U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

90–459 DTP 2003

S. HRG. 108–190

CONFIRMATION HEARING ON THE NOMINATION

OF R. HEWITT PATE TO BE ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION, DEPARTMENT OF JUSTICE

HEARING

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

MAY 21, 2003

Serial No. J–108–13

Printed for the use of the Committee on the Judiciary

(

(II)

COMMITTEE ON THE JUDICIARY 

ORRIN G. HATCH, Utah, Chairman 

CHARLES E. GRASSLEY, Iowa 

ARLEN SPECTER, Pennsylvania 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

LARRY E. CRAIG, Idaho 

SAXBY CHAMBLISS, Georgia 

JOHN CORNYN, Texas 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERBERT KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

JOHN EDWARDS, North Carolina 

BRUCE ARTIM, Chief Counsel and Staff Director 

BRUCE A. COHEN, Democratic Chief Counsel and Staff Director 

(III)

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page

Craig, Hon. Larry E., a U.S. Senator from the State of Iowa .............................. 32

DeWine, Hon. Mike, a U.S. Senator from the State of Ohio ................................ 44

prepared statement .......................................................................................... 132

Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah ............................ 1

prepared statement .......................................................................................... 134

Kohl, Hon. Herb, a U.S. Senator from the State of Wisconsin ............................ 3

prepared statement .......................................................................................... 136

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 31

prepared statement .......................................................................................... 138

Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ................. 31

PRESENTER 

Allen, Hon. George, a U.S. Senator from the State of Virginia presenting 

R. Hewitt Pate, Nominee to be Assistant Attorney General, Antitrust Division, Department of Justice ................................................................................. 2

STATEMENT OF THE NOMINEE 

Pate, R. Hewitt, Nominee to be Assistant Attorney General, Antitrust Division, Department of Justice ................................................................................. 5

Questionnaire .................................................................................................... 7

QUESTIONS AND ANSWERS 

Responses of R. Hewitt Pate to questions submitted by Senator DeWine .......... 50

Responses of R. Hewitt Pate to questions submitted by Senator Leahy ............ 54

Responses of R. Hewitt Pate to questions submitted by Senator Kennedy ........ 59

Responses of R. Hewitt Pate to questions submitted by Senator Kohl ............... 61

SUBMISSIONS FOR THE RECORD 

Singh, Seema, Legal Counsel, Office of Hon. Arlen Specter, May 20, 2003, 

memorandum ........................................................................................................ 139

Specter, Hon. Arlen: 

letter to Hon. Mike DeWine, April 21, 2003 .................................................. 141

letter to R. Hewitte Pate, Esq., May 13, 2003 ............................................... 143

Warner, Hon. John, a U.S. Senator from the State of Virginia, statement 

of support for R. Hewitt Pate, Nominee to be Assistant Attorney General, 

Antitrust Division, Department of Justice ......................................................... 144

(1)

NOMINATION OF R. HEWITT PATE, OF VIRGINIA, TO BE ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION, DEPARTMENT 

OF JUSTICE 

WEDNESDAY, MAY 21, 2003

UNITED STATES SENATE, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:19 a.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Orrin G. Hatch, 

Chairman of the Committee, presiding. 

Present: Senators Hatch, Specter, DeWine, Craig, Leahy, and 

Kohl. 

OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. 

SENATOR FROM THE STATE OF UTAH 

Chairman HATCH. We’re happy to welcome you all out here to 

this nomination hearing this morning. We are honored to have Senator Allen here. It is our pleasure to consider the nomination of 

Hugh Pate to be Assistant Attorney General for the Antitrust Division at the United States Department of Justice. 

I would like to start by welcoming Mr. Pate to the Committee 

and congratulating him for being nominated by President Bush. 

Your impressive background and past government service make me 

very confident that you will be a great asset to the Department of 

Justice, this Committee, and, of course, the people of our country. 

Over the last decade, the position of the Assistant Attorney General for the Antitrust Division has grown in very great importance. 

The rapid transformation of our country’s economy, particularly in 

new technologies and international markets, has raised public attention and policy focus on a variety of important antitrust issues. 

The Assistant Attorney General in charge of the Antitrust Division 

plays a crucial role in formulating competition policy and enforcing 

the existing antitrust laws to make sure that our free market economy survives efficiently and serves the public. 

Now, I think I will reserve the rest of my remarks until later, 

and if could—can you reserve yours until we let Senator Allen say 

his remarks? And let me just mention, Senator Warner is managing the DOD authorization bill on the floor, and he particularly 

caught me and said, Mr. Pate, he wanted to be here and asked me 

if I would put his very complimentary statement into the record because he fully supports you and believes that you will make a great 

Antitrust Division chief. 

2

So if we can do that without objection, and if you will forgive 

Senator Warner, there is not much he can do. He has to be there. 

So we are going to count on Senator Allen doing the job here, and 

we will turn to him at this time. 

PRESENTATION OF R. HEWITT PATE, NOMINEE TO BE ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION, U.S. DEPARTMENT OF JUSTICE, BY HON. GEORGE ALLEN, A U.S. 

SENATOR FROM THE STATE OF VIRGINIA 

Senator ALLEN. Thank you, Mr. Chairman. And I have Senator 

Warner’s statement here that I would like to have put in the record 

for my colleague. 

Chairman HATCH. Without objection. 

Senator ALLEN. Mr. Chairman, Senator Kohl, members of the 

Committee, thank you for this hearing on Hugh Pate. I should say 

Mr. R. Hewitt Pate, a fellow Virginian, to be Assistant Attorney 

General of the Antitrust Division of the U.S. Department of Justice. He is joined here by his wife, Lindsey, and his daughters, 

Lizzie and Ellen. And I know they are very proud of their father, 

and we are proud to have you all here with us for this—

Chairman HATCH. We are happy to have you here, too, and, 

Lizzie and Ellen, you are beautiful young women. And you blush 

beautifully, too. 

[Laughter.] 

Senator ALLEN. As you said, Mr. Chairman, the enforcement of 

the antitrust laws is very important and essential for the protection of competition in our free market economy, and I have known 

Mr. Pate for many years, and I can confidently say without any 

reservation whatsoever that he is very well qualified, and I am confident that he will be effective, he will handle the job and leadership positions and decisions with dignity and impartiality in enforcing the law. 

I, when I was Governor of Virginia, appointed Mr. Pate to the 

Virginia Commission on Higher Education and to the Governor’s 

Commission on Self–Determination and Federalism. You may see 

from his record that he did get his undergraduate degree from the 

University of North Carolina. I got to know Hew—that is what we 

call him, ‘‘Hew’’ Pate—when he was at law school at the University 

of Virginia in Charlottesville and I was a member of the House of 

Delegates at that time representing the Charlottesville area. And 

Mr. Pate at the University of Virginia at the law school graduated 

first in his class in 1987 and then went on to clerk for Fourth Circuit Judge J. Harvie Wilkinson. In addition, Mr. Pate clerked for 

Justice Lewis Powell and Justice Anthony Kennedy on the Supreme Court of the United States. 

After these impressive clerkships, Mr. Pate went on to practice 

antitrust law for 10 years at Hunton and Williams, which is a 

highly respected and one of the largest law firms in the Commonwealth of Virginia. It is an international firm, actually. 

He also taught competition law at the University of Virginia Law 

School, and since 2001, Mr. Pate has worked in the Department of 

Justice’s Antitrust Division and has been the Acting Assistant Attorney General for Antitrust since November of 2002. 

3

In fact, there was one case that Senator Warner and I had one 

position and the Justice Department and Antitrust had another position. And Mr. Pate came and briefed us on it. Applying the law 

and the facts of that situation, he said, ‘‘Here’s why we come down 

this way,’’ contrary to the way that Senator Warner and I were advocating. After that meeting, we felt that that issue had been given 

fair consideration. He applied the law logically and understandably, and there was no more grousing appeals for reconsideration 

and all the rest. 

So when you have a friend who has to tell two other friends that 

applying the law in the question of a judgment call contrary to 

what you desire, it is not an easy task to do. And that is why I 

am confident that he will impartially adhere to the laws, provide 

for proper competition in our economy, and I ask you, Mr. Chairman and members of the Committee, to move as swiftly as possible 

for the confirmation of R. Hewitt Pate, because I know he is a man 

of integrity, of capability, and with the qualifications we would 

want to be heading up this important Division. 

And I thank you, Mr. Chairman and members of the Committee, 

for having this hearing. 

