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S. HRG. 113–387 

CARTEL PROSECUTION: STOPPING PRICE FIXERS 

AND PROTECTING CONSUMERS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ANTITRUST, 

COMPETITION POLICY AND CONSUMER RIGHTS 

OF THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

NOVEMBER 14, 2013 

Serial No. J–113–41 

Printed for the use of the Committee on the Judiciary 

( 
(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

DIANNE FEINSTEIN, California 

CHUCK SCHUMER, New York 

DICK DURBIN, Illinois 

SHELDON WHITEHOUSE, Rhode Island 

AMY KLOBUCHAR, Minnesota 

AL FRANKEN, Minnesota 

CHRISTOPHER A. COONS, Delaware 

RICHARD BLUMENTHAL, Connecticut 

MAZIE HIRONO, Hawaii 

CHUCK GRASSLEY, Iowa, Ranking Member 

ORRIN G. HATCH, Utah 

JEFF SESSIONS, Alabama 

LINDSEY GRAHAM, South Carolina 

JOHN CORNYN, Texas 

MICHAEL S. LEE, Utah 

TED CRUZ, Texas 

JEFF FLAKE, Arizona 

BRUCE A. COHEN, Chief Counsel and Staff Director 

DAVID YOUNG, Republican Chief of Staff 

SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS

AMY KLOBUCHAR, Minnesota, Chairman 

CHUCK SCHUMER, New York 

AL FRANKEN, Minnesota 

CHRISTOPHER A. COONS, Delaware 

RICHARD BLUMENTHAL, Connecticut 

MICHAEL S. LEE, Utah, Ranking Member 

LINDSEY GRAHAM, South Carolina 

CHUCK GRASSLEY, Iowa 

JEFF FLAKE, Arizona 

CAROLINE HOLLAND, Democratic Chief Counsel 

BRYSON BACHMAN, Republican General Counsel 
(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Klobuchar, Hon. Amy, a U.S. Senator from the State of Minnesota ................... 1 

Lee, Hon. Mike, a U.S. Senator from the State of Utah ...................................... 3 

WITNESSES 

Witness List ............................................................................................................. 31 

Baer, William J., Assistant Attorney General, Antitrust Division, U.S. Department of Justice ..................................................................................................... 4 

Ronald T. Hosko, Assistant Director, Criminal Investigative Division, Federal 

Bureau of Investigation, Washington, DC ......................................................... 4 

prepared statement by Messrs. Baer and Hosko ........................................... 33 

Salzman, Hollis, Partner & Co-Chair, Antitrust and Trade Regulation Group, 

Robins Kaplan Miller & Ciresi, LLP, New York, New York ............................ 18 

prepared statement .......................................................................................... 43 

Hockett, Christopher B., Chair, Section on Antitrust Law, American Bar 

Association, and Partner, Davis Polk & Wardwell, LLP, Menlo Park, California ..................................................................................................................... 20 

prepared statement .......................................................................................... 47 

Levenstein, Margaret C., Research Scientist, Institute for Social Research, 

Adjunct Professor of Business Economics and Public Policy, Ross School 

of Business, University of Michigan, Ann Arbor, Michigan ............................. 21 

prepared statement .......................................................................................... 60 

Rosman, Mark, Partner, Wilson Sonsini Goodrich & Rosati, Washington, DC . 23 

prepared statement .......................................................................................... 67 

QUESTIONS 

Questions submitted by Senator Klobuchar for Hon. William Baer ................... 78 

Questions submitted by Senator Klobuchar for Ronald Hosko ............................ 79 

Questions submitted by Senator Klobuchar for Margaret Levenstein ................ 80 

Questions submitted by Senator Klobuchar for Mark Rosman ........................... 81 

Questions submitted by Senator Klobuchar for Hollis Salzman ......................... 82 

QUESTIONS AND ANSWERS 

Responses of Hon. William Baer to questions submitted by Senator 

Klobuchar .............................................................................................................. 83 

Responses of Ronald Hosko to questions submitted by Senator Klobuchar ....... 88 

Responses of Margaret Levenstein to questions submitted by Senator 

Klobuchar .............................................................................................................. 91 

Responses of Mark Rosman to questions submitted by Senator Klobuchar ....... 92 

Responses of Hollis Salzman to questions submitted by Senator Klobuchar ..... 98 

MISCELLANEOUS SUBMISSIONS FOR THE RECORD 

Letter to Hon. Eric Holder from Senators Stabenow, Schumer, Brown, 

Klobuchar, Levin, Cardin, and McCaskill; September 30, 2013 ...................... 104 

(1) 

CARTEL PROSECUTION: STOPPING PRICE 

FIXERS AND PROTECTING CONSUMERS 

THURSDAY, NOVEMBER 14, 2013 

U.S. SENATE, 

SUBCOMMITTEE ON ANTITRUST, COMPETITION

POLICY, AND CONSUMER RIGHTS, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:48 p.m., in Room 

SD–226, Dirksen Senate Office Building, Hon. Amy Klobuchar, 

Chairman of the Subcommittee, presiding. 

Present: Senators Klobuchar, Blumenthal, and Lee. 

OPENING STATEMENT OF HON. AMY KLOBUCHAR, A U.S. 

SENATOR FROM THE STATE OF MINNESOTA 

Chairman KLOBUCHAR. Good morning, and I am pleased to be 

here with Ranking Member Senator Lee. Today we are going to be 

discussing criminal enforcement against the most egregious type of 

antitrust violation, and that is price fixing. The concept is simple. 

Under the law competitors cannot get together and form a cartel 

to agree on what prices to charge their consumers. Price fixing is 

not only a crime; it is also a tax on businesses, consumers, and innovation. 

Price fixing can come in various forms. It can involve agreements 

to set an actual price or agreements to limit output. It can involve 

agreements not to compete, such as rigging a competitive bidding 

process or dividing up a market between competitors. 

There is absolutely no business justification for this conduct. Cartels have no purpose other than to rob consumers. As Justice Scalia 

wrote in a 2004 Supreme Court decision, cartels are ‘‘the supreme 

evil of antitrust.’’ 

Anyone who bought a TV, computer, or other device with an LCD 

screen between roughly 2001 and 2006 was a victim of price fixing. 

I do not know if they know that, but they were. Executives from 

several manufacturers of LCDs met secretly in a hotel room where 

they hatched a scheme to fix the prices of LCDs for major computer 

and TV makers in the U.S. and around the globe. They continued 

to meet for years until one of the cartel members, fearing detection, 

notified the DOJ’s Antitrust Division in order to avoid criminal liability by cooperating with prosecutors. So far, the Justice Department has locked up 13 executives and fined participating companies a total of $1.39 billion. Yes, that is a billion. Not an ‘‘M,’’ a 

‘‘B’’ for billion. 
2 

Over the past two years, the Department of Justice has been uncovering an extensive network of price fixing in the auto parts industry—again, something that most Americans may not know, but 

does affect them and should matter to them. Between 2003 and 

2010, Japanese auto part makers rigged the bids to fix prices on 

five billion dollars in auto parts sold in the United States, everything from seat belts to starter motors to ignition coils and other 

essential vehicle components. This means that car makers here in 

the U.S., including GM, Ford, Chrysler, and the U.S. subsidiaries 

of Honda, Mazda, Nissan, Toyota, and Subaru paid artificially high 

prices for parts included in cars sold to 25 million Americans. The 

companies involved have been fined more than $1 billion, and 17 

executives have been sentenced to jail time. 

The Antitrust Division’s work on criminal cartels over the past 

two decades is a true success story. The evolution of its Corporate 

Leniency Program, which offers leniency to the first cartel member 

to report criminal conduct, has clearly helped to unmask major 

international cartels. However, despite tough fines and jail sentences, the DOJ continues to discover more and more of these cartels. 

So we need to ask important questions: Is enforcement as effective as it can be in deterring price fixing? With the DOJ’s budget 

tightening due to sequestration, is there a risk that cartels will get 

away with even more with their bad conduct? Is DOJ’s focus on 

large international cartels coming at the expense of going after 

more of the localized domestic cartels? 

We will also ask the ultimate question that most consumers 

might be asking: How does this impact me? How do consumers, the 

victims of price fixing, get their money back? 

The Antitrust Division collects extensive fines on behalf of the 

government, and they go to a worthy cause: the Crime Victims 

Fund. Under the antitrust laws, consumers who are harmed by cartels must seek restitution for the higher prices they paid in private 

litigation. Retailers from Best Buy—that is our local company; I 

thought I would add that in—retailers from Best Buy on down to 

Mom-and-Pop stores who sold TVs and computers, auto makers 

who installed price-fixed auto parts, and consumers who bought 

these products all have to go to court and get their money back. 

To make sure that consumers have an incentive and ability to 

bring these cases as well as to deter price fixing, antitrust law 

holds price fixers liable for treble damages, or triple the amount 

they ripped off from their victims. 

Congress has acknowledged the critical role that private suits 

play when it comes to protecting consumers from criminal price fixing. In 2004 and again in 2010, Congress passed bipartisan legislation that provides an incentive to convicted price fixers to cooperate 

with the Justice Department and private litigants in exchange for 

being liable for only single as opposed to treble damages for their 

illegal conduct. We need to make sure that this system is working 

and that road blocks are not being put up to prevent businesses 

and consumers from getting the redress that they deserve. 

As a former prosecutor, cracking down on white-collar crime was 

always a priority of mine, as it is now heading up the subcommittee of the antitrust group. And when it comes to price fix-
3 

ing, crime quite literally pays. Companies can make hundreds of 

millions of dollars for as long as they can if they keep all their coconspirators in line and under wraps. But by having strong laws 

on the books against price fixing, tough government enforcement, 

and the opportunity for victims to get redress, we send the message 

to corporate boardrooms across the globe that price fixing and bid 

rigging will not be tolerated and it will not pay. 

I look forward to hearing from our witnesses about the good work 

that they are doing, and I will turn it over to Senator Lee for his 

opening statement. 

OPENING STATEMENT OF HON. MIKE LEE, A U.S. SENATOR 

FROM THE STATE OF UTAH 

Senator LEE. Thank you, Madam Chair. Thanks to both of you 

for joining us today. 

Cartels cost Americans many billions of dollars every single year. 

Each time a consumer pays for a product or for a service that has 

been affected by price fixing, bid rigging, or market allocation, that 

consumer is necessarily paying a premium that in some fashion or 

another enriches persons who are engaged in criminal conduct. 

Cartel activity has no redeeming value, no virtue. There is widespread agreement among Republicans and Democrats that cartels 

should be vigorously pursued and severely punished, and there is 

certainly absolute agreement between Senator Klobuchar and myself on this point. 

