[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
FINDINGS AND RECOMMENDATIONS OF THE ANTITRUST MODERNIZATION COMMISSION
=======================================================================
HEARING
BEFORE THE
ANTITRUST TASK FORCE
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
MAY 8, 2007
__________
Serial No. 110-23
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California LAMAR SMITH, Texas
RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ROBERT C. SCOTT, Virginia HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
MAXINE WATERS, California DANIEL E. LUNGREN, California
MARTIN T. MEEHAN, Massachusetts CHRIS CANNON, Utah
WILLIAM D. DELAHUNT, Massachusetts RIC KELLER, Florida
ROBERT WEXLER, Florida DARRELL ISSA, California
LINDA T. SANCHEZ, California MIKE PENCE, Indiana
STEVE COHEN, Tennessee J. RANDY FORBES, Virginia
HANK JOHNSON, Georgia STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois TOM FEENEY, Florida
BRAD SHERMAN, California TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota
Perry Apelbaum, Staff Director and Chief Counsel
Joseph Gibson, Minority Chief Counsel
------
Antitrust Task Force
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California STEVE CHABOT, Ohio
RICK BOUCHER, Virginia RIC KELLER, Florida
ZOE LOFGREN, California F. JAMES SENSENBRENNER, Jr.,
SHEILA JACKSON LEE, Texas Wisconsin
MAXINE WATERS, California BOB GOODLATTE, Virginia
STEVE COHEN, Tennessee CHRIS CANNON, Utah
ANTHONY D. WEINER, New York DARRELL ISSA, California
ARTUR DAVIS, Alabama J. RANDY FORBES, Virginia
DEBBIE WASSERMAN SCHULTZ, Florida STEVE KING, Iowa
LAMAR SMITH, Texas, Ex Officio
Perry Apelbaum, Staff Director and Chief Counsel
Joseph Gibson, Minority Chief Counsel
C O N T E N T S
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MAY 8, 2007
OPENING STATEMENT
Page
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, and Chairman, Antitrust Task Force. 1
The Honorable Steve Chabot, a Representative in Congress from the
State of Ohio, and Ranking Member, Antitrust Task Force........ 3
WITNESSES
Ms. Deborah Garza, Chair, Antitrust Modernization Commission
Oral Testimony................................................. 4
Mr. Johnathan R. Yarowsky, Vice Chair, Antitrust Modernization
Commission
Oral Testimony................................................. 6
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Joint Prepared Statement of Deborah Garza, Chair, Antitrust
Modernization Commission; and Johnathan R. Yarowsky, Vice
Chair, Antitrust Modernization Commission...................... 8
APPENDIX
Material Submitted for the Hearing Record
Prepared Statement of the Honorable Lamar Smith, a Representative
in Congress from the State of Texas, and Ranking Member,
Committee on the Judiciary..................................... 79
Prepared Statement of the Honorable Sheila Jackson Lee, a
Representative in Congress from the State of Texas, and Member,
Antitrust Task Force........................................... 81
Biographies of Deborah Garza, Chair, Antitrust Modernization
Commission; and Johnathan R. Yarowsky, Vice Chair, Antitrust
Modernization Commission....................................... 90
Prepared Statement of Glenn English, CEO, National Rural Electric
Cooperative Association and Chairman, Consumers United for Rail
Equity......................................................... 91
FINDINGS AND RECOMMENDATIONS OF THE ANTITRUST MODERNIZATION COMMISSION
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TUESDAY, MAY 8, 2007
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The Task Force met, pursuant to notice, at 2:19 p.m., in
Room 2141, Rayburn House Office Building, the Honorable John
Conyers, Jr. (Chairman of the Task Force) presiding.
Present: Representatives Conyers, Berman, Jackson Lee,
Chabot, Smith, Keller, and Issa.
Staff present: Stacey Dansky, Majority Counsel; Stewart
Jeffries, Minority Counsel; and Brandon Johns, Staff Assistant.
Mr. Conyers. Good afternoon. The hearing on the Antitrust
Task Force will come to order.
We are now examining the findings and recommendations of
the Antitrust Modernization Commission.
And I yield first to the Ranking Member of the full
Committee, Lamar Smith.
Mr. Smith. Mr. Chairman, I thank you very much for
yielding. All I want to do is thank you for convening this very
first hearing of the Antitrust Task Force and for your
initiative on creating one.
I unfortunately have to be over at the Capitol in 10
minutes, so I am not going to be able to stay, so I would like
to ask unanimous consent that my particularly articulate and
persuasive opening statement be made a part of the record.
I thank you, Mr. Chairman.
Mr. Conyers. Without objection, so ordered.
I apologize for my lateness. President Preval of Haiti has
just arrived in the Capitol, and I was detained longer than I
thought I would be.
We are delighted to welcome both the chair and vice chair
of the Antitrust Modernization Commission and appreciate both
of you being here to report on the Commission's findings and
recommendations: Ms. Deborah Garza and, of course, John
Yarowsky, the vice chair.
For the past 3 years, our witnesses, along with 10 other
commissioners, have been analyzing the antitrust laws to
determine whether they are fully effective as is or if they
could benefit from refinement to reflect changes in technology
and the marketplace.
For over a century now, antitrust laws have served as our
economic bill of rights, providing the ground rules for fair
competition. The antitrust laws are our chief bulwark against
schemes by cartels and monopolists to deprive consumers and our
economy of the benefits of competition and innovation--that is
lower prices, better products, and greater efficiency.
The AMC's report is an ambitious one with over 300 pages of
analysis and recommendations. The AMC covered a lot of ground.
Some of their recommendations are particularly useful; for
example, its recommendation that immunities from antitrust laws
should be disfavored and only created when the heavy burden is
met of clearly demonstrating that the exemption is necessary to
satisfy a specific societal goal that trumps the benefits of a
free market.
It is a good starting point for Congress as it moves
forward with various proposals.
Other recommendations do not receive such glowing reports.
I lower my head to mention the Robinson-Patman Act. That
provides a set of guidelines for marketplace behavior by
guaranteeing that everyone competing in any given marketplace
has a level playing field. It does this by prohibiting sellers
from offering different prices to different purchasers of
commodities where there is no pro-competitive justification.
Robinson-Patman helps ensure that small businesses and mom-
and-pop stores have the ability to compete with big power
retailers like Wal-Mart. In its recommendations, the AMC
suggests repeal of Robinson-Patman, claiming it is not
performing its intended function and that it conflicts with the
goals of modern antitrust law.
Admittedly, the Act has flaws, is structurally complex and
very hard to administer, and it is not used often as an
enforcement tool. But these problems should not mean we should
repeal the law altogether. Instead of repealing the act, it is
my hope that we can find a way to make it work better.
