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IS THERE LIFE AFTER TRINKO AND CREDIT 

SUISSE?: THE ROLE OF ANTITRUST IN REGULATED INDUSTRIES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COURTS AND 

COMPETITION POLICY 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

JUNE 15, 2010 

Serial No. 111–119 

Printed for the use of the Committee on the Judiciary 

( 

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

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

TAMMY BALDWIN, Wisconsin 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

DANIEL MAFFEI, New York 

JARED POLIS, Colorado 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM ROONEY, Florida 

GREGG HARPER, Mississippi 

PERRY APELBAUM, Majority Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

SUBCOMMITTEE ON COURTS AND COMPETITION POLICY

HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia, Chairman 

JOHN CONYERS, JR., Michigan 

RICK BOUCHER, Virginia 

CHARLES A. GONZALEZ, Texas 

SHEILA JACKSON LEE, Texas 

MELVIN L. WATT, North Carolina 

MIKE QUIGLEY, Illinois 

DANIEL MAFFEI, New York 

JARED POLIS, Colorado 

HOWARD COBLE, North Carolina 

JASON CHAFFETZ, Utah 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

BOB GOODLATTE, Virginia 

DARRELL ISSA, California 

GREGG HARPER, Mississippi 

CHRISTAL SHEPPARD, Chief Counsel 

BLAINE MERRITT, Minority Counsel 

(III) 

C O N T E N T S 

JUNE 15, 2010 

Page 

OPENING STATEMENTS 

The Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress 

from the State of Georgia, and Chairman, Subcommittee on Courts and 

Competition Policy ............................................................................................... 1 

The Honorable Howard Coble, a Representative in Congress from the State 

of North Carolina, and Ranking Member, Subcommittee on Courts and 

Competition Policy ............................................................................................... 2 

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

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

Subcommittee on Courts and Competition Policy ............................................. 3 

WITNESSES 

Mr. Howard A. Shelanski, Deputy Director for Antitrust in the Bureau of 

Economics, Federal Trade COmmission, Washington, DC 

Oral Testimony ..................................................................................................... 10 

Prepared Statement ............................................................................................. 12 

Mr. John Thorne, Senior Vice President, Verizon Communications, Incorporated, Arlington, VA 

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

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

Mr. Mark A. Lemley, William H. Neukom Professor of Law, Stanford University, School of Law, Stanford, CA 

Oral Testimony ..................................................................................................... 45 

Prepared Statement ............................................................................................. 47 

Mr. Mark Cooper, Director of Research, Consumer Federation of America, 

Washington, DC 

Oral Testimony ..................................................................................................... 110 

Prepared Statement ............................................................................................. 112 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

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

in Congress from the State of Michigan, Chairman, Committee on the 

Judiciary, and Member, Subcommittee on Courts and Competition Policy .... 5 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Howard Coble, a Representative in 

Congress from the State of North Carolina, and Ranking Member, Subcommittee on Courts and Competition Policy .................................................... 135 

(1) 

IS THERE LIFE AFTER TRINKO AND CREDIT 

SUISSE?: THE ROLE OF ANTITRUST IN REGULATED INDUSTRIES 

TUESDAY, JUNE 15, 2010 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COURTS AND

COMPETITION POLICY

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:21 a.m., in 

room 2237, Rayburn House Office Building, the Honorable Henry 

C. ‘‘Hank’’ Johnson, Jr. (Chairman of the Subcommittee) presiding. 

Present: Representatives Johnson, Conyers, Quigley, Polis, Coble, 

Chaffetz, and Goodlatte. 

Staff present: (Majority) Anant Raut, Counsel; Rosalind Jackson, 

Professional Staff Member; (Minority) Stewart Jeffries, Counsel; 

and Tim Cook, Staff Assistant. 

Mr. JOHNSON. This hearing of the Committee on the Judiciary 

Subcommittee on Courts and Competition Policy will now come to 

order. Without objection, the Chair is authorized to declare a recess. 

Today’s hearing is the latest in the series of hearings I call, ‘‘An 

Antitrust System for the 21st Century.’’ I have initiated these hearings to consider some of the issues raised by the bipartisan Antitrust Modernization Commission created by the Judiciary Committee. 

The question before us today is this: Did the Supreme Court’s decision in the Trinko and Credit Suisse cases sound the death knell 

for antitrust enforcement in regulated industries? In the 100-plus 

years since the antitrust laws were enacted they have coexisted 

with other types of regulations. 

The reason Congress wrote both is that different types of laws 

provide different types of protection for consumers. Antitrust has 

always been concerned with promoting competition; when businesses compete consumers win. But regulators may have other concerns, such as safety or policy goals other than fair competition. 

In some cases the antitrust laws may be in tension with other 

regulations. In rare instances, following one law might result in the 

violation of an antitrust duty. 

In a few of these cases Congress has expressly created exemptions from the antitrust laws. In others, courts have implied an imVerDate Aug 31 2005 13:32 Nov 05, 2010 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\061510\56952.000 HJUD1 PsN: 56952
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munity, as is the case with certain rights under labor and employment law. 

Traditionally, such implied immunities have been narrow in 

scope because the courts have assumed that, unless Congress has 

said so explicitly, it intends for all laws that it passes to coexist. 

But in Trinko and Credit Suisse the Supreme Court appears to 

have abandoned this traditional perspective. In a most unjudicial 

way the Court went beyond ruling on the facts at hand and took 

a skeptical approach to the antitrust laws and the competence of 

our Federal judges and juries in applying them. 

As a Member of Congress and as the Chairman of the Subcommittee on Courts and Competition Policy, I find this to be offensive. Our Federal courts and juries handle complex matters all the 

time, and if the judges of the Supreme Court believe our system 

is not up to the task they should make suggestions for improving 

the system, not take swipes at it in their opinions. 

The past century has been one of growth and innovation, and 

time and again the courts have proven well capable of adjusting 

and refining the antitrust laws to reign in excess and ensure that 

antitrust rules are fair, efficient, and predictable. As a result, our 

antitrust laws police business excesses but do not hamper legitimate innovation. That is an approach I support, but it is one that 

the Supreme Court appears to have inexplicably cast aside in these 

cases. 

In a few short years the effect of those decisions has been devastating. Instead of the default being that the antitrust laws apply, 

Trinko and Credit Suisse have been cited to dismiss antitrust cases 

in the securities and telecom industries before they can even be 

tried on their merits, nor is there anything that limits these decisions to their respective industries. Under Trinko, will courts start 

looking skeptically at all antitrust claims? 

I am also concerned by what appears to be a trend of the Supreme Court legislating from the bench. As a former judge I take 

the role of the court very seriously, and I also respect its limits. 

The regulatory laws in both Trinko and Credit Suisse contain savings clauses that Congress has specifically written-in in order to 

ensure that antitrust law was not displaced by regulation, yet that 

is exactly what happened. 

As Justice Thomas wrote in a scathing decent in Credit Suisse, 

‘‘The regulatory statutes explicitly say the very remedies the Court 

hopes to be impliedly precluded.’’ It is not every day that I agree 

with Justice Thomas, but on this one I do. 

The role of the courts is to interpret the law, not to rewrite the 

law or usurp the role of Congress in setting economic policy for this 

Nation. If these cases were correctly decided, what more does Congress have to do to keep the antitrust laws in effect? 

I will now recognize my colleague, Howard Coble, the distinguished Ranking Member of the Subcommittee, for his opening remarks. 

Mr. COBLE. Thank you, Mr. Chairman. Thank you for calling this 

hearing of the Courts and Competition Policy Subcommittee. 

Today’s hearing could have profound implications for the jurisdiction of this Subcommittee. It deals with two Supreme Court cases 

3 

that you mentioned that, if the critics are correct, could severely 

limit the reach of antitrust laws in regulated industries. 

I am of two minds on today’s hearing, Mr. Chairman. On the one 

hand, I am an avid supporter of our Federal antitrust laws. They 

are critical to ensuring that customers receive the benefits of competition, namely lower prices and greater choices. So, to the extent 

that these decisions can be read as a blanket exemption from the 

antitrust laws, I am skeptical of their reach. 

On the other hand, I am wary of overregulating businesses, or 

what is worse, giving businesses conflicting regulatory demands; to 

the extent that these decisions can be read as merely clarifying the 

regulatory burden borne by businesses, I am supportive. 

The fact that these decisions can be read two different ways really complicates matters, it seems to me. For example, is Trinko 

merely a limit on the extent that antitrust law can compel a dialup firm to deal with its rivals, or is it a blanket antitrust exemption for the telecommunications industry despite an antitrust savings clause in the 1996 Telecommunications Act? 

These are very complicated and weighty issues, as we all know, 

in antitrust law, and I am pleased that we have such a diverse 

panel of experts to assist us in understanding the reach of these 

decisions. These questions are hardly just academic. 

Currently, members of both the House and Senate are meeting 

to reconcile the financial services regulatory bill. Those versions of 

that legislation contain antitrust savings clauses. Depending on 

what we learn here today we may need to revisit that language to 

ensure that courts will honor congressional intent with respect to 

the role that antitrust will play in the financial services industry 

going forward. 

