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98–754 PDF 2016

S. HRG. 113–803 

OVERSIGHT OF THE ENFORCEMENT OF THE 

ANTITRUST LAWS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ANTITRUST, 

COMPETITION POLICY AND CONSUMER RIGHTS 

OF THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

APRIL 16, 2013 

Serial No. J–113–13 

Printed for the use of the Committee on the Judiciary 

( 
(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

DIANNE FEINSTEIN, California 

CHUCK SCHUMER, New York 

DICK DURBIN, Illinois 

SHELDON WHITEHOUSE, Rhode Island 

AMY KLOBUCHAR, Minnesota 

AL FRANKEN, Minnesota 

CHRISTOPHER A. COONS, Delaware 

RICHARD BLUMENTHAL, Connecticut 

MAZIE HIRONO, Hawaii 

CHUCK GRASSLEY, Iowa, Ranking Member 

ORRIN G. HATCH, Utah 

JEFF SESSIONS, Alabama 

LINDSEY GRAHAM, South Carolina 

JOHN CORNYN, Texas 

MICHAEL S. LEE, Utah 

TED CRUZ, Texas 

JEFF FLAKE, Arizona 

BRUCE A. COHEN, Chief Counsel and Staff Director 

KOLAN DAVIS, Republican Chief Counsel and Staff Director 

SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS

AMY KLOBUCHAR, Minnesota, Chairman 

CHUCK SCHUMER, New York 

AL FRANKEN, Minnesota 

CHRISTOPHER A. COONS, Delaware 

RICHARD BLUMENTHAL, Connecticut 

MICHAEL S. LEE, Utah, Ranking Member 

LINDSEY GRAHAM, South Carolina 

CHUCK GRASSLEY, Iowa 

JEFF FLAKE, Arizona 

CRAIG KALKUT, Democratic Chief Counsel 

ROB PORTER, Republican Chief Counsel 
(III) 

C O N T E N T S 

APRIL 16, 2013, 2:38 P.M. 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Franken, Hon. Al, a U.S. Senator from the State of Minnesota .......................... 4 

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

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

prepared statement .......................................................................................... 52 

Lee, Hon. Michael S., a U.S. Senator from the State of Utah ............................. 2 

WITNESSES 

Witness List ............................................................................................................. 27 

Baer, Hon. William J., Assistant Attorney General, Antitrust Division, 

U.S. Department of Justice, Washington, DC ................................................... 5 

prepared statement .......................................................................................... 28 

Ramirez, Hon. Edith, Chairwoman, Federal Trade Commission, 

Washington, DC ................................................................................................... 7 

prepared statement .......................................................................................... 38 

QUESTIONS 

Questions submitted to Hon. William J. Baer by: 

Senator Blumenthal ......................................................................................... 54 

Senator Grassley .............................................................................................. 56 

Senator Klobuchar ............................................................................................ 59 

Senator Leahy ................................................................................................... 62 

Senator Lee ....................................................................................................... 65 

Questions submitted to Hon. Edith Ramirez by: 

Senator Grassley .............................................................................................. 58 

Senator Klobuchar ............................................................................................ 61 

Senator Leahy ................................................................................................... 63 

Senator Lee ....................................................................................................... 73 

ANSWERS 

Responses of Hon. William J. Baer to questions submitted by Senators 

Blumenthal, Grassley, Klobuchar, Leahy, and Lee ........................................... 115 

Responses of Hon. Edith Ramirez to questions submitted by Senators 

Grassley, Klobuchar, Leahy, and Lee ................................................................. 82 

MISCELLANEOUS SUBMISSIONS FOR THE RECORD 

American Dental Association, statement ............................................................... 140 

(1) 

OVERSIGHT OF THE ENFORCEMENT OF THE 

ANTITRUST LAWS 

TUESDAY, APRIL 16, 2013 

UNITED STATES SENATE, SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND

CONSUMER RIGHTS, COMMITTEE ON THE JUDICIARY, Washington, DC. 

The subcommittee met, pursuant to notice, at 2:38 p.m., in room 

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

Chairman of the Subcommittee, presiding. 

Present: Senators Klobuchar, Franken, Blumenthal, and Lee. 

OPENING STATEMENT OF HON. AMY KLOBUCHAR, 

A U.S. SENATOR FROM THE STATE OF MINNESOTA 

Chairman KLOBUCHAR. Good afternoon, everyone, and I think we 

all know before we start that all our thoughts and prayers are with 

the victims and their families in Boston. And seeing that last night, 

where I am sure everyone watched it on TV and saw those first responders, the police and fire and volunteers and just regular citizens, people who had just run 26 miles were not running away 

from that but were running toward it to help their fellow citizens. 

So our thoughts and prayers are with everyone in Boston. 

We have a good hearing today, and we have a good attendance 

in our hearing room, and I want to thank my colleagues that are 

here: Ranking Member Senator Lee as well as my colleague in 

Minnesota, Senator Franken. 

With us today, as you know, we have Assistant Attorney General 

Baer for his first appearance, right? Is that correct, except for your 

confirmation? 

Mr. BAER. That is correct. 

Chairman KLOBUCHAR. Okay, good. Just to get that clear. As 

well as FTC Chairman Ramirez, we thank you so much for coming 

and being here as well, and we congratulate you on your new appointment. 

We are pleased to have both of you here so we can discuss the 

critical competition issues that impact consumers. We look forward 

to hearing about your priorities and what you envision as being the 

cutting-edge antitrust issues that our country faces, and that you 

believe we in Congress should be monitoring, focusing on, and 

pushing. 

The legal technicalities behind our antitrust laws will not be familiar to most Americans, but the fruits of effective antitrust enforcement are. Companies vigorously competing for business to 
2 

offer the lowest prices and the highest quality and most innovative 

goods and services is really what competition is all about. And that 

is something I would like to highlight today in that vigilant antitrust enforcement means more money in the pockets of American 

consumers. 

It means identifying and preventing competitive problems before 

they occur, like stopping a merger that would allow a few dominant 

players to raise prices, or when a merger is allowed to move forward, putting conditions in place to protect competition. 

It means stopping price-fixing cartels that hurt consumers by artificially inflating prices for goods such as auto parts, TVs, and tablet computers. Last year alone, the Justice Department obtained 

more than $1 billion in criminal antitrust fines. 

And it means challenging anticompetitive practices like pay-fordelays, settlement agreements that keep cheaper generic drugs 

from coming onto the market. The FTC estimates that consumers 

and taxpayers would save billions of dollars each year if these anticonsumer agreements were stopped. 

Antitrust enforcement is also a boost for our economy. Unfettered 

competition spurs innovation and fosters economic growth, leading 

to more jobs and greater prosperity. 