I also have concerns about the Commission's ambiguous
recommendation on the repeal of Illinois Brick and Hanover Shoe
Supreme Court cases. In these two cases, the Supreme Court
ruled that only direct purchasers, not indirect purchasers, may
sue for damages from price fixing and that antitrust defendants
in these cases cannot use the defense that the direct purchaser
passed on the over-charge to the indirect purchaser or the
consumer.
Illinois Brick has been controversial since it was adopted,
but many States have adopted policies that allow indirect
purchasers to sue. I applaud the Commission for attempting to
resolve this issue and I agree that allowing indirect
purchasers to sue will enhance consumer welfare.
I am more skeptical, however, of the Commission's proposal
because of the potentially adverse effect it could have on
direct purchaser actions. If each direct purchaser must
determine how much of the over-charge was passed on downstream,
it might be very difficult for them to pursue these actions.
The result could be an overall decrease in holding price-fixers
and monopolists accountable. This is an issue we shall continue
to study carefully.
I also want to mention that no matter how current or modern
the antitrust laws are, the positive effects of such laws
cannot be felt without adequate enforcement by the agencies.
The AMC says that the U.S. merger policy is fundamentally sound
and that there does not appear to be a systematic bias toward
either over-enforcement or under-enforcement. Yet in the past
few years with technological and marketing innovation occurring
at breakneck speed, we have seen a wave of consolidation in
some of our key industries.
According to Thomson Financial, this year was the fourth
largest in history for mergers and acquisitions. The fact that
the Department of Justice has failed to challenge any of these
massive industry-consolidating mergers makes me worry about the
AMC's conclusion here.
I look forward to hearing from the two senior commissioners
and appreciate the incredible amount of work that has gone into
this endeavor over the last 3 years. And I want to continue our
dialogue about the importance of our antitrust laws. This
Antitrust Task Force was created specifically to get us into
the inquiring of how we can make this area of our law better.
I would now recognize Steve Chabot, our Ranking minority
Member on this Task Force, for an opening statement.
Mr. Chabot. Thank you. And I would like to thank the
distinguished gentleman from Michigan, Chairman Conyers, for
holding this important hearing.
I was privileged to speak a few weeks ago at the American
Bar Association's Annual Spring Antitrust Conference, and I
happened to be seated next to our witnesses. One of our
colleagues, one of your colleagues, Commissioner Valentine, had
the opportunity to discuss with some of the folks there the
significance of the Antitrust Modernization Commission report.
And in particular, I acknowledged the importance of the
Commission's report to Congress, specifically as it provides us
with a backdrop against which this Task Force can better
analyze the specific antitrust issues which we have identified
for review over the next 6 months. This report is very timely
for this Task Force.
At the very heart of the creation of the Commission and its
directive to study our Nation's antitrust laws was Congress's
concern that rapidly advancing technology was incompatible with
competition and consumers. As we have all witnessed, technology
has dramatically changed the marketplace and the nature of
competition. Technology that we viewed as science fiction years
ago has now become a part of our daily lives.
Our first hearing reviewing the XM and Sirius Satellite
Radio merger held just a few months back highlighted the
uncertainty that consumers, businesses, regulators and the
courts face in the 21st century.
Most of the issues that the Commission examined and will
report on today were not contemplated at the time of our
Nation's antitrust laws upon their enactment almost 118 years
ago and while the courts have done a good job in balancing
innovation against competition within the antitrust framework,
this new information-driven economy has forced us all to take a
look at the effectiveness of our antitrust structure.
The good news is that the Commission, after a thorough
review, found our Nation's antitrust laws to be ``fundamentally
sound.'' This finding of soundness is important because it
reaffirms that competition and consumers continue to be
adequately protected even in this new age of technology and
innovation. It also alleviates concern that our laws are not
flexible enough to respond to change.
Our challenge in the 110th Congress is to ensure that
competition continues to flourish. However, we must be mindful
that too much Government intervention and regulation can also
be harmful. The Commission's report, findings and
recommendations provide us with a much needed starting point to
move forward.
Again, I thank our witnesses for being here.
And I want to thank the Chairman. I know we all look
forward to hearing in more detail the findings and
recommendations of the Commission.
And, Mr. Chairman, I might note that I have to appear
before the Rules Committee at 3:00, so I will have to leave,
but I will come right back as soon as I appear.
I yield back.
Mr. Conyers. Thank you, Steve Chabot.
Our witnesses: Deborah Garza has been a member of the
Antitrust Modernization Commission in Washington, where she
served as chair. She was a member of the law firm where she was
a partner at Fried, Frank, Harris, Shriver & Jacobson, handling
antitrust counseling and litigation. She has also been a
partner at Covington & Burling and was in the antitrust
division of the Department of Justice as Chief of Staff and
Counsel to the Assistant Attorney General through the years of
1987 and 1989.
In addition, of course, she is now the Deputy Assistant
Attorney General for Regulatory Affairs at the Antitrust
Division. We offer our congratulations, although she is not
testifying here in that capacity, of course.
John Yarowsky, became a member of Patton Boggs Public
Policy Practice Group in 1998, after serving 3 years as special
associate counsel to President Bill Clinton. His practice at
the firm is diverse, spanning a broad range of legislative and
public policy areas while at the same time providing strategic
counseling to clients on antitrust, telecommunications,
intellectual property and administrative practice and
procedure.
I am going to submit both of their bios for the record and
proceed to hear them.
Both Ms. Garza and Mr. Yarowsky have submitted a joint
statement to the Task Force. Without objection, it will be made
a part of the record and any other opening statements will be
included as well.
And I would like to include for the record the other
members on the Antitrust Modernization Commission and the
Commission staff.
We welcome you today. We are here to talk about the high
points and the points where there might be differences of view.
And I think I would ask the former chairperson, Ms. Garza, to
begin, please.
TESTIMONY OF DEBORAH GARZA, CHAIR,
ANTITRUST MODERNIZATION COMMISSION
Ms. Garza. Thank you, Chairman Conyers, Ranking Member
Chabot, Members of the Antitrust Task Force, for inviting us to
testify today on the findings and recommendations of the
Antitrust Modernization Commission.
We really are delighted to be here to be able to respond to
any questions you have and to open what we hope will be a very
productive dialogue, because as you recognized, Chairman
Conyers, these are very difficult issues deserving of a lot of
discussion and consideration.
Before I begin, I would like to acknowledge that the AMC
staff is all sitting behind us in the first row. They are
really the backbone and the reason why we were able to get the
report out at all much less on time and under budget.