With that, Mr. Chairman, I look forward to hearing from our witnesses on this important topic and I yield back the balance of my 

time. 

Mr. JOHNSON. Thank you, Mr. Coble. 

I now recognize John Conyers, a distinguished Member of the 

Subcommittee and the Chairman of the full Committee on Judiciary. 

Mr. CONYERS. Thank you, Chairman Johnson, and Howard 

Coble, and my other colleagues here. This is an important hearing 

in many respects and unusual. The part that makes it so unusual 

for me is we have attorney John Thorne, who argued the Trinko 

case, as a witness. 

We are very honored to have you here. 

Mr. THORNE. I argued the case in the Second Circuit, where we 

lost, however, and left it to my colleague to argue successfully in 

the Supreme Court. 

Mr. CONYERS. Yes, but you were assisting those that argued it 

in the Supreme Court, where you did a lot better, and we thank 

you for coming here today, because we look forward to your analysis and experience in this matter. 

As both the Chairman and Howard Coble have suggested, this is 

a hugely important matter, and this Committee in the judiciary is 

very important. One way to look at it is that we are caught between Thurgood Marshall’s calling antitrust laws ‘‘the Magna 

4 

Carta of free enterprise’’ and the fact that the courts are implying 

that antitrust is more subordinated to other regulatory concerns. 

And Thorne goes even as far as to say that—well, he goes further 

than anybody else: ‘‘The result in Trinko did not depend on regulatory context.’’ 

And so there is a pattern and direction that has been determined 

by the courts that I think we don’t disagree on, and the question 

is, is antitrust just a good law and look, we have got the Sherman 

and Clayton Acts, and then Rodino—the Hart-Scott-Rodino—came 

in even later. So what the Committee is asking is, what direction 

are we going in and what direction ought we go in? 

Now, I would like to describe my take on what the relationship 

of the three branches of government are, because sure, the Court 

takes swipes at legislation, but we take swipes at the Court all the 

time. We don’t do so badly ourselves. 

Matter of fact, we can take out a Court decision if we want to, 

and they can find unconstitutional or some other problem of our 

legislation. And, of course, that is the genius with the system, isn’t 

it, that we have three branches coequal? 

And there are always these tugs of war and differing interpretations that are going on, and so I am anxious to hear from the witnesses. I will put my statement—the rest of my statement—in the 

record. And thank you for calling this hearing. 

[The prepared statement of Mr. Conyers follows:] 

5 

PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR., A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF MICHIGAN, CHAIRMAN, COMMITTEE ON THE JUDICIARY, AND MEMBER, SUBCOMMITTEE ON COURTS AND COMPETITION POLICY


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Mr. JOHNSON. I thank you, Mr. Chairman, for your statement. 

And are there any other statements? 

I am now pleased to introduce the witnesses for today’s hearing. 

Let the record show that there was no affirmative response to my 

last question. 

Our first witness is Howard Shelanski, Deputy Director of Antitrust for the Bureau of Economics at the Federal Trade Commission. Mr. Shelanski is also a former Supreme Court clerk for Justice Antonin Scalia. 


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Our next witness is Mr. John Thorne, Senior Vice President for 

Verizon Communications. Mr. Thorne successfully argued the 

Trinko case before the Second Circuit in 2004. 

Next we have Professor Mark Lemley, from Stanford University 

School of Law. 

Finally, we have Dr. Mark Cooper, Director of Research for the 

Consumer Federation of America. 

Thank you all for your willingness to participate in today’s hearing. Without objection, your written statement will be placed into 

the record, and we would ask that you limit your oral remarks to 

5 minutes. 

You will note that we have a lighting system on the table that 

starts with the green light. After 4 minutes it turns yellow, then 

red at 5 minutes. 

After each witness has presented his or her testimony Subcommittee Members will be permitted to ask questions subject to 

the 5-minute rule. 

Mr. Shelanski, will you begin your testimony? 

TESTIMONY OF HOWARD A. SHELANSKI, DEPUTY DIRECTOR 

FOR ANTITRUST IN THE BUREAU OF ECONOMICS, FEDERAL 

TRADE COMMISSION, WASHINGTON, DC 

Mr. SHELANSKI. Chairman Johnson, Ranking Member Coble, and 

Members of the Subcommittee, thank you for the opportunity to appear before you today. I am Howard Shelanski, deputy director for 

antitrust in the FTC’s Bureau of Economics. 

The written statement we have already submitted represents the 

views of the Commission. My oral testimony is my own and does 

not necessarily reflect the views of the Commission or any commissioner. 

I would like to make two points in this statement: First, the Supreme Court’s decisions in Credit Suisse and Trinko make it more 

difficult for antitrust law to play the important role it has long 

played in regulated sectors of the American economy. Second, the 

cost-benefit reasoning that led the Supreme Court to reject the private suits at issue in Credit Suisse and Trinko does not apply to 

public enforcement acts. Even if one assumes that those cases 

strike the correct balance in private suits, they should not be interpreted to block public cases where the Federal antitrust agencies 

find that antitrust enforcement would yield additional benefits for 

American consumers. 

Before the 2004 Trinko decision public agencies and private 

plaintiffs have long enforced antitrust law in a variety of regulated 

settings. Those cases range from enforcement against collective refusals to deal in the securities industry to refusals to interconnect 

with rivals in the electricity and telecommunications markets. The 

most dramatic example, of course, is the government’s 1973 suit 

against AT&T that culminated in the breakup of the bell system 

and to thwart competition in lower long-distance calling rates to 

American consumers. 

But cases show that antitrust laws have played an important 

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some way than rules do. This is the role that antitrust, particularly 

public enforcement of antitrust, should be able to continue to play 

in the future, but which it may be impeded by Credit Suisse and 

Trinko. Antitrust enforcement was not, of course, unlimited in regulated 

industries. The Supreme Court has long held that antitrust enforcement could not occur when it directly conflicts with regulation, 

but Credit Suisse and Trinko marks a significant change from that 

earlier doctrine. 

Credit Suisse extended the definition of conflicts by blocking from 

antitrust claims that involve conducts not regulated by securities 

law, and it could only conflict with regulations through judicial 

error. The result could be gaps in enforcement when neither antitrust nor regulation can reach harmful conduct. 

Trinko can be read to make it harder to bring antitrust claims 

against firms, since competitive conduct is subject to regulated— 

regulatory oversight, even when Congress has included a savings 

clause that expressly preserves the simultaneous operation of antitrust and regulation. In some instances this might make sense. For 

example, in the specific context where an agency actively administers a rule whose standard for the competitive conduct at issue 

is more demanding on the defendant than antitrust laws. In such 

cases the courts are right to ask whether the marginal gains from 

antitrust enforcement outweigh the potential costs. 

Our concern is that Trinko could be read more broadly by the 

lower courts and block antitrust claims even when regulation does 

not directly or effectively address unfair methods of competition. 

Had the Supreme Court made clear that to preclude antitrust 

claims a regulatory structure must, like the one at issue in Trinko, be directly relevant to the conduct at issue, be more demanding 

than antitrust law, and be actively administered, one might worry 

less about harmful side effects of that ruling. 

The risk for public enforcement agencies is that, given the Trinko 

Court’s emphasis on the potential costs of antitrust, lower courts 

will block public antitrust cases where the regulatory scheme falls 

well short of the FCC’s implementation of the 1996 act’s competitive access provisions. 

Why did the Court rule as it did in Credit Suisse and Trinko? 

Phrased broadly, the Court’s concern was that antitrust is always 

costly, and in the presence of regulation is likely to have little additional benefit for competition. 

If that cost-benefit calculation for the kinds of private suits at 

issue in Credit Suisse and Trinko, they differ greatly for public enforcement acts. A public agency’s incentives are very different from 

those of private plaintiffs. 

The FTC does not collect revenue or otherwise materially benefit 

from successful competition enforcement. The government has no 

incentive to use antitrust law or the Federal Trade Commission Act 

against a regulated firm unless doing so can yield benefits beyond 

those the market already gets through regulation. 

The Federal antitrust agencies, therefore, have more incentive 

and obligation than private plaintiffs do to assess the potential cost 

of an antitrust case, to evaluate whether antitrust enforcement can 

provide benefits not provided by regulation, and to balance the two 

12 

in the public interest. As a result, public enforcement is more likely 

than private litigation to avoid claims that would be prone to judicial errors, that will interfere with regulation, or that will fail to 

yield net benefits over regulation. 

We therefore think it would be good policy for Congress to clarify 

that neither Credit Suisse nor Trinko prevents public antitrust 

agencies from acting when they conclude that anticompetitive conduct would otherwise escape effective regulatory scrutiny. 

Thank you again for allowing me to appear today. I would be 

happy to answer any questions you may have. 

[The prepared statement of Mr. Shelanski follows:] 

PREPARED STATEMENT OF HOWARD A. SHELANSKI


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Mr. JOHNSON. Thank you, Mr. Shelanski. 

