[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
ANTITRUST AGENCIES: DEPARTMENT OF JUSTICE ANTITRUST DIVISION AND
FEDERAL TRADE COMMISSION BUREAU OF COMPETITION
=======================================================================
HEARING
BEFORE THE
TASK FORCE ON ANTITRUST
AND COMPETITION POLICY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 25, 2007
__________
Serial No. 110-158
__________
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. ``BOBBY'' 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
WILLIAM D. DELAHUNT, Massachusetts CHRIS CANNON, Utah
ROBERT WEXLER, Florida RIC KELLER, Florida
LINDA T. SANCHEZ, California DARRELL ISSA, California
STEVE COHEN, Tennessee MIKE PENCE, Indiana
HANK JOHNSON, Georgia J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio 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
------
Task Force on Antitrust and Competition Policy
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California RIC KELLER, Florida
RICK BOUCHER, Virginia STEVE CHABOT, Ohio
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas DANIEL E. LUNGREN, California
MAXINE WATERS, California CHRIS CANNON, Utah
STEVE COHEN, Tennessee DARRELL ISSA, California
BETTY SUTTON, Ohio MIKE PENCE, Indiana
ANTHONY D. WEINER, New York J. RANDY FORBES, Virginia
DEBBIE WASSERMAN SCHULTZ, Florida 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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SEPTEMBER 25, 2007
Page
OPENING STATEMENT
The Honorable Ric Keller, a Representative in Congress from the
State of Florida, and Ranking Member, Task Force on Antitrust
and Competition Policy......................................... 1
WITNESSES
The Honorable Deborah Platt Majoras, Chairman, Federal Trade
Commission (FTC)
Oral Testimony................................................. 4
Prepared Statement............................................. 6
The Honorable Thomas O. Barnett, Assistant Attorney General,
Antitrust Division, Department of Justice
Oral Testimony................................................. 49
Prepared Statement............................................. 51
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Prepared Statement of the Honorable Lamar Smith, a Representative
in Congress from the State of Texas, and Ranking Member,
Committee on the Judiciary..................................... 2
APPENDIX
Material Submitted for the Hearing Record
Prepared Statement of the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan,
Chairman, Committee on the Judiciary, and Chairman, Task Force
on Antitrust and Competition Policy............................ 98
ANTITRUST AGENCIES: DEPARTMENT OF JUSTICE ANTITRUST DIVISION AND
FEDERAL TRADE COMMISSION BUREAU OF COMPETITION
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TUESDAY, SEPTEMBER 25, 2007
House of Representatives,
Task Force on Antitrust
and Competition Policy
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 1:15 p.m., in
room 2141, Rayburn House Office Building, the Honorable Zoe
Lofgren (acting Chair of the Task Force) presiding.
Present: Representatives Lofgren, Cohen, Sutton, Chabot,
Keller, Lungren, Cannon, Issa, Smith, and Pence.
Staff present: Stacey Dansky, Majority Counsel; Stewart
Jeffries, Minority Counsel; Ted Kalo, General Counsel-Deputy
Staff Director; Sean McLaughlin, Minority General Counsel;
Teresa Vest, Majority Chief Clerk.
Ms. Lofgren. [Presiding.] Good afternoon. The hearing will
come to order. And the Chair is authorized to call a recess at
any time. In the absence of our Chairman, Mr. Conyers, who is
temporarily detained at a meeting, I will invite our Ranking
Member to make his opening statements in hopes that Mr. Conyers
will be here soon to give his.
Mr. Keller. Well, thank you, Madam Chairwoman, for
initiating and convening this important hearing of the Task
Force on Antitrust and Competition Policy. And I want to
especially thank our witnesses, Mr. Barnett and Ms. Majoras for
being here today.
Antitrust law affects nearly every industry. So far this
Antitrust Task Force has held important hearings on the
proposed XM-Sirius Satellite Radio merger and the somewhat
controversial issue of credit card interchange fees.
Previously the Judiciary Committee has held hearings on
telecommunications, sports, oil and gas, utilities, ocean
shipping, airlines, agriculture, and financial services related
to antitrust issues. 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. Today's hearing gives us
the opportunity to see how those laws are being enforced and
whether there are any areas where congressional intervention
would be appropriate.
From their written testimony, it appears that last year the
Antitrust Division of the Department of Justice and the Federal
Trade Commission have both been very active. These two agencies
have been involved in enforcement actions in the real estate,
oil and gas, health care, airline and telecommunications
fields, just to name a few. Both agencies have filed amicus
briefs in numerous cases before the U.S. Supreme Court in what
has been one of the most active periods of antitrust
jurisprudence in years.
The antitrust agencies are also in the best position to
assess recent trends in international antitrust enforcement
such as the European Union's recent decision in the Microsoft
case and to provide Congress with guidance on how best to
promote comity between the multiple antitrust enforcement
agencies around the world. Because of their activities, DOJ and
FTC can also serve as a guide for this task force as it
considers future hearings.
For instance, I understand that the FTC has particular
interest in legislation that would make certain types of
settlements in pharmaceutical patent litigation illegal. I am
very interested to hear their views on this topic and perhaps
possibly holding hearings on this issue in the future if
needed.
Again, I want to thank the witnesses very much for being
here today. And I look forward to hearing your testimony later.
And, Madam Chairman, at this point I will yield back the
balance of my time.
Ms. Lofgren. Thank you.
Mr. Smith, if you wanted to put your opening statement in
the record or----
Mr. Smith. Yes, Madam Chair. I ask unanimous consent to
have my opening statement made a part of the record. Thank you.
Ms. Lofgren. So ordered.
[The prepared statement of Mr. Smith follows:]
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 first hearing of the
Task Force on Antitrust and Competition Policy.
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.
Today's hearing gives us the opportunity to see how the two
antitrust agencies are faring in enforcing the law. On the one hand, I
am heartened by the recent announcement that British Airways and Korean
Air Lines have agreed to pay criminal fines of $300 million each for
their part in a price fixing scandal.
Similarly, I am pleased to see that the FTC, after studying the
broadband industry, has found that there is healthy competition in that
sector. DOJ, too, has found that competition in that industry is robust
and the so-called ``problem'' that net neutrality advocates are trying
to ``fix'' has not been adequately demonstrated.
On the other hand, there have been some recent missteps as well. It
was troubling to read that the FTC, in the course of its efforts to
block the merger between Whole Foods and Wild Oats food stores,
disclosed--albeit inadvertently--competitively sensitive information
about the transaction. The FTC subsequently lost its challenge in
court, but, according to the written testimony of Chairwoman Majoras,
continues to pursue administrative remedies against the parties.