Our hearing today will focus on what has worked well in cartel 

enforcement and potential areas for improvement in that area. The 

Department of Justice, working together with the FBI, has a very 

impressive record of prosecuting cartels. In recent years, the Antitrust Division has averaged almost $1 

billion in criminal fines. The average prison sentences for defendants guilty of engaging in cartel activity has also increased. 

But while these accomplishments are noteworthy, it is very important for us to remember that the government must not rest on 

its laurels. Some commentators suggest that criminal fines, however large they might be, may not be sufficient to deter criminal 

activity by corporations, and in some instances they may end up 

punishing shareholders more than the truly guilty actors. 

Others have raised concerns regarding the difficulty of discovering cartels by means other than pursuant to the government’s 

Leniency Program. The Leniency Program has been hugely successful, but it has some limitations. It depends on bad actors fearing 

that there is a reasonable chance that they will actually get caught. 

It also depends on a bad actor turning itself in before the cartel has 

done too much harm to consumers. 

I look forward to discussing the ways in which the government 

can detect and prosecute cartels, even in those instances in which 

a guilty company has neither the incentive nor the courage to come 

forward. 

I also look forward to discussing a few other aspects of cartel enforcement that may well merit some consideration. I have heard 

concerns expressed about the current policy with respect to providing defendant companies some sort of credit for having implemented a compliance program. I have also heard concerns about 
4 

the potential for double fines for transactions that affect both the 

U.S. and a foreign jurisdiction. 

Finally, I believe the Antitrust Division and Mr. Baer deserve a 

tremendous amount of credit for implementing a new policy in 

April of this year by which the names of persons carved out of a 

settlement are not made public in an indictment. 

As a final note that is not directly related to this hearing, I am 

carefully reviewing the Division’s proposed settlement with American Airlines and U.S. Airways and intend to follow up with the 

Department of Justice by letter regarding that particular transaction. 

I look forward to hearing from the witnesses, and thank you both 

for being able to help. 

Chairman KLOBUCHAR. Thank you very much. 

I would like to introduce our distinguished first panel of witnesses. Our first witness is Mr. William Baer. Mr. Baer was sworn 

in as the Assistant Attorney General for the Department of Justice 

Antitrust Division in January of this year. Prior to his appointment, he was a partner at Arnold & Porter and head of the firm’s 

antitrust practice group and director of the FTC’s Competition Bureau. 

Our second witness is Mr. Ronald Hosko. Mr. Hosko was named 

the Assistant Director of the Criminal Investigative Division for 

the Federal Bureau of Investigation in July 2012. Previously he 

served as a special agent in charge of the Washington Field Office 

Criminal Division. 

I thank you both for appearing at our Subcommittee’s hearing 

today, and I think you brought a really cool-looking chart—don’t 

you think? 

Senator LEE. Absolutely. 

Chairman KLOBUCHAR. So we are looking forward to hearing 

about that, and I think I would ask you to rise and I will swear 

you in. So raise your right hands. Do you affirm that the testimony 

you are about to give before the Committee will be the truth, the 

whole truth, and nothing but the truth, so help you God? 

Mr. BAER. I do. 

Mr. HOSKO. I do. 

Chairman KLOBUCHAR. Thank you. All right. Well, let us get 

started. 

Mr. Baer. 

STATEMENT OF WILLIAM J. BAER, ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION, U.S. DEPARTMENT OF JUSTICE; 

AND RONALD T. HOSKO, ASSISTANT DIRECTOR, CRIMINAL 

INVESTIGATIVE DIVISION, FEDERAL BUREAU OF INVESTIGATION, WASHINGTON, DC 

Mr. BAER. Thank you, Chairman Klobuchar, thank you, Ranking 

Member Lee. I appreciate you inviting me to appear before you 

today, and I am very pleased to be seated alongside Assistant Director Hosko. The FBI, as you said, Chairman Klobuchar, is a key 

and longstanding partner in the Justice Department’s success in 

battling cartels. Working together, we think we can and will continue to make a difference for American consumers. 
5 

Spotlighting cartel misconduct is the right focus for the Subcommittee. Price fixing, bid rigging, and other criminal antitrust 

crimes cause direct and unambiguous harm to U.S. consumers. Effective enforcement by the FBI and the Antitrust Division restores 

competition and returns markets to competitive levels, resulting in 

lower prices for consumer goods and consumer services. 

In this last Fiscal Year just completed, the Division filed 50 

criminal cases. We charged 21 companies and 34 individuals for 

crimes affecting tens of billions of dollars of U.S. commerce. The 

Division obtained criminal fines totaling just over $1 billion, and 

courts sentenced 28 individuals to jail terms that averaged more 

than two years per defendant. American taxpayers are well served 

by effective cartel enforcement. 

In just the past five fiscal years, the Antitrust Division averaged 

about $850 million in criminal fines per year versus the average 

appropriation of about $85 million, minus some money we get from 

Hart-Scott-Rodino merger filing fees, but the direct appropriation 

on average was $85 million, the fines on average $850 million. And 

as the Chairman noted, these fines do not go to the Antitrust Division. They go to the Crime Victims Fund, which helps victims of 

all types of crime throughout the United States. 

In recent years, our efforts have resulted in a dramatic increase 

in exposing the world’s largest price-fixing cartels. We have successfully prosecuted cartels involving air transportation, obtaining 

$1.8 billion in criminal fines. Liquid crystal displays, the LCD panels, that go into everything consumers buy to watch on an iPad or 

a TV, we obtained more than $1.4 billion in fines there. And most 

recently, as we will talk about, the auto parts matter where to date 

we have obtained $1.6 billion in criminal penalties. 

Those fines do not tell the whole story. To be sure, criminal penalties make cartel behavior less attractive for companies. But it is 

also the threat of jail time for the company officials responsible for 

injuring consumers that is itself a powerful deterrent. That threat 

is real. Today more individuals involved in cartel activity are being 

jailed for longer periods of time than ever before. In the 1990s, our 

average jail sentence for an antitrust crime was about eight 

months. Today the average prison sentence is 25 months, over a 

threefold increase. 

Successful prosecution of large international cartels obviously 

poses significant challenges to the FBI and to us, with documents, 

witnesses, and wrongdoers often located outside the U.S. We have 

a shared commitment with enforcers around the world to fighting 

international cartels, and we work closely together in trying to 

overcome those challenges. 

Last month, Attorney General Holder described our ongoing auto 

parts investigation and how it exemplifies ways in which the Division and the FBI together cooperate with our foreign counterparts. 

This is the largest criminal investigation the Antitrust Division has 

ever pursued, both in terms of its scope and the potential of volume 

of commerce affected by the conduct. The investigation included 

FBI search warrants executed on the very same day in the United 

States as dawn raids were conducted elsewhere around the world. 

And today the cooperation with our international counterparts con-
6 

tinues. It includes enforcers from Japan, Canada, Korea, Mexico, 

Australia, and the European Commission. 

What do we have to show thus far for our efforts? To date, we 

have charged 21 companies and 21 executives. All 21 companies 

have either pleaded or agreed to plead guilty. The immediate victims of those companies are automotive manufacturers such as 

Ford, GM, Chrysler, Honda, Toyota, Nissan, Subaru, Mazda, and 

Mitsubishi. And as you can see from the chart that is stage left, 

to my right, the conspiracies covered a wide variety of parts, including important safety systems such as seat belts, airbags, and 

antilock brakes. 

The cases filed to date involve conduct affecting over $8 billion 

in auto parts sold to car manufacturers in the United States, and 

those are parts used in more than 25 million cars purchased by 

American consumers. The multiple conspiracies we charged in September affected auto companies manufacturing in 14 different 

States. 

Cartels involving components of finished products are not unique 

to the automobile industry. For example, our long-running joint investigation with the FBI into LCD flat panels uncovered long-running price-fixing conspiracies that affected computer manufacturers 

like Hewlett-Packard, Dell, and Apple. In turn, those conspiracies 

injured families, schools, businesses, charities, and government 

agencies that purchased the notebooks, the laptops, the computer 

monitors that incorporated the LCD panels into their products. We 

had a trial last year against one of the corporate conspirators, 

AUO, and we offered evidence showing that the conspirators increased their margin on each product by an average of $53. That 

meant every flat panel shipped into the United States had an inflated price of as much as $53. That stat alone tells us how the cartel behavior we are trying to attack imposes real costs on the direct 

purchasers and in turn on U.S. consumers. 

We have also prosecuted successfully cartels in the financial 

services industry involving municipal bonds where we worked together with the FBI, the SEC, the Comptroller of the Currency, the 

Federal Reserve, and a working group of 20 different State Attorneys General. There the implicated have paid about $750 million 

in restitution, penalties and disgorgement, and 20 individuals have 

been charged; 19 have either been convicted in trials or pleaded 

guilty. 

While our enforcement efforts do focus to a significant extent on 

large-scale national and international cartels, we appreciate that 

there is local and regional impact that we need to pay attention to. 

For example, the Division continues to uncover collusive schemes 

among real estate speculators aimed at eliminating competition at 

real estate foreclosure auctions. With the assistance of the FBI and 

folks at HUD, we are looking at bid rigging and fraud in local markets in Alabama, California, Georgia, and North Carolina. To date, 

we have already brought charges against 64 individuals and three 

companies. That bad behavior involved more than 3,400 foreclosed 

homes, and it has caused more than $23 million in loss primarily 

to mortgage holders. 

Together, the FBI and the Antitrust Division’s dedicated public 

servants are working hard to hold both companies and individuals 
7 

responsible for cartel behavior. The American consumer is the beneficiary of those efforts. 

Thank you, and I look forward to responding to your questions. 

Chairman KLOBUCHAR. Thank you very much, Mr. Baer. 

Mr. Hosko. 

Mr. HOSKO. Good afternoon, Chairwoman Klobuchar and Ranking Member Lee. I appreciate the opportunity to appear before you 

today and for your continued support of the men and women of the 

FBI. 

The FBI has forged a strong partnership with DOJ’s Antitrust 

Division which has resulted in successful prosecutions in very significant cases. The international relationships, diverse scope, and 

broad intelligence network of the FBI uniquely positions us to join 

our DOJ colleagues in addressing these criminal matters that often 

have a global reach. 

There is no doubt that collusion within the global economy undermines the U.S. market and harms U.S. consumers. The FBI is 

absolutely committed to investigating domestic antitrust violations. 

Recognizing the potential economic impact of broader multinational 

conspiracies, the FBI has aligned its international criminal investigative programs, including antitrust, to detect and investigate 

price fixing and other illicit conduct by foreign cartels. 

