In a settlement which doesn’t seem to have been much noticed by major media outlets, Morgan Stanley has agreed to pay $4.8 million to settle charges of acting, in concert with energy company Keyspan, in anticompetitive behavior affecting the NYC electricity market. Here’s the Department of Justice press release of September 30, 2011, with the caption Morgan Stanley Rigs NYC Electricity Bids  Here’s an excerpt.

The Department of Justice today announced a settlement with Morgan Stanley that requires Morgan to pay $4.8 million for violating the antitrust laws by entering into an agreement with KeySpan Corporation that restrained competition in the New York City electricity capacity market. The department said the agreement likely resulted in a price increase for electricity retailers, which, in turn, led to increased electricity prices for consumers. The department’s Antitrust Division today filed a civil antitrust complaint in U.S. District Court for the Southern District of New York and submitted a proposed settlement that, if approved by the court, would resolve the lawsuit. The settlement provides for disgorgement of profits for a violation of the antitrust laws and requires Morgan to pay $4.8 million to the United States. The department previously entered into a settlement with KeySpan that required the company to disgorge $12 million in profits for its role in the agreement, which was approved by the court in February 2011. “This settlement with a major financial institution will signal to the financial services community that use of derivatives for anticompetitive ends will not be tolerated,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “Disgorgement of ill-gotten gains, as was paid here, is an effective Antitrust Division tool to remedy harm to competition.” According to the complaint, in January 2006, KeySpan and Morgan executed a financial derivative for New York City capacity while Morgan simultaneously entered into an off-setting derivative with Astoria Generating Company, KeySpan’s largest competitor in the capacity market. The agreements effectively transferred to KeySpan a financial interest in Astoria’s capacity, thereby ensuring that KeySpan would withhold substantial output from the capacity market and increase prices. For its part, Morgan earned revenues by retaining the spread between the fixed prices of the two derivative agreements. The anticompetitive effects of the Morgan/KeySpan agreement lasted until March 2008, when regulatory conditions eliminated KeySpan’s ability to affect the market price of electricity capacity.

While we’re happy that the excellent attorneys in DOJ’s Antitrust Division brought this case,  the press release leaves seval questions neither asked nor answered:

1. How much did Morgan Stanley and Keyspan make? Without knowing that, it’s impossible to determine whether the settlement is sufficient.
2. Did anyone at Morgan Stanley or Keyspan lose their job, receive a demotion, or lose a bonus?
3. Did the settlement negotiations include  an agreement to issue a press release on a Friday, lessening the likelihood that major news  organizations would see the release before it went stale?