Mr. Thorne? 

TESTIMONY OF JOHN THORNE, SENIOR VICE PRESIDENT, 

VERIZON COMMUNICATIONS, INCORPORATED, ARLINGTON, 

VA 

Mr. THORNE. Likewise, I want to thank—— 

Mr. JOHNSON. And, Mr. Thorne, could you make sure that that 

mic is on? Okay. 

Mr. THORNE. Mr. Chairman, Mr. Ranking Member, Chairman 

Conyers, Members of the Subcommittee, thank you for inviting me 

to testify today, and thanks for the introduction. I want to clarify 

one small point: I argued the Trinko case in the Second Circuit, 

and unfortunately, I lost it. My good friend, Richard Taranto, argued it in the Supreme Court, and the Court was so impressed 

with his argument that there was no dissent from the decision in 

that case. 

So I am very familiar. One effect of losing a case is you really 

do come to understand it well. I am familiar with the Trinko case. 

I am, unfortunately, much less familiar with Credit Suisse. I am 

not an expert in SEC regulation, and so I am not going to be able 

to say very much about that today. 

I want to point out, as a matter of Verizon’s interest in this hearing, is it is primarily as a customer. We buy—and these are rough 

numbers—$30 billion every year of products from other firms. We 

buy enormous amounts of health care, and medicine, and telecom 

infrastructure, and devices of various sorts to build our networks. 

So we are extremely focused on effective, vigorous antitrust enforcement. 

And so, for example, I pointed out in my written testimony, we 

brought affirmative, offensive antitrust cases to enforce the antitrust laws. We believe in it that strongly. 

Let me just make two quick points, and these are elaborated on 

in the written testimony. First of all, as I read the Trinko decision 

it did not depend on a regulatory context. The facts came out of 

regulation because the things that Verizon was selling to its competitors were things that had been compelled by the FTC rules 

under the 1996 act, so the fact-setting was a regulatory fact-setting, but the decision was straight antitrust. 

The Supreme Court’s decision itself said so. It said that because 

of the—regulation that might have been a good candidate for regulatory immunities, but because of the savings clause they weren’t 

going to think immunity, they were just going to apply the existing 

antitrust precedents. That is what the Court said. So you don’t 

have to take the Court at its word, you can ask people like the people on this panel, ‘‘What do you think the Court meant? Does its 

reasoning or decision go broader?’’ 

A few years back Congress commissioned the Antitrust Modernization Commission to do a full study of how are the antitrust 

laws working? And in particular, one of the things that the commission was charged with looking at was, how is the intersection 

between antitrust and regulation going? And so there is a chapter 

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section of antitrust and regulation, how antitrust applies with 

these regulated industries. 

If you spend time with this, as I have done, it has got a series 

of findings and recommendations for congressional action peppered 

throughout it. They are in the gray boxes. And most of the gray 

boxes have an asterisk or two indicating that one or another of the 

members of the commission disagree with the particular consensus 

that the commission came up with. So it will say Cochairman 

Yarowsky dissented from a particular recommendation, or Commission member Kempf dissented—lots of dissents from the recommendations. 

There is one—one of the findings that the commission made that 

was unanimous—this was a bipartisan commission, and a unanimous finding—that the Trinko decision—I am going to quote from 

it—‘‘is best understood only as a limit on refusal-to-deal claims 

under Section 2 of the Sherman Act. It does not displace the role 

of the antitrust laws in regulated industries.’’ So since Congress 

asked the commission to study how things were going and they 

looked at Trinko, their view, like mine, is Trinko did not displace 

antitrust in regulated industries. 

Now, the second thing I will just say a word about, and it is 

elaborated on in the written testimony, is there is a series of Supreme Court decisions going back to 1920 that say—this could have 

been a controversial decision back in 1920, but it is well established in the subsequent 90 years—if you get to a monopoly position lawfully by being the first in the market, by having a better 

product, by having a government franchise—if you get to a lawful 

monopoly you are not required to dismantle the monopoly by giving 

it up to rivals. 

All of the cases involving refusal-to-deal, all of the Supreme 

Court cases involve a situation where you are voluntarily dealing 

with some folks and then you discriminate against your rival. In 

that situation you can have antitrust liability for refusal-to-deal, 

but it is based on discrimination between voluntary dealing and refusal to deal with rivals or customers of rivals, and there is no Supreme Court decision that is different from what Trinko has said 

in 90 years of history on those sorts of cases. 

So thank you again for the invitation, and I look forward to the 

questions. 

[The prepared statement of Mr. Thorne follows:] 

29 

PREPARED STATEMENT OF JOHN THORNE


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Mr. JOHNSON. Thank you, Mr. Thorne. 

Professor Lemley? 

TESTIMONY OF MARK A. LEMLEY, WILLIAM H. NEUKOM PROFESSOR OF LAW, STANFORD UNIVERSITY, SCHOOL OF LAW, 

STANFORD, CA 

Mr. LEMLEY. Thank you, Mr. Chairman, Ranking Member Coble, 

Members of the Subcommittee. I appreciate the invitation to speak 

here, and I want to start by saying that I agree, Mr. Chairman, 

with what you said in your opening statement. 

I think it is right to say that the antitrust law traditionally opposed implied repeal of antitrust law by regulation, that that policy 

is a good one because it protects important competition interests in 

circumstances where regulated industries—where regulators— 

might not protect those interests. And I will also agree with you 

that that wise policy is under attack as a result of the Trinko, and 

particularly the Credit Suisse decisions, because the Supreme 

Court in the last 10 years seems to have backed off from the rule— 

longstanding rule—that there is no implied repeal of the antitrust 

laws in government regulation. 

What I want to spend my time today talking about just briefly 

is one of the unfortunate consequences, which is the problem that 

I call regulatory gaming. There are a number of circumstances in 

which private parties engage in behavior that harnesses pro-competitive or neutral regulations and uses them for exclusionary purposes. 

In the paper that is attached to my testimony, Stacey Dogan and 

I identify a number of those circumstances. Let me just give two 

examples: one is the Unocal case, in which the—an oil company 

participated before a government-run standard-setting organization 

to set air quality standards in California, persuaded the government to adopt as a mandatory rule a particular set of air quality 

standards, and then revealed that it had a patent covering that 

particular technology and no one else could use it unless they paid 

a super-competitive price. 

Another example involves the pharmaceutical industry, which is 

engaged in a variety of techniques designed to try to extend the life 

of its patents covering certain drugs. One particular example involves so-called product-hopping, in which pharmaceutical patent 

owners make minor changes to their products that don’t affect their 

FDA regulatory approval but make it impossible under the HatchWaxman Act for generic manufacturers to substitute generic drugs 

that are cheaper for those patented products. 

The difficulty here is that these are actions which, in the absence 

of a regulatory system, wouldn’t exist. There wouldn’t be a problem 

but for the fact that the government regulation helps the gaming 

to take effect. It gives it cover. It gives it monopoly power. It gives 

it mandatory authority. 

And in those circumstances where the regulation itself is not restricting competition but private action is restricting competition, 

antitrust law can and should step in. The worry is that under 

Credit Suisse and Trinko the reasoning of the Supreme Court suggests that antitrust law needs to back off, it needs to defer to the 

regulatory agency not just in circumstances where the regulatory 

46 

agency has made an affirmative decision to restrict competition, 

but even in circumstances where the regulatory agency has merely 

been silent—has not acted—and I think that is a mistake. 

Now, Mr. Chairman, you suggested correctly that we have long 

had a maxim in antitrust law that courts wouldn’t assume the passage of a particular regulation impliedly repealed or limited the 

reach of that antitrust law. And I think that maxim is correct, and 

if the Supreme Court is no longer properly applying it the right solution, it seems to me, is to reverse the presumption. 

Rather than simply having individual savings clauses in particular regulatory statutes, which seems in recent years to have 

been effective, we might consider a more general amendment to the 

antitrust law along the following lines: No regulation or act of Congress shall be interpreted to restrict or repeal the antitrust laws 

unless it expressly so provides. 

And a provision along those lines would serve the same purpose—it would enact the no implied repeal rule—but it would effectively reverse the presumption. Rather than asking in any particular case, ‘‘Did Congress intend this regulation to change the 

antitrust laws?’’ the rule would be that unless Congress expressly 

said, ‘‘Here is an exemption from the antitrust laws,’’ courts 

wouldn’t be allowed to create one. And I think that would be wise 

policy. 

[The prepared statement of Mr. Lemley follows:] 

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PREPARED STATEMENT OF MARK A. LEMLEY


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Mr. JOHNSON. Thank you, Professor Lemley, and also thank you 

for your submission of corrective language. 

Dr. Cooper? 

TESTIMONY OF MARK COOPER, DIRECTOR OF RESEARCH, 

CONSUMER FEDERATION OF AMERICA, WASHINGTON, DC 

Mr. COOPER. Thank you, Mr. Chairman, Members of the Committee. 

