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ANTITRUST ENFORCEMENT AGENCIES: THE ANTITRUST DIVISION OF THE DEPARTMENT OF

JUSTICE AND THE BUREAU OF COMPETITION

OF THE FEDERAL TRADE COMMISSION

HEARING

BEFORE THE

TASK FORCE ON ANTITRUST

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

JULY 24, 2003

Serial No. 55

Printed for the use of the Committee on the Judiciary

(

Available via the World Wide Web: http://www.house.gov/judiciary 

(II)

COMMITTEE ON THE JUDICIARY 

F. JAMES SENSENBRENNER, JR., Wisconsin, Chairman 

HENRY J. HYDE, Illinois 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

WILLIAM L. JENKINS, Tennessee 

CHRIS CANNON, Utah 

SPENCER BACHUS, Alabama 

JOHN N. HOSTETTLER, Indiana 

MARK GREEN, Wisconsin 

RIC KELLER, Florida 

MELISSA A. HART, Pennsylvania 

JEFF FLAKE, Arizona 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

JOHN R. CARTER, Texas 

TOM FEENEY, Florida 

MARSHA BLACKBURN, Tennessee 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California

PHILIP G. KIKO, Chief of Staff-General Counsel 

PERRY H. APELBAUM, Minority Chief Counsel

—————

Note: The Task Force on Antitrust was established on March 26, 2003 and consists of all the 

Members of the full Judiciary Committee. 

(III)

C O N T E N T S 

JULY 24, 2003

OPENING STATEMENT 

Page 

The Honorable Lamar Smith, a Representative in Congress From the State 

of Texas, Chairman, Subcommittee on Courts, the Internet, and Intellectual 

Property ................................................................................................................ 1

The Honorable John Conyers, Jr., a Representative in Congress From the 

State of Michigan, and Ranking Member, Committee on the Judiciary ......... 3

The Honorable William D. Delahunt, a Representative in Congress From 

the State of Massachusetts ................................................................................. 4

WITNESSES 

The Honorable R. Hewitt Pate, Assistant Attorney General, Antitrust Division, Department of Justice 

Oral Testimony ..................................................................................................... 6

Prepared Statement ............................................................................................. 8

The Honorable Timothy J. Muris, Chairman, Federal Trade Commission 

Oral Testimony ..................................................................................................... 16

Prepared Statement ............................................................................................. 18

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Post-hearing questions submitted to the Honorable Timothy J. Muris, Chairman, Federal Trade Commission ........................................................................ 46

Responses to post-hearing questions by the Honorable Timothy J. Muris ......... 48

Post-hearing questions submitted to the Honorable R. Hewitt Pate, Assistant 

Attorney General, Antitrust Division, Department of Justice ......................... 59

Responses to post-hearing questions by the Honorable R. Hewitt Pate ............. 68

(1)

ANTITRUST ENFORCEMENT AGENCIES: THE 

ANTITRUST DIVISION OF THE DEPARTMENT 

OF JUSTICE AND THE BUREAU OF COMPETITION OF THE FEDERAL TRADE COMMISSION 

THURSDAY, JULY 24, 2003

HOUSE OF REPRESENTATIVES, TASK FORCE ON ANTITRUST, COMMITTEE ON THE JUDICIARY, Washington, DC.

The Task Force on Antitrust met, pursuant to call, at 2:04 p.m., 

in Room 2141, Rayburn House Office Building, Hon. Lamar Smith 

presiding. 

Mr. SMITH. The Task Force on Antitrust of the Committee on the 

Judiciary will come to order. I am going to recognize Members for 

their opening statements, and then we will move to introduce the 

witnesses. 

I do want to say to the witnesses and to the people who are in 

the room that, for good or for bad, we expect about eight votes in 

half an hour, and so we do expect to take a fairly lengthy recess 

at that point. But we certainly want to get through the witnesses’ testimony by that time and perhaps ask a few questions. 

I will recognize myself for purposes of an opening statement. 

And, again, today is an oversight hearing on the Antitrust Enforcement Agencies: the Antitrust Division of the Department of 

Justice, and the Bureau of Competition of the Federal Trade Commission. 

The Committee on the Judiciary has exclusive jurisdiction over 

America’s antitrust laws. Today’s hearing will focus on the Federal 

agencies charged with enforcing the antitrust laws, the Antitrust 

Division of the Department of Justice and the Bureau of Competition of the Federal Trade Commission. This Committee last conducted a general oversight hearing on these agencies 3 years ago, 

and the Chairman intends to conduct a general oversight hearing 

of this nature on a more regular basis. Last year, corporate mergers and acquisitions totalled $460 billion. While last year’s total was less than that reached in 2001, increasing consolidation in key national markets only underlines the 

importance of aggressively enforcing antitrust laws in a manner 

that promotes competition and maximizes the consumer welfare of 

all Americans. As Justice Thurgood Marshall observed, antitrust 

laws are the Magna Carta of free enterprise. They are as important 

to the preservation of economic freedom in our free enterprise sysVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6601 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
2

tem as the Bill of Rights is to the protection of our fundamental 

personal freedoms. 

The Antitrust Enforcement Agencies are charged with adapting 

essentially static antitrust laws to rapidly changing economic circumstances. This has led some to question the efficiency of existing 

antitrust law and its application to the new information-based 

economy. As Judge Richard Posner has observed, ‘‘The mismatch 

between law time and new economy real-time is troubling, because 

an antitrust case involving a new-economy firm may drag on for so 

long, relative to the changing conditions of the industry, as to become irrelevant and ineffectual.’’ This Committee has worked to ensure that the antitrust laws reflect the shifting needs of the modern economy. Last Congress, this 

Committee reported legislation to create the Antitrust Modernization Commission, which will examine key antitrust issues, including the intersection between antitrust and intellectual property, 

the role of State agencies in antitrust enforcement, international 

antitrust enforcement, and other issues. 

With respect to international antitrust, some have expressed concerns that foreign antitrust authorities have applied their antitrust 

laws in a discriminatory manner that unfairly advances foreign 

commercial interest at the expense of American businesses and 

American jobs. Others have expressed concerns about the lengthy 

period of time required for civil nonmerger investigations at both 

antitrust agencies. 

While I recognize that complex and novel issues are often presented, protracted delays during merger and nonmerger investigations may hinder the ability of innovative companies to bring competition and choice to consumers. 

There are other areas of particular interest to this panel. This 

Committee played a critical role in drafting market opening provisions in the Telecommunications Act of 1996. The policy compromise upon which this legislation was predicated permitted the 

Bell Companies to compete in the long distance market if they 

opened their own markets to competition. Section 271 of the 

Telecom Act ensured that the Department of Justice would play an 

important role in reviewing Bell Company applications for long distance entry to ensure that reciprocal opportunities for local nonincumbents existed. 

Over the last 6 years, the Antitrust Division has reviewed section 

271 applications in over 40 States. In its recent Triennial Review 

rulemaking, the Federal Communications Commission examined 

unbundling and line-sharing obligations that have helped form the 

basis of effective local telephone competition. 

While the Telecom Act provides no statutory mechanism compelling Antitrust Agencies to consult with the FCC during these proceedings, the antitrust implications of these reviews may necessitate a more proactive role from either or both of the agencies represented here today. 

This Committee is also closely monitoring the Supreme Court’s 

review of the Trinko Decision which concerns the continued application of the antitrust laws to the telecommunications industry and 

judicial deference to the explicit antitrust savings clause contained 

in the Telecommunications Act of 1996. 

3

In addition, the SEC recently voted to substantially liberalize 

broadcast media ownership rules, a decision some believe might 

undermine the localism and consumer choice that are essential to 

a vibrant marketplace of ideas. 

While the Chairman of this Committee intends to conduct a 

hearing on this subject in the near future, it is his hope that the 

considerable antitrust expertise of both agencies is not ignored during these critical proceedings. 

In the coming months, this Committee’s Task Force on Antitrust 

will conduct a series of robust hearings on current antitrust topics 

ranging from broadcast media ownership to the antitrust implications of college athletic conferences. 

The Chairman wishes to thank the witnesses in advance for appearing at today’s hearing, and to assure them that the testimony 

we receive will help this Committee better assess the needs, activities, and priorities of the vital agencies that each of you all represent. 

The gentleman from Michigan, the Ranking Member of this Committee, is now recognized for his opening statement. 

Mr. CONYERS. Thank you, Chairman Lamar Smith. I am happy 

to be here. I have always had an interest in this activity. And I 

want to commend you for the numbers of hearings and subject matters that you propose. 

Now, I don’t want to get our two guest witnesses in trouble, but 

you seem to be doing a pretty good job, guys, and I don’t know 

what they are going to do with this information downtown when 

I—I mean, maybe I should really come on at you real hard this 

afternoon, so everybody will sleep more comfortably tonight. 

But I think we are starting off in some good directions, I think, 

the Antitrust and FTC. I welcome you here, and I hope that we 

have a continuing exchange of ideas and suggestions, issues over 

and above the formal hearings that we both feel are required. And 

I know Lamar will join me in that. 

Now, somebody besides me is troubled by the historical line of increasing mergers, consolidations, takeovers, that have marked the 

last generation. And it is not that we can sit around the table and 

turn that around, but I think what it means is it has to be analyzed and to be understood. We are in an economy where in Detroit, right this moment the big three automakers and the Union 

of the Collective Bargaining Representatives are in negotiations. 

And outside of health care considerations, the next issue on the 

table is, how many plants are we going to close down? How many 

more thousands of people from which automobile lines are going to 

be closed up? And yet, at the same time, there are mergers going 

on at a pace—and I might as well tack on the other part of it, is 

that foreign car makers each year get a little bit more of the American car market. And I know this takes us into—and this is one 

of the things we want to talk about. It takes us into the whole area 

that, let us face it, some auto makers abroad are subsidized by 

their government. Many of their workers work at a fraction of the 

remuneration that our automobile employees, under collective bargaining agreements, work. There are many reasons for these 

things, but I think that this not only bears some analysis on our 

4

part, it may be the subject of a hearing, but I think our meetings 

in between the hearings could be very, very important. 

The one sad note that I have to bring to your attention is the 

Univision merger. And I will say no more about it, but I think that 

that impact on the Hispanic community is not going to be beneficial. And, with that, I would turn back any time I have. 

Mr. DELAHUNT. Would you yield? 

Mr. CONYERS. Sure. I would be happy to yield to the gentleman 

from Massachusetts. 

Mr. DELAHUNT. First of all, I want to publicly state that I really 

think that what the Chairman has done in terms of the creation 

of this task force is extremely important. And I think the work that 

both the FTC and DOJ Antitrust Division does is probably as important as any work that is done by a Government agency in terms 

of the impact on our economy and our way of life. And I really 

want to applaud Chairman Sensenbrenner and Chairman Smith. 

And I would associate myself with the remarks by the Ranking 

Member, Mr. Conyers. 

And the concern that I have—and maybe you can address this 

in your testimony—is, do you have enough resources to do the job? 

Because this, I think in terms of magnitude, will only increase, 

particularly in the areas we talk about, the global economy, the 

international antitrust issues. And if you don’t have the resources, 

I know that OMB gets very upset with you and gets angry, but, 

you know, let us make believe that this is a hearing where no one 

else is present, and that it is—I don’t want to call it a secret hearing, but one that promotes candor and frankness. Because if you 

don’t have the tools, if you don’t have the resources to do this, we 

are going to pay for it otherwise. 

With that, I yield back. 

Mr. SMITH. Thank you, Mr. Conyers. Thank you, Mr. Delahunt. 

What I would like to do is to introduce the witnesses, and then 

we will recess for the series of eight votes, and then reconvene an 

hour later, just so you all can plan and so that people who are in 

the audience can plan as well. 

Our first witness is the Honorable R. Hewitt Pate, Assistant Attorney General for Antitrust at the U.S. Department of Justice. Mr. 

Pate was nominated by President Bush and confirmed by the Senate as Assistant Attorney General for Antitrust on June 16, 2003. 

Prior to his Senate confirmation, Mr. Pate served as Acting Assistant Attorney General for the Antitrust Division since November 23, 

2002. Prior to that, Mr. Pate was a Deputy Assistant Attorney 

General in the Antitrust Division, a position he has occupied since 

June 3, 2001. 

Prior to his appointment to the Antitrust Division, Mr. Pate 

practiced law at Hunton & Williams, where he was a partner on 

the firm’s antitrust team and was involved in litigating cases related to regulation of the competitive process, including antitrust, 

patent, trademark, trade secrets, false advertising, and other business torts. 

After graduating from law school, Mr. Pate clerked for Supreme 

Court Justice Anthony Kennedy, former Supreme Court Justice 

Louis F. Powell, Jr., and Judge Harvey Wilkinson, III, U.S. Court 

of Appeals for the Fourth Circuit. 

5

Mr. Pate was a frequent lecturer and author of articles related 

to antitrust and other legal matters. In 1999, he served as the 

Ewald Distinguished Visiting Professor of Law at the University of 

Virginia. 

Mr. Pate received his bachelor’s degree with honors from the 

University of North Carolina in 1984, and earned his law degree 

from the University of Virginia in 1987, where he graduated first 

in his class and was a member of the Order of the Coif. Mr. Pate 

is a member of the Virginia and District of Columbia bars, and 

past Chair of the Virginia Bar Antitrust Section. He is also a member of the American Bar Association, the Federalist Society, and 

the Fourth Circuit Judicial Conference. And we welcome Assistant 

Attorney General Pate. 

Our second witness is the Honorable Timothy J. Muris, Chairman of the Federal Trade Commission. Mr. Muris was sworn in 

June 4, 2001, as Chairman of the FTC. Prior to serving as Chairman, Mr. Muris has held three previous positions at the Federal 

Trade Commission. From 1974 to 1976, he was Assistant Director 

of the Planning Office; from 1981 to 1983, he was Director of the 

Bureau of Consumer Protection. And from 1983 to 1985, he was Director of the Bureau of Competition. 

Mr. Muris also served with the Executive Office of the President 

Office of Management and Budget for 3 years. He has also been a 

law professor at George Mason University School of Law and interim dean of the law school from 1996 to 1997. Mr. Muris has also 

spent time in the private sector, and was of counsel with the law 

firm of Collier, Shannon, Rill & Scott, and with the firm of Howrey, 

Simon, Arnold & White. 

Mr. Muris graduated with high honors from San Diego State 

University in 1971, and received his JD from UCLA in 1974. He 

is a member of the American Bar Association’s Antitrust Section, 

and has written widely on antitrust, consumer protection, regulatory, and budget issues. 

Mr. Muris resides in Oakton, Virginia, with his wife, Pamela 

Harmon, and three children. Welcome, Chairman Muris, as well. 

Without objection, although there are no other Members here, we 

will make their opening statements a part of the record. And the 

Committee will now stand in recess until 3:15 just so people can 

make plans accordingly. 

[Recess.] 

Mr. SMITH. The Task Force on Antitrust of the Judiciary Committee will reconvene. 

Thank you all for your patience. The votes obviously took longer 

than we expected. We hope it will not deter our witnesses from appearing before us again in the future, but this is very unusual, it 

being the last week before we adjourn for the August District Work 

Period. 

We now go to our witnesses, and we look forward to their testimony. And, General Pate, we will begin with you. 

6

STATEMENT OF R. HEWITT PATE, ASSISTANT ATTORNEY 

GENERAL, ANTITRUST DIVISION, DEPARTMENT OF JUSTICE 

Mr. PATE. Thank you very much, Chairman Smith. It is a privilege to be here before the Committee today to talk about the activities of the Antitrust Division. 

As the Members of your Committee are well aware, competition 

is the cornerstone of our Nation’s economic foundation, and antitrust enforcement promotes and protects a robust free-market activity, helps consumers obtain innovative, high-quality goods and 

services, and to obtain those at lower prices. 

Antitrust enforcement has really enjoyed tremendous bipartisan 

support, and we are very appreciative to the Members of this Committee for that. I would like to particularly recognize Chairman 

Sensenbrenner’s efforts and those of others on the Committee in 

putting in place the Antitrust Modernization Commission. We look 

forward to working with that Commission as it explores ways that 

we can improve and strengthen antitrust enforcement in the 

United States. 

I would like to spend just a few minutes, if I may, highlighting 

three major enforcement areas for the Division. 

First, our criminal program, which detects, punishes, and deters 

price fixing and other types of illegal cartel behavior. Secondly, our 

merger review program, which prevents anticompetitive combinations that can lead to higher prices or to greater opportunities for 

collusive behavior. And then, finally, I will mention some aspects 

of our civil nonmerger program. 

On the criminal enforcement side, this is a core priority of the 

Division. And the reason for that is that cartel activity robs U.S. 

consumers and businesses of literally hundreds of millions of dollars each year. And this occurs over a wide range of products. 

During the current fiscal year, the Antitrust Division has been 

very active. We have already obtained almost $60 million in criminal fines, and obtained convictions of 11 corporations and 17 individuals. In the past fiscal year, we obtained $75 million in fines, 

with convictions of 20 corporations and 23 individuals. And at the 

Division, our emphasis has been on seeking longer and more certain prison terms, because we believe that—as opposed to fines, 

which often, even when they are imposed in large amounts, can be 

seen as a cost of doing business by some of these corporations who 

are involved—prison sentences are the real and most effective deterrent in this area. And we have obtained in the last fiscal year 

10,000 jail days of prison time and increased the average sentence 

to approximately 18 months, which is an all-time high for the Division. And we are at approximately that pace this year. 

We focus not only on international cartels, which are important 

because of their breadth and the range of the illegal activity they 

can involve, but also local conduct in the United States. 

Our amnesty program is really the key driver to the success of 

our criminal program. By allowing leniency for one participant in 

a cartel who comes in and exposes illegal conduct, this allows us 

to prevent cartels from forming, to destabilize those that do form, 

and to get reports of criminal activity that would otherwise go undiscovered. We want to look at ways of improving this leniency program. 

7

And more fundamentally, we will look forward to working with 

this Committee, because I think the time has come to consider 

whether it would be appropriate to increase the criminal penalties 

associated with antitrust violations, particularly in the wake of the 

Sarbanes-Oxley legislation which has raised the minimum prison 

terms and penalties associated with mail fraud, wire fraud, and 

other offenses that we often see in tandem with antitrust misconduct. We want to make sure that antitrust criminal behavior 

brings with it the type of penalties that reflect its seriousness in 

terms of the damage it does to consumers and to our economy. 

On the merger enforcement side, as you know, another key part 

of the Division’s mission is enforcing section 7 of the Clayton Act. 

