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OVERSIGHT OF THE ANTITRUST 

ENFORCEMENT AGENCIES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INTELLECTUAL PROPERTY, 

COMPETITION, AND THE INTERNET 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

DECEMBER 7, 2011 

Serial No. 112–98 

Printed for the use of the Committee on the Judiciary 

( 

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

(II) 

COMMITTEE ON THE JUDICIARY 

LAMAR SMITH, Texas, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

DENNIS ROSS, Florida 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

MARK AMODEI, Nevada 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

JARED POLIS, Colorado 

SEAN MCLAUGHLIN, Majority Chief of Staff and General Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON INTELLECTUAL PROPERTY, COMPETITION, AND THE INTERNET

BOB GOODLATTE, Virginia, Chairman 

BEN QUAYLE, Arizona, Vice-Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

SANDY ADAMS, Florida 

MARK AMODEI, Nevada 

MELVIN L. WATT, North Carolina 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

BLAINE MERRITT, Chief Counsel 

STEPHANIE MOORE, Minority Counsel 

(III) 

C O N T E N T S 

DECEMBER 7, 2011 

Page 

OPENING STATEMENTS 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Subcommittee on Intellectual Property, Competition, and the Internet .................................................................................... 1 

The Honorable Melvin L. Watt, a Representative in Congress from the State 

of North Carolina, and Ranking Member, Subcommittee on Intellectual 

Property, Competition, and the Internet ............................................................ 3 

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

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

Member, Subcommittee on Intellectual Property, Competition, and the 

Internet ................................................................................................................. 4 

WITNESSES 

Jon Leibowitz, Chairman, Federal Trade Commission 

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

Prepared Statement ............................................................................................. 9 

Sharis A. Pozen, Acting Assistant Attorney General, Department of Justice 

Antitrust Division 

Oral Testimony ..................................................................................................... 27 

Prepared Statement ............................................................................................. 29 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Ranking Member, Subcommittee 

on Intellectual Property, Competition, and the Internet, and Member, Subcommittee on Intellectual Property, Competition, and the Internet ............... 5 

Prepared Statement of the Honorable Michael Grimm, a Representative in 

Congress from the State of New York ................................................................ 173 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Response to Post-Hearing Questions from Jon Leibowitz, Chairman, Federal 

Trade Commission ............................................................................................... 176 

Response to Post-Hearing Questions from Sharis A. Pozen, Acting Assistant 

Attorney General, Department of Justice Antitrust Division .......................... 179 

(1) 

OVERSIGHT OF THE ANTITRUST 

ENFORCEMENT AGENCIES 

WEDNESDAY, DECEMBER 7, 2011 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON INTELLECTUAL PROPERTY, COMPETITION, AND THE INTERNET, COMMITTEE ON THE JUDICIARY, Washington, DC. 

The Subcommittee met, pursuant to call, at 10:04 a.m., in room 

2141, Rayburn House Office Building, the Honorable Bob Goodlatte 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Goodlatte, Quayle, Sensenbrenner, 

Coble, Chabot, Issa, Jordan, Adams, Amodei, Watt, Conyers, Chu, 

Deutch, Lofgren, Jackson Lee, and Johnson. 

Staff Present: (Majority) Holt Lackey, Counsel; Olivia Lee, Clerk; 

and (Minority) Stephanie Moore, Counsel. 

Mr. GOODLATTE. Good morning. This hearing of the Subcommittee on Intellectual Property, Competition, and the Internet 

will come to order. This hearing will conduct oversight of the two 

agencies that share responsibility for enforcing America’s antitrust 

laws, the Department of Justice Antitrust Division and the Federal 

Trade Commission’s Bureau of Competition. 

When applied in a predictable fashion based on sound economic 

principles, the antitrust laws preserve a free and competitive economy. Antitrust laws protect against monopolies, cartels, and combinations that would abuse market power to enrich themselves at 

the expense of competition and American consumers. If the antitrust laws go unenforced, competition and consumers will suffer. If 

they are over enforced, they can give unfair advantage to specific 

competitors and thwart pro-competitive practices that benefit consumers. But when applied correctly, the antitrust laws protect competition rather than competitors and intervene in our free market 

economy only to the extent necessary to preserve competition. 

Thanks to an improved understanding of economics and the history of antitrust laws’ original intent, antitrust case law and enforcement has become much clearer and more predictable over the 

past 40 years. Today’s hearing is about Congress ensuring that the 

two Federal agencies charged with enforcing the antitrust laws, the 

Department of Justice and the FTC, continue to do so in the most 

balanced, clear, and predictable way as possible. 

Particularly in this difficult economy, the antitrust laws must set 

clear rules of the road by which job creators and consumers can do 

business, and although antitrust is more predictable than it was 40 

2 

years ago, there are still areas of inefficiency and uncertainty that 

I hope to explore in today’s hearing. 

I am particularly concerned that merging companies are often 

uncertain about which agency will review their merger. The two 

antitrust agencies share responsibility for the merger review process and decide between themselves which agency will review any 

given merger by a process known as clearance. In many cases, 

clearance is reasonably clear because one agency or the other has 

expertise in the industry involved. However, jurisdiction may be 

hotly disputed in high profile matters or when neither or both 

agencies have relevant expertise. 

The process by which the agencies resolve clearance disputes is 

opaque. There are stories which do not inspire confidence of clearance disputes being settled by coin tosses, jump ball arrows or back 

room deals. This uncertainty about clearance can affect Americans’ 

ability to predict whether a given merger will be approved. Because 

of different rules that apply to the two agencies, it is widely believed that mergers that are reviewed by the Federal Trade Commission are less likely to win approval than mergers that are reviewed by the Department of Justice. 

The first step in a merger challenge for both agencies is to apply 

in court for a preliminary injunction blocking the merger pending 

further proceedings, but courts apply a lower standard to preliminary injunction requests by the FTC than to the DOJ. After the 

preliminary injunction phase, the FTC may challenge the merger 

in an administrative proceeding while the DOJ must bring its challenge in Federal Court. This also makes it easier for the FTC to 

block a merger. 

These disparities harm the predictability of the merger review 

system. That is why the prior Obama administration Assistant Attorney General for Antitrust, Christine Varney, said, and I quote, 

‘‘I don’t think we want to foster a system where the legal review, 

the result of your merger depends on which agency it’s in front of. 

I would recommend to the Congress that they start to think about 

how to rationalize that.’’ I would like to accept Ms. Varney’s recommendation and invite today’s witnesses to help this Committee 

think about how to rationalize these disparities. 

There are a number of other oversight issues respecting the 

transparency, predictability, and fairness of the antitrust system 

that this Committee should explore today. These issues include but 

are not limited to the scope of the FTC’s authority under Section 

5 of the FTC Act, how the proposed closure of DOJ field offices will 

affect the budget, DOJ’s increasing reliance on conduct remedies in 

merger cases, and whether the agency’s recent guidance regarding 

the antitrust treatment of accountable care organizations will provide clarity and certainty to health care providers trying to adjust 

to the new health care law. 

All of these issues are important to creating the clear and predictable rules for free market competition that are necessary to 

grow the economy. 

I look forward to today’s hearing, and it’s now my pleasure to 

yield to the Ranking Member of the Subcommittee, the gentleman 

from North Carolina, Mr. Watt. 

3 

Mr. WATT. Thank you, Mr. Chairman, and I want to thank you 

for convening this hearing, and I want to enthusiastically welcome 

our witnesses today. 

Since the beginning of this session of Congress, this Subcommittee and/or the full Judiciary Committee have held hearings 

on pending mergers before your agencies. We have evaluated, predicted, and sometimes second guessed how a particular proposal 

should be processed and investigated by you and your staffs. My 

philosophy in this context has always been to try to participate in 

the process to actively educate our constituents on complex matters 

that are in the process of being analyzed beyond the public eye. I 

appreciate the fact that we will never have access to all the facts 

and data on which you base your determinations of whether to approve or disapprove a given merger with or without conditions, and 

we are therefore ill equipped to pass definitive judgment on any 

pending proposal. So I am pleased that you are here today to provide us with insight on your leadership, collaboration, and approaches to enforcement of the laws within your respective and 

sometimes joint jurisdiction. 

Your written submissions have certainly raised specific areas appropriate for congressional oversight. For example, what is the effectiveness of behavioral conditions imposed on approved mergers? 

Should Congress enact legislation prohibiting pay-to-delay settlements? How should we evaluate the intersection between patent 

protection and competition, and are there policy gaps for Congress 

to fill in that space? What challenges do we face in coordinating 

antitrust policy internationally? 

I hope that some of my colleagues will explore some or all of 

these issues, but my interests are particularly dominated by one 

merger in particular, not with respect to the specifics of the merger 

but the debate it inspired within the FTC and in the academic literature. That merger is the Google/DoubleClick merger and the debate it has ignited about whether or to what extent privacy should 

be an element of antitrust enforcement, especially in the online environment. I believe that the prospect of compromising privacy is 

a price consumers pay for most online services. Simply by logging 

on to a computer, consumers surrender their privacy. Personal information is required, collected, shared, used, sold, tracked, and retained frequently without our knowledge. 

Chairman Leibowitz, as you noted in your concurring statement 

approving the Google/DoubleClick merger, quote, ‘‘This rampant 

tracking of our online conduct as well as the resulting consumer 

profiling and targeting raises critical issues about the sufficiency of 

companies’ disclosure, the depth of consumers’ understanding and 

control of their personal information, and the security and confidentiality of the massive collection of sensitive personal data.’’ 

And former Commissioner Pamela Jones Harbour in dissent noted 

that while, quote, ‘‘A minority of consumers will share their most 

intimate details with anyone on the Internet, on the radio or on national television, privacy principles should protect the majority of 

consumers who do care about their privacy and who would prefer 

greater transparency about the use of their personal information.’’ 

Various academics have also weighed in on these issues, posing 

the question whether traditional antitrust enforcement is currently 

4 

inadequate to protect privacy and whether the Department of Justice and the FTC should expand the scope of analysis to include 

privacy and other sociopolitical issues in the competition calculus. 

Because I am ever more convinced that one of the most important 

things we can do as policymakers is to preserve our privacy protections online, I’m very interested in your perspectives on the future 

of privacy and how it relates to or plays out under the antitrust 

laws. 

Just yesterday we liberalized the prospect or the manner in 

which consumers can give up their privacy online, and I note also 

that you recently approved a privacy settlement involving 

Facebook, and if I have some time I may want to inquire into that 

further. 

Mr. Chairman, I thank you for convening this hearing. I think 

it’s a very important hearing, and I yield back the balance of my 

time. 

Mr. GOODLATTE. I thank the gentleman, and it’s now my pleasure to recognize the Ranking Member of the Judiciary Committee, 

the gentleman from Michigan, Mr. Conyers. 

Mr. CONYERS. Thank you, Chairman Goodlatte. We welcome the 

witnesses. It’s worth noting that both of your agencies have done 

more to enforce our antitrust laws than in previous years, but that 

doesn’t give me much comfort. American and transnational conglomerates are getting away with incredible violations of the law. 

Companies—Google, Monsanto, Goldman Sachs—have acted repeatedly with impunity, engaging in unlawful, anticompetitive 

practices knowing that they can exploit the loopholes in a government system whose antitrust and criminal enforcement resources 

and commitment are not very strong. 

So it’s my hope that this is the first of a series of hearings that 

will go on in terms of antitrust enforcement. Strong antitrust enforcement is critical because free markets and competition, which 

are supposed to be the foundation of our system, can only thrive 

when there is a strong enforcement in this area of the law. Weak 

antitrust enforcement stifles job creation and weakens the economy. The previously accepted phrase ‘‘too big to fail’’ sums it all up. 

When companies like AIG, CitiGroup, and a number of Wall Street 

predators become so large that our entire economy depends on 

their continued success, which may incorporate unethical or illegal 

activity, then the economy has become too concentrated and too 

distorted. 

Three years after the financial distress Wall Street has put us 

in, not one Wall Street CEO has been imprisoned. In each case 

when our Federal antitrust enforcers have stepped up, they have 

helped restore competition to the market and protect consumers. 