Chairman HATCH. Well, thank you, Senator Allen. I worry about 

a nominee, though, that doesn’t hew the line for two powerful Senators from Virginia like the two of you. 

[Laughter.] 

Senator ALLEN. Well, I am still for him, and I respected that he 

argued the case very well and in a logical way in applying the law. 

Chairman HATCH. I appreciate that, and that is what we want. 

We want people who are going to do what is right. 

Senator ALLEN. And I will present to you, to the clerk, Senator 

Warner’s testimony or his introduction, unless you—do you already 

have it, Mr. Chairman? 

Chairman HATCH. We do, and thank you. 

Senator ALLEN. You do? Good. 

Chairman HATCH. You can leave it there, and we will make sure 

it is in the record. 

Senator ALLEN. I will leave it here. 

Chairman HATCH. Thanks, Senator Allen. We know you are 

busy, and we will excuse you. We know how busy you really are. 

Senator ALLEN. We know how busy you are as well, Mr. Chairman, and thank you. 

Chairman HATCH. Thank you so much. We appreciate it. 

Well, I will finish my opening remarks, and I will turn to the 

Ranking Member of the Antitrust Subcommittee, Senator Kohl. 

STATEMENT OF HON. HERB KOHL, A U.S. SENATOR FROM THE 

STATE OF WISCONSIN 

Senator KOHL. Thank you so much, Mr. Chairman. We meet 

today to consider the nomination of Hew Pate to be Assistant Attorney General for Antitrust. The mission of the Justice Department’s Antitrust Division has never been more important. In our 

challenging economic times, we depend on the dynamism and competition to provide the economic growth and jobs necessary to propel our economy forward. Only aggressive enforcement of our Nation’s antitrust laws will ensure that competition flourishes and 

4

consumers obtain the highest quality products and services at the 

lowest possible prices. 

If confirmed, Mr. Pate will assume the leadership of the Antitrust Division at a very crucial time. One example is the ferment 

in the media sector. In the next few weeks, the Federal Communications Commission is expected to adopt new rules that will fundamentally relax the limits on media ownership that have existed 

for decades. This ruling is likely to unleash a wave of media consolidation and media acquisitions that have the potential to reshape the way Americans receive their news, information, and entertainment programming. Only by maintaining diversity in media 

ownership can we ensure the diverse marketplace of ideas so essential to our democracy. The Antitrust Division will stand as our last 

line of defense against excessive media concentration. 

Our work in the last year has also uncovered serious allegations 

of anti-competitive practices in the ways hospitals buy the medical 

devices essential to delivering quality health care to millions of 

Americans. Group purchasing organizations have been accused of 

adopting exclusionary contract practices which benefit dominant 

suppliers to the detriment of innovation and patients. 

While the Federal Trade Commission has taken the lead in investigating this industry, the Antitrust Division’s cooperation in revising the joint FTC–DOJ health care guidelines will be essential 

to restoring competition to this vital sector. 

Mr. Pate, the performance of the Antitrust Division over the last 

2 years under your predecessor’s leadership does concern me. From 

the defects in the Microsoft settlement, which many believe was 

unnecessarily weak and riddled with loopholes, to the general decline in the Division’s enforcement activities, we are left to wonder 

if the Division was truly committed to its crucial mission of protecting competition. 

It is essential that the next head of the Antitrust Division be 

committed to restoring the proud tradition of vigorous antitrust enforcement to the Justice Department. Your impressive record of 

achievement and your fine reputation demonstrate that you are 

well qualified to restore our confidence and lead the Antitrust Division. I have been impressed with your dedication since you have 

been the acting head of this Division. 

Mr. Pate, the position of Assistant Attorney General for Antitrust 

carries with it a special burden and a special responsibility. The 

companies over whom the Antitrust Division has jurisdiction have 

ample resources to hire skilled and talented counsel to represent 

their best interests. But no one represents the interest of the 

American consumer other than the Antitrust Division. Millions of 

consumers will depend on your efforts and your judgment. It is my 

sincere hope and full expectation that you will meet this challenge 

when you are confirmed. 

Thank you very much, Mr. Chairman. 

Chairman HATCH. Well, thank you, Senator Kohl. 

Mr. Pate, we will just swear you in at this point, if we can. Do 

you solemnly swear to tell the truth, the whole truth, and nothing 

but the truth, so help you God? 

Mr. PATE. I do. 

5

Chairman HATCH. Thank you, sir. We would be happy to take 

any statement you would care to give at this time. 

STATEMENT OF R. HEWITT PATE, NOMINEE TO BE ASSISTANT 

ATTORNEY GENERAL, ANTITRUST DIVISION, U.S. DEPARTMENT OF JUSTICE 

Mr. PATE. Thank you, Senator. I do have a brief opening statement. 

It is a great honor to me to have been nominated by the President to serve in the Justice Department as Assistant Attorney General for Antitrust, and I thank you, Mr. Chairman, and the Committee for the opportunity to appear today. I would like to thank 

Senator Allen and also Senator Warner for their support and for 

the warm introductions that they’ve given. 

Senator Allen mentioned my family. I would like to recognize the 

support that my wife, Lindsey, and my daughters, Ellen and Lizzie, 

provide me, which is valuable beyond measure, and I thank them 

for that. 

Chairman HATCH. We are happy to have them with you here 

today. 

Mr. PATE. I have with me today also my mentor as a young lawyer, Tom Slater, from my former firm, who taught me a great deal 

about antitrust litigation. And the Committee may be interested to 

know that John Shenefield, whose presence I really appreciate here 

today, was the head of that firm’s antitrust practice when he left 

in the late 1970’s to become the AAG for Antitrust during the 

Carter administration. Tom Slater then succeeded him as head of 

the firm’s antitrust practice. I went to work for Slater, and now 

here some 13 years later, if confirmed, I have the opportunity to 

succeed Mr. Shenefield to be—

Chairman HATCH. That sounds like nepotism to me. 

[Laughter.] 

Chairman HATCH. We have one law firm controlling all the antitrust rules in this country. 

Mr. PATE. Well, in fairness, Mr. Shenefield moved on and has 

had an illustrious career elsewhere, but I do appreciate being associated with that lineage. 

Chairman HATCH. We are happy to have both of you here, and, 

Mr. Shenefield, we remember your term. I was here when you 

served, and you did a very good job, and we just appreciate having 

both of you. Both of you have done good jobs, and we are grateful 

to have you in this position as well. 

I am going to have to turn this over to Senator DeWine—it looks 

like we have another vote—because I am in the middle of the tax 

conference. I hate to leave, but I am totally in support of your nomination. I think it is one of the best nominations we could possibly 

have. But Senator DeWine, who himself has been an Attorney General, and Senator Kohl do an excellent job on our Antitrust Subcommittee, and I am going to turn it over to Senator DeWine. It 

looks like we have a vote, and I will tell them to hold it for you. 

Mr. PATE. Well, thank you, Senator. I appreciate your being here 

to open the hearing. 

Chairman HATCH. Thank you so much. We are honored to have 

you accept this position, and we appreciate your wife and family, 

6

because we know the long hours that you have to put in, and it 

is very, very difficult for you. So we appreciate the service that you 

give as well. 

Go ahead. I am sorry to interrupt you. 

Senator DEWINE. [Presiding.] I think what we are going to do, 

since we just started a vote, I think that we will stop at this point 

so we don’t break the questioning. 

Mr. PATE. Okay. And should I complete my brief statement at 

that time when you resume? 

Senator DEWINE. We are going to do that. We are going to have 

to just break it right now. We are going to go vote. Senator Kohl 

and I will vote, and we will be back. 

Thank you very much. 

Mr. PATE. Thank you, Senator. 

[Recess 10:33 to 10:59 a.m.] 

Senator DEWINE. The hearing will come to order. We apologize 

for the interruption. We didn’t count on—at least, I didn’t count on 

a second vote. 

Mr. Pate, will you please continue your opening statement? 

Mr. PATE. I will. Thank you, Senator. Having introduced my family and Mr. Slater and Mr. Shenefield earlier, let me just continue 

by saying this, Mr. Chairman: 

The antitrust laws are truly a cornerstone of our market economy. We in the United States rely to a great extent on competition 

to ensure that citizens get the benefit of higher quality and lower 

prices in the goods and services that they need, and sound enforcement of our antitrust laws protects this competition. 