We do this through section 7A of the Clayton Act, the Hart-ScottRodino Act, which requires reporting of mergers of a certain size. 

Certainly a big story there has been that the merger wave of the 

late 1990’s has very much retreated from the dizzying pace that 

you saw there, and merger filings are still dramatically down from 

what they were at the height of the late-1990’s activity. 

Thus far this fiscal year, the Division has opened 73 preliminary 

investigations and issued second requests for additional information in 16 of those investigations, and we have brought challenges 

to 13 mergers. Among those investigations that are currently pending that are of significance, the News Corporation/DirectTV transaction, First Data/Concord, and GE/Instrumentarium are occupying 

a good deal of time at the Division. 

Since June of 2001, when I began working at the Division, we 

have successfully challenged 20 of the 21 transactions that we 

deemed anticompetitive. We have resolved six of those by consent 

decree, nine through a restructuring of the transaction, four were 

abandoned after we indicated we would challenge the transaction, 

and two—the General Dynamics/Newport News and DirectTV/

Echostar transactions—were abandoned after the Division filed 

suit. 

As to our civil nonmerger program, these involve cases other 

than criminal prosecutions based on anticompetitive conduct challenged under the Sherman Act. We have been very active in this 

area as well. Perhaps the best-known case is the Microsoft case, in 

which we continue to be active in enforcing the decree, the consent 

decree that the Division obtained following the court of appeals’s 

opinion in that case. Just this morning, Division attorneys were in 

court with Judge Kollar-Kotelly for a status conference. I am 

pleased to say that we have managed to obtain significant improvements, particularly with respect to Microsoft’s licensing terms, 

which have been a subject of some interest with respect to the enforcement of the settlement. 

We are going to vigorously monitor Microsoft’s compliance with 

the settlement to make sure that consumers get the full benefit of 

the settlement. 

A final activity that I will mention, since you mentioned it, Mr. 

Chairman, in your opening statement, is our work in the telecom 

area. We have been very active in section 271 reviews of RBOC applications to enter local service provision in a variety of markets. 

That process has taken a good deal longer than some thought that 

it should, but we have been very diligent in trying to ensure that 

8

the Regional Bell Operating Companies put in place an operating 

system and other conditions that are going to lead to the introduction of competition in those areas. We are moving in that direction 

and moving toward the end of that process. And with the ability 

of different firms to offer packages of telecom service, and with the 

appearance on the scene of more significant cable telephany, we 

hope to see an improving outlook for competition there. 

We have been active in other areas as well, which I won’t detail—gun-jumping, market-allocation cases, and others. We want to 

work to continue to improve the timeliness of our civil nonmerger 

activity to make sure that cases don’t go on longer than they 

should and to make sure we are moving swiftly to get relief for consumers. 

We will continue to be active on the international front as 

globalization continues. Over 100 countries now have some form of 

national or regional antitrust enforcement regime, and so this is 

going to need to be a continued focus of the Division, working together with the Federal Trade Commission, through a variety of institutions such as the International Competition Network, the 

OECD, and others to make sure that antitrust enforcement on a 

global basis goes forward on sound terms. 

Mr. SMITH. General Pate, just as you don’t want those cases to 

go on longer than they should, we are going to need to move on 

to the next testimony as well. 

Mr. PATE. Well, if I might conclude, then, just to say on resources, since it was raised, we appreciate the support we have gotten from this Committee. We are in with a request this year for 

a $141 million budget, which we think is a judicious request. I 

know right now we are looking at a figure of about $128 million 

in the mark that is currently there, and I hope that the Committee 

will take seriously our need for sufficient resources to do our important work. 

I appreciate the opportunity to be here today. 

Mr. SMITH. Thank you, General Pate. 

[The prepared statement of Mr. Pate follows:]

PREPARED STATEMENT OF R. HEWITT PATE

Good afternoon, Mr. Chairman and members of the committee. It is a pleasure 

for me to appear before you today on behalf of the Antitrust Division of the Department of Justice to discuss the Division and its enforcement activities to protect consumers and businesses through sound and vigorous antitrust enforcement. 

As members of this Committee appreciate, competition is the cornerstone of our 

Nation’s economic foundation. Antitrust enforcement promotes and protects a robust 

free-market economy. It has helped American consumers obtain more innovative, 

high- quality goods and services at lower prices; and it has strengthened the competitiveness of American businesses in the global marketplace. 

That is not the same as guaranteeing the success of any particular competitor; 

we are not in the business of picking winners and losers, or dictating how a market 

should be structured. Those decisions should be made by competitive market forces. 

The goal of antitrust enforcement is to ensure that anticompetitive agreements, conduct, and mergers do not distort market outcomes. 

Antitrust enforcement has enjoyed substantial bipartisan support through the 

years, and we appreciate this Committee’s active interest in and strong support for 

our law enforcement mission. 

The first part of my testimony today will review recent developments in the Division’s three core enforcement programs: criminal, merger, and civil non-merger. 

Then I will describe some ongoing international and policy developments at the 

9

Antitrust Division to strengthen the foundation for effective antitrust enforcement 

here and around the world. 

ENFORCEMENT ACTIVITIES

Let me spend a few minutes highlighting some of the Antitrust Division’s recent 

work in each of these three major enforcement areas. In brief, the Antitrust Division’s criminal program detects, punishes and deters price-fixing and other illegal 

conduct by those who conspire to cheat consumers rather than compete to win their 

business. Our merger review program prevents anticompetitive combinations that 

can lead to higher prices or to increased opportunities for collusive behavior. And 

our civil non-merger program prevents the unlawful creation or abuse of monopoly 

power. 

Criminal Enforcement 

Criminal enforcement remains a core priority, and we are continuing to move 

forcefully against hard-core antitrust violations such as price-fixing, bid-rigging, and 

market allocation. Cartel activity essentially robs U.S. consumers and businesses of 

many hundreds of millions of dollars annually. This causes higher prices for virtually all consumers because of the wide range of products that cartel activity implicates, such as school milk, electricity, clothing, and food products, just to mention 

a few areas of prosecutions in recent years. During the current fiscal year, the Antitrust Division has obtained almost $60 

million in criminal fines, with convictions of 11 corporations and 17 individuals; in 

the previous fiscal year, the Division obtained over $75 million in fines, with convictions of 20 corporations and 23 individuals. We have continued a recent trend toward more certain and longer prison terms for individual antitrust offenders. In the 

last fiscal year, defendants in Division prosecutions received more than 10,000 days 

of jail time—a record high—with convicted individuals receiving sentences averaging more than 18 months, another record high average that is continuing thus 

far in the current fiscal year. 

The following cases from the last couple of years give good examples of the types 

of jail time we have been successful in pursuing: (i) the prosecution of Sotheby’s former Chairman, Alfred Taubman, who was convicted after trial and sentenced to 

a year and a day in prison and a $7.5 million fine for his role in the auction-house 

price-fixing scheme between Sotheby’s and Christie’s; (ii) the three-year jail term 

imposed on Elmore Roy Anderson for rigging USAID bids and defrauding USAID 

in connection with construction work in Egypt that the U.S. government funded as 

part of the Camp David Peace Accords; (iii) the 63-month jail term imposed on 

Melvyn Merberg for his role in rigging bids submitted to, and defrauding, Newark 

public schools and other government, not-for-profit, and private entities in the New 

York City metropolitan area; and (iv) a record-breaking ten-year sentence imposed 

on Austin ‘‘Sonny’’ Shelton, a former Guam government official, for orchestrating a 

bid-rigging, bribery, and money-laundering scheme involving FEMA-funded contracts in Guam. 

We have maintained a strong focus on international cartels because of the tremendous volume of commerce typically associated with such conspiracies. Currently, 

there are almost 50 sitting grand juries investigating international cartel activity. 

But we are committed to rooting out criminal anticompetitive conduct wherever it 

occurs, and have more than 70 grand juries investigating domestic cartels. Many of 

our recent criminal cases have been significant domestic cases involving price fixing 

and bid-rigging. 

Some of our recent criminal prosecutions include the following:

• In April of this year, two more individuals pled guilty to participating in a 

conspiracy to rig bids and allocate markets for advertising printing and 

graphics in the New York City area. This is a continuing investigation that 

since September 2002 has resulted in 13 guilty pleas, with two additional defendants scheduled for trial this October. Thus far, three defendants have 

been sentenced to prison terms of 37, 21, and 15 months, and an additional 

defendant has agreed to a prison term of 63–78 months when he is sentenced 

later this year. In addition, these defendants have been ordered to pay millions in restitution to victims and back taxes to the IRS. The charges arose 

out of wide-ranging bid-rigging and kickback schemes, pursuant to which the 

advertising executives subverted competitive bidding requirements and 

steered valuable contracts to suppliers who gave them cash, airline tickets, 

expensive clothing, limo service, and other kickbacks.

• In February of this year, Hoechst A.G., an international chemical conglomerate based in Germany, pled guilty and agreed to a $12 million fine for its 

10

role in a conspiracy that suppressed competition in the world markets for 

monochloroacetic acid (referred to as ‘‘MCAA’’), an industrial chemical used 

in the production of commercial and consumer products including pharmaceuticals, herbicides, and plastic additives. Hoechst was the third company to 

plead guilty and accept a multi-million-dollar fine in this ongoing investigation, following Dutch company Akzo Nobel Chemicals B.V.’s $12 million fine 

and French company Elf Atochem’s $5 million fine. The top executive of each 

company agreed to serve 3 months in prison.

• In November 2002, Morganite, Inc., pled guilty to participating in a decadelong international cartel to fix prices for carbon brushes and collectors used 

to transfer electrical current in direct current motors, and agreed to pay a $10 

million fine. At the same time, the company’s UK parent, Morgan Crucible 

Co. PLC, pled guilty to obstructing our investigation by giving us false information in an attempt to convince us that their price-fixing meetings with 

competitors were legitimate business meetings and by composing a written 

script containing this false information for a co-conspirator to use in answering Division questions. The parent company agreed to pay a $1 million fine.

• In October 2002, Arteva Specialties S.a.r.l., a Luxembourg company doing 

business out of Charlotte, North Carolina as KoSa, pled guilty to price-fixing 

and market allocation in polyester staple, a synthetic fiber used in textile 

products such as clothing, table and bedding linens, upholsteries, carpeting, 

and air and water filters. The company agreed to pay a $28.5 million fine, 

and its former director of textile staples pled guilty and agreed to eight 

months in prison and a $20,000 fine. This is part of a continuing investigation.

Other markets where the Antitrust Division has brought recent criminal prosecutions include: industrial chemical markets for organic peroxides, used in the manufacture of polyvinyl chloride, low-density polyethylene, and most polystyrene products such as containers and packaging; carbon cathode block, a heat- and chemicalresistant product used in aluminum smelters; nucleotides, used to enhance food flavor; magnetic iron oxide (MIO) particles, used in the manufacture of video and audio 

tapes; tactile tile; scrap metal; automotive tooling; industrial pumps used in wastewater treatment equipment; vitamins used in human nutritional supplements and 

livestock feed additives; federal highway construction contracting; home improvement contracting; periodical magazine distribution; sheriff’s auctions; collectible 

stamp auctions; and automotive replacement glass. 

The Division’s corporate leniency, or amnesty, program continues to be our most 

active generator of criminal investigations. Under the Division’s corporate leniency 

policy, a corporation that reports its illegal antitrust activity at an early stage will 

not be charged criminally for this activity if the company meets the requirements 

of the leniency program. For a corporation that comes forward after an investigation 

has begun to be eligible for leniency, the Division must not yet have evidence 

against the company that is likely to result in a sustainable conviction. Executives 

of the company who cooperate with the investigation are also covered by the leniency. Acceptance into the Division’s leniency program can save a company tens of 

millions of dollars in fines and can avoid the prosecution and incarceration of its 

culpable executives. 

This policy, while allowing leniency for one participant in the cartel, has tremendous benefits to enforcers and consumers. First, the mere possibility that one of the 

cartel members will get leniency if it is the first to come in to the Division works 

to prevent cartels from forming in the first place, because businesses have an increased risk they will be targeted for prosecution as a result of a fellow cartel member reporting on their illegal activities, subjecting them to heavy criminal fines and 

incarceration of their culpable executives. Second, even if a cartel does form, the 

benefits associated with the leniency policy lead to destabilization of the cartel by 

creating a powerful incentive for a company to report the cartel to antitrust authorities. Third, having a member of the cartel provide evidence to authorities helps ensure that prosecutions of the cartel are likely to be more successful than without 

such cooperation. Fourth, companies targeted for prosecution as a result of a particular grant of leniency not infrequently seek to negotiate a plea agreement and 

seek to obtain more lenient treatment than otherwise by reporting on activity of an 

unrelated cartel. Thus, the leniency program has something of a domino effect. One 

leniency grant may ultimately have the effect of enabling the Division to prosecute 

multiple cartels. 

The Division’s leniency policy is a very important factor behind the Division’s increased ability to crack cartels in recent years; of course there are also other factors, 

including the Division’s increasing use of search warrants and the increased assistVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
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ance provided by foreign antitrust authorities, including coordinated searches in 

multiple jurisdictions. We intend to continue to look for ways to improve the leniency program in order to destabilize and prosecute more cartels on behalf of American businesses and consumers. Notably, the Division’s success with the leniency 

program has influenced antitrust authorities around the world to adopt or strengthen their own leniency policies. The European Union revised its leniency program 

last year to closely mirror our own, making it easier for corporations who need a 

‘‘package deal’’ to come forward and cooperate. 

In addition to leniency applications, the Division discovers antitrust violations 

from a variety of sources, including citizen complaints made to the Division’s New 

Case Unit or to a Division field office, leads from foreign antitrust authorities, and 

news reports; leads may also come from a new entrant whom cartel members have 

tried to recruit into an ongoing antitrust conspiracy, a customer who has suspected 

price-fixing or bid-rigging, a disgruntled cartel member, or even a relative of a cartel 

member or industry insider. 

While the increasing jail sentences and huge multi-million dollar fines that have 

characterized international cartel prosecutions are vitally important, the Antitrust 

Division does not limit its enforcement to those cases; we also prosecute multiple 

cases that, while seemingly small, are significant to the victims and to our overall 

efforts at deterrence. We are determined to bring antitrust violators to justice; and 

we also want the level of our enforcement activity, including the fines and sentences, to send a powerful and unmistakable deterrent message to those in our 

country and around the world who would victimize American consumers and the 

American marketplace. For that reason, I believe it is time to consider whether it 

is appropriate to increase the penalties associated with criminal antitrust violations. 

I look forward to working with this Committee on that issue. 

Merger Enforcement 

Another core element of the Division’s enforcement mission is enforcing section 7 

of the Clayton Act against mergers and acquisitions that may substantially lessen 

competition or tend to create a monopoly. Section 7 authorizes the Division to file 

suit to block anticompetitive mergers, and section 7A of the Clayton Act, known as 

the Hart- Scott-Rodino Antitrust Improvements Act, requires parties to most mergers above a certain dollar value threshold ($50 million) to file notification with the 

federal enforcement agencies and observe a prescribed waiting period in order to 

give the agencies adequate time to review the merger. 

The merger wave of recent years has subsided from its dizzying heights of a few 

years ago. We received Hart-Scott-Rodino Act pre-merger filings for 1,187 transactions in Fiscal Year 2002, and have received filings for over 800 thus far this fiscal year, compared to over 4,500 in each of the previous two fiscal years. Part of 

that reduction is due to the enactment of the Hart-Scott-Rodino Antitrust Improvements Act of 2000, which significantly raised the HSR filing thresholds. Even so, 

it is apparent that merger activity is down. 

Despite the slowdown, there are still many mergers that require careful review, 

and we are working hard to ensure that those transactions are receiving appropriate 

levels of scrutiny. Thus far this fiscal year, the Antitrust Division has opened 75 

preliminary investigations, issued second requests for additional information to the 

parties in 16 of those investigations, and challenged 13 mergers. We have a number 

of important merger investigations ongoing, including investigations involving News 

Corp./DirectTV, First Data/Concord and GE/Instrumentarium, among others. We 

will closely examine those transactions, and all mergers we review, for potential 

anticompetitive impacts on consumers. 

Since June 2001, the Division has challenged 34 mergers it deemed anticompetitive, and we have been successful in 31 of the 32 matters that have thus far reached 

a conclusion. Nine of these matters were resolved by consent decree, twelve through 

a ‘‘fix-it-first’’ restructuring, seven were abandoned after the Division indicated that 

it would file suit, and three—General Dynamics/Newport News, Hughes/Echostar, 

and SGL Carbon/ Carbide/Graphite Group—were abandoned after the Division filed 

suit. The Division was unsuccessful in seeking to block the Sungard/Comdisco merger, a transaction the Division asserted was likely substantially to lessen competition 

in the market for shared ‘‘hotsite’’ disaster recovery services. Two of the merger 

challenges remain in litigation. 

The range of markets involved in these merger challenges includes airlines, airline reservation systems, banking, defense contracting, dairy processing, fresh 

bread, corn wet milling, molded doors and doorskins, industrial rapid prototyping 

systems, radio broadcasting, satellite multichannel video programming distribution, 

electric power, ready-mix concrete, college textbooks, computer-based testing, comVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6621 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
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puter processing center ‘‘hotsite’’ disaster recovery services, and nuclear submarine 

construction. 

Some of our recent and significant recent merger challenges include:

• UPM Kymmene OYI/MACtac. The Division sued and had a preliminary injunction hearing last month in an effort to block a merger between Raflatac 

(a UPM subsidiary) and MACtac, the second and third largest producers of 

pressure sensitive labelstock in North America. Labelstock is the base material for labels used in a variety of applications that American consumers encounter every day, including shipping labels and supermarket scale labels. 

The Division concluded that the merger would facilitate coordination between 

the merged company and other North American producers of bulk paper 

labelstock, and would substantially reduce competition in the production of 

bulk paper labelstock and result in higher prices for bulk paper labelstock 

throughout the United States.

• Northrop Grumman/TRW. Northrop was one of only two U.S. companies that 

design, develop, and produce the payload used in reconnaissance satellites. 