Antitrust and competition policy are not Republican or Democratic issues. They are consumer issues. We can all agree that robust competition is essential to our free market economy and critical to ensuring that consumers get the best prices. In the words 

of the great Supreme Court Justice Thurgood Marshall, Antitrust 

laws in general and the Sherman Act in particular are the Magna 

Carta of free enterprise. They are as important to the preservation 

of economic freedom and our free enterprise system as the Bill of 

Rights is to the protection of our fundamental personal freedoms. 

As a former prosecutor, I know how important it is to have a 

good cop on the beat, ready and willing to go to court when necessary to enforce the law. So we hope that both of you, Mr. Baer 

and Chairman Ramirez, are mindful of that special responsibility 

that you have to consumers. And we trust but will also verify that 

you will see to it that the American people are well served by flourishing competition. Millions of consumers depend on your efforts 

and your judgment to ensure that the economy is sufficiently vibrant. 

You both have inherited a legacy at the Antitrust Division and 

the FTC, and it is my sincere hope and full expectation that you 

will strive to uphold this legacy in the years ahead. I look forward 

to your testimony, and I turn it over to my Ranking Member here, 

Senator Lee. 

OPENING STATEMENT OF HON. MICHAEL S. LEE, 

A U.S. SENATOR FROM THE STATE OF UTAH 

Senator LEE. Thank you very much, Madam Chair. Our meeting 

today marks the Subcommittee’s first antitrust oversight hearing 

since President Obama’s re-election last November. It is also the 

Subcommittee’s first oversight hearing since Assistant Attorney 

General Baer was confirmed to lead the Department of Justice’s 

Antitrust Division and Ms. Ramirez replaced Chairman Leibowitz 

as the head of the FTC. Both Mr. Baer and Chairwoman Ramirez 
3 

are highly respected within the Antitrust Committee, and I thank 

both of them for their service and for being here with us today. 

Checks and balances are, of course, essential to our constitutional system. As James Madison wrote in Federalist No. 51, the 

Constitution establishes subordinate distributions of power where 

the constant aim is to divide and arrange the several offices in 

such a manner that each may be a check on the other. Congressional oversight is a critical means by which the legislative branch 

may act as a check on the executive. Meaningful oversight ensures 

that the executive branch and enforcement agencies within that 

branch are accountable to the people not only through the election 

of the President every 4 years, but also by means of democratically 

elected Representatives in Congress who seek to ensure that our 

laws are administered faithfully and impartially. 

Compared to its prolix pronouncements in other areas of the law, 

Congress has given relatively little guidance to enforcement agencies regarding the proper approach to competition law. Whether 

wisely or not, Congress has enacted statutes with broad language 

and significant mandates, leaving many of the details to be sorted 

out in cases brought before Federal courts. 

This does not, of course, mean that antitrust enforcement has not 

sometimes become political. To the contrary, industry participants 

have long sought to influence enforcement agencies or to apply, or 

even misuse, the antitrust laws to the detriment of their competitors. 

Others with ideological rather than business goals in mind have 

attempted to transform competition law into a vehicle for wealth 

redistribution or for other social policies. 

Fortunately, in recent decades, and particularly since the publication of Robert Bork’s authoritative work, ‘‘The Antitrust Paradox,’’ antitrust enforcers have increasingly relied on objective 

metrics and rigorous economic analysis. Doing so provides greater 

transparency and certainty for the business community, which can 

rely on stable rules and know that decisions are usually the result 

of a fair and rational process. 

Perhaps most importantly, Bork’s approach has become a consensus norm that the purpose of antitrust enforcement is neither 

to protect competitors from competition nor to inject Government 

regulators into the economy, but instead to maximize the welfare 

of the consumer. 

As Mr. Baer very eloquently put it during his confirmation hearing before this Subcommittee last summer, antitrust enforcement 

is best when it has a sound analytical foundation and when it focuses on behavior that poses a serious risk to economic harm to the 

American people. 

In light of these considerations, the need for congressional oversight of executive administration, the broad language of the antitrust statutes, and the risk that political forces will perversely seek 

to decouple antitrust enforcement from economic analysis, our Subcommittee’s oversight role takes on particular significance. We 

must be vigilant in guarding against novel and illegitimate antitrust doctrines. 

But our duty does not end there. We have an obligation to help 

ensure that antitrust analysis is grounded in consistent, rational, 
4 

evidence-based processes, and that antitrust enforcers are not 

swayed by political or business pressures extraneous to the objective task before them. 

Although it requires patience and sustained effort, evidencebased antitrust is the only legitimate approach because it provides 

the best results for consumers. It grounds our discussion in facts, 

and it focuses our efforts on a shared goal: the benefit of the American people. 

Properly limited enforcement of our antitrust laws, therefore, 

need not be partisan in nature. Antitrust law protects free markets, and free markets are the most effective means for allocating 

scarce resources to their highest-valued uses. 

I am committed to protecting free markets from both unnecessary Government intervention and private anticompetitive conduct. 

I hope the matters we discuss today will help illuminate the ways 

in which the Department of Justice and the FTC are properly, and 

perhaps in some cases improperly, carrying out the important task 

of faithfully and objectively enforcing our Nation’s antitrust laws. 

Thank you, Madam Chair. 

Chairman KLOBUCHAR. Well, thank you very much, Senator Lee. 

I note, Mr. Baer, for your first hearing you kind of have a leg 

up when the Ranking Republican quotes you and Robert Bork in 

the same statement, so this is good for you. 

[Laughter.] 

Chairman KLOBUCHAR. Okay. We now turn to Senator Franken. 

OPENING STATEMENT OF HON. AL FRANKEN, 

A U.S. SENATOR FROM THE STATE OF MINNESOTA 

Senator FRANKEN. I will make this short. Thank you, Madam 

Chair, for starting off today’s hearing with your remarks about the 

senseless attack in Boston. All Minnesotans’ and I know all Americans’ hearts go out to the people up there. 

I want to congratulate Chairwoman Klobuchar on her new position as Chair of the Antitrust Subcommittee. She has big shoes to 

fill following Senator Kohl’s retirement, but I know she is up to the 

task and is going to do a tremendous job as Chair of this very important Subcommittee. 

Mr. Baer and Ms. Ramirez, welcome. Thank you for appearing 

with us today. It has been far too long since our last oversight 

Committee hearing, and I hope these can be more regular going 

forward. 

Mr. Baer, before we get started, I want to commend the Department for its comments to the FCC last week on the need to make 

spectrum available to smaller wireless carriers rather than the big 

incumbent carriers. As you may know, I opposed the AT&T/T-Mobile merger and was pleased that the Department sued to block 

that deal. More needs to be done to make sure that smaller and 

mid-sized carriers are able to build out their networks and to be 

competitive. And I hope that you will continue to play an active 

role in pushing the FCC to promote competition and protect the 

public interest. 

With that, Madam Chair, I turn it to you. 

Chairman KLOBUCHAR. Thank you very much, Senator. 