In 2008, we formed the International Corruption Unit to manage 

antitrust, Foreign Corrupt Practices Act, and international fraud 

against the government as well as money-laundering investigations 

that involve systemic commercial corruption or complicity of foreign 

officials. 

The alignment recognized the need for shared and enhanced expertise in multinational criminal investigations, productive relationships with foreign partners, and the application of proactive 

techniques to identify sophisticated conspiracies. The body of information and intelligence generated by these cases provides a broader understanding of illicit commercial activity within regions, countries, and industries. 

A second element, the Foreign Corrupt Practices Act, prohibits 

bribery of foreign public officials by U.S. and certain foreign businesses for commercial advantage. Partnering with DOJ’s Criminal 

Division, the FBI investigates allegations of illegal commercial 

bribery around the world. Since the Act itself does not apply to corrupt foreign officials, committed foreign partners add tremendous 

value to our efforts. 

Through parallel investigations, both the companies’ representatives and corrupt officials can be brought to justice. To enhance cooperation in this area, the FBI recently implemented the International Foreign Bribery Task Force. It is a partnership of law enforcement counterparts from the United Kingdom, Canada, and 

Australia, and fosters enhanced information sharing and investigative cooperation in foreign bribery matters. 

The recent addition of international money-laundering investigations to the international corruption portfolio provides yet another 

avenue for us to identify public and commercial corruption. For example, a kleptocracy investigation might reveal the target not only 

looted his nation’s treasury but accepted bribes from U.S. companies to allow for access to markets and resources. 
8 

During the country’s engagements in Afghanistan and Iraq, hundreds of functions historically performed by military personnel 

were privatized. As a result, the FBI and our partners observed 

complex and wide-ranging fraud schemes related to government 

contracting. In 2005, we launched the International Contract Corruption Initiative to evaluate the crime problem, engage the numerous law enforcement agencies sharing jurisdiction, and develop 

a mutually reinforcing strategy to address the problem. As a result 

of these efforts, the FBI joined eight other federal law enforcement 

agencies in forming the International Contract Corruption Task 

Force, which focuses on fraud and corruption related to U.S. military, reconstruction, and humanitarian aid in Afghanistan and 

Iraq. 

Using forward-deployed agents to conduct assessments of corruption and fraud allegations, we developed viable cases and directed 

domestic field offices to coordinate prosecutions. Many of the 

schemes we uncovered involved military and civilian personnel responsible for some element of the contracting process. Examples included payment of bribes in exchange for issuing government contracts and kickbacks to facilitate theft of diesel fuel using scores of 

tanker trucks. Individuals involved were not only criminally derelict in their duty; in some cases they may have aided the enemy. 

As this is in most cases white-collar crime, the primary motivating force was greed. 

Interagency cooperation contributes greatly to the success of this 

initiative and others. A joint operations center staffed by representatives from the eight participating agencies and collocated within 

our International Corruption Unit provides vital information sharing, deconfliction of cases, and analytic support to deployed investigators. 

Despite resource challenges across the government, we have 

achieved meaningful success in countering antitrust and other 

international corruption. Clearly there is more to be done, but 

through coordination with committed foreign and domestic partners 

and by effectively prioritizing, the FBI is positioned to combat the 

most egregious offenders. 

In conclusion, I thank you both for this opportunity to discuss 

our programs, and I look forward to answering your questions. 

[The prepared statement of Messrs. Baer and Hosko appears as 

a submission for the record.] 

Chairman KLOBUCHAR. Thank you very much. Thank you to both 

of you. 

I did want to put on the record a statement from Senator Levin 

of Michigan. As you know, Detroit is home to the auto industry, the 

State of Michigan, very important, and it is a good statement about 

the concerns that he has about price fixing and the good work that 

needs to continue to be done. So, with that, I will enter Senator 

Levin’s statement in the record. 

[No statement from Senator Levin was submitted for the record.] 

Chairman KLOBUCHAR. Mr. Baer, before I get into the cartel 

issues, I want to ask about something that Senator Lee mentioned 

in his statement, and that is the settlement of the U.S. Airways 

and American Airlines merger. 
9 

As we all know from the news this week—and you know better 

than all of us up here—the settlement calls for divestiture of slots 

at two slot-constrained airports—that would be Reagan and 

LaGuardia—and two gates at each of five other large airports. The 

Justice Department’s complaint, as I recall, was broad. It said the 

merger would create some major problems for competition, and 

there were fare issues as well as risk of increases in baggage and 

change fees, something I have been involved in in the past in terms 

of trying to eliminate that or reduce it. 

Do you think that the divestitures address all of these problems? 

And what do you see is coming out of this for the rest of the country in addition to the areas where the slots were divested? 

Mr. BAER. Thank you, Chairman Klobuchar. We do think this 

settlement is going to result in a net improvement in the competitive situation for U.S. air passengers. Why do I say that? Right 

now, we have had develop over the years what our complaint refers 

to as a relatively cozy oligopoly between the four major legacy carriers. And what we are trying to do in terms of this settlement is 

enable the group of carriers who are low-cost, effective competitors 

to be able to offer more opportunity, more seats at more competitive fares than ever before. 

In coming to that as an acceptable resolution to the litigation we 

filed to block the merger, we looked hard at what happened in airports around the country when low-cost carriers did get a foot in 

the door. When United had to give up its slots at Newark three 

years ago when it merged with Continental, Southwest picked up 

about 30 slots and was able to enter that market. It, within short 

order, was able to fly nonstop to six cities and offer consumers extraordinarily competitive fares in many of those cities. 

Just an example, from Newark to St. Louis, Southwest within a 

matter of months had increased the number of seats available to 

consumers by twofold, 100 percent. Fares dropped on average—this 

is not just the Southwest fare but the competitor fare—dropped on 

average by 27 percent. These low-cost carriers do have and can 

have a meaningful impact, but it is not just on the nonstop traffic 

that they add. They then can connect city to city, city to city to city, 

one-stop traffic, and offer consumers more meaningful competition 

on those fares than they are getting today. 

As we looked at that hard evidence—and this is just but an example—Jet Blue was able to obtain a few slots to obtain a presence 

here at DCA, and it had a dramatic effect on seats available up to 

Boston and the prices charged for those seats. 

So enabling some folks who now are constrained because they do 

not have access to slots, they do not have access to gates around 

the country to be more competitive, we are going to change the 

competitive dynamic that the legacy carriers are facing today. They 

are going to have to respond, and they do respond—— 

Chairman KLOBUCHAR. Do you think that would help, though, 

with the change fees and the baggage fees and some of these other 

issues that go to areas that are not even included in your slot-divested areas? 

Mr. BAER. Well, we can see from the ads that not all carriers are 

alike in terms of how they handle baggage fees. For example, they 

compete on that dimension. But because a carrier like Southwest 
10 

is very limited today in the points where it can go to, it does not 

offer that national competition that it will be able to offer on a 

much broader platform if this deal goes through, if the court accepts our proposed settlement and divestitures. 

Chairman KLOBUCHAR. Okay. Just one more question. I know 

you are focused on these low-cost carriers, and we love having lowcost carriers there as a competitive force. But they do not always 

serve some of those small and medium-size cities like I have in my 

State. I do not think we have Jet Blue going to Bemidji or, you 

know, places like that. 

One question I had is the divestiture bidding process. Will all 

airlines be able to participate? And as I understand it, the DOJ has 

acknowledged that some small and medium-size communities will 

lose service as a result of these divestitures. And if that is the case, 

shouldn’t we allow some of the carriers that might compete more 

readily for those flights to be able to compete for those slots? 

Mr. BAER. Thank you, Madam Chair. We do not know that anyone is going to lose service, and, in fact, you know, we are not a 

regulator. We do not decide where people fly and where they do not 

fly. But we were conscious in negotiating the settlement in making 

sure that none of the slots that were surrendered by American and 

U.S. Airways were the small-plane commuter slots that are designated to fly to small and medium-size communities. We set those 

aside, let them keep them in order to keep open the opportunity 

for them to fly to those small and medium-size communities where, 

as you say, the low-cost carriers are, at least today under the current configuration, unlikely to fly. And, separately, the Department 

of Transportation and the merging parties—American and U.S. 

Air—entered into an agreement in which U.S. Air and American in 

the new American configuration agreed to continue to use those 

commuter slots to serve small and medium-size communities and 

medium-size hubs. 

Chairman KLOBUCHAR. But are all airlines going to be able to 

participate? Just yes or no. 

Mr. BAER. That is the first part of the question. The answer is, 

‘‘Yes, but,’’ if I may, and the ‘‘but’’ simply is that we will talk to 

anybody who can come in and convince us that they are going to 

compete those assets aggressively and effectively. Based on our experience, we have some concerns about whether the legacy carriers 

are really going to offer that competitive dynamic. So we will talk 

to them. If they do not like where we end up going, they have an 

opportunity to object in court to the settlement. But we will hear 

them, we will listen to them. That is what we do. 

Chairman KLOBUCHAR. Okay. Well, I just think the goal of an 

auction should be to select carriers that can both effectively compete, as you point out, on price with the new American Airlines, 

but also serve those small and medium-size communities that could 

lose service as a result of the divestiture. So I am sure there will 

be more ahead on that. 

But let us get to auto parts and cartels and other things. We 

noted that the DOJ has posted impressive wins in prosecuting cartels, yet year after year, even as more and more larger fines and 

prison sentences are imposed, there still seem to be more and more 

cartels uncovered. Is price fixing not being deterred? Or are we just 
11 

becoming better at detecting it? And I guess the follow-up question 

would be: What new innovations is the DOJ looking at despite limited constraints with funding? Which I will get to in a minute. 

What other ideas do you see ahead for cartel enforcement? 

Mr. BAER. Senator, we think we are getting better at detection, 

and both you and Senator Lee mentioned the Leniency Program as 

one vehicle by which we are able to get companies to self-report 

bad conduct. That is successful both on a national and local level 

and on an international level. 

In addition, by cooperating with helping educate our fellow competition enforcement agencies around the world on the evils of cartels, we have actually achieved remarkable convergence in the last 

20 years, agreement that these things should be prosecuted vigorously, that other governments should establish leniency programs 

to encourage self-reporting, and that seems to be working. 

Chairman KLOBUCHAR. Very good. On the resource issue I just 

mentioned, last week Preet Bharara, the U.S. Attorney for the 

Southern District of New York, raised serious concerns about the 

Justice Department’s underfunded budget. He said, ‘‘People are 

going to start getting away with bad conduct. Victims are going to 

be able to be vindicated. In my mind, it is something of a tragedy.’’ 

Do you share this concern? And do you have enough resources to 

maximize detection and prosecution of cartels? 

Mr. BAER. We will work as effectively as we can with every dollar Congress entrusts to us, every taxpayer dollar. That is our job. 