Former Federal Trade Commission Chairman Robert Pitofsky 

edited a recent volume on antitrust practice in the last couple decades entitled, ‘‘How the Chicago School Overshot the Marks: The 

Effect of Conservative Economic Analysis on U.S. Antitrust.’’ The 

Trinko and Credit Suisse rulings demonstrate that under the influence of conservative economics the Supreme Court has not simply 

overshot the mark, it has gone off the deep end. 

These cases establish regulation as the barrier to antitrust oversight without requiring the courts to examine the effectiveness of 

regulation in controlling behaviors that are repugnant to both regulation and antitrust. This is particularly ironic since conservative 

economics generally takes a dim view of the ability of regulators to 

promote the public interest. If anything, conservative economic 

theories should have led the Court to give antitrust a wider berth, 

not a narrower berth. 

Trinko, in particular, presumes antitrust has high costs and low 

benefits without demanding a careful accounting of the costs and 

benefits. It assumes false positives are plentiful, more likely, and 

more costly than false negatives without any empirical evidence to 

support that claim. It is the ultimate triumph of economic theory 

over fact in the antitrust space that favors corporations and regulation at the expense of competition and antitrust. 

After a decade in which we have watched large corporations inflict huge losses on the economy and society—Worldcom, Enron, 

Lehman Brothers, Goldman Sachs, and BP—the notion that large 

corporations acting on their private interests can be expected to behave in economically efficient and socially responsible ways or that 

regulation can be presumed to be effective in protecting the public 

interest seems rather silly. 

We need every regulatory cop on the beat and antitrust is one 

of the most important weapons policymakers have to protect the 

public from anticompetitive, anti-consumer business practices. To 

preemptively sideline antitrust in industries where it is needed 

most—those with the greatest market power—destroys the balance 

between regulation and antitrust that has worked well over the 

course of a century. 

Regulation is a second best, to be sure, but better than unfettered exercise of market power where market structure does not 

support vigorous competition, and I testified here on that issue in 

relationship to the antitrust modernization process. 

The antitrust laws are simultaneously applied to regulated industries to constantly probe for areas where competition can improve the public welfare. Regulators are not particularly adept at 

this role because it is not their core competence and they have a 

tendency to be captured by the industries they regulate. The greatest value of the balance between regulation and antitrust exists 

111 

where the market structure is least certain, where there is a transition between regulation and competition or where there are a mix 

of competitive and monopoly elements in the market. 

Much of a 21st century economy resides in this middle range, 

and the telecommunications sector, which was the target of the 

Trinko case, is a perfect example. Congress was seeking to move 

telecommunications to a greater reliance on competition after a 

century of reliance on monopoly. The incumbent telephone companies would determine to prevent the loss of their market power. 

Under their litigious, obstinate foot-dragging, the effort to open the 

network collapsed. 

Both antitrust and regulation were aiming at the same goal, and 

the transition would have benefited from close antitrust scrutiny. 

The Trinko decision not only prevented this scrutiny in that case, 

but it severely restricted the likelihood of scrutiny in future cases. 

Trinko was a stretch of the antitrust laws that the Court could 

have easily brushed aside if it was so inclined without changing the 

terrain of antitrust laws. That was the easy and prudent thing to 

do, especially when citing the regulatory scheme of a statute that 

expressly stated Congress was not intending to restrict the applicability of the antitrust laws. Instead, the Supreme Court engaged in 

an extreme form of judicial activism using a weak case to make a 

major change in antitrust practice. 

The Court could remedy the situation in future cases by making 

it clear that the Trinko decision applies only to private antitrust 

suits and its application to private antitrust actions rests on the 

unique regulatory obligations and oversight embodied in the 1996 

Telecommunications Act. Unfortunately, given the extremist ideology that underlies the decisions I am doubtful that the Court will 

be inclined to fix the problem any time soon. 

Congress should act swiftly to restore the balance between antitrust and regulation that worked so well in the 20th century. 

Thank you. 

[The prepared statement of Mr. Cooper follows:] 

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PREPARED STATEMENT OF MARK COOPER


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Mr. JOHNSON. Thank you, Dr. Cooper. 

And now we will begin with questions. 

Mr. Thorne, is it not true that the issue in Trinko that went up 

to the Supreme Court was whether the conduct by the telecom 

company violated the antitrust law? 


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Mr. THORNE. Mr. Chairman, that is exactly correct. The question 

in Trinko was whether Verizon, in providing access to its facilities, 

had done it in a way that was consistent with the antitrust laws. 

Mr. JOHNSON. And the Court used dictum to suggest that in general the benefits of applying antitrust law in a privately-brought 

case was few. In other words, there weren’t very many benefits to 

be had for the bringing of a private action in a regulated industry 

context. Is that correct? 

Mr. THORNE. Mr. Chairman, with all respect, I have read the 

case differently. I read it as having two parts, and give me a second, I will explain: First, the Court asked—— 

Mr. JOHNSON. And I think you did during your testimony. 

Mr. THORNE [continuing]. That the dicta that you are referring 

to was not on the question of whether Verizon had violated the existing antitrust laws. The additional question—the second part of 

the decision—because the antitrust laws are somewhat plastic—it 

is a very brief statute—don’t restrain competition, don’t monopolize—the Court has the ability if it wants to to expand antitrust 

into places it has never gone before. 

And on the question of—the second question, not whether existing antitrust laws were violated—the Court found clearly they were 

not—but on the second question, should we take this occasion to 

expand antitrust into a new place, in that circumstance the Court 

thought for a whole list of reasons it would be a bad idea. And one 

of the things the Court listed was the fact that regulators were already policing the very conduct. 

Mr. JOHNSON. Okay. Well, let me get Professor Lemley’s opinion 

about that. 

Mr. LEMLEY. So I think Mr. Thorne is correct to say the Court 

expressly considered should antitrust law not apply here at all, and 

they rejected that conclusion because of the savings clause. But I 

think it is also correct to say that the Court went out of its way 

to express skepticism of the value and role of antitrust in an area 

that was subject already to regulation. And the Court in particular 

said antitrust can do less good here because regulators are already 

policing the risk to competition and it has a greater potential for 

harm. And so I think the Court was, in fact, going beyond its brief 

to decide the question that Mr. Thorne’s case presented—— 

Mr. JOHNSON. Do you—— 

Mr. LEMLEY [continuing]. Conduct violated the antitrust laws. 

Mr. JOHNSON. All right. Thank you. 

Do you agree, Mr. Shelanski? 

Mr. SHELANSKI. Mr. Chairman, I think that the Court tried to 

draw two lines that will be very difficult to implement in practice. 

On one hand, as Professor Lemley said, the Court did not say that 

antitrust law, as clearly established, doesn’t apply. It wasn’t able 

to say that in light of the savings clause. 

It did, however, say that claims that would be an extension of 

the outer boundaries of antitrust law could not be brought where 

there is a regulatory structure in place. There are two problems 

with that statement: Under the fact-intensive analysis of Section 2 

of the Sherman Act, which tends to occur under the rule of reason 

and involve a balancing of pro-versus anticompetitive effects, every 

case is going to be different on its facts, and identifying the outer 

120 

boundary is not nearly as clear or straightforward an exercise as 

the Court represents. 

And so lower courts could look at a case, say, ‘‘Well, we have 

never seen exactly this case before. It must be beyond the outer 

boundary. It must be foreclosed in the presence of a regulatory 

structure,’’ which brings me to the second problem of the decision: 

The Court does not establish clear standards for the regulatory 

structure that must be in place before it precludes an antitrust 

claim. Does it have to be as elaborate, detailed, and competently 

and actively enforced as the Telecommunications Act of 1996? If so, 

as I suggested in my testimony, we may worry less about the displacement of antitrust. 

But what about a regulatory scheme that does not directly address the competitive harm at issue but addresses some competitive harm, or it is within the authority of an agency but not enforced? The Court doesn’t tell us whether or not that kind of regulatory structure is adequate, and our profound concern at the Federal Trade Commission is that lower courts could interpret such a 

weak regulatory structure to defeat antitrust claims, and not just 

outer boundary antitrust claims, good antitrust claims that could 

be brought under existing precedence. 

Mr. JOHNSON. Well, let me ask Dr. Cooper, do you feel that the 

ruling in Trinko taken together with—or ruling in Credit Suisse 

taken together with Trinko actually act to impose a presumption 

that actions brought by plaintiffs, both public and private, in a regulated setting are—in other words, the burden of proof has been 

shifted to the plaintiff on these kinds of cases to establish that the 

antitrust laws do apply? 

Mr. COOPER. Actually, I think the example that—the end point 

where Mr. Thorne wants to end up shows us the great danger. Of 

course, the argument he makes is that, if I never dealt voluntarily 

I never have to deal. And this is an industry in which it controlled 

access to its networks for a century never voluntarily making it 

available, and Congress said it is now time to make it available. 

For me, the critical question will be, if you allow that to happen 

in our—especially in our technology industries, you will have a 

lockdown of all of the functionalities on which a broad swath of economic activity relies. That is the implication of this case, and he 

drew it. That implication is disastrous; it needs to be rebutted, I 

think, precisely by containing the damage that this case can do. So 

the proposition which we can ask is whether the refusal-to-deal has 

severe negative economic and social effects. 