I would like to introduce our witnesses here today. 
5 

The first witness, Mr. William Baer. Mr. Baer was sworn in as 

the Assistant Attorney General for the Department of Justice Antitrust Division on January 3, 2013. Prior to his appointment, he 

was a partner at Arnold & Porter and head of the firm’s antitrust 

practice group and head of the FTC’s Competition Bureau from 

1995 to 1999. 

Our second witness is FTC Chairwoman Edith Ramirez. She was 

sworn in as a Commissioner of the FTC in April 2010 and designated Chairwoman by President Obama on March 4th of this 

year. Before joining the Commission, Ms. Ramirez was a partner 

in private practice in Los Angeles representing clients in intellectual property, antitrust, and unfair competition suits. 

Thanks to both of you for appearing at our Subcommittee hearing, and we are going to have you testify. I would ask you to rise 

and raise your right hand as I administer the oath. Do you affirm 

that the testimony you are about to give before the Committee will 

be the truth, the whole truth, and nothing but the truth, so help 

you God? 

Mr. BAER. I do. 

Ms. RAMIREZ. I do. 

Chairman KLOBUCHAR. Thank you. 

Please go ahead, Mr. Baer. You each have 5 minutes. 

STATEMENT OF WILLIAM J. BAER, ASSISTANT ATTORNEY 

GENERAL, ANTITRUST DIVISION, U.S. DEPARTMENT OF 

JUSTICE, WASHINGTON, DC 

Mr. BAER. Thank you, Chairwoman Klobuchar, Ranking Member 

Lee, Senator Franken. It is a privilege to be here. It is even more 

of a privilege when the microphone is on. 

[Laughter.] 

Mr. BAER. As you may be aware, Attorney General Eric Holder 

issued a statement just a few minutes ago. I want to take a moment to convey on behalf of the Department of Justice our deepest 

condolences to the victims and their families who have been affected by yesterday’s tragic attack in Boston. Our thoughts and 

prayers go out to them. Attorney General Holder has directed the 

full resources of the Justice Department to be deployed to ensure 

this matter is fully investigated. 

As Chairwoman Klobuchar noted, I have been at the Antitrust 

Division for just a short time, but I am honored to be part of its 

proud and successful tradition of vigorous antitrust enforcement. It 

is a privilege as well to be sitting next to the new head of the Federal Trade Commission, Edith Ramirez. She is an exceptional public servant and a friend. We are looking forward to working together on behalf of American consumers. 

Competition is the cornerstone of our Nation’s economic foundation. The antitrust laws serve to promote and protect a free-market 

economy by prohibiting anticompetitive agreements, conduct, and 

mergers that distort market outcomes. 

When markets are working, consumers benefit from lower prices 

and higher-quality goods and services. As Senator Lee noted, this 

is not a partisan issue. We all agree that firms should not be able 

to distort the economic choices available to consumers, or to sellers 

in upstream markets. 
6 

The Antitrust Division focuses its enforcement efforts on the 

products consumers use every day—the items we buy at the grocery store, media and entertainment, communications, consumer 

electronics, and new technologies—as well as other goods and services that have a significant impact on our Nation’s economy. That 

includes health care, agriculture, transportation, energy, and financial services. With your permission, I would like to drill down in 

two areas—first, cartel enforcement. 

Price fixers and bid riggers do serious and demonstrable harm to 

consumers. Criminal prosecution of these wrongdoers is critical. We 

target domestic and international cartels that rob consumers of 

their hard-earned dollars. In the last Fiscal Year alone, the Division filed 67 criminal cases; 16 corporations and 63 individuals 

were charged. We obtained, as the Chairwoman noted, criminal 

fines of well over $1 billion, and the courts sentenced 45 individuals to jail terms that averaged over 2 years per defendant. 

Aggressively pursuing cartels benefits consumers in multiple 

ways. The specific price fixing is eliminated, and the wrongdoers 

are punished. Other wrongdoers are put on notice that they may 

be next, and they have a real incentive to discontinue yet undetected illegal conduct. And those contemplating price fixing realize 

the risk they are running and are deterred from committing the 

crime in the first instance. 

American consumers and taxpayers are well served by these ef- forts. In the last 5 years, we averaged criminal fines of almost $800 

million per year, and at the same time, in that 5-year period, our 

average annual net appropriation was just about 10 percent of 

that, or $80 million. These fines do not go to the Antitrust Division. 

They go to the Crime Victims Fund, helping those victimized by 

crimes, not just antitrust crimes, throughout the country. 

Our civil enforcement efforts at the Antitrust Division also 

produce important results for American consumers. Let me just 

give one example. 

Last year, together with 33 State Attorneys General, we challenged a conspiracy involving Apple and five major book publishers 

to raise prices for electronic books, e-books. The results tell us stories. Our State Attorney General partners have already obtained 

customer refunds of over $80 million from the defendant publishers. Our settlements with those publishers forced them to abandon going forward the agreements that had kept e-books’ prices 

high, and those settlements have restored meaningful retail price 

competition for e-books. What do I mean? According to published 

reports, in just the last few months, the average price for the top 

25 bestsellers on the New York Times Best Seller list dropped by 

over $3, from $11 a book to $8. 

As my statement for the record details, the Antitrust Division is 

busy doing other important work that I would be happy to discuss. 

That written statement further illustrates how our efforts can have 

a tangible and enduring impact on the markets that matter most 

to American consumers. 

Senators, Chairwoman Klobuchar, I realize that Congress and 

the American public legitimately hold its public servants to a high 

standard, and you should. I can assure you that the Antitrust Division’s dedicated public servants are working hard to enforce the 
7 

antitrust laws vigorously for the benefit of American consumers. As 

my testimony seeks to demonstrate, we are putting scarce American taxpayer dollars you entrust us with to good use. 

Thank you. 

[The prepared statement of Mr. Baer appears as a submission for 

the record.] 

Chairman KLOBUCHAR. Thank you very much. 

Chairman Ramirez. 

STATEMENT OF THE HONORABLE EDITH RAMIREZ, CHAIRWOMAN, FEDERAL TRADE COMMISSION, WASHINGTON, DC 

Ms. RAMIREZ. Thank you, Chairman Klobuchar, Ranking Member Lee, and Senator Franken, for inviting me to testify today regarding the Federal Trade Commission’s current antitrust and 

competition policy efforts. Let me also thank you for all the support 

that you have given the FTC. 

The FTC works in conjunction with the Department of Justice’s 

Antitrust Division to ensure that the American economy remains 

competitive through vigorous antitrust enforcement. I am grateful 

for the excellent working relationship we have with Assistant Attorney General Bill Baer and his colleagues at the Antitrust Division. We will continue to work closely with the Division as well as 

our counterparts in the States whenever possible to enhance antitrust consistency, clarity, and transparency. 

I would like to now turn to some of the FTC’s recent highlights, 

beginning with the two FTC cases before the Supreme Court this 

term. 

In February, in a rare unanimous decision, the Court revived the 

FTC’s suit to stop an alleged hospital merger to monopoly in Albany, Georgia, by ruling that the State action doctrine did not immunize the transaction from the antitrust laws. 