The Antitrust Division’s Criminal Enforcement Program detects, 

punishes, and deters price fixing and other illegal conduct by those 

who conspire to cheat consumers rather than compete to win their 

business. Our Merger Review Program prevents anti-competitive 

combinations that can lead to higher prices or can lead to greater 

opportunities for collusive behavior. And our Civil Non–Merger 

Program prevents the unlawful creation or abuse of monopoly 

power. 

This year marks the 100th anniversary of the appointment under 

President Roosevelt of the first Assistant to the Attorney General 

responsible for antitrust. This organizational step laid the foundation for the current Antitrust Division, and the Division has a great 

history of vigorous enforcement of our antitrust laws. My work at 

the Division for just about 2 years now has made me appreciate 

that it is the extraordinary public service of our dedicated career 

attorneys and career economists who make the Division’s enforcement record possible. And I am very humbled to think that, if confirmed by the Senate, I will have the opportunity to do all that I 

can to help the Division carry forward its important work. 

I’d like to thank you again, Mr. Chairman, for the opportunity 

to appear before the Committee, and I would be happy to answer 

any questions that Senators may have. 

[The biographical information follows:]

7


90459.001
8


90459.002
9


90459.003
10


90459.004
11


90459.005
12


90459.006
13


90459.007
14


90459.008
15


90459.009
16


90459.010
17


90459.011
18


90459.012
19


90459.013
20


90459.014
21


90459.015
22


90459.016
23


90459.017
24


90459.018
25


90459.019
26


90459.020
27


90459.021
28


90459.022
29


90459.023
30


90459.024
31

Senator DEWINE. Let me turn to my colleague, Senator Leahy, 

for any opening statement he would like to make. 

STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR 

FROM THE STATE OF VERMONT 

Senator LEAHY. Thank you, Mr. Chairman. I am glad to be here 

with you and with Senator Kohl. Both of you, as I have said before, 

do such a superb job in handling this Subcommittee, and I will put 

most of my statement in the record. But I do worry about the geographic boundaries of our marketplace being pushed further and 

further out, and many of the competitive issues that were once only 

local have become regional, national, or even global in their nature. 

And when the economy is suffering and in down times, then you 

have a temptation to act anti-competitively. We are in a world 

dominated by high-tech information industries. Technological 

change is coming at a dizzying speed. And so we have to have fair 

and efficient enforcement of our antitrust laws. We think of mergers of competitors, but more and more vertical arrangements are 

entered into, and we have to look at those. It doesn’t mean they 

are all bad by any means, and in some cases they can give consumers a greater range of choice. In others, they can very much 

limit it. And we have to make sure in the digital age that consumers are covered. 

I have raised concern about the recent proposal by H.P. Hood 

and National Dairy Holdings to join, which would have had one entity, Dairy Farmers of America, in control of 90 percent of the milk 

market in my part of the country, at a time when milk prices are 

at an all-time low. 

I might conclude with this, Mr. Chairman. On the question of 

media concentration, I have talked before this hearing with Mr. 

Pate. I sent a letter, along with Senator Jeffords, to Chairman 

Powell at the FCC expressing our concerns about media concentration. And I will arrange to give Mr. Pate a copy of that letter because, as he has pointed out to me, there are different rules that 

involve the Department of Justice and the FCC on that, and they 

have different concerns, expressing it as you do. 

And the last thing I would say: it is so nice to see your family 

here, and as I told you earlier, you are blessed with a wonderful 

family, and I hope these two lovely 8-year-olds gain something from 

this. This is not what they would normally be doing in school, so 

we are delighted to have you here. 

Mr. PATE. Thank you, Senator. 

Senator LEAHY. Thank you, Mr. Chairman. 

Senator DEWINE. Senator Specter. 

STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM 

THE STATE OF PENNSYLVANIA 

Senator SPECTER. Well, just a word or two. Welcome, Mr. Pate. 

You are taking on a very major assignment here. The modern 

trends on mergers and acquisitions and concentrations really pose 

a very, very different economic picture for America today than 

when Jefferson raised a question about whether big was bad and 

Brandeis raised about the same issue. So it is a very, very important matter. 

32

One of the subjects that has been of continuing concern to me 

has been the monopoly practices of OPEC oil, and when we have 

a chance to talk about it, I would like to get your views on what 

might be done on an aggressive policy, because I think that OPEC 

does not qualify for any of the exclusions from the antitrust laws 

under sovereign immunity, et cetera. But I will save most of my 

comments for the Q and A. 

Thank you, Mr. Chairman. 

Senator DEWINE. Senator Craig? 

STATEMENT OF HON. LARRY E. CRAIG, A U.S. SENATOR FROM 

THE STATE OF IDAHO 

Senator CRAIG. Welcome before the Committee. 

Mr. PATE. Thank you, Senator. 

Senator CRAIG. Your reputation tells me that you are going to be 

confirmed, and we will look forward to working with you. I do say 

that I reflect some of the concerns expressed by my colleagues here. 

Dominant in them is the consolidation of the segments of the agricultural economy that have offered great frustration to the producers in the last decade or two. And while that frustration doesn’t 

go away, there is ongoing study as to whether, in fact, it affects 

market price and whether all of this activity fits within the antitrust laws of our country or does not. 

My guess is that during your tenure some of those issues will be 

visited, and we will look forward to working with you on them. 

Thank you. 

Mr. PATE. Thank you, Senator. 

Senator DEWINE. Since I am presiding today on behalf of Chairman Hatch, and since I am going to be here throughout the hearing, I know some of my colleagues do have to leave because they 

have other hearings going on. I am going to hold my opening statement and I am going to hold my questions until the end. 

So we will start with Senator Leahy for the first round of questions. 

Senator LEAHY. I would just as soon go to Senator Kohl. 

Senator DEWINE. That is fine. Senator Kohl? Senator Kohl is the 

ranking member, as you know, of the Antitrust Subcommittee, and 

Senator Kohl and I have exchanged gavels back and forth a number of times. And I suspect we may at some time in the future do 

that again, although I hope that doesn’t occur too soon. 

[Laughter.] 

Senator LEAHY. I hope it does. 

Senator DEWINE. Well, we understand. 

Senator Kohl? 

Senator KOHL. Thank you very much, Senator DeWine. 

Mr. Pate, as you know, over the last year, our Subcommittee has 

investigated disturbing allegations of anti-competitive practices 

among the large buying organizations that purchase medical equipment and devices for hospitals, what are known as group purchasing organizations or GPOs. We held a hearing last year and received evidence of GPO contracting practices and conflicts of interest that can effectively prevent competitive medical device manufacturers from gaining access to hospitals for their devices, innovaVerDate 0ct 09 2002 11:50 Nov 20, 2003 Jkt 090465 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\90459.TXT SJUD4 PsN: CMORC
33

tive products like retractable needles, for example, or advanced 

pacemakers. 

As a result, it appeared that in many cases hospitals were not 

getting the best products at the best prices for their patients. The 

situation is quite disturbing. We cannot tolerate, as you know, a 

situation in which patients and physicians could be well denied the 

best medical devices because of anti-competitive practices by these 

GPOs. 

We are pleased that in response to our concerns, several of the 

largest GPOs, including the industry leader Premier, have now 

committed to voluntarily change many of their contracting practices and end conflicts of interest. We commend Premier and the 

other GPOs that have worked with us over the last year to reform 

their practices. However, we also believe that vigorous antitrust enforcement is required of this industry and that the joint FTC–DOJ 

health care guidelines covering the activities of GPOs need to be 

reviewed and updated in light of the industry practice we uncovered and the consolidation that has taken place in this industry. 

I have a question for you regarding this issue and then a followup. 

First, do you share our concern, Mr. Pate, regarding the possibility of anti-competitive practices by GPOs which could well result 

in device manufacturers’ being denied access to the hospital marketplace? 

Mr. PATE. Senator, the issue you raise is one of great importance. 

The ways in which hospitals can purchase medical supplies affects 

not just the price of medical care but also access to new and innovative products, as you mention. This is an issue of concern and attention at the Division. 

As you know, the Federal Trade Commission has an open investigation in this area. It would be inappropriate for me to make 

comments directly about that, but I will say that the Division 

works cooperatively with the Federal Trade Commission in this 

area. We have joint health care hearings, open, with the Federal 

Trade Commission in which this a subject on which we’re going to 

be seeking evidence. And if as a result of that we find that there 

is a need for changes to the health care guidelines as they relate 

to GPOs particularly, then we have pledged to work with the Federal Trade Commission on that. So this is an area in which you can 

expect us to be active. 

Senator KOHL. So what you are saying is that, if and when you 

are confirmed, we can expect your very prompt re-examination of 

the health care guidelines to begin and would expect it to be finished in a fairly quick and effective way? 