I think that I can speak for all of the commissioners in
saying that it was an honor to be entrusted with the large task
of studying the U.S. antitrust laws and reporting to the
President and Congress on whether they need to be modernized
for today's economy. We took that trust seriously and we took
to heart Congress's direction that we solicit and consider the
views of all interested persons.
We did that, and after 3 years of work and many, many days
of hearings and deliberation, we produced a consensus report in
which all the commissioners joined.
Our Nation's antitrust laws have served the U.S. well for
more than 100 years and are a model for the rest of the world.
In fact, I spent this morning discussing with the members of
the delegation of the Chinese National People's Congress, which
is considering adopting their own antitrust laws, what our
antitrust laws provide. And this I think is an indication that
the whole world appreciates the role, thanks to I think the
U.S., of competition law and the role it has played in helping
to ensure innovation and investment that is essential to a
healthy and growing economy.
The report is over 500 pages long. In total, we made about
80 recommendations. Rather than trying to summarize our
findings and recommendations in 5 minutes, I thought I would
touch on just a very few high points, or what I consider to be
high points and important points.
First and foremost, the report is an endorsement of free
market principals. Free trade unfettered by either private or
Government restraints promotes the most efficient allocation of
resources and the greatest consumer welfare.
Second, the report concludes that the state of U.S.
antitrust law is essentially sound. Certainly there are ways in
which enforcement can be improved, and we suggest some of
those. On balance, however, the Commission believes that U.S.
antitrust enforcement has achieved an appropriate focusing on:
one, fostering innovation; two, promoting competition and
consumer welfare rather than protecting competition; and,
three, aggressively punishing criminal cartel activity while
carefully assessing other conduct that may officer substantial
benefit.
And, third, the Commission does not believe that new or
different rules are needed to address so-called ``new economy
issues.'' Consistent applications of the principals that I just
noted will ensure that the antitrust laws remain relevant in
today's environment and tomorrow's as well.
The U.S. antitrust laws, as written, are sufficiently
flexible to be consistently modernized through the
interpretations and actions of the courts, the enforcement
agencies and under the supervision of Congress.
And with that, to leave us with plenty of time the address
specific questions we have, I will complete my statement.
Mr. Conyers. Thank you so much. Excellent beginning.
Mr. Yarowsky, we welcome you back again to the Committee,
where you have been before, and we would appreciate hearing
from you now.
TESTIMONY OF JONATHAN R. YAROWSKY, VICE CHAIR,
ANTITRUST MODERNIZATION COMMISSION
Mr. Yarowsky. Thank you, Chairman Conyers, Ranking Member
Chabot, Subcommittee Chairman Berman and other Members of the
Task Force who may appear.
I am honored to have had your confidence to serve on this
Commission, and I am honored to have served with such
distinguished individuals from such diverse backgrounds and
with such an amazing staff, as you have heard. You will hear a
lot about that.
Ever since 1938, Commissions have been created, primarily
by Congress, to review the state of antitrust policy. This has
happened with almost clockwork precision every 20 or 25 years.
And I think as you stated in your opening statement, and as
Chairwoman Garza has said, yes, the state of antitrust is
``good.''
That is not a small statement, because after 13 days of
hearings, over 120 witnesses and many days of public
deliberations, the Commission found that no changes were needed
in the following areas: changing Section 7 of the Clayton Act,
that sets out the merger standard; changing Section 2 of the
Sherman Act, that creates the monopolization standard; changing
the filing requirements, the initial filing requirements for
the Hart-Scott-Rodino Act; whether to create different rules
for different industries; answer, no; changing the fundamental
enforcement architecture of the antitrust laws that provides
for dual enforcement roles for both the Federal Government and
the States; for having two separate agencies, the DOJ and the
FTC; and for leaving the central features of the remedial
system, treble damages and attorney's fees, in place.
It is easy to say everything ultimately was recommended to
stay the same, at least in these main features, but it was not
easy to get to that point. There were very vigorous debates
about leaving the current structure in place, and where we have
come out took a lot of dynamic energy, to say the least.
But you know what is interesting to me, having lived up
here for a long time, is that many of the things I just listed
are really the handiwork of Congress. Much of the architecture
of what you all have done in past Congresses has been
recommended to stay in place. Where we have advocated change--
and we have advocated a number of, I think, important
legislative changes--these other areas are where there is
either confusing case law or administrative issues, whether in
the courts or in the agencies.
However, this vote of confidence for leaving so much of the
underlying policy in place, comes in the face of a torrent of
developing economic reasoning into the competitive analysis in
the past 25 years. The central role of economics is no longer
an ideological debating point. It certainly was 20 years ago,
about the right weight to give to economic analysis. And it has
led to more institutional continuity and enforcement over a
series of different Administrations in the past 15 years. I
think this is all for the good.
But with the central role played by economics, comes a real
possibility that the courts and Congress may be left behind
when it comes to discussing issues such as the three-part test
to determine whether bundled discounts or rebates violate
section 2 of the Sherman Act. What I mean by that is that
Congress must stay deeply involved with all of the economic
discussions that are going on with the larger policy views, so
that Congress continues to shape the contour and structure of
the antitrust laws.
For about a year and a half in the White House I was
connected with judicial selection, and one of the observations
I had, personal observations, was that very few of the
candidates--and this is not a criticism--for the bench really
had very little background in antitrust and were particularly
daunted by the economics that were developing and whether they
would be up to dealing with that.
They did take some comfort, however, in reviewing the
statutes of Congress as well as the legislative history as a
starting point, and that was their entry point. And that just
reinforced for me what I came to believe, working here and
since then, that we need a very active Committee here.
The Committee has fought long and hard to make sure that
they will stay relevant. Some of the great moments of this
Committee history and in this room, for Members now on the dais
and those looking down from the walls, have come from the often
bipartisan coming together to defend the antitrust laws, to
vigorously assert jurisdiction over certain regulatory
initiatives that are occuring in other Committees for which
they have primary jurisdiction.
If it had not been for the effort of this Committee, then
telecommunication policy, energy policy and many other policies
would not have had the benefit of a competitive slant. That is
going to be increasingly more important as we go forward.
So with that, I can say that I am honored to be here again.
We look forward to your questions.
[The joint prepared statement of Ms. Garza and Mr. Yarowsky
follows:]
Joint Prepared Statement of Deborah A. Garza and Jonathan R. Yarowsky
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Mr. Conyers. Thank you so very much.
I wanted to bring to your attention from the outset, and
you probably know it, that the Commission itself was the work
product of Jim Sensenbrenner, the former Chairman of this
Committee, and it is one of the issues we agreed upon. And I
just wanted his name to get into the record, because I think
that it was a good idea, and we frequently agree on many of the
antitrust issues.