And, the European Union's recent action in the Microsoft case
raises questions about whether--and how--comity and a common
understanding of antitrust laws can be promoted between the United
States and the rest of the world.
I look forward to hearing the testimony of Chairwoman Majoras and
Assistant Attorney General Barnett on these and other matters.
I yield back the balance of my time.
Ms. Lofgren. And all Members may put their opening
statements in the record. Mr. Conyers may wish to deliver his
opening statement when he arrives from his meeting.
I will just note that I think the antitrust portfolio is
one of the most important of the DOJ. Those of us who are
fortunate to live in a country that has a vigorous capitalist
economy also know that competition is protected through
vigorous antitrust review.
And I will note that I do have concerns over the level of
review of mergers that have occurred in DOJ and other
enforcement activities. And I will certainly get into that when
it is time for questions.
At this point, I would like to introduce our witnesses and
ask them to make their opening statements.
First we have Deborah Platt Majoras, who is our first
witness. She is the Chairman of the Federal Trade Commission
(FTC). Ms. Majoras has spent much of her career working on
antitrust issues.
From April of 2001, through 2003, she served first as the
Deputy Assistant Attorney General and then as the Principle
Deputy for the Department of Justice's Antitrust Division.
Prior to her time at the Justice Department, she was a partner
in the antitrust section of the Jones Day Law Firm.
Welcome to you, Ms. Majoras.
Next we have Thomas O. Barnett. Mr. Barnett is the
Assistant Attorney General for the Department of Justice's
Antitrust Division. He was confirmed as Assistant Attorney
General in 2006, but had been serving as the Acting Assistant
Attorney General for the division since July of 2005.
Prior to his tenure as Acting Assistant Attorney General,
Mr. Barnett had, since 2004, served as the Antitrust Division's
Deputy Assistant Attorney General for civil enforcement. Before
joining the Justice Department, Mr. Barnett was a partner at
Covington and Burling, where he was vice-chair of the firm's
antitrust and consumer protection practice group.
Welcome, Mr. Barnett.
And if you would note the machine on the table, we have 5
minutes to hear your oral testimony. We do ask when the yellow
light goes on that you have about a minute left and that you
sum up. And your full written statements will be made part of
the record.
So first, let me call on you, Ms. Majoras, to give us your
statement.
TESTIMONY OF THE HONORABLE DEBORAH PLATT MAJORAS, CHAIRMAN,
FEDERAL TRADE COMMISSION (FTC)
Ms. Majoras. Madam Chairwoman, Ranking Member Keller,
Members of the Task Force, thank you for the opportunity to
discuss the FTC's efforts to protect consumers by ensuring
competition, which is a critical underpinning of our market
economy, remains robust. To this end, at the FTC we focused our
enforcement effort on the areas that are most likely to impact
consumers, namely, health care, energy, real estate, technology
and retail sectors.
During the past 3 fiscal years, the FTC's competition work
has produced 51 merger enforcement actions or withdrawals of
mergers, which derived from 84 second requests, that is,
expanded investigations, and 22 nonmerger actions. During the
same time period, we have completed 12 statutorily mandated
rule makings and reports, eight public conferences and
workshops, plus a set of hearings on issues arising under
section 2 of the Sherman Act, and nine reports on competition
issues significant to consumers.
Through the first 11 months of this fiscal year, 2007, pre-
merger filings have increased 23 percent in the same period in
the last fiscal year. And the number of investigations that we
have undertaken reflects this continual uptick. Since January
of this year, we have litigated three preliminary injunction
actions in Federal court.
On the health care front last month, the Commission ruled
that Evanston Northwestern Health Care Corporation's
consummated acquisition of Highland Park Hospital was
anticompetitive, that it resulted in higher prices, and a
substantial lessening of competition for acute care in-patient
hospital services in parts of Chicago's northern suburbs.
The Commission also has challenged several recent health
care transactions and achieved substantial relief for consumers
in the areas of generic drugs, over-the-counter medications,
injectable analgesics, and other medical devices and diagnostic
services.
The Commission continues to work to detect and investigate
anti-competitive agreements between drug companies that delay
generic entry. Indeed, our Federal court challenge to an
alleged anti-competitive agreement involving Ovcon, a branded
oral contraceptive product, has led to the introduction of
lower priced generics.
So far in 2007, the Commission has challenged three mergers
in the energy industry. Western Refinery's acquisition of Giant
Industries, unsuccessful in district court. Equitable
Resources' proposed acquisition of The Peoples Natural Gas
Company, which is still in litigation, and the proposed $22
billion deal whereby energy firm, Kinder Morgan would be taken
private by its management and a group of investment firms,
including the Carlysle Group and Riverstone Holdings. We also
charged the American Petroleum Company with illegally
conspiring with competitors to restrict the importation and
sale of motor oil lubricants in Puerto Rico.
The FTC has actively investigated restrictive practices in
the residential real estate industry recognizing that the
purchase of a home is the most significant investment that most
consumers will ever make. In the past year alone, the agency
has brought eight enforcement actions against associations of
realtors or brokers who adopted restrictive rules that
allegedly withheld the valuable online benefits of their
multiple listing services that they control from consumers who
chose to enter into nontraditional type contracts with real
estate brokers.
In the critical technology arena, in February of 2007, the
Commission issued a final opinion and order finding that
technology developer, Rambus, Inc., had unlawfully monopolized
the markets for four computer memory technologies that had
incorporated into industry standards for D-ram chips. And we
required Rambus to license its SD-ram and DDRSC-ram
technologies according to maximum allowable royalty rates. This
was the Commission's first litigated case in the standards
setting area and we believe the first time in 22 years that the
Commission has heard a monopolization case in administrative
litigation.
The Commission also guards against anti-competitive conduct
in the retail sector. And I would be happy to elaborate on that
later.
In addition, complementing our law enforcement work in the
past year, we have issued reports on competition issues in real
estate, gasoline, broadband and intellectual property, and
provided competition analysis to policy makers regarding such
areas as attorney advertising and pharmacy benefit managers. We
aided the NHS modernization commission in its examination of
the U.S. antitrust laws. And to ensure that our knowledge
remains fresh, we are actively engaged in market research with
recent hearings examining the boundaries of permissible and
impermissible conduct under section 2 of the Sherman Act, a
workshop to examine broadband connectivity competition policy,
and a 3-day conference on energy markets in the 21st century.
Madam Chairman, Members of the Task Force, the FTC is
committed to working to preserving competition and to
protecting consumers. And we look forward to speaking with you
further about this. And we appreciate your support. Thank you.
[The prepared statement of Ms. Majoras follows:]
Prepared Statement of the Honorable Deborah Platt Majoras
Ms. Lofgren. Thank you very much.
Mr. Barnett, you are now welcome to deliver your oral
testimony.