The second case, which I know members of this Subcommittee 

have been watching closely, involves a pay-for-delay patent settlement. The Court heard arguments at the end of March, and we are 

hopeful that the Court will hold that these agreements are presumptively unlawful. 

As both of these Supreme Court cases show, the FTC remains 

broadly focused on preserving competition in health care markets 

as a way to help contain health care costs. In recent years, the 

Commission has stopped hospital mergers in Northern Virginia; 

Toledo, Ohio; and Rockford, Illinois. We are also looking closely at 

mergers involving other health care providers, challenging two 

such deals in recent months. 

In December, the Commission, along with the Pennsylvania Attorney General, blocked a proposed merger between the dominant 

health care system in Reading, Pennsylvania, and a surgery center. 

Then, last month, the FTC, in conjunction with the Idaho Attorney 

General, challenged Idaho’s largest health care system’s acquisition 

of the State’s largest physician practice group. 

We also continue to target efforts by brand-name drug companies 

to stifle generic competition. In addition to pay-for-delay, we are 

looking at other brands’ strategies to illegally preclude generic competition. This includes the potential abuse of safety protocols, 

known as REMs, to prevent generics from beginning the Hatch- 
8 

Waxman process and a practice known as product hopping where 

a brand introduces a follow-on product with minimal additional 

clinical value to prevent generic competition. 

High-technology markets also play an increasingly important role 

in consumers’ lives, and the Commission also remains focused on 

enforcement in this sector. The Commission recently challenged a 

proposed merger between Integrated Device Technology and PLX 

where there was evidence of intense head-to-head competition and 

a combined market share of over 80 percent. 

However, the Commission recognizes the important role that innovation plays in technology markets and takes a cautious approach where action is more likely to deter rather than promote innovation, such as in our recent investigation of Google’s search 

practices which the Commission unanimously decided to close. 

The Commission also remains focused on preserving the integrity 

of the standard-setting process. In the Bosch and Google/MMI matters, we brought actions to prevent the owners of standard essential patents from improperly seeking injunctions against willing licensees to the potential detriment of consumers. 

The Commission will continue to engage in an ongoing dialogue 

with stakeholders in this important area and to be vigilant where 

conduct threatens to distort the standard-setting process. 

Thank you very much, and I am happy to respond to any questions. 

[The prepared statement of Ms. Ramirez appears as a submission 

for the record.] 

Chairman KLOBUCHAR. Well, thank you very much to both of 

you, and I think a lot of people who are hearing you testify for the 

first time in this oversight hearing are most focused on what your 

top priorities are. When we look at the past, we know that, for instance, Chairman Leibowitz was very focused on pay-for-delay, and 

I think we get some sense from your testimony of what you are interested in. I do not want to put words in your mouth, Chairwoman 

Ramirez, but it seems that you are focused on the health care work 

that is going on with the FTC, as well as the patent standards, 

which I was interested to hear you talk about because I have heard 

a lot about that lately, as well as continuing the work for pay-fordelay. 

Am I missing other things? Obviously, you have broader jurisdiction than that. 

Ms. RAMIREZ. The key priority that I have, Senator—you have 

identified some key focus areas for the FTC and for me personally. 

Generally speaking, I intend to pursue active enforcement where 

there might be harm to competition and harm to consumers. But 

you have identified the areas of emphasis. 

Chairman KLOBUCHAR. And I think you also know that on that 

issue of pay-for-delay, I have introduced legislation to put a stop 

to these anticompetitive practices. And will you support this legislation? And does the FTC support this legislation? 

Ms. RAMIREZ. Senator, as you know, this area has been one of 

concern for many years for the FTC. I cannot speak for the current 

Commission with regard to your proposal, but I can tell you that 

I do support the bill. 

Chairman KLOBUCHAR. Thank you very much. 
9 

Mr. Baer, same question about your partners, and I had some 

follow-up on the cartel issue as well, which I think is really interesting and that not many people realize that you are working on. 

Mr. BAER. Thank you, Madam Chairwoman. Obviously—— 

Chairman KLOBUCHAR. Except the people you are going after, I 

guess. 

Mr. BAER. There are those. 

Cartel enforcement remains a top priority, making sure that we 

are going after not just domestic wrongdoers but wrongdoers overseas who enter price-fixing arrangements that end up having an 

impact on U.S. consumers. 

We intend to work as well aggressively in health care, in communications, broadband issues, intellectual property issues. Much of 

this we will do and have been doing jointly with the FTC, holding 

hearings to explore some of the issues that will help us develop a 

sound analytical framework and factual-based approaches to our 

law enforcement activities. 

Chairman KLOBUCHAR. And you and I talked earlier about the 

fact that, as the world becomes more global, you have a lot of these 

international cartels that actually hurt American businesses. We 

talked about the auto part cartels, and I wanted to ask why you 

think that these types of cases are on the rise. Is it because your 

Department has devoted more resources to investigating them or 

are certain market conditions causing this? Or is it related to the 

increasing concentrated markets that have been more susceptible 

to price-fixing schemes? 

Mr. BAER. I think part of it—and perhaps most of it—is having 

the tools to begin to explore problematic behavior that occurs 

abroad with an impact on the United States. We have a program 

which encourages corporations to come in and self-report and identify their wrongdoing. And we have been working with foreign enforcers around the world to urge them to develop similarly aggressive cartel enforcement programs. So there has been progress on a 

number of fronts. My sense is that we are simply uncovering things 

that have been under a rock for a while, but we have now got the 

help and the resources to move the rock. 

Chairman KLOBUCHAR. Very good. 

Chairwoman Ramirez, you mentioned the patent issue, and I 

think what you are referring to has been a topic of conversation because of several cases that have been filed with the International 

Trade Commission. We can all agree that standardization of technology and essential patents have been critical to the development 

of the competitive market for smartphones and tablets, but recently, concerns have been raised about the practice of bringing 

standard essential patent cases to the ITC seeking an exclusion 

order to prevent products with the patent from being imported into 

the U.S. Some worry that the ITC exclusion orders related to 

standard essential patents could gravely harm competition. 

What sort of negative effects might the use of exclusion orders 

regarding standard essential patents have on competition and consumer welfare in general? 

Ms. RAMIREZ. Senator, thank you for that question. One of the 

concerns that we have is that injunctive relief generally, whether 

it be at a district court or at the ITC when it comes to a standard 
10 

essential patent, has the ability to deter innovation and competition and investment in standard compliant products. And that is 

because the patent holder in this context has made a voluntary 

commitment to license patents on a FRAND or RAND basis. And 

any effort to renege on that commitment then raises risks for both 

the competitive process in the standard-setting context and then 

again over time can have long-term impact on investment in standard compliant products. 

So as a result, the FTC has advocated and asked district courts 

to take into account when there is a FRAND commitment that has 

been made and the patent holder is asking for an injunction. In addition, the FTC has also advocated that the ITC through its public 

interest authority also take this into account as they consider 

whether or not it is appropriate to issue an exclusion order. 