The challenge to block H&R Block and TaxACT merger, the ongoing suit to block the AT&T proposed acquisition of T-Mobile, the 

FTC last year settlement with Intel are all consumer wins. We 

wait to see what will happen with today’s headlines, the AetnaBlue Cross dispute in Michigan that the Justice Department has 

actively intervened into, the FTC’s work on anticompetitive pay-fordelay agreements among pharmaceutical manufacturers that have 

so far frequently kept generic drugs off the market. Only action 

5 

will protect American consumers and jobs, and so I am aware of 

enforcement efforts have increased over the last couple years. 

This year the Federal Trade Commission challenged 17 mergers 

believed to be anticompetitive, but it isn’t enough. Google attempts 

to purchase Motorola, Verizon teams up with the new Comcast 

NBC Universal on shared service ventures, and as the whims of 

Wall Street investment firms wreak havoc on the global economy, 

we need antitrust to become a top priority for our law enforcement 

system. 

I’ll put the rest of my statement in the record, and I think you 

get my drift. Thank you, Mr. Chairman. 

[The prepared statement of Mr. Conyers follows:] 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Ranking Member, Committee on 

the Judiciary, and Member, Subcommittee on Intellectual Property, Competition, and the Internet 

Thank you Chairman Goodlatte for convening this oversight hearing today. 

Although it is worth noting that both of your agencies have done more to enforce 

our antitrust laws than the previous one, this gives me little comfort. American and 

transnational conglomerates get away with murder. Companies like Google, Monsanto, and Goldman Sachs often act with impunity when it comes to engaging in 

unlawful and anti-competitive practices because they know they can exploit gaping 

loopholes and a government whose antitrust and criminal enforcement resources 

and commitment are weak. 

Strong antitrust enforcement is critical to our Nation. Free and competitive markets are the foundation of our economy. 

Weak antitrust enforcement stifles job creation and brings weakness to the economy. The phrase ‘‘Too-big-to-fail’’ sums it all up: when companies like AIG, 

CitiGroup, and the Wall-Street-Robber-Barrons become so large that our entire 

economy depends on their success: the economy has become too concentrated and 

distorted. It is shocking that three years after Wall Street bludgeoned the US and 

world economy, not one Wall Street CEO has gone to prison. 

In each case when our federal antitrust enforcers have stepped up, they have 

helped restore competition to the market to protect consumers. The Justice Department’s successful challenge to block the H&R Block/TaxACT merger, ongoing suit 

to block AT&T’s proposed acquisition of T–Mobile, and the FTC’s 2010 settlement 

with Intel are wins for consumers. Promising developments may come with the Justice Department’s challenge against Blue Cross Blue Shield’s conduct in Michigan 

and the FTC’s work on the anti-competitive pay-for-delay agreements among pharmaceutical manufacturers that keep generic drugs off the market. 

Only action will protect American consumers and American jobs. Now I am aware 

that enforcement efforts have increased over the last two years. For example, during 

Fiscal Year 2011, the Federal Trade Commission challenged 17 mergers believed to 

be anti-competitive. 

But this is not enough. As Google attempts to purchase Motorola, as Verizon 

teams up with the new Comcast-NBC–Universal on shared service ventures, and as 

the whims of Wall Street Investment firms wreak havoc on the global economy, we 

need consumer- and competition-oriented antitrust to become a top priority for our 

government. 

Mr. GOODLATTE. I thank the gentleman, and the opening statements of other Members of the Committee will be placed in the 

record without objection. 

Before I introduce the witnesses, as is the custom of the Committee, I would ask them to stand and be sworn. 

Do you and each of you swear that the testimony you’re about 

to give is the truth, the whole truth, and nothing but the truth, so 

help you God? 

[Witnesses sworn.] 

6 

Mr. GOODLATTE. Thank you very much. Our first witness today 

is Federal Trade Commission Chairman Jon Leibowitz. Mr. 

Leibowitz was sworn in as an FTC Commissioner in 2004 and was 

designated Chairman by President Obama in 2009. Before joining 

the Commission, Chairman Leibowitz served in several capacities 

as Chief Counsel to Senator Herb Kohl from 1989 to 2000, including as Democratic Chief Counsel and Staff Director of the U.S. Senate Antitrust Subcommittee from 1997 to 2000. Leibowitz also 

worked for Senator Paul Simon from 1986 to 1987. Before joining 

the Commission, Mr. Leibowitz served most recently as Vice President for Congressional Affairs for the Motion Picture Association of 

America from 2000 to 2004. A Phi Beta Kappa graduate in American history from the University of Wisconsin, Leibowitz graduated 

from the New York University School of Law in 1984. 

Our second witness is Acting Assistant Attorney General for 

Antitrust, Sharis Pozen. Ms. Pozen became the acting head of the 

Antitrust Division in August 2011 upon the resignation of Assistant Attorney General Christine Varney. Previously Ms. Pozen 

served as Chief of Staff and Counsel to Ms. Varney. Immediately 

prior to joining the Department, Ms. Pozen was a partner in the 

Washington, D.C. office of Hogan & Hartson, LLP, where she 

served as Director of the firm’s Antitrust Practice Group. Prior to 

joining Hogan & Hartson in 1995, Ms. Pozen held several positions 

at the Federal Trade Commission, where she began her professional career in 1989. Ms. Pozen received her JD from Washington 

University Law School in St. Louis in 1989 and her BA from Connecticut College in 1986. 

I want to welcome both of our witnesses, and Mr. Leibowitz, we’ll 

begin with you. 

TESTIMONY OF JON LEIBOWITZ, CHAIRMAN, FEDERAL TRADE 

COMMISSION 

Mr. LEIBOWITZ. Thank you, Chairman Goodlatte, Ranking Member Watt, Mr. Conyers, Mr. Sensenbrenner, Mr. Deutch, and Ms. 

Lofgren for inviting me here to testify today on the FTC’s current 

antitrust activities, and I’m happy to be here with my colleague 

Ms. Pozen. 

Let me start with what I hope is modestly good news for the 

economy, premerger filings are up. In fact, there were twice as 

many filings this year as compared to 2 years ago. That means 

companies are beginning to feel more confident about the future, 

and it’s also good news for consumers because the vast majority of 

mergers don’t raise competitive issues, and indeed some may create 

benefits. Of course, we review merger filings to determine which 

ones may substantially lessen competition. That’s our standard 

under the Clayton Act. 

In fiscal year 2011 we brought, as Mr. Conyers noted, 17 merger 

enforcement actions. Most of the time that means we negotiated divestiture of assets to remedy a problem, and we let the rest of the 

acquisition go forward, but this year the FTC went to Federal 

Court four times to stop mergers, so it has been a busy year for 

us. 

As this Committee knows, the FTC has jurisdiction over a wide 

swath of the economy. Mr. Watt noted that we spend a lot of time 

7 

thinking about and involved in privacy issues on our consumer protection side, and in both our consumer protection and our competition missions, we try to focus on sectors where our action will do 

the greatest good for the greatest number of people. It’s a utilitarian approach, and these include energy technology and of course 

health care. 

As spending on health care approaches 18 percent of our GDP, 

the FTC has redoubled its efforts to combat illegal pay-for-delay 

pharmaceutical settlements, prevent harmful consolidation, and 

formulate policies that will support innovative health care collaborations. One area of health care competition that has required particular attention this year is hospital mergers. Several years ago 

under Republican Chairman Tim Muris we conducted retrospective 

studies of consummated hospital mergers to examine their effects, 

and we found in some instances that prices had gone up substantially. That formed the basis of the Commission’s challenge to a 

previously consummated hospital merger of two hospitals serving 

Evanston, Illinois. Since then the Commission has successfully 

challenged an impending hospital merger in Northern Virginia, 

and this year alone we have challenged three others, leading us to 

believe we might be witnessing the start of a wave of consolidation 

that could raise prices and reduce quality of care for American consumers and patients. Sometimes we’ve alleged these. Hospital 

mergers have used what we think is a misapplication of what’s 

known as the State action doctrine as a fig leaf for their deals. 

Another area of focus at the FTC is high tech industries. The 

proper application of competition principles in the high tech arena 

can be difficult, but it is critical. Antitrust enforcement can stop illegal conduct that chokes off avenues for new firms to challenge incumbents and that was the crux of our case against Intel, and we 

resolved it in a way that’s good for consumers and also allowed 

Intel to continue to innovate going forward. 

Sometimes, however, market facts suggest that the FTC take a 

wait-and-see approach, as we did when we determined not to challenge Google’s purchase of AdMob. I think we made the right call 

here. Competition between Apple’s iPhone and Google’s Android 

platforms has led to an explosion of mobile applications. We will 

continue to pursue this balanced course, intervening only, as you 

mentioned, Chairman Goodlatte, when warranted to protect consumers and competition for the competitive process. 

Energy markets continue to demand the Commission’s attention. 

There’s only so much that households can do to reduce their gasoline consumption, so higher fuel prices severely cut into a family’s 

ability to buy other necessary goods or save for the future. Recently 

we opened an investigation when we observed unusual behavior 

among certain oil refiners. Their profit margins were going up 

while simultaneously their utilization rates were going down. 

Let me also touch upon our authority under Section 5 to stop unfair methods of competition. As you know, Congress granted Section 5 authority to the FTC when it created our agency in 1914. 

Section 5 is a carefully balanced tool that allows us to go modestly 

beyond the ambit of the antitrust laws to stop anticompetitive conduct, but it limits the remedies we may apply, and it makes it more 

difficult to bring follow-on private class action lawsuits. We have 

8 

unanimous, bipartisan support within the Commission to use Section 5 in appropriate circumstances, circumstances in which competition itself is harmed. 

For example, we used Section 5 to challenge invitations to 

collude most recently against U-Haul. This attempt to fix prices in 

the truck rental market in Florida couldn’t be reached under the 

antitrust laws because there was no actual agreement or meeting 

of the minds about raising prices, but it is conduct that can and 

should be stopped. 

Finally, let me mention our antitrust policy work. We are in the 

midst of what might be called an antitrust renaissance. The working partnership with our colleagues at the Antitrust Division has 

recently produced two significant policy documents, a revision to 

the horizontal merger guidelines and a statement of enforcement 

policy for accountable care organizations. These joint efforts help to 

bring clarity and consistency to the law, guidance that benefits the 

business community and law-abiding companies. 

We look forward to continuing to work side by side with the Department of Justice as well as with State attorneys general to promote competition for the benefit of American consumers and businesses. 

Thank you. Happy to take questions after Ms. Pozen speaks. 

[The prepared statement of Mr. Leibowitz follows:] 

9 

Prepared Statement of Jon Leibowitz, Chairman, Federal Trade 

Commission 


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Mr. GOODLATTE. Thank you, Mr. Leibowitz. 

Ms. Pozen, welcome. 


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TESTIMONY OF SHARIS A. POZEN, ACTING ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF JUSTICE ANTITRUST DIVISION 

Ms. POZEN. Thank you and good morning. Is this on? Thank you 

and good morning, Chairman Goodlatte and Members of the Subcommittee, and thank you for the opportunity to appear before you. 

It’s an honor to serve as Acting Assistant Attorney General and to 

work with the Department’s leadership and the dedicated, talented 

division career staff, and our front office team. 

When the Attorney General announced my appointment, he said 

it would be a seamless transition. That is my focus, continued, vigorous antitrust enforcement, transparency, and certainty for consumers and businesses. 

Echoing what’s been said this morning, competition drives our 

economy. Vigorous antitrust enforcement preserves competition 

and delivers American consumers lower prices, higher quality 

goods, and more innovation. We take a measured approach to the 

antitrust law enforcement and rely on sound competition and economic principles. We evaluate each matter carefully, thoroughly, 

and in light of the particular facts. 

The division’s major competition initiatives include civil merger 

and nonmerger enforcement, criminal enforcement, competition advocacy, and international activities. We have focused on mergers 

and conduct that harm consumers and stymie innovation in critical 

industries. Efficient and effective merger review and enforcement 

are among our core priorities. 