TESTIMONY OF THE HONORABLE THOMAS O. BARNETT, ASSISTANT
ATTORNEY GENERAL, ANTITRUST DIVISION, DEPARTMENT OF JUSTICE
Mr. Barnett. Madam Chairwoman, Ranking Member Keller, and
other Members of the Task Force, it is a pleasure to appear
before you. I thank you for the opportunity to highlight the
Division's accomplishments and answer your questions. I also
appreciate the active interest and strong support of our law
enforcement mission that the Judiciary Committee through the
continuing work of the Antitrust Task Force has provided to us.
Competition is the cornerstone of our Nation's economic
foundation. Antitrust enforcement promotes and protects the
robust free market economy by helping ensure that anti-
competitive agreements, conduct, and mergers do not harm
consumers. In my short time, I will briefly highlight just a
few of our outstanding achievements.
On cartel enforcement, we thank the Committee for its
efforts in increasing the criminal fines and statutory maximum
sentences for Sherman Act offenses in 2004 as well as for
making antitrust offenses a predicate act for wiretapping
authorities. The division's cartel enforcement efforts had an
outstanding year for fiscal year 2007, which ends this week.
The division more than doubled its record for the most total
jail time imposed, obtained the second highest amount of fines
in division history, and succeeded in obtaining the longest
jail sentence for a foreign national ever charged with an
antitrust offense.
As one specific example of success, on August 23rd of this
year, British Airways and Korean Airlines each pleaded guilty
and were sentenced to pay separate $300 million fines for
fixing cargo and passenger fares. Each fine ties the record for
the division's second largest fine ever.
On the same day, the United Kingdom's Office of Fair
Trading announced a similar resolution with British Airways
with a fine of approximately $250 million. This was the first
time that the Division and the OFT have brought parallel
charges.
One important focus of the Division's criminal enforcement
efforts in the past year has been fraud and corruption in the
bidding, contracting, and procurement process. These cases take
money out of the pocket of every American taxpayer and deserves
severe condemnation. They deal with U.S. operations in Iraq,
construction in New Orleans following Hurricane Katrina, U.S.
Navy, the Department of Defense, U.S. schools, among others.
Merger enforcement continues to be one of the Division's
core priorities. The Division is committed to challenging
mergers that the evidence developed through a thorough
investigation evaluated pursuant to rigorous economic analysis
demonstrates is likely to harm U.S. consumers and businesses.
In fiscal year 2007, six transactions were restructured or
abandoned by the parties in response to a Division
investigation. And the Division filed an additional four merger
enforcement actions in district court.
Some of our most significant recent merger actions include
the following: The Division challenged Monsanto's $1.5 billion
proposed merger between Monsanto and Delta and Pine Land and
obtained a consent decree that required Monsanto and DPL to
divest a major seed company, multiple cotton seed lines, and
other valuable assets.
The Division is currently litigating to challenge to a
transaction between two daily newspapers in Charleston, WV. In
August 2006, the Division challenged Mittal's proposed
acquisition of Arcelor as likely to adversely affect
competition in the $2 billion tin mill products market in the
Eastern United States.
The Division also seeks continually to improve its merger
review process and its transparency. In December of last year,
we announced a revision to the 2001 merger review process
initiative. This initiative helps us identify and devote
increased resources to those transactions that should be
challenged. Our transparency efforts also have included the
release of a joint DOJ-FTC commentary on the Horizontal Merger
Guidelines in March of 2006.
The Division remains active in other areas such as holding
hearings in conjunction with the FTC on section 2 standards. In
addition, with more and more countries adopting an antitrust
enforcement regimes, we make a priority of strengthening
international cooperation and promoting antitrust policy
convergence.
In the last year, we have worked closely with multi-lateral
organizations around the world such as the OECD and the
International Competition Network and further developed strong
bilateral relationships in other countries. I emphasize that
none of what I have discussed today could have been
accomplished without the dedicated career staff of the
Antitrust Division. It is an honor and a privilege to serve
with them.
I am pleased with what we have accomplished, but I
recognize that the hallmark of any successful organization is a
continuing desire to improve. In that regard, we look forward
to working with the Members of the Task Force and your
respective staff.
[The prepared statement of Mr. Barnett follows:]
Prepared Statement of the Honorable Thomas O. Barnett
Ms. Lofgren. Thank you, Mr. Barnett. And thank you both for
your testimony.
We will now move to questions from the task force. And we
will begin with our Ranking Member, the gentleman from Florida,
Congressman Ric Keller.
Mr. Keller. Thank you, Madam Chairman.
And, Ms. Majoras, let me begin now with you. I know you
only had 5 minutes to give us your opening statement. And one
of the things you weren't able to expound upon was some of the
work you do on behalf of consumers in the retail sector to
tackle anticompetitive behavior.
Let me begin by asking you if you had a chance, you or your
staff, to observe the hearing that this task force did in July
on the issue of credit card interchange fees and the impact
those have on the retail sector.
Ms. Majoras. Thank you, Ranking Member Keller. I know that
we followed the issue with some interest. I will say this,
though. The Justice Department and the FTC try to divide our
work. And I hate to do this on the very first question, but the
interchange fee issues have traditionally resided with the
Department of Justice. And so, they have brought cases in the
area. And so, we are less informed on the issue.
Mr. Keller. Okay.
And, Mr. Barnett, let me ask you. Was that a hearing that
you were able or your staff was able to observe? And is there
anything that your office is doing to take a look at this
interchange fee issue and the impact on the retail sector and
consumers?
Mr. Barnett. Yes, we are very focused on this issue, not
only through events such as the hearing, but through conducting
our own monitoring activities and investigations in the area.
Without commenting on any specific investigation, I would
observe that these markets are somewhat complicated. They are
what our economists like to call two-sided markets, which makes
the analysis of competitive effects and the impact on consumer
welfare more challenging than some other areas.
Notwithstanding that, that is a challenge that we think is
a very important area of the economy. It is an important
sector. And so, we are looking at it. We have significant
resources devoted to evaluating that issue right now.
Mr. Keller. Well, thank you. And it is also a two-sided
issue, as you know. And certainly, the credit card electronic
payment system has revolutionized the world and made it easier.
And we are all thankful for that.
And then on the other side, we hear the retailers telling
us, ``Hey, this is 60 percent of the market share, MasterCard,
Visa. And they can charge us as much as we want, and there is
nothing we can do about it.'' So we are actively looking at
both sides as well, as you are.
While I have you there, Mr. Barnett, let me ask you. We had
a hearing back in February on the XM-Sirius satellite merger.
Were you or your staff able to observe that hearing and the
testimony of our witnesses such as the CEO, Mel Karmazin?