I am going to just raise a few and let you field them as
you will.
The first thing that I congratulate you on is trying to
figure out how to narrow the exemptions. To me, that is worth
celebrating, because with more than 30 exemptions on the books,
more being applied for and also sometimes given other names, I
think that this is very, very important.
I also agree with the regard for a division, a more
efficient division of labor between the two antitrust
enforcement agencies, the Department of Justice and the Federal
Trade Commission, FTC. And here your recommendations were very
well received.
Transparency was another one that was very important.
Now, the Robinson-Patman repeal leads me to temper some of
my enthusiasm for the list of things that I supported. You
confused me on repealing Illinois Brick but sticking Hanover
Shoe onto it, which seems to me to make things more difficult.
The contribution in claims reduction provision attracted some
negative feedback in some quarters.
And so let me ask you to comment on any of those items that
you choose to.
Ms. Garza. Well, I will start off with easy, with something
you like, immunities and exemptions.
I mentioned that earlier this morning we were with the
delegation from China and actually the discussion was all about
immunities and exemptions. And the question they had is, we see
your antitrust law, we understand it, but can you please
explain why you have 30 statutory exemptions. And then also
they had questions about State action, another issue.
And so we discussed with them a little bit the history of
exemptions and immunities and, you know, some of the most
sweeping exemptions I think exhibited an ambivalence about the
antitrust laws and a fear, even, of competition. There was a
concern that some industries just weren't fit for competition
and there was a belief that some industries were national
monopolies. That thankfully has changed a lot beginning in the
1970's and into today as we have recognized that very few
industries if any are not suitable for competition.
So what we have seen over time is actually a contraction, I
think, in the immunities and exemptions and a focus on much
more limited immunities for specific conduct or immunities that
limit liability to single damages, et cetera.
With that as the background in recognizing how difficult it
can be to take away an immunity that has been granted, we
decided rather than to attack specific immunities and
exemptions, to try to offer you all a framework that you might
be able to use in considering whether to adopt immunities and
exemptions in the future, but also to use in considering
perhaps the repeal of existing exemptions.
And one of the things that we do recommend as well is that
to the extent Congress does decide that other societal values
have to trump the antitrust laws in a particular area and does
enact an exemption, we recommend it that there be considered a
sunset provision, which would change the dynamics perhaps that
exist today and ensure that after some period of time, in order
to keep on, there has to be a reevaluation and the parties who
were the proponents of the immunity have to come forward to you
with evidence to show that there is a net gain to the U.S.
economy consumers as a result of the exemption.
Mr. Yarowsky. I would just add one thing. Many of those 30
exemptions did not come from this Committee. A number of them
did. But where they came from were other Committees, looking at
other initiatives, and then they threw them in, because they
happened to have jurisdiction over those industries, or they
were thrown in during the process of a conference report. Which
again reinforces that your vigorous assertion of jurisdiction,
even if it has to be sequential referrals, is absolutely
critical to guard against further erosion in this area.
Mr. Conyers. You know, the wave of mergers and
consolidation and the lack of challenges is something I have to
raise on my list. I don't want you to try to address it now.
Maybe I will get it a little bit later.
But I now choose to turn to Mr. Chabot, the Ranking Member.
Mr. Chabot. Thank you very much, Mr. Chairman.
Hopefully I can get in a few quick questions and things
here and get your responses.
First of all, I think we all are aware that gas prices are
on the rise once again, causing real harm to real people in
this country, all across this country. And obviously when this
happens, there are calls for Congress to increase regulation of
the oil and gas industry or modifying the standards for oil and
gas mergers.
What are the implications of the Commission's
recommendations regarding regulated industries with respect to
such calls for increased regulation, for oil and gas, for
example?
Ms. Garza. Well, the Commission specifically found and
recommended that there should not be a separate standard for
evaluating mergers in various industries, and while we didn't
specifically mention the oil and gas industry, that was
something that we were obviously conscious of. We were aware of
the fact that Congress was considering whether it was
appropriate to have a different or higher standard for mergers
in the oil and gas industry.
And the Commission's conclusions were that there wasn't any
need to do that. Section 7 and the way that it is enforced by
the courts and enforced by the antitrust authorities, is
sufficiently flexible in order to take account of all of the
relevant acts.
Now, in the regulated industries area, which we also looked
at, we recommended that the antitrust agencies should have the
primary role of assessing the competitive implications of
mergers and that the regulatory agencies, the non-antitrust
regulatory agencies, such be involved only to the extent that
there are some other non-competition related societal goals
that are important to ensure that cannot be safeguarded through
application of the antitrust laws.
Mr. Chabot. What are the implications of the increasing
globalization of antitrust law? What are some likely
consequences, for example, if America retains its shipping
antitrust exemption in light of the E.U.'s recent decision to
rescind its exemption? And what are the implications for
potential internationalization of the Robinson-Patman Act,
also?
Mr. Yarowsky. I will just start out with that, Mr. Chabot.
Obviously, there is a convergence in many ways now with
some of the foreign antitrust laws and the U.S. antitrust laws.
In some ways, that will be a very good thing, I think, is the
general sense, procedural aspects of, let's say, merger review.
There has been a lot of discussion about why, in a global
merger, where it is being reviewed here in America as well as
at the E.U., why are there different time frames for review? It
would be much better if there was a more consistent, harmonized
procedure that people could rely on and get results and answers
quickly.
The issue of substantive antitrust law convergence is a
really difficult one. Do we really want it to be an issue like
the GATT talks, trade talks, where suddenly there is a uniform
global antitrust law in this area. We have different
traditions. I guess one could say that about trade and
everything else.
But I think the general sense is you have got to go much
more cautiously about imposing a substantive standard across
the board and certainly being very careful about throwing
antitrust into kind of trade talks that could be decided in
kind of an international diplomatic situation instead of a
substantive situation with antitrust analysis.
Mr. Chabot. Thank you.
Go ahead, Ms. Garza.
Ms. Garza. I just quickly wanted to react to two things you
mentioned. One was ocean shipping and the other was the
Robinson-Patman Act.
On the ocean shipping front, I think the commissioners did
feel that the fact that we are now the only developed Nation
that continues to support an exemption for ocean shipping price
setting should be a bit of an embarrassment to us, and we think
that the action that the Europeans took is perhaps a good
opening for us to follow and do the same.
On the Robinson-Patman Act, I guess I will be brave enough
to address that, Chairman Conyers. The one thing that moved me,
at least, in agreeing with my fellow commissioners on our
recommendation was the fact that it does become difficult to
explain to non-U.S. competition authorities what the Robinson-
Patman Act does.