Mr. PATE. You can expect we’ll be very active in this area. I 

think that it would be most likely that we would try to conclude 

the joint health care hearings and the collection of evidence on 

health care issues before, frankly, there would be a revision of the 

guidelines. But what I’m talking about there is a period of several 

weeks during which those hearings are going to continue. And after 

that, if there is a need to move forward, we’ll be doing that together with our colleagues at the Federal Trade Commission. 

Senator KOHL. Okay. One more question on this round. Mr. Pate, 

the Federal Communications Commission is about to conclude perVerDate 0ct 09 2002 11:50 Nov 20, 2003 Jkt 090465 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\90459.TXT SJUD4 PsN: CMORC
34

haps the most fundamental revision to its media ownership rules 

that we have ever seen and expects to issue its new rules in the 

next few weeks. 

It has been reported in the press that the new rules will be a 

major relaxation of current media ownership limits, even though 

we have recently seen a great amount of consolidation in the 

media. And these reports trouble many of us. 

Mr. Pate, if these ownership limits are lifted, then we can imagine an even greater wave of media mergers and acquisitions. Indeed, the investment firm of Merrill Lynch has just released a report predicting just such a merger and acquisition binge. The antitrust enforcement agencies will then be our last line of defense 

against excessive media concentration. 

Some believe that there is nothing special about mergers and acquisitions in the media marketplace and that they should be treated just like any other merger. For example, when I discussed this 

issue with your predecessor, Charles James, last year, he said that 

the only thing that mattered in reviewing such a media merger 

was the economic consequences of the transaction. 

I respectfully disagree. First, mergers in the media are different 

because they affect competition in the marketplace of ideas which 

are so central to our democracy, and diversity in ownership is essential to ensuring that such competing views are heard. Therefore, 

I believe that we must give media mergers special and more exacting scrutiny than when we review mergers in other industries 

which do not affect the free flow of information. Former FTC Chairman Robert Pitofsky agrees with this view. 

What is your view, Mr. Pate? Is the conventional view of antitrust review of media mergers focused solely on, for example, ad 

rates, correct? Or do you agree with me that the Justice Department should consider a media merger’s impact on diversity of views 

and information and not limit your analysis to a merger’s likely effect on economic interests such as advertising rates? 

Mr. PATE. Well, Senator, this is an important issue, one on which 

I know members of the Committee have been very active. There 

are different predictions as to what may follow from the FCC’s 

rulemaking. I recall the report you mentioned. I know that an analyst group, I believe called the Precursor Group, issued a report a 

couple of days ago, suggesting that there would not be consolidation following the rulemaking. 

We’re not in the business of predicting what will happen but 

dealing with transactions that do come before us. What I would say 

on that front is that—I know you characterize us as the last line 

of defense, but I can certainly assure you that we will be in place, 

and if there are transactions that present anti-competitive consequences, we will stop them. We have been active in the media 

area in whatever size case, including big cases such as DirecTV–

EchoStar. 

As to the specific diversity issue that you mentioned, it is the 

case that we have a different statutory mandate than the Federal 

Communications Commission, which, for example, right now is 

looking at a diversity index that would look directly at diversity of 

voices, to some extent at local production. Our statute, the Sherman Act, is different and is directed specifically at competition. But 

35

I would say that when we step in to stop an anti-competitive transaction, that may as a by-product also preserve diversity of voices. 

And that’s all to the good. 

Senator KOHL. I appreciate that. And, finally, I would like you 

to offer me some response that is somewhat specific to my suggestion that media activities, because they relate to something so central to democracy, deserve more than just an economic review, that 

there is another level of review that is proper and necessary when 

it comes to media diversity. 

Mr. PATE. Well, certainly as a statutory mandate, the FCC directly looks at those things. And in terms just of the general interest in citizens, no one can deny that there is a great interest in diversity of access to views in the media. 

When we go to court, which is what we need to do to challenge 

an anti-competitive transaction, we have to proceed under the 

standards of the Sherman Act. And those are specifically directed 

toward competition. But as I say, the work that we try to do in protecting competition may also from time to time help preserve diversity in the marketplace in terms of the output of views that are accessible to consumers. 

Senator KOHL. Thank you, Mr. Pate. 

Thank you, Mr. Chairman. 

Senator DEWINE. Senator Specter? 

Senator SPECTER. Thank you, Mr. Chairman. 

Mr. Pate, at the outset, I thank you for your timely intervention 

with the Department on a matter of significance in Pennsylvania 

where we had a bankruptcy sale involving a company called Carbide Graphite, and you had the matter under study and intervened 

in a very timely way to forestall an antitrust potential violation 

which resulted in the continuation of the plant and the employment of some 120 people in a small town, St. Mary’s in Pennsylvania. That was, I thought, unusual, very prompt action, and we 

thank you for that. 

Mr. PATE. Well, thank you, Senator. That was an important situation, one in which the Division had to act quickly. The Division’s 

Principal Deputy, Debbie Majoras, was in charge of that and did 

a good job. We also had tremendous help from the U.S. Attorney’s 

Office in Pennsylvania in that case as well. So I appreciate your 

comments on that. 

Senator SPECTER. Mr. Pate, back on October 11th, I wrote to 

President Clinton and, similarly—in 2000, and on April 25, 2001, 

wrote to President Bush concerning the energy crisis and the high 

prices of OPEC oil. And, Mr. Chairman, I would like both of these 

letters to be made a part of the record. 

Senator DEWINE. Without objection, they will be made a part of 

the record. 

Senator SPECTER. And these letters outlined the basis for pursuing OPEC, essentially pointing out that the governmental activity exemption did not apply and citing the case law on commercial 

transactions, and even an alternative suit from the International 

Court of Justice at The Hague. But the principal idea was to move 

under the antitrust laws, and we have seen the energy issue become even more complicated, difficulties in finding sufficient fuel, 

costs of using fossils, coal. 

36

I hope that you will take a very, very serious look at this issue 

because we now know with certainty that the Saudis are not our 

friends. And while there may have been some political factors to 

ease off in the past, I think that has all changed with 9/11 and the 

revelations of Saudi involvement. 

This is too complicated a subject to discuss at any length in the 

course of the 7 minutes allotted, so perhaps it might just as well 

be left with your commitment to study it and act if you think you 

have a case and can get permission from the White House. 

Mr. PATE. Well, Senator, I understand that this is a very difficult 

legal area. I know that FTC Chairman Pitofsky testified on this a 

few years ago and noted some of the legal hurdles that might be 

in the way of such a case. I know that it has been a subject of interest to you personally, Senator. 

Let me say this: Bringing an enforcement action against OPEC 

would certainly involve more than just the legal and policy considerations ordinarily involved in an antitrust case that the Division 

might bring. As the content of your question indicates, there are 

inherent diplomatic and international relations issues involved in 

such a case, and the issue would be one that would involve interests broader—not only broader than the Antitrust Division, but 

broader than the Department of Justice. And I believe that in the 

past administrations have pursued this issue through diplomatic 

and other means, but as with any topic, I would pledge to take a 

look at the antitrust law on this subject and to provide your staff 

with information on that if you believe our review would be appropriate. 

Senator SPECTER. Well, let’s leave it this way: Would you make 

a commitment to within 90 days give a conclusion as to whether 

you think there is an antitrust violation? And if you do, then I 

think others in the Congress would weigh in—I certainly would—

as a matter of policy in international relations take it up to the 

Secretary of State and really up to the President. But I think the 

threshold question is whether the Assistant Attorney General in 

charge of the Antitrust Division thinks there is a case. 

Mr. PATE. Well, Senator, as with any issue in which Senators 

seek our views, if you were to request those, I commit to you that 

the Division will get a response back to you promptly. And I certainly think 90 days is a reasonable amount of time to do that. 

Senator SPECTER. Okay. I am requesting it. 

Let me turn now to a matter of interest to Pennsylvania. There 

is a travel agency called Travelocity, which I visited recently because they had brought to my attention a very serious situation 

which appears to me to be an antitrust violation. I had written to 

you about this just a week ago, on May 13th, but the essential facts 

for the record at hearing are these: that there is a competitor of 

Travelocity’s—and we are putting all the cards up on the table, it 

is a question of fair competition, legal competition—a company 

called Orbitz, which is jointly owned by five major airlines: United, 

American, Delta, Continental, and Northwest. And those five airlines together account for four of five tickets sold in the United 

States. And almost all major U.S. airlines, which account for more 

than 90 percent of domestic bookings, are represented to participate in Orbitz on similar terms with the five identified airlines. 