Mr. JOHNSON. Thank you, Dr. Cooper. 

I will now turn to the Ranking Member, Mr. Howard Coble. 

Mr. COBLE. Thank you, Mr. Chairman. 

Gentlemen, thank you for your appearance today. 

Mr. Shelanski, you expressed concern that the FTC and DOJ 

could be precluded from bringing some antitrust cases in regulated 

industries as a result of these two cases. Do you have some suggestion for how Congress could legislatively repeal these cases for DOJ 

and FTC, A, and B, is this concern based on how Trinko and CSFB 

have been actually interpreted by district courts and courts of appeal, or are you concerned mainly as to how they may be interpreted? 

121 

Mr. SHELANSKI. Thank you, sir. 

Let me start with your second question first. I think our principal concern is, given the relatively few number of years that have 

occurred since Credit Suisse and given the long cycle that our investigations in cases can occur over, that we are thinking about 

how these cases may affect our enforcement. We are always thinking in every action about these cases, about whether they impose 

some impediments. 

And we have current cases in which we are very attuned to the 

possibility that Credit Suisse and the Trinko issues could arise. So 

at this point, given the relatively short time that has passed, our 

concern is mostly current and prospective than with particular decisions that have occurred. 

As to what could be done to protect the jurisdiction of the Federal Trade Commission—I am obviously not here to speak on behalf of the Justice Department, but I will speak broadly about public enforcement—our concern is that public enforcers who have an 

ability to coordinate with regulatory authorities, to identify the 

gaps in regulation, to work interactively with regulatory authorities to identify places where antitrust can be a useful complement, 

that we not be prevented by interpretations of Credit Suisse and 

Trinko from undertaking that independent policy judgment about 

whether antitrust would be more beneficial than costly in any particular setting where we are investigating a regulated firm. 

And so the particular kind of language is not something that I 

would be prepared to provide you right off the top of my head, but 

a general thrust would be something that protects that jurisdiction 

that expressly says, ‘‘Nothing in the antitrust laws as heretofore 

developed would prevent the public antitrust agencies from exercising their independent judgment about the value of an antitrust 

case.’’ 

Mr. COBLE. Thank you, Mr. Shelanski. 

Mr. Thorne, you stated in your testimony that Trinko would not 

have prevented the government from bringing its case at AT&T. 

One thing that has been suggested here is that the antitrust enforcement agencies—notably DOJ and FTC—be exempted from the 

Trinko and CSFB decisions. Would such an exemption underline 

the regulatory clarity that you wanted to bring to bear with the 

Trinko case? Or in other word, would you favor a statutory exemption from Trinko for DOJ and FTC? 

Mr. THORNE. Mr. Ranking Member, first of all—and I have to 

say this—my experience with both the Justice Department and 

FTC has been one of absolute admiration. The enforcers at the Justice Department and the Federal Trade Commission are first-rate; 

they are the best antitrust enforcers on the planet. So I am not 

going to say anything bad about their ability to enforce the antitrust laws. 

But the idea of breaking apart public enforcement and private 

enforcement under two different regimes is a new idea. It is the 

first time in over 100 years under the Sherman Act that we have 

had a different enforcement regime for the two areas. So it started 

to raise questions in my mind like, if you are going to separate the 

private cases from the public cases does that mean that the private 

122 

cases can no longer tag along with the public cases? And it seems 

like there are a series of questions. 

Right now the Justice Department is viewed as only a law enforcer; it doesn’t set out separate policies or make laws, it just enforces the laws as they are written. Would this change that relationship that the Justice and the Federal Trade Commission have? 

So I am interested in the proposal. It is novel, and it seems to 

raise for me a series of questions that ought to be thought through. 

Mr. COBLE. And I didn’t mean to imply, Mr. Thorne, that you are 

accusatory. I didn’t mean to suggest that at all. 

Mr. Lemley, let me start with you and then open it up to the others. Professor, how can Congress effectively communicate its intent 

to have antitrust laws and telecommunication laws operate side by 

side? 

Mr. LEMLEY. Well, I do think it is a problem because of the presence of savings clauses in the very statutes that have been interpreted, and that is why I think the best approach is actually to 

modify the antitrust law itself to say that you should not assume 

or imply repeal from the antitrust law unless Congress expressly 

grants an immunity. I think that if done in the context of a hearing 

like this and with legislative history that made it clear that this 

was directed at cases like Credit Suisse, I think the message would 

be received by the courts that this was not, in fact, an area in 

which antitrust deference was appropriate merely because there 

was a regulatory system. And I have suggested in my written testimony some language that—quite brief language—that might 

achieve that end. 

Mr. COBLE. Mr. Chairman, a red light appeared, but may others 

respond to my question? 

Mr. JOHNSON. Certainly. 

Mr. COBLE. Doctor, do you want to start? 

Mr. COOPER. The goal that Professor Lemley outlined is precisely 

the place we need to get to, where the full force of the antitrust 

laws apply. And if the argument is going to be that somehow or 

another regulation has done the job then that burden ought to be 

on the defendant in the case. That is, we need the antitrust laws 

to have full effect. 

The savings clauses tend to get thrown in at the last minute. 

They don’t have a lot of legislative history. If there is any possibility that the Congress was carving out some sort of exemption 

they are not well documented in the record, and I think that is a 

mistake. This is a moment, and this is a sector, where we desperately need to make sure that we can get down that path to a 

more competitive environment, so—— 

Mr. COBLE. Thank you, sir. 

Mr. COOPER [continuing]. Changing the—switching the burden 

would be the critical point here. The presumption should be in 

favor of antitrust and rebuttable if there is specific regulatory language that one can cite and demonstrate effective regulation is actually in place, not just in theory. 

Mr. COBLE. Thank you. 

Mr. Thorne, do you and Mr. Shelanski want to weigh in? 

Mr. THORNE. No, thank you, Mr. Ranking Member. 

Mr. SHELANSKI. I have nothing to add. 

123 

Mr. COBLE. Thank you. 

I yield back. Thank you, Mr. Chairman. 

Mr. JOHNSON. Thank you, sir. 

Next we will recognize Mr. Conyers for questions. 

Mr. CONYERS. Thank you very much. 

Just for the record, Dr. Cooper, are you a lawyer? 

Mr. COOPER. I am not a lawyer. 

Mr. CONYERS. Okay. You seem to advise a lot of lawyers, though. 

Mr. COOPER. I have been an expert witness about 400 times, so 

you spend a lot of time with lawyers. 

Mr. CONYERS. Okay. I have never recommended law school to a 

person your age, but there are honorary degrees, probably, floating 

around in the profession. 

Anybody want to comment on their thinking about the pattern 

of the history of antitrust law in America—Sherman Act 1890, 

Clayton Act 1914, Robinson-Patman Act 1936, Hart-Scott-Rodino 

1976? Where we started off with—while we were protecting people 

originally in the 19th century from consumer fraud, conspiracies, 

collusion, it was anti-monopolistic, price-fixing. Then Clayton came 

in with private—the rights of private lawsuits to enforce antitrust 

law in America; Hart-Scott-Rodino mergers, Robinson-Patman fair 

pricing considerations. 

Is this an era that is gone—we sort of dealt with it? We had a 

rash of cases—big cases—that we study in law school. But now it 

seems like the pendulum is swinging the other way, that we are 

trying to scale back and even to me sometimes strange interpretations of savings clauses, that if you don’t put a savings clause in 

it maybe means that antitrust isn’t being contemplated. 

What do you think, Cooper, Lemley, Thorne, Shelanski? 

Mr. COOPER. I would offer two observations. It is interesting, you 

gave me the following key dates in the antitrust history: 1890, 

1914, 1936, and 1976. I would point out that the Interstate Commerce Act is 1887; the Mann Act, which extended the Interstate 

Commerce Act to telecom, is 1910; and the Federal Communications Act—the Federal Power Act—are all the early 1930’s. 

So the interesting thing is that the notion that we needed both 

regulation and antitrust is deeply embedded in that century of legislative history, so the idea that the Court finds it repugnant to 

have dual jurisdiction just is inconsistent with that history, and I 

think it is really important, as I mentioned in my testimony, that 

Congress legislated both at almost exactly the same time very consciously understanding it needed both. That is, to me, the most important lesson. 

The second point I would make is that the essential facilities doctrine, in an age where digital networks become the center of economic and communications and social activities, the access to that 

essential facilities—that network—becomes more important than 

ever. And of course, that is the issue that the Court was whacking 

away at in this case. 

So we are going in the wrong direction on both counts. We are 

claiming that we ought not have dual jurisdiction when that is 

clearly a part of our history, and we are restricting the access to 

essential facilities when it is more important than ever to have access to those facilities. 