As the report indicates, we think that in many ways the
Robinson-Patman Act operates in a way that is antithetical to
the antitrust laws. And we try to discourage foreign
competition authorities from enacting strict price regulations
when they are looking at adopting competition regimes.
But it becomes very difficult for us to in effect say,
``Well, don't do as we do; do as we say,'' while we have got
the Robinson-Patman Act on the books, but it is really not
enforced very much and there are ways to enforce it so it is
not as harmful. And it makes it more difficult for us,
basically, to convince other Nations that they should not enact
similar statutes that really police pricing.
Mr. Conyers. Thank you so much.
Howard Berman?
Mr. Berman. Thank you, Mr. Chairman.
I would like to focus the witnesses attention on the
recommendations and the antitrust and patents section and have
you expand a little on the recommendations. I mean, you come
down on the side of saying that while there is a tension, we
can have our patent laws and have our antitrust laws and
maintain a climate that incentivizes innovation and at the same
time avoid the most negative anticompetitive implications of
granting exclusive rights. But you worry about features of our
current patent system.
Could you highlight for us which of the recommendations of
the Federal Trade Commission and the National Academy of
Sciences that would constitute reforms of the patent system
that you think are the most important and that Congress should
pay attention to adjusting? Either of you.
Mr. Yarowsky. I will take the first crack at this, but I do
want to say before I do that I am working on patent reform and
so I want that----
Mr. Berman. Is that why you look familiar?
Mr. Yarowsky. Yes, that is probably why I look familiar.
The recommendations of the FTC, the National Academy of
Sciences and other expert groups really focus initially on
patent quality. If too many patents are issued with not precise
quality, that has a devastating affect on competition, because
remember, patents do have exclusive rights, monopoly rights.
If too many patents are issued, that space, the competition
space, gets filled with these little monopolies, and so they
better be defined very carefully and precisely so that you
don't occupy any more space than you have to.
Obviously, the first look then is at the patent office.
Applications have gone up probably 300 percent in the last 15
years for the PTO. That is fine. We have great examiners. But
that is a terrible burden for them. There is a 500,000, 600,000
patent backlog that is currently hanging over everyone's head,
which then delays the issuance of patents.
If patents are of poor quality or questionable quality,
that leads to disputes later on. Well, disputes then spill over
into our courts for many years. If there was an alternative
dispute mechanism that was expeditious, that would be
wonderful, but there isn't really one that currently exists in
the Patent and Trademark Office. And so at that point, the
patent system, which is supposed to drive economic growth,
competition and innovation becomes a problem in and of itself
and drags down kind of the competitiveness of many companies.
So I think the first strand is to enhance the resources of
the PTO to keep up with this increase in applications, then
have clarification about quality. The Supreme Court just came
out last week with a decision about clarity--about what is
novel and what is just obvious. I think it will be very
helpful. And then look at how dispute resolution is being
handled both in the courts and at the PTO.
Ms. Garza. I don't know that I have anything to add to
that.
We do recognize that a patent doesn't necessarily signify
an antitrust monopoly. And so we think that is important to
keep in mind. But on the other hand, there can be a problem if
the patent system is abused, if obvious inventions are
patented.
And so our recommendation is that in particular the
recommendations of the Federal Trade Commission and the
National Academy of Sciences that direct themselves to ensuring
the quality of patents be taken up by Congress. And I do agree
with John that the Supreme Court seems to be taking steps
itself to adjust some of what it apparently believes is, if not
an abuse, a problem with the current patent system.
But we agree that, you know, if the patent system is out of
whack, then you could potentially have a competitive impact,
and we agree however that both systems should be able to
coexist and both systems should have as the common goal
stimulating innovation and competition.
Mr. Conyers. Thank you.
The gentleman from Florida, Ric Keller?
Mr. Keller. Thank you, Mr. Chairman.
Ms. Garza and Mr. Yarowsky, I want to just ask you about
the Robinson-Patman Act repeal. I don't necessarily disagree
with your recommendation, but just to draw out that a little
bit.
Ms. Garza, can you give us the top three policy reasons why
your Commission recommended that the Robinson-Patman Act should
be repealed in its entirety?
Ms. Garza. Well, you know, I don't know that I have a list
of three, but the reason we think that it should be repealed is
because it does arguably prohibit the kind of price discounting
that the antitrust laws otherwise are intended to encourage.
Mr. Keller. When you say price discounting, are you talking
about volume discounting essentially?
Ms. Garza. Volume discounting. Various kinds of discounting
can be vulnerable under the Robinson-Patman under the Robinson-
Patman Act, and because of difficulties that defendants can
have in proving justification and meeting other standards of
the act, it can really just have a chilling effect.
And I think that, you know, you may not see a lot of
litigation nowadays, but in my experience, and maybe other
people's experience, is that it does have a chilling effect,
and in a way it provides almost an excuse for not competing as
hard as companies can compete.
Mr. Keller. Let me cut you off there.
Mr. Yarowsky, do you have anything to add to that? Any
other policy reasons other than it inhibits volume discounting?
Mr. Yarowsky. No. But at some point, now or later, I would
like to explain my position on Robinson-Patman.
Mr. Keller. Let me ask you a couple of questions, and then
I will give you a chance.
It is my understanding from talking with friends of mine
who are car dealers that a car dealer, say, who sells Toyota
Corollas, and he sells 1,000 cars a year, versus a smaller car
dealer who sells Toyota Corollas at only 100 per year, both pay
the exact same amount from the manufacturer and they don't get
a volume discount from the manufacturer.
Is that your understanding, Ms. Garza?
Ms. Garza. I don't really have an understanding of how
pricing works in the auto industry, but I will say that our
feeling is that a manufacturer should have--we start with the
proposition that unless the manufacturer has market power, they
have an incentive to basically expand output, to basically make
sure that they get distributors who are selling a lot and that
the volume discounts and other things that they employ are
meant to basically reward the most efficient and successful
distributors and distribution techniques.
Mr. Keller. Well, that is my understanding, and I think it
is based on Robinson-Patman.
Do you disagree with that, Mr. Yarowsky?
Mr. Yarowsky. No, not----
Mr. Keller. Okay. Let me give you a simple example. And I
like the corner grocery stores as much as anyone. I go to the
one right here on 4th and East Capitol every week. I am
probably one of their best customers.
But does Wal-Mart and the little corner grocery store both
pay the same amount for the same size can of Campbell's Soup
under the Robinson-Patman Act, Mr. Yarowsky?