37

The key concern that Travelocity has is the so-called most-favored-nation agreement between Orbitz and air carriers which 

guarantees Orbitz access to the airlines’ lowest fares to the exclusion of Travelocity. 

It sounds to me on its face like a restraint of trade. What do you 

think? 

Mr. PATE. Well, Senator, I appreciate an opportunity to address 

the Orbitz case, which I know has been one of interest among 

members. For the reasons you state, the Orbitz matter has been a 

subject of great concern at the Division. A joint venture involving 

an MFN among five horizontal competitors with 70 percent or more 

of the traffic raises obvious antitrust issues. 

At the time we opened the investigation, however, the Division 

determined right about the time I came to the Division, correctly, 

I believe, that we should look at the market operation of Orbitz 

and make a determination based on that rather than do as some 

were suggesting at the time, try to seek an injunction to prevent 

Orbitz from coming into operation at all, because there were potential consumer benefits from this new venture that were being offered. 

At this point, our economists have been involved in trying to review large volumes of market evidence, but one of the problems we 

face is the post–September 11th environment in which the airline 

industry has faced a situation unlike any I am aware of. And, 

frankly, it has been difficult to come to a conclusion that we can 

be confident about in the case. 

But I assure you we are not sitting on it. We are working hard 

on it, and we want to bring the case to a conclusion to determine 

whether we need to try to take some action and whether that 

would be justified. It is a priority matter at the Division. 

Senator SPECTER. You might think 90 days is too short to come 

to a conclusion, unlike OPEC oil? 

Mr. PATE. Well, on a non-merger investigation of that importance, I know these things take longer than many would think is 

necessary. I can assure you we are working hard on it, but I would 

hesitate to put a timetable on it of that type because it is equally 

important that we get the answer right as that we act quickly in 

a case like this. We are working on it. 

Senator SPECTER. Orbitz is important, but not more important 

than OPEC. 

Mr. PATE. I wouldn’t suggest that it is. 

Senator SPECTER. I am just jousting with you a little on time. If 

not 90 days, perhaps 180, but we would appreciate a close look. 

Mr. Chairman, I have just a little more, if I might proceed. 

Senator DEWINE. Sure. 

Senator SPECTER. I am handed a note by staff reminding me that 

the investigation has been ongoing since May of 2000. Now, that 

is not under your watch, but I hope you will keep that factor in 

mind that we are 3 years into the matter. 

I note that the Department of Transportation is going to be 

issuing regulations here, and I am a little perplexed as to why the 

Department of Transportation has the lead role when this is really 

an antitrust issue. Will the Department of Justice and the FTC be 

38

giving the Department of Transportation your inputs as to the potential antitrust issue and the past violation? 

Mr. PATE. Senator, I believe what you are addressing there is the 

CRS rulemaking that’s underway at the Department of Transportation, and, yes, we are looking right now at providing record comments to the Department of Transportation about how the CRS 

rulemaking should go forward. 

We had a letter from Senator Kohl and from Senator DeWine 

jointly asking about that same topic, and it’s a matter that our attorneys and economists are working on now. 

Senator SPECTER. Why does the Department of Transportation 

have what is really the lead role on a matter of this sort which is 

really an antitrust issue? 

Mr. PATE. Well, the rulemaking that I believe you’re referring to 

is really a rulemaking that occurs under the Federal Aviation Act, 

and there are different aspects of aviation competition in which the 

DOT takes the lead and others, such as merger review, where the 

Justice Department takes the lead. So the reason for that division 

as it relates to the CRS rules is the content of the statute that they 

follow. 

Senator SPECTER. Well, I would just like to be sure that the real 

antitrust experts are at work on it, and I thank you for your assurances. 

Mr. Pate, I think you are an impressive nominee. You are an impressive witness. I look forward to supporting you and working 

with you. 

Mr. PATE. Thank you, Senator. 

Senator SPECTER. Thank you, Mr. Chairman. 

Senator DEWINE. Thank you, Senator Specter. 

Senator Kohl? 

Senator KOHL. Thank you very much, Mr. Chairman. 

Mr. Pate, we were pleased last year when the Justice Department decided to block the merger between DirecTV and EchoStar. 

Now the media giant News Corporation, owners of the Fox television and cable networks, wants to acquire a controlling interest 

in DirecTV. While not a direct horizontal merger among competitors like the EchoStar–DirecTV deal, this merger does raise important vertical issues. One of the world’s most powerful producers of 

news and entertainment would be acquiring one of the most important distribution vehicles. 

Mr. Pate, we recognize that you cannot comment on the specifics 

of the News Corporation–DirecTV deal as it will be reviewed by 

your agency when you are confirmed. But can you tell us generally 

how you will analyze vertical mergers in the media industry? Do 

combinations of content producers and distribution channels pose 

special dangers, especially for competitors who do not own a means 

of distribution? 

Mr. PATE. Well, thank you for that question, Senator. I appreciate your remarks on the DirecTV–EchoStar merger. We were very 

pleased with the outcome we got there. It was actually an instance 

where I was able to appear in court myself on that case and was 

especially pleased at the way it turned out. 

As to the transaction you mentioned, the upcoming News Corp. 

transaction, as you say, it would not be appropriate for me to comVerDate 0ct 09 2002 11:50 Nov 20, 2003 Jkt 090465 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\90459.TXT SJUD4 PsN: CMORC
39

ment on that. It involves obviously different circumstances from 

the purchase—or the merger of two direct horizontal competitors as 

we had in DirecTV–EchoStar. But we’ll be looking at it closely. 

On the overall question about vertical mergers, as a general approach, vertical mergers, as you know, generally provide lesser concern under the antitrust laws than a merger of horizontal competitors. Nonetheless, there are instances where the vertical consequences of a merger can present a sufficient impediment to competition by one of the horizontal competitors that they do raise significant concerns. 

I would mention cases since I have been at the Division: 

Northrup–Grumman, TRW, we had a case called Prem Door in the 

door manufacturing area. So we have in recent times looked at 

vertical aspects of mergers, and we’ll do that in any case that it’s 

called for. But beyond that, I think it would be inappropriate to address specifically an upcoming transaction such as the one you 

mentioned. 

Senator KOHL. All right. In the 1996 Telecommunications Act, 

Congress essentially deregulated radio station ownership, ending 

national ownership caps and allowing one company to own up to 

eight radio stations in large markets. As you know, an enormous 

wave of consolidation followed, resulting in large corporations such 

as Clear Channel now owning more than a thousand stations 

across the country. 

Many people have decried this gigantic wave of radio consolidation and contend that it has homogenized radio ownership—radio 

across the country with the same formats and programming offered 

in every major city by the same owners. Many stations, critics do 

contend, care little about their local markets and are often programmed at one central and oftentimes one very distant location. 

Local news coverage has suffered perhaps the most. Radio stations 

once competed with different city hall or courthouse reporters, for 

example, and those same groups of eight stations now share one reporter and only one perspective. Many stations have eliminated 

news coverage altogether. Last Sunday’s Washington Post reported, 

for example, that on 9/11 several of Washington’s leading FM radio 

stations had nowhere to turn but to television, and they merely fed 

the sound from these television broadcasts. 

Does the experience of radio consolidation sound a warning bell 

for media consolidation in general? Doesn’t this experience support 

examining a media merger’s effect on the marketplace of ideas, to 

which I referred before, rather than just on the economic cost of advertising? 

Mr. PATE. Well, as we discussed with your earlier question about 

media consolidation, Senator, when we intervene to stop an anticompetitive merger, it can have the effect of preserving diversity. 

The specific treatment of issues such as local content generation, 

local ownership, and looking directly at the content of broadcasting 

is something that comes within the Federal Communications Commission’s mandate. When we act, as I mentioned earlier, we act 

under the Sherman Act. 

In terms of doing that with respect to your concern about local 

communities, I will stress that we look at that on a local geographic, market-by-market basis. We don’t simply look at a radio 

40

merger in a nationwide context; rather, we look from market to 

market at what the effects will be on a particular locality. 

As to my experience in this field with respect to radio mergers, 

the one recent transaction we’ve had was the Univision–HBC 

transaction, and in that case radio overlaps between HBC and a 

company called Entrevision, where the specific issue in which we 

intervened and required a divestiture. So these are issues that 

we’re going to look at closely. 