Chairman KLOBUCHAR. Another issue on patents, a recent study 

found that 56 percent of all patent lawsuits are filed by so-called 

non-practicing entities or, as they are known to their critics, ‘‘patent trolls.’’ These entities purchase patents from the original holders and often sue companies for patent infringement. Critics say 

the suits are often unfounded, but the companies end up having to 

either pay large sums in legal fees to defend the suits—I know this 

because my State has a lot of patents. In fact, one of our companies 

has a patent for every employee. That is 3M—or simply end up 

paying the patent trolls under a settlement or licensing fee. 

It seems to me that this practice could potentially have a negative effect on competition and consumer welfare, but there is also 

a concern that any efforts to address bad actors could have unintended consequences on our intellectual property system. 

So I am wondering if something should be done about this. I 

have just heard it raised repeatedly as we are seeing, even despite 

the great work we did with the America Invents Act and patent reform and getting rid of the backlog and doing some good things, 

that there is still this issue out there. 

Ms. RAMIREZ. Yes, Senator, this is another area in which the 

FTC, and also in conjunction with the Department of Justice, has 

been engaged in recently. We held a joint workshop in December 

to explore the ramifications on competition and on consumers of 

this model, patent assertion entities that are in the business of 

buying and then asserting patents. And the question is fundamentally whether, as some assert, patent assertion entities are able to 

assist small inventors in monetizing their inventions or whether 

this ends up being a tax on innovation. 

So it is an issue that we are looking at very closely. We have just 

received—the comment period, I should say, has just closed with 

regard to this workshop, and we are examining those comments, 

and we are going to be deciding and proceeding from there how to 

move forward in this area. 

We do feel that it is an area that warrants additional study so 

that we can properly evaluate the impact of patent assertion entities on competition. 

But let me also add that we have heard also reports of patent 

assertion entities making unsubstantiated claims relative to small 

businesses. It is an issue that causes us great concern, and we will 

be continuing to look to see whether it might be appropriate for the 
11 

Federal Trade Commission to exercise its authority relative to 

these types of actions. 

Chairman KLOBUCHAR. Very good. 

Did you want to add anything, Mr. Baer, before I turn it over to 

Senator Lee? 

Mr. BAER. I will defer to Senator Lee. 

Chairman KLOBUCHAR. Very good. Okay. Senator Lee. 

Senator LEE. Thank you. Thanks again to both of you. 

Let us start with Mr. Baer. In 2008, the Department of Justice 

issued a 213-page report that sought to provide clarity and transparency in laying out its enforcement views and developing a set 

of objective and administrable standards for Section 2 analysis. 

Your predecessor, Ms. Varney, formally withdrew the report and in 

so doing promised especially vigorous Section 2 enforcement. 

During your confirmation hearing, you noted that while the report generally contained sound analysis, you thought that some of 

it suggested enforcement standards were more restrictive than 

warranted by the case law and could inhibit the effective enforcement against anticompetitive conduct. 

Given that you do not believe that the 2008 report got it quite 

right, can you please briefly describe for us the principles that you 

believe should guide Section 2 enforcement? 

Mr. BAER. Thank you, Senator. My concern, as you state, with 

the 2008 report was that it may have been going too far too fast 

in articulating what was an evolving series of judicial precedent as 

it relates to Section 2. 

I was also concerned, as was my predecessor, over the fact that 

the Federal Trade Commission had felt it inappropriate to join in 

that guidance, so we were at risk of having guidance out there that 

potentially was inconsistent or not fully subscribed to by both enforcement agencies. As a general matter, I think that is wrong. 

We have, in approaching Section 2, a series of decisions out of 

the Supreme Court and out of the Court of Appeals for the District 

of Columbia providing some guidance about various tests that can 

be applied. Those tests have tended to evolve in fact-specific situations, industry-specific situations, and I think the better way to 

move forward with Section 2 enforcement is carefully articulating 

what we are doing and why we are doing it. But I do not think we 

were ready to put out guidance. If we did so, I am afraid it would 

be so qualified that the business community would not get the benefit of it. There is a concept, you know, of guidance in name only 

that I think we ought to resist as antitrust enforcers if the caveats 

are such that a counselor cannot effectively advise a corporation 

about what behavior is likely to get them in trouble with the FTC 

or the Antitrust Division. 

Senator LEE. Okay. Thank you. That is helpful. 

Also during your confirmation hearing, you said, in response to 

a question about Section 2 enforcement standards, ‘‘I believe that 

coordinated statements of policy engender confidence in the agencies and provide clearer guidance for businesses and practitioner, 

and that is what I would strive for, if confirmed.’’ 

I agree that clearer enforcement criteria will tend to help the 

agencies identify and prove violations as they do their work, and 
12 

will provide businesses with the information that they need to comply with law and to avoid violations moving forward. 

So my question is this: What have you done so far and what will 

you commit to do moving from to provide such needed Section 2 

guidance? 

Mr. BAER. Senator, what I am prepared to commit to is to move 

forward cautiously. There are different forms of guidance that an 

antitrust enforcer can and should provide. It does not necessarily 

need to be in the form of a formal statement of principles such as 

in the horizontal merger guidelines, which the FTC and the Antitrust Division jointly issued a couple of years ago. We can through 

speeches, through statements that would accompany enforcement 

actions that are filed under the Tunney Act in Federal district 

court. We can also issue closing statements where we choose not 

to proceed with a possible Section 2 concern, and talk publicly 

about why we chose not to proceed in order to—it is almost a caseby-case look—help people understand what our thought process is, 

where we think we need to proceed, and where we do not. 

Senator LEE. Supplying data points. 

Chairwoman Ramirez, several current and past Commissioners 

have criticized the Commission for its seemingly unfettered views 

regarding Section 5 of the FTC Act, noting that the FTC’s expansive decisions appear to lack regulatory humility, and some of them 

argue that decisions should instead be based on sound economic 

and empirical foundations. 

Commissioner Ohlhausen recently noted that it is important that 

the Government strive for transparency and predictability in this 

context, and she called for the Commission to fully articulate its 

view about what constitutes an unfair method of competition before 

invoking Section 5. 

At the ABA Antitrust Section Annual Meeting last week, you 

said that the Commission needs to apply Section 5 ‘‘carefully.’’ Do 

you agree with me about the importance of transparency and predictability in this area? And in your view, what are the limiting 

principles that can find the scope of unfair methods claims brought 

pursuant to Section 5? 

Ms. RAMIREZ. Senator, I do agree that it is beneficial for the 

agencies to provide clear enforcement criteria where they can. I do 

take a different view with regard to Section 5. I believe that this 

is an area where it is difficult to specify precisely what the outer 

bounds are. In my view, if you look at the recent past, the agency 

has been approaching its use of Section 5 in a very careful, judicious way. The statute was written expansively, as were the dictates of the Sherman Act, and that evolved incrementally on a 

case-by-case basis over the course of decades. 