When reviewing mergers, we quickly identify those transactions 

that raise no competitive issues and let them proceed, and fiscal 

year 2011 demonstrates that. We cleared 98 percent of the transactions we reviewed without requesting more information. For the 

remaining 2 percent we identified the transactions that required 

enforcement. In many of these the parties proposed remedies to resolve the competitive problems, and we entered into consent agreements. In other cases, when the parties did not propose effective 

remedies, we went to court. 

As was noted, among these is our successful lawsuit to stop H&R 

Block from acquiring TaxACT, a transaction that would have left 

American taxpayers with only two major digital do-it-yourself tax 

preparation providers, leading to higher prices, lower quality products, and less innovation. The court agreed and blocked the proposed merger, which was an important victory on behalf of the 40 

million American consumers who use this type of tax software. 

We also sued AT&T regarding its proposed acquisition of T-Mobile. While I can’t provide details of the pending court matter, I can 

say, as articulated in our complaint that was filed in court, this 

transaction, if consummated, would substantially reduce competition in mobile wireless telecommunications services across the 

United States, resulting in higher prices, less innovation, and lower 

quality services in an industry that is important to millions of 

American consumers and businesses. 

In addition, we continually seek to improve our transparency in 

merger enforcement. The revised horizontal merger guidelines the 

Chairman referred to which were released with the FTC last year 

28 

and our updated policy guide on merger remedies have helped 

achieve this goal. 

Our civil, nonmerger enforcement is an important way we vigilantly police the Nation’s markets against anticompetitive conduct. 

For example, we have an ongoing court challenge to Blue Cross/ 

Blue Shield of Michigan’s use and enforcement of most favored nations clauses in its hospital contracts, which distort the competitive 

process. We also challenged a Texas hospital’s use of exclusionary 

contracts with health insurers through which the hospital maintained its market power, and our litigation against American Express concerning merchant fees continues, and we are also investigating the electronic book industry along with the European Commission and with States attorneys generals. 

Our criminal enforcement program continues to achieve remarkable successes. In fiscal year 2011 the division filed 90 criminal 

cases, which is up from 60 cases filed in fiscal year 2010. We obtained over $520 million in criminal fines, we charged 27 corporations and 82 individuals, and courts imposed 21 jail terms, totaling 

more than 10,000 days of jail time. These cases were brought in a 

range of important industries, including real estate, auto parts, financial services, and the air transportation services. 

One example is the division’s ongoing international cartel investigation into price fixing and bid rigging in the auto parts industry. 

This has already resulted in one corporation and three individual 

guilty pleas, a $200 million fine, and three separate jail terms for 

executives. This case involved hard core, pernicious price fixing 

that could only have resulted in inflated prices on the parts found 

in every American consumer’s car. 

Also thriving is our competition advocacy program. Our competition advocacy efforts focus on sectors important to Americans’ everyday lives, such as health care, agriculture, and finance. 

On the international front, we remain mindful of international 

issues in our day-to-day investigations and policy work, recognizing 

that our decisions can affect consumers and businesses elsewhere. 

We have looked to strengthen relations with emerging economies 

such as China and India. Last summer we, along with the Federal 

Trade Commission, signed a memorandum of understanding with 

all three Chinese competition agencies. We and the FTC expect to 

sign an MOU with India in 2012. We are a leader in international 

competition groups, and since 2009 we have led the global dialogue 

on procedural fairness and transparency issues in these organizations. The accomplishments I have highlighted today and my testimony depend on the dedication of our division career staff. I can 

tell you it is an honor and a privilege to serve with them. 

Chairman Goodlatte, Ranking Member Watt, and Members of 

the Subcommittee and Committee, thank you again. I am pleased 

to answer your questions. 

[The prepared statement of Ms. Pozen follows:] 

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Mr. GOODLATTE. Thank you, Ms. Pozen. Chairman Leibowitz, I’m 

going to start with a question that does not relate to your antitrust 

jurisdiction but is an issue of concern to this Subcommittee. In fact, 

we’ve held a hearing on it, and that is related to ICANN, the Internet Corporation for Assigned Names and Numbers, which is about 


Pozen-27.eps
56 

to open an application window that could result in the creation of 

an unlimited number of new generic top level domains. 

In the past, you have spoken about how difficult it is to identify 

the true owner of domain names and how that causes harm and 

hampers law enforcement efforts in the case of Internet fraud and 

consumer deception. Do you have an opinion, Mr. Chairman, about 

ICANN’s plan to roll out hundreds, maybe even thousands of new 

gTLDs, and how would that impact consumers and the FTC’s consumer protection mission? 

Mr. LEIBOWITZ. So this is an area, of course, where your intellectual property jurisdiction and our consumer protection jurisdiction 

intersect, and I would say at the Commission we are very, very 

concerned that this rollout of new gTLDs has the potential to be 

a disaster for consumers and for businesses, and let me tell you 

briefly why we think that’s true. 

We bring a lot of Internet fraud cases, as do our sister law enforcement agencies around the world, as does the Criminal Division 

and CCIPS in the Department of Justice, and what we have found 

is that domain names are often registered under fraudulent or registered with using fraudulent names, using inaccurate contact information, and if you are a criminal or a scam artist, you want to 

do it that way because you want to make it harder for us to go 

after malefactors. We worry that if ICANN goes broadly and if it 

doesn’t ensure accuracy in its Whois database, which is terribly inaccurate, again, when you’re going after people engaged in ripping 

off consumers, this is going to be exponentially worse. And then 

there is also a burden on businesses. 

Of course, businesses don’t want to go up against phishing sites, 

and think about how many different ways you can spell the name 

Marriott and now multiply it by all these new domain names, domains, but they also will have to—at I think $180,000 per new 

gTLD, businesses will have to defensively register all of their 

names, and so our sense is it’s burdensome to businesses, it could 

be very harmful to businesses and their brands as well as to consumers. We see enormous costs here to consumers and businesses 

and not a lot of benefit, and so we are working with consumer protection agencies around the world who also have concerns, and we 

want to work with this Committee. I know Senator Rockefeller and 

the Senate Commerce Committee is holding a hearing tomorrow, 

and we want to work with you. It’s a real problem unless they 

make some changes and ensure accuracy. 

Mr. GOODLATTE. Thank you. I have got to get some other questions in here, but let me just ask you one follow-up. 

Mr. LEIBOWITZ. Sure. 

Mr. GOODLATTE. We share your concern. Have you expressed 

your concerns to the Secretary of Commerce and others in the Administration who have maybe the last chance to exercise some influence here to get this changed? 

Mr. LEIBOWITZ. We have been talking to the Commerce Department. We’ll continue that. And I think in the not-too-distant future, 

we will also be talking directly as a Commission to ICANN about 

this. 

Mr. GOODLATTE. Thank you. And now to antitrust. The Antitrust 

Modernization Commission recommended that Congress enact legVerDate Aug 31 2005 10:59 Jun 05, 2012 Jkt 000000 PO 00000 Frm 00060 Fmt 6633 Sfmt 6601 H:\WORK\IP\120711\71600.000 HJUD1 PsN: 71600
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islation to require the agencies to clear all Hart-Scott-Rodino merger cases within a short period of time to prohibit the FTC from pursuing administrative litigation in Hart-Scott-Rodino merger cases 

and to ensure that the same standard for the grant of a preliminary injunction applies to both agencies. Would you both agree that 

if the goal is to put parties on an even footing, regardless of which 

agency reviews their merger, then these are reasonable steps? Mr. 

Leibowitz? 

Mr. LEIBOWITZ. I would say that the system that Congress has 

designed, which has some procedural differences but results in the 

same standards, you have to show you’re going to win on the merits is one that works pretty well. I know back when the Commission issued its report, which I read very closely, there was a lot of 

concern about clearances fees, but particularly about the timing of 

resolution of merger reviews. I don’t think those problems exist 

anymore, so I understand their recommendation. I don’t believe 

that was a unanimous recommendation, although I will get back to 

you, but I think when the heads of the FTC and the Antitrust Division act in the best public interest we get these disputes resolved. 

And I think ultimately the—— 

Mr. GOODLATTE. Do you disagree with the principle that companies should have equal rights regardless of whether the merger 

happens to clear to the FTC—— 

Mr. LEIBOWITZ. No, of course I agree with that, but I think—— 

Mr. GOODLATTE. FTC or the DOJ? 

MR. LEIBOWITZ. But I think that the different procedures, which 

again were set up by Congress, are ones that result in the same 

outcome. I don’t think its outcome determinative whether you go to 

the FTC or whether you go to the Antitrust Division. We ask for 

a preliminary injunction and they ask for a permanent injunction. 

And in one of our last preliminary injunctions, by the way, the 

Commission got a preliminary injunction to block a hospital merger 

in Cleveland, Ohio, and the parties decided, as is their right, to 

come back and get a full trial before the FTC. So I agree with the 

baseline principle that parties deserve full, fair, and objective and 

speedy resolution by both the Commission and the Antitrust Division. They deserve the same standards. I think that they get them. 

Mr. GOODLATTE. Let me ask Ms. Pozen to answer the same questions. 

Ms. POZEN. No, sure, and many experts have reviewed this process, you know, the shared jurisdiction between our two organizations. I think that typically in the reports you’re citing to and others, folks agree that if you had to build this from scratch you might 

not build it in the same way it is today, with the overlapping jurisdiction and the clearance. 

Mr. GOODLATTE. What’s the impediment to rebuilding it to attempt to achieve that kind of fairness? 

Ms. POZEN. I would leave that in the hands of Congress, sir. It 

is in the hands of Congress. 

Mr. GOODLATTE. And what would be your recommendation to us? 

Ms. POZEN. Well, I don’t know if I have a specific recommendation on that. You know, we work with the system as it exists, and 

we try to work efficiently and effectively to clear transactions, to 

make it clear to the parties right away which agency will be hanVerDate Aug 31 2005 10:59 Jun 05, 2012 Jkt 000000 PO 00000 Frm 00061 Fmt 6633 Sfmt 6601 H:\WORK\IP\120711\71600.000 HJUD1 PsN: 71600
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dling that review. We each have expertise. There are times when 

our expertise—— 

Mr. GOODLATTE. Well, let me get back to my specific question at 

the outset. Do you think these specific recommendations of the 

Antitrust Modernization Commission are reasonable steps for the 

Congress to take? 

Ms. POZEN. I think that there are reasonable steps that can be 

taken to ensure that clearance is done in a timely manner. We do 

the best we can with the system that exists. If you determine that 

you want to change and Congress wants to change that system, we 

would be happy to work with you on how to do that. 

Mr. GOODLATTE. That’s helpful, but not in terms of the advice 

about the merits of the underlying question. But I’ll now turn to 

the gentleman from North Carolina, Mr. Watt. 

Mr. WATT. Thank you, Mr. Chairman. Your questions remind 

me, I sit on the Financial Services Committee, too, and there’s uniform agreement that the SEC and the CFTC should be merged, but 

we’ve got two Committees in Congress dealing with them, and 

they’ve got a history of existing, and nobody wants to undertake 

that. We didn’t try to do it in Dodd-Frank because we knew it was 

a ballistic mine. 

So, anyway, I raised some issues about privacy in my opening 

statement, and I want to pose three questions that I hope you will 

address in writing because I don’t think we can really deal with 

them sufficiently in the 5 or 6-minute time frame. 

First question, are the privacy concerns you, Mr. Leibowitz, and 

former Commissioner Harbour expressed in the Google/DoubleClick 

decision unique to online advertising or do they apply to the Internet generally? 

Second question, is the current privacy framework and enforcement mechanism sufficient to meet the challenges online? 

And, third, a similar question to the one Mr. Goodlatte asked, 

how would you integrate privacy protection into traditional antitrust analysis and help us define the role of Congress in that 

space? 

If you could respond to those off line and not take the time to 

do it this morning because I think it’s far too complex to do, I 

would certainly appreciate it. 

Mr. LEIBOWITZ. We will do that. 

Mr. WATT. All right. I know I can’t ask Ms. Pozen this question, 

but I know you have an extensive background in the Antitrust Division also, and I was thinking maybe you could express your opinion about whether the Department of Justice did the right decision 

to proceed to litigation in AT&T/T-Mobile merger, if you have one. 