At the same time, the combination of sequestration and the need 

to impose a limitation on hiring until that process sorts itself out 

means we have actually many fewer prosecutors going after antitrust crimes today than we did three years ago. We have gone from 

about 124 down to about 84. As you know, based on your experience, that kind of reduction cannot help but have an impact. 

Chairman KLOBUCHAR. And does that include the ones that were 

eliminated because of the closure of the field offices in places like 

Cleveland, Atlanta, Dallas, and Philadelphia? 

Mr. BAER. We offered the opportunity for all those people to 

transfer. Some did, some—— 

Chairman KLOBUCHAR. Right. Many positions were eliminated, 

I—— 

Mr. BAER. No, the positions were not eliminated, but with a hiring freeze in place, we are limited in our ability to go out and recruit replacements. 

Chairman KLOBUCHAR. Right. 

Mr. BAER. Hopefully when we get that issue resolved, we can get 

back to our normal hiring practice. 

Chairman KLOBUCHAR. Well, right, and I would love to, as we 

talked about in the hallway, replace sequestration, and I have 

some ideas on how we can do it right now, and I am hopeful we 

are going to do something about this going forward with the budget 

negotiations while still bringing our debt down, because I am afraid 

we are going to lose out for consumers in the long term if we do 

not have people going after cartels like these. But as I mentioned, 

some of these field offices did close down, most likely because of 

budget issues. 
12 

Do you think that it is harder to go after some of these local— 

you know, where people might be more willing to come forward 

about price fixing at an auto dealer shop or all kinds of things 

when you do not have those? 

Mr. BAER. We hope not. Part of what we do, in addition to our 

Leniency Program, is we do considerable outreach, particularly 

with other government officials at the federal, State, and local 

level, helping particularly federal procurement officials understand 

where they might be seeing a suspicious pattern of bidding behavior, and they will know who to come to at the FBI or over at the 

Antitrust Division. 

I learned this morning that over the past four years or so we 

have actually done briefings and education for over 20,000 civil 

servants at various levels of government to help them help us. That 

is one way we can enrich the process. But it is a challenge doing 

outreach at the level we would like to do with the resources currently available to us. 

Chairman KLOBUCHAR. Okay. Do you want to follow up at all, 

Mr. Hosko? 

Mr. HOSKO. I would share the U.S. Attorney’s and Mr. Baer’s 

concern and my Director’s concern about the resource restrictions 

that we are facing. In the past 12 years, the FBI shifted approximately 1,200 agents out of the criminal programs to address the 

counterterrorism threat, and that was hundreds of agents out of 

our white-collar crime program. With each of those agents that is 

not in this strata of our work, that is an opportunity for some person who wants to conspire unlawfully to commit crimes that we are 

talking about here today, the whole range of white-collar crime. 

There are hundreds of Internet frauds that are being conducted 

today that we cannot touch, nor could we ask to have prosecuted 

because we do not have the sufficient numbers of people to conduct 

the investigations or to have them prosecute it. 

So this is another piece of that market, the white-collar crime 

market broadly, that without FBI agents there and without somebody else filling that void—it might be State and local law enforcement effectively trained to fill the void and take the cases—there 

is going to be a gap, and that gap presents an opportunity for price 

fixers and predators. 

Chairman KLOBUCHAR. Very good. I do not know if you know, 

but Mr. Comey, Director Comey, and I went to law school together. 

We were in the same class. 

Mr. HOSKO. I did not know that. 

Chairman KLOBUCHAR. Yes, there you go. So I will report back 

to him that you are doing a good job, Mr. Hosko. 

Mr. HOSKO. Thank you. 

[Laughter.] 

Chairman KLOBUCHAR. But also I have appreciated—and you can 

tell him this—that he has been out front on how many FBI agents 

this is going to mean if this continues with the sequester. I think 

the number is—what is it, 2,000? 

Mr. HOSKO. It is roughly 3,500 personnel. 

Chairman KLOBUCHAR. 3,500, okay. 

Mr. HOSKO. And I think it bears mentioning that we need smarter FBI agents, and among the first things that we turned off in Fis-
13 

cal Year 2013 was training. So our opportunity to get together with 

prosecutors, with partners, and with our own work force to make 

them smarter on these subjects got flattened last year because of 

the impacts of sequester on our budget. We need a smarter work 

force, a more agile work force, and these impacts will take us in 

the other direction. 

Chairman KLOBUCHAR. All right. Good. Well, I have gone on 

awhile here, so I am going to give it over to Senator Lee to ask as 

many questions as he wants. Thank you very much to both of you. 

Senator LEE. Thank you very much. 

First of all, on the airline issue, I am pleased to hear you discuss 

the bidding process for the slots made available under the terms 

of the settlement agreement. That is an issue that, as you know, 

Senator Klobuchar and I have been concerned about, and that is 

an issue that we opined about in our letter that we sent to you a 

few months ago. And I continue to share, of course, Senator 

Klobuchar’s view that the bidding process should be open and competitive, and so I look forward to following up on that by letter. 

Mr. Baer, with respect to some concerns that I have had about 

people coming to me and indicating that there is a potential for 

U.S. companies to be fined for the same conduct, I wanted to raise 

some of those concerns with you. There is some potential, as I understand it, for a company, including a U.S. company, to be fined 

twice for the same conduct related to a cartel. Such double counting, as I understand it, would arise in a context in which both the 

United States and a foreign government stand convinced that the 

same transaction had an impact on its own customers, on its own 

consumers within that country. 

I know this can be complex, and it can be really difficult to ascertain in any given context for any given activity. But I just wanted 

to ask you what the Division can do, if anything, to ensure that 

companies, including and especially U.S. companies, are not made 

subject to double fines for the same transaction in a cartel investigation. 

Mr. BAER. Thank you, Senator. First, in determining what a fine 

amount should be in the United States, we are guided by the U.S. 

Sentencing Guidelines, which require us to take a look at the volume of affected commerce involving the United States. So in calculating our fines, we are looking not at the worldwide sales, but we 

are looking at the sales that have a connection to the United States 

and potential adverse impact on U.S. consumers. And then we 

work out a fine under a formula under the Sentencing Guidelines. 

In terms of trying to make sure, though, that people are not getting hit two, three, four, or five times around the world for the 

same thing, we have begun working quite closely with other enforcers, talking about methodology where we can, we have got confidentiality issues in terms of Rule 6(b) about what we can share, 

but talking about approaches so that the cartel offense is properly 

penalized but not overly penalized, that this just does not become 

a tool for everybody to get dollars. So it is a legitimate concern, but 

we are focused on it. 

Senator LEE. Okay. And you think the procedures you have in 

place are adequate to address that? 

Mr. BAER. Yes, sir. 
14 

Senator LEE. Okay. As I understand it, the Department does not 

currently have in place a mechanism whereby a company’s own 

compliance program can be taken into account when discussing settlement for illegal cartel activity. Is that the case? 

Mr. BAER. I think there is a misperception out there. When we 

are looking at the fine that we are going to demand from a cooperating company, we do look at the cooperation they provided, that 

is, the self-confession, even if they are not in under the Leniency 

Program; but we also take a look at—and in private practice I have 

benefited from this when I represented corporations—the quality 

and extent of the in-house compliance program. But it goes to the 

size of the fine, not whether the misconduct occurred or not, and 

that is where sometimes I think there may be a misunderstanding 

out there in the business community that I need to work on. 

Senator LEE. Okay. So it does exist, it can be taken into account, 

it is routinely taken into account. It just relates to the severity of 

the fine and not whether or not an action should be brought. 

Mr. BAER. That is correct, although routinely taken into account 

does not mean we routinely credit it because we have really got to 

look at whether it was something that is on paper or that is real. 

Senator LEE. Right, or whether it is something that is there 

largely to cover up the fact that something funny might be going 

on behind the scenes. 

Mr. BAER. Yes, sir. 

Senator LEE. Do you think the extent to which you take it into 

account is adequate? Does it adequately reward—I do think there 

are tremendous benefits to be born—to the extent to which any 

company believes that by having a pretty robust, honest, and aggressive internal compliance program, to the extent they believe 

that they will benefit from doing that, I think they will do it. And 

the more we can do to incentivize companies to do this, the better 

off I think we are going to be, because we are going to—obviously 

whenever we are operating in the world of government, we are 

dealing with finite resources—resources that can become more finite over time with things like sequestration and things like that. 

And so the more we can get people to police themselves rather than 

requiring you to police them, the better off we are going to be. 

Do you think the extent to which you take that into account currently adequately incentivizes that? 

Mr. BAER. Senator, I think the key incentive is the penalties that 

people pay if they do not comply, if corporations and their officers 

are involved in the misconduct. I have been practicing in this area 

for many years, and part of the time in the private sector, and one 

reason why I think we are seeing fewer U.S. corporations involved 

in antitrust misconduct is that the level of awareness within the 

corporate community, particularly in the U.S., has risen over the 

last 20 years. The consequences are so severe. 

So I do think the threat of bad outcomes is motivating better 

front-end attention being paid by both lawyers and by the company 

execs. 

Senator LEE. What about the types of penalties, not just the 

magnitude of the penalty but the types of penalties available? Are 

those adequate? 
15 

Mr. BAER. I believe they are. You know, it is always hard to tell 

what you are deterring and not deterring and what you are overdeterring. But these are huge penalties. Companies are worried 

about them. They are worried about the treble damage consequences that come on top of an antitrust violation. And one 

measure of whether it is working properly is the number of companies who are coming in and voluntarily self-confessing. You know, 

if the first one in does get leniency for itself as a company and cooperating employees, but it still faces civil penalties, and the other 

companies rush in because they know we are going to respect the 

fact they got in early and owned up and give them a downward adjustment in what they would otherwise have to pay, I think it is 

working pretty well. I do not think we need more authority than 

we have now. 

Senator LEE. Including authority to make someone ineligible to 

serve on a corporate board in the future? 

Mr. BAER. I think the thought of going to jail is a pretty powerful 

deterrent absent having other authority. 

Senator LEE. Thank you very much. 

Thank you, Madam Chair. 

Chairman KLOBUCHAR. Thank you very much. 

We have been joined by Senator Blumenthal, someone who 

knows a little bit about prosecuting wrongdoers. 

Senator Blumenthal. 

Senator BLUMENTHAL. Thank you. I want to first thank Senator 

Klobuchar and Senator Lee for having this hearing—very, very important and significant not only to the profession—and I thank you, 

Assistant Attorney General Baer, for your professional involvement 

over many years in this area of law—but also to the American people, and particularly as institutions become bigger and people lose 

confidence and trust in the workings of the marketplace as those 

institutions become bigger and more powerful, I think the work 

that you do is ever more important. 