Senator KOHL. Would you say you would tend to be, can we predict more in the mold of a Charles James or a Joel Klein, in terms 

of your activity? In terms of your activity. I am not talking about 

your philosophy, but he was perhaps, in my judgment, more energetic just in terms of his activity, not necessarily his political philosophy but—

Mr. PATE. Well, Joel Klein has been, Senator, a friend of mine 

for a long time, and Charles James is a friend and my former boss, 

so I may be too close to the situation to comment. 

I guess if I were going to try to affiliate myself with two predecessors, I would take my friend, John Shenefield, who is here, and 

then James Rill, who was in charge of the Division and is also a 

good friend who served in the previous Bush Administration. 

Senator KOHL. Thank you. 

Mr. PATE. Thank you. 

Senator KOHL. Thank you, Mr. Chairman. 

Senator DEWINE. Senator Leahy. 

Senator LEAHY. Thank you, Mr. Chairman. I would hope you look 

very carefully at the issues that Senator Kohl and others have 

raised on this, and as I said, I will give you a copy of the letter 

that Senator Jeffords and I sent to Chairman Powell on this media 

concentration. Just from the article that Senator Kohl referred to 

from the Post over the weekend, plus what many of us who travel 

around the country see, I mean the homogenization of radio is terrible. When somebody can sit in a room in Maryland and pretend 

to give the traffic reports for a West Coast radio station, you realize how much they have lost touch. But you also find when the 

company, Clear Channel—I believe they will deny this, but I believe they have done this—actively censored different artists and 

others, I mean that is wrong, or even those who have talk shows, 

who have actively censored them or made sure they cannot compete with each other. I think one of the great things I found growing up was to find my own State having a number of radio stations 

that are each different. It is bad enough that our newspapers 

around the country have become very homogenized. Now if radio 

and television does the same thing, we have a real problem. Plus 

the public safety aspects. In my State we only have a couple, two 

or three radio stations left that can do the things when there is a 

flood, a massive snowstorm—and in Vermont, massive, you have to 

go about 15 or 20 inches. 15 inches the schools open an hour late. 

20 inches it is possible to have some closings, but those are newcomers to the State. 

[Laughter.] 

Senator LEAHY. And 25 inches I am willing to open the office 

three hours late, but you need these kinds of things. The best thing 

about this country is to have diversity of views, diversity of opinVerDate 0ct 09 2002 11:50 Nov 20, 2003 Jkt 090465 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\90459.TXT SJUD4 PsN: CMORC
41

ions, and it is not real competition if somebody is able to say in one 

place what is going to be heard all over the country. It does not 

help any of us. So please look at it carefully. 

I also would note that in December I wrote to you about opposing 

the proposed merger between HP Hood and National Dairy Holdings, a dairy processing company largely owned by Dairy Farmers 

of America. Now, this is somewhat parochial, I will admit, but it 

would have allowed them to, as I said in my opening statement, 

control 90 percent of the fluid milk in New England. The Department of Justice now has launched an investigation of the proposed 

merger. HP Hood and National Dairy announced that they would 

restructure their merger, I think that because the Department of 

Justice was looking at it, that they were more careful. I hope I 

have your commitment that your Department will continue to look 

at it. I am not asking you to prejudge it, but would you at least 

continue to look at it carefully? 

Mr. PATE. Thank you, Senator. You do have that commitment, 

and we do not view agricultural issues as parochial ones or unimportant ones. As you know, at the Division, we have a man named 

Doug Ross, who is our special counsel full time on agriculture. 

With respect to milk specifically, we recently brought a case which 

was not a reported merger, but a transaction that was below the 

threshold called Southern Belle, which related to school milk markets primarily in Kentucky, in which joint control by DFA presented a concern. We were looking very closely at the NDH–Hood 

transaction when it was withdrawn, and to the extent that or a 

similar transaction in that industry comes back, you can rest assured we will be looking at it closely. 

Senator LEAHY. I mention this because in 2001 Dean Foods and 

Suiza Foods merged. I was concerned about that, and expressed 

concern. They control about 30 percent of the milk nationally, 

about 70 percent in New England. Since that merger, what has 

happened is that farmers receive 25 percent less for their milk. The 

price in the supermarket is virtually the same for a gallon. It may 

change a cent or two, but most places it is the same. So I hope also 

that your Department will look and find out whether that merger 

brought about the severe drop in prices to the producers. It certainly has not made any change for the consumer, but whether 

that has anything to do with the severe drop to the producers. 

Mr. PATE. Well, just as you mentioned, Senator, in the agricultural area, this can be somewhat unlike other areas. We are concerned with issues of so-called monopsony power, an in order for 

farmers to have a fair market in which to sell their milk, there 

needs to be a choice of potential purchasers. So I think these are 

legitimate issues and they’re ones that we’ll continue to look at. 

With Respect to Suiza–Dean the Department did insist on some 

divestitures there, but as with any other case, if information comes 

to light about what has happened since the merger that can help 

us do a better job in the future, we would want to consider that 

as well. 

Senator LEAHY. Thank you, Mr. Pate. I will put my other questions in the record. I do have one, if I just might, Mr. Chairman. 

Senator DEWINE. Sure. 

42

Senator LEAHY. You gave a speech in February, offering praise 

for a European Union initiative, whereby either the EU or a member country could investigate an antitrust matter, but not vote. You 

suggested, as I read it, the U.S. system where many States and 

Federal agencies launch investigation, is too cumbersome. But I 

look at things like Microsoft. That case came about because there 

had been cooperative State and Federal law enforcement officials 

working. Some of the things that come eventually to the Federal 

level began because of aggressive action at the State level. 

So would you like to speak a little bit to your speech? 

Mr. PATE. I would. I appreciate the opportunity to talk about 

that. 

Senator LEAHY. I thought you might. 

Mr. PATE. The context in which I was mentioning that is one in 

which, as you know, we have from time to time been critical of our 

colleagues at the European Commission. On the other hand, the 

point I wanted to make there is that we need to be open to ideas 

in terms of what they are doing there, and Mario Monte, I think 

very ambitiously, is looking at how in a Federal system they can 

work together. 

With respect to what I have here, I guess I would refer you to 

my remarks at the ABA antitrust meeting more recently, in which 

I pointed out that one of the strengths of our antitrust system is 

the decentralization of that system. The Antitrust Division has a 

voice in making antitrust law. So do the courts. So do State attorneys general. And we work cooperatively very well with State attorneys general. We’re doing that now in terms of enforcing the 

Microsoft settlement, even working with the so-called non-settling 

States who took a different view of the case than we did. As long 

as I’m at the Division, if I’m confirmed, you’ll find that we’re going 

to continue to cooperate with the States. 

There are situations in which having a very large number of enforcers looking at the same case can make it difficult to enforce in 

a nonduplicative way, and we want to work together with the 

States on that problem when it comes up as well. 

Senator LEAHY. I will take a look. In fact, if you could have 

somebody send me over the ABA speech, I will actually read it. 

Mr. PATE. I’ll make sure you have it. 

Senator LEAHY. Not everybody will make that offer, but I will 

read it. Thank you. 

Thank you, Mr. Chairman. 

Senator DEWINE. Senator Kohl. 

Senator KOHL. Thank you, Mr. Chairman. I have just one more 

question. 

Mr. Pate, the Government’s landmark antitrust case against 

Microsoft was settled before you assumed your current responsibilities. As you may know, I expressed serious concerns regarding the 

loopholes and limitations in the settlement when it was announced, 

and I still hold some of these concerns today. 

A couple of questions. First, have you been satisfied in the manner with which Microsoft has implemented the settlement thus far? 

And can you point to any specific ways in which a settlement has 

improved competition in the computer software market today? 

43

Mr. PATE. Well, Senator, I appreciate your comments on Microsoft. I know there was a wide range of opinions about that case. 

We at the Division were very pleased about what Judge Kollar–

Kotelly had to say about the ways in which the settlement did 

track very faithfully the findings of the D.C. Circuit Court of Appeals and did provide effective relief for consumers. 

Since that time we have worked together with the State attorneys general’s offices who have been involved in the case to try to 

make sure that settlement is effective. I would say that it’s an area 

in which we understand the need to be vigilant in making sure 

that the settlement is carried out. One recent example in which—

that I would point out, where our lawyers who are in charge of enforcing that settlement, obtained some improvements was in the 

area of the licensing agreements that Microsoft uses. Through our 

efforts, together with our State colleagues, we obtained an agreement that Microsoft change those licensing terms, and also removed a nondisclosure agreement, so that the terms of the agreement could be available to the public so that we could get comment 

from interested parties. 

