Overview
On December 5, 2025, the Justice Department's Antitrust Division, together with the attorney general of Texas, filed a complaint and announced a proposed consent decree requiring the divestiture of six power plants to resolve alleged antitrust concerns arising from Constellation Energy Corporation's $26.6 billion acquisition of Calpine Corporation. This action represents the first time in nearly 15 years that the Department of Justice (DOJ) has sought structural relief in a merger involving electric generation assets and may signal heightened scrutiny of the industry, in both merger and conduct cases.
Two themes feature prominently in the government's filings: geographic market definition and the alleged mechanism by which the transaction would lessen competition.
Geographic Market
Antitrust practitioners often say that cases rise or fall on market definition, and this case is no exception. The DOJ's complaint reflects the agency's longstanding view that transmission constraints can subdivide regional markets into narrower geographic markets. In this case, the agency identifies "PJM Coastal Mid-Atlantic" as a distinct market, citing the Nottingham constraint as a recurring bottleneck that limits exports and leads to persistent price separation.
This approach mirrors the DOJ's 2011 Exelon/Constellation case, which carved PJM into "Mid-Atlantic North" and "Mid-Atlantic South" PJM based on similar constraints. By contrast, the DOJ treats Electric Reliability Council of Texas (ERCOT) as a single geographic market. According to the complaint, congestion within ERCOT is relatively limited, and the region's electrical isolation means that customers cannot readily turn to imports if prices rise. This lack of supply substitution renders ERCOT a self-contained market under the DOJ's analysis.
Alleged Lessening of Competition
The DOJ's Complaint focuses on how the merger would increase Constellation's ability and incentive to raise wholesale electricity prices through strategic withholding of generation. According to the DOJ, today, if either Constellation or Calpine withheld output from marginal gas-fired units, the other could step in to supply power, limiting any price impact. But post-merger, that competitive check disappears.
Notably, this theory is advanced even though the combined company would hold well below the 30% market share threshold referenced in the Merger Guidelines—approximately 12% of total capacity in ERCOT. The DOJ instead emphasizes portfolio effects rather than aggregate market share.
According to the complaint, mid-merit and peaking units, particularly gas-fired plants, frequently set market-clearing prices in PJM and ERCOT auctions. By withholding these units or submitting offers that keep them out of dispatch, the merged firm could force system operators to rely on higher-priced alternatives, thereby increasing the market-clearing price paid to all dispatched resources. Because Constellation also owns substantial low-cost baseload generation, including nuclear assets, the DOJ argues that the incentive to withhold is amplified: higher prices earned on inframarginal baseload units could outweigh the revenue lost from the withheld plant.
The DOJ alleges that Calpine's assets would give Constellation a more diversified and strategically valuable generation portfolio, enhancing its ability to profitably pursue this strategy in both ERCOT and the PJM Coastal Mid-Atlantic market.
Implications for Electricity Industry Participants
The DOJ's challenge to the Constellation/Calpine transaction carries important implications for electricity industry participants, both in merger review and in conduct investigations.
Heightened Merger Scrutiny Despite Modest Market Shares
The action underscores the DOJ's willingness to challenge mergers in the industry even where traditional market share metrics fall well below the thresholds set out in the Merger Guidelines. The complaint's focus on portfolio effects, rather than capacity share alone, signals that companies with diverse generation assets should expect closer scrutiny.
Narrow Geographic Markets and Transmission Constraints
The case reinforces the DOJ's continued reliance on transmission constraints to define narrow geographic markets within wholesale power regions. Participants should expect the agency might revisit and update historical congestion analyses and continue to argue for localized markets where recurring constraints produce price separation. This has implications not only for deal modeling and risk assessment, but also for asset valuation, as plants located in constrained zones may be viewed as competitively sensitive.
Revival of Structural Remedies
The proposed divestiture remedy reflects a renewed willingness by the Antitrust Division to seek structural relief and is consistent with its emphasis on enforcement actions addressing "pocketbook" issues that have a direct and tangible impact on consumers.
Possible Spillover into Conduct Investigations
The DOJ's theory of harm has implications beyond merger enforcement. By framing withholding and other behavior as an antitrust violation, the DOJ signals that the industry could face increased scrutiny even outside the context of a merger.
Different Regulators, Different Conclusions
The consent decree may also indicate a willingness by the DOJ to diverge from conclusions reached by the Federal Energy Regulatory Commission (FERC) and state commissions, which approved the transaction under their respective jurisdictional analyses. Both the New York Public Service Commission and the Public Utility Commission of Texas cleared the deal without requiring divestitures. FERC, which regulates only the PJM portion of the transaction, conditioned its approval on divestitures of four PJM plants, while the DOJ consent required the divestiture of an additional PJM plant.
This divergence underscores the different analytical frameworks at play. While FERC's review does consider competition when evaluating whether a transaction is consistent with the public interest, including, when appropriate, effects within geographic submarkets, the DOJ applies a broader antitrust lens, with the goal of preventing undue concentration and preserving market competition. FERC's Order approving the merger also accepted Constellation's agreement to abide by certain behavioral remedies as part of the mitigation plan, including among other things caps on its generators' offers in the PJM energy market. In contrast, DOJ's proposed consent decree did not include any behavioral remedies and instead relied solely on (increased) divestitures to address competitive concerns.
Similarly, the DOJ required divestitures in ERCOT, even though the companies held only a small market share. In contrast, the Public Utility Commission of Texas approved the merger without any divestitures, concluding that it does not violate PURA § 39.154, because the parties would control approximately 12.8% of the installed generation capacity in, or capable of delivering electricity to, the ERCOT region, well below the 20% threshold.
Taken together, the case signals a more aggressive antitrust posture toward consolidation and competitive conduct in organized wholesale electricity markets, with meaningful implications for transaction planning, compliance, and risk management across the industry.