And I want to begin with the Leniency Program, which really 

works only because you have done effective enforcement in the 

past. In other words, as you aptly described it, the fear or apprehension—in other words, the deterrent effect of past prosecutions— 

is what drives the Leniency Program at the end of the day. 

And my concern is that most of the cases that are brought today, 

I think, from what I have seen, are generated exclusively from 

firms that have decided to come forward and seek leniency applications. And I know that resources are a consideration, that enforcement requires more than just issuing a subpoena. You have to have 

experts and litigators and economists to evaluate what comes 

through a subpoena, as well as other sources of evidence, to bring 

that investigation to trial and then to pursue the trial. 

I am worried that the success of the Leniency Program combined 

with budget constraints that your Division faces will in effect give 

you incentives to pursue only the companies that come forward— 

the low-hanging fruit, for lack of a better term—and the large dollar amount in our international cartels that come to your attention 

through the Leniency Program, and perhaps forgo the smaller but 

equally harmful domestic cartels that require more Department of 

Justice resources if there is nobody coming forward. And needless 
16 

to say, as I know from personal experience, some of the most egregious and harmful of the cartels may have nobody coming forward. 

So maybe to get your general reaction to those concerns. 

Mr. BAER. I share the concerns, and we are paying attention to 

it. The majority of our case leads come from leniency but not all. 

We have successfully just last month prosecuted bid rigging at a 

Superfund site in New Jersey, hospital procurement fraud in the 

State of New York. We talked in my prepared—our joint prepared 

remarks about our cooperative efforts to deal with real estate mortgage foreclosure fraud all around the country. We are working as 

best we can to get our people to stretch and continue outreach efforts to educate State and local and county officials about what to 

look for and when to come to the FBI office in their community or 

come to us and we will work together and we will go after it. 

Senator BLUMENTHAL. Let me ask you, in terms of sort of 

leveraging resources, what is the state of cooperation with State 

Attorneys General these days? 

Mr. BAER. Speaking to a former Attorney General of the State 

with whom, when I was at the FTC, we cooperated well, I think 

it is in a good place. In some ways it is not for me to say, but on 

matters like going after the Apple e-books conspiracy, we had I 

think 34 co-plaintiff States and reached a very successful outcome, 

good working relationship. On merger investigations like beer and 

like the recent merger involving American and U.S. Air we settled, 

we worked closely and cooperatively. 

Part of what we need to do is make sure that we recognize the 

legitimate State interests that need to be reflected in any discussion about settlement or challenge, but so far I think it is working 

quite well, and I have been pleased to get back on that side of the 

ledger. 

Senator BLUMENTHAL. Thank you. 

I want to focus on an issue concerning congressional exemption 

under the antitrust laws, a little bit different from what we have 

been discussing. As you may know, Senator McCain and I have introduced a measure called the ‘‘FANS Act,’’ F-A-N-S, because we 

are troubled by the blackout policies of professional sports leagues 

and broadcast and cable networks that all too often leave sports 

fans in the dark, literally, unable to watch games that they want 

to see. And we believe that the leagues enjoy antitrust exemptions 

and billions of dollars in subsidies that should require them to give 

fans fair access to their favorite teams on TV, which is why we introduced this legislation actually just last Monday that would protect fans, consumers, and taxpayers who essentially make these 

leagues successful. Part of the reason they are successful also is 

they enjoy live programming antitrust exemptions that enable 

them to have live programming more available to consumers and 

using the cable and the Internet. 

I am not asking you to give me your opinion or judgment on the 

proposed legislation right now. I understand you may want a 

chance to look at it. I would hope that perhaps you would and give 

me your views on it. But talking in general about antitrust exemptions, if the market dynamics show that prices are increasing, in 

this case it is the rights to sports programming, and the evidence 

for a unique marketplace need to collude—and here they are 
17 

colluding, and that evidence is unclear—isn’t it appropriate for 

Congress to consider revisiting antitrust immunities that have 

been granted in the past? 

Mr. BAER. Senator, I appreciate the pass on the specifics of the 

legislation because I could not respond adequately, although we 

will look at it. As a general matter, the Antitrust Division of the 

Justice Department and my colleagues at the Federal Trade Commission have urged that antitrust exemptions be granted sparingly 

and be looked at very, very closely. That continues to be the view 

of the Justice Department. 

Senator BLUMENTHAL. Well, I certainly join you in that general 

view and hope that you will perhaps join me in advocating that 

this exemption should be narrowed or eliminated if the leagues 

continue these blackout policies that are essentially anti-consumer 

and take advantage of market power without any public benefit or 

insufficient public benefit to justify them. So I thank you for that 

view, and I look forward to hearing more about it. 

Thank you, Madam Chair. 

Chairman KLOBUCHAR. Thank you very much, Senator 

Blumenthal. 

Before you leave and we get our next panel up, we really felt 

that we have not given you enough opportunity to talk about your 

chart, Mr. Baer, if that is your chart, with your car and everything, 

so we wondered if you wanted to add anything for your final question about the auto products targeted by the conspirators and 

which are some of the biggest parts of the car products that are 

targets. 

Mr. BAER. We developed that chart in part just to show the pervasiveness of the bad conduct pattern we had seen. If you look at 

the auto products that the conspirators fixed prices on—this is just 

what we have discovered and prosecuted so far, it is not necessarily 

the end of the game by any stretch—but, you know, Mitsubishi got 

overcharged for alternators, starter motors, ignition coils. Hitachi, 

you know, six different products, air flow meters, throttle bodies, 

ignition coils, alternators, valve timing controller devices, starter 

motors. It is Mitsubishi compressors, condensers. 

If you look around the car and look at the safety systems or the 

electrical systems, there has been a very bad pattern of conduct 

that domino by domino we—the dominoes are falling. I almost 

mixed a metaphor there, but I caught myself. The dominoes are 

falling, and we think we are actually, as we go forward, going to 

be able to deliver more good news to the American consumer about 

prosecuting bad conduct with the help of the guy to my left and his 

terrific team. 

Chairman KLOBUCHAR. Okay. Do you want to add anything, Mr. 

Hosko? 

Mr. HOSKO. No. I echo Mr. Baer’s sentiments. 

Chairman KLOBUCHAR. Okay, very good. Well, we are looking 

forward to hearing about more successes, and if there is anything 

we can help with legislatively, even the smallest things, we would 

love to do anything to help. And I think your first answer to that, 

‘‘Yes, get rid of the sequestration, Senator.’’ But if there are any 

tools that we can give you and legal issues, we would love to work 

together to help you. 
18 

Do you want to add anything, Senator Lee? 

[No response.] 

Chairman KLOBUCHAR. Okay. Thank you, both of you. 

Mr. BAER. Thank you very much. 

Mr. HOSKO. Thank you. 

Chairman KLOBUCHAR. We will call up our second panel. 

[Pause.] 

Chairman KLOBUCHAR. Okay. I would like to now introduce our 

next panel of distinguished witnesses. 

Our first witness will be Hollis Salzman. Ms. Salzman is a partner at Robins Kaplan Miller & Ciresi, which I will add is a Minneapolis-based law firm, and I do not think that is why she is here. 

In fact, I think our staff was looking for experts in this area, and 

it just happened to be a Minneapolis-based law firm because, in 

fact, you are out of the New York office, and she is the co-chair of 

the Antitrust and Trade Regulation Group, and I will say Robins 

Kaplan has handled some major international civil litigation and 

handled it quite well. 

We next have Mr. Christopher Hockett. Mr. Hockett is a partner 

at Davis Polk and serves as the head of the firm’s antitrust practice, also a very well-known firm. He is also chair of the section on 

antitrust law for the American Bar Association and is testifying on 

behalf of the section. 

Our third witness will be Ms. Margaret Levenstein. Dr. 

Levenstein is the executive director of the Michigan Census Research Data Center and an associate research scientist for the Institute for Social Research at the University of Michigan. She is 

also an adjunct professor of business economics and public policy 

in the Ross School of Business. So being from Michigan, you probably care a lot about cars. Okay. You do not have to answer that. 

Our final witness will be Mark Rosman. Mr. Rosman is a partner 

at Wilson Sonsini Goodrich & Rosati, where he is a member of the 

firm’s antitrust practice. 

A friend of mine from the University of Chicago was at your firm 

for a long time. We can talk about it later. 

Prior to joining the firm, he served as assistant chief of the National Criminal Enforcement Section in the Justice Department’s 

Antitrust Division. 

So I ask our witnesses to rise and raise their hands as I administer the oath. Do you affirm that the testimony you are about to 

give before the Committee will be the truth, the whole truth, and 

nothing but the truth, so help you God? 

Ms. SALZMAN. I do. 

Mr. HOCKETT. I do. 

Ms. LEVENSTEIN. I do. 

Mr. ROSMAN. I do. 

Chairman KLOBUCHAR. Thank you. Why don’t we begin with Ms. 

Salzman. 

STATEMENT OF HOLLIS SALZMAN, PARTNER & CO-CHAIR, 

ANTITRUST AND TRADE REGULATION GROUP, ROBINS 

KAPLAN MILLER & CIRESI, LLP, NEW YORK, NEW YORK 

Ms. SALZMAN. Thank you very much for inviting me to be here 

to testify. We talked a lot about the auto parts litigation, and I am 
19 

one of the co-lead counsels in the private enforcement actions that 

supplements the criminal cases in the auto parts cases. 

I wanted to make three points here today that are outlined in my 

written testimony. 

The first point relates to ACPERA, and I echo the comments 

made earlier today. The Antitrust Division’s use of the amnesty 

and leniency for the first firm who reports its participation in a 

cartel and providing evidence against the cartel has been hugely 

successful. For example, the air cargo litigation, the LCD case, and 

most recently, and as we have been discussing today, the auto 

parts cartels where the DOJ has secured record fines and sent 

ample numbers of people to jail for violating the antitrust laws. 

These are real-life cases that affect real people. These are consumers that are harmed, consumers who purchase computers, cell 

phones, automobiles. These are products purchased by every household in America, and consumers are greatly affected by these cartels and the overcharges to their products as a result. 

ACPERA could be enhanced. Specifically the statute does not 

provide enough guidance on the contours of the required cooperation and the timing of such cooperation in civil cases. A recent example is in the auto lights litigation that is pending before Judge 

Wu in the Central District of California. Recently in that case, the 

plaintiffs made a motion before the court to exclude the ACPERA 

applicant’s right to seek single damages in a case because the applicant did not cooperate in a timely fashion or in a robust manner 

with the plaintiffs in that action, and Judge Wu agreed with the 

plaintiffs. The timing of cooperation is particularly relevant if you 

think about it in terms of a statute of limitations. If a defendant, 

an ACPERA applicant, is to provide quality evidence and that evidence provides additional co-conspirators that could be brought into 

litigation or that should have charges brought against it as participants in the conspiracy but that information arrives after a statute 

of limitations has run, that information has no value for the private plaintiff. 