We’re going to continue to do things like that, and Judge Kollar–

Kotelly has set up a procedure that is going to try to make sure 

that the settlement is effective, and we’re committed to doing that. 

Senator KOHL. And with respect to Microsoft, last week the 

International Herald Tribune reported an allegation that Microsoft 

had engaged in a number of questionable business practices during 

the last year in order to dissuade governments and large institutions from choosing cheaper alternatives to its dominant Windows 

operating system. The alleged practices include offering steep discounts for Windows or even offering it for free if necessary. In addition, the newspaper claimed that Microsoft representatives were attending trade fairs under false identities and purporting to be independent computer consultants in order to persuade customers to 

avoid buying competitive products. 

Do these allegations concerns you, Mr. Pate? And if true, do they 

raise questions regarding Microsoft’s pledges to have undertaken 

reforms and obey the spirit as well as the letter of the settlement? 

Do you plan, when you are confirmed, to investigate these allegations? 

Mr. PATE. Senator, with respect to the reports you mention, our 

level of concern would depend on the actual facts that we were able 

to verify. 

With respect to discounting and other practices in Europe, I 

would suggest a caution in that the laws in Europe with respect 

to what sort of discounting is appropriate may differ from ours, and 

there may be instances in which things that are actually on-themerits competition from our point of view, may run afoul of different local rules there. 

On the other hand, as to your general question, we have met in 

the past repeatedly with firms who have concerns about Microsoft. 

If I am confirmed, we will continue to welcome input from those 

who think there are matters that need to be addressed, and I can 

assure you, if we find anticompetitive conduct, we will take appropriate action to stop it. 

Senator KOHL. Thank you, Mr. Pate. 

44

Mr. PATE. Thank you, Senator. 

Senator KOHL. Thank you, Mr. Chairman. I return the floor to 

you. 

Senator DEWINE. Senator Kohl, thank you very much. 

STATEMENT OF HON. MIKE DEWINE, A U.S. SENATOR FROM 

THE STATE OF OHIO 

Senator DEWINE. Mr. Pate, the good news or the bad news is you 

are down to me, I think, now. 

[Laughter.] 

Senator DEWINE. Let me welcome you again to the Committee. 

Mr. PATE. Thank you, Senator. 

Senator DEWINE. I appreciate you being here, and your wife 

Lindsey, and Ellen and Lizzie are doing pretty well I think there. 

I am not sure this is an improvement over school though. 

[Laughter.] 

Senator DEWINE. School has got to be better than this, but I will 

not ask them to comment. They can tell you later, but school has 

got to be more exciting than this. 

But we do appreciate your leadership at the Department you provided as Acting Assistant Attorney General for Antitrust really 

during a period of great transition. The transition period has not 

only included the departure of your predecessor, Charles James, 

but also that of two different deputy attorney generals, deputy assistant attorney generals, one for international enforcement and 

one for economics. Really I think you are to be commended for the 

way that the Antitrust Division has functioned during this transition period, and we thank you for that. 

In today’s challenging economic climate, vigorous antitrust enforcement we believe remains vitally important to ensuring that 

our markets function properly, and ultimately that American consumers get the benefit of better goods and services at better prices. 

The Antitrust Division is of course an integral part of our Nation’s 

antitrust enforcement efforts. In fact, it is likely that the role of 

Antitrust Division will grow in importance in the near future. I am 

thinking in particular of the issue of media consolidation. Of 

course, we have already talked about that a little bit today. It has 

been widely reported that the FCC is likely to weaken its media 

ownership rules early next month. Accordingly, consumers will look 

increasingly to the Antitrust Division to carefully scrutinize potential mergers and acquisitions in the television, the radio, the cable 

news and the entertainment markets. We must take care to not 

allow consolidation in these markets to harm consumers’ interest. 

The pending News Corp–DirecTV deal is an example of the type 

of media deal that creates the need for thorough review. Although 

the FCC rule-making may not directly implicate the deal, I think 

the proposed acquisition is really typical of the type of consolidation that we are seeing throughout the media sector. Because of 

this, Senator Kohl and I plan to hold an Antitrust Subcommittee 

hearing next month on the News Corp–DirecTV deal, and we will 

closely examine the proposal at that time. We have already begun 

to line up witnesses for that hearing. I think it is going to be a lively and I think a very positive hearing. 

45

For today, however, there are a number of other key areas that 

I think we need to examine. When your predecessor appeared before the Antitrust Subcommittee last September I stressed the importance of antitrust scrutiny for joint ventures. While joint ventures differ from full-fledged mergers, they often have significant 

competitive impact and require similar vigorous scrutiny from the 

antitrust agencies. Joint ventures also differ from mergers because 

Hart–Scott–Rodino Act does not cover them. As a result, the Antitrust Division is not required to examine joint ventures under the 

statutory merger timelines. Despite the lack of statutory timelines, 

however, it is important that the Antitrust Division review these 

arrangements within reasonable time periods without of course sacrificing careful, thorough, economically sound analysis. 

We also must recognize that the Antitrust Division and other 

American antitrust authorities are not the only important antitrust 

authorities in the world. As business becomes more global, and 

commerce flows more freely around the world, companies that do 

business worldwide face nearly 100 different antitrust enforcement 

agencies. Ongoing efforts to facilitate cooperation between various 

antitrust agencies around the world and efforts to coordinate procedural and substantive antitrust standards represent important advances in antitrust enforcement. 

I know you have worked a great deal in international coordination, and hope that those efforts continue. I look forward to discussing with you these and other issues today. In just a moment 

we are going to do that with just a few questions, although some 

of these areas have been really I think thoroughly examined by my 

colleagues. 

I also want to discuss this along with the successes of the Antitrust Division during your tenure as the Acting Assistant Attorney 

General and the challenges that still remain. So we do also look 

forward to working with you in the future, and really again, I want 

to just say I appreciate your work, look forward to your confirmation. I think you have done a very good job thus far, and I know 

you are going to continue that work after your confirmation. 

[The prepared statement of Senator DeWine appears as a submission for the record.] 

Senator DEWINE. Let me just start. I just have a couple questions. First, I have expressed concern in the past about supplierowned joint ventures. Now, I understand that the Antitrust Division has several ongoing investigations of these joint ventures, and 

as I have said before how I have some concerns about the length 

of time that some of these investigations go on, it is certainly important to thoroughly examine these issues, but the Orbitz investigation, for example, does seem to be taking quite a long time. I 

am particularly worried that the very existence of the investigation 

is starting to have an impact on the marketplace. I know, of course, 

that you cannot get into the details of an ongoing investigation, so 

I am not going to ask you to do that, but perhaps we could discuss 

the more general question of what if any impact does the existence 

of ongoing investigations into these joint ventures have in the market? In other words, does the existence of these investigations deter 

supplier-owned joint ventures from behaving in an anticompetitive 

manner, or does the existence of these investigation discourage leVerDate 0ct 09 2002 11:50 Nov 20, 2003 Jkt 090465 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\90459.TXT SJUD4 PsN: CMORC
46

gitimate precompetitive activities? How should the balance be 

struck, and more importantly, how can the Antitrust Division investigate these issues thoroughly enough to protect consumers but 

quickly enough to give businesses and the marketplace the certainty and the finality that they really need? 

Mr. PATE. Thank you, Senator. Let me address your joint ventures comment directly, but first, thank you for your comments 

about the Division’s operation during the interim period since 

Charles James left in November. I really do appreciate that, and 

would like to recognize that that has been the result of a lot of 

hard work from Debbie Majoris, the principal deputy; Connie Robinson, our Director of Operations who stepped in; Ken Heyer, who 

served the function of Economics Deputy essentially prior to our 

filling that slot recently. But I appreciate your comments on that 

point. 

With respect to joint ventures, there were really two aspects of 

the importance that Charles placed on that that he talked about 

with you in an earlier hearing. One is the so-called sham joint venture, where two companies may characterize as a joint venture 

something that is really nothing more than an agreement to eliminate competition. We have been very active in that area and have 

moved very fast. Our alternative newspapers case and the case involving the Math Works, both were situations where the Division 

acted quickly to bring assets back into competition. 

As to the investigations that have taken a longer time, I am not 

sure that despite the long pendency of those investigations that 

they are really average examples. Orbitz, our foreign currency joint 

venture transaction, the music distribution investigations, all were 

situations involving the inception of brand new industries and the 

need on our part to collect and evaluate huge amounts of economic 

data. As I said earlier, they take a long time, but it is just as important to get the right result as it is to move quickly in a case 

like that. 