TRW was one of only a few companies with the ability to serve as a prime 

contractor on U.S. government reconnaissance satellite programs. Since Defense Department contracts typically rely on the prime contractor to select 

sub-systems, Northrop’s acquisition of TRW—which enabled it to be both 

prime contractor and payload provider for reconnaissance satellites—resulted 

in a vertical combination that could have substantially lessened competition 

in the development and sale of reconnaissance satellites systems used by the 

U.S. military, by giving Northrop the ability and incentive to lessen competition by favoring its in-house payload to the detriment or foreclosure of its payload competitors and by refusing to sell, or selling at disadvantageous terms, 

its payload to competing prime contractors. To prevent this result, the Division challenged the merger and entered into a consent decree requiring Northrop to act in a non-discriminatory manner in (1) choosing a payload for a 

satellite program where Northrop is acting as the prime contractor, and (2) 

supplying its payload to prime contractors competing with Northrop for U.S. 

satellite programs. The consent decree, fashioned in consultation with the Defense Department, also gives the Secretary of the Air Force significant power 

to ensure compliance with the consent decree, including the ability to ask the 

Department of Justice to seek civil penalties of up to $10 million for each violation of the decree.

• Hughes/Echostar. Hughes Electronics’s DirecTV and Echostar’s DISH Network were the only two significant direct broadcast satellite licensees in the 

United States. Their proposed merger would have created a monopoly in 

areas where cable television is not available, primarily rural areas, thereby 

eliminating competitive choice for millions of households. It also would have 

left tens of millions of other households—for whom DirecTV, DISH Network, 

and the local cable company now compete to provide multichannel video programming distribution service—with only two competitive choices. After the 

Division filed suit to block the merger as anticompetitive, the parties abandoned the merger.

• Dairy Farmers of America/Southern Belle. This 2002 merger between two 

dairy processors was not subject to the Hart-Scott-Rodino premerger notification requirements, because its dollar value fell below the statutory threshold 

for reporting, and the Division did not learn about it until after it had been 

completed. DFA’s acquisition eliminated the only other independent bidder for 

school milk in the area, resulting in a monopoly in 47 school districts in Kentucky and Tennessee, and reduced the number of independent bidders from 

three to two in 54 other school districts in those two states. The Division filed 

suit in April of this year to require DFA to divest its interests in Southern 

Belle Dairy in order to restore competition for milk prices in those school districts. The enforcement action is pending.

• General Dynamics/Newport News. General Dynamics and Newport News 

were the only two nuclear-capable shipyards and the only designers and producers of nuclear submarines for the U.S. Navy. The two shipbuilders also led 

opposing teams to develop the next generation propulsion system for use in 

submarines and surface combatants, so-called electric drive. Our staff worked 

in close consultation with the Department of Defense, the only customer, in 

evaluating the proposed merger. Our complaint alleged that the combination 

would create a monopoly in nuclear submarine design and construction, and 

would substantially lessen competition for electric drive and surface combatVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6621 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
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ants. After the parties terminated their merger agreement, Newport News received a second bid from Northrop Grumman, which did not raise significant 

competitive issues.

• Suiza/Dean. Suiza and Dean were dominant firms in several geographic markets for fluid milk processing and school milk markets. The parties agreed to 

divest eleven dairies to National Dairy Holdings, L.P. (NDH), a newly formed 

partnership that is 50 percent owned by Dairy Farmers of America Inc. 

(DFA), a dairy farmer cooperative. The parties also agreed to modify Suiza’s 

supply contract with DFA to ensure that dairies owned by the merged firm 

in the areas affected by the divestitures would be free to buy their milk from 

sources other than DFA.

• United/USAirways. At the time of the transaction, United and USAirways 

were the second and sixth largest U.S. airlines. The Division concluded that 

USAirways was United’s most significant competitor on densely traveled, 

high-revenue routes between their hubs, such as Philadelphia and Denver, as 

well as for nonstop travel to and from Washington D.C. and Baltimore, and 

on many routes up and down the East Coast. The acquisition would have 

given United a monopoly or duopoly on nonstop service on over 30 routes, 

where consumers spend over $1.6 billion annually, and would have substantially limited the competition it faced on numerous other routes representing 

over $4 billion in revenues. The parties abandoned the transaction after the 

Division indicated its intention to challenge it.

• 3D Systems/DTM. The Division concluded that the acquisition as initially 

proposed would have substantially lessened competition in the U.S. industrial 

rapid prototyping systems market, by reducing the number of competitors in 

the U.S. market from three to two and limiting the dynamic competition that 

has resulted in lower prices to customers and technological improvements to 

rapid prototyping systems. Rapid prototyping is a process by which a machine 

transforms a computer design into three-dimensional objects, speeding the design process for everything from cellular phones to medical equipment. The 

Division filed suit to block the transaction, and subsequently reached a settlement with 3D Systems Corporation that allowed the company to go forward 

with its purchase of DTM Corporation, provided that 3D and DTM agreed to 

license their rapid prototyping patents to a company that will compete in the 

U.S. market. The settlement was designed to permit new entry by requiring 

3D and DTM to license their rapid prototyping-related patents to a firm that 

will compete in the U.S. market and that currently manufactures rapid prototyping equipment.

We have also been very active in cases related to our merger enforcement program, filing several cases against ‘‘gun-jumping’’ and other violations of the HartScott-Rodino premerger notification and waiting period requirements. It is important that merging parties strictly adhere to the requirements of the HSR Act and 

maintain their companies as separate and independent firms during the HSR waiting period. 

In a case we filed against Gemstar and TV Guide in February of this year, we 

charged Gemstar with assuming premature control over TV Guide prior to its July 

2000 acquisition, in violation of the HSR Act’s pre-merger waiting period requirements, as well as with fixing prices and allocating customers in violation of section 

1 of the Sherman Act. Starting in mid-1999, a full year before the merger, Gemstar 

and TV Guide had agreed to stop competing for customers, decided together on 

prices and terms to be offered, and jointly managed their interactive program guide 

business. Filed along with our complaint was a consent decree under which Gemstar 

agreed to pay a record civil penalty of $5.67 million, and that also gave customers 

that signed contracts with TV Guide during the pre-merger period a chance to rescind those contracts. 

We brought similar case in September 2001 against Computer Associates International, Inc. and Platinum Technology International, Inc., charging that the parties 

had agreed that Platinum would limit the price discounts and other terms it offered 

its customers during the premerger waiting period, and that Computer Associates 

had obtained premature operational control of Platinum, prematurely reducing competition between the two companies. In April 2002, the Division entered into a consent decree with Computer Associates requiring the payment of $638,000 in civil 

penalties and prohibiting Computer Associates from agreeing on prices, approving 

or rejecting proposed customer contracts, or exchanging prospective bid information 

with any future merger partner. 

14

Civil Non-merger Enforcement 

Civil non-merger cases are cases, other than criminal prosecutions, that are based 

on anticompetitive conduct under the Sherman Act. We have been very active in 

this area as well. 

The Division’s best-known recent civil non-merger case is the Microsoft case. After 

the court of appeals rendered its decision narrowing the basis of liability and 

vacating the remedy, and ordering a new remedy hearing before a different district 

judge, we reached a settlement with Microsoft, which the district court approved 

and entered with minor revisions. The consent decree enjoins the conduct found to 

be unlawful from recurring and takes proactive steps to restore lost competition. All 

states that joined in the Division’s enforcement action either joined in our settlement or have reached separate settlements with Microsoft, except for Massachusetts, which is appealing the district court’s decision denying the vast majority of 

the additional relief it and eight other states had sought. We are not participating 

in that appeal, but we have filed appellate briefs supporting the decision by the district court to deny a motion by the Computer and Communications Industry Association and the Software & Information Industry Association to intervene in our 

case in order to appeal the court’s approval of the settlement. 

We are continuing to actively monitor Microsoft’s compliance with the decree. In 

April, we prompted Microsoft to revise its terms for licensing to third parties certain 

technology used by Microsoft server operating system products to interoperate with 

Windows operating system products, to eliminate the non-disclosure agreement covering the licensing terms and to make the licenses more accessible and functional. 

Earlier this month we filed a compliance report with the district court describing 

our recent compliance enforcement activities, including a separate section written 

by Microsoft describing its compliance efforts. The Division remains committed to 

enforcing complete compliance with the consent decree. 

Let me mention some other recent civil non-merger cases. 

In January of this year, the Division filed a lawsuit against NT Media (New 

Times) and Village Voice Media, charging them with unlawful market allocation in 

violation of section 1 of the Sherman Act. New Times and Village Voice Media are 

the nation’s two leading publishers of alternative news weeklies, and had been 

head-to-head competitors in publishing alternative news weeklies in Cleveland and 

Los Angeles. In October 2002, however, New Times agreed to shut down its Los Angeles news weekly, the New Times Los Angeles, if Village Voice Media would close 

its news weekly in Cleveland, the Cleveland Free Times. Thus, the companies 

‘‘swapped’’ markets, leaving New Times with a monopoly in Cleveland and Village 

Voice Media with a monopoly in Los Angeles. The lawsuit was settled by consent 

decree, in which the parties agreed to terminate their illegal market allocation 

agreement, allow affected advertisers in Los Angeles and Cleveland to terminate 

their contracts, and divest the assets of the New Times Los Angeles and the Cleveland Free Times to new entrants in those markets. 

Last December, the Division sued Mountain Health Care, an independent physicians organization in Asheville, North Carolina, charging that it was restraining 

price and other forms of competition among physicians in Western North Carolina 

by adopting a uniform fee schedule governing the prices of its participating physicians and negotiating with health plans on their behalf, resulting in higher rates 

charged to health plans, and ultimately higher health costs for ultimate consumers. 

The case was settled with a consent decree requiring Mountain Health to cease operations and dissolve. 

Last summer, the Division sued The MathWorks Inc. and Wind River Systems 

Inc. to stop them from illegally allocating the markets for software used to design 

dynamic control systems. Dynamic control system design software enables engineers 

to develop the computerized control systems of sophisticated devices, such as antilock braking systems for automobiles, guidance and navigation control systems for 

unmanned spacecraft, and flight control systems for aircraft. High-technology products like these work behind the scenes to help build some of the most sophisticated 

products in our economy. We concluded that the ‘‘licensing’’ arrangement between 

the parties operated primarily to force the exit of the Wind River product from the 

market and to prevent it from re-emerging in the hands of some other party. The 

parties settled the case with a consent decree requiring The MathWorks to divest 

Wind River’s design control software assets. 

We also have cases currently in litigation. In our case against Visa and 

MasterCard, we are defending against an appeal challenging the district court’s 

finding of partial liability—the district court found against the Division on its challenge to the dual governance structure, permitting member banks to simultaneously 

participate in management of both networks, but found for the Division on its challenge to the practice of prohibiting members from issuing competing cards. In the 

15

case against Dentsply International for unlawfully maintaining its monopoly in the 

market for artificial teeth, we completed trial in May 2002, and post-trial briefing 

and argument last September, and are now awaiting the court’s ruling. 

INTERNATIONAL AND POLICY INITIATIVES

International 

Increased economic globalization is continuing to create new challenges for antitrust enforcement. With corporations and corporate alliances stretching across the 

world, and with nearly 100 national and regional antitrust regimes now operating 

in the international arena, seeking convergence in procedure and substance where 

possible—without compromising sound enforcement principles—helps minimize the 

cost, complexity, and sheer uncertainty of enforcement and compliance that could 

otherwise become a major hindrance to procompetitive business activity and economic growth. Accordingly, we have continued working with antitrust enforcers 

abroad to forge effective cooperative relationships based on our core beliefs in competition. 

A special focus has been the European Union, which stands as the most important 

antitrust enforcer outside our borders. Despite our different legal traditions and cultures, and despite substantial differences in the language of our governing laws, the 

U.S. and EU enforcement agencies have been able to develop largely consistent competition policies, built on sound economic foundations directed at the goal of promoting consumer welfare through competition rather than on protecting firms from 

efficiency-enhancing mergers and other arrangements that may increase competitive 

pressures. The past two years have been among the most productive ever in our relationship, as a result of increased contact between senior antitrust officials on both 

sides of the Atlantic, as well as a reinvigorated U.S.-EU merger working group. The 

working group has analyzed important merger topics such as efficiencies and our 

differing policies towards conglomerate mergers. It has also developed a set of merger review ‘‘best practices’’ that the Division, the FTC, and the EC published last October. 

In addition to our bilateral efforts with the EU, Canada, Japan, and others, we 

are also pursuing multilateral efforts to promote cooperation and convergence 

around sound antitrust principles, through the International Competition Network. 

The ICN, which we and the FTC helped take the lead in launching less than two 

years ago, has emerged as a global network of antitrust authorities from more than 

70 developed and developing countries on six continents, representing nearly 90 percent of the world’s Gross Domestic Product. Its virtual network structure, and its 

organization around diverse working groups that consult frequently and informally 

throughout the year, have enabled the ICN to produce meaningful results very 

quickly. 

At an ICN conference last month in Merida, Mexico, we adopted guiding principles and recommended practices for merger notification and review procedures 

that had been prepared by the ICN Merger Review Working Group; the recommended practices are non-binding, and governments will implement them voluntarily, as appropriate. We also discussed efforts to assist new antitrust agencies in 

developing economies, as described in a report by the ICN Capacity Building and 

Competition Policy Implementation Working Group. And the Competition Advocacy 

Working Group led discussions on how competition advocacy efforts can promote 

procompetitive outcomes across other areas of government. The ICN also established 

a new working group on the role of competition enforcement in regulated sectors, 

and it agreed to explore the potential for work on the topic of cartel enforcement. 

Through these and other international efforts, the Antitrust Division is committed 

to promoting convergence around sound antitrust principles in order to strengthen 

enforcement while minimizing unnecessary burdens on corporations doing business 

around the world. 

Policy 

The Division has also been undertaking a number of policy initiatives to revitalize 

our economic and legal approaches in several areas of enforcement policy, including 

intellectual property, remedies, coordinated effects in merger enforcement, and 

health care. 

Our intellectual property hearings are a response to the increasing frequency with 

which intellectual property issues have arisen in our merger and civil conduct investigations and enforcement actions in recent years. While intellectual property and 

antitrust law share the common purpose of promoting dynamic competition and 

thereby enhancing consumer welfare, issues at the intersection of intellectual property and antitrust can be murky. More than ever before, the creation and disseminaVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6621 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
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tion of intellectual property is a major engine driving economic growth. Consequently, as antitrust law addresses the competitive implications of conduct involving intellectual property, and as intellectual property law addresses the nature and 

scope of intellectual property rights, care must be taken to maintain proper incentives for the innovation and creativity on which our national economy depends. Our 

joint hearings with the FTC on this subject, which took place from February to October of last year, drew from a broad cross-section of business leaders, legal practitioners, economists, and academic experts with extensive experience in these areas. 

We expect to publish a report by the end of this year, which we hope will provide 

helpful insights into the effects of competition and patent law and policy on innovation and other aspects of consumer welfare. 

Our remedies policy initiative is a response to the basic fact that we not only need 

to win the battle, we need to win the war. That is, it does not help consumers to 

enforce against an illegal merger or other agreement if, at the end of the day, the 

relief reached does not fully and adequately protect competition. The Division has 

been reviewing this important component of antitrust enforcement, examining our 

guiding principles and the legal and economic basis for imposition of particular remedies, as well as administrative issues, to better ensure that our remedies protect 

and preserve the competitive interests that gave rise to our enforcement action. 

Another recent policy initiative is our reinvigoration of coordinated effects analysis in merger review. In recent years, theories of unilateral effects, focusing on the 

potential for the merged firm to exercise market power on its own, have predominated in our merger challenges. We are committed to considering coordinated effects 

theories, which focus on the potential for the merged firm to exercise market power 

in coordination with other firms in the market. A team of Division lawyers and 

economists undertook a months-long re-examination of coordinated effects analysis, 

and the results of their efforts will be used throughout the Division in appropriate 

situations. 

Our joint hearings with the FTC on health care competition law and policy reflect 

the continuing strong interest of antitrust enforcers and the public in the variety 

of complex issues in this area. Since the hearings began in February of this year, 

there have been 22 days of hearings on a wide range of important topics, including 

defining hospital markets properly for analysis, the role of specialty hospitals, the 

significance of hospitals’ non-profit status, vertical arrangements, entry barriers and 

monopoly and monopsony power in health insurance, physician collective bargaining, the state action and Noerr- Pennington doctrines, and enforcement agency 

guidance. Future sessions will cover such topics as defining physician markets properly, physician information sharing, group purchasing organizations, criminal and 

civil remedies, and international perspectives. The hearings are generating valuable 

input from relevant medical, insurance, legal, academic, and government groups on 

these important topics, enhancing understanding in these areas. We expect the 

hearings to continue until October, and anticipate publishing a public report on the 

hearings sometime in the spring of 2004. 

CONCLUSION

Mr. Chairman, the men and women of the Antitrust Division approach our critical 

mission to enforce the U.S. antitrust laws with the utmost seriousness. We are committed to continuing the excellent work that has always been done by the Division, 

while positioning ourselves to meet the challenges of the future. Given the important role of competition in our nation’s economy, the Antitrust Division must be a 

vigorous, formidable, and effective enforcer of our antitrust laws. 

Thank you. I would be happy to answer any questions.

Mr. SMITH. Chairman Muris. 

STATEMENT OF THE HONORABLE TIMOTHY J. MURIS, 

CHAIRMAN, FEDERAL TRADE COMMISSION 

Mr. MURIS. Thank you very much, Mr. Chairman, and Mr. Conyers. I am pleased to appear here before you today with Hew Pate, 

my friend and colleague from the Antitrust Division, to discuss 

these important issues. 

Competition, the cornerstone of our economy, promotes lower 

prices, higher quality, and greater innovation. Let me briefly review three principles that underlie our efforts to promote competition. First, we focus on segments of the economy that have the bigVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6601 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
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gest impact on consumers. Second, we consider the scope of antitrust as well as its content. Third, we constantly work to improve 

our processes, including the ways we inform the public about our 

policies and enforcement standards. 

To begin, we take full advantage of a uniquely broad set of tools 

to promote and protect competition in key sectors of the economy. 

For example, we focus on health care because it accounts for over 

15 percent of our GDP, a quarter more than in 1990. 

Prescription drug prices have grown even faster, doubling between 1995 and 2000. Nearly 25 percent of our new antitrust investigations involve pharmaceuticals. 

Specifically, we have used our various tools to stem abuses of the 

Hatch-Waxman amendments. Hatch-Waxman increased generic 

drug entry, helping consumers save billions. Some brand-name 

manufacturers, however, have gamed the amendments to forestall 

generic competition. The Commission issued a report evaluating 

anticompetitive uses of Hatch-Waxman. The House and Senate 

have each passed bills that incorporate the study’s major legislative 

recommendations. 

The Commission has also brought cases against brand-named 

firms’ alleged efforts to slow generic entry either through agreements to pay generic manufacturers to stay out of the market, or 

through improper action to trigger delay under Hatch-Waxman. 

The Commission recently obtained strong, and in some cases unprecedented, relief against Bristol-Myers Squibb for allegedly engaging in both types of conduct. 