So we think that having appropriate explanations in the 

ACPERA statute as part of it, both in terms of what is expected 

of a leniency applicant in terms of its cooperation in a private case, 

as well as the timing of the cooperation, will not only assist the private litigants, but will also provide guidance to defendants in their 

process as they move through their Leniency Program and would 

likely want to take advantage of the single damages limitation that 

is being offered to them. 

A second point, while not part of ACPERA, is the Senate’s recent 

passing of the Whistleblower Act for reporting antitrust crimes, 

which will enhance the ability to secure evidence of antitrust violations. We are hopeful that this Act will receive approval of the full 

Congress. 

We do think, however, that the added provision of a financial reward for reporting should be reconsidered by the Senate as such 

a provision would motivate employees to step forward with information on criminal acts. 

Finally, given the tremendous success of the Department of Justice’s cartel enforcement, including recoupment of record fines exceeding well over $1 billion in each of the last two years alone, we 
20 

urge Congress to consider increased funding for the DOJ’s antitrust 

enforcement efforts. It is especially in difficult economic times 

when companies are looking for ways to increase profits, which 

may include engaging in unlawful conspiracies, and given the recent DOJ record fines, which are growing daily, increased and continued funding for the Department of Justice makes good economic 

dollars and sense. 

Thank you. 

[The prepared statement of Ms. Salzman appears as a submission for the record.] 

Chairman KLOBUCHAR. Thank you very much. 

Next, Mr. Hockett. 

STATEMENT OF CHRISTOPHER B. HOCKETT, CHAIR, SECTION 

ON ANTITRUST LAW, AMERICAN BAR ASSOCIATION, AND 

PARTNER, DAVIS POLK & WARDWELL, LLP, MENLO PARK, 

CALIFORNIA 

Mr. HOCKETT. Good afternoon, Chairman Klobuchar and Ranking Member Lee. I am Chris Hockett. I am a partner at Davis Polk 

and chair of the 8,000-member Section of Antitrust Law. My remarks today are given on behalf of the Antitrust Section, and I 

thank you for the honor of appearing before you. 

As we have heard from every witness so far—and I do not think 

there will be any change by the end of the day—there is no question that cartels hurt American consumers and the American economy by raising prices, stopping competition, reducing output, and 

reducing quality. And for decades, it has been a top priority of the 

Antitrust Division to prosecute cartel conduct. 

The commitment of the Division to this mission has been exemplary and unwavering over multiple administrations. Our Nation’s 

Criminal Antitrust Enforcement Program is truly a model of bipartisan or nonpartisan consistency. And as Chairman Klobuchar and 

Ranking Member Lee have observed, it has also been highly successful. 

The advent of the revised Leniency Program in the 1990s and 

Congress’ decision to increase penalties for criminal antitrust conduct have launched a new era of success in detecting and prosecuting large international cartels that inflict significant harm on 

the American public. 

As one former Division head once said, ‘‘Leniency programs are 

the greatest investigative tool ever designed to fight cartels.’’ 

Now, is the system working perfectly? No. There is always room 

for improvement. So what are the important challenges and what 

can we do about them? 

Well, I have made some remarks about that in my written testimony, but today I would like to briefly highlight two things. 

One, personnel cuts. Over the years, the returns on cartel enforcement efforts have been multiples of the Antitrust Division’s 

budget. You heard from Assistant Attorney General Baer 10 times 

each year, year over year. And we are currently in the midst of a 

boom in U.S. cartel enforcement with the auto parts investigation 

being the largest ever, and it is just one among many. 

However, this intense activity level coincides with other events 

that have resulted in a one-third decrease in the number of cartel 
21 

enforcers at the Division plus the implementation of a hiring 

freeze. It is perhaps too early to tell the effects of this head-count 

reduction, but given the importance of cartel enforcement to American consumers and the complexity of the job that needs to be done, 

the current situation presents a significant concern. 

The second thing is the internationalization of cartel enforcement. Antitrust law has been one of the United States’ most successful exports over the past 20 years, and that includes cartel enforcement. Other countries have seen the high fines and criminal 

sanctions associated with our enforcement efforts and have followed our lead. Fifty countries now have leniency programs, and 

we are encouraging other countries to adopt criminal laws to prevent antitrust violations, and they are. 

Now, that is in many ways a very good thing because it increases 

the chances of detection, it increases deterrence, but there are also 

some downsides. It adds complexity and requires the kind of coordination that Assistant Attorney General Baer mentioned they were 

engaged in: coordination, cooperation, engagement with counterparts around the world, among other things, to avoid the kind of 

double recovery problem that Senator Lee mentioned. 

The proliferation of these vigorous anti-cartel mechanisms 

around the world also creates another complexity, and that is, 

criminal sanctions are going to be enforced by jurisdictions whose 

notions of due process and fair treatment are different, quite a bit 

different from our own. And we strongly support the Division’s continued involvement to ensure transparent and fair investigative, 

administrative, and adjudicative procedures related to cartel enforcement, both in the U.S. and abroad. We at the Antitrust Section are committed to furthering those goals, but we are no substitute for the Antitrust Division, which is an active and important 

leader in international organizations such as the ICN and the 

OECD. 

So we urge the Antitrust Division to be supported in its efforts 

to stay engaged in those very, very important international dialogues for the sake of American consumers and American businesses doing business globally, because we do not want people to 

be thrown in jail for getting into a joint venture. 

[The prepared statement of Mr. Hockett appears as a submission 

for the record.] 

Chairman KLOBUCHAR. Very good. Thank you. 

Dr. Levenstein. 

STATEMENT OF MARGARET C. LEVENSTEIN, RESEARCH SCIENTIST, INSTITUTE FOR SOCIAL RESEARCH, ADJUNCT PROFESSOR OF BUSINESS ECONOMICS AND PUBLIC POLICY, 

ROSS SCHOOL OF BUSINESS, UNIVERSITY OF MICHIGAN, 

ANN ARBOR, MICHIGAN 

Dr. LEVENSTEIN. Thank you, Senator Klobuchar and Senator Lee, 

for inviting me to speak to you today. 

As we have said, cartels can and do have a significant negative 

impact on consumers and competition. My research with Valerie 

Suslow has shown that cartels do last, perhaps not forever, but on 

average seven to 10 years. Cartels have been found in a wide variety of industries, including ones that are technologically dynamic, 
22 

not just staid, staple goods industries, but things like computer 

chips and flat panel screens. Cartels affect consumers in industry, 

agriculture, financial services, and the public sector. 

While economists, which I am, being economists, differ on exact 

estimates of the impact of cartels on prices, it is clear that cartels 

can raise prices substantially. But cartels do not simply raise 

prices. To survive and protect their profits, cartels must prevent 

entry. They must create barriers to entry. 

Some of these barriers will not endure, but if you are a firm attempting to enter an industry and are denied access to technology, 

as happened to a firm in the graphite electrodes industry, or denied 

access to customers, as happened to someone who tried to go up 

against the sewing needle cartel, or faced with a targeted price 

war, as happened to a firm that was trying to sell steel pipes, then 

it will not matter to you that some other firm, but perhaps with 

deeper pockets, manages to wear the cartel down years later. Your 

entrepreneurship, the potential that your dynamic activity could 

contribute to our economy, is stymied. 

The Antitrust Division has had a strong and consistent anti-cartel enforcement policy for the past 20 years. But cartels continue 

to form, and we see recidivism among convicted cartel members. 

This suggests that existing penalties, while they have increased, 

are still insufficient. Firms still treat these fines as the cost of 

doing business. We can and should increase fines, and corporate 

fines are critical to aligning shareholders’ incentives with consumer 

welfare. But fines large enough to deter collusion are probably 

large enough to bankrupt firms given the uncertainty in detection 

and the high profits that collusion dangles in front of firms. We do 

not want to bankrupt firms. That simply undermines rather than 

strengthens competition. 

So we need smarter, not simply larger, penalties. Jail terms, embraced by the Division, provide a more effective—a very effective, 

I think, deterrent to individual executives and to managers. 

Two other potential remedies I think should be considered. 

First of all, I think we should consider banning executives who 

have been convicted of felonies against consumers in their industry. 

There are not an enormous number of tools to do that, but I do not 

think it is impossible. There are some ways that we could imagine 

doing that. 

I also think we need to consider increased scrutiny of mergers of 

former cartel members. We have seen in a couple instances cartels 

broken up, only to see consolidation in the industry afterwards, 

which defeats the purpose. 

Finally, you might consider increased private litigation as a way 

to increase deterrence, but I think it is important to remember that 

private action by itself rarely discovers cartels. Civil penalties are 

important for fairness, and the DOJ, with its outreach to consumers, can help consumers to detect and prevent collusion, and so 

bring private resources, sort of a Consumer Neighborhood Watch, 

if you like, to bear. So private action can complement federal action, but it is not a substitute for federal action. 

Amnesty has been very effective at breaking up cartels, particularly international cartels that had long considered themselves immune. But amnesty cases still require resources, and unless there 
23 

are effective resources for—unless prosecutorial resources are expanded or at least maintained, amnesty cases crowd out other investigations. Colluding firms hide what they are doing and develop 

ever more sophisticated ways of operating and hiding these things, 

and so it takes increasing resources on the part of investigators to 

discover collusion. 

Investigative resources can pay off. Newly developed statistical 

screening techniques discovered collusion in LIBOR three years before the Wall Street Journal reported on it. Novel techniques in 

analyzing Web-based communication could be used to discover invitations to collude, such as those that were employed in the U-Haul 

case. 

Intra-industry swaps, which have legitimate business purposes 

but which are also used regularly to meet cartel quotas, could be 

investigated. 

The Division and FTC should also identify highly concentrated 

market niches. Most cartels operate in extremely concentrated 

markets. In one study, Professor Suslow and I found that over twothirds of cartels were in markets with a four-firm concentration 

ratio of over 75 percent, and these were often global concentration 

ratios. With appropriate resources, the DOJ and the FTC can identify markets that are at risk. This is not a simple task, as market 

definition is key. 

For example, there are over 5,600 commercial banks in the 

United States, and for decades most economists thought of U.S. 

banking as being overly fragmented, not too concentrated. But the 

number of participants in LIBOR is much smaller. The number of 

participants in foreign exchange markets, which were also subject 

to collusion we now know, is smaller still. And I can count on one 

hand the number underwriting municipal bonds. Thus, Professor 

Suslow and I called a recent paper ‘‘Constant Vigilance.’’ 