I’m not trying to put you on the spot. Yes? 

Mr. LEIBOWITZ. You know that Ms. Pozen can’t talk about it. 

Mr. WATT. Yeah, I know she can’t talk about that, right. 

Mr. LEIBOWITZ. I’ll just say this, it is a—— 

Mr. WATT. Either you agree with it or you don’t agree with it or 

you don’t want to express—— 

Mr. LEIBOWITZ. Well, I don’t think I can say I agree, but I certainly agree that it is a major merger, it has enormous effect on 

consumers, and we are very supportive of the work and the effort 

59 

that the Antitrust Division has put into this matter, and it will be 

resolved, and I don’t think I can say much more than that. 

Mr. WATT. Okay. All right. 

Mr. LEIBOWITZ. So I think I’ll stop there. 

Mr. WATT. Well, you punted, okay. I’m interested in the process 

by which you get to these policy statements such as the horizontal 

merger agreement that you all have worked out. This strikes me, 

and maybe I’m missing something here, as similar to a rulemaking 

process. Is that the process you are going through? Are people, is 

the public allowed to comment publicly on these processes or 

should they be or how do you differentiate this from a rulemaking 

process? 

And then the last question I’ll have is about some concerns that 

were raised by Ms. Pozen about your hospital litigation because 

one of the concerns I’m having in my local community is that the 

hospitals have become pretty big operations, and they are now excluding physicians who have all of the qualifications to practice at, 

practice medicine from doing procedures in their hospitals because 

they have these exclusive agreements with a particular group of 

doctors, excluding all other doctors. It’s an integrated operation up 

and down the line, but it seems to me that it has some policy implications. I’m wondering if you agree and, if so, what would be the 

appropriate process for a particular physician or somebody else 

calling your attention to this and getting a review of a particular 

situation? 

So those are my questions. I’ll leave the rest of the time for you 

all to answer. 

Mr. LEIBOWITZ. All right. Let me take the first question on horizontal merger guidelines. It’s not a rulemaking. We do occasionally 

do rulemakings, although we’re more of an enforcement agency 

usually on the consumer protection guide. This is more guidance, 

and it’s guidance to courts and practitioners, and the reason we do 

it is courts like to look at the guidelines as they go through a merger analysis, it’s helpful to them, and stakeholders, going back to 

the certainty point that the Chairman mentioned, want to know 

how we look at mergers. And so what we did beforehand was we 

went out and we talked to all the stakeholders, including Jim Rill, 

who was the head of the Antitrust Division when the 1992 guidelines were issued, and we said is it appropriate after 18 years for 

us to come back and take another look? And I think there was—— 

Mr. WATT. How are you defining stakeholders in that context? 

Mr. LEIBOWITZ. Stakeholders, businesses—— 

Mr. WATT. Okay. All right. 

Mr. LEIBOWITZ. Consumer groups. 

Mr. WATT. So you did get input? 

Mr. LEIBOWITZ. We did. And then there was a general consensus 

that if we moved in an evolutionary and not a revolutionary way, 

that that would be a good thing for business certainty and a good 

thing for those who were involved in the merger process and ultimately also a good thing for consumers, and so there were some 

areas where there was a consensus to make some modest changes. 

One was to raise the HHIs for safe harbors because experience had 

told us that the old levels were too low and took some things out 

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phasis on market shares. They’re important, but they’re not the beall, the end-all. They’re a starting point. And then—— 

Mr. WATT. I didn’t want to go into the details, I was just trying 

to—— 

Mr. LEIBOWITZ. Right, right. 

Mr. WATT. I was just trying to—I was discussing the process 

more than—— 

Mr. LEIBOWITZ. And then we had a vote. And then the only other 

point I would make is we had a vote, it was unanimous among 

Commissioners. 

Ms. POZEN. Yeah, I would add that this was distinction, this was 

an attempt to update guidance that had been in existence for many 

years but hadn’t been updated for 17 years, so to your question we 

did initiate a process. Our agencies formed a working group. We 

had workshops throughout the United States. They included antitrust practitioners, corporations, international antitrust authorities 

as well participated in those. We took those comments back because our first question was should we update these? Should we 

spend our resources and time doing this? And we got a unanimous 

chorus from everyone out there saying yes, they should be updated. 

Then it was a careful process of updating. We did publish those actually on the FTC Web site for comment, and then took those comments into account to come out with what is our final 2010 Horizontal Merger Guidelines. 

I would note that the H&R Block case I talked about in the court 

opinion, it’s about an 80-page opinion, a thorough analysis of that 

merger. The judge relied heavily on the 2010 Horizontal Merger 

Guidelines in her analysis. 

Mr. WATT. Should you—— 

Ms. POZEN. Do you want me to answer your question about the 

physicians? 

Mr. WATT. You can do it in writing if you would prefer, if the 

Chairman would prefer. I’m well over my time. 

Ms. POZEN. I’m happy to—I can make it quick if that helps. We 

both share jurisdiction in the health care markets. At the Department of Justice we have a group of experts who really know health 

care from both the insurance side and the provider side. As I mentioned, the Texas case, that was a hospital engaging in exclusive 

contracts with insurers. The kind of scenario that you’re describing 

where you have physicians and you feel like they’re being excluded, 

the process they would follow is to contact the chief of our Litigation 1 section, Josh Soven. The name is readily available on our 

Web site, and he would listen to any complaint and process it accordingly. So that’s the process that someone would follow who has 

those issues. 

Mr. WATT. And I will follow up in writing with the first three 

questions I outlined just so you don’t have to try to remember 

them. 

Mr. LEIBOWITZ. Thank you. 

Mr. WATT. Thank you. 

Mr. GOODLATTE. I thank the gentleman. 

Mr. WATT. Yield back. 

Mr. GOODLATTE. The gentleman from Arizona, Mr. Quayle, the 

Vice-Chairman of the Subcommittee, is recognized for 5 minutes. 

61 

Mr. QUAYLE. Thank you, Mr. Chairman. Thank the witnesses for 

being here. Ms. Pozen, when we had Attorney General Holder here 

in May, I asked him a question regarding the jurisdiction between 

the FTC and DOJ when sometimes it overlaps and there’s no clear 

barrier in terms of who is going to actually have that jurisdiction, 

whether it be a merger, an enforcement action, and sometimes it’s 

actually been reported that it results in a coin flip or trade bargains to actually see who actually has the jurisdiction. 

Ms. POZEN. Uh-huh. 

Mr. QUAYLE. And I just wanted to see if there was an update because Attorney General Holder said that, you know, they have been 

working to try to alleviate that, and I wanted to see how that is 

going. Are there a more clear path on when the FTC is going to 

have jurisdiction and when the DOJ is going to have jurisdiction, 

when they both have experience in that area? 

Ms. POZEN. Well, and you’re focused on exactly the first step. 

When a merger is notified, it’s notified to both of our organizations. 

If it’s in an industry where we do have overlapping expertise, because that is the starting point is expertise, we look to our staffs 

to try to articulate that expertise as it relates to the particular 

merger as quickly as possible. Our teams engage right away and 

start talking to each other about that expertise. If it ends up that 

it is equal, which is very, very rare—usually one agency has more 

expertise than the other, but there are, as I said, converging industries where just over time things have gotten blurred—I would 

work with the Chairman, and we have done so in the time since 

I’ve been Acting AAG, and we come to an agreement very quickly 

and effectively. So that’s at least been my experience as Acting Assistant Attorney General. 

Mr. LEIBOWITZ. So let me just follow up on your question, Mr. 

Vice Chairman, and Ms. Pozen’s answer. If it comes up to our level, 

we are very unhappy because they need to resolve these issues and 

act like adults. We gave statistics I think last year to the Subcommittee, but I think in well over 95 percent of the cases these 

are resolved on the basis of expertise, and just going back to what 

Ms. Pozen said, and we’ve said this before, you might not design 

this process from scratch to have two antitrust agencies with some 

overlapping jurisdiction on civil. We have slightly broader authority 

on the antitrust unfair methods of competition, they have criminal 

jurisdiction, but it’s a system that Congress designed, and as long 

as we’re working in the public interest and we’re acting like adults, 

you don’t see any or you don’t see many problems. I can assure you 

that this might have been a bigger problem in the early oughts and 

the late 1990’s when I worked on the Senate Antitrust Subcommittee. You know, Congress had a lot of questions about this 

and there were hearings I believe on this topic alone. So we understand, we have to work with the system that’s been given us, but 

we better do a good job. 

Mr. QUAYLE. Okay, thanks. And, Ms. Pozen, I want to talk about 

the new remedy guide that was released on June 17th which 

changed previous policy to one which conduct or behavioral remedies are often used—— 

Ms. POZEN. Uh-huh. 

Mr. QUAYLE [continuing]. To address merger concerns. 

62 

Ms. POZEN. Uh-huh. 

Mr. QUAYLE. And an example of that was when DOJ approved 

Comcast, the NBC Universal merger that included a requirement 

that Comcast and NBC must abide by the net neutrality principles 

even if the FCC’s regulation was struck down in court. 

Ms. POZEN. Uh-huh. 

Mr. QUAYLE. Do conduct or behavior remedies allow the DOJ to 

shift it from being a litigating agency to actually becoming a regulating agency, and could they require political policy or public policy of companies in order to actually approve of the merger? 

Ms. POZEN. That’s an excellent question. We still consider ourselves a law enforcement organization, and we really are focused 

on finding the most effective remedy for the case that’s before us, 

and so we are looking very carefully and very thoroughly at the 

competitive concerns, and then the parties typically come forward 

with a resolution, and we analyze whether that will resolve those 

concerns. In certain mergers, including the one that you mentioned, 

NBC-Comcast, there you had what we call verticality, right? You 

had one company having an input into the other company, and we 

wanted to ensure that that input was available on equal terms to 

others so that they couldn’t be foreclosed, others wouldn’t be foreclosed from that same input. So we chose—— 

Mr. QUAYLE. Was there a history of that problem before with 

these companies or were you looking for a problem that didn’t 

exist, solving a problem that didn’t exist just because, hey, it could 

theoretically happen down the road? 

Ms. POZEN. We’re very concerned with industries that are evolving and changing quickly to ensure that there’s an open and fair 

playing field, and that was what we were concerned about with 

that merger, and so we believe our remedy allowed that. It allowed 

the playing field to be open and fair, it established a process for 

doing that, and we felt fortunate that the judge in that case, Judge 

Leon, who we went through the Tunney Act proceeding, agreed 

with that. 

Mr. QUAYLE. This actually goes to my final question, is this is 

something I asked the Attorney General, and he said he was going 

to get back to me, as to probably going to the Antitrust Division. 

I haven’t heard back, but now since you’re here I’m going to ask 

you the question which hopefully you can answer. I asked him if 

they’ve actually seen any activity of actual bottlenecks or gatekeepers on the Internet that are actually keeping content from consumers. So it kind of addresses a concern that you have. Have you 

actually seen that occur or is this a hypothetical of maybe it can 

occur, and we just want to stop it before it does? 

Ms. POZEN. Well, in a technological market that is emerging and 

in the Internet, as business is evolving and emerging and using the 

Internet more and more, we’re very conscious of ensuring that we 

are diligent in reviewing whether or not there are bottlenecks, and 

your question is have we found those bottlenecks? I can’t comment 

on any ongoing investigations at this point, but all I can say is bottlenecks have to worry us. If there isn’t access to the Internet or 

to information or products or services that are needed by other 

businesses and it is being done through an exercise of market 

63 

power and done in an illegal matter through some sort of agreement, then we are concerned and we will take action. 

Mr. QUAYLE. But in a general sense you can’t talk specifically 

about a specific case, but it was just kind of have you seen actual 

bottlenecks? Because that I don’t think would be violating any sort 

of—I mean, we’re not getting into specifics. Have you seen bottlenecks that are occurring now? 

Ms. POZEN. Have I—there are bottlenecks that we have been 

alerted to that do exist, and when we are alerted to such, then we 

would investigate them thoroughly and carefully to determine, you 

know, whether or not, again, it is in violation of the Sherman Act, 

whether it’s some sort of coordinated effort to create that bottleneck or, again, whether it’s an exercise of market power in a way 

that violates the Sherman Act. 