In light of the elasticity of the Sherman Act, it is really no surprise that Section 5 as a stand-alone basis for authority for the 

FTC has not developed in that same fashion. I think that this is 

an area where the Commission ought to—it is authority that the 

Commission ought to use where there is harm to competition and 

harm to consumers, and I think those are the central tenets that 

would guide its application. 

Senator LEE. In December 1980, the FTC issued a policy statement on fairness, clarifying what was the scope of its consumer un-
13 

fairness jurisdiction. Absent definitive policy statements, regulatory 

uncertainty results in additional and unnecessary costs to the business community, costs that are ultimately borne by and passed on 

to consumers. 

When can we expect the Commission to articulate a definitive 

policy statement on the parameters of Section 5 authority relating 

to unfair methods of competition? 

Ms. RAMIREZ. Senator, this is an area that I will continue to engage in a dialogue with my fellow Commissioners. However, I will 

say that I do believe that there is guidance that is provided. If you 

look back at the recent cases in which the agency has taken action 

using Section 5 on a stand-alone basis, it would include cases such 

as invitation-to-collude cases, in the context of the exchange of information that can then be used to facilitate collusion or other unlawful practices, and also in the standard-setting arena. 

So it really is confined to a fairly narrow set of circumstances. 

I do differ with those—my current and former colleagues who think 

that we are applying it in a reckless manner. I think that, in fact, 

the agency has been using its Section 5 authority rigorously and 

judiciously. 

Senator LEE. Okay. Thank you. 

Thank you, Madam Chair. 

Chairman KLOBUCHAR. Thank you very much. 

Senator Blumenthal. 

Senator BLUMENTHAL. Thank you, Madam Chair, and thank you 

to both Assistant Attorney General Baer and Chairman Ramirez. 

Let me just say what is an obvious truth to everyone who has 

a familiarity with law enforcement, antitrust law enforcement 

these days, that we are at a critical juncture with the consolidation 

that has taken place in many of our most important industries, including communications, health care, pharmaceuticals, and financial services. And the public is beginning to understand the ramifications and consequences of consolidation in limiting their 

choices, potentially raising prices, and limiting the quality of service. And so the work that you do is ever more important, and I 

would hope that you would continue the resurgence of antitrust enforcement that we have seen over the last 3 years after a real 

dearth of activity and aggressive enforcement in some previous 

years. And I think that the solid effort that you have made to reinvigorate antitrust law enforcement to preserve competition and 

promote jobs—it not only preserves competition, but it also promotes jobs—would continue. 

Let me Chairman Ramirez, if I may, about an area that is of interest to me, group purchasing organizations—GPOs, as you know 

them. When I was Attorney General in Connecticut, we led an investigation into the Healthcare Research and Development Institute, also known as HRDI, which was profiting from anticompetitive behavior through a business model that failed to provide any 

benefit really to the hospitals and providers on whose behalf they 

were negotiating. 

Since then, the FTC and the Department of Justice have investigated GPOs, and both have filed lawsuits against various of them, 

but they have not taken any industry-wide actions. And a lot of 

medical device manufacturers you probably heard from, as I have, 
14 

have demonstrated practices by GPOs that effectively foreclose 

them from entering the market. These exclusionary practices, some 

documented in the media, including kickbacks, sole-source contracts, bundling of products so that hospitals have to purchase the 

bulk of their supplies from a single vendor to qualify for a discount. 

The kickbacks are particularly problematic, I believe. They are 

paid by manufacturers to the GPOs, and these kickbacks deceive 

buyers and distort demand and, in effect, artificially inflate prices. 

So my question is, first of all, concerning the safe harbor that apparently GPOs occupy to some extent, given the investigations and 

ongoing concerns, Chairman Ramirez, do you believe that the safe 

harbor provisions relating to GPOs really protect the public from 

anticompetitive behavior? And should they be revisited? 

Ms. RAMIREZ. Senator, I think that the agency has the authority, 

notwithstanding the safe harbor, to take action in appropriate circumstances if warranted. I am aware and appreciate your concerns 

that you have articulated relating to group purchasing organizations. I will note that I think a number of issues such as the applicability of the anti-kickback laws are ones that are not related to 

antitrust. So I know that this is an issue that raises a series of 

complicated questions. 

What I can tell you and assure you is that we are fully committed to taking a look at these organizations and, if necessary, 

taking action if we find that there is a violation of the competition 

laws. 

Senator BLUMENTHAL. So we can count on your commitment that 

you will do hearings, workshops, meetings to investigate the impacts of GPOs on the health care marketplace, costs and competition? 

Ms. RAMIREZ. What I can commit to you is that we will continue 

to be vigilant in this area. Given resource constraints, I cannot 

commit to particular actions, but I will assure you that we will continue to take a look and investigate complaints as appropriate and 

as necessary. 

Senator BLUMENTHAL. Well, if I bring to your attention some of 

these issues, I hope that you will investigate them. 

Ms. RAMIREZ. Again, we will take a look at them and proceed as 

necessary. But I appreciate the concern, and I assure you that I 

will be vigilant in this area. 

Senator BLUMENTHAL. Do you think that the FTC can better police this area as opposed to the specific actions that you brought? 

Ms. RAMIREZ. As a law enforcer, the way that we approach these 

issues is to look at the specific facts of a case, so that is what I 

see as being the appropriate course of action in this area. 

Senator BLUMENTHAL. General Baer, let me ask you, I read with 

interest the Division’s letter recently to the FCC concerning policies 

relating to spectrum and competition, and I was happy to see that 

the Division is becoming active in this area in the role as an advocate for competition. Having just reviewed a number of transactions in the wireless marketplace, I understand that the Division 

has developed some expertise in this area, and I would like to ask 

you about the future of the marketplace. 
15 

Do you think that the FCC needs a policy like a spectrum screen 

or auction rules that specifically seek to encourage competition in 

the wireless marketplace? 

Mr. BAER. The answer is yes, Senator. We believe that well-defined, competition-focused rules for putting spectrum, the newly 

available spectrum to use quickly and efficiently is the best way of 

promoting consumer welfare, and that was why we publicly filed 

the comments. In addition, we have spent a fair amount of time 

working very cooperatively, quietly with the Federal Communications Commission on these difficult policy choices. 

Senator BLUMENTHAL. Do you think that the FCC should account 

for the differences in the quality between different spectrum, particularly high- and low-frequency spectrum? 

Mr. BAER. Senator, yes. I think the fact that the low-frequency 

spectrum is sort of paradoxically higher quality, that is a factor 

that needs to be taken into account about how to allocate spectrum 

that is now becoming available to the Government, spectrum that 

previously was not available to be shared with the marketplace and 

market participants. 

Senator BLUMENTHAL. Thank you. My time has expired. I thank 

both of you for your hard work in this area, and thank you for 

being here today. Thank you. 