We also filed an amicus brief in a private case involving some of 

the same practices in which Bristol-Myers asserted Noerr-Pennington immunity. The court ruled against Bristol-Myers, adopting 

much of our reasoning. 

Thus, we applied our research and reporting function, our powers 

of persuasion, and law enforcement to address abuses of the HatchWaxman amendments. This combined approach produced significant results for consumers. 

Turning to energy. The FTC has also focused considerable resources. Besides reviewing petroleum and natural gas mergers, the 

Commission has charged Union Oil Company of California with 

monopolization by allegedly failing to disclose its patents in a regulatory proceeding, which may cost California consumers millions in 

higher gas prices. 

The FTC is also studying, and will report on, the causes of volatility in refined petroleum products prices, and is monitoring gasoline prices to identify possible anticompetitive activities. 

Besides health and energy, the continuing development of hightech industries influences our agenda. For example, the FTC is 

studying a variety of new technology issues through its Internet 

Task Force. The Task Force has organized a public workshop on Ecommerce issues, advocated consumers’ interest in regulatory decisions affecting E-commerce, and completed a report on how restrictions on Internet sales raised prices and reduced choices in wine 

markets. 

Let me discuss briefly the Commission’s efforts to consider the 

scope of certain antitrust immunities. We established task forces to 

study two doctrines: State action and Noerr-Pennington, that insuVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6601 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
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1This written statement represents the views of the Federal Trade Commission. My oral presentation and responses are my own and do not necessarily reflect the views of the Commission 

or of any other Commissioner. 

late certain activity from the antitrust laws. Properly applied, both 

doctrines serve important constitutional interests, but some court 

decisions have expanded both doctrines beyond the Supreme 

Court’s original precepts. 

Our Task Forces have resulted in cases that may provide an opportunity for clarification of the law. 

I will conclude with our efforts to improve our internal processes. 

Currently, we are working with the Antitrust Division to refine and 

test an electronic HSR notification system to reduce filing burdens 

and provide us with valuable data collection. The Commission staff 

also obtained input from experienced antitrust practitioners around 

the country on possible improvements in merger investigations and 

remedy negotiations. These efforts resulted in public statements on 

both issues designed to improve our processes. 

Moreover, the Commission has worked to increase public awareness and understanding of its actions by explaining why it decided 

not to take action in certain cases, drafting more informative analyses to aid public comment on consent agreements, and publishing 

its responses to public comments on consent agreements. 

We will continue to maintain a competitive marketplace for U.S. 

businesses and consumers. I thank you for your support of our important work. 

Mr. SMITH. Thank you, Chairman Muris. 

[The prepared statement of Mr. Muris follows:]

PREPARED STATEMENT OF TIMOTHY J. MURIS

Mr. Chairman and Members of the Task Force, I am Timothy J. Muris, Chairman 

of the Federal Trade Commission (‘‘Commission’’ or ‘‘FTC’’). I am pleased to appear 

before you to discuss the FTC’s activities to promote competition.1

Our testimony today will outline the principles that underlie the Commission’s 

agenda, and describe a number of our accomplishments. While my colleagues and 

I bear the ultimate responsibility for the agency’s actions, we rely on a dedicated, 

professional, and highly-qualified staff. 

I. INTRODUCTION

Through vigorous enforcement of the antitrust laws and related activities, the 

Federal Trade Commission helps ensure that markets operate freely and openly. Aggressive competition promotes lower prices, higher quality, and greater innovation. 

The work of the FTC is critical in protecting and strengthening the free and open 

competition that is the cornerstone of our economy. As the Commission implements 

its competition agenda, we confer regularly with our colleagues in the Department 

of Justice’s Antitrust Division to ensure a consistent federal approach. 

It is virtually undisputed today that the purpose of antitrust is to protect consumers, that economic analysis should guide decisions, and that horizontal cases involving mergers and agreements among competitors are the mainstays of antitrust. 

A freely functioning market, subject to the rules of antitrust, provides maximum 

benefits to consumers. 

To maximize our success, we need to articulate both our substantive aims and the 

strategies we will employ to achieve them. By doing so, we can be proactive rather 

than reactive, and we can better protect consumers. 

Our strategic framework includes the following key elements:

• The FTC concentrates on those segments of the economy that have the biggest impact on consumers, which currently include health care, energy, and 

technology-related markets, and on conduct that poses the largest threat to 

consumer welfare.

19

2 15 U.S.C. § 18a, as amended, Pub. L. No. 106–553, 114 Stat. 2762 (2000). 3Throughout the 1990s, the FTC typically had no more than one or two antitrust cases in 

administrative litigation. The eight nonmerger administrative cases currently pending are Schering-Plough Corp., Dkt. No. 9297 (July 2, 2002) (Initial Decision); Polygram Holding, Inc., Dkt. 

No. 9298 (June 28, 2002) (Initial Decision); Rambus, Inc., Dkt. No. 9302 (June 18, 2002) (complaint); Union Oil Co. of California, Dkt. No. 9305 (Mar. 4, 2003) (complaint); California Pacific 

Medical Group, Inc. dba Brown and Toland Medical Group, Dkt. No. 9306 (July 8, 2003) (complaint); Alabama Trucking Association, Inc., Dkt. No. 9307 (July 8, 2003) (complaint); Movers 

Conference of Mississippi, Inc., Dkt. No. 9308 (July 8, 2003) (complaint); and Kentucky Household Goods Carriers Association, Inc., Dkt. No. 9309 (July 8, 2003) (complaint). 4 American Medical Assn., 94 F.T.C. 701 (1979), aff’d as modified, 638 F.2d 443 (2d Cir. 1980), 

aff’d by an equally divided Court, 455 U.S. 676 (1982) (order modified, 99 F.T.C. 440 (1982), 

100 F.T.C. 572 (1982), and 114 F.T.C. 575 (1991)). 

• We take full advantage of the uniquely broad set of powers and capabilities 

that Congress has entrusted to us, including law enforcement, research and 

reporting, and advocacy on behalf of consumers and competition.

• The Commission recognizes that the scope of its activities is as important as 

their content. While certain immunities from the antitrust laws are necessary 

and appropriate, undue expansion of those immunities, beyond the original 

intent and purpose, harms consumers.

• The FTC conveys to the public, with as much clarity as possible, the policies 

and standards it applies in its decisions. To minimize the costs that our work 

imposes on the economy, we also continuously seek to improve our processes.

• The FTC assists and cooperates with competition agencies in countries 

throughout the world.

Merger enforcement continues to be a major focus of the FTC’s competition workload. Stopping mergers that lessen competition ensures that consumers will have 

the benefit of lower prices and greater choices in their selection of goods and services. During the unprecedented merger wave in the late 1990s through 2000, the 

agency was forced to divert resources to meet its statutory responsibilities under the 

Hart-Scott-Rodino Act (‘‘HSR’’).2 With the significant recent decline in merger activity, the Commission has been able to restore the historical balance of enforcement 

efforts to both merger and nonmerger areas. Since the peak in merger activity in 

2000, when the agency opened only 25 nonmerger investigations, the FTC has 

worked to reinvigorate its nonmerger enforcement program. In 2001, the agency 

opened 56 new nonmerger investigations, and in 2002, the agency opened another 

59 nonmerger investigations. The results of this renewed investment in non-merger 

enforcement are now emerging, and include a total of 16 non-merger enforcement 

actions taken thus far in FY 2003, more than any year since 1980; as well as eight 

non-merger matters in administrative litigation.3

In the remainder of this testimony, I will elaborate on both our strategic framework and the results it has helped us obtain. 

II. FOCUSING ON KEY SECTORS OF THE ECONOMY

As part of its proactive approach, the FTC concentrates resources on anticompetitive conduct in areas of the economy that have a major impact on consumers’ budgets, including energy, health care, and technology. The FTC employs a variety of 

tools to promote and protect competition in these and other areas. In addition to 

enforcing the antitrust laws, the agency holds workshops, conducts studies, writes 

reports, and advocates on behalf of consumers and competition before other government entities. 

A. Health Care 

Health-related products and services account for more than 15 percent of the 

United States gross domestic product, an increase of 25 percent since 1990. Without 

effective antitrust enforcement, those figures could grow even higher. In the twenty 

years since the Supreme Court affirmed the FTC’s jurisdiction over health care professionals in the American Medical Association case,4 the FTC has worked to enable 

new and more efficient arrangements for delivering and financing health care services by challenging artificial barriers to competition among health care providers. 

1. Law Enforcement Actions Involving Health Care 

The FTC has placed renewed emphasis on stopping collusion and other anticompetitive practices that raise health care costs and decrease quality. 

a. Law Enforcement Involving Pharmaceutical Companies. The growing 

cost of prescription drugs is a significant concern for patients, employers, and govVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6621 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
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5See National Health Expenditures, by Source of Funds and Type of Expenditures, Health 

Care Financing Administration, available at <http://www.hcfa.gov/stats/nhe-oact/tables/

t3.htm>. 6Pfizer Inc., Dkt. No. C–4075 (May 27, 2003) (consent order). 7 Baxter International Inc. and Wyeth, Dkt. No. C–4068 (Feb. 3, 2003). 8 Amgen Inc. and Immunex Corp., Dkt. No. C–4056 (Sept. 3, 2002). 9Drug Price Competition and Patent Restoration Act of 1984, Pub. L. No. 98–417, 98 Stat. 

1585 (1984) (codified as amended 21 U.S.C. § 355 (1994)). 10 21 U.S.C. § 301 et seq. 11See H.R. Rep. No. 98–857, pt. 1, at 14 (1984), reprinted in 1984 U.S.C.C.A.N. 2647, 2647. 12 CONGRESSIONAL BUDGET OFFICE, HOW INCREASED COMPETITION FROM GENERIC DRUGS HAS

AFFECTED PRICES AND RETURNS IN THE PHARMACEUTICAL INDUSTRY (July 1998), available at 

<http://www.cbo.gov>. 13 Bristol-Myers Squibb Co., Dkt. No. C–4076 (Apr. 14, 2003) (consent order). 

ernment. Drug expenditures doubled between 1995 and 2000.5 In response, the FTC 

has increased its pharmaceutical-related investigations. In 1996, fewer than five 

percent of new competition investigations involved pharmaceuticals, while in 2002, 

the percentage of new investigations involving pharmaceutical products was almost 

25 percent. 

• Mergers Affecting the Pharmaceutical Industry. In April, the Commission settled with Pfizer Inc., the largest pharmaceutical company in the world, and 

Pharmacia Corporation to resolve concerns that their $60 billion merger 

would harm competition in nine separate and wide-ranging product markets, 

including drugs to treat overactive bladder, symptoms of menopause, skin 

conditions, coughs, motion sickness, erectile dysfunction, and three different 

veterinary conditions.6 The settlement required divestitures to protect consumers’ interests in those markets while allowing the remainder of the transaction to go forward. 

Other recent FTC pharmaceutical industry merger actions include (1) Baxter/Wyeth, in which the FTC obtained a settlement requiring divestitures to 

protect competition in the market for propofol, a general anesthetic commonly 

used for the induction and maintenance of anesthesia during surgery, and the 

market for new injectable iron replacement therapies used to treat iron deficiency in patients undergoing hemodialysis; 7 and (2) Amgen/Immunex, in 

which the FTC obtained an agreement settling allegations that Amgen Inc.’s 

$16 billion acquisition of Immunex Corporation would reduce competition for 

three important biopharmaceutical products used to treat rheumatoid arthritis, Crohn’s disease, psoriatic arthritis, and side effects of chemotherapy.8

• Pharmaceutical Firms’ Efforts to Thwart Competition from Generic Drugs. To 

address the issue of escalating drug expenditures, and to ensure that the benefits of pharmaceutical innovation would continue, Congress passed the 

Hatch-Waxman Amendments 9 (‘‘Hatch-Waxman’’) to the Food, Drug and Cosmetic Act (‘‘FDC Act’’).10 Hatch-Waxman established a regulatory framework 

that sought to balance incentives for continued innovation by research-based 

pharmaceutical companies and opportunities for market entry by generic drug 

manufacturers.11 Hatch-Waxman has increased generic drug entry, helping 

consumers save $8–10 billion on retail prescription drug purchases in 1994 

alone, according to the Congressional Budget Office.12 Hatch-Waxman has 

been subject to some abuse, however. Some drug manufacturers have allegedly attempted to ‘‘game’’ the system, securing greater profits for themselves 

without providing a corresponding benefit to consumers. Many of the FTC’s 

pharmaceutical industry investigations have focused on this problem. 

(1) First Generation Cases. The Commission has challenged conduct by 

firms that allegedly have ‘‘gamed’’ the Hatch-Waxman framework to deter or 

delay generic competition. Our ‘‘first generation’’ of such matters involved 

agreements through which a brand-name drug manufacturer allegedly paid a 

generic drug manufacturer not to enter and compete. One aspect of a recent 

major settlement with Bristol-Myers Squibb (‘‘BMS’’), involved allegations of 

this type of conduct.13 The FTC’s complaint charged that BMS engaged in a 

series of anticompetitive acts over the past decade to obstruct entry of lowprice generic competition for three of BMS’s widely-used pharmaceutical products: two anti-cancer drugs, Taxol and Platinol, and the anti-anxiety agent 

BuSpar. The conduct included a $72.5 million payment to a would-be generic 

rival to abandon its legal challenge to the validity of a BMS patent and to 

stay out of the market until the patent expired. 

The Commission has settled three additional cases of this type, including 

an April 2002 settlement resolving charges that American Home Products enVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6621 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
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14Schering-Plough Corp., Dkt. No. 9297 (Apr. 3, 2002) (consent order as to American Home 

Products Corp.); see also Abbott Laboratories, Dkt. No. C–3945 (May 22, 2000) (consent order), 

Geneva Pharmaceuticals, Inc., Dkt. No. C–3946 (May 22, 2000) (consent order); Hoechst Marion 

Roussel, Inc., Dkt. No. 9293 (May 8, 2001) (consent order). 15 Bristol-Myers Squibb Co., Dkt. No. C–4076 (Apr. 14, 2003) (consent order). 16The proposed order includes a provision prohibiting BMS from triggering a 30-month stay 

for any BMS product based on any patent BMS lists in the Orange Book after the filing of an 

application to market a generic drug. 17 Biovail Corp., Dkt. No. C–4060 (Oct. 2, 2002) (consent order). 18 Biovail Corp. and Elan Corp. plc., Dkt. No. C–4057 (Aug. 20, 2002) (consent order). 19FTC Press Release, FTC Seeks to Block Cytyc Corp.’s Acquisition of Digene Corp. (June 24, 

2002), available at <http://www.ftc.gov/opa/2002/06/cytyc—digene.htm>. 

tered into an agreement with Schering-Plough Corporation to delay introduction of a generic potassium chloride supplement in exchange for millions of 

dollars.14 An action against Schering-Plough and Upsher-Smith, which remains in administrative litigation, raises similar issues. 

(2) Second Generation Cases. Pursuant to the Hatch-Waxman Act, a branded drug manufacturer must list any patent claiming its branded drug in the 

FDA’s ‘‘Orange Book’’ list of approved drugs and their related patents. Companies seeking FDA approval to market a generic equivalent of that drug before patent expiration must provide notice to the branded manufacturer, 

which then has an opportunity to file a patent infringement action. The filing 

of such an action within the statutory time frame triggers an automatic 30-

month stay of FDA approval of the generic drug. Our ‘‘second generation’’ of 

enforcement activities has involved allegations that individual brand-name 

manufacturers have delayed generic competition through the use of improper 

Orange Book listings that trigger the FDA’s automatic 30-month stay of approval of a generic drug. 

One facet of the FTC’s BMS settlement involved allegedly improper Orange 

Book listings. The complaint stated that BMS misled the FDA about the 

scope, validity, and enforceability of patents to secure listing in the FDA’s 

‘‘Orange Book;’’ breached its duty of good faith and candor with the U.S. Patent and Trademark Office, while pursuing new patents claiming these drugs; 

and filed baseless patent infringement suits against generic drug firms that 

sought FDA approval to market lower-priced drugs.15 Because of BMS’s alleged pattern of anticompetitive conduct and the extensive resulting consumer 

harm, the Commission’s proposed order necessarily contains strong—and in 

some respects unprecedented—relief.16

Another recent FTC success in this area is an October 2002 settlement with 

Biovail Corporation, which resolved charges that Biovail illegally acquired a 

license to a patent and improperly listed the patent in the FDA’s Orange 

Book as claiming Biovail’s high blood pressure drug Tiazac.17

(3) Agreements Between Generic Manufacturers. In a case against Biovail 

and Elan Corporation, plc (Elan), the Commission alleged that the companies 

entered into an agreement that provided substantial incentives for the two 

firms not to compete in the market for the 30 mg and 60 mg dosage strengths 

of generic Adalat CC, an anti-hypertension drug. The Commission approved 

a consent order in August 2002 requiring the firms to terminate their agreement and prohibiting them from entering similar agreements in the future.18

b. Other Merger Enforcement Involving Health Care. In June 2002, the 

Commission authorized the staff to seek a preliminary injunction blocking Cytyc 

Corporation’s proposed acquisition of Digene Corporation, involving the merger of 

two manufacturers of complementary cervical cancer screening tests.19 The complaint alleged that the combined firm would have an incentive to use its market 

power in one product to stifle increased competition in the complementary product’s 

market. Thus, if the merger had been consummated, rivals would have been substantially impeded from competing. Following the Commission’s decision, the parties 

abandoned the transaction. 

c. Law Enforcement Involving Health Care Providers. For decades, the FTC 

has worked to facilitate innovative and efficient arrangements for the delivery and 

financing of health care services by challenging artificial barriers to competition 

among health care providers. These efforts continue. In the past three months alone, 

the FTC has settled with seven groups of physicians for allegedly colluding to raise 

22

20 Carlsbad Physician Association, Inc., et al., Dkt. No. C–4081, (June 13, 2003) (consent 

order); Anesthesia Service Medical Group, Inc., Dkt. No. C–4085 (July 11, 2003) (consent order); 

Grossmont Anesthesia Services Medical Group, Inc., Dkt. No. C–4086 (July 11, 2003) (consent 

order); SPA Health Organization, doing business as Southwest Physician Associates, File No. 