Mr. QUAYLE. Okay, thank you very much. Thank you, Mr. Chairman. 

Mr. GOODLATTE. I thank the gentleman. The gentleman from 

Michigan, Mr. Conyers, is recognized for 5 minutes. 

Mr. CONYERS. Thank you, Mr. Chairman. Now, I’ve been working 

with antitrust law for as long as you have or longer, and this hearing—and I’m very pleased that the Chairman called it and the 

Ranking Member, both for whom I have high regard—is very disturbing. You know, it’s almost like a little chit-chat back and forth. 

Here are the top prosecutors of the Federal antitrust law sitting 

before us, and we’re having little discussions, and so I’m going to 

be in touch with both of you in writing and maybe in person, but 

I wish that I could have sent you my statement before you wrote 

your statement because we’re all talking off on—we’re talking past 

each other. 

Now, the first thing I would like to know is, is it correct for me 

to assume that our national and transnational conglomerates are 

getting away with a great deal of anticompetitive behavior? 

Mr. LEIBOWITZ. National and transnational companies? 

Mr. CONYERS. Companies. 

Mr. LEIBOWITZ. Well, I would say, I think I can speak for both 

of us on this. 

Mr. CONYERS. Well, you—— 

Mr. LEIBOWITZ. We go after—— 

Mr. CONYERS. You speak for yourself, I will talk with her later. 

Mr. LEIBOWITZ. Congressman, you know—— 

Mr. CONYERS. Yes or no? 

Mr. LEIBOWITZ. When we see a problem, we go after it. Are there 

companies that are getting away with antitrust violations? I am 

sure there are, but we do our best to go after malefactors wherever 

we find them, and we have big investigations going on, as you 

know, and we have tried to push the ball forward on behalf of consumers and competition. I think I’ll stop there. 

Mr. CONYERS. That’s a totally unacceptable answer. I just want 

you to know that between us, and we’ll be getting back to it later. 

Now could I ask you the same question, ma’am. 

Ms. POZEN. Sure, and I have to tell you, I am astonished, like 

you, at what I see because we have a criminal antitrust program 

at the Department of Justice, and as our criminal Deputy Assistant 

Attorney General says whenever he is asked, we have given corVerDate Aug 31 2005 10:59 Jun 05, 2012 Jkt 000000 PO 00000 Frm 00067 Fmt 6633 Sfmt 6601 H:\WORK\IP\120711\71600.000 HJUD1 PsN: 71600
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porations, international corporations one billion reasons not to violate the antitrust laws, and yet as I reported to you, we are still 

prosecuting international cartels. 

So I am astonished in the level of pernicious behavior, because 

I view cartel behavior where people are still sitting in smoke-filled 

rooms deciding what prices are going to be, and the example I gave 

you is in the auto parts industry where we have prosecuted 

Furukawa and its executives for this kind of conduct. 

Mr. CONYERS. Well, today’s headline in some papers was that 

Aetna and BlueCross/BlueShield in Michigan are at it again, but 

the Department of Justice is on the case. I want to give you some 

compliment for that. 

BlueCross/BlueShield has been before the courts in Michigan for 

so many times across the years that it seems to me that they regard that just as a part of doing business the way they want to, 

that you have got to go to court and somebody from law enforcement is going to tag you every now and then. 

But what bothers me, Chairman Goodlatte, is the reopening just 

the door a small way on a massive problem that the Judiciary 

Committee has got to go into far more deeply. And I’m hoping that 

this will be the Subcommittee that does it, because this is just far 

too complicated and the stakes are far too high. 

Let me just close with this one question. The Trinko decision. Is 

there anybody here that can justify what they did in suggesting 

that—the court suggesting that antitrust law is trumped by communications law? That decision is an impediment to antitrust enforcement of regulated industries, and that’s something that maybe 

we can do something about. But do you feel hindered to any general as a result of that? 

Ms. POZEN. We are very conscious of the Trinko decision and it 

causes us pause quite often. However, we have continued to move 

ahead. We work very closely and effectively with the Federal Communications Commission. The reference to our NBC-Comcast merger review, we worked with them. We came up with a solution that 

both agencies could endorse. And in the AT&T/T-Mobile merger, 

again we worked—they have a different system, a different process, 

but again we worked with them to ensure that we are mindful of 

each other’s processes and jurisdiction, but that we can work together and that we can assert the antitrust laws forward. 

Mr. LEIBOWITZ. And I would agree with that. I would say taken 

to its logical extreme or extent, Trinko could make it very difficult 

to bring antitrust cases. It is a somewhat opaque decision, as you 

know, Mr. Conyers. And part of the reasons why we have begun 

to use our unfair methods of competition authority is because by 

its nature it is not an antitrust statute. So it takes us out from 

under the limitations on plaintiffs more clearly. And, again, you 

know, we are out there trying to stop anticompetitive conduct and 

in Trinko can be an impediment, but it is less of a impediment 

when we use our broader jurisdiction. 

Mr. CONYERS. Did both of your agencies put out annual reports 

of what happened and how much you have been able to accomplish 

and even what some of the impediments may have been? 

Mr. LEIBOWITZ. We do, yes. 

Mr. CONYERS. Okay, well, I’m going to start looking at them. 

65 

Thank you, Mr. Chairman. 

Mr. GOODLATTE. I thank the gentleman. And I would note that 

both of the cases that Ms. Pozen referenced we have held hearings 

on in this Subcommittee and we are very interested in the aggressive enforcement of our antitrust laws. So we look forward to working with the gentleman from Michigan on other ideas he might 

have on these subjects. 

And now the Chair is pleased to recognized gentlewoman from 

Florida, Mrs. Adams, for 5 minutes. 

Mrs. ADAMS. Thank you, Mr. Chair. I am going to ask some questions and if you would be succinct, because I have a few questions. 

Chairman Leibowitz, earlier in your testimony you said briefly 

about the FTC’s use of Section 5 in regards to collusion, I believe. 

Can you advise or share your views regarding the use of Section 

5 authority and give us a sense of what you believe are the outer 

limits of Section 5. 

Mr. LEIBOWITZ. Well, we can use Section 5 to bring a Sherman 

or Clayton Act case. We can go a little more broadly than that modestly to stop unfair methods of competition. The Congress gave us 

that authority in 1914 and we have used it in a couple of instances. 

So one in Florida, where you’re from, where U-Haul engaged, we 

alleged, in an invitation to collude on trucking routes. Its executives called up their Budget executives and said let’s raise prices 

and Budget said no, we’re not going to do that. If they had said 

yes, we would have submitted it over to Department of Justice for 

criminal prosecution. But this is the kind of activity that is hard 

to bring an antitrust case on. That’s why we use unfair methods 

of competition. 

Mrs. ADAMS. Outer limits? 

Mr. LEIBOWITZ. I’m sorry? 

Mrs. ADAMS. Outer limits of Section 5? 

Mr. LEIBOWITZ. The touchstone for Section 5 is always going to 

be harm to competition or harm to the competitive process. And we 

try—— 

Mrs. ADAMS. Let me do this then. Do you agree that it would improve the clarity and predictability of the law if FTC provided guidance about the bounds of Section 5 before investigating or proceeding against businesses on the sole basis of your Section 5 authority. 

Mr. LEIBOWITZ. Well, we do. 

Mrs. ADAMS. You do? 

Mr. LEIBOWITZ. And so—we do. In our Intel decision, which was 

a unanimous, bipartisan decision, as are most matters of decision 

in our agency, and in our U-Haul decision we put out pretty clear 

guidance here. And—— 

Mrs. ADAMS. Can you provide that to me, please? 

Mr. LEIBOWITZ. Excuse me? 

Mrs. ADAMS. Can you provide that to me, please? 

Mr. LEIBOWITZ. Of course we will. 

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Mrs. ADAMS. In the past the FTC has promised to promulgate a 

Section 5 report clarifying the balance of your Section 5 authority. 

Why haven’t you provided that report? And when can we expect 

one? 

Mr. LEIBOWITZ. Well, we did a workshop under former Chairman—— 

Mrs. ADAMS. No, I asked you why haven’t you provided that report and when can we expect one? I don’t want—I’m just asking 

very specific questions. 

Mr. LEIBOWITZ. What we have said as a Commission is that we 

were going to provide guidance and we have done that in specific 

cases. 

Mrs. ADAMS. Okay. When can we expect one? 

Mr. LEIBOWITZ. Well, I think what I said again is that we will 

provide guidance—— 

Mrs. ADAMS. Mr. Leibowitz, I believe that you had testified that 

we were going to be expecting one. I’m just asking you when can 

we expect it? 

Mr. LEIBOWITZ. At a time, if and when the Commission decides 

it will issue a report, the Commission will do that. I’m sure that 

will be bipartisan and consensus driven. 

Mrs. ADAMS. So you haven’t gotten a report together yet and 

so—— 

Mr. LEIBOWITZ. We sometimes write reports—— 

Mrs. ADAMS. I will move on. 

Mr. LEIBOWITZ. Let me just say this. We sometimes write reports 

after workshops; sometimes we do not. And again it is a decision 

of the Commission. 

Mrs. ADAMS. Well, I believe that you said that you were going 

to provide one in the past. So I am looking forward to seeing one, 

should one ever come about. 

Ms. Pozen, I was listening intently when you were asked some 

questions from my colleague, Mr. Quayle, and one of them that 

caught my interest because of my law enforcement background was 

the whole issue of will you remain also a Criminal Division and not 

just a Civil and become party to political issues. So I guess my 

question to you is because traditionally DOJ antitrust has devoted 

roughly equal resources to criminal antitrust enforcement and civil 

antitrust enforcement, it appears that civil enforcement has generally been concentrated in the offices that are remaining opened 

while other offices that are being closed focused primarily on your 

criminal prosecution enforcement. Will the DOJ Antifrust Division 

remain a 50-50 civil-criminal agency? 

Ms. POZEN. Yes, we will. I can talk more about the realignment 

and the office closures if you would like, but our plan is certainly 

to continue a vigorous enforcement of criminal parts of the antitrust law. 

Mrs. ADAMS. I kind of would like that. I mean, recently you announced a plan to close the field offices in Atlanta, Dallas, Cleveland, and Philadelphia and transfer those positions to divisions in 

Washington, New York, Chicago, and San Francisco offices. You 

projected this move would save $8 million rental costs of the closed 

offices. Did you calculate similar dollar value estimates of other figures that are necessary to determine whether this move will actuVerDate Aug 31 2005 10:59 Jun 05, 2012 Jkt 000000 PO 00000 Frm 00164 Fmt 6633 Sfmt 6601 H:\WORK\IP\120711\71600.000 HJUD1 PsN: 71600
161 

ally result in net increase or decrease to the Federal deficit, such 

as the cost of additional office space for transferred employees in 

the high rent cities for which the division will retain those offices, 

the impact of the move on the division’s ability to generate criminal 

fines payable to the crime victims fund, and if not, how can we be 

confident that this move will not increase the deficit? 

Ms. POZEN. All questions and considerations that we have taken 

into account as we made what I can only characterize as a very difficult decision. As you said, we have seven criminal field offices. We 

are proposing closing four of those offices. There will be three remaining field offices, one in San Francisco, Chicago, and Philadelphia. And this was as I think about it, a three fold analysis that 

we undertook. First of all, I think—— 

Mrs. ADAMS. Is it possible for me to see that analysis? 

Ms. POZEN. Sure, I’m happy to provide that to you. 

As I said it was a threefold analysis that we undertook. First of 

all, we looked at what we all are facing here in Washington and, 

in general, an economy that is requiring a shrinking of the Federal 

Government, and Congress has requested that we do that and so 

we have taken that very seriously. And the Attorney General announced a number of changes to streamline and have cost savings 

at the Department of Justice, one of which was the closure of our 

field offices. So one was being conscious of the budget and trying 

to reduce our budget effectively. 

The second—— 

Mrs. ADAMS. While maintaining your ability as a law enforcement agency; correct? 