Chairman KLOBUCHAR. Senator Franken. 

Senator FRANKEN. Thank you, Chairwoman. 

Chairwoman Ramirez, I want to applaud the FTC for being 

proactive on pay-for-delay agreements between brand and generic 

drug manufacturers. I am a cosponsor of Chairwoman Klobuchar’s 

excellent bill on this issue, and I have also introduced another bill, 

the Fair Generics Act, which has been referred to the HELP Committee. 

CBO estimates that if we fix this problem, consumers could save 

$11 billion in drug costs over the next 10 years. We need to put 

an end to these anticompetitive deals—and that is what they are— 

and I hope the Supreme Court will agree with me when it rules 

on this issue in a couple months. But pay-for-delay agreements are 

just one way that pharmaceutical companies are delaying generic 

drug entry. 

You mentioned REMs and drug safety programs and product 

hopping before. Can you tell me what the Commission is doing to 

address unnecessary REMs and product hopping, which are also 

making it harder for consumers to purchase low-cost drugs? 

Ms. RAMIREZ. Senator, first of all, let me thank you for your leadership in the area of pay-for-delay and in these other areas. 

I cannot comment on any specific investigations, but I can tell 

you that the agency is very concerned about efforts by branded 

pharmaceutical manufacturers who employ strategies such as 

REMs and product hopping in an effort to impede or otherwise 

delay generic competition. So this is an area that we are looking 

at very closely. Again, I cannot comment on specific investigations, 

but these are areas in which we have weighed in publicly through 

the filing of amicus briefs, and it is one that we are looking at very 

closely. 
16 

Senator FRANKEN. Well, I certainly hope that if it is appropriate, 

you bring enforcement action, and I hope you will do that, again, 

if it is appropriate and not just file amicus briefs. 

Ms. RAMIREZ. Without question. Again, I cannot comment on specific cases, but I can tell you that we are looking very closely at 

this issue, and if there is a violation, we will take immediate action. 

Senator FRANKEN. Thank you. Thank you. 

Mr. Baer, in early 2010, the Department collaborated with the 

USDA to hold the first-ever public workshops on competition in the 

agriculture and dairy sectors. That was 3 years ago, and very little 

has been done by the Department to address the competition issues 

that you uncovered. 

Dairy farmers in Minnesota are getting a smaller and smaller 

share of the price of a gallon of milk, and this trend is playing out 

across the country as family farmers are getting less and less of 

each dollar spent on food. 

What is the Department doing on this issue? And will you pledge 

to work closely with USDA to protect independent farmers? 

Mr. BAER. I can make that commitment to you, Senator, and, indeed, one of the benefits of those hearings that were held in the 

first term of the Obama Administration, jointly with the Department of Agriculture, was to educate their folks and our folks as to 

the very issues that dairymen—as you know, I am from Wisconsin 

and appreciate those unique issues—and cattlemen and other 

growers, farmers, to understand what challenges they face, where 

they believe they were subject to anticompetitive conduct, where 

mergers ran the risk of inflating prices to consumers and unfairly 

lowering the price to growers and to dairymen. 

We have been working closely with DOA. We are also working 

closely with State Attorneys General in farm States, and that will 

continue to be a big priority for us. We understand it is important 

to the farmers and to the American consumer. 

Senator FRANKEN. Mr. Baer, consumers are paying a larger and 

larger percentage of their household budgets to their cable, wireless, and Internet providers. Families cannot afford to pay $200 a 

month for cable and Internet while also paying several hundred 

dollars a month for their mobile phones. These markets are very 

consolidated, and the Comcast/NBCUniversal merger and agreements like the one between Verizon and big cable companies are 

only going to make it harder for consumers to find affordable options. 

News reports indicate that you are investigating most-favorednation clauses, and I want to urge you to continue your work and 

to keep a close eye on the terms of the Comcast/NBCUniversal deal 

and the agreement between Verizon, Comcast, and the other major 

cable companies. 

These agreements mean nothing if they are not promptly and aggressively monitored and enforced. Will you make that pledge? 

Mr. BAER. Yes, sir. 

Senator FRANKEN. Thank you. 

I am specifically worried about the broadband market. Comcast 

previously imposed discriminatory data caps on its customers, and 

we have seen providers artificially elevating the price of stand- 
17 

alone broadband service in order to press customers to buy an expensive bundle. 

Will you keep an eye on this market to make sure consumers 

have meaningful options and are able to cut the cord and watch online video rather than signing up for expensive pay TV service? 

Mr. BAER. Senator, that is a key part of our mission, and I can 

make that commitment to you. 

Senator FRANKEN. Thank you. 

This is for both of you. I am very concerned that the Supreme 

Court may soon make it hard or much harder for small businesses 

to file private antitrust enforcement actions. Instead, they may be 

forced to arbitrate their claims. Can you explain why private antitrust enforcement is so important and why forced arbitration is not 

an effective remedy? This is for either of you. 

Ms. RAMIREZ. I will take that, Senator. It is our view that private 

enforcement of the antitrust laws is a very important complement 

to the enforcement by the agencies, and the position that we have 

articulated in a recently filed amicus brief on this issue is that an 

arbitration clause that eliminates the ability of an individual to obtain redress of the antitrust laws should not be enforced. 

So I believe that, again, private enforcement plays an important 

role, and we have urged that position to the Supreme Court. 

Mr. BAER. The Justice Department agrees with that. Indeed, the 

Solicitor General filed a brief in the American Express case stating 

the importance of allowing a private right of action and not allowing that to be stripped away through what is almost a contract of 

adhesion for small businesses and for others. We think that shared 

approach of public enforcement with the ability of private citizens 

to go in and recoup damages has worked very well, and there is 

no reason to change it. 

Senator FRANKEN. Thank you both. 

Thank you, Madam Chair. 

Chairman KLOBUCHAR. Thank you very much, Senator. 

Senator Lee. 

Senator LEE. Thank you very much, Madam Chair. 

Let me proceed with Mr. Baer to follow up on a line of questions 

from Senator Blumenthal a minute ago. The upcoming spectrum 

auctions hold the prospect of bringing much needed spectrum into 

the market. Consistent with competitive market forces, those entities with the most pressing need for additional spectrum will be 

willing to pay the most for that same spectrum, thus ensuring that 

the spectrum is put to the best and most efficient use in the marketplace. 

But your recent FCC filing and your written testimony today 

seem to suggest a preference to forgo competitive bidding and instead steer low-frequency spectrum toward smaller nationwide networks. 

I am concerned about any approach that might involve the Government meddling in the competitive bidding process, in effect to 

pick winners and losers, because antitrust laws are meant to protect competition and not individual competitors. So I am concerned 

with the process in which the administration would seek to protect 

and, in effect, subsidize certain carriers, especially those carriers— 

especially when those same carriers chose not to participate in the 
18 

last major low-frequency spectrum auction. So I would like to get 

your response to a few questions related to this. 