Mr. Barnett. Certainly, Ranking Member Keller, any
transaction for which we are conducting a full-fledged
investigation. And that is certainly a transaction on which we
are quite focused and conducting an extensive evaluation. We
try to obtain information from wherever we think we can that
will be useful to us. And information through hearings such as
the one as this Committee held having industry participants
providing testimony is very relevant information. And----
Mr. Keller. And I don't want to cut you off, but my time is
running out. So let me just do a follow-up and give you a
chance to answer it.
I know there is some things you can't talk about. And I am
not going to ask you what your decision is going to be or what
your thoughts are. But can you give us an idea of the timeframe
for whatever decision is ultimately made and what the status of
this review is right now?
Mr. Barnett. I can't. I would like to, but I can't give you
an exact timeframe. We want to make sure that we get the
information that we need so that we can conduct an appropriate
analysis and evaluation. And we will not decide until we have
done that.
We want to do that as quickly as possible. But we also want
to get to the right answer.
Mr. Keller. Thank you.
I have several more questions, but my time is expired,
Madam Chairman. So I will yield back the balance.
Ms. Lofgren. Thank you, Mr. Keller.
I want to follow-up on the credit card interchange fee
issue because the hearing that we had was really pretty stark.
And it became pretty clear in the course of the hearing that
this is a very one-sided operation where the retailers in some
cases they weren't even permitted to see the contracts. And
they are very high fees.
I actually was so frustrated at the apparent lack of action
in DOJ that I contacted the attorney general of California to
see if States have an opportunity. And they actually have an
active investigation ongoing on this issue.
I am wondering, if you can't tell us obviously what you are
going to decide, what is your estimate on the timeframe for
your investigation of this situation. Can you tell us that, Mr.
Barnett?
Mr. Barnett. Again, I don't have a precise estimate. I can
tell you that we try to be thorough and comprehensive in our
evaluation. To give you an example, when the Division brought
an action in the credit card industry involving Visa and
MasterCard, that investigation took a number of years before we
had collected the information that we felt was necessary to
pursue the challenge. We then filed a suit and ultimately
prevailed.
So this is a much more recent investigation. I expect that
it will take us some time. But again, we like to do these as
quickly as we responsibly can. And that is what we are
committed to do here.
Ms. Lofgren. May I ask how many investigators you have
assigned to this?
Mr. Barnett. I don't have an exact number here.
Ms. Lofgren. If you could get back to us on that, I would
appreciate it. You know, obviously we want a thorough
investigation. But how much effort you put into something also
depends on how fast it is going to be done. And in the
meanwhile, if the testimony we received is correct, there is a
lot of retailers in the country that are being on the short end
of the stick and consumers paying higher prices than they
really should.
Mr. Barnett. Well, Madam Chairwoman, it is a little
difficult for me to give an exact number in that the number of
people involved at any given point in time varies depending on
what is going on in the investigation. If we are taking
depositions----
Ms. Lofgren. Well, perhaps you can give me a range how many
and over what period of time.
I want to talk about standard setting. I don't want to get
into individual cases. But in the tech world, it is a difficult
matter. You do want standard setting. You know, that really
does advance the growth of technology. On the other hand, you
can have problems with standard setting, as we all know.
And I know that the joint I.P. report that you have issued
indicates that the agencies are going to evaluate joint
activity to establish licensing terms under the rule of reason.
Have you been able jointly to do that kind of follow-up and
tracking of these standard setting operations? And if so, what
have you found?
Mr. Barnett. Well, we are continually monitoring various
developments in different industries. The Division has issued a
couple of business review letters, one involving VITA, an
organization called VITA, the other one, I believe, IEEE, where
we applied a rule of reason type analysis to some disclosure
policies that those organizations were interested in pursuing
to try to address the issue of what some people called, sort
of, hold-up issues after they set a standard, a member who has
a patent----
Ms. Lofgren. Right. No, I am familiar with the issue.
Mr. Barnett. And in those instances, we found that under a
rule of reason type approach that the disclosure policies were
reasonable and we thought would be potentially procompetitive.
Ms. Lofgren. I am wondering--my time is almost up--whether
you can explain to us maybe in a follow-up letter how you go
about tracking this, as you said you would in the report, and
whether it is pursuant to the National Cooperative Research Act
and if you have a comment on how that has worked in terms of
spurring this kind of disclosure. It would be very helpful.
I know, Ms. Majoras, in the remaining seconds.
Ms. Majoras. Very happy to do that. We have been very
active in the standards setting arena. And we are monitoring
complaints and so forth as we get them from standard setting
organizations, so we can absolutely give you a follow-up on
that.
Ms. Lofgren. I would appreciate that. My time has expired
with actually 18 seconds to go.
And so, I will now call on the gentleman from Ohio, Mr.
Chabot, for his questions.
Mr. Chabot. Thank you very much, Madam Chair.
And I would ask the first question to either or both of the
witnesses here. The Antitrust Modernization Commission made a
series of recommendations regarding the Hart-Scott-Rodino Act
and the merger process as it relates to the roles and
responsibilities of the FTC and the Department of Justice.
What have you done to facilitate the implementation of
these responsibilities, particularly as it relates to prompt
clearance to either the FTC or the Department of Justice and
parity among the FTC and Department of Justice enforcement
mechanisms? And you can both take a shot at it, if you would
like.
Ms. Majoras. All right. Well, before the AMC even issued
its recommendations, we had already been working on those
things. The issue of burden in the merger review process is one
that has been with us for years and one that I have been
particularly interested in both in the private sector, at the
DOJ, and at the FTC.
And so, in February of 2006, we put into place some new
measures to try to curb the burdens in that process. Some of
those match pretty completely to the AMC recommendations. Some
of them don't.
A few of the AMC recommendations we don't necessarily agree
with because we think it is such an effort to micro-manage the
process that in the realities of trying to do a merger
investigation, it would inhibit our abilities. But we are
trying very hard to curb the burden because, frankly, it puts a
lot of burden on us as well.
The second thing on the clearance issues, we have
currently--this issue has been with us for years. We have tried
to fix this, you know, how we allocate the work between us. We
are trying again.
We have people from both agencies sitting down working
together and trying to come up with a new system. But some
people on the bar, of course, in the business community think
that we should work with Congress to actually make a decision.
Mr. Chabot. Okay. Thank you very much.
Anything you would like to add, Mr. Barnett?
Mr. Barnett. Just quickly on the burden of the review
process. The Division back in 2001, frankly, when chairman
Majoras was at the Division, launched a review process
initiative that was designed to reduce the burden, increase the
efficiency. That has worked very well. We nonetheless updated
and revised it a bit in December of last year.