Mr. Yarowsky. They may not necessarily pay the same amount.
I mean, it really is an individualized set of agreements about
what retailers pay. They may well pay the same amount. I think
the volume discount exception to Robinson-Patman which could
justify differential pricing, that was there from the very
beginning, 1936. The question is how it is interpreted and
there is been a lot of confusion even about that, which seems
pretty obvious.
Mr. Keller. I am somewhat confused for a couple reasons. It
seems like I gave you a chance to give me, both of you, three
policy reasons why you want to get rid of Robinson-Patman Act
and you can only come up with one, and that is volume
discounting, and so when I ask you does Wal-Mart pay a cheaper
price that a corner grocery store, I would kind of expect you
to tell me no, they all pay the same under this law.
Mr. Yarowsky. There are some other reasons that have come
out. One, it may limit more discounting activity, and that
would be a perverse, ironic result. There have been a lot of
studies showing that fear of this act, and again I----
Mr. Keller. Take the remaining time to tell me what you
wanted to get out about Robinson-Patman.
Mr. Yarowsky. Here is my view of Robinson-Patman. I agree
with all of the commissioners that it is not working well and
there is a real problem. It is not being enforced by the
agencies and there is a lot of substantive confusion in the
law.
However, rather than just closing your eyes and repealing
Robinson-Patman, I don't agree with that. I think Congress
needs to revisit Robinson-Patman, that the same forces, the
same constituencies that have cried out for Congress to look at
it, are still here.
The problem is, I think you need to downsize and re-sculpt
the act, if possible, so that it does work, it is lower to the
ground, it may not be so convoluted. Remember, what Congress is
now having to do is create mini-Robinson-Patman Acts because
the larger one doesn't work.
The program access rules--Congress helped stimulate the
production of those because, for example, satellite was at a
perceived disadvantage from cable in getting content,
programming, when they first started out. And the answer was,
well, we are giving a volume discount to cable, and the small
satellite companies said, well, we can't survive on that. So
program access rules came into effect just for that little
sphere.
Net neutrality. This Committee really dug into that last
year. Without going into the pros or cons of net neutrality,
there was also concerns pushing that consideration about price
discrimination. Again, if Congress had passed a net neutrality
bill, it would not have been a generic bill at all that would
have applied across our economy. It just would have been for a
small sector.
I think if you repeal Robison-Patman, you are going to see
a proliferation of these mini price discrimination regimes. I
don't think that is a good idea. I would rather see Congress
draw back, do a tough evaluation, spend the time, go over it
and see if they can re-craft a workable Robinson-Patman Act
across the board.
Mr. Conyers. Thank you so much.
The gentleman from California, Darrell Issa?
Mr. Issa. Thank you, Mr. Chairman.
I don't want to sound like a one-trick pony, but I am going
to pick up on the patent reform and how it relates here. I
think everyone that has been on the dais and probably everyone
that will come in and out during the hearing agrees that the
major thrust of patent reform is to get better patents. And
recognizing that we do have a high failure rate when they stand
the test of the brightest sunshine in major litigation.
But one question I have is, let's assume for a moment that
they are valid and should be enforced. I think I was hearing,
you know, that there are still many antitrust violations, and I
just want to make sure that it is clear for the record that,
assuming they are valid, they are a right to a monopoly and a
right to dominate an industry and a right to get premium prices
and the Federal Trade Commission tends to resent that.
Is that a fair statement? I am noticing some wincing, so I
will assume that you are going to disagree.
Ms. Garza. I don't know if everything you said is fair, but
I don't know----
Mr. Issa. If I were still a Chairman, it would be. But I am
not.
Ms. Garza. Here is the thing. I would say that you are
right, and I think the Commission agrees that a validly issued
patent confirms the right of exclusion on the owner, and we say
in our discussion of Section 2 as well as the patents that you
have the right to command whatever price you can command.
Now, having a patent doesn't mean that you have dominance
by any stretch of the imagination, because you could have a
patent but that doesn't mean that that technology that is
embodied in that patent is superior to other patented or non-
patented technology.
So the one thing that is important to keep in mind is that
a patent doesn't equal dominance. A patent equals the right to
exclude. It does not necessarily equal market power or
dominance.
Mr. Issa. Sure. And following up on that, because you said
exactly what I wanted said, in a sense, not because I asked you
to say it, because I was a devil's advocate instead.
When we look at pharmaceuticals, it seems like in many
Committees of Congress we are constantly trying to make them
provide medicines cheaper and thus breaking down the inherent
right of their patent to create exclusion for the life of the
patent, and we happen to have this life plus the time we took
away in administrative function, but it is still life of the
patent, and thus say that they should not get the high price.
When we are looking at antitrust, isn't it fair to look at
these pharmaceuticals as not different for purposes of their
right to get what might be enormous profits if they hit a
winner and of course with the enormous loss if it isn't a
dominant product or in fact it doesn't get approved.
Ms. Garza. Well, antitrust policy I think says that if you
have a valid patent, you have the right to recover whatever
profits you can, and if it is a winning drug, then that's an
important incentive to others to invest in developing other
drugs.
And as you have indicated, and I don't know, I can't recall
right now what the percentage of success is, but the percentage
of successes, but the percentage of success is really quite low
for pharmaceuticals and the investment required is quite high.
So that really illustrates, in some sense, what we said in the
report about the importance of preserving incentives to
innovate.
So where there is a valid patent and you allow them to
recover the rewards of their investment, then you are in
essence encouraging further innovation in new patents. That is
assuming that there is no other sort of abuses or anything.
Mr. Issa. Sure. But it is not encouragement. It is a
constitutional right based on its encouragement. Did you have
anything to add on that?
Ms. Garza. No.
Mr. Issa. And I made this point, and the Chairman knows all
too well, because many of the Committees of Congress right now
seem to want to strip away some part of that for the greater
good of society, not for the greater incentive to innovate.
Mr. Yarowsky, earlier, though, you said that the lack of an
effective administrative process was part of the problem with
patents. And I know that wasn't on point to antitrust, but in
the last minute or so, if in fact the reexamination process
were open, transparent, open in the sense that you could see
and you could make input, would that change your feeling on the
administrative remedies?
Mr. Yarowsky. From my view, as long as you can get a post-
grant process, I mean, there are many names being hurled around
in the----
Mr. Issa. And I use reexamination because we understand
what they are that people aren't using.
Mr. Yarowsky. Right. But if I am able to just use a more
general phrase like post-grant process, if that process would
allow more information to come in with a transparency so there
is a public dimension, I think that would help crystalize more
quickly the validity question, and the validity question is the
key, because once you feel confident about that, then everybody
goes about their own business to innovate further, which is
what we all want, and that leads to a more competitive economy.