While we will never stop all price fixing—and we probably would 

not want to because that would be overdeterrence—there are both 

investigative tools and sanctions that, with appropriate policies and 

resources, we can apply to reduce the impact of anticompetitive behavior on consumers and competition. 

Thank you. 

[The prepared statement of Dr. Levenstein appears as a submission for the record.] 

Chairman KLOBUCHAR. Thank you very much. 

Mr. Rosman. 

STATEMENT OF MARK ROSMAN, PARTNER, WILSON SONSINI 

GOODRICH & ROSATI, WASHINGTON, DC 

Mr. ROSMAN. Good afternoon and thank you, Chairman 

Klobuchar and Senator Lee. My name is Mark Rosman, and I am 

a partner at Wilson Sonsini Goodrich & Rosati in the Antitrust 

Group here in Washington, D.C. Before joining Wilson Sonsini, I 

was a trial attorney and prosecutor for the U.S. Department of Justice Antitrust Division for 2 decades, and I work both in the field 

office as well as at the headquarters. It is my distinct honor to 

have worked for the DOJ, and it is a distinct honor to be here 

today to testify with you all. 
24 

Before leaving the DOJ, I was the lead prosecutor on the airlines 

investigation, which you heard Assistant Attorney General Baer allude to, bringing in $1.8 billion in fines. It was certainly a proud 

accomplishment of mine while I was at the Department. And I 

brought in this little piggy bank that I kept on my desk when I was 

at the Department. It is from China, and one of the prosecutors in 

my old office brought this back for me, and I kept it on my desk 

as a little good luck charm and also a bit of a motivator to bring 

in the big fines. And I have this on my desk today, but it has a 

little bit of a different meaning to me today. 

Number one, when I look at it, I wonder: Could I ever have really put $1.8 billion in this little piggy bank? 

But, also, I wonder, to echo Dr. Levenstein’s comments, whether 

going for bigger fines was always the best thing and the right thing 

that the Department should be doing as opposed to looking at some 

other alternatives that the Senators here today have raised and 

asked about, going for smarter fines, perhaps. And I am going to 

talk a little bit more about that in my comments. 

In my written comments I outline four areas of concern, and I 

do not think anybody can really question the success of the Antitrust Division, and these comments are made in the vein of improving and building on that success. 

One of the areas of concern is a discussion of refocusing and rebalancing, if you will, the Division’s focus on these blockbusters, I 

will call them, cartels, international cartels. And I think we heard 

Senator Blumenthal ask a good question about, you know, whether 

perhaps—or at least raise a concern whether the emphasis and the 

focus has shifted, the pendulum has swung to the other end of the 

spectrum such that there may be a lack of focus on domestic and 

regional price-fixing violations. 

A second concern I raised is about the application of the guidelines to lower-level employees and mid-level employees, and whether the Antitrust Division should consider using some guidelines applications such as offering individuals who are involved in these offenses a minimal or minor role adjustment in order to encourage 

cooperation, because juries recently have acquitted a number of 

these individuals that have been brought to trial in cases, and 

there have been a lot of resources spent prosecuting lower-level individuals. 

A third concern goes to your point, Senator Lee, about the point 

that you have raised about double counting and whether there are 

other ways the Division could approach sentencing and fines for 

corporations. And, in particular, there is a practice that is used 

now and has been used for quite some time of a bump, it is called, 

if you will, for indirect commerce. And this is significantly raising 

the fines both in the airlines cases that I worked on, but also continuing today in the auto parts cases, and whether that commerce—whether the Division needs to go after that commerce, 

whether it is just serving a deterrent effect, and whether it may 

be best gone after by other authorities that are now actively investigating these types of violations. 

And then, finally, I raise some thoughts in my written remarks 

about concerns about deterrence generally and specifically as to individuals who are involved, and I think there has always been a 
25 

push, and certainly when I was at the DOJ, of raising the bar, increasing the amount of time individuals go to jail, and certainly I 

would agree with the Assistant Attorney General’s remarks that 

fear of going to jail is a deterrent, but I think one thing that I 

would highlight is also there has to be a fear of detection, a fear 

of getting caught. And I think the professor alluded to that as well. 

And so, you know, if you are not really afraid of getting caught, 

having longer and higher jail sentences may not be the best deterrent. 

With that, I see my time is up, and I am happy to answer any 

questions that you may have. 

[The prepared statement of Mr. Rosman appears as a submission 

for the record.] 

Chairman KLOBUCHAR. Thank you very much. We are going to 

get started. Senator Lee is going to go first this time. Thanks. 

Senator LEE. I want to talk a little bit more about the bump, Mr. 

Rosman. I suspect that this happens a fair amount because they 

want to obtain a larger fine. They have got their own piggy bank 

on their desk. I thought that was interesting, by the way. That was 

the first thought I had, was how you could possibly fit over $1 billion in such a thing. My second thought was that that piggy bank 

sort of resembles a cat. I do not know quite what to do with that, 

but I do not know, maybe they have a different variety of pig there. 

But it seems to me that this could result in double counting and 

double penalizing the same conduct, the same transaction. How do 

they go about it? And, more importantly, what can we do to help 

discourage improper bumping? 

Mr. ROSMAN. Yes, so I will say that when I was at the Division— 

and I am sure today it is the case as well—the leadership and the 

attorneys were mindful of this issue, and so there was a concern, 

and there were discussions and ongoing discussions today, as we 

have heard, with their counterparts from other countries to try to 

take into account that this is a real issue. 

And so, for example, in the airlines cases, when you looked at indirect commerce, it was a question of inbound, what was called ‘‘inbound commerce’’—in other words, for air cargo or passenger commerce, commerce that was literally on flights coming into the 

United States. And so that was part of the bump. But the DOJ did 

not take a dollar-for-dollar measure of that commerce. There was 

actually an adjustment that was made based on the import-export 

ratio. So the DOJ did try to take into account and not actually take 

all of that commerce. 

What I am questioning here today is: Is that enough? And given 

the increasing levels of enforcement worldwide, do they really need 

to go after that? And are there, in fact, other ways to incentivize 

companies, such as through compliance program credit and perhaps other penalties, such as increased corporate governance, that 

would achieve the same goals that the Division has rather than 

just simply trying to ratchet up the fines. 

Senator LEE. I do not necessarily hear you saying that there is 

a legitimate purpose for the practice. Do you think there is? Should 

it be abandoned altogether? 

Mr. ROSMAN. Well, I would say that, you know, it depends on the 

facts. As you pointed out earlier, these are complex kind of factual 
26 

considerations, even getting down to the level of, you know, where 

is the product that is in question invoiced? You know, where is the 

invoice sent to? Is it sent to the United States? Is it sent to some 

other country to try to determine where the sale takes place? 

So it is a very fact-driven type of analysis, and in some cases, if 

there is a direct—you know, you could say that even in an indirect 

sale there is some effect on the United States. I am not here to say 

that that is impossible. But I think that given that the fines are 

reaching very high levels, even just taking direct commerce alone, 

it is a fair question to ask: Do you need this indirect commerce? 

Does it really serve a deterrence purpose? Other countries going 

after that commerce that takes place in their country, is that 

enough of a deterrent without having to account for it, even if you 

agree that it might have had some indirect effect on the U.S.? I 

think that is a valid question. 

Senator LEE. Thank you. That is helpful. 

Dr. Levenstein, let us talk about fines and jail time. You talk in 

your testimony about the fact that in some circumstances fines 

might not work and, in fact, might be even counterproductive. You 

might reach a point at which they become counterproductive. Talk 

to me a little bit about why reliance on prison time and/or debarment might be better. 

Dr. LEVENSTEIN. I think the way that economists think about 

this is that, in order to deter collusion, you need to have the expected payoff to collusion be negative. You do not want it to pay. 

And you can have it not pay by having high fines. You can have 

it not pay by having it likely that you will have to pay those fines, 

so increasing the investigative activity, the likelihood of detection 

will also increase deterrence. 

There are other things, though. There are individuals who may 

not have to pay the fines or may be compensated in other remunerative ways. When you think about going to jail, you might actually get managers who are not willing to engage in collusion if you 

use prison sentences. 

I think there are other things that—so I think that—well, there 

are two things. One is that prison sentences are effective deterrents if people believe that they are likely to face them. So, again, 

it is always combined with discovery. 

I think that we want to think about things like barring people 

from an industry because there are clearly certain industries and 

certain firms that have been engaged in this activity over and over 

again, and we even have the suggestion that there are firms that 

say, okay, you take one for the team and then we will take care 

of you after that. And people have to understand that—this is not 

an acceptable way to compete, and that you cannot participate in 

the market if you do this. 

Senator LEE. Yes, that, and I suppose are people who, once they 

have learned they can earn a living in a certain way, they would 

like to continue earning a living that way, especially if it is very 

lucrative. 

Dr. LEVENSTEIN. Well, when people have been successful at doing 

this and the fines are not—the fines are not enough to make it not 

profitable. That is the bottom line. And if you know that it is still 

profitable, then you are going to keep doing it. 
27 

Senator LEE. Okay. Mr. Hockett, you expressed some concerns 

regarding fair treatment and due process for defendants, especially 

in foreign jurisdictions with which the U.S. cooperates in investigations. What do you think we could do to help alleviate those concerns within the U.S. in that regard? 

Mr. HOCKETT. You know, a couple of ways. I think, number one, 

set a good example by continuing to provide transparency, fairness, 

and due process in our own system when we are addressing conduct by people who live outside the United States. 

Second, I think continuing to engage in these international fora, 

which is something that may seem sort of extra and optional to 

people who are not involved in it, but it is really the only way that 

the U.S. Government can try to shape the norms of what is considered a hard-core antitrust violation worthy of jail time or huge 

fines and how people are treated in those systems. It is a big challenge because unlike, say, merger enforcement, which bolts onto a 

country’s regime probably they did not have anything like it until 

they decided to adopt it, a criminal antitrust enforcement regime 

overlays the country’s native criminal justice system, which, as I 

indicated before, might be dramatically different from what we are 

used to and the guarantees of due process and procedural fairness 

that we are used to. 

So what we do not want is a situation in which American businesses and citizens doing business abroad are confronted with 

claims that seem quite exotic as far as hard-core antitrust violations and then are treated to foreign justice systems that are unfair. 

The only way to do that is through the soft influence that we 

have through these international fora, and in which the DOJ has 

played quite an active role, but they are increasingly constrained 

in doing that by the lack of funds. 

Senator LEE. Thank you. 

Thank you, Madam Chair. 

Chairman KLOBUCHAR. Very good. Thank you. 