Overall we think we are more successful in clearing
transactions without having to issue a second request
identifying them early as not a threat to competition. And we
continue to work in that regard because, as the Chairman says,
the vast volumes of information and documents that we receive
are a burden on us as well as the parties.
On clearance, I readily endorse what the Chairman said. We
have people working on it right now, and we are committed to
trying to improve that process as well.
Mr. Chabot. Thank you very much.
My second question is what are the implications of the
increasing globalization of antitrust law. Does America's view
of antitrust law, that it seeks to protect competition, not
particular competitors, hold true in other jurisdictions? And
should America be promoting its view of antitrust laws abroad?
And if so, how should we do that? And again, you can both take
a shot at it.
Mr. Barnett. Sure. Well, there are two sides to the coin on
this one. On the cartel enforcement front, the globalization of
enforcement has been a benefit to the United States. It has
made it easier for us to detect, gather evidence about and
prosecute cartels and those that prey upon American consumers.
So that has been a--and the example of the OFT going after B.A.
at the same time we did is a good illustration of the benefits.
With respect to mergers and other kinds of conduct, there
are challenges that are there that having different approaches,
different processes can create burdens. Having divergent
outcomes can create very significant concerns. And we at both
agencies have been very focused on this for years.
That was part of the purpose of the agencies helping to
found the International Competition Network in 2001 and why we
are so engaged through organizations, through bilateral
relationships, why we have sent people to China who has
recently enacted an anti-monopoly law. It is a concern, and it
is one that we are trying to address.
Mr. Chabot. Thank you.
Ms. Majoras?
Ms. Majoras. Thank you. There is no question that we in our
work internationally--and that includes with developed
countries, so our major trading partners, but also with
developing countries who now have antitrust agencies and are
trying to develop market economies after years of having state-
based economies. So we are doing work with all of them.
And, yes, we definitely are trying to influence the process
by what we have learned that we have done well and that we
haven't done so well in enforcement of antitrust over the years
in the United States. So that is clearly a big part of what we
are doing.
It is a challenge. In 1990, we had about 25 competition
agencies worldwide. And today we have over 100. So it is a lot
to absorb into the competition group, if you will, in a short
period of time.
Mr. Chabot. Thank you very much.
I think my time is expired, Madam Chair. Thank you.
Ms. Lofgren. Thank you.
The gentlewoman from Ohio, Ms. Sutton?
Ms. Sutton. Thank you, Madam Chair.
Thank you both for your testimony. You made it clear in
your remarks that in the United States the Antitrust Divisions
of the Department of Justice and, of course, the FTC review
various mergers and acquisitions to consider whether they have
anti-competitive effects. And this sort of follows up on my
colleague from Ohio's question.
So when a major hospital or hospital firm or a bank seeks
to acquire another, we consider here in this country if the
merger would put any single player in a market in a position to
manipulate the market. But while antitrust considerations apply
to U.S. firms, we are now, as you point out in your testimony,
living in a global world.
Trade agreements, starting with the 1994 NAFTA and the 1995
WTO, contain various service sector market access conditions
that provide the right for foreign firms in covered sectors to
establish and operate in the United States through mergers and
acquisitions and startups. And the market access rights for
those foreign firms established in the WTO's general agreements
on trade and services and the NAFTA and CAFTA and other free
trade agreements, including the one that will be voted on
shortly here with Peru, guarantees such market access rights
free of government limits on the size of the firm, the number
of employees.
The United States has submitted its own hospitals,
insurance, banking and other financial service sectors to such
commitment. So I have a couple of questions.
I mean, can you tell me what would happen when a foreign
firm already operating with a sizeable market in the U.S. then
sought to acquire another large U.S. operation in the same
sector? And wouldn't those extreme service sector market access
rights for foreign firms in our trade agreements conflict with
our own domestic antitrust policies?
Mr. Barnett. If I understand the question, my understanding
at least is if a foreign firm has operations in the United
States and they seek to acquire another United States firm,
that transaction would be subject to section 7 of the Clayton
Act and section 1 of the Sherman Act. And we would review it.
And if we found it constituted a violation of the law, we
would pursue it. I am not aware of there being a trade barrier
or a bar to our pursuing such a transaction.
Ms. Majoras. Indeed, I would just add that today, despite
what trade agreements say, if a foreign firm that operated in
the United States and sold goods to our consumers wanted to
merge with another foreign firm that also had sales in the
United States and that were to present a competitive problem,
we could go after that merger as well. So I agree with Mr.
Barnett. I don't see that as raising a problem for our
enforcement.
Ms. Sutton. And has that happened at all? Have you gone
after any foreign firms?
Ms. Majoras. Sure. I am trying to think of the particular
examples. I mean, we required certainly, for example, we had
British Petroleum take over Amoco some years ago. And the FTC
required major divestitures in that particular case.
Mr. Barnett. I would give the example of Mittal, Arcelor
last year, two steel companies. Mittal is Indian, but based in
Europe. And Arcelor, the target, is a French headquartered
company. They both had operations in the U.S. And we sought and
obtained a significant divestiture to remedy competitive harm
in the United States.
Ms. Sutton. Okay, just so I understand correctly, you are
saying that all of our antitrust policies can be applied to
foreign firms operating in the United States?
Ms. Majoras. That is essentially how the jurisdiction
works. Obviously, there are legal terms for exactly how it
works, but foreign firms operating in the United States that
sell goods here we have not had a jurisdictional problem in
attacking practices when necessary.
Ms. Sutton. Are you consulted when the United States is
negotiating the trade agreements to make sure that there aren't
any conflicts?
Mr. Barnett. We not only are consulted, but we,
particularly with some of the recent trade agreements, there
have been competition chapters or sections to it. We have been
active participants. We have been at the table to help guide
those negotiations and generally think they have gone quite
well.
Ms. Sutton. And both of you?
Ms. Majoras. That is correct, both agencies together with
USTR and commerce.
Ms. Sutton. Okay, great. Thank you.
I yield back.
Ms. Lofgren. The gentlelady yields back.
I would like to recognize the gentleman from California,
Mr. Lungren.
Mr. Lungren. Thank you very much, Madam Chairwoman.
And I thank the witnesses for appearing. This may sound
like a strange question coming from me, but when we talk about
that we applaud the globalization of the antitrust concept and
that we attempt to influence or exert our influence effectively
as we can for other countries to adopt the same approach, I
wonder how you respond to the question from some other
countries about the multiplicity of authorities that can handle
antitrust cases in the United States.
Not only the two of you, but, as a former Attorney General
of California, we jealously guarded our authority. We
attempted, I thought, to try and work with the Justice
Department, particularly the U.S. Justice Department to ensure
that we were working in concert and didn't sort of double up in
inconsistent ways.