So I would agree with you, if that post-grant process could
be more transparent and lead to validity determinations more
clearly and more quickly, I think that would be a very positive
result.
Mr. Issa. Thank you.
And I know the Chairman is looking forward to the
Subcommittee marking up just such a bill in the relatively near
future.
With that, I yield back.
Mr. Conyers. Thank you very much.
I apologize for not calling on Sheila Jackson Lee before
Darrell Issa, but I do now. The gentlelady from Houston is
recognized.
Ms. Jackson Lee. Thank you, distinguished Chairperson.
In our anteroom is a number of Russian parliamentarians. It
means that this room has many diverse opportunities and
responsibilities, and as Chairman they are admiring your
leadership. I apologize if I was in and out dealing with a
number of members from the Russian Duma. I know that they are
there as they are listening to this process of democracy.
With that in mind, let me thank the commissioners for their
work. I think that the principals that you have enunciated, the
commitment that we have to the free market competition, should
remain a touchstone of the United States economic policy and
the recognition of the core antitrust laws, that they are sound
and help safeguard the competition of today's economy, are all
good points. And I think you had one other point that I am
noting, possibly that new or different rules are not needed for
industries in which innovation, intellectual property and
technological innovation are central features.
I have a second thought to that and I raise a particular
industry. I heard you mention in briefly and I would like to
have some comment on that as well as to follow up some of the
questions of my colleagues.
We have watched the oil and gas industry over the decades
have a metamorphic change, whether it is caterpillar to
butterfly, butterfly to caterpillar. But we see the large
combinations of Exxon-Mobil. We see the large combinations of
Chevron-Texaco, Conoco-Phillips, and it goes on and on.
For some reason, I thought the innovativeness of the
industry, the broadness of the industry, was far more vibrant
and challenging when there was less of this huge oil
monopolies, and I happen to come from what has been claimed to
be the energy capital of the world and we proudly claim that in
Houston, Texas. But I have watched my independence be dominated
and domineered, a word that I have just crafted, by these large
conglomerates.
It seems that rules do need to be changed in order to
create a vibrant, competitive industry. Where are the
independents in the energy industry? What value do we get out
of the large conglomerates? Do we get new technology? We
certainly don't get a sensitivity in pricing. In fact, that is
one of the major challenges of our legislative agenda this
year, is gasoline pricing. Of course, some people will look at
it from the perspective of conservation, alternative fuels, but
why are we not looking at it in the very staid, rigid
monopolistic focus that the industry has crafted.
I know I can't see any real documentation of any new
technology, new intellectual innovation in the energy industry,
based upon their large size. Do you see any?
So my question would be, when is it time to look at a
monopoly or monopolies and sense that there needs to be new
rules?
My second question would be to again try this question on
Robinson-Patman. I am glad, Mr. Yarowsky, that you have
indicated that we don't need a repeat of it, but I am
interested to find out how price discrimination can be
prohibited by the Robinson-Patman Act or prevented by other
antitrust laws.
And if you could start with those two questions. The first
one, I really want to have both of you elaborate on. I think we
need to keep an open mind on industries that seemingly have
harmed the consuming public through their largeness.
Mr. Yarowsky. Sure, okay. Why don't I take a stab at going
first on both of those.
On the oil and gas mergers, Congresswoman, the only thing
that we definitively came up with that is relevant, and then I
will mention another factor, but I don't mean to represent it
as a Commission deliberation or recommendation but to be very
responsive as I can to you, is that we agree that the merger
standard to evaluate mergers shouldn't be different industry by
industry. Because if you started doing that, there might be
some purpose served in the immediate time to do that for one
industry, but then time would go on and you would be left with
different standards for different industries and it would be
very difficult to run a uniform policy.
So that doesn't answer all your questions, but that was the
one recommendation we did have.
We had a second recommendation, I think it is relevant,
though, it is more general, but it goes to what you described.
A second recommendation we had was that we recommended that the
agencies develop what we call kind of vertical merger
guidelines. I mean, what the guidelines mainly do, the merger
guidelines, are horizontal mergers, and you were describing
some of those, where the same type of company merges with
another like type of company and creates a more powerful,
consolidated entity.
But there are also vertical mergers, so that you then
integrate manufacturing, distribution and retailing. Those have
powerful effects on innovation. I am not saying they are all
bad or all good, but they do have very strong effects on issues
like innovation and competition and can influence what happens
downstream with the consumer, the ultimate consumer, which is
something we all live with. Those guidelines, we think, need to
really be revisited, because they really haven't been looked at
for many years, and reissued.
And I think they would have bearing on oil and gas mergers
that we have seen as well as other mergers. I think that is
something tangible that we recommended that should be done.
On Robinson-Patman, the real question, Congresswoman, is
this. The antitrust laws generally have a certain meaning, the
words, because they have been there now for over a century. So
when someone talks about antitrust injury under any of the
antitrust laws, it has a meaning that the courts have developed
over time. Robinson-Patman, and this isn't a criticism, it is
just what happened in 1936, used different words than existed
in the basic antitrust law statutes, which had to do with
restraints of trade and monopoly.
And it was a much more intricately designed statute, and it
was really the result of a crying out--this was during the
Depression and post-Depression as small businesses were
completely swallowed up. There was a real reason why Congress
addressed this and has continued to look at it seriously. But
it was a very kind of difficult statute to craft and courts in
some ways have made the effort to try to harmonize the words of
that statute with the general antitrust statute. Some have
tried, some have thrown up their hands and said, well, they are
different and so the meanings are different.
Well, I don't think that is a good result. And my feeling
is, though it is going to be very difficult, I have seen that
this Committee can do very difficult things and achieve them.
And I just think it is worth the energy, if there is time in
the agenda, to devote a lot of time to seeing if there is a way
to re-craft Robinson-Patman to get a more harmonized meaning
that the courts will understand, probably downsize it because
it is very voluminous, and then I think you can build consensus
that it should be enforced by the agencies, which has not
occurred. For 15 years, it has not been enforced. That is a
terrible thing because it builds no confidence in the system.
And, you know, the States also have their little mini-
Robinson-Patman Acts, some of them do, so even if you would
just repeal Robinson-Patman, those acts would still live on.
So I just think it is worth the effort and time to see what
might be done to re-craft Robinson-Patman. And so my vote on
the Commission, not to defend my vote, was simply that it is
not working. I have to agree with that. It is not working. But
my hope is that you can revisit it, create definitions that
would work and then achieve the same social goals that people
feel are very important.