011–0197 (June 9, 2003) (proposed consent order accepted for public comment); Washington University Physician Network, File No. 021–0188 (July 11, 2003) (proposed consent order accepted 

for public comment); The Maine Health Alliance and William R. Diggins, File No. 021–0017 

(July 18, 2003) (proposed consent order accepted for public comment); and Physician Network 

Consulting, File No. 021–0178 (July 22, 2003) (proposed consent order accepted for public comment). 21 California Pacific Medical Group, Inc. dba Brown and Toland Medical Group, Dkt. No. 9306 

(July 8, 2003) (complaint). 22 In re Buspirone Patent Litigation/In re Buspirone Antitrust Litigation, Memorandum of 

Law of Amicus Curiae the Federal Trade Commission in Opposition to Defendant’s Motion to 

Dismiss, available at <http://www.ftc.gov/os/2002/01/busparbrief.pdf>. 23 In re Buspirone, 185 F. Supp. 2d 363 (S.D.N.Y. 2002). 24GENERIC DRUG ENTRY PRIOR TO PATENT EXPIRATION: AN FTC STUDY (July 2002), available 

at <http://www.ftc.gov/opa/2002/07/genericdrugstudy.htm>. 25White House Press Release, President Takes Action to Lower Prescription Drug Prices by 

Improving Access to Generic Drugs (Oct. 21, 2002), available at <http://www.whitehouse.gov/

news/releases/2002/10/20021021–2.html>. 26 Applications for FDA Approval to Market a New Drug: Patent Submission and Listing Requirements and Application of 30-Month Stays on Approval of Abbreviated New Drug Applications Certifying That a Patent Claiming a Drug Is Invalid or Will Not Be Infringed, 68 Fed. 

Reg. 36675 (2003); see also FTC Press Release, Statement of FTC Chairman Supporting FDA’s 

Final Generic Drug Rule (June 12, 2003), available at <http://www.ftc.gov/opa/2003/06/

030612murisstmtgdr.htm>. 

consumers’ costs20 and issued an administrative complaint against another.21 Many 

of these cases involve significant numbers of doctors—more than three-quarters of 

all doctors in the Carlsbad, New Mexico area in one matter, over 1,000 physicians 

in Dallas, Texas in another, and an organization consisting of more than 1,500 San 

Francisco physicians in the case in administrative litigation. The Commission’s consent orders put a stop to allegedly collusive conduct harming employers, individual 

patients, and health plans by depriving them of the benefits of competition in the 

purchase of physician services. 

2. Other Health Care Initiatives 

In addition to enforcement action, the FTC has used its research and reporting 

capabilities as well as its powers of persuasion to foster competition in health care.

• In re Buspirone Amicus Brief. In January 2002, the FTC filed an amicus brief 

in pivotal private litigation involving allegations of improper Orange Book 

listing practices.22 In re Buspirone involves allegations that BMS violated the 

antitrust laws by wrongfully listing a patent on its branded drug, BuSpar, in 

the FDA’s Orange Book, thereby foreclosing generic competition. BMS argued 

that the conduct in question was covered by the Noerr-Pennington doctrine—

a legal rule providing antitrust immunity for conduct that constitutes ‘‘petitioning’’ of a governmental authority. In its amicus brief opposing Noerr immunity, the Commission argued that submitting patent information for listing 

in the Orange Book did not constitute ‘‘petitioning’’ the FDA and that, even 

if it did, various exceptions to Noerr immunity applied. The district court subsequently issued an order denying Noerr immunity and adopting much of the 

Commission’s reasoning.23 The Court’s ruling does not mean that all improper 

Orange Book filings will give rise to antitrust liability. An antitrust plaintiff 

still must prove an underlying antitrust claim. The Buspirone decision merely 

establishes that Orange Book filings are not automatically immune from antitrust scrutiny. 

• Generic Drug Study. In July 2002, the FTC issued a report entitled ‘‘Generic 

Drug Entry Prior to Patent Expiration: An FTC Study,’’ which evaluated 

whether Hatch-Waxman is susceptible to strategies to delay or deter consumer access to generic alternatives to brand-name drug products.24 The report recommended changes in the law to ensure that generic entry is not delayed unreasonably, including through anticompetitive activity. In October 

2002, President Bush directed the FDA to implement one of the key findings 

identified in the FTC study.25 Last month, the FDA approved a new rule to 

curb one of the abuses uncovered by the FTC study—pharmaceutical firms’

alleged misuse of the Hatch-Waxman patent listing provisions—to speed consumer access to lower-cost generic drugs.26 In addition, both the Senate and 

23

27 H.R. 1, 108th Cong. §§ 1101–1118 (2003); H.R. 1, incorporating S. 1, 108th Cong. §§ 701– 706, 901–911 (2003). 28See FTC Press Release, FTC Chairman Announces Public Hearings on Health Care and 

Competition Law and Policy to Begin in February 2003 (Nov. 7, 2002), available at <http://

www.ftc.gov/opa/2002/11/murishealthcare.htm>; Public Hearings: Health Care and Competition Law and Policy, 67 Fed. Reg. 68672 (2002). 29 Agendas, public comments, transcripts, and other materials related to the hearings are 

available on the FTC’s Web site at <http://www.ftc.gov/ogc/healthcarehearings/index.htm>. 30 Conoco Inc. and Phillips Petroleum Company, Dkt. No. C–4058 (Feb. 7, 2003) (consent 

order). 31Southern Union Co., Dkt. No. C–4087 (July 16, 2003) (consent order).

House of Representatives recently passed bills that incorporate the FTC 

study’s two major legislative recommendations.27

• Hearings on Health Care and Competition Law and Policy. To explore developments in the dynamic health care market, the FTC, working with DOJ’s Antitrust Division, commenced a series of hearings on ‘‘Health Care and Competition Law and Policy’’ on February 26, 2003.28 Over a seven-month period, 

the FTC and DOJ are spending almost 30 days of hearings in a comprehensive examination of a wide range of health care issues, involving hospitals, 

physicians, insurers, pharmaceuticals, long-term care, Medicare, and consumer information, among others. To date, the hearings have focused on the 

specific challenges and complications involved in applying competition law 

and policy to health care; issues involved in hospital merger cases and other 

joint arrangements, including geographic and product market definition; horizontal hospital networks and vertical arrangements with other health care 

providers; the competitive effects of mergers of health insurance providers; 

and consumer information and quality of care issues.29 A public report that 

incorporates the results of the hearings will be prepared after the hearings. 

• Hospital Merger Retrospectives. In addition, the Bureaus of Economics and 

Competition are evaluating the effects of consummated hospital mergers in 

several cities. The agency will announce the results of these retrospective 

studies whether the mergers in question may have been beneficial or harmful 

to consumers. If the analysis reveals that one or more of the mergers considered were anticompetitive, then the Commission will carefully consider 

whether an administrative enforcement action would be warranted. The availability of an appropriate remedy will obviously influence the FTC’s decision(s). In any event, the agency will obtain useful real-world information 

about the consequences of particular transactions and the nature of competitive forces in health care, which will be enormously helpful in analyzing and 

possibly challenging future hospital mergers. 

B. Energy 

Energy is vital to the entire economy and represents a significant portion of total 

U.S. economic output. The FTC has focused considerable resources on energy issues, 

including conducting in-depth studies of evolving energy markets and investigating 

numerous oil company mergers. 

1. Law Enforcement Actions Involving Energy

• Oil Merger Investigations. The Commission has an extensive history of carefully investigating mergers in the petroleum industry. These mergers typically involve a host of individual product/geographic market combinations. 

When necessary, the agency has insisted on remedial divestitures to cure potential harm to competition. Most recently, in the Conoco/Phillips merger, 

the Commission issued a consent order requiring the merged company to divest two refineries and related marketing assets, terminal facilities for light 

petroleum and propane products, and certain natural gas gathering assets.30

• Natural Gas Merger Investigations. The FTC also has investigated mergers in 

the natural gas industry and taken necessary action to preserve competition. 

In July 2003, the Commission finalized a consent order designed to preserve 

competition in the market for the delivery of natural gas to the Kansas City 

area.31 The order conditionally would allow Southern Union Company’s $1.8 

billion purchase of the Panhandle pipeline from CMS Energy Corporation, 

while requiring Southern Union to terminate an agreement under which one 

of its subsidiaries managed the Central pipeline, which competes with Panhandle in the market for the delivery of natural gas to the Kansas City area. 

Absent the settlement agreement, the transaction would have placed the two 

pipelines under common ownership or common management and control, 

24

32 Union Oil Co. of California, Dkt. No. 9305 (Mar. 4, 2003) (complaint). 33FTC Press Release, FTC to Hold Public Conference/Opportunity for Comment on U.S. Gasoline Industry in Early August (July 12, 2001), available at <http://www.ftc.gov/opa/2001/07/

gasconf.htm>; FTC Press Release, Factors That Affect Gasoline Prices To Be Discussed at FTC 

Conference (May 1, 2002), available at <http://www.ftc.gov/opa/2002/05/gasolineprices.htm>. 

Agendas, public comments, transcripts, and other materials related to the hearings are available 

on the FTC’s Web site at <http://www.ftc.gov/bc/gasconf/index.htm>. 34FTC Press Release, FTC Chairman Opens Public Conference Citing New Model To Identify 

and Track Gasoline Price Spikes, Upcoming Reports (May 8, 2002), available at <http://

www.ftc.gov/opa/2002/05/gcr.htm>. 

eliminating direct competition between them, and likely resulting in consumers’ paying higher prices for natural gas in the Kansas City area. 

• Gasoline Monopolization Case. In March 2003, the Commission issued an administrative complaint in an important nonmerger case involving the Union 

Oil Company of California (‘‘Unocal’’).32 The complaint alleges that Unocal 

violated Section 5 of the FTC Act by subverting the California Air Resources 

Board’s (‘‘CARB’’) regulatory standard-setting procedures of the late 1980s relating to low-emissions reformulated gasoline (‘‘RFG’’). According to the complaint, Unocal misrepresented to both CARB and industry participants that 

some of its emissions research was non-proprietary and in the public domain, 

while at the same time pursuing a patent that would permit Unocal to charge 

royalties if CARB used such emissions information. The complaint alleged 

that Unocal did not disclose its pending patent claims and that it intentionally perpetuated the false and misleading impression that it would not enforce any proprietary interests in its emissions research results. The complaint states that Unocal’s conduct has allowed it to acquire monopoly power 

over the technology used to produce and supply California ‘‘summer-time’’ RFG, a low-emissions fuel mandated for sale in California from March 

through October, and could cost California consumers five cents per gallon in 

higher gasoline prices. This case is being litigated before an Administrative 

Law Judge. 

2. Other Energy Industry Initiatives

• Study of Refined Petroleum Product Prices. Building on its enforcement experience in the petroleum industry, the FTC is studying the causes of volatility 

in refined petroleum product prices. In two public conferences, held in August 

2001 and May 2002, participants discussed key factors that affect product 

prices, including increased dependency on foreign crude oil sources, changes 

in industry business practices, and new governmental regulations.33 The information gathered through these public conferences will form the basis for 

a report to be issued later this year. 

• Gasoline Price Monitoring. In May 2002, the FTC announced a project to 

monitor wholesale and retail prices of gasoline in an effort to identify possible 

anticompetitive activities to determine if a law enforcement investigation 

would be warranted.34 This project tracks retail gasoline prices in approximately 360 cities nationwide and wholesale (terminal rack) prices in 20 major 

urban areas. The FTC Bureau of Economics staff receives daily data purchased from the Oil Price Information Service (‘‘OPIS’’), a private data collection company. The economics staff uses an econometric (statistical) model to 

determine whether current retail and wholesale prices each week are anomalous in comparison with historical data. This model relies on current and historical price relationships across cities, as well as other variables. 

As a complement to the analysis based on OPIS data, the FTC staff also 

regularly reviews reports from the Department of Energy’s Consumer Gasoline Price Hotline, searching for prices significantly above the levels indicated 

by the FTC’s econometric model or other indications of potential problems. 

Throughout most of the past two years, gasoline prices in U.S. markets have 

been within their predicted normal bounds. Of course, the major factor affecting U.S. gasoline prices is the substantial fluctuation in crude oil prices. 

Prices outside the normal bounds trigger further staff inquiry to determine 

what factors might be causing price anomalies in a given area. These factors 

could include supply disruptions such as refinery or pipeline outages, changes 

in taxes or fuel specifications, unusual changes in demand due to weather 

conditions and the like, and possible anticompetitive activity. 

To enhance the Gasoline Price Monitoring Project, the FTC has recently 

asked each state Attorney General to forward to the FTC’s attention consumer complaints they receive about gasoline prices. The staff will incorVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6621 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
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35 Rambus Inc., Dkt. No. 9302 (June 18, 2002) (complaint). 36 Id. 37 In 1996, the FTC brought a similar case against Dell Computer, alleging that Dell had 

failed to disclose that it had an existing patent on a personal computer component that was 

adopted as the standard by a video electronics group. Dell Computer Co., 121 F.T.C. 616 (1996) 

(consent order). 38FTC Press Release, Muris Announces Plans for Intellectual Property Hearings (Nov. 15, 

2001), available at <http://www.ftc.gov/opa/2001/11/iprelease.htm>. Agendas, public comments, transcripts, and other materials related to the hearings are available on the FTC’s Web 

site at <http://www.ftc.gov/opp/intellect/index.htm>.

porate these complaints into its ongoing analysis of gasoline prices around the 

country, using the complaints to help locate price anomalies outside of the 

360 cities for which the staff already receives daily pricing data. 

The goal of the Monitoring Project is to alert the FTC to unusual changes 

in gasoline prices so that further inquiry can be undertaken expeditiously. 

When price increases do not appear to have market-driven causes, the FTC 

staff will consult with the Energy Information Agency of the Department of 

Energy. The FTC staff also will contact the offices of the appropriate state 

Attorneys General to discuss the anomaly and the appropriate course for any 

further inquiry, including the possible opening of a law enforcement investigation. 

C. Technology 

The continuing development of ‘‘high-tech’’ industries and the significance of intellectual property rights influence our antitrust agenda. The U.S. economy is more 

knowledge-based than ever. While the fundamental principles of antitrust do not 

differ when applied to high-tech industries, or other industries in which patents or 

other intellectual property are highly significant, the issues are often more complex, 

take more time to resolve, and require different kinds of expertise. To address these 

needs, we now have patent lawyers on staff, and we sometimes hire technical consultants in areas such as electrical engineering or pharmacology. 

1. Law Enforcement Actions Involving Technology 

As technology advances, there will be increased efforts to establish industry 

standards for the development and manufacture of new products. While the adoption of standards is often procompetitive, the standards setting process, which involves competitors’ meeting to set product specifications, can be an area for antitrust concern. In a complaint issued in June 2002, the Commission has charged that 

Rambus, Inc., a participant in an electronics industry standards-setting organization, failed to disclose—in violation of the organization’s rules—that it had a patent 

and several pending patent applications on technologies that eventually were adopted as part of the industry standard.35 The standard at issue involved a common 

form of computer memory used in a wide variety of popular consumer electronic 

products, such as personal computers, fax machines, video games, and personal digital assistants. The Commission’s complaint, which is currently being litigated before an Administrative Law Judge, alleges that once the standard was adopted, 

Rambus was in a position to reap millions in royalty fees each year, and potentially 

more than a billion dollars over the life of the patents.36 Because standard-setting 

abuses can harm robust and efficiency-enhancing competition in high tech products 

and innovation, the Commission will continue to pursue investigations in this important area.37

2. Other Technology Initiatives

• Intellectual Property Hearings. In 2002, the FTC and DOJ commenced a series of ground-breaking hearings on ‘‘Competition and Intellectual Property 

Law and Policy in the Knowledge-Based Economy.’’ 38 These hearings, which 

took place throughout 2002 and were held in Washington and Northern California, involved testimony from academics, industry leaders, technologists and 

others about the increasing need to manage the issues at the intersection of 

competition and intellectual property law and policy. The FTC anticipates releasing a report on its findings later this year. 

• Internet Task Force. The Internet boom, heralded by many as the next industrial revolution, has immense potential as an engine for commerce and offers 

consumers enormous freedom. Contrary to the perception of the Internet as 

a virtually unfettered free market, however, extension of pre-existing state 

regulations to the Internet or potentially anticompetitive business practices 

may be limiting the cost savings or convenience that the Internet affords, 

without offsetting benefits. The FTC’s Internet Task Force has been analyzing 

26

39FTC Press Release, FTC Releases Agenda for Public Workshop on Possible Anticompetitive 

Efforts to Restrict Competition on the Internet (Sept. 30, 2002), available at <http://

www.ftc.gov/opa/2002/09/ecomagenda.htm>. Agendas, public comments, transcripts, and other 

materials related to the hearings are available on the FTC’s Web site at <http://www.ftc.gov/

opp/ecommerce/anticompetitive/index.htm>. 40See Comments of the Staff of the Federal Trade Commission, Intervenor, In re: Declaratory 

Ruling Proceeding on the Interpretation and Applicability of Various Statutes and Regulations 

Concerning the Sale of Contact Lenses (Connecticut Board of Examiners for Opticians, Mar. 27, 

2002), available at <http://www.ftc.gov/be/v020007.htm>. 41See Letter from Timothy J. Muris, Chairman, Federal Trade Commission and Charles A. 

James, Assistant Attorney General, Department of Justice, to E. Fitzgerald Parnell III, President, North Carolina State Bar (July 11, 2002), available at <http://www.ftc.gov/os/2002/07/

non-attorneyinvolvment.pdf>. 42POSSIBLE ANTICOMPETITIVE BARRIERS TO E-COMMERCE: WINE (July 2003), available at 

<http://www.ftc.gov/os/2003/07/winereport2.pdf>. 43 Cf. Silver v. New York Stock Exchange, 373 U.S. 341 (1963) (implied antitrust exemptions 

are not favored). 44 Northern Pac. R. Co. v. United States, 356 U.S. 1, 4 (1958). 

state regulations that may have pro-consumer or pro-competition rationales, 

but that nevertheless may restrict the entry of new Internet competitors. It 

also is examining barriers that arise when private parties employ potentially 

anticompetitive tactics, such as when suppliers or dealers apply collective 

pressure to limit online sales.

• Internet Competition Workshop. In October 2002, the Commission hosted a 

three-day public workshop examining potential barriers to e-commerce in ten 

different industries.39 The purpose of the workshop was to (1) enhance the 

Commission’s understanding of the nature of competition in e-commerce; (2) 

help educate policymakers about the effects of overly restrictive state regulations; and (3) help educate private entities about the types of business practices that may or may not be viewed as problematic. The workshop included 

panel discussions addressing specific industries that have grown via the 

Internet, but where competition may be constrained by state regulations or 

business practices. 

