## Facts

- Boston Edison was a vertically integrated electric utility generating, transmitting, and selling electricity in eastern Massachusetts.
- Several Massachusetts towns operated municipal distribution systems, bought electricity from Edison at wholesale, and competed with Edison for retail customers.
- Wholesale rates charged by Edison were set and supervised by the Federal Energy Regulatory Commission (FERC); Edison’s retail rates were set and supervised by the Massachusetts Department of Public Utilities (DPU).
- Edison filed for, and received, approval to increase its wholesale rates; the towns opposed the increase in the FERC proceeding but the higher rates took effect.
- The towns alleged Edison maintained comparatively low regulated retail rates while increasing regulated wholesale rates, leaving the towns unable to price competitively at retail (a “price squeeze”).
- The towns sued under Sherman Act § 2, claiming Edison used the squeeze to monopolize or maintain monopoly power in retail electricity sales.
- A jury found Edison liable for monopolization, and the district court entered judgment for the towns.

## Issues

1. Whether a “price squeeze” can constitute monopolization under Sherman Act § 2 when both the wholesale and retail rates that create the squeeze are set or approved by regulatory agencies.
2. Whether antitrust courts should assess “fair” upstream and downstream prices, and the adequacy of the resulting margin, in a setting governed by comprehensive rate regulation.

## Decision

- The First Circuit reversed the district court’s judgment and set aside the jury verdict.
- The court held that the alleged price squeeze was not actionable under Sherman Act § 2 on these facts because the challenged wholesale and retail prices were the product of detailed regulatory ratemaking.
- The court reasoned that finding liability would require an antitrust court to determine what wholesale and retail rates (and margins) are “fair,” effectively duplicating or conflicting with agency ratemaking.
- The court emphasized the low expected consumer benefit and high error and administrative costs of imposing antitrust remedies on regulator-approved rate relationships.
- The court noted antitrust law may still apply to regulated firms for independently unlawful conduct (e.g., collusion, predation, or non-price exclusion), but not for claims directed principally at regulated rate levels and structures.

## Legal Principles

- A classic § 2 price-squeeze theory presumes discretion over pricing and requires evaluating whether upstream prices are “too high” and downstream prices “too low” relative to a “fair” margin for rivals.
- Where specialized regulators set or approve both upstream and downstream rates, antitrust adjudication of an alleged squeeze would require courts to engage in ratemaking judgments that regulators are institutionally designed to make.
- In a fully rate-regulated industry, courts generally should not treat regulator-approved wholesale and retail rates, and the margin between them, as the basis for § 2 monopolization absent separate exclusionary conduct outside the rate-setting framework.
- Regulators are the primary forum for disputes over cost allocation, cross-subsidization, discriminatory rate design, and related pricing structure questions within the regulatory scheme.

## Conclusion

The First Circuit held that a municipal utilities’ § 2 monopolization claim based on a regulated utility’s alleged price squeeze fails where the asserted squeeze arises from wholesale and retail rates established through comprehensive regulatory ratemaking, because antitrust liability would require courts to second-guess agency-approved rates and replicate regulatory pricing decisions.


Town of Concord v. Bos. Edison Co., 915 F.2d 17 (1st Cir. 1990)