124 

Mr. LEMLEY. I do think antitrust has a—antitrust history has a 

pendulum problem. We started out with the antitrust laws to correct excesses of private behavior and we succeeded, but in some 

sense we succeeded too well and antitrust laws started to reach too 

far into the regulation of private behavior. That pendulum has 

been swinging back for 30 years now and I think it may well have 

swung too far in the opposite direction. 

It is absolutely desirable to have economic analysis and sophistication in thinking about antitrust. I guess I would like to see us 

not push the pendulum back the other way but see if we can get 

it not to swing so far in either direction and to center itself somewhere where we focus on economic analysis, we make the right decisions, but we are not simply saying we have to cut back antitrust 

or we have to expand antitrust at all costs. 

Mr. CONYERS. Professor, what cases were you thinking of when 

you mentioned the pendulum had swung too far? 

Mr. LEMLEY. Well, if you look at the history until a couple of 

weeks ago when the Supreme Court decided the American Needle 

case antitrust plaintiffs, both governmental and private, have been 

on a losing streak in the United States Supreme Court that had 

run 18 years and 18 cases without a single antitrust plaintiff’s victory until American Needle. 

And I do think—I think the concerns that were expressed in the 

early 1980’s about not simply reacting to any private behavior by 

saying, ‘‘There must be an antitrust problem here,’’ were real, but 

I think the opposite concern is equally powerful. You cannot simply 

say, ‘‘Well, if there is any plausible justification that we can come 

up with for why private behavior might be acceptable we should 

automatically defer to that behavior. 

Mr. CONYERS. I quite agree with your analysis with the numbers, 

but name me a case. 

Mr. LEMLEY. Well, so some of the ones—I think the Credit Suisse 

case that we are talking about here is problematic. I think the— 

I think some of the decisions that make it essentially impossible to 

prove certain types of antitrust cases—predatory pricing cases, for 

example—are problematic. Predatory pricing is often over-claimed, 

but that doesn’t mean it doesn’t happen. So the legal standards 

that we have created in cases like Brooke Group may be too strict. 

Mr. CONYERS. Mr. Thorne? 

Mr. THORNE. Two quick observations, Mr. Chairman. First, listening to your summary of the dates, it just—it is amazing to me 

how durable these very simple antitrust laws have been, and I 

think everybody on the panel agrees how important. Justice Marshall was not going too far in talking about the Sherman Act as 

a Magna Carta for free enterprise, almost on the par of the First 

Amendment guaranteeing speech and political participation. It is 

very important and there is no—it is wonderful to see how durable 

it has been. 

As a small second note on Brooke Group and on cases like it, 

these are the new cases that probably add up to the 18 that Professor Lemley talks about. If you think that it is important to have 

antitrust that is fair, efficient, and predictable, you need some clarity for businesses that are going to go out—like Verizon or other 

private enterprises—go out and then actually behave in the marVerDate Aug 31 2005 13:32 Nov 05, 2010 Jkt 000000 PO 00000 Frm 00128 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\061510\56952.000 HJUD1 PsN: 56952
125 

ketplace. So if Verizon is going to price a product it needs to know 

at what point can we go in cutting prices to benefit consumers— 

at what point can we go before we will be in some liability, we will 

be hailed before a one-time lay jury and then told we have priced 

too low, we have hurt our rivals, and now you pay triple damages 

in a class action. 

The predictability comes from having a test like, don’t price 

below your costs. That is something businesses understand. There 

is sometimes a debate about where, you know, this measure of cost 

or another measure of a cost—but the concept, don’t price below 

your costs and you will be okay—— 

Mr. CONYERS. But there is no law against that. 

Mr. THORNE. Well, that is what Brooke Group held, but if Brooke 

Group could be repealed then businesses would not have the predictability of knowing. For example, if I lower my prices today and 

hurt some small rivals I have benefited consumers right away but 

the rivals may not be able to keep up with price cuts. 

So there is a theme in the recent cases of saying a successful 

firm is allowed to do things that benefit consumers. A successful 

firm can cut price down to cost. A successful firm can innovate or 

invest just like a smaller rival can do. These are things that are 

good for consumers, and these are decisions that I think—— 

Mr. CONYERS. Your recommendation is good if the company has 

market power—in other words, if it is big and powerful. If it isn’t 

you can price wherever you want—and I will be corrected on this; 

I have got a number of lawyers that are researching it now. 

Attorney Thorne, do you think you should have won your case? 

Mr. THORNE. The Trinko decision? I thought I should have won 

it in the Second Circuit and I am pleased that we won it without 

dissent in the Supreme Court, and I think it is good law and not 

a mistaken law. Thank you, Mr. Chairman. 

Mr. CONYERS. Well, why didn’t you win? [Laughter.] 

Mr. THORNE. The Second Circuit has, in a series of cases, expressed skepticism not about the particular legal standards that 

apply but the procedural posture of the case. So the way the case 

came up to the Second Circuit and then the Supreme Court was 

on a motion to dismiss. Trinko had not been allowed to take discovery, and we had not been allowed to take discovery of Trinko. So it was on—it was a—complaint with a lot of details which 

gave you the information necessary to decide if there was a complaint there. But the Second Circuit is historically reluctant to decide things on a motion to dismiss; they prefer to see a little discovery. And the phrase of Judge Sack, who was on the Second Circuit panel of writing, he quoted—I think it was Dickens, it was 

with some miscreant in Oliver Twist ‘‘—Let’s see what happens; 

maybe something will turn up.’’ Discovery was and summary judgment, was just the preferred procedure, and I think that is why we 

lost in the Second Circuit. 

Mr. CONYERS. And it reminded me of the sports metaphor—‘‘We 

was robbed.’’ 

Thank you, Mr. Chairman. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Next we will hear from Mr. Chaffetz for questions. 

Mr. CHAFFETZ. Thank you. 

126 

And thank you all for being here. 

Mr. Shelanski, I would like to start with you if I could. Recently 

Congress passed a massive health care reform bill, and the FTC 

has historically pursued numerous antitrust actions in the health 

care field. Are there any concerns that what was passed in March 

will prevent the FTC from bringing price-fixing cases in the health 

care industry? 

Mr. SHELANSKI. Thank you. That is an excellent question. 

We at the commission do a lot of enforcement, as you noticed, in 

the health care sector. It has been historically one of the major regulated industries in which we have operated and continue to operate. And the health care bill, having been recently passed, is something that we are, of course, studying with a great eye to the extent 

to which there may be regulatory provisions that affect our ability 

to continue—— 

Mr. CHAFFETZ. I am not an attorney, by the way, Mr. Chairman. 

I just want to know for the record. If you have got one of those honorary degrees you are handing out let me know, though. That 

would be great. 

Mr. CONYERS. Well, I am sure the law schools are already deciding among themselves which ones will confer you with an honor by 

next summer. 

Mr. CHAFFETZ. Thank you. 

To continue on, Mr. Shelanski, if the FTC and the Department 

of Justice are given different substantive legal standards for bringing antitrust cases how would you deal with all the private class 

action cases that would want to follow in their wake? Would trial 

bar lawyers, class actions, triple damages be allowed to piggyback 

on the government cases? How is that going to work? 

Mr. SHELANSKI. Well, that is obviously going to be an extremely 

important area for policy. And to the extent that what the Supreme 

Court was primarily concerned about were what has been called 

the toxic combination of triple damages and class action—how to 

preserve the good aspects of antitrust without the high error costs, 

where—and not all such cases are inappropriate, I want to be very 

clear about that; but those that are have to be prevented from following on the heels. 

I would make two remarks about that, though. One is that when 

the public agencies win a case that demonstrates that there is 

merit to the claim of anticompetitive conduct, and so to the extent 

that a firm may have further civil damages that flow from proven 

anticompetitive conduct, that is what the antitrust laws are there 

to prevent and to compensate the damage of plaintiffs for. 

But I would also add that where the Federal agencies enforce 

there may be ways for them to resolve claims without precedential 

effects. The Federal Trade Commission Act brings all of its competition law cases technically under Section 5—that is of not the 

Sherman Act, not the Clayton Act, but the Federal Trade Commission Act. It does not provide for private rights of—automatic private rights of action. It does not provide for triple damages; and 

which also provides, under the Supreme Court’s very decision in a 

number of other cases for—antitrust law, but clearer that private 

plaintiffs can follow on with those actions. 

127 

Mr. CHAFFETZ. Let me continue on here regarding Trinko here. 

You argued that ‘‘The Second Circuit’s erroneous construction of 

Section 2 would fundamentally transform the Sherman Act so as 

to require monopolists to pull their competitive punches, assist 

their competitors, convert themselves from retailers into wholesalers, and share monopoly profits on demand.’’ Are you repudiating your earlier findings in the Supreme Court, and why, and 

what has changed? 

Mr. SHELANSKI. Okay, I just want to be clear—I am not sure I 

wrote those words—— 

Mr. CHAFFETZ. Okay, assuming that it is not a quote, but generally the spirit of what I said there—I am happy to repeat it, but 

I believe I am pulling from a direct quote here that was in the 

brief, at least—— 

Mr. SHELANSKI. Okay. Okay. I thought you were quoting the testimony. I am sorry. 