• E-commerce Advocacy. The Internet Task Force has taken the lead in drafting 

a number of competition advocacy pieces. Two have had a clear impact in 

helping decision-makers take consumers’ interests into account: (1) the Connecticut Board of Examiners for Opticians decided in June 2003, in accordance with our advice, that out-of-state sellers who ship contact lenses to Connecticut residents need not have a Connecticut optician’s license, provided 

that the lenses are sold pursuant to a lawful prescription; 40 and (2) on January 24, 2003, the North Carolina State Bar released two opinions eliminating 

the requirement that an attorney be physically present at real estate closings, 

and allowing non-attorneys to obtain signatures and receive and disburse 

funds, as we had recommended in joint comments with the DOJ.41

• Report on Internet Wine Sales. Earlier this month, the Commission released 

a staff report concluding that e-commerce offers consumers lower prices and 

more choices in the wine market, and that states could expand e-commerce 

by permitting direct shipping of wine to consumers.42 The empirical study 

found that state bans on direct shipping prevent consumers from saving as 

much as 21 percent on some wines and from conveniently purchasing many 

popular wines from suppliers around the country. The report also concluded 

that states may be able to limit sales to minors through less restrictive means 

than an outright ban on direct shipping, such as by requiring that a supplier 

verify the recipient’s age and obtain an adult’s signature before delivering the 

wine. 

III. THE SCOPE OF ANTITRUST

A. Antitrust Immunity Generally 

As a general matter, immunity from the antitrust laws is exceptional and 

disfavored.43 The antitrust laws, ‘‘a comprehensive charter of economic liberty aimed 

at preserving free and unfettered competition,’’ rest on the premise that ‘‘the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material 

progress, while at the same time providing an environment conducive to the preservation of our democratic political and social institutions.’ 44 Accordingly, few industries or competitive situations are not subject to the antitrust laws. In fact, there 

27

45For example, Section 601(b)(2) of the Telecommunications Act of 1996 repealed the FCC’s 

ability to confer immunity on telephone company mergers submitted to the FCC for review, and 

the Department of Transportation’s authority to approve domestic airline mergers expired in 

1989 pursuant to 49 U.S.C. App. § 1551 (1988). Such mergers are now subject to ordinary application of the antitrust laws. 46 Any meeting among competitors, regardless of whether an antitrust exemption applies, carries some risk that the discussion may spill over into competitively sensitive matters. An antitrust exemption, however, may be perceived as providing shelter for firms inclined to discuss 

off-limits topics, particularly when there is some interpretive flexibility about what subject matters are reasonably ‘‘related to’’ the objectives of the legislation. 47We are aware, of course, that there have been rare instances in which Congress enacted 

statutory grants of immunity for joint action of competitors. In those situations, the exemption 

typically applied to specific industries or activities that were subject to a special regulatory regime, or to a specific transaction or agreement that had been approved by a federal agency, 

again usually in the context of a regulated industry. Prior approval of an agreement by a federal 

agency has not been required when the scope of the immunity was very limited, but broader 

grants of immunity have been accompanied by strict controls on the development and implementation of agreements. Without such strict limits, the dangers of antitrust exemptions are even 

greater. 48 317 U.S. 341 (1943). 49 365 U.S. 127 (1961). 50 381 U.S. 657 (1965). 

has been a trend to deregulate industries and remove antitrust immunities rather 

than to create more of them.45

Proponents of antitrust immunity frequently claim a need for special treatment 

because firms engaged in a particular industry or activity need to collaborate on 

matters that have special value or importance to our economy, national security, or 

other societal interests. They assert that the antitrust laws will impose burdensome 

compliance obligations or chill beneficial activity. They also frequently claim that an 

exemption would only clarify that the conduct, which is already permissible, does 

not violate the antitrust laws. They therefore assert that the situation warrants special treatment. 

We do not believe these reasons provide a sound basis for an antitrust exemption. 

Antitrust analysis today is highly capable of distinguishing harmful and unreasonable conduct from conduct that has a legitimate justification, and can therefore accommodate any legitimate needs for competitor collaboration. Further, case precedents, interpretive Guidelines, and advisory opinions from the FTC and the DOJ, 

along with advice from antitrust counsel, can enable firms to make well-informed 

judgments about whether a proposed activity will present antitrust risks. Therefore, 

antitrust exemptions generally are not necessary. 

Moreover, unnecessary antitrust exemptions have significant potential to be 

harmful. First, an exemption for conduct that does not violate the antitrust laws inevitably will encourage more demands for similar treatment, gradually eroding the 

fundamental principle that antitrust constitutes the cornerstone of a competitive 

market economy. Second, an unnecessary exemption can create confusion or uncertainty whether the relevant conduct would otherwise violate the antitrust laws. 

Third, unnecessary, imprecise, or excessively broad antitrust immunities may harm 

consumers by providing a pretextual reason for parties inappropriately to discuss 

and collaborate on matters that are not, or should not be, exempt.46 Such conduct 

is difficult to detect and prosecute and can hinder, rather than facilitate, the important economic and security contributions that it was hoped the particular industry 

would make. Therefore, we believe that selective antitrust exemptions generally are 

unwise as well as unnecessary.47

B. The State Action and Noerr-Pennington Doctrines 

The state action doctrine—first articulated in Parker v. Brown 48—provides a defense to certain antitrust claims involving the regulatory conduct of state governments. Similarly, the Noerr-Pennington doctrine—first articulated in Eastern R.R. 

Presidents Conf. v. Noerr Motor Freight 49 and United Mine Workers of America v. 

Pennington 50—provides immunity for private parties’ efforts to ‘‘petition’’ the government. When properly applied, both doctrines serve important Constitutional interests. The state action defense is grounded in principles of federalism and is intended to prevent antitrust enforcement from interfering with legitimate state regulatory activities. Noerr immunity, on the other hand, is grounded in First Amendment principles and is intended to protect a citizen’s right to petition the government for the redress of grievances. 

While the core principles underlying these doctrines have validity, some lower 

court decisions have expanded the reach of both doctrines beyond the precepts originally articulated by the Supreme Court. Moreover, when the governing standard is 

28

51 American Bar Association Section of Antitrust Law, The State of Antitrust Enforcement— 2001, Report of the Task Force on the Federal Antitrust Agencies—2001, at 42 (2001), available 

at <http://www.abanet.org/antitrust/antitrustenforcement.pdf>. 52 Analysis of Proposed Consent Order to Aid Public Comment, Indiana Household Movers and 

Warehousemen, Inc., Dkt. No. C–4077 (Apr. 25, 2003) (consent order). 53 Alabama Trucking Association, Inc. Dkt. No. 9307 (July 8, 2003) (complaint); 54 Bristol-Myers Squibb Co., Dkt. No. C–4076 (Apr. 14, 2003) (consent order). 55 Union Oil Co. of California, Dkt. No. 9305 (Mar. 4, 2003) (complaint). 

unclear, enforcement (and deterrence) can be problematic. Thus, for example, the 

American Bar Association Antitrust Section’s 2001 report on antitrust policy recommended a reexamination of the scope of the state action doctrine.51

The scope of these doctrines has important consequences for consumers. Through 

study and analysis, and by bringing carefully-selected enforcement actions, the FTC 

can help to clarify the limits of the state action and Noerr-Pennington doctrines. To 

that end, we established FTC Task Forces to examine state action and Noerr issues. 

The work of both Task Forces has resulted in a variety of actions, including antitrust enforcement, amicus briefs, and competition advocacy. 

1. State Action Task Force 

The State Action Task Force has been conducting a careful analysis of existing 

case law on the scope of the state action defense. The Task Force has observed that 

some courts have applied the doctrine too broadly, thereby protecting anticompetitive conduct of parties acting in their own interest, rather than the interest of ‘‘the 

state itself.’’ An overbroad application can be especially problematic when the party 

purportedly acting pursuant to a delegation of state authority is a private market 

participant with strong incentives to restrain trade. The Task Force’s work has resulted in investigations that we hope will clarify the two key elements of the state 

action defense—‘‘clear articulation’’ of the state’s intent to displace competition, and ‘‘active supervision’’ of any anticompetitive private agreements. In the Analysis to 

Aid Public Comment in the Commission’s recent Indiana Movers consent order, for 

example, we described three factors relevant to showing that the state has ‘‘actively 

supervised’’ the conduct for which the state action defense is asserted: (1) the development of an adequate factual record, including notice and opportunity to be heard; 

(2) a written decision on the merits that would provide analysis and reasoning, and 

supporting evidence, that the private conduct furthers the legislature’s objectives; 

and (3) a specific assessment—both qualitative and quantitative—of how the private 

action comports with the substantive standards established by the state legislature, 

particularly when the standards include competition or consumer welfare.52 Earlier 

this month, the Commission issued administrative complaints in three similar cases 

involving associations of household goods movers in three states.53 The complaints 

allege that the associations have violated the FTC Act by engaging in collective action in the form of filing tariffs containing collective rates on behalf of their members. One or more of these cases may eventually present an opportunity for further 

clarification of the contours of the state action doctrine. 

Movers Conference of Mississippi, Inc., Dkt. No. 9308 (July 8, 2003) (complaint); 

and Kentucky Household Goods Carriers Association, Inc., Dkt. No. 9309 (July 8, 

2003) (complaint). 

2. Noerr-Pennington Task Force 

The Noerr-Pennington Task Force is conducting a similar analysis of existing case 

law regarding Noerr-Pennington immunity. As in the state action context, the Task 

Force has observed that some courts have applied the doctrine too broadly. In some 

instances, parties have been granted immunity in spite of the fact that the anticompetitive conduct at issue had no ‘‘petitioning’’ component whatsoever. In other 

instances courts have immunized abusive tactics, such as repetitive lawsuits and 

misrepresentations, that clearly were intended to delay a competitor’s entry or raise 

its costs, rather than legitimately to petition the government. The Task Force has 

worked to identify situations that may be inconsistent with the underlying rationale 

for Noerr immunity even when petitioning of the government may be involved. For 

example, members of the Task Force played a key role in preparation of the Commission’s amicus brief in In re Buspirone, discussed above. 

Several recent FTC enforcement actions also involve Noerr issues. For example, 

in the Commission’s BMS settlement, discussed above, most of the acts challenged 

involved use of governmental processes.54 Thus, the complaint affirmatively pled 

that Noerr did not immunize BMS’s actions. Among other reasons cited, the complaint indicated that BMS’s alleged knowing and material misrepresentations to the 

FDA fell outside of Noerr protection. The Commission’s Unocal case, also discussed 

above, raises a similar issue.55 If proven, the allegation that Unocal urged the CaliVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6621 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
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56 Bristol-Myers Squibb Co., Dkt. No. C–4076 (Apr. 14, 2003) (consent order). 57 185 F. Supp. 2d 363, 370 (S.D.N.Y. 2002) 58 Bristol-Myers Squibb Co., Dkt. No. C–4076 (Mar. 7, 2003) (Analysis of Proposed Consent 

Order To Aid Public Comment). 59 California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972). 60 Id. 61See 15 U.S.C. § 18a, as amended, Pub. L. No. 106–553, 114 Stat. 2762 (2000). 62See 16 C.F.R. § 2.20 (Jan. 24, 2001). 63See Press Release, FTC Initiates ‘‘Best Practices Analysis’’ for Merger Review Process (Mar. 

15, 2002), available at <http://www.ftc.gov/opa/2002/03/bcfaq.htm>. 64Federal Trade Commission, Bureau of Competition, Statement of the Federal Trade Commission’s Bureau of Competition On Guidelines for Merger Investigations (Dec. 11, 2002), available at <http://www.ftc.gov/os/2002/12/bcguidelines021211.htm>. 

fornia air-quality board to adopt a standard for clean-burning gasoline, while misrepresenting its intentions regarding any intellectual property rights in the standard may present the Commission with an opportunity to evaluate more fully the significance of misrepresentations to a government entity for a Noerr immunity claim. 

BMS also raised the question whether Noerr protects conduct that merely triggers 

ministerial government action rather than seeking a discretionary decision.56 Noting 

the court’s observation in In re Buspirone Antitrust Litigation,57 the Commission 

stated that Orange Book filings are not entitled to Noerr protection because they 

involve no petitioning; the FDA merely accepts the NDA holder’s representations 

and exercises no intervening judgment.58

In addition, the Commission noted in BMS that a clear and systematic pattern 

of anticompetitive misuse of governmental processes—such as BMS’s alleged inequitable conduct at the PTO, wrongful Orange Book listings, sham litigation, and payments for generics not to enter is inconsistent with Noerr protection—caused the 

challenged conduct to fall outside the scope of Noerr protection. In the Commission’s 

view, the logic and policy underlying the Supreme Court’s California Motor Transport 59 decision, which held a pattern of filings undertaken without regard to their 

merits to be outside the protections of Noerr, supported the application of a pattern 

exception for BMS’s alleged pattern of conduct.60

IV. IMPROVING INTERNAL PROCESSES AND TRANSPARENCY

A. Electronic Premerger Filing 

As part of an overall movement to make government more accessible electronically, the FTC, working with the DOJ, is conducting final refinement and testing 

of an electronic system for filing HSR premerger notifications. The system, along 

with rules changes necessary to allow filing electronically, should be complete and 

ready for use this fall. E-filing will reduce filing burdens for businesses and government and create a valuable database of information on merger transactions to inform future policy deliberations. 

B. Improving HSR Merger Investigations 

The agencies have taken steps to reduce the burden on merging parties in document productions responsive to Second Requests. In response to legislation amending the HSR Act,61 the Commission amended its rules of practice to incorporate new 

procedures.62 The amended rules require Bureau of Competition staff to schedule 

conferences to discuss the scope of a Second Request with the parties and also establish a procedure for the General Counsel to review the request and promptly resolve any remaining issues. Measures adopted include a process for seeking modifications or clarifications of Second Requests, and expedited senior-level internal review of disagreements between merging parties and agency staff; streamlined internal procedures to eliminate unnecessary burdens and undue delays; and implementation of a systematic management status check on the progress of negotiations on 

Second Request modifications. 

In 2002, the Bureau of Competition held a series of ‘‘brown bag’’ meetings in cities 

around the country to obtain comments and suggestions from experienced antitrust 

practitioners on additional possible improvements in the merger investigation process.63 In December 2002, the Bureau announced new Guidelines for Merger Investigations that incorporate the learning from those sessions.64 The new measures include promptly releasing investigational hearing transcripts to testifying witnesses, 

simplifying how documents responsive to a Second Request are produced, easing the 

burdens associated with parties’ claims of privilege, avoiding or minimizing additional document searches, providing information about the standards used in evaluating Second Request compliance, and facilitating the search for and submission of 

electronic materials. 

30

65FTC Press Release, FTC Competition Director Announces Guidelines for Negotiating Merger 

Remedies (Apr. 2, 2003), available at <http://www.ftc.gov/opa/2003/04/mergerremedies.htm>. 66See, e.g., FTC Press Release, Investigation of Kroger/Raley’s Supermarkets Transaction 

Closed (Nov. 13, 2002) available at <http://www.ftc.gov/opa/2002/11/krogerraley.htm>; Federal Trade Commission, Statement of the Federal Trade Commission Concerning Royal Caribbean Cruises, Ltd./P&O Princess Cruises plc and Carnival Corp./P&O Princess Cruises plc, File 

No. 021–0041 (Oct. 4, 2002), available at <http://www.ftc.gov/os/2002/10/

cruisestatement.htm> and <http://www.ftc.gov/os/2002/10/cruisedissent.htm> (Commissioners 

Anthony and Thompson, dissenting). 67Wal-Mart Stores, Inc., Dkt. No. C–4066 (Feb. 27, 2003) (consent order), letters to commenters available at <http://www.ftc.gov/os/caselist/c4066.htm>. 

C. Facilitating Negotiation of Merger Remedies 

A parallel series of public workshops held last year focused on issues involved in 

fashioning remedies, especially in merger cases. Topics about which the FTC sought 

the public’s views included: identifying which assets should be divested and the 

terms of a proposed divestiture; criteria for evaluating proposed buyers; when ‘‘upfront’’ divestiture is necessary or desirable; use of ‘‘crown jewel’’ provisions; thirdparty rights; pre-divestiture risks to competition; and divestiture success. Information gained from these workshops formed the basis of the ‘‘Statement of the Federal 

Trade Commission’s Bureau of Competition on Negotiating Merger Remedies,’’ issued this past March.65 The Statement is designed to streamline merger settlement negotiations by increasing the transparency of the process. 

D. Transparency in FTC Decision Making 

The Commission’s law enforcement efforts are also made more effective by public 

awareness of what types of conduct are likely to be challenged as law violations. 

Transparency helps to serve the FTC’s objectives in a number of ways: understanding fully what kinds of transactions or conduct the Commission is likely to 

challenge, and why, greatly facilitates antitrust lawyers’ counseling of their clients, 

and prevents many harmful mergers or anticompetitive practices without need for 

government intervention. Each successful enforcement action not only promotes 

competition in the specific market(s) at issue, but also serves to communicate to the 

business and legal communities that the FTC can and will move successfully to 

challenge the type of merger transaction or conduct at issue. The Commission has 

sought to expand public awareness and understanding of its actions in several new 

ways (in addition to its traditional means of communicating, including adjudicative 

opinions, press releases announcing enforcement actions, analyses to aid public comment on consent agreements, speeches, guidelines, and other policy statements). 

While it may seem obvious that documents associated with enforcement actions 

(e.g., press releases, analyses to aid public comment, and pleadings) convey important information to the public, it is also true that explaining why the Commission 

decided not to take action in a particular case may well provide at least as much 

useful information. Thus, on several occasions in the recent past, the Commission 

issued statements explaining why it declined to take actions involving mergers for 

which the agency had issued a second request or otherwise conducted a significant 

inquiry.66 The agency has also put more emphasis on drafting informative analyses 

to aid public comment. Most recently, the Commission published on its Web site its 

responses to comments submitted by members of the public on a consent agreement 

(in addition to the comments themselves, which the Commission has published for 

some time).67

V. INTERNATIONAL ACTIVITIES:

NEW INITIATIVES, ENFORCEMENT AND ASSISTANCE

Because competition increasingly takes place in a worldwide setting, cooperation 

with competition agencies in the world’s major economies is a key component of our 

enforcement program. Given differences in laws, cultures, and priorities, it is unlikely that there will be complete convergence of antitrust policy in the foreseeable 

future. Areas of agreement far exceed those of divergence, however, and instances 

in which our differences will result in conflicting results are likely to remain rare. 

The Commission has increased its cooperation with agencies around the world, both 

on individual cases and on policy issues, and is committed to addressing and minimizing policy and enforcement divergences.