Ms. POZEN. Exactly. That is the second one I was getting to. Exactly. We have to maintain our program. We have had great successes in our program trying to ensure that we are as efficient and 

effective with the resources that we have. 

And the third, and again of equal importance, are our employees. 

The employees in those offices, the lawyers and the support staff, 

are terrific and they are an asset to our division and to the Department of Justice. 

So trying to thread the needle through all of these three we came 

up with the proposal to close the four field offices. In that process, 

we are able to guarantee jobs for all the employees in those offices 

and guarantee moving expenses. Certainly recognize that some 

people are not going to be able to move. And it ends up we can 

offer severance pay and insurance for up to 1 year as well as preference for Federal jobs in those localities. 

Again, we are very mindful of our law enforcement program. We 

are very mindful of the significant fines that we have collected. I 

was just reporting the $520 million for last year. 

Mrs. ADAMS. I think my time has expired. But I do have more 

questions. You said you were offering a severance pay for a year? 

Ms. POZEN. Yes. 

Mrs. ADAMS. One year’s pay? 

Ms. POZEN. Yes, up to one year. 

Mrs. ADAMS. I yield back. 

Mr. QUAYLE. [Presiding.] I thank the gentlelady. The Chair recognizes the gentlelady from California, Ms. Lofgren, for 5 minutes. 

162 

Ms. LOFGREN. Thank you, Mr. Chairman. You know, I just wanted to make a brief comment on the ICANN issue that the Chairman raised. Because we focus on IP, we focus on IP. I mean, and 

I certainly would not discount the trademark issues that have been 

raised. 

On the other hand, there are broader issues which is that China 

is clearly on the move to try and take over governance of the Internet. And the concern about phishing will hopefully be somewhat 

addressed by the rollout of DNSSEC that is happening here for authentication, but it won’t take care of China’s ambition to actually 

supplant the international effort. I’m not defending ICANN’s every 

decision, but it certainly in my judgment is preferable to China 

running the Internet. 

How as an FTC commission will—your job is antitrust; ours is 

IP. How do you go about incorporating that other type of issue that 

is in—— 

Mr. LEIBOWITZ. That’s a very good question. And I don’t mean to 

disparage ICANN itself. I think they do a lot of good things and 

Internet governance has a lot of difference dimensions as you point 

out. Our concern on our consumer protection side is that it’s going 

to lead, if there is a major rollout of gTLDs without accurate information required in the—— 

Ms. LOFGREN. That’s not my question. There are legitimate 

issues. I am not discounting that. The question is as a process 

question, how do you go about incorporating the fact that we are 

in a faceoff, Western world to China, on Internet governance? 

Mr. LEIBOWITZ. Well, I think we have to be mindful of those 

other atmospherics, those other variables that are important. At 

the same time we are a consumer protection antitrust agency and 

so we talk to all the stakeholders and we have our voice. 

Ms. LOFGREN. I am just thinking ahead. Consumer protection is 

not going to be optimized if China controls the Internet. 

Mr. LEIBOWITZ. Certainly will not be optimized. Again, what we 

are hoping is that the Internet remains under appropriate governance. And I think that you and I agree that ICANN generally does 

a good job. And two is that they tighten up these rules. 

Ms. LOFGREN. Let me ask you, maybe both of you, we recently 

adopted a patent bill and at the same week that happened—I come 

from Silicon Valley, I mean companies are madly trying to buy 

other companies, not because of what they do, just to buy up their 

patent portfolios. I mean, there is a patent war that is going on 

that is unbelievable. And our certainly antitrust law is to break up 

monopolies; patent law is to grant monopolies. 

And the question is how do you approach these two issues that 

are at odds with each other? Should antitrust law ever constrain 

the use of IP rights by owners? And if so, how would that happen? 

Do you ever constrain the unilateral enforcement of valid patents 

or licensing agreements between two or more companies? I think 

this is a huge emerging issue in the tech sector and maybe others. 

Mr. LEIBOWITZ. Congresswoman, you are absolutely right. And 

there is at some level a tension between antitrust and patents. 

Now, we like to think that they can work well together in a very 

complementary way. We wrote a report, before I came to the Commission, on the patent system in 2003. It has been cited by MemVerDate Aug 31 2005 10:59 Jun 05, 2012 Jkt 000000 PO 00000 Frm 00166 Fmt 6633 Sfmt 6601 H:\WORK\IP\120711\71600.000 HJUD1 PsN: 71600
163 

bers of this Committee, including Mr. Berman, as one of the bases 

for the patent legislation that Congress enacted and by the Supreme Court. So it is a complex interaction when you deal with 

things like standards setting and patent pools. 

Ms. LOFGREN. We relied on that study very heavily in our many 

years of looking at that. 

Mr. LEIBOWITZ. Right. So we try to work with stakeholders, understand the issues, do a lot of workshops, and hopefully we get 

this issue generally right. 

Ms. LOFGREN. Maybe Ms. Pozen can address this. 

Ms. POZEN. Sure. I would only add to it this intersection, just as 

you identified it, the intersection of the rights holders versus antitrust. And I think where we find the rub is when there is abuse. 

And that is the standard the courts have applied, when there is an 

abuse of those patent rights, extending them in a way or using 

them in a way that is anticompetitive. We look at every case separately. We look at every case before us carefully and try to find 

that right balance. It is a challenge, I’ll admit. But so far, so good. 

Mr. LEIBOWITZ. If I may just follow-up. One of the areas where 

we found an abuse is in what we call pay-for-delay pharmaceutical 

settlements, where—this Committee has held hearings on it— 

where the brand literally makes a payment to the generic competitor and the generic stays out longer. So consumers are left footing 

the bill or holding the bag. We estimate that that is $3.5 billion a 

year in harm to consumers and to the Federal Government. I think 

the CBO scored the Senate legislation at almost $5 billion in savings for the government because the government buys generic 

drugs. 

Ms. LOFGREN. Thank you very much, Mr. Chairman. My time 

has expired. 

Mr. QUAYLE. I thank the gentlelady. The Chair now recognizes 

the gentleman from North Carolina, Mr. Coble, for 5 minutes. 

Mr. COBLE. Thank you, Mr. Chairman. I arrived belatedly. I had 

another hearing. That is why I showed up late. Good to have you 

all with us. 

Ms. Pozen, define bottlenecks for me. 

Ms. POZEN. Define bottleneck? 

Mr. COBLE. Yes. 

Ms. POZEN. A bottleneck is a term that is very loosely used, but 

in the context in which I was talking about it earlier was the context of the Internet where one Web site or some type of actor in 

the Internet space has access into or onto another place in the 

Internet and has a way of shutting off that access to other competitors to benefit itself. So that’s how I would define a bottleneck in 

that context. 

Mr. COBLE. That probably would be anticompetitive, would it 

not? 

Ms. POZEN. Yes, when you—when it’s an exercise of market 

power, if you have dominance in a given area and you are exercising it in a way that forecloses your competitors, that can be a 

violation of the Sherman Act. 

Mr. COBLE. Did you want to weigh in? Looks like you were—— 

Mr. LEIBOWITZ. Well, I generally agree that that is a definition 

of—appropriate definition of bottlenecks. We see it sometimes in 

164 

generic entry in pharmaceuticals. We see it from time to time in 

the broadband space. And we work our best to try to respond to 

those bottlenecks if they violate the law and in the event we see 

them. 

Mr. COBLE. I thank you both. Ms. Pozen, I want to talk about 

the Google-ITA transaction a minute. As I understand it, part of 

that agreement was that a Web site would be set up in which competitors could file complaints about whether Google was complying 

with the conditions of the consent decree. I was told recently that 

the consent decree allows Google to administer that Web site. Is 

this true? 

Ms. POZEN. As part of the consent agreement in Google-ITA we 

did require that they set up a Web site to obtain the complaints 

that came in and then they are obligated to report those to us. We 

will get our first report in April. 

Mr. COBLE. Well, I may be missing something here, you may 

have to throw me a rescue line, but it seems to me this would discourage smaller competitors from availing themselves of the ability 

of going to the Web site. Am I right or wrong? 

Ms. POZEN. Well, I would say in this instance you can utilize that 

Web site that Google has set up, but we accept complaints directly 

at the Justice Department. We have a General Counsel’s Office 

that is overseeing the implementation of that remedy and if folks 

have issues that they want to call to our attention, they should get 

in touch with Bob Kramer, who is our General Counsel in the Antitrust Division. He is charged with overseeing that remedy to ensure that it is effective. 

Mr. COBLE. I am not trying to gang up on Google but at first 

blush that seemed a little irregular, but I guess not? 

Ms. POZEN. It was what we thought was the right solution in this 

instance, sir. 

Mr. COBLE. Good to have you both with us. I yield back, Mr. 

Chairman. 

Mr. GOODLATTE. I thank the gentleman. The Chair now recognizes the gentleman from Florida, Mr. Deutch, for 5 minutes. 

Mr. DEUTCH. Thank you, Mr. Chairman. Thank you both for 

being here. In my State of Florida the agriculture industry has 

really been devastated by invasive insect pests that have profound 

negative implications on the farmers and consumers as well. And 

as you are aware, one method to protect crops from those pests involves the development of new seeds containing traits that are resistant to the insects. I am concerned with the business practices 

in the industry. Specifically it has been brought to my attention the 

lack of competition in the generically modified seed industry. And 

so I would like to commend the Department of Justice and the 

Antitrust Division for investigating the business practices of Monsanto in this area, given the dominant role that they play. 

I would ask if you could speak to the actions that could be taken 

to ensure that there is a strong innovation component and competition in the generically modified seed industry. 

Ms. POZEN. The industry you are referring to is actually interesting in the sense that it is the intersection of intellectual property, antitrust, and agriculture. And it is something that we have 

taken a very hard look at. As you know, we held workshops around 

165 

the United States on agriculture, including these specific issues 

that you cited to. I can’t comment on ongoing investigations but I 

can assure you that your concerns have been voiced by others and 

we are looking into that. 

Mr. DEUTCH. I appreciate that. Going back to some comments 

that both of you have made, Mr. Leibowitz, I think you spoke about 

the importance of competition. You used the Google Android and 

iPhone area. Ms. Pozen, you spoke about competition advocacy that 

you do at Justice. 

So the question that I have is given that the Internet marketplace is where there is so much economic development and growth 

in the coming years, we obviously want to do everything we can to 

support competition and encourage start-ups. So I am worried 

about market dominance in the Internet search arena. Recently 

Ask.com exited the search market, cutting 130 engineering jobs, 

stopping work on new algorithmic technology. The president of the 

company cited Google’s dominance in the market as the reason for 

their exit. Google, as I understand it, controls more than 79 percent 

of the search market in the U.S. and over 90 percent in Europe. 

I know that the FTC, Mr. Leibowitz, is investigating these issues 

and I think it is an important investigation. If you could, to the extent that you are free to talk about this, generally at least, if you 

could address the issues of market dominance and the potential 

negative effect on Internet innovation and, more broadly, what impact that will have on future innovation in the Internet economy? 

Mr. LEIBOWITZ. Well, I guess I would say this. As you know, we 

are conducting an investigation of Google. We are using both our 

consumer protection and our competition authority. We are moving 

forward on that mostly collecting documents and asking questions 

at this point. As a general matter, putting Google aside, whenever 

you see a dominant company, you wonder, if they are engaging in 

types of exclusionary or bad conduct, whether they are using that 

to stifle innovation and harm consumers in violation of the antitrust laws or in a way that is an unfair method of competition. 

So it is a critically important issue in the Internet space where 

there has been so much dynamism and so many benefits to consumers and you want that to continue. It is an important question 

to ask across different industries as well. 

Mr. DEUTCH. If I could follow up on the specific issue of exclusionary conduct in the Internet space. If you could speak to that 

in a little more detail. 

Mr. LEIBOWITZ. I think I probably have gone about as far as I 

should involving exclusionary conduct in the Internet space, given 

our pending investigation. It is a fair question. It is fair for me to 

avoid answering it. 

Mr. DEUTCH. I was asking only in the broadest possible terms. 