Mr. CHAFFETZ. My apologies. From the brief—— 

Mr. SHELANSKI. The public antitrust agencies are just as concerned with sound antitrust enforcement as the Supreme Court is, 

and the public agencies would, I think—what they were expressing 

in that brief—and I want to be clear that I was neither an author 

of the brief nor am I authorized to speak on behalf of those that 

were—but my personal interpretation of what was written in that 

brief was a concern that refusals-to-deal not be too automatically 

punished because, as Mr. Thorne has argued, when you have successfully developed a product and successfully innovated in an area 

there should—it would be harmful, as the FTC has often stated, for 

American consumers if you automatically had to turn over that innovation, that invention, that product to a rival. That could harm 

competition rather than help competition. 

And I think what was being expressed in the brief was a concern 

that we not have a rule that, as we were talking about pendulums, 

that goes too far in telling successful innovators that as successful 

competitors you have to confer your advantage on your rivals. As 

Justice Scalia said in the Trinko case, that could harm competition, 

not help it, and I don’t think we disagree with that. 

The question is, as my colleague, Professor Lemley said, where 

that pendulum is set. The Court may have gone too far in Trinko. 

Mr. CHAFFETZ. Thank you, Mr. Chair. 

Mr. JOHNSON. Thank you. 

Next we will hear from Mr. Polis with questions. 

Mr. POLIS. I join my colleague from Utah as a non-attorney on 

the Committee. A basic question maybe one of you can help me 

with is the concept—legal term—regulated industry binary and 

clear, or is it a continuum of what a regulated industry is or isn’t? 

Mr. LEMLEY. I think the answer is it is clearly—it is a continuum 

and that is a significant part of the problem. In some sense all industries are regulated, they are all subject to health and welfare 

regulation, environmental oversight and that sort of thing, and so 

one of the worries is that if we defer in—if antitrust law defers to 

any area in which there is regulation in the modern economy that 

may be almost on to everyone. Now, obviously some industries are 

more heavily regulated—— 

128 

Mr. POLIS. If we take an example—if we can comment on the 

publishing industry as an example. This would be an industry that 

has some regulation, especially regarding, you know, sale of books 

and pricing and so forth that could be viewed within the antitrust 

realm. Is that one that falls somewhere on the continuum between—if anybody is familiar already with that industry—between 

regulated and unregulated? 

Mr. LEMLEY. I think it is probably a less regulated industry than 

most, but—and it is certainly the case that we wouldn’t want antitrust to step away from actions in the book publishing industry. 

There were, in the last 10 years, significant antitrust cases brought 

against price-fixing behavior among publishers, and we don’t want 

to give cover to antitrust violations as private defendant have 

sometimes suggested in other industries merely because there is a 

regulatory component. 

Mr. POLIS. And some of the regulated industries on that end are, 

in fact, regulated for other reasons, and indeed, for primary reasons unrelated to competition policies. Is that correct as well? 

Mr. LEMLEY. Absolutely. Absolutely. 

Mr. POLIS. Do you have any examples of that you can give, what 

you might consider a regulated industry where the primary thrust 

of the regulatory structure is not necessarily around the same 

types of concerns that antitrust law address? 

Mr. LEMLEY. Well, I mean, so I think one example is securities 

regulation, right, where our interests are in—they are in some 

sense bound up with the working of the marketplace, but they are 

not with competition in the same sense antitrust law thinks about 

it. But environmental regulation obviously fits into that category as 

well. If we are restricting the way in which you run a coal mine 

we are not doing it in order to encourage competition; we are doing 

it because we are worried about the environmental consequences—— 

Mr. POLIS. And in your opinion there is not any legislative legal 

language in the regulatory structure that is created for many of 

these regulated industries that specifically was designed by Congress to exempt them from antitrust? 

Mr. LEMLEY. I think that is right, and I think that is right precisely because the assumption, until 6 or 7 years ago, was that we 

didn’t need legislative language to solve this problem because 

courts wouldn’t impliedly repeal the antitrust laws merely because 

there was regulation. And it is that assumption that has been 

called into question. 

Mr. POLIS. Right. So an answer—a legislative answer—could 

take two forms. One would be modifying the Antitrust Act to explicitly not exempt regulated industries; the others would be to 

amend the relevant regulations for the respective industries to 

make it clear that nothing contained in those acts exempt them 

from antitrust. 

Mr. LEMLEY. Right. And I will just mention in the latter category 

that there are an awful lot of regulations out there. The former 

seems the simpler approach. 

Mr. POLIS. I should ask, clearly the former is the simpler approach, also, perhaps, you know, difficult—so would it, in fact, be 

legally constructive going forward when we look at industry regulaVerDate Aug 31 2005 13:32 Nov 05, 2010 Jkt 000000 PO 00000 Frm 00132 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\061510\56952.000 HJUD1 PsN: 56952
129 

tion to include boilerplate language not exempting them from antitrust, or could that be taken as a point of evidence that, in fact, 

the ones that don’t contain that language it wasn’t contemplated? 

Would you recommend that—would you consider recommending 

that course of action to us going forward in the industries who regulate? 

Mr. LEMLEY. So I think it is a worry, right, because one of the 

cannons of construction the courts use is, ‘‘Well, you said it here, 

you didn’t say it here, so in the second category you must not have 

meant it to apply,’’ which is why I think that the general approach 

within the antitrust laws is the proper one. 

Mr. POLIS. Yes. Thank you. Just as a—and this would obviously—the counterargument would be as a reaction to a precedent 

that didn’t exist when the other laws were set up. You are correct, 

obviously, legislatively in terms of opening up all the various industries that are regulated not the most likely political occurrence. But 

certainly going forward, absent an ability to modify the Antitrust 

Act itself, it certainly is a possibility that we could explore at the 

same time as we started to explore a clarification within the Antitrust Act. 

I appreciate your answers and I yield back. 

Mr. JOHNSON. Thank you, Mr. Polis. 

Next, Mr. Goodlatte? 

Mr. GOODLATTE. Well, thank you, Mr. Chairman. I appreciate 

your holding this hearing and I appreciate this very interesting discussion by our panelists. 

To follow up on the comments of the gentleman from Colorado, 

you could also take it a step further and in writing revisions to our 

antitrust laws say that when those laws are applied under circumstances specified in the law they would supersede the regulatory effect. 

My concern here is this: I am very much a supporter of our antitrust laws, and I do not think we apply them as often as we should, 

and I share some of the concerns that have been expressed here. 

But quite frankly, I think antitrust has a more positive effect on 

our economy when it tells an entity, you can’t do a certain thing 

because of its anticompetitive effect. But that still incentivizes that 

business to find a different way to deliver those services to their 

customers that they were told they couldn’t deliver in that fashion 

because it had an unfair effect on their competition. Whereas with 

regulation my fear is that the regulatory process is, you will do this 

but you will do it this specific way, and that often has a very negative impact upon the incentive of businesses to be innovative in 

their process. So the clashing of those two ideas here is one that 

I respect, quite frankly, the Court’s concerns. 

And Professor Lemley, let me ask you in that regard: You are 

talking about reversing the presumption. Help me juxtapose that 

with the Supreme Court’s decision in Credit Suisse in which they 

have set forth this four-factor test which seems to me would put 

some burden on the defendant in those cases to first say, hey, there 

are regulations here, number one. Number two, the regulatory 

agency, whether it is FTC or somebody else, is indeed exercising 

their authority under those regulatory powers. Thirdly, that there 

would be a conflict that would exist between those regulations and 

130 

the exercise of the antitrust decision. And then finally, whether the 

practices would be subject to conflicting requirements lie within the 

heart of the securities laws. Obviously this decision could well be 

read to only apply to the securities industry. 

But that seems to be a pretty good test. What is your response 

to that? 

Mr. LEMLEY. Well, so I think my first response is that test in 

the—articulated in the abstract is not a bad test. As applied in the 

actual Credit Suisse case it didn’t work because the very conduct— 

the conduct that was in question, I think, was pretty clearly anticompetitive, and the regulatory decision to which the Court chose 

to defer was not an affirmative decision to require the conduct or 

even to bless the conduct; it was merely regulatory in action, the 

fact that the FCC hadn’t brought an action against this particular 

conduct. 

Mr. GOODLATTE. So good test but bad decision? 

Mr. LEMLEY. Yes, I think that is right. 

Now, so I think the—so my worry, then, is, you know, what is 

the—how are lower courts who are reading this decision as applied 

in this context going to take terms like, ‘‘Is there a conflict between 

the two?’’ If there is a real conflict—if the regulation affirmatively 

says you have to do it this way—then yes, you shouldn’t hold people liable for violating the antitrust laws for doing what the regulators told them they had to do. That would be unfair. 

I agree with you, on the other hand, that if we have a choice between and antitrust regime that says, don’t engage in anticompetitive conduct but feel free to compete otherwise, we are better off 

choosing that over a regulatory system that tells people how they 

have to compete. And so my instinct would be to say we ought to 

limit the circumstances in which we think there is a real conflict 

between regulation and the antitrust laws as much as possible. 