• ICN. In 2001, the FTC, the DOJ, and 12 other antitrust agencies from around 

the world launched the International Competition Network (‘‘ICN’’). The ICN 

is an outgrowth of a recommendation of the International Competition Policy 

Advisory Committee (‘‘ICPAC’’) that competition officials from developed and 

developing countries convene a forum in which to work together on competiVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6621 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
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tion issues raised by economic globalization and the proliferation of antitrust 

regimes. ICN provides a venue for antitrust officials worldwide to work toward consensus on proposals for procedural and substantive convergence on 

best practices in antitrust enforcement and policy. Seventy-one jurisdictions 

have joined the ICN. The FTC is a leading participant in the ICN’s projects, 

which include multi-jurisdictional mergers, capacity building and competition 

policy implementation, and antitrust enforcement in regulated sectors.

• Trade Agreements. The FTC co-chairs the U.S. delegation to the WTO working group on trade and competition policy and is actively involved in the preparations for the Cancun Ministerial Conference. We also continue to work 

with the nations of our hemisphere to develop competition provisions for a 

Free Trade Agreement of the Americas, and are actively involved in the development of competition chapters of bilateral free trade agreements such as 

those concluded with Chile and Singapore and under negotiation with Australia.

• OECD. The FTC is participating in the valuable continuing work of the 

OECD Competition Committee on, among other things, merger process convergence and regulatory reform.

• Technical Assistance. For the past 12 years, the FTC, along with the DOJ, 

has assisted developing nations that have made the commitment to market 

and commercial law reforms. With funding from the U.S. Agency for International Development and the U.S. Trade & Development Agency, the two 

antitrust agencies have provided technical assistance to about 30 nations to 

help them develop their competition and consumer protection laws. The program is presently active in South America, Mexico, South Africa, North Africa, Indonesia, Southeastern Europe, and the former Soviet Union. The program emphasizes the development of investigative skills, and relies on a combination of resident advisors, regional workshops, and targeted short-term 

missions. These activities have enabled a large number of career staff to 

share their expertise, although great care is taken to avoid any intrusions on 

time and planning for domestic enforcement projects. 

VI. CONCLUDING REMARKS

Mr. Chairman and Members of the Task Force, we appreciate this opportunity to 

provide an overview of the Commission’s efforts to maintain a competitive marketplace for American businesses and consumers. We believe that the Commission’s 

antitrust enforcement has demonstrable benefits for consumers and the American 

economy—benefits that far outweigh the resources allocated to maintaining our 

competition mission. I would be pleased to respond to any questions you may have.

Mr. SMITH. Let me direct my first question to both of you all. 

And that is, to ask you if you currently seek any changes in the 

antitrust laws and procedures from the point of view of either Department of Justice or the FTC? 

Mr. PATE. Well, Mr. Chairman, I would just, if I might, just pick 

up on something I mentioned in my opening statement. We think 

that the time has come to consider whether we need to increase the 

criminal penalties. 

Mr. SMITH. Actually, you have anticipated my next question as 

well. If you want to go to that, please do. I was going to ask you 

specifically about criminal penalties. You did mention it in your 

oral statement a while ago. Why don’t you expound on that. 

Mr. PATE. Thank you, I will. Particularly, as I mentioned, after 

the criminal penalties for mail and wire fraud under the SarbanesOxley legislation have been raised to maximum 20-year terms, we 

think that the time has come to examine whether there should be 

an increase in the maximum prison sentences under the antitrust 

laws. There is legislation pending in the other Chamber that would 

call for an increase to 10 years. We fully support that. We think, 

while I don’t have a firm position on a number or a final position 

with respect to fines, that likewise we would welcome the opporVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6601 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
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tunity to work with this Committee to consider increases on that 

front as well. 

Mr. SMITH. Okay. What about my first question? Any changes in 

antitrust laws, other than criminal penalties, that you would like 

to see? 

Mr. MURIS. No. We are requesting new legislation to deal with 

cross-border fraud for our consumer protection mission, but we are 

not requesting any new legislation for antitrust. 

Mr. SMITH. Okay. And what about civil penalties with FTC? 

Would you like to see any changes there? 

Mr. MURIS. No, we are not proposing any changes there. 

Mr. SMITH. Okay. And you see nothing wrong with the criminal 

penalties mentioned by——

Mr. MURIS. We don’t have criminal enforcement. I would certainly defer to General Pate. But, in general, criminal enforcement 

is very important, and I see no reason why we should not increase 

the penalties. 

Mr. SMITH. Okay. Very good. Thanks. 

The next question goes to international antitrust agreements, 

both on the status and on where you see yourselves going in the 

future in that regard. General Pate. 

Mr. PATE. We have been very active particularly with the international competition network, which is a network of approximately 

40 jurisdictions who have antitrust enforcement now. We are going 

to continue to devote a lot of resources to making sure that we 

have convergence on sound antitrust principles, and that we avoid 

disputes and divergences of approach that we think can be harmful 

to competition and may have negative impacts on American companies who are seeking to bring competitive products to global markets. And so we are going to continue to be active on that front. 

Mr. SMITH. A quick question. You mentioned in your testimony 

a few minutes ago the 21 cases, and it sounded to me like you felt 

that you had had an impact on 21 out of 21 cases. Is that because 

you choose your cases carefully, or because you are particularly effective? 

Mr. PATE. Well, when we bring a case, we have done a lot of 

work ahead of time to make sure it is a good one. And so, yes, I 

think our success rate, once we decide to bring a challenge, is higher. 

My colleague handed me a figure. The actual figures on cases we 

have challenged may be a little higher than what I mentioned 

there, but the full statement perhaps has even greater numbers 

that you should take a look at. But, yes, we do think that is what 

we do. 

Mr. SMITH. Thank you, General Pate. Thank you, Chairman 

Muris. I have some written questions actually to direct to both of 

you all, and I would like to do so and ask you to reply to them 

within 10 days, if you would. 

Mr. PATE. I would be pleased to do that. 

Mr. SMITH. Thank you very much. 

[The information referred to follows in the Appendix] 

Mr. SMITH. The gentleman from Michigan, the Ranking Member, 

is recognized for his questions. 

Mr. CONYERS. Thank you, Mr. Chairman. 

33

I am happy to have you both here, as I have said before. The 

only problem that has arisen in this hearing is helping me out 

here. We have a case in which the head of the Antitrust Division 

joins in an amicus brief with a Government monopoly to seek to 

reform the antitrust rules before the Supreme Court. And I am 

talking about the Verizon case. A gratuitous involvement to be 

sure, but I am told by staff it has enormous consequences if 

Verizon and the Antitrust Division of DOJ prevail in the United 

States Supreme Court. 

Mr. PATE. Representative Conyers, I would appreciate an opportunity to address the Trinko case, which is an important case in 

which we were happy to see the Supreme Court accept review. It 

has been part though not of a gratuitous involvement but of a continued and balanced involvement of the Division to deliver two important messages about the Telecom Act and its relation to the 

antitrust laws. 

On the one hand, we have made clear in the Trinko case, and 

in other cases, that the Telecom Act does not create an exemption 

from the antitrust laws, that the antitrust laws will apply fully to 

the conduct of the Bell Operating Companies. 

On the other hand, what was at issue in the Trinko case is the 

question of whether the regulatory requirements of the 1996 Act 

would be imported into section 2 of the Sherman Act. And we think 

Congress was equally clear in its savings clause under that legislation that it would not, and that the case at issue in Trinko was not 

a meritorious case and that it would be harmful to section 2 for 

those regulatory obligations to be imported. So we believe that is 

an important case. 

Mr. CONYERS. So do I, but not for the reasons that you have put 

forward. 

Mr. SMITH. Without objection, the gentleman from Michigan is 

recognized for another 2 minutes. 

Mr. CONYERS. Thank you, Mr. Chairman. 

Here is page 7 of the amicus: In the context of an alleged refusal 

to assist a rival, conduct is exclusionary only if it would not make 

business or economic sense apparent from its tendency to reduce or 

eliminate competition. 

Now, what does that mean? It means that no matter how big the 

harm to consumers and competition, if there is a small benefit to 

the monopolist, we may ignore the harm. 

Now, you are appearing as an amicus supporting Verizon’s position, and now you are telling me that you are merely clearing up 

what you think that we meant in the Congress when that law was 

passed. I disagree. And I think we are going to have to spend a lot 

more time, your lawyers and my lawyers and maybe some outside 

scholars, clearing this up, because this is not the kind of signal 

that makes me or the consumers that I had in mind when we 

passed the law sleep more comfortably in their beds at night. 

Mr. PATE. Representative Conyers, we would welcome the opportunity to do that. The standard you mentioned from page 7 of that 

brief is the same standard well-established in the law that we used 

as a plaintiff in the Microsoft case, and in the American Airlines

case we brought. We think it certainly does not mean by any 

means that great harm to consumers would be excused because of 

34

any benefit to a monopolist. And so I would be more than happy 

to spend time with your staff working through that standard and 

how we think it appropriately applies. And I appreciate the opportunity to address it here. 

Mr. CONYERS. Thank you. 

Mr. SMITH. Thank you, Mr. Conyers. 

The gentleman from North Carolina, Mr. Coble, is recognized. 

Mr. COBLE. I thank the Chairman. Mr. Chairman, I apologize to 

you and the Ranking Member for my abrupt departure. But not unlike waning days prior to a District Work Period, it has been chaotic around here today. I apologize to the witnesses as well. 

Mr. Pate, do I recall that the Chairman said you studied in 

North Carolina? 

Mr. PATE. I did, in Chapel Hill. 

Mr. COBLE. Are you a native Carolinian? 

Mr. PATE. My mother is from Greensboro, but I grew up in Virginia. 

Mr. COBLE. Well, that is close enough. That is my district, so I 

will claim that. 

Gentlemen, let me ask you this. To what extent do either the Department of Justice Antitrust Division or the Bureau of Competition at the FTC consult with the FCC during Triennial and Biennial Review proceedings? 

Mr. PATE. I think that question is probably best directed toward 

the Division because of our work in the telecom field. We do not 

have a practice of routinely filing written comments. We have done 

that from time to time at a staff level. We make our expertise 

available to the Commission when it asks for it, and that occurs 

from time to time. Not every issue that the Commission deals with 

is an antitrust issue, though; they have much broader public policy 

telecom issues. And with respect to those, it would be much less 

likely that we would be involved. 

Mr. COBLE. Mr. Muris. 

Mr. MURIS. It has been a longstanding arrangement between the 

two agencies, because there are two of us enforcing many of the 

same laws, that we don’t duplicate each other’s work. This is an 

area that the Antitrust Division does and not the FTC. 

Mr. COBLE. Gentlemen, to what extent do foreign countries abuse 

antitrust laws to the detriment of American businesses, A. And, B, 

what have the Antitrust Division and the FTC done to prevent this 

from occurring if it is a problem? 

Mr. MURIS. There is certainly the potential and there have been 

occasional disagreements with other countries. I recently noted one 

involving the Antitrust Division. It is very important with the proliferation of antitrust agencies that we spend as much time as possible explaining how we do antitrust to other countries to encourage agencies around the world to adopt best practices. As General 

Pate mentioned, the International Competition Network was 

formed very recently in the last few years to do that. I think it has 

had a positive impact. We have a close working relationship with 

the Europeans, for example, and we spend a lot of time, particularly since the disagreement I alluded to, working with them to improve relations and understanding of how we do things together. I 

think this has to be persuasive. But because we are the leaders in 

35

the antitrust analysis and have many more resources than other 

parts of the world, I think we are much more successful than not 

in encouraging best practices, in encouraging the focus not on protecting competitors but on protecting consumers. 

Mr. PATE. I agree entirely with what Chairman Muris said with 

respect to the GE/Honeywell matter involving the European Commission that he alluded to. I think, since that time, you have seen 

a great effort on the part of Mario Monti over at the European 

Union to try to reform and improve their merger processes. I was 

at a conference with him recently whereby Bob Pitofsky, who was 

in Tim’s seat during the Clinton administration, participated. And 

it was good to see agreement there that antitrust should not be 

misused to defend national champions and to try to exclude American or other businesses from external markets. 

And so I think there is some good progress being made there, 

and I agree with what Tim has to say about the ICN and other 

places we can do that. 

Mr. COBLE. Well, the work that you all are doing in the area of 

antitrust is indeed important. And I am sure our Committee is concerned and interested. And I appreciate each of you being here. 

And, Mr. Chairman, I yield back my time. 

Mr. SMITH. Thank you, Mr. Coble. 

The gentlewoman from California, Ms. Lofgren, is recognized for 

her questions. 

Ms. LOFGREN. Thank you, Mr. Chairman. I doubt that I will use 

the entire 5 minutes. And I would echo Mr. Coble’s comments. This 

has been a chaotic day, and I am sorry that we have not all of us 

been able to sit here throughout the entire proceedings with you. 

I want to go back and touch on the issue raised by the Ranking 

Member, Mr. Conyers. I am concerned that the Department is pursuing a standard that is a departure from practice. And you mentioned the Microsoft case and the Department’s posture in that. 

And I don’t want to get into the whole Microsoft case, except to 

note that it is my understanding that the D.C. Circuit sitting en 

banc did find that the plaintiff must demonstrate that the anticompetitive harm or the conduct outweighs the procompetitive conduct, which is a finding that I think is at variance from the brief 

that Mr. Conyers quoted from and that you discussed. Am I 

misreading that, or could you comment on that? 

Mr. PATE. There have been a variety of standards articulated 

under section 2 of the Sherman Act. With respect to the standards 

stated in the Trinko brief, though, you have to look at the context, 

which is one of a claimed duty of assistance to a rival. And I think 

there, if you look at the Supreme Court’s decision in the Aspen

case, one of the most recent in that line of cases, you will see in 

that case an explanation of the fact that the monopolist declined 

to undertake a transaction that would have made business sense 

for it apart from the attempt to exclude a rival. 

So we think the standard that we are advocating in the Trinko

brief is well-supported in existing law and in the context that it involves a claim for a duty of assistance to a competitor, that it is 

an appropriate standard and one that has strong support in a number of Division cases and decided cases. 

36

Ms. LOFGREN. I don’t know if you saw it—and I just saw excerpts 

because none of us have time to read very much except reports. 

But in Bloomberg on March 18, our former FTC Chairman, Mr. 

Pitofsky, said that your argument, and I quote, changes the goal 

line in his view for proving illegal monopolization, and that, in his 

view, it is adding something that has not been there before in antitrust case law. 

Why do you think he would reach that conclusion that is so at 

variance with what you are saying here? 

Mr. PATE. Well, Bob and I have talked about this case in the 

past. As I say, there are a variety of articulated standards under 

section 2. We think this is an appropriate one that is supported in 

past case law. Perhaps he prefers a different one, but we think that 

having a standard under section 2 for unilateral conduct, particularly where the claim is for assistance to a competitor under the 

so-called ‘‘essential facilities doctrine’’ which was at issue in that 

case, that a standard that looks to whether the conduct makes 

business sense but for exclusion of a competitor is a well-recognized 

one that is going to lend objectivity to section 2 of the Sherman Act 

and have a beneficial effect. 

And as to Mr. Pitofsky’s views on that, I haven’t, I am sure, got 

to the bottom of that. But—— Mr. CONYERS. Could—— Ms. LOFGREN. Well, if I could just say and then I will yield to 

the Ranking Member. I just don’t see it the way that you have described. And I think that the Department has taken it upon itself 

to argue for a change in what has been the standard. And I would 

yield to the Ranking Member, my senior Member on the Committee. 

Mr. MURIS. Mr. Chairman, since we are referring to something 

my predecessor said, and since I was at the panel; Hew and I were 

both at the panel where this was discussed. Bob Pitofsky was not 

referring to the brief on the merits. I think what he was—and obviously, he could speak for himself if he were here. But clearly, from 

the date he was not, because the brief was filed, I think, 2 months 

later. He was referring to what I thought was a misinterpretation 

of some statements made in the brief seeking certiorari. 

I agree with what General Pate is saying in that if we did have 

this case where we had very—the standard does not mean, and I 

think the brief is pretty clear in its whole context, that if we do 

have clear harm to consumers, that there is nothing in this brief 

that would stop bringing such a case. 

Mr. CONYERS. So you are telling us not to worry? 

Mr. MURIS. Well, I think that the Commission—a unanimous 

commission—joined this brief, and I am the only Bush appointee. 

There were four Clinton appointees. And I do not think—obviously, 

you can take a sentence or two in any brief and read it in a way 

that might cause concern. I think in context, though, I personally 

would not have joined the brief if it had the kind of consequences 

that you are suggesting. 

Mr. CONYERS. Well, that is why we have lawyers and that is why 

this is the Judiciary Committee. And that is why we all agreed 

that we will be in informal discussions about these matters, much 

of which started before you got to your positions. So it is not a matVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6601 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
37

ter of holding you personally accountable. But I don’t know why the 

Members of the Committee, most lawyers, can’t understand what 

it seems like the people in the executive branch seem to appreciate 

to have a completely different interpretation. That is great stuff. 

This is what we wake up in the morning hoping to come to find, 

that there is an honest legal difference of view and interpretation, 

and now we have found one. 

Mr. SMITH. The gentlewoman’s time has expired. The gentleman 

from Utah, Mr. Cannon, is recognized for his questions. 

Mr. CANNON. Thank you, Mr. Chairman. 

Mr. Pate are you surprised or disappointed that since—pardon 

me. Let me apologize first of all for being late. This has been a hectic day here on the Hill with lots of votes. And I appreciate—— Mr. MURIS. We have heard. 

Mr. CANNON. Yes, I am sure, people in and out. And this is a 

matter of great interest to many of us, and I apologize for not having heard your testimony, and I am, frankly, still trying to figure 

out the last exchange which I came in the middle of. Were we talking about Trinko and the Trinko brief there? 

Mr. PATE. Yes. 

Mr. CANNON. Good. So we won’t revisit that. Thank you. You can 

breathe easier on that one. 

But anyway, I apologize for the fact that we are back and forth. 

And we appreciate your time and willingness to be here. 

But, Mr. Pate, are you surprised or disappointed that since the 

1996 Telecommunications Act, the Bells have not entered each other’s territories to compete? I understand that one Bell CEO suggested recently that it wouldn’t be right to do so, to compete. Do 

you have any antitrust concerns around this subject because it implies an agreement not to compete? And, did the Department open 

an investigation at any point since that statement was made or investigate this in the context of an already open investigation? 

Mr. PATE. I am familiar with the statement you mentioned. We 

did look into that. The statement itself did not indicate an agreement. Obviously, a unilateral decision as to what territories a Bell 

operating company would contest is a very different matter from a 

concerted agreement as to where they would be. I am not aware 

of evidence of any such agreement. 