But if we were to look at a foreign country and we were to
look at them with a regimen for antitrust law or call it what
you will, that appeared to have a multiplicity of authorities
to which American companies would have to respond and in some
ways just the time it would take to go through the multiplicity
of authorities would delay our entry into the marketplace or
effective way of doing it, we might take umbrage at that.
And so, my question is, can you give us an idea of how you
would explain the legitimacy of having a multiplicity of
authorities, how you attempt to ensure that that does not
inadvertently add uncertainty to the economic decision-making
that really doesn't go to the core of antitrust questions, but
to the core of decision making.
Ms. Majoras. Terrific question, one that we do grapple
with. We have been asked many times.
I can remember very recently in China being asked very
specifically about why we have two antitrust agencies and how
that all works. And to tell you the truth, my response is that
if you were starting from scratch, you might not do it this
way.
I think our system is working very well today because we
have adapted it. But one has to ask the question how many
layers of enforcement do you need, because, of course, the
problem with over-enforcement of the antitrust laws is that the
market starts to freeze up, as heavy regulation does in other
contexts.
And so, suddenly the very competition that you want to
protect you are squelching instead. And so, we talk about that.
We talked about how we work together with each other, how we
worked with sectoral regulators like the FTC, how we work with
the States and how private enforcement works and some of the
ways in which private enforcement, which Europe is now looking
at, might be done in a way to avoid some excesses.
Mr. Barnett. I completely agree with that and would just
add briefly that it does present potentially a very significant
burden and obstacle to marketplace competition and efficient
operation of the markets. I think it is incumbent upon the
various antitrust enforcement authorities--for example, the
FTC, the DOJ, and the various State attorneys general--to
coordinate and to cooperate in a way that minimizes those
burdens.
And one example I have given is if we are going to pursue a
joint enforcement action or a joint investigation, it should
appear to the parties as if there really is only one
investigator and one prosecutor. That is the ideal situation to
try and minimize that burden. But the potential for harm is
very real.
Mr. Lungren. Ms. Majoras, let me just ask you a question on
a particular case. The FTC recently had the case of the
proposed merger between Whole Foods and Wild Oats Grocery
Stores, which was unsuccessful in Federal District Court. In
your written testimony you indicate that the Federal Trade
Commission is still pursuing an administrative action against
Whole Foods.
Can you explain that? Because from the outside it would
appear you lost in court, but it is like, okay, we lost there,
but we still got you.
Ms. Majoras. Of course. The way the Congress set up the FTC
when we believe that a merger would be anticompetitive, we file
an administrative action within the FTC. But in order to stop
the merger long enough to be able to proceed in the
administrative action, we go to Federal court for that purpose.
That is different from the Justice Department.
Mr. Lungren. Right.
Ms. Majoras. Where we are now is if we have lost in
District Court, which we have, the next step will be to decide
whether, in fact, we will go forward in an administrative
action. I mean, it is there now because it was filed months
ago. The question now is whether we will proceed.
The Commission has a test that it goes through in deciding
that. And it has been the very rare case that we have proceeded
after losing in District Court.
Mr. Lungren. Thank you very much.
Thank you, Madam Chairwoman.
Ms. Lofgren. The gentleman's time is expired.
The gentleman from Utah is recognized for 5 minutes.
Mr. Cannon. Thank you, Madam Chair.
If I could just followup with both of you briefly on Mr.
Chabot's line of questioning and to some degree, Mr. Lungren's,
could you describe what we are doing with especially the
European community to harmonize our laws. Or do we have a
process, and how aggressively are we pursuing that?
Mr. Barnett. We have a very extensive process at multiple
levels, both at the European Commission level as well as at the
member State level now because most of these member States have
their own regimes and, indeed, enforce not only their member
State laws, but also European competition laws.
We have annual bilateral consultations with the European
Commission. Our staffs communicate on virtually a daily basis
on individual investigative matters. Where there are issues of
concern that come up, it gets elevated and either both
agencies--I think we speak directly to their senior management
on those issues.
We also work through multilateral organizations such as the
OECD or the ICN publishing best practices, as an example, a
merger review that helps persuade those organizations,
including the European Commission to improve their processes.
And, you know, on the cartel enforcement front, as an example,
we have been very active with the European Commission as well
as the OFT and some others on working on their enforcement
programs.
Mr. Cannon. Thank you.
The FTC is currently reviewing the proposed Google-Double
Click merger. And my understanding is that it took the FTC and
DOJ more than the 30-day period under the Hart-Scott-Rodino
pre-merger notification process to determine which of the two
agencies would review the merger.
Why did this take so long? And would DOJ and FTC and
ultimately the parties themselves benefit if Congress were to
allow you to enter into an agreement similar to the agreement
you had in 2002 that helped spell out which mergers would be
reviewed by which agency in advance?
Ms. Majoras. Yes, I think we would be benefited. I was at
the Justice Department at the time we negotiated that agreement
with the FTC where I now am. And it was an effort to fix this
problem. And some Members of Congress asked us to stand down.
And we did so, but I think to the detriment of the system
overall.
Why did this one take longer? Unfortunately, in higher
profile mergers in interesting markets, first of all, they tend
to be converging markets, so it is not clear which of us has
the best experience. And then our staff are eager. They are
interested in what they do.
And so, we have a big back and forth over who has the most
experience and who ought to get the matter. I am not proud of
the process. It embarrasses me, quite frankly. And I have been
talking about that for years.
We have tried to make as many internal reforms as we can.
But during my confirmation hearing, I was asked to please
refrain from going back to the 2000 agreement, and I agreed to
do it. So I think it would take some action from Congress
before I could do that again.
Mr. Cannon. Let me try and get one last question in. I had
a startling experience this last week. I have a 9-year-old who
is now old enough to have a telephone. And I have a son who
just returned to the United States. So in the last month or so,
I have purchased two telephones.
And I noticed that you and the other body talked about the
commentary exemption frustrating the FTC's ability to deal with
deceptive and unfair acts. Is that the case? And in particular,
this is a complex area of law. I used to Chair the Committee on
Commercial and Administrative Law. Now I am the Ranking Member
there. And clearly, there are some commercial aspects here of
contracts of adhesion.
And with my son it was fairly straightforward. I had to ask
about the $175 termination fee, which I had read about
elsewhere that was with my daughter. But with the most recent
phone, we went through this elaborate process where I signed
documents that I didn't have time to read, didn't have an
interest in reading, and then had to take a phone call from the
company where I agreed to certain terms.
But none of the really significant--I didn't think it was
significant terms. And finally, the phone didn't get qualified
until they sent me an e-mail or a text message and I responded
to the text message. I am amazed at the process. I mean, what
you have here is a convergence of many carriers on several
items that cost consumers a great deal of money. Is that what
is driving your concern?