Mr. GOODLATTE. How does your ‘‘reversing the presumption’’ differ from this test? I mean, what would you add to that or how 

would you differ from that in terms of attempting to reinstate some 

antitrust authority here without creating too many of these conflicts between the antitrust enforcement and regulatory enforcement? 

Mr. LEMLEY. Well, I think the focus should, in fact, be on conflict. That is, I think if we simply had a rule that said, the antitrust laws apply here, they haven’t been repealed, they can nonetheless—they should nonetheless be—antitrust should defer to actual actions by the regulators and they ought to defer in circumstances in which there really is a conflict so that the behavior 

by the defendant is compelled by the regulators and so it can’t be 

an antitrust violation as a result. You can’t put a private company 

in the position of having to violate one law or the other. 

But short of that, if the government hasn’t acted and if the government’s regulatory scheme doesn’t put people in the position that 

they are going to run afoul of one regime or the other, unless there 

is an express immunity that Congress has adopted, I don’t think 

the courts should be creating one by implication. 

Mr. GOODLATTE. Mr. Chairman, my time is expired. I wonder if 

I might ask Mr. Thorne if he—I know he didn’t profess to be an 

expert on the Credit Suisse decision, but he might visualize how 

131 

this discussion that we have just had might impact his company 

and his point of view about this. 

Mr. THORNE. Well, my company is probably not affected by Credit Suisse because in—— 

Mr. GOODLATTE. You are not in the securities industry, but—— 

Mr. THORNE. The telecom statute has a very strong, explicit savings clause, so antitrust is fully preserved for telecom. But, you 

know, I have read the Credit Suisse decision. I noticed how deeply 

context-specific it was. It didn’t seem like a blanket rule was going 

to work. It was something that depended on the rules, depended 

on the facts. 

The Securities Exchange Commission there was an advocate for 

immunity. The Justice Department came in on the other side and 

said, no, we think we have got a way to make antitrust work despite your concerns about needing all the cooperation of the firms 

to aggregate capital. So it sounds like something where you would 

want the advice of the SEC in crafting something that will change 

how the SEC-related rules were immunizing against antitrust conduct. 

Mr. GOODLATTE. And if I might also ask Mr. Shelanski to talk 

about that very point, you had a conflict between two government 

agencies—not yours, but the SEC and the Justice Department—the 

court of appeals, the Department of Justice, and the SEC had decidedly different positions on the question of whether security law 

is preemptive in the antitrust laws. Can you explain the position 

that the agencies took before the Supreme Court and the extent to 

which the Court adopted the government’s position? Would the 

FTC take the same position today? 

Mr. SHELANSKI. I can’t speak to whether the FCC would take the 

same position today—— 

Mr. GOODLATTE. I said the FTC. 

Mr. SHELANSKI. Oh, the FTC. I think that our position would be 

very much along the—I can’t speak for the agency, but our testimony today suggests that our testimony would be very much along 

the lines, or our position would be very much along the lines of the 

position that the Department of Justice took. 

We as a public agency can make a reasoned judgment about 

whether the conduct we are attacking is reached or not by regulation and whether or not we can frame the issue crisply enough that 

a court can separate the antitrust conduct from regulated conduct. 

There is a profound irony that the Credit Suisse court did not address. The very courts that they are saying are incapable of avoiding confusion between the securities laws and separate non-regulated antitrust conduct are the same courts they are saying will 

have to apply the four-part test whenever a conflict comes up. I 

find that to be a little bit strange. 

And just to address your other point, I agree fully that fixed 

rules that say you must do something in a particular way are less 

desirable than more targeted and more flexible antitrust enforcement. There is a risk after Credit Suisse and after Trinko that regulatory agencies will feel they have to be more rather than less aggressive because of fear that antitrust cannot play its backup role. 

That was a concern of the Justice Department in the Credit Suisse 

132 

case and I think it is a concern that we at the commission would 

have today. 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

Mr. JOHNSON. Thank you. 

I have one additional question. What is the cumulative effect on 

public and private enforcement of antitrust laws of the Supreme 

Court’s decisions in Trinko and Credit Suisse? What is the cumulative effect? 

And I would like to get a response from you all. 

Mr. SHELANSKI. Well, I will begin with addressing the public enforcement side of your question and I will try to say a word about 

private enforcement as well. Certainly at the FTC we do a substantial amount of enforcement in regulated industries—health care 

and electricity, just to name two, would be a couple of areas—— 

We have to think very carefully in our enforcement decisions 

going forward about whether or not we will, in a given case, run 

into a Credit Suisse or a Trinko problem, so it certainly imposes 

a burden and a litigation of risk on the agency. And as I said in 

response to Mr. Chaffetz, this is something that is, going forward, 

going to be a serious concern for us in health care, energy, other 

industries. 

On private enforcement, the only thing I can say is it must—I 

think both of these cases will, over time, and perhaps have already, 

although we can’t observe cases that have soon happened because 

counsel said we can’t bring the case, but I would imagine that it 

is a—the effects have been to reduce private enforcement. 

Mr. THORNE. Mr. Chairman, as a private enforcer, Trinko and 

Credit Suisse have not cooled our ardor at all in seeking to fully 

enforce the antitrust laws. As I mentioned in my written testimony, after Trinko we brought a case in a highly regulated industry. We felt no deterrent from the Trinko decision. We think Trinko 

lines up squarely with the prior precedents and didn’t change anything. 

And again, I am not an expert, but as I read Credit Suisse that 

is a case that is specific to the SEC context, and I don’t see that 

precluding private enforcement. And if you look at the good work 

that the Justice Department and the FTC have done in this Administration so far I don’t see these cases cooling their ardor at all 

either. 

Mr. JOHNSON. Thank you, Mr. Thorne. Very careful analysis. 

Professor? 

Mr. LEMLEY. I think the cases have emboldened the companies 

that are regulated to look for ways that they can game the system, 

because if they can engage in conduct that is within or find shelter 

in regulation they are more confident that they will escape antitrust scrutiny, and I think that is a bad thing. 

Mr. COOPER. That is my concern and I have expressed it already—the dynamic of establishing the principle that if you never 

deal you never have to deal. In industries where we have deeply 

interconnected networks and essential facilities is leading us to a 

place where you get people with the ability to really frustrate the 

entry of competition. 

Mr. JOHNSON. Thank you. 

133 

And are there any other questions from Members of the Committee? 

With that, I will conclude this hearing. I would like to thank all 

of the witnesses for their testimony, and without objection Members will have 5 legislative days to submit any additional written 

questions which we will forward to the witnesses and ask that you 

answer as promptly as you can to made a part—to be made a part 

of the record. Without objection the record will remain open for 5 

legislative days for the submission of any other additional materials. 

Today’s hearing has raised troubling questions regarding the Supreme Court’s attitude toward antitrust laws and the ability of the 

lower courts to enforce them. I remain concerned that this is part 

of a larger disregard held by this Court toward the will of Congress. 

And with that, this hearing of the Subcommittee on Courts and 

Competition Policy is adjourned. 

[Whereupon, at 11:48 a.m., the Subcommittee was adjourned.] 

(135) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF THE HONORABLE HOWARD COBLE, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NORTH CAROLINA, AND RANKING MEMBER, SUBCOMMITTEE ON COURTS AND COMPETITION POLICY

Mr. Chairman, thank you for calling this hearing of the Courts and Competition 

Policy Subcommittee. 

Today’s hearing could have profound implications for the jurisdiction of this subcommittee. It deals with two Supreme Court cases that, if the critics are correct, 

could severely limit the reach of antitrust laws in regulated industries. 

I am of two minds on today’s hearing. On the one hand, I am a strong supporter 

of our federal antitrust laws. They are critical to ensuring that customers receive 

the benefits of competition, namely, lower prices and greater choices. 

So, to the extent that these decisions can be read as blanket exemptions from the 

antitrust laws, I am skeptical of their reach. 

On the other hand, I am wary of over-regulating businesses or, what is worse, 

giving businesses conflicting regulatory demands. 

So, to the extent that these decisions can be read as merely clarifying the regulatory burden borne by businesses, I am supportive. 

The fact that these decisions can be read two different ways really complicates 

matters. For example, is Trinko merely a limit on the extent that antitrust law can 

compel a dominant firm to deal with its rivals? Or is it a blanket antitrust exemption for the telecommunications industry, despite an antitrust savings clause in the 

1996 Telecommunications Act? 

These are very complicated and weighty issues in antitrust law and I am glad 

that we have such a diverse panel of experts to help us understand the reach of 

these decisions. 

These questions are hardly just academic. Currently, Members of both the House 

and Senate are meeting to reconcile the financial services regulatory bill. Both 

versions of that legislation contain antitrust savings clauses. Depending on what we 

learn here today, we may need to revisit that language to ensure that courts will 

honor Congressional intent with respect to the role that antitrust will play in the 

financial services industry going forward. 

With that, I look forward to hearing from all of our witnesses on this important 

topic. 

I yield back the balance of my time. 

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