I will start with you, Ms. Salzman. You represent victims of price 

fixing, the consumers, and often companies that have paid higher 

prices because of a crime and criminal cartels. What is the magnitude of the harm? And what have you seen that it means for 

their bottom line and their ability to expand their businesses? 

Ms. SALZMAN. I think that that is a very good question, but it 

varies from case to case, and depending on the particular conspiracy, each conspiracy takes on its own characteristics in terms 

of the amount of overcharge. 

I cited a study in my written testimony, and, you know, depending on how you look at the averages, you are looking at probably, 

at the low end, around 25 percent of an overcharge. And what this 

does to consumers is consumers do not know about these antitrust 

conspiracies because, until it is brought to light either by the government or private enforcement, they just continue to overpay 

higher prices for goods. And for businesses that are paying for 

overpriced goods from purchases from wrongdoers, they are passing 

it on to consumers who are ultimately injured. But also for the 

businesses what it does is it creates higher costs for them in terms 

of inputs for their businesses, and that in and of itself is a problem 
28 

for their business model and what else they could do with those 

funds in terms of competing in the market, research and development, other ways that they could spend that money. 

I was wondering if I could make one comment to the bumping 

question. 

Chairman KLOBUCHAR. Sure. 

Ms. SALZMAN. I just have a slightly different perspective on this 

bumping issue. The way that I see it—and I am thinking in particular in the auto parts litigation, where there was an imputed 

amount in the fine, it had to do with goods that were manufactured 

abroad, but put into a product that ultimately ended up in the 

United States. And to me that is commerce that affects our consumers here in the U.S. And if you violate the antitrust laws and 

you are being brought to justice for that, you should be held accountable for those transactions. 

Chairman KLOBUCHAR. We talked earlier about the lawyer power 

in the Antitrust Division and across the board, including with the 

FBI, with their agents. How do you think this will negatively affect 

consumers if we see this continued drawdown of people working in 

this complex area? 

Ms. SALZMAN. I think, as I said in my remarks, that I do think 

funding the Department of Justice so that it has adequate staffing 

and funds to continue their investigation is imperative for our 

economy. In bad economic times, companies look for ways to make 

money, and unfortunately some of the companies look to conspiring 

with their competitors, which results in higher prices for small 

businesses and consumers. So I think it is imperative that the Department of Justice continue to get funding and increased funding. 

Chairman KLOBUCHAR. And if they do not bring a case for whatever reason, does that affect your decision about what you do? 

Ms. SALZMAN. It does not always affect our decision. There are 

times when we are given information on a conspiracy and we try 

to investigate, but without the power of subpoena that the Department of Justice has, it is very difficult to get the necessary early 

information and evidence that would be required to sustain a motion to dismiss a complaint in court. 

Chairman KLOBUCHAR. Very good. Thank you. 

Mr. Hockett, Senator Lee asked you about the international aspect of this, and just stepping back from—I know you have these 

concerns on the due process issues and other things. Just how has 

it changed over the years? I would just think more and more this 

has become an international issue, so there is a reason to pursue 

it beyond our—I do not think these crooks care about the State borders or country borders, and look at this as an international issue, 

and isn’t there an argument to actually have this be more of an 

issue that is raised in whether it is trade negotiations or other 

things without other countries? 

Mr. HOCKETT. Yes, it is certainly a global issue. These cartels 

that have come to light, largely through the Leniency Program, 

have operated across international borders. They have hurt not 

only U.S. consumers but consumers all around the world. And as 

I have indicated, the regimes designed to enforce against cartel 

conduct have sprouted up all over the world with our encouragement. That is what makes it so important for our enforcers to work 
29 

side by side with theirs, not simply to promote fairness and avoid 

double recoveries, but also to coordinate the enforcement efforts 

themselves, which require simultaneous seizures of information, 

dawn raids, sharing of information consistent with confidentiality 

requirements, so that they can act as effective law enforcement 

agents and prosecutors. 

Chairman KLOBUCHAR. Thank you. 

Dr. Levenstein, understanding that more than just economic data 

is needed to prove price fixing, some experts have suggested that 

the DOJ should use economic screening tools to monitor industries, 

particularly those that are highly concentrated, as a way of detecting potential cartel activity. For example, a number of foreign jurisdictions use economic screens, and screens are widely attributed to 

discovering the LIBOR conspiracy. 

What is your view on the use of economic screens to detect cartels? 

Dr. LEVENSTEIN. Well, I think statistical screens—— 

Chairman KLOBUCHAR. Would you explain it to everyone here 

what that means? 

Dr. LEVENSTEIN. A statistical screen is simply a way of looking 

at the prices that are supposedly set independently by all of the 

participants in a market to see whether or not it is even within the 

realm of plausibility that they were set independently without 

working together. And it was clear from the analysis of the LIBOR 

case that the probability that these prices—that these LIBOR rates 

had been set independently on a daily basis over many, many years 

and somehow ended up the way that they did was not within the 

realm of possibility. And they use—I mean, it is not just are they 

the same prices, but they actually look at the matching of the digits in the price to determine these things in that particular case. 

Screens have also been used in some gas price-fixing cases I believe the FTC has looked at. 

They have also been used, say, in the school milk auctions. They 

have been shown that you can use those. That was done ex post, 

not to discover the cartel, but they have been shown to be quite effective in distinguishing, particularly when you are talking about 

auctions, where you have a small number of bidders, when you 

have auctions where the bids become public, it is actually—it is 

very hard for the customer to protect itself because we do want 

transparency from our local governments, but it makes it very easy 

for these firms to do this, and it is a very useful technique in getting at it. 

Chairman KLOBUCHAR. And critics have said that there is sometimes a risk of a false positive. How do you respond to that? 

Dr. LEVENSTEIN. You need good investigative techniques. You 

need good statisticians. I do not think anybody is saying, oh, just 

because they charge the same price, that means it is collusion. But 

the techniques are actually quite robust. 

Chairman KLOBUCHAR. Okay. Thank you very much. 

Mr. Rosman, just one last question here. Do you agree that private enforcement and private follow-on suits are an important component to antitrust law and the benefit of consumers? And are 

there barriers now for victims to get to court? 
30 

Mr. ROSMAN. I do agree that private enforcement is an important 

part of the mix of deterrence, and as was referred to earlier, treble 

damages are a big component of that. So I think it is important, 

yes. 

Are there barriers now? I am not sure there are significant barriers. Ms. Salzman might disagree with me about that. I think 

that, you know, you certainly see whenever there is an investigation brought by the DOJ you can almost, you know, bet—you could 

bet that there are going to be class action suits filed right on the 

heels of whatever case—it does not even have to be a case, frankly. 

It can be a search warrant, a headline in the news, and these cases 

are going to be filed. 

And there are now, you know, many more cases where plaintiffs 

are choosing to opt out, such as, I believe, Best Buy was one of 

those cases where they believe they have their own case for damages; they can opt out of the class action. 

So I think there is a robust private enforcement that is going on 

out there. Perhaps there could be some fine tuning to it, but I 

think that plaintiffs do have a strong voice out there right now. 

Chairman KLOBUCHAR. All right. Do you have any follow-ups? 

[No response.] 

Chairman KLOBUCHAR. Okay. Very good. Well, I wanted to thank 

all of you. I think this was a robust hearing, to use Mr. Rosman’s 

word there at the end, and I know that there were some ideas 

tossed out there for changes to the law, which we appreciate. And 

we really appreciate everyone’s time, and thank you for all of your 

efforts in this very, very important area. 

We will leave the record open for a week—is that enough time? 

Okay—for colleagues to put any questions on the record or for ourselves, and we just want to thank you all for taking time out of 

your day today and visiting with us, and we learned a lot. So thank 

you for that, and the hearing is adjourned. 

[Whereupon, at 4:31 p.m., the Subcommittee was adjourned.] 
(31) 

A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
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PREPARED STATEMENT OF WILLIAM J. BAER, ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION; AND RONALD T. HOSKO, ASSISTANT DIRECTOR, CRIMINAL INVESTIGATIVE DIVISION, FEDERAL BUREAU OF INVESTIGATION
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PREPARED STATEMENT OF HOLLIS SALZMAN, PARTNER AND CO-CHAIR, ANTITRUST

AND TRADE REGULATION GROUP, ROBINS, KAPLAN, MILLER & CIRESI, L.L.P. 
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45 
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PREPARED STATEMENT OF CHRISTOPHER B. HOCKETT, CHAIR, SECTION ON ANTITRUST

LAW, AMERICAN BAR ASSOCIATION, AND PARTNER, DAVIS POLK & WARDWELL, 

L.L.P., MENLO PARK, CALIFORNIA
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PREPARED STATEMENT OF MARGARET C. LEVENSTEIN, RESEARCH SCIENTIST, INSTITUTE FOR SOCIAL RESEARCH, ADJUNCT PROFESSOR OF BUSINESS ECONOMICS AND

PUBLIC POLICY, ROSS SCHOOL OF BUSINESS, UNIVERSITY OF MICHIGAN, ANN

ARBOR, MICHIGAN
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PREPARED STATEMENT OF MARK ROSMAN, PARTNER, WILSON SONSINI GOODRICH & 

ROSATI, WASHINGTON, DC 
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QUESTIONS SUBMITTED BY SENATOR AMY KLOBUCHAR FOR ASSISTANT ATTORNEY

GENERAL WILLIAM BAER
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QUESTIONS SUBMITTED BY SENATOR AMY KLOBUCHAR FOR RONALD HOSKO
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QUESTIONS SUBMITTED BY SENATOR AMY KLOBUCHAR FOR MARGARET LEVENSTEIN
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QUESTIONS SUBMITTED BY SENATOR AMY KLOBUCHAR FOR MARK ROSMAN
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QUESTIONS SUBMITTED BY SENATOR AMY KLOBUCHAR FOR HOLLIS SALZMAN
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RESPONSES OF ASSISTANT ATTORNEY GENERAL WILLIAM BAER TO QUESTIONS

SUBMITTED BY SENATOR KLOBUCHAR
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RESPONSES OF RONALD T. HOSKO TO QUESTIONS SUBMITTED BY SENATOR KLOBUCHAR
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RESPONSES OF MARGARET LEVENSTEIN TO QUESTIONS SUBMITTED BY SENATOR

KLOBUCHAR
92 

RESPONSES OF MARK ROSMAN TO QUESTIONS SUBMITTED BY SENATOR KLOBUCHAR
93 
94 
95 
96 
97 
98 

RESPONSES OF HOLLIS SALZMAN TO QUESTIONS SUBMITTED BY SENATOR KLOBUCHAR
99 
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104 

LETTER TO HON. ERIC HOLDER, ATTORNEY GENERAL, U.S. DEPARTMENT OF JUSTICE
105 

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