Ms. Majoras. What is driving our concern is that with the
convergence of technologies and the like and when new
technologies come up, consumer expectations aren't necessarily
set. So consumers need very good disclosures about what they
are paying for.
Here are markets in which if the company claims that they
have common carrier status, it is true, the FTC has no
jurisdiction, so we can't assert our authority to battle
deceptive practices. So, yes, that is what we are trying to get
at.
Mr. Cannon. This is an amazing thing where poor people are
way disproportionately affected by these harsh decisions. I
think there is now a universal deal that you can't terminate a
contract even 1 day before the 2-year period runs without
incurring a $175 fee. I would encourage you to pursue that. And
if we need to help with some kind of change to the law, I would
like to know that.
Ms. Majoras. All right. Thank you.
Ms. Lofgren. The gentleman's time is expired.
The gentleman from Indiana, Mr. Pence, is recognized.
Mr. Pence. Thank you, Chairman. Thanks for calling this
hearing and bringing these two distinguished public servants
before this Task Force.
I appreciate your service to the country. And I am curious
about a couple of kind of headline issues and what either one
of you might be doing with them.
Number one would be when I am back in Muncie, Indiana,
people are not so much worried about some of the issues we
fight about out here. But they are pretty worried about
gasoline prices.
And to the Chair of the FTC I would ask, you know, this
calls for regulation of the oil and gas industry here in
Congress, price gauging statutes have been advanced. I haven't
supported them, but, I mean, as Federal solutions.
I know the FTC has looked at this. And I would like to know
what has the FTC actually found at this point with regard to
collusion in the pricing of gasoline.
And secondly, also ripped from the headlines, Mr. Barnett,
this whole issue of real estate, mortgages, and the concern
that we all have about when all these ARMs come due at the end
of this year. I know that the Antitrust Division under your
leadership has undertaken a civil action regarding real estate
broker activities. And I just wondered if you might comment as
appropriate on that and how you think that kind of enforcement
will benefit homeowners in the future.
Ms. Majoras. We are well aware at the FTC that there is
virtually no product in the United States that is sold that
affects consumers as much as gasoline and, certainly, the price
of gasoline, which has gone up in recent years. So we spend an
enormous amount of time studying gasoline markets,
investigating gasoline markets and making sure that companies
are adhering to the antitrust laws.
We have done several studies in recent years, including a
major study after Hurricanes Katrina and Rita. We have not
found collusion among the oil companies. Obviously, we have
OPEC at the upstream end, which is another story. But we have
not found it.
What we have found, which is hard for people to hear, is a
market that behaves pretty competitively according to laws of
supply and demand. Now, in recent years, demand has been going
up. Our supply has not kept pace. People ask, ``Well, how could
that happen? How could there be competitive markets but our
refining capacity is not keeping pace?''
Well, the problem has been--and we sort of have short
memories, I am afraid. It was just a few years ago that
refineries were not making so much money. Their profits were
not going up. And so, that inhibited investment.
What we are seeing now--and we just saw a major
announcement by Royal Dutch Shell that, in fact, they are
increasing their capacity in Port Arthur, Texas by 325,000
barrels a day, which is enormous. That is a third of all of our
imports that we get.
So we are seeing what we thought we would see with these
higher prices, increased investment. And we think that that is
going to be a good thing for consumers.
Mr. Pence. And British Petroleum was trying to increase its
capacities in Indiana until very recently.
Ms. Majoras. Yes, indeed.
Mr. Pence. I want you to be very aware.
Ms. Majoras. So it is a big area, obviously, of discussion.
I would be happy to talk more, but I don't want to use up all
your time.
Mr. Pence. Very good. Thank you.
Mr. Barnett. Well, if there is any one market that is as
important as the gasoline market, it might well be the real
estate market, given that that is by far and away the largest
transaction that most people engage in in their lives. I don't
think it is appropriate for me to comment on pending
litigation.
Mr. Pence. I understand.
Mr. Barnett. But more generally, the Department of Justice
and very much in cooperation with the Federal Trade Commission,
has been quite active in the real estate area. It is not only
through investigations and enforcement actions such as a couple
of years ago when we took an action against the Kentucky Real
Estate Commission, which banned rebates by brokers, essentially
banning price discounts to brokers.
We have been engaged in through advocacy efforts with a
variety of States who either have regulations or laws that ban
such price discounting or that are considered to do so as well
as something they call minimum service requirements.
Mr. Pence. Right.
Mr. Barnett. It means they force you as a purchaser of
brokerage services to buy a package of services even if you
don't want all of them. And we have found that by freeing up
the market to let consumers and suppliers make these choices,
there is indications that consumers can save thousands of
dollars on a transaction, which is a very significant benefit
to Americans.
Mr. Pence. I thank the Chair.
I thank the general.
I yield back.
Ms. Lofgren. In consulting with the Ranking Member, we are
going to do a quick second round of questions. Not that
everybody has a second round, but Mr. Keller, I think, has a
quick question. I know I do.
So Mr. Keller is now recognized for 5 minutes.
Mr. Keller. Well, thank you, Madam Chairman.
Mr. Barnett and Ms. Majoras, you know here in Congress we
essentially have two types of laws, one, the noncontroversial
laws that we can all agree on on a bipartisan basis. We pass
those in the House through the suspension calendar. And the
Senate has a procedure called the hot line.
And then the controversial laws, which are the ones that
grab all the headlines. I want to start with noncontroversial
laws and ask you, as people who deal with the antitrust issues
on a daily basis far more than Members of Congress do: Is there
any sort of noncontroversial technical changes to the antitrust
laws that you feel would be helpful and would be needed to help
you protect consumers or to otherwise do your jobs?
Mr. Barnett, I will start with you and give you both a shot
at that.
Mr. Barnett. The short answer is, I think, no. And I don't
know if you would call this controversial or not, but I want to
underscore our gratitude for the 2004 act that you all worked
on to increase the statutory maximum fines for criminal cartel
price fixing activities.
The effects of that are really only just being felt now.
And we are optimistic that we are going to see very significant
increases in actual penalties imposed. And we appreciate your
efforts in helping us get there.
Mr. Keller. Okay.
Ms. Majoras, any thoughts along those lines?
Ms. Majoras. Congressman Keller, I can't think of anything
off the top of my head. But if I may, may I think about that a
little bit and submit something to you in writing if we think
of it?
Mr. Keller. Please. Yes, please get it to me and also
Chairman Conyers.
Ms. Majoras. Great.
Mr. Keller. And then let me just follow-up with the second
part of that question. Is there any law that might be
considered controversial by some sector or another that you all
think that nevertheless would be good for consumers or
otherwise would be helpful for you to do your job? And what
comes to mind?