Ms. Jackson Lee. Mr. Chairman, I thank you for indulging--
--
Mr. Yarowsky. I am sorry for such a long answer.
Ms. Jackson Lee. Can Ms. Garza make a quick response to
those two questions?
Thank you very much, Mr. Yarowsky. It was a very thoughtful
answer.
Ms. Garza. Let me address your question about mergers in
the oil and gas industry.
To clarify, the reason we didn't think it was appropriate
to have a special standard is because the standard that exists
today is very broad--the statutory standard. It basically
prohibits mergers and acquisitions that would substantially
reduce competition in any line of trade. And the test that the
courts and the agencies apply are all focused on identifying
whether a merger and acquisition--what effect it would have on
output and price. So they are looking at the right thing; what
effect is this transaction going to have on output and price.
Is it going to reduce output and raise price?
And the analysis that they undertake itself is very
complex. But we are sensitive to the concerns that you raise.
And it is not a good situation for public confidence in the
laws, for example, for people not to understand the basis for
enforcement decisions, and by that I mean both cases that are
brought and cases that aren't brought.
So we do actually make a number of recommendations that are
designed to help ensure that the Congress in your oversight
capacity understands the basis for enforcement generally, but
also in respect to specific transactions, and also that the
public does.
Now, the FTC and the DOJ have done a very good incredible
job at that with guidelines and speeches and others. But we
have recommended that they go even further, with more closing
statements, we call them, basically explanations when there is
a transaction that people have an expectation might be
challenged and there is a decision taken not to challenge it,
that there be an effort to explain as well as can be done,
respecting confidentiality concerns, why the agencies didn't
take the steps they took.
Now, that is a burden on the agencies, but we think it is
very important for them to have to do that so people understand
the bases for enforcement. Otherwise you lose your respect for
the antitrust laws and the enforcement, and that would be
problematic.
We would like to see these laws as being basically as self-
enforcing as possible and we would like the public to have
confidence that they are, that their welfare is being looked
after. So we agree with you on that, and we think that one
answer to that is substantially increase transparency.
Ms. Jackson Lee. My only conclusion, Mr. Chairman, is that
there is a great input by the merged oil and gas industries and
there is a great price increase, and that seems to be ongoing.
I thank the witnesses.
I thank the Chairman.
Mr. Conyers. I want to thank you all. This has been very
helpful.
I want to say that we raised some questions that certainly
need to be examined even though this is a several-year product
that you have before us. But it is an important one, because
this Antitrust Task Force is committed to trying to generate a
little more challenge to the enormous number of mergers that
have taken place over the last period of years.
And Chairwoman Garza, Vice Chairman Yarowsky, you have
acquitted yourself well on behalf of your fellow commissioners
and the staff that labored so diligently on this matter, but we
want to keep 5 legislative days open for any questions that may
come to you that we can include in the record.
And so, without objection, the Members will have 5
additional legislative days to submit questions which we will
forward to you.
And, without objection, the record will be open for 5
legislative days for the submission of any other material.
We thank you for your excellent testimony and hard work.
The hearing is adjourned.
[Whereupon, at 3:25 p.m., the Task Force was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record
Prepared Statement of the Honorable Lamar Smith, a Representative in
Congress from the State of Texas, and Ranking Member, Committee on the
Judiciary
Mr. Chairman, thank you for convening this hearing of the Antitrust
Task Force.
Vigorous, unimpeded competition sustains our economy and keeps it
strong. It leads to innovative products that better our lives and keep
prices low. The Judiciary Committee has a long history of oversight to
ensure that American markets retain healthy competition.
At the heart of that competition is the Sherman Act, which the
Supreme Court has dubbed the ``Magna Carta of free enterprise.''
Sections 1 and 2 of the Act, which Congress passed in 1890, are
deceptively simple; each is only one sentence long.
However, those two sentences have come to regulate all manner of
business dealings in this country, including who a company can--and
must--deal with, how it prices its goods, and whether it can merge with
a rival company.
The antitrust laws are unique in American legal culture in that
they are enforced by two federal agencies, the Department of Justice
and the Federal Trade Commission. In addition, each state's attorney
general can bring suit under both federal and state antitrust laws.
The antitrust laws can be enforced both criminally and civilly.
Private citizens can also bring suit to recover damages and enjoin
anticompetitive business practices.
Antitrust enforcement has also expanded beyond America's borders.
When the United States passed the Sherman Act over 100 years ago, it
was alone in the world. Today over 100 countries have some sort of
competition law, and more are considering them.
In fact, China is currently debating its own antitrust laws,
despite being a country that does not necessarily share America's
fundamental economic principles.
Antitrust law affects every industry as evident from the wide
variety of hearings that the House Judiciary Committee has held under
its antitrust jurisdiction. The Committee has held hearings on
telecommunications, sports, oil and gas, utilities, ocean shipping,
airlines, agriculture, and financial services.
Given the impact of antitrust law on the American economy, it is
vital that we examine how well these laws are working, particularly in
light of the innovation that today's high tech economy has brought.
The Antitrust Modernization Commission, which spent the last three
years studying the antitrust laws, found that the Sherman Act is
fundamentally sound and requires no major changes by Congress.
That said, the Commission's 450 page report has more than 80
recommendations on a variety of subjects, including repeal of Illinois
Brick, repeal of the Robinson-Patman Act, modifications to the merger
review clearance process, and amendments to the Federal Trade
Commission's ability to bring injunctions and to pursue administrative
litigation in merger cases.
The Commission's report also provides a framework for Congress to
assess immunities from the antitrust laws, such as the McCarran-
Ferguson Act and the Shipping Act, and exemptions related to regulated
industries.
Accordingly, today's hearing can help inform the Task Force's work
on a number of issues that it may consider, including competition in
the credit card, pharmaceutical, oil and gas, healthcare, professional
sports, and telecommunications industries, just to name a few.
I would like to congratulate Chairwoman Deb Garza and Vice-Chair
Jon Yarowsky for their hard work. Together with the other 10
Commissioners and professional staff, they produced an excellent report
on time and under budget. The report is well written and helps make
difficult concepts easy to understand. It also contains a wealth of
supporting data and is an example of how such studies should be
conducted in the future.
I yield back the balance of my time.
Prepared Statement of the Honorable Sheila Jackson Lee, a
Representative in Congress from the State of Texas, and Member,
Antitrust Task Force
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Biographies of Deborah Garza, Chair, Antitrust Modernization
Commission; and Johnathan R. Yarowsky, Vice Chair, Antitrust
Modernization Commission
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Prepared Statement of Glenn English, CEO, National Rural Electric
Cooperative Association and Chairman, Consumers United for Rail Equity
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