Ms. POZEN. And I am happy to help if I can. 

Mr. DEUTCH. Please do. 

Ms. POZEN. Recently we reviewed Google’s acquisition of Admeld 

and concluded that it didn’t raise competitive concerns for a variety 

of reasons outlined in a statement that we issued. I believe that 

was last week. 

And in that statement we did say we are keeping a watchful eye 

on the space you have articulated to ensure that we look at transVerDate Aug 31 2005 10:59 Jun 05, 2012 Jkt 000000 PO 00000 Frm 00169 Fmt 6633 Sfmt 6601 H:\WORK\IP\120711\71600.000 HJUD1 PsN: 71600
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actions and other activities there to ensure that there is anticompetitive conduct that we take action. And we work extensively 

with the FTC on these kinds of issues. 

Mr. DEUTCH. I guess without going into detail, then, the idea of 

looking at exclusionary conduct in the Internet space specifically, 

is there a history of that analysis at the FTC or at Justice? 

Ms. POZEN. Well, at the Department of Justice I would cite you 

to our Microsoft case. It wasn’t the Internet, but it was technology. 

And there we took action alleging that Microsoft had dominance in 

the operating system and was using that dominance in a variety 

of predatory ways that harmed competition. 

Mr. DEUTCH. I appreciate it. 

Mr. LEIBOWITZ. This is an area we are constantly looking at because we think it is so important to consumers and we have seen 

so many benefits. We want to make sure that continues and so we 

have other investigations and sometimes we do quick looks when 

competitors come in or others come in and raise concerns. It’s what 

we do. 

Mr. DEUTCH. Mr. Chairman, my time has expired. Thank you 

very much. 

Mr. QUAYLE. I thank the gentleman. The Chair now recognizes 

the gentleman from Georgia, Mr. Johnson, for 5 minutes. 

Mr. JOHNSON. Thank you, Mr. Chairman. Mr. Chairman, I’m 

concerned about the fact that in this country, in this day and time 

we have more and more opportunities for big business to engage 

in action that actually results in higher costs to consumers. Our 

free enterprise system is a system that requires, in order for it to 

function most effectively, competition. So I viewed the activities of 

the Department of Justice to be critical in the maintenance of our 

free market system and how it enables businesses to develop. 

That’s one of the things that makes our country great. 

And so we must make sure that we don’t have a situation where 

enterprises feel like they can do a lot of price fixing, bid rigging, 

territorial and customer allocation, bribery, subverting the competitive process and other things. These things send people to jail and 

people—when you start getting in people’s pocketbooks that’s one 

thing. But when you take the whole pocketbook from them and lock 

them up in jail, that is a sobering reality that many don’t want to 

face if we have vigorous enforcement. 

But here we are talking about closing down four of the seven 

antitrust field offices throughout America, leaving the whole Southeast without any office of enforcement. We are doing this just simply to save money, are we not? 

Ms. POZEN. We are doing this to save money and to hopefully be 

more efficient in our law enforcement as well. It is twofold. 

Mr. JOHNSON. Well, you know in terms of efficiency, we have got, 

what, 90-plus experienced attorneys and staffers who are going to 

be asked to move to a new location, the other three office, Chicago, 

New York, and San Francisco. 

Ms. POZEN. Yes. I misspoke earlier. I said Philadelphia, not New 

York. Thank you for clarifying that. 

Mr. JOHNSON. And those locations have higher living costs so the 

people who move there would have to be compensated in accordance with those higher prices. So you’re going to be looking at, asVerDate Aug 31 2005 10:59 Jun 05, 2012 Jkt 000000 PO 00000 Frm 00170 Fmt 6633 Sfmt 6601 H:\WORK\IP\120711\71600.000 HJUD1 PsN: 71600
167 

suming that everybody actually was able to move, relocate, you’d 

be looking at increased labor costs as opposed to less labor costs; 

is that correct? 

Ms. POZEN. When we announced—— 

Mr. JOHNSON. And if you could—— 

Ms. POZEN. Provide some background? Would that be helpful? 

Mr. JOHNSON. Well, I don’t want any background. I just want 

you to answer yes or no if you could. 

Ms. POZEN. Sure. We believe that the realignment that we’ve set 

forth, which again was very difficult to come to—we are in difficult 

budgetary times at the Department of Justice, and it is not my preferred activities as acting AAG to do this at all, nor anyone at the 

Department of Justice. But when the Attorney General announced 

a number of office closures and realignments and streamlining, we 

were among those and the notification process was started for our 

closure. 

Mr. JOHNSON. But the Antitrust Division is actually an income 

generator; right? 

Ms. POZEN. Right, we are. We are—— 

Mr. JOHNSON. So you are actually generating income for the use 

of the Department—or any other department, by the way, because 

it can be allocated to another department’s use—we are actually 

raising revenue without raising taxes? 

Ms. POZEN. Right. In making this decision we considered all that 

you are raising. 

Mr. JOHNSON. So if we have got an office that is—the Atlanta office alone—responsible over the last 10 years for about 200—about 

a quarter of a billion dollars worth of fines and forfeitures and penalties that have been collected and if we cut that ability by cutting 

the office and the people who staff the office who know the industry 

that are potential targets, they know the local bar, they know the 

regional court systems, if we cut that efficiency and then place it 

in the hands of some newly hired lawyers that don’t have the litigation experience, the legal experience of the attorneys and staffers 

who are currently working and who would not be able to relocate, 

then we are cutting the efficiency of the Department’s law enforcement efforts. And that, I think, is a tragedy. 

I think at this point with the consolidation of industry and the 

effect that it has on prices for consumers, I think this is the wrong 

time to be shutting down for alleged cost cutting reasons. You are 

cutting the nose to spite your face really. I think it is a bad time 

to close down four of seven regional offices. It seems like what we 

are trying to do around here is just cut government and we are not 

really thinking about the effect of the cuts. 

Now, I know that big business wants to have an environment 

where they would not have any regulatory control over them so 

that they could make money hand over foot, quarter after quarter, 

and it increases dramatically year by year, but there’s only so 

much that the American people can pay. And we’ll get to a point 

where that will ruin the capitalist system. And so I want to protect 

our system. I want to protect the capitalist system. But it requires 

competition. And it requires the government to make sure that the 

little people are treated fairly because we can’t rely on the fox to 

guard the hen house. 

168 

And so I think it is a tragedy that we would talk about cutting 

antitrust enforcement. The criminal side is the first one that would 

suffer the most. The regulatory side. You can get some inexperienced lawyers to come in and having read law books and getting 

a little guidance from some senior folks they can make certain decisions but to actually prosecute. 

Mr. AMODEI. [Presiding.] If I might to my colleague from Georgia, 

I want the record to reflect that he asked for and has received a 

minute of extra time which has expired. So the gentleman’s time 

has expired. And I appreciate, Ms. Pozen, please feel free to get directly with Mr. Johnson on those things. 

Mr. JOHNSON. I’d like to have a bipartisan inquiry. Really a hearing. 

Mr. WATT. If the gentleman would yield, Mrs. Adams actually 

asked a lot of the same questions and she agreed to follow up with 

some specific written guidance that they applied in this context. 

Mr. JOHNSON. Well, I think we need a hearing on this very specific issue alone because it is of such gravity. 

Mr. AMODEI. And that will be part of our record today for that 

request. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Mr. AMODEI. The Chair now recognizes the lady from the Golden 

State, Ms. Chu, for 5 minutes. 

Ms. CHU. Thank you, Mr. Chair. I have a few questions that I’d 

like you to address. First for chairman Leibowitz. My constituents 

have expressed numerous concerns regarding the competitiveness 

of the PBM market, the pharmacy benefit manager market. They 

are concerned that the consolidation of the current marketplace 

harms patients by reducing choice, decreasing access to pharmacy 

services, and ultimately this could lead to higher prescription drug 

costs paid by plan sponsors and consumers. And I’m certainly concerned about patient well being and quality pharmacy care for my 

constituents as well as rising health care costs. How are you evaluating and addressing the concerns of patients and community pharmacies as it relates to the ongoing consolidation of this market? 

Mr. LEIBOWITZ. Well, as you know, we are reviewing two matters 

now, and I can say this publicly because the companies have acknowledged that. One is Express Scripts-Medco, a major merger. 

We’re collecting documents. We are asking questions and we will 

apply the law which says that if the agreement may substantially 

lessen competition, then we will challenge it in court. 

The other matter that we are looking at is CVS-Caremark, which 

is a consummated merger and we have an investigation going on. 

And so I think I need to leave it at that. Except to say that I have 

certainly met with community pharmacists and my father-in-law 

was a professor of pharmacology and my mother was a pharmacist, 

so I am intimately aware of the concerns of community pharmacists who provide enormous value. 

And I guess I would mention one other thing, which is that we 

look at price effects when we are reviewing a merger. But you can 

also look at nonprice effects like service and convenience. So I will 

leave it at that. 

Ms. CHU. I thank you for that. I want to turn to criminal issues. 

Ms. Pozen, in your testimony you mentioned that last year the 

169 

Antitrust Division in DOJ filed 90 criminal cases, up from 60 cases 

in 2010, and obtained over $520 million in criminal fines. And you 

state that in those cases you charged 27 corporations, 82 individuals and the court imposed 21 jail terms. 

Can you explain the cause behind the recent rise in criminal 

antitrust enforcement and give us some examples? 

Ms. POZEN. Sure, we—again, the cases that come to our attention 

or that we learn about we pursue vigorously on the criminal and 

civil side. In particular on the criminal side we see ebbs and flows 

in terms of activities and I don’t know if there is any particular 

reason for the uptick other than we have continued to be vigilant 

and continue to prosecute where we thought it was necessary. 

We have some significant cartel matters that have been ongoing 

for some time and that continue. As I mentioned in my written 

statement—in my oral statement, the auto parts industry. We have 

announced a prosecution of Furukawa and a $200 million fine 

there. That investigation is ongoing. It is a large and significant investigation. 

We have others going in the air cargo industry, in the LCD industry, and also in muni bonds. That is we have had several agreements that we have reached with significant large banks ranging 

from $130 million to over $200 million in fines and restitution and 

we are working toward now—the trials are starting after the first 

of the year—prosecuting the brokers involved in those muni bond 

bid rigging and price fixing schemes. We are just continuing to be 

the cop on the beat. As I said earlier, I continue to be astonished 

that businesses continue to violate the law. But we continue to 

work to prosecute where we need to. 

Ms. CHU. Okay. And finally I wanted to ask about the global 

economy. Today we have about 120 antitrust agencies around the 

world, including new agencies in China and India, and it is becoming increasingly common and important for agencies to investigate 

the same matter. I understand your Antitrust Division has been cooperating with international counterparts and there was some example recently with the German Federal Cartel Office on this 

merger issue regarding patent applications for Novell by CPTN. 

What are you doing to form international partnerships and coordinate your efforts on these types of matters? 

Ms. POZEN. We continue to really work with our international 

counterparts around the world through a variety of means. We engage with them in international organizations like the OECD and 

like the International Competition Network. Those are great forums of different natures where we are active participants. 

We have also sought to, with the FTC, to engage with emerging 

economies, as you mentioned. We signed a memorandum of understanding with Russia first and then recently with the Chinese antitrust authorities in July and are planning on signing one with 

India in 2012. Those MOUs set out in very simple terms efforts 

that both or all agencies—in China it is a five-way agreement—are 

going to work together to have regularized meetings to comment on 

each other’s guidelines and laws. 

And in addition to, I would note, we just celebrated our 20th anniversary of our cooperation agreement with the EC. That is an enduring relationship that we were celebrating in Brussels in October 

170 

and as part of that we updated our best practices—our merger best 

practices guidelines which we use in those forums as well. It is a 

variety of means that we engage. We do it on investigations specifically, and have a great working relationship on a number of investigations today with a number of authorities and then more broadly 

as I described. 

Mr. LEIBOWITZ. Just to follow up and Ms. Pozen is exactly right. 

We spend a lot of time thinking about the international dimension. 