Ms. Majoras, I know some folks with the FTC, I have heard,
important legislation that preserves access to Affordable
Generics Act or--I am not really up on it, but something to do
with settlements and pharmaceutical patent litigation that may
be illegal. Or I understand that is controversial, but along
those lines.
And let me again start with Mr. Barnett. Any big ticket
laws that you think that should be proposed or considered that
might be controversial?
Mr. Barnett. Well, I would mainly point to one
recommendation of the Antitrust Modernization Commission, which
in my testimony before them we supported, which is a
reevaluation of any antitrust exemptions that are out there. We
do believe that not only should they be rarely passed, but they
ought to be periodically reevaluated to see that the conditions
that may have justified them at one point in time are still
warranted.
Mr. Keller. Even baseball?
Mr. Barnett. Well, I am not going to take anything off the
table. So----
Mr. Keller. If you are going to make headlines, let us
swing for the fence here.
Mr. Barnett. Yes, there you go.
Mr. Keller. All right.
All right, Ms. Majoras?
Ms. Majoras. As you mentioned, we have been in discussions
with some Members of Congress about an issue that has concerned
us for some time, which is the issue of branded pharmaceutical
and generic pharmaceutical companies entering in settlements
together where the branded pays the generic to stay out of the
market for a particular period of time. It is a complicated
issue, I will grant you.
But we and our economists have looked at it. And we
actually think that consumers are being harmed and that it is
not just a matter of exercising patent rights in a legal way.
So we have been very concerned about that.
The Antitrust Modernization Commission has recommended that
the Robinson-Patman Act be repealed. I think it is something
that is worth taking a look at. I think that statute has
probably seen better days.
And as we talk about the international realm that we find
ourselves in, that act is put in our faces constantly as a
measure that was put in place years and years ago to protect
small businesses. We know a lot more now about what it takes to
have a vibrant marketplace that even includes small businesses.
And I don't think the Robinson-Patman Act is something that is
protecting consumers as it was intended to.
Mr. Keller. On the pharmaceutical end real quick, are you
suggesting any changes to Hatch-Waxman?
Ms. Majoras. I would rather see the change in Hatch-Waxman
than see the change in the antitrust laws. But there is no
question. Hatch-Waxman created this situation, no doubt about
it.
It was an unintended consequence of Hatch-Waxman, which, of
course, had a very good purpose in both protecting the branded
intellectual properties so they could get return on investment
but at the same time, making sure that affordable generics come
into the market as appropriate. So this has been caused by
Hatch-Waxman. So if we are going to act, I think that is the
way to do it.
Mr. Keller. Thank you.
And, Madam Chairman, I yield back the balance of my time.
Ms. Lofgren. The gentleman yields back.
I just have a couple of quick questions. I will note that,
as I said in my brief opening remarks, the antitrust portfolio
is an essential one. And I have had the sense over the last
several years that the enforcement at DOJ at least has not been
as vigorous as it has been in past years. And the statistics
seem to back that up.
Using the Department of Justice's own statistics, there was
a 59 percent decline in merger investigations in the past 4
years of the Bush administration compared to the last 4 years
of the Clinton administration. And with respect to merger
challenges, in the last 4 years, reveal a 75 percent decline
compared to the last 4 years of the Clinton administration and
a 37 percent decline even for nonmerger enforcement.
There are times when I feel that, you know, the most
vigorous antitrust activity is really occurring with State
A.G.'s. But there are some things I think that it is very
difficult for them to do. And that really comes to my question
regarding the Internet.
I believe that the rules that were in place until the FTC
decision in 2005 really did play a tremendous, important role
in fostering innovation and an even playing field in that
section. And I was very surprised, frankly, that the department
submitted a filing with the FCC just recently in late opposing
the concept of net neutrality. And I was wondering why this
filing was months late, after the comment period was over, and
what motivated the department to do this. And who did you meet
with?
I note in the filing there was a mention of the opponents
of that neutrality, Hands Off the Internet and Consumers for
Cable Choice, which I think are sometimes referred to as astro-
turf groups, really funded by the phone companies, AT&T and
Verizon. I am wondering, did you meet with the opponents of the
phone companies before you filed. Who did you meet with in
reaching the conclusion?
Mr. Barnett. Well, Madam Chairwoman, I respectfully
disagree with your assessment regarding the DOJ's enforcement
activities. With respect to merger enforcement, we applied
consistently across--I tend to believe--across Administrations
the Horizontal Merger Guidelines that both agencies----
Ms. Lofgren. Well, my question was about the net neutrality
filing.
Mr. Barnett. I understand that, Madam Chairwoman. I just
note that between the last 4 years of the Clinton
administration and the last 4 years of the Bush administration
there was perhaps a 70 percent drop in the number of mergers.
So you would expect the number of reviews and the number of
challenges would be likely to go down.
With respect to net neutrality, I was the one who made the
decision to file those comments. We certainly collected
information from a wide range of sources.
Ms. Lofgren. Can you give me a list after this hearing?
Mr. Barnett. And the gist of the comments or the bottom
line is not necessarily to say that some regulation is ever
inappropriate. It was to say that as we understand it--and this
is a core part of our competition advocacy mission--as we
understand it, in general we let markets work with antitrust
enforcement as a backdrop. We try not to intervene with
Government regulation, unless there is a specific case to be
made for that.
And we had not seen--until we reviewed the other comments
that had been filed with the FCC. We reviewed them, and we did
not see that a case had been made. That doesn't necessarily
mean that a case can't be made down the road. But we were
providing our experience, our expertise in this industry for
the benefit of the FCC.
Ms. Lofgren. I would like to know, and you can provide it
in writing afterwards. I don't want you to orally list it. But
I would like to know who you met with or who the department met
with prior to that filing.
And I also would note, because my time is about to expire,
that 96 percent of the residential broadband market nationwide
is really controlled by a duopoly. And I just can't think of
why that wouldn't be a compelling public policy goal to disrupt
that kind of market control. And how you can possibly think
that that is a competitive market is just astounding to me.
So I will not belabor it. I will look for your report on
who you met with after this hearing. And I will now call on the
gentleman from--I guess our gentleman has left.
My time is expired. And Ms. Sutton has left. And I guess we
have closed down this hearing. And at this point, we will note
that the hearing record remains open for 5 days. Members have 5
days to submit additional questions. And we would ask the
witnesses if we forward additional questions to answer them as
promptly as you may.
And with that, this hearing is adjourned.
[Whereupon, at 2:17 p.m., the Committee 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 John Conyers, Jr., a Representative
in Congress from the State of Michigan, Chairman, Committee on the
Judiciary, and Chairman, Task Force on Antitrust and Competition Policy