitioner would recoup through a long-term price hike on other customers,” Sauer’s brief added. “All told, without ever competing with respondent on the merits (i.e., offering a better service), petitioner was able to prevent respondent from operating its superior facility.”

“When a monopolist engages in a coordinated campaign to squelch competition, no circuit holds that each discrete aspect of the defendant’s conduct must be analyzed in isolation,” the solicitor general argued. “Instead, courts uniformly agree, consistent with this [Supreme] Court’s precedent, that a holistic analysis is appropriate in circumstances like these.”

A unanimous three-judge 4th Circuit panel ruled against Duke Energy in August 2024. The panel threw out a trial judge’s ruling in the dispute. The full 4th Circuit voted, 11-2, in November 2024 against hearing the case en banc.

Duke’s Supreme Court petition criticized the 4th Circuit panel’s decision.

“This petition presents an important and recurring question of antitrust law: when can 0 + 0 = 1? The district court found that antitrust math is no different from ordinary arithmetic. If an antitrust plaintiff pleads a series of independently lawful acts, each of which does not violate this Court’s precedents, those acts cannot together add up to some nebulous antitrust violation,” Duke’s lawyers wrote. “The court of appeals concluded otherwise, embracing a ‘monopoly broth’ theory prominent in the 1960s to 1980s but long since discarded.”

“This Court’s intervention is needed to restore antitrust law to the principles that have governed for the last three decades,” the petition continued.

The 4th Circuit “bucked” the consensus of “[f]ive courts of appeals, numerous district courts, and the leading antitrust treatise” about the proper approach to the case, Duke’s lawyers argued.

“[T]o get around this Court’s well-established tests for predatory pricing, refusals to deal, and sham litigation, NTE dusted off the old monopoly-broth playbook, arguing that Duke was liable because of its overall ‘anticompetitive scheme,’” the petition argued. “This time, the move worked. Breaking from decades of case law, the Fourth Circuit held that antitrust plaintiffs can add up distinct, independently lawful actions and put their ‘combined effect’ before a jury.”

NTE Carolinas responded to Duke’s arguments in its Supreme Court brief.

“The Fourth Circuit held that respondents have a triable monopolization case for two independent reasons,” the brief explained. “First, a reasonable jury could find multiple acts by Duke unlawful under this Court’s canonical tests for predatory pricing and refusal to deal. Second, petitioners’ conduct involved ‘a complex or atypical exclusionary campaign, the individual components of which do not fit neatly within pre-established categories.’”

“Because this Court’s specific tests for common types of monopolistic conduct do not cover all the ‘many different forms’ of anticompetitive conduct, which ‘cannot always be categorized,’ the court below also considered Duke’s course of conduct ‘as a whole’ and found that a reasonable jury could find it anti-competitive,” NTE Carolinas’ lawyers wrote.

Appeals Court Judge Paul Niemeyer wrote for the unanimous 4th Circuit panel that ruled against Duke.

“In particular, NTE presented evidence in the district court that Duke devised a plan to ensure that NTE, its only serious competitor, would not have the opportunity to compete for the business of Fayetteville, North Carolina, the only major wholesale customer whose long-term contract with Duke was expiring soon enough to allow NTE to compete for its business,” Niemeyer wrote.

“The district court granted Duke’s motion for summary judgment, in which Duke argued that the conduct that NTE imputed to Duke constituted legitimate competition in seeking to retain Fayetteville’s business and that none of the actions on which NTE relied was unlawful,” Niemeyer added. “While the court concluded that there was a question of fact on whether Duke had monopoly power, it also concluded as a matter of law that Duke did not engage in anticompetitive conduct but rather legitimate competition to retain Fayetteville’s business.”

“While we recognize that much of Duke’s conduct can be understood to be legitimate competitive conduct, … we also have found much from which a jury could conclude that Duke’s actions were illegitimate anticompetitive conduct that violated § 2 of the Sherman Act,” the 4th Circuit opinion continued. “Because genuine disputes of material fact exist, we vacate the district court’s summary judgment and remand for further proceedings.”