As to your very specific question, there are two sides to that coin. 

Some think—and this has been an opinion that has been expressed 

in the context of Orbitz—that the pendency of the investigation 

may have prevented anticompetitive conduct. Others equally, with 

respect to that very same case, say that the pendency of the investigation is an unfair burden on Orbitz. So we at the Division try 

not to look at either side of that coin. For an investigation to be 

open, we do not see ourselves as sitting as regulators with no end 

in sight. Rather, if an investigation is open, it needs to be driving 

towards some potential Sherman Act claim. These things can take 

some time, but we try to do them as expeditiously as possible. So 

I hope that is responsive. 

Senator DEWINE. Good, good. Thank you very much. 

Mr. Pate, in passing the Telecommunications Act of 1996, Congress granted a role to the Antitrust Division in examining the applications of the Bell operating companies to provide long distance 

services in their local service areas, the so-called Section 271 applications. The Antitrust Division has adopted the standard that a regional Bell operating company should be permitted to provide long 

distance service in its local service area only when those local markets in a State have been fully and irreversibly opened to competiVerDate 0ct 09 2002 11:50 Nov 20, 2003 Jkt 090465 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\90459.TXT SJUD4 PsN: CMORC
47

tion. In addition to providing a role to the Antitrust Division in examining the Section 271 applications, Congress also expressly included an antitrust savings clause in the 1996 Act to ensure that 

the antitrust laws continued to apply. 

Has the Antitrust Division undertaken any investigations of alleged anticompetitive conduct by the Bell operating companies in 

their local markets once 271 applications have been granted? 

Under what circumstances do you foresee the Antitrust Division 

undertaking such investigations to ensure that competition of local 

markets remain fully and irreversibly opened to competition? 

Mr. PATE. Well, Senator DeWine, as you mentioned, the Congress gave the Division a specific responsibility, a statutory responsibility under Section 271 of the Telecommunications Act in this 

field. We have been very active in the 271 process, and as you 

know, the statute requires the Federal Communications Commission to give weight to the comments expressed in our evaluations. 

We have in some cases recommended that, or concluded that 

markets are fully and irreversibly open, and recommended that the 

FCC grant those applications. In others we’ve been unable to support the applications, and we think our work in that field has been 

very important. 

You’re very correct in what you say with respect to the savings 

clause, and since I’ve been at the Division we have filed several 

briefs reiterating the Department’s position that the antitrust laws 

continue to apply. I don’t think it would be appropriate to discuss 

any particular case, but I would just say generally that we hope 

that once we conclude that a market is fully and irreversibly open 

to competition, that means that the operating systems and other 

necessary attributes are present there, that the market will function and that as a commercial matter there will be access for local 

competitive firms, but if as you say, there is an allegation of anticompetitive conduct, we certainly believe, under the savings clause, 

that it’s our job to be there to evaluate it, and we’ll do that. 

Senator DEWINE. Thank you very much. Let me turn to the issue 

that you have already discussed a little bit, and that is the international antitrust arena, which has so fundamentally changed really in the last decade. International antitrust enforcement has really 

increased in importance over the past few years as business has become more global and really the number of antitrust enforcement 

regimes around the world have increased. In fact, there are nearly, 

I believe there are nearly 100 antitrust enforcement regimes in the 

world today. This means that business has faced an array of different antitrust standards and procedural requirements. In specific 

cases this can lead to different jurisdictions reaching different conclusions on the same transactions. This happened, of course, in the 

GE–Honeywell merger case. In general it can create a great deal 

of uncertainty for businesses as they operate internationally. 

I am pleased to hear about the strides that you have made in facilitating cooperation among the different antitrust authorities, and 

let me also just congratulate you—we talked about this the other 

day in the office—but congratulate you on the successes that you 

have had in this area. You have stated that the U.S.–EU bilateral 

relationship is a good model for how a bilateral relationship should 

work. Recently Senator Kohl and I met with Mario Monte, EuroVerDate 0ct 09 2002 11:50 Nov 20, 2003 Jkt 090465 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\90459.TXT SJUD4 PsN: CMORC
48

pean Commissioner for Competition, and he mentioned the positive 

working relationship as well. 

Let me just ask you how are we progressing with other bilateral 

relationships? What is the future there, do you think? 

Mr. PATE. I think, Senator DeWine, that the future is positive. 

We do have a particularly good relationship with the EU that’s 

borne fruit in all aspects of our work, particularly on the criminal 

side, where we just this year for the first time have had joint investigations in terms of drop-in interviews, dawn raids, as they call 

those in the EC, coordinated with the EC, Japan, Canada, some of 

the other countries with whom we have a particularly strong bilateral relationship. 

On the broader front I would mention the International Competition Network to you, and that is an organization, not an organization composed of a number of private interests, not a bar organization, but an organization of enforcement authorities around the 

world. As you mentioned, there are about 100 countries now that 

do have antitrust statutes. The ICN, as it’s called, we think is a 

good forum for us to try to share the view that antitrust enforcement ought to be based on objective economics and objective law 

enforcement rather than any other considerations. And the best 

thing we can do is have a forum to try to discuss that. There’s a 

meeting coming up next month in Mexico that’s going to involve 

the jurisdiction, many of the jurisdictions with antitrust laws, and 

we think that is a good forum that can make improvements in the 

area that you mention. 

Senator DEWINE. Mr. Pate, again, thank you very much. Let me 

just again say, as I did announce, that Senator Kohl and I do plan 

on holding an Antitrust Subcommittee hearing next month on the 

News Corp–DirecTV deal. We think that is a very important hearing. We intend to spend significant time on that hearing to thoroughly examine that issue. 

Another issue that Senator Leahy raised with you is the whole 

media consolidation issue. We also plan on holding a hearing on 

that issue in June, and we will examine that issue as well. I must 

say that I share many of the concerns that were expressed by Senator Leahy. I understand, Mr. Pate, that your jurisdiction, under 

our law, is of a limited jurisdiction. You do have jurisdiction in 

these areas, but it is somewhat limited, as you and I talked about 

the other day in my office. But we have an obligation I think in 

this Subcommittee to have an overview of this issue. I think from 

a public policy point of view that these consolidations present some 

very big, big public policy issues that frankly go beyond the economic issues that you are limited to looking at, and some of the 

antitrust issues that you are limited to looking at, and so we intend 

to look at the broad issues as well. 

Again, Mr. Pate, thank you very much. I think you are off to a 

great start in your job, and we look forward to moving forward on 

your confirmation. 

Mr. PATE. Thank you very much, Senator DeWine. 

Senator DEWINE. Thanks for being with us. 

[Whereupon, at 12:04 p.m., the Committee was adjourned.] 

[Questions and answers and a submission for the record follow.]

49


90459.025
50


90459.026
51


90459.027
52


90459.028
53


90459.029
54


90459.030
55


90459.031
56


90459.032
57


90459.033
58


90459.034
59


90459.035
60


90459.036
61


90459.037
62


90459.038
63


90459.039
64


90459.040
65


90459.041
66


90459.042
67


90459.043
68


90459.044
69


90459.045
70


90459.046
71


90459.047
72


90459.048
73


90459.049
74


90459.050
75


90459.051
76


90459.052
77


90459.053
78


90459.054
79


90459.055
80


90459.056
81


90459.057
82


90459.058
83


90459.059
84


90459.060
85


90459.061
86


90459.062
87


90459.063
88


90459.064
89


90459.065
90


90459.066
91


90459.067
92


90459.068
93


90459.069
94


90459.070
95


90459.071
96


90459.072
97


90459.073
98


90459.074
99


90459.075
100


90459.076
101


90459.077
102


90459.078
103


90459.079
104


90459.080
105


90459.081
106


90459.082
107


90459.083
108


90459.084
109


90459.085
110


90459.086
111


90459.087
112


90459.088
113


90459.089
114


90459.090
115


90459.091
116


90459.092
117


90459.093
118


90459.094
119


90459.095
120


90459.096
121


90459.097
122


90459.098
123


90459.099
124


90459.100
125


90459.101
126


90459.102
127


90459.103
128


90459.104
129


90459.105
130


90459.106
131


90459.107
132


90459.108
133


90459.109
134


90459.110
135


90459.111
136


90459.112
137


90459.113
138


90459.114
139


90459.118
140


90459.119
141


90459.116
142


90459.120
143


90459.115
144


90459.121
145


90459.122
146

Æ


90459.123