With respect to competition in local areas, we think as the section 271 process has moved toward its conclusion, there has been 

a good deal of introduction of local competition. And as I mentioned 

earlier, as we began to see Internet telephony come on line as well, 

I think the competitive situation there is improving. 

Mr. CANNON. I think we are going to have competition, I agree 

with that. But I am wondering, have you seen much competition 

between the Baby Bells? I am not sure of anyplace where Baby 

Bells have gone into another Baby Bell territory and competed aggressively in land lines. 

Mr. PATE. The primary competition we have seen has been by 

the companies most associated with long distance service coming 

in, and then so-called CLECs, competitive local exchange carriers 

coming into those areas. 

Mr. CANNON. The whole environment is evolving. What I am 

wondering in particular, does it concern you that you are not seeVerDate 0ct 09 2002 13:26 Jan 07, 2004 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6601 G:\HEARINGS\COMPLETE\108TH\108-1\XYWRITE\88546.000 HJUD2 PsN: ANNE
38

ing competition by the monsters in this industry in each other’s 

historic territories? And while I agree that a unilateral statement 

is not the same thing as a real agreement, it does indicate a position and a nominal agreement that appears to actually exist in reality. 

Mr. PATE. We welcome the introduction of competition from 

wherever it comes, and think the level of competition is growing. 

I think it is beneficial that as you see the section 271 process, you 

are going to see competition among different carriers for packages 

of service. 

So I would not go to the conclusion that the failure to see more 

entry into the territories of—each by the others—necessarily indicates we are not achieving the benefits. 

Mr. CANNON. But, I am not asking about competition in society. 

I am wondering if you guys are looking at a rationale behind the 

failure of the RBOCs to compete within each others territories? 

Mr. PATE. We monitor this situation very closely. If at any time 

we think that we have evidence of a concerted agreement to allocate markets, or to decline to compete, we will act very aggressively 

against it. 

Mr. CANNON. But you have absolute evidence of a declining to 

compete, because nobody is doing it; none of the RBOCs are doing 

it in any of the other RBOCs markets. 

Mr. PATE. Right. And my point is, that under the antitrust laws, 

unilateral decisions, even tacit coordination, that results in that 

situation is not a violation of the antitrust laws. 

An agreement would be. If we find an agreement, then we will 

pursue a violation. 

Mr. CANNON. Are you looking for an agreement? Because, obviously something is happening, to not have competition? Are you 

looking for an agreement? 

Mr. PATE. If we find any evidence that indicates an agreement, 

we will pursue it very aggressively. 

Mr. CANNON. I think the fact that you don’t have any RBOCs, 

in my experience, competing, especially in places where you have 

got great opportunities to compete, places where, for instance, 

AT&T is now doing—last I heard they had a couple of thousand 

lines in Michigan. And yet no other—no RBOC has stepped in to 

compete in that open territory, would suggest to the mind, that 

there was more than just a hint of the attitude of one company in 

that statement. 

But I hope will you continue looking, because I love competition. 

I think it is going to serve us awfully well. 

Mr. CONYERS. Could the gentleman consider yielding? 

Mr. CANNON. I would certainly yield. 

Mr. CONYERS. I thank the gentleman. Because we have got a letter here to Attorney General Ashcroft in which—I will just read it 

so you get the drift. In this context, dated December 18, 2002——

Mr. CANNON. Mr. Conyers, if I could reclaim my time for a moment. I see that my time has expired. I did have a question I wanted to ask of behalf on Mr. Goodlatte. 

Mr. SMITH. Without objection, the gentleman from Utah is recognized for an additional 2 minutes. 

39

Mr. CANNON. Thank you. I would be happy to recognize the gentleman. 

Mr. CONYERS. I thank the gentleman. I am going to seek the generosity of the Chair to get some additional time. 

Mr. CANNON. Thank you. That being the case, let me ask a question, if I can find it here. There we go. Chairman Muris, I recognize 

this question is a bit off topic, and so I apologize for that, but it 

is very important to ask you while we have you here before us 

today, because there has been a great deal of characterization of 

your position and the Commission’s position recently on the creation of a National Do Not Spam Registry at the FTC. 

Do you think that the Congressionally mandated creation of a Do 

Not Spam List by the FTC is advisable at this time? Would it be 

cost effective? And would it stop most spam? 

Mr. MURIS. This is complex. I think I need to back up and just 

approach the question this way. There are three issues involved in 

the spam problem, which is the toughest consumer protection problem that I have ever seen. One is—and to which legislation could 

be addressed how can we find the spammers? 

Second is can we punish them effectively? And third is what are 

the standards for legitimate businesses to send unsolicited commercial e-mail? 

Most of the legislation is addressed toward the third issue, because of the difficulty of dealing with the first two issues. We have, 

for example, offered some very modest suggestions on what would 

make it easier for us to find spammers. Those have not found their 

way into the legislation. 

This Committee has proposed criminal enforcement. I do think 

that would help us both find them and punish them better, although we are working right now, without this legislation, with 

many U.S. Attorneys on criminal prosecution of spam. 

There are problems in the various bills. The Senate bill, for example, unless we got a favorable court interpretation, if it became 

law, would impose a knowledge standard that could easily make 

the bill of little use for us. In that context let me address Do Not 

Spam. It is an intriguing idea. As you know, we have a National 

Do Not Call Registry which is extremely popular; I am very supportive of it. 

Leaving aside technological questions, and there are people on 

both sides of the technology issue whether it is feasible at a tolerable cost to Do Not Spam. With Do Not Call, we can assure Americans that on October 1, if you are on the list, you are going to receive a lot fewer calls. That is just not true with Do Not Spam. We 

have looked—we collect spam. We are the only people in the world 

that like to get spam. We get over a hundred thousand a day. We 

search them. We have looked at random samples of spam. 

Overwhelmingly, the spam right now is, without looking hard, is 

either product categories like pornography that are dubious, or it 

is obviously false. And we can’t—these guys are very hard to find. 

So I think a Do Not Spam List at this time would not be a useful 

expenditure of anyone’s money. 

Mr. CANNON. Mr. Chairman, Mr. Goodlatte couldn’t be here. He 

had a follow-up question. Could I ask the Subcommittee’s indulgence for an extra 2 minutes to ask a follow-up question? 

40

Mr. SMITH. Mr. Cannon, rather than do that, I think we are 

going into a second round of questions. If you will wait, we will be 

able to recognize you in just a minute. 

Mr. CANNON. Be happy to. 

Mr. SMITH. The gentleman from California, Mr. Berman, is recognized for his questions except those on the subject that deal with 

the Chairman’s constituent firms. 

The gentleman from California. 

Mr. BERMAN. Well, in that case, Mr. Chairman, I have no questions. Understanding the jesting and whimsical nature in which 

the Chairman recognized me, I will pretend I didn’t hear it. 

Mr. Pate, in a January 2002, letter I asked Attorney General 

Ashcroft to initiate a Justice Department investigation into whether Clear Channel Communications—is this under the old map or 

the new map in Texas? 

Mr. SMITH. Under either map. 

Mr. BERMAN. Under either map, into whether Clear Channel 

Communications was violating antitrust laws. Among other things, 

I relayed widespread reports that Clear Channel owned radio stations have tied air play of some musicians’ music to their use of 

a Clear-Channel-owned concert promotion company. 

Three months after I sent my letter, Assistant Attorney General 

Dan Bryant responded that DOJ was monitoring the situation and 

was willing to receive any information about practices that might 

raise antitrust concerns warranting an investigation. 

I found it somewhat curious that DOJ would essentially ask Congress and private parties to do the investigating for it. Nonetheless, 

over the course of the next year, I encouraged the many people who 

continued to contact me with credible concerns to, in turn, relay 

those concerns to the designated Antitrust Division attorney. 

I assumed that DOJ would do its job, namely that it would vigorously investigate these allegations. Most of the folks I sent to DOJ 

expressed frustration at the lack of responsiveness. I am unaware 

of any attempts by DOJ to proactively contact potentially affected 

parties, as you would expect in a serious investigation. 

For a time my own staff was able to get their calls to DOJ returned, until I testified before the Senate Commerce Committee in 

January of this year and noted DOJ’s unresponsiveness. I am extremely dissatisfied with DOJ’s apparent unwillingness to initiate 

any kind of investigation into these serious allegations. 

And I would like to know, once and for all, what DOJ has done 

to investigate the allegations of antitrust violations by Clear Channel. If it has investigated those allegations and found them lacking 

credibility, I would like to know that, and I think Clear Channel 

would as well. If it has an ongoing investigation, I would also like 

to know that. 

Mr. PATE. Representative Berman, I am aware of your letter. 

And I have looked into these questions personally. The Clear Channel matter is one of importance to us. We have two open investigations of Clear Channel at this point. Our staff lawyers have conducted a number of interviews with witnesses that I believe your 

office has directed our way, and for that we are very appreciative. 

We certainly do not rely on outside parties to undertake our investigations, and we have likewise undertaken significant efforts to 

41

find additional evidence with respect to the type of allegations that 

you raise. 

I have no question that some of the folks with whom you may 

have been talking are frustrated. But the important point to bear 

in mind is that commercial frustration that artists and others may 

have with Clear Channel from time to time is a different question 

from whether we could prove the presence of market power and 

abuse of that power in a tying situation under the Sherman Act. 

We have an open investigation, and we are going to continue to 

pursue that. 

Mr. BERMAN. So there is an open investigation of this issue? 

Mr. PATE. On that issue, that is correct. And an additional investigation. 

Mr. BERMAN. I do want to mention that none of the people that 

I normally would expect to be contacted in such a proactive investigation have been contacted. 

Mr. PATE. Well, we do not publicize investigative measures we 

undertake. So I can’t comment as to who has or has not been contacted. 

Mr. BERMAN. I just want to note that the people who you contact 

can publicize that they have been contacted. And at least with 

some pretty good contacts among the likely people, we have submitted names, I haven’t received any indication from them, that if 

they haven’t come to you they have been contacted. 

Mr. PATE. Well, one thing that is not acceptable for me is for you 

to fail to get timely responses from us. If you are good enough to 

be directing parties our way who have an antitrust complaint, I 

hope you and your staff will feel comfortable to contact me, personally, if you feel you are not getting a response on that, and I will 

make sure that it is attended to immediately. 

Mr. BERMAN. Then in summary, and I appreciate that and I will 

follow it up, but from what I understand at this time, there is an 

investigation ongoing? 

Mr. PATE. That is correct. We have two open investigations of 

Clear Channel. 

Mr. BERMAN. At least one of them is tied to the issues I raised 

in my letter? 

Mr. PATE. That is correct. 

Mr. BERMAN. Okay. 

Mr. SMITH. Thank you, Mr. Berman. The gentleman from Michigan, Mr. Conyers, is recognized for additional questions. 

Mr. CONYERS. Thank you very much. General Pate, one of the 

tests by which many of us on this Committee measure the antitrust 

division is how they handle vertical price-fixing cases, which you 

are aware of the differences. And long before you got there, we had 

been dismayed by the very few vertical price-fixing cases that have 

been contemplated or brought by the Antitrust Division. And I 

would just like you to know how interested we are in following that 

area of your responsibility. 

Mr. PATE. Thank you, Representative Conyers. That is an area 

in which I know Members of Congress have been interested over 

the years. I think you are well aware of the legal standards that 

govern those cases. And at the Division, we need to assess how to 

42

best direct our resources to protect consumers, and we are going to 

continue doing that. I appreciate your interest in that subject. 

Mr. CONYERS. Now, with reference to the letter that Congresswoman Lofgren and I sent to Antitrust, in which we have—we 

were asking about the investigation of the potential collusion of 

some of the Bells. And we sent that letter on December 18, 2002. 

And since this is before your time, I am going to make sure your 

staff gets copies of this and the response that we received from 

Jamie Brown, then the Acting Assistant Attorney General, and sort 

of bring us all up to date. 

Because the response we received from your predecessor was 

that we were assured that the Division will carefully review the information in our letter and other information available to us from 

past investigations and will continue to carefully monitor competitive developments in this important industry. 

Now, we want to reraise this issue with you now. And that is 

what we are doing now that we are all together in the same place. 

Mr. PATE. Well, this goes to the issue that I was discussing with 

Representative Cannon, regarding the statement by a BOC executive. Again, the important point for our enforcement is that a unilateral decision as to what territory to enter is a very different 

thing from a concerted agreement that would violate section 1. And 

given the position that the BOCs have consistently taken in litigation and otherwise, that it was inappropriate for the CLECs and 

others to be taking advantage of certain of the provisions of the 

1996 Act to enter competitively into local markets, I have to wonder how difficult it would be to meet the Supreme Court standard 

for proving an agreement that you must find conduct that would 

be inconsistent with unilateral action, given that the letter that 

you—the statement that you mentioned from the executive does 

not explicitly say that an agreement has taken place, and given the 

standards that have to be met to prove such an agreement. 

We have monitored and looked carefully at the situation. If we 

find evidence that indicates an illegal agreement, we will pursue it 

aggressively. But the statement that you referenced certainly is 

not, in and of itself, proof of that violation, even though it may 

rightly give you concern that there is not as much competitive 

entry as you would like to see in the industry. 

Mr. CONYERS. Well, I didn’t suggest that it was the proof. And 

furthermore, what I want is the assurance that your unit is looking 

into this and are deeply concerned about this. Because, there is— there is a lot of discussion out there about this. But finally, let’s 

take a look at Univision; you have not mentioned that. 

Now, here is a situation where radio and television market power 

has been brought together. And you signed off on that. And I find 

that, again, something that we should be able to discuss much 

more. 

Mr. PATE. Well, I think we should if you are under the impression that our role was to sign off on the proposed Univision transaction. We obtained some very important relief for consumers in 

that transaction. We found that in a number of cities there were 

overlaps with respect to radio competition, and that because of its 

partial ownership position in Entravision, approximately a 30 percent ownership interest that Univision would have had in 

43

Entravision, there was the potential for harm to competition in 

those markets, and that is why in the consent decree that we obtained in that decision, Univision is required to divest, to give up, 

to divest its holdings down to a level that would be consistent with 

a passive investment, to give up its ability to control Entravision’s 

operations. 

And by doing all of that, we protected consumers in those markets—by our challenge to that aspect of the transaction. So we 

think our role there was very important. 

Mr. CONYERS. I do too. But what about television? 

Mr. PATE. We looked at—— Mr. SMITH. The gentleman from Michigan is recognized for an 

additional 2 minutes. If the witness will respond briefly. 

Mr. PATE. The transaction was not one that involved television 

overlaps. It was one in which a number of groups suggested that 

we should look at a combined market for Spanish-language media 

and to lump television and radio together, if you will. 

That would have been something the Division has not done in 

media cases previously. It is something that in examining the markets that were at issue, and how those who were affected by the 

transaction viewed, or in this case did not view radio and television 

as competitive alternatives, we found that would not have been an 

appropriate way to define the market. 

I wouldn’t rule out the possibility that we would, in other circumstances, find it appropriate to define a market that way. But 

that is the basis on which we approached the television issues in 

the transaction. 

Mr. CONYERS. Well, let me thank you very much. And look forward to our future exchanges. 

Mr. PATE. Thank you. 

Mr. SMITH. Thank you, Mr. Conyers. The gentleman from Utah, 

Mr. Cannon, is recognized for additional questions. 

Mr. CANNON. Thank you, Mr. Chairman. I appreciate that. Your 

agency, Mr. Muris, is struggling with spam. Congress is struggling 

with spam. All of America is struggling with spam. If you would 

indulge me for one more question. 

Mr. MURIS. Yes. 

Mr. CANNON. But first, Mr. Chairman, I would like to ask unanimous consent to submit for the record several letters and position 

papers on the subject. 

Mr. SMITH. Without objection they will be made part of the 

record. 

Mr. CANNON. Thank you, Mr. Chairman. 

In this environment where technology is changing, security 

issues are a major concern. I am concerned about creating a database with millions of valid e-mail addresses which can be a potential gold mine for spammers who have proved themselves to be ingenious in this regard. 

Can you give us a rock-solid guarantee that we could actually 

protect a database like that? And/or do you have any comment on 

that? 

Mr. MURIS. We held a 3-day spam forum a few months back. And 

there was—I would say the majority opinion then expressed serious 

concerns about our ability to do that. Since then we have had a lot 

44

of additional talks with people about the technology. There are— some people on our staff, however, are convinced that the technological issues can be dealt with. I don’t know at what cost, and we 

are still looking at it. 

I think, obviously, since we are dealing with people who aren’t 

complying with laws that exist in any event, that the danger you 

talked about is a very serious danger of putting—you know, the potential of someone getting a list of valid e-mail addresses. 

Mr. CANNON. Thank you, Mr. Muris. 

General Pate, I just have one other question. Does this potentially raise antitrust issues in your mind when a company holding 

a monopoly share of the voice market, and a significant share of 

the broadband market, refuses to sell broadband to a customer if 

that customer wants to buy voice service over the monopoly’s loop 

from a competing company? 

Mr. PATE. It potentially does. We would need to look at the market facts, the presence or absence of market power in a particular 

situation. The antitrust laws don’t set up a regulatory regime of 

open access under all circumstances. So there may be access that 

a competitor would seek in a situation where denial of that access 

would not raise antitrust concerns. 

But yes, it could. It would be something that merits examination 

on a case-by-case basis. 

Mr. CANNON. Are you aware that several States have found that 

is not anticompetitive? And is that significant in your mind? 

Mr. PATE. That a State public utility commission, for example, 

would or would not determine that an open access rule is required 

as part of its regulatory oversight, would not govern whether we 

might find an antitrust problem with a particular business practice. They are two different inquiries. 

Mr. CANNON. Are you looking at any situations like that currently? 

Mr. PATE. I am not aware, sitting here, of an open investigation 

of that type. I wouldn’t rule out the possibility that our staff has 

its eye on a situation like that, but I don’t have one in mind I could 

mention to you today. 

Mr. CANNON. Thank you very much, General Pate. 

Mr. Chairman, I yield back. 

Mr. SMITH. Thank you, Mr. Cannon. That concludes our questions. General Pate and Chairman Muris, we appreciate your testimony today. It has been very helpful. And as you might have gathered from my opening statement, we expect to see you all again 

sometime soon as well, but we appreciate your expertise and your 

interest in this subject. 

The Committee stands adjourned. 

Mr. PATE. Thank you, Mr. Chairman. 

[Whereupon, at 5:10 p.m., the Committee was adjourned.] 

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