And the more you have law enforcement authorities in other countries that work at the same time frames and where the law has 

generally converged, and we encourage that convergence, it is just 

better for American businesses and better really for American consumers and consumers in those country as well. So it is something 

we spend a lot of time on at both our agencies and we work really 

well together on it. 

Ms. CHU. Thank you. I yield back. 

Mr. AMODEI. Thank you. The Chair recognizes the gentlelady 

from Texas, Ms. Jackson Lee. 

Ms. JACKSON LEE. I thank both the Chair and the Ranking Member and I thank the witnesses as well. Let me just ask a pointed 

question for both of you. I heard my colleague, Congressman Johnson, raising a line of questioning about the return from your agencies in terms of making dollars for the U.S. Treasury. Tell me very 

quickly—to both the Chairman of the FTC and to the Department 

of Justice—what major budget cutting will do to your efforts on 

balancing the oversight over necessary antitrust issues. 

Mr. Chairman? And I’ve got a series of questions. I would like 

a quick answer on that financial part. 

Mr. LEIBOWITZ. You know, knock on wood we might—we should 

be okay or we may be okay in our appropriations but if we have 

to cut personnel, it means that completing investigations rapidly, 

which every company deserves, will be a little bit harder. It means 

that other things that we do that are important like our international work will be tougher to do. And so an 8 percent budget 

cut which is what we get under sequestration would be very, very 

problematic. And not for us, but for the consumers we are supposed 

to protect. 

Ms. POZEN. I faced a $3 million budget cut in 2012 that I am 

starting to manage toward today. And part of our efforts in anticipation of that cut was the realignment of our field offices, trying 

to preserve the jobs for those 97 individuals in those four offices. 

Because I’m concerned if I waited any longer that I wouldn’t be 

able to offer them jobs and moving expenses. So it has an impact. 

We are trying to do the same with less. We are trying to do the 

best that we can. We are trying to be more efficient and effective. 

Ms. JACKSON LEE. We have a concept with our banks: Too big 

to fail. And it draw obviously a great concern by the public. They 

want to know what happened in terms of some issues that is probably more addressed to the Criminal Division but the question of 

too big to fail comes from the origins of our first breaking up of monopolies under Teddy Roosevelt. 

So let me ask these questions to both of you quickly so I can get 

answers from the two of you. I don’t think we should be attacking 

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sight. And I raise that question on the merger that has already 

been approved between United and Continental. And now the 

growing pains are being experienced. But in particular I’m interested in AT&T and T-Mobile. One, I’m interested because I really 

want to create jobs and there is a very strong argument that that 

creates jobs. And what I would argue is that there may be a 

valid—this is obviously something that is either behind us, we hear 

that it may be in front of us, it maybe in some engagement. But 

I’m wondering is there a concept of intense oversight while also 

protecting the American brand so that we can create these jobs and 

we can enhance the opportunities for a stronger entity? 

I would raise that came question with Google. I want to make 

sure that we have competitiveness, but I don’t think we should 

have a particular company under the gun simply because it is big. 

I would like to give you the resources to intensify your oversight 

but to recognize that there is value in intellectual property, in inventiveness, in what largeness brings about. We have had largeness before. We need to be able to regulate. 

So speak to me about your regulatory aspects so that we are not 

killing jobs by going after companies who have innovative ideas 

about mergers and can actually be effective. 

And just quickly to Assistant Secretary Pozen, tell me about the 

victory that you have gotten with H&R Block coming up on the tax 

season by acquiring TaxACT and the regulation of that. So if you 

could answer those questions so that we can create jobs here in 

America. 

Ms. POZEN. Sure. I will start with H&R Block. That was in the 

digital do-it-yourself tax preparation software that was a merger of 

H&R Block with TaxACT. I think we filed our lawsuit in May and 

proceeded to court very quickly, had our trial in September, October, and the judge issued a decision at the end of October. That decision is an 80-page decision. And for us antitrust wonks or nerds 

or whatever you want to call it, it was incredibly written and detailed and really was an accumulation and a great resource I think 

to folks going forward of the state of the law in this circuit on 

merger and merger analysis. 

So we are very proud of that. It was our first successful merger 

challenge since 2004. So it has been a long time so it felt very good 

for lots of reasons. But I think it advanced antitrust jurisprudence 

significantly. 

In terms of your question about jobs, as you noted and I agree 

with you, it is competition that we are focused on. And with competition comes innovation, and with innovation comes expansion of 

our economy, and with that comes jobs. And so that is the way we 

analyze and look at those issues. If you build a better mouse trap 

in the United States, if you did it through legitimate means, you 

don’t suffer antitrust consequences. It’s how you use that market 

power. Or if you try to build it just that much too big that raise 

competitive concerns without countervailing efficiencies where we 

get involved. 

Mr. LEIBOWITZ. Yes, and following up on that, being big alone is 

not an antitrust violation. But the antitrust laws I think are generally calibrated to promote job growth, to promote innovation. So 

the merger standard under the Clayton Act—Chairman Clayton 

172 

was the Chairman of this Committee in 1914 when Clayton was 

passed—says we challenge deals when they may substantially lessen competition. As we know, competition drives innovation, it 

drives job growth, it drives a lot of different things. 

And then when you look at the conduct standards, monopolization alone is not a violation. If you achieve a monopoly status by 

virtue of your excellent work or the way you market your product, 

that is not a problem. It is when you combine that with bad acts 

either to get to your monopoly status or to maintain it, that it is 

in violation of the law. 

So it is a ready good question and it is one that we ponder both 

in specific cases and at a general level all the time in our agencies. 

Ms. JACKSON LEE. Well, thank you. I don’t want us to be in the 

business of because something is big, created major jobs—the auto 

industry was big in years past and probably still competitive, that 

bigness alone. I would like to have the kind of oversight and regulation addressing the question of competitiveness, but remember 

we are also competing worldwide. And so some of these issues relate to how we can compete worldwide and sometimes bigness requires that. As long as we are following the rules, I would hope 

that that would be part of our structure in dealing with some of 

the companies that are so much larger than others. 

Mr. AMODEI. Would the gentlelady for Texas like to be recognized 

for an additional minute for purposes of wrapping up? 

Ms. JACKSON LEE. How kind of the gentleman. Yes, I would. I 

would ask unanimous consent. I apologize for not—— 

Mr. AMODEI. Without objection, so ordered. Please proceed. 

Ms. JACKSON LEE. The Chairman looked like he was trying to 

reach out and say something. I’m not sure. 

Mr. LEIBOWITZ. I think I have said enough probably. But if you 

have another question I would be happy to answer it. 

Ms. JACKSON LEE. I just will end on the note of the way I framed 

it, is that we are in this tight job market and we are in this tight 

creation market. I want to find room for competitiveness and I also 

find room for bigness. My initial premise is that people are mad at 

the finance industry because they believe that it wasn’t regulated, 

there wasn’t oversight, and I want to make sure we have oversight 

but we allow growth and opportunity. Is that my sense of antitrust 

effectiveness? 

Mr. LEIBOWITZ. Agreed. Yes, I think that’s well put. 

Ms. JACKSON LEE. Madam Secretary—Madam Attorney General? 

Ms. POZEN. Yes, I agree that we are constantly being vigilant in 

the markets that we oversee to ensure that those companies that 

are large aren’t abusing that dominance and again that those companies who engage in mergers that are legitimate and don’t raise 

significant concerns, we let those go forward. But if a merger does 

raise a competitive concern and doesn’t have countervailing efficiencies to overcome that, we do challenge them. 

Ms. JACKSON LEE. I thank the Chairman for his courtesy. 

Mr. AMODEI. Thank you. I’d like to thank the witnesses, Mr. 

Chairman, Madam Assistant Attorney General. I appreciate that 

on behalf of the Ranking Member and the Chairman, neither of 

which I am. 

173 

Without objection, all Members will have 5 legislative days to 

submit to the Chair additional questions for witnesses, which we 

will forward and ask the witnesses to respond as promptly—I know 

Mr. Johnson had some other questions perhaps—as they can and 

get their answers back and they will be made a part of the record. 

Also, Representative Michael Grimm has asked that his written 

statement be included in the record. Without objection, it will be 

made a part of the record for this hearing day. 

[The prepared statement of Mr. Grimm follows:] 

Prepared Statement of the Honorable Michael Grimm, 

a Representative in Congress from the State of New York 

The increasing consolidation of hospital markets, and the federal antitrust response to those consolidations has been and will continue to be an issue that not 

only Staten Islanders face, but is an issue that is of significant community interest 

across the country. Changes in both public and private sector reimbursement systems as state budgets constrict, and dramatic transformation of health care markets 

take place due to the recently enacted health care law, will likely prompt unprecedented consolidation in the hospital industry and cause Congress and the Administration to reassess exactly how they approach hospital consolidation, and competition in the health care market. 

The substantial and persistent increases in the cost of health care services that 

began when Medicare was first established in the late 1960s and have continued 

since then, have led directly to the changing market realities for hospitals. These 

market realities also call into question exactly how hospital mergers fit into traditional antitrust litigation, and how these mergers and acquisitions translate into a 

competitive marketplace for affordable and accessible health care services. 

Between the high cost of delivering any service in New York City, and the high 

cost of delivering health care services, New York hospital systems struggle to find 

a stable flow of capital, and forces these entities into an increased pace of hospital 

consolidation and/or sponsorship. By any criteria, the law concerning hospital market definition is in shambles. Common sense suggests that all health care is local. 

People want to be hospitalized near their families and homes, in hospitals in which 

their own—local—doctors have hospital privileges. However, various court decisions 

have stretched the geographic boundaries of markets into a fluid definition, which 

in many cases fails to heed the warnings of a failed institution, and allows the Department of Justice to pick winners and losers in the hospital market, not based 

on policy or community specific logistics, but based on the expertise of the litigators 

themselves. 

A fluid definition of market power and geographic boundaries allows a unique 

place, like Staten Island, to fall victim to the exact policy decisions the Federal 

Trade Commission seeks avoid on antitrust law. Medical antitrust law follows the 

same pattern as the law governing contracts between manufacturers and distributors of branded goods in other industries. The intricacies of the health care industry 

requires industry-specific policy that takes industry and community dynamics into 

context. Staten Island, as part of New York City is subject to extensive New York 

City taxes, but is often treated as a separate municipality. The ambiguous antitrust 

policies stemming from the Administration have resulted in the Federal Trade Commission and the Department of Justice to deny Staten Island a fair evaluation as 

a part of New York City in total. Absent of industry-specific policy changes, communities like Staten Island will be casualties of an anticompetitive market and will end 

up paying more for services and time spent traveling to another hospital in New 

York City or across state lines to New Jersey. In the end, this costs taxpayers more 

money, and is completely counter-intuitive if lawmakers plan on ensuring a vibrant, 

competitive, health care industry alive in all of New York City, and the country. 

These circumstances has resulted in limited hospital access on the Island, and 

forces Staten Island residents to become purchasers of high cost, less efficient care 

than other New York City residents. As our ‘‘anchor hospitals’’ begin to feel the financial burden of payment cuts from the state and federal level, institutions will 

likely fail, leaving the hard working residents of Staten Island a de-facto anticompetitive market place for essential health services. Medical antitrust reform 

must be expedited in order to avoid the acceleration of hospital mergers and acquisitions that are likely to occur as the health care law goes into effect. 

The combination of these extenuating circumstances call on the need for federal 

legislators to concretely define the product market, geographic market, and market 

174 

concentration and competitive effects based on the specific dynamics of the health 

care industry. By doing so, the FTC will be forced to analyze cases on the basis of 

an elastic health care industry and an evolving community-specific market rather 

than outdated and inconsistent logic that has been the Achilles’ heel of medical antitrust law. 

Mr. AMODEI. And without objection, all Members will have 5 legislative days to submit any additional materials for inclusion in the 

record. And with that, again I want to thank the witnesses and my 

colleagues and the hearing is adjourned. 

[Whereupon, at 11:55 a.m., the Subcommittee was adjourned.] 

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Response to Post-Hearing Questions from Jon Leibowitz, 

Chairman, Federal Trade Commission 


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Response to Post-Hearing Questions from Sharis A. Pozen, Acting Assistant 

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