First, should competition laws be used to steer a scarce resource 

toward particular competitors? 

Second, are you suggesting that the parent companies of the 

smaller carriers lack the resources to bid in a competitive auction 

to determine who most values the spectrum, the scarce resources 

in question? 

And, finally, is it your position that, absent this kind of Government intervention, larger carriers will obtain spectrum they do not 

actually need simply to keep it from others? In other words, are 

you suggesting they have sufficient spectrum to meet their needs? 

Mr. BAER. Senator, all very fair and legitimate questions. Our 

comment tried to address some of those subtleties. Among other 

things, we urged the FCC, which ultimately is going to promulgate 

the rules that will govern the auction, to take a close look at 

whether some of the spectrum that is already available to some of 

the carriers is being warehoused and not being put to efficient use. 

This is a market where, because the input, the spectrum, is scarce, 

that control of that spectrum potentially has some ability to affect 

competition downstream. 

So what we were trying to say—what we were saying to the Federal Communications Commission is balance these factors, take a 

look at whether or not the playing field is already tilted in favor 

of big guys who may or may not—we were not making a factual 

judgment, but it ought to be examined whether or not they are 

using what they already have, and use that as a factor in deciding 

what rules to set for the auctions going forward. 

Senator LEE. Okay. Thank you. 

And then this next line of questions is for both of you. It relates 

to the fact that some have expressed some concern that the FTC 

and the Department of Justice face different standards for obtaining a preliminary injunction in merger cases. Of course, under Section 13(b) of the FTC Act, the FTC may obtain an injunction by 

showing that weighing the equities in action would be in the public 

interest, but some courts have interpreted that language and found 

the standard may be satisfied where the FTC shows that a transaction raises serious and difficult questions. 

The Department of Justice, on the other hand, must seek a preliminary injunction pursuant to Section 15 of the Clayton Act, 

which does not specify a standard for obtaining preliminary relief. 

Courts often apply such a standard using a version of the traditional equity test, which generally requires the Government to 

show a reasonable likelihood of success on the merits. So I guess 

I have got two interrelated questions, which I will pose to both of 

you. 

In your view, first of all, does current law provide for diverging 

standards for the FTC and Department of Justice in seeking preliminary injunctions in merger cases? And if so, do you believe 

there is any legitimate reason for that difference? 

The second question I have for you is: Do you believe this situation is problematic? And if so, is it necessary for Congress to act 

to clarify that the same standard applies to all preliminary injunction litigants? 
19 

So go ahead and answer that in any order you would prefer. It 

looks like you—— 

Ms. RAMIREZ. How about if I begin, Senator? Thank you for your 

question, and I do appreciate this concern. 

In my view, even though the words are different, at the end of 

the day I believe that the standards that are used by the two agencies in obtaining a preliminary injunction are, in fact, quite similar. 

As a practical matter, what each agency needs to do is to go before a judge and show and provide evidence that backs up the 

charges that are being made, and in persuading that judge. In my 

view, as a practical effect, the two standards are similar. And I 

think even though this issue has been raised, I believe it would be 

difficult to point to a specific situation where a case that would 

have led to a different outcome had it been handled by a different 

agency. 

Senator LEE. So you are not concerned about it? You are not asking Congress to fix that? There is not a problem to fix, in other 

words. 

Ms. RAMIREZ. Again, I do not see a practical difference between 

the standard as it is being applied by the courts. 

Senator LEE. Thank you. 

Mr. Baer. 

Mr. BAER. Senator, briefly, I am in the somewhat unique position 

of actually having been at the FTC as Director of the Bureau of 

Competition having to evaluate what merger challenges to recommend to the Commission. I am now in a somewhat comparable 

position at the Antitrust Division, and I think what Chairwoman 

Ramirez says is exactly right. At the end of the day, in order to 

succeed in a Federal district court, either agency needs to offer 

compelling facts, a story that is coherent, analytically sound. We 

share merger guideline analytics together, and so at the end of the 

day, I do not think there is a practical problem that Congress 

needs to address. 

Senator LEE. Not a practical problem because there is not a practical difference between the two standards. 

Mr. BAER. Yes. 

Senator LEE. Not something that is likely to produce differing 

outcomes either. 

Mr. BAER. To me that is exactly the right question. Are we at 

risk of different outcomes depending on which agency a transaction 

lands at? And my experience, in the private sector as well as in the 

public sector, is no. 

Senator LEE. Okay. Thank you, Madam Chair. I see my time has 

expired. 

Chairman KLOBUCHAR. Thank you very much, Senator Lee. 

Mr. Baer, one of the very few industries to enjoy an exemption 

from antitrust law is the railroad industry. Due to the exemption, 

we have heard from a lot of shippers—we call them ‘‘captive customers’’ in my State—that they suffer from high prices due to the 

conduct of dominant railroads, especially how the pricing works on 

the last leg of the trip. This means higher shipping costs are 

passed along to consumers, resulting in higher electricity bills, 

higher food prices, and higher prices for manufactured goods. 
20 

I have introduced a bipartisan bill, with a number of Republicans 

supporting it, to eliminate this obsolete antitrust exemption for 

railroads. 

At your confirmation hearing, you said you would study up on 

this issue. What is your view of the railroad exemption? I think we 

all see rail as a major part of our transportation network, especially when we have to export to the world. But at the same time, 

we want those rates to be fair. And will you work within the administration to make sure the rates are fair? And what is your 

view of this if you have had a chance to study up on it? 

Mr. BAER. Chairman, the Antitrust Division is committed to promoting competition in the railroad industry, and one of the parts 

of my job I have just begun to learn in the last 90 days is the importance of working within the administration to promote those 

competition principles as we work with the Senate and the House 

to formulate a position on legislation. And we will be an active 

voice within administration circles in favor of competition principles in that sector. 

Chairman KLOBUCHAR. Thank you very much. 

As a former prosecutor, I know the importance of being willing 

and ready to file suit and go to court, and you cannot just put on 

a good poker face. You have to show you are willing to do it. The 

party you are negotiating with needs to know that you will do that 

if the case requires it—not in all cases. Negotiation is also important, but I think they have to know you are willing to go to the 

mat. 

Mr. Baer, some thought the Antitrust Division had gained a reputation for being more willing to tolerate mergers and cutting deals 

rather than going to court. Do you think the Division’s recent suits 

to block the AT&T merger and the beer merger has put the perception to rest? By the way, that is the InBev/Grupo Modelo merger, 

which I know is still pending, although I did tell Senator Lee that 

I was hoping our first hearing was going to be about beer, but then 

the airline merger got in the way and your Department got in the 

way, so we decided not to have that be the hearing, as fun as it 

would have been. But could you comment about that willingness to 

litigate? And maybe you could as well, Chairman Ramirez. 

Mr. BAER. First, as a kid from Milwaukee, talking about beer 

comes quite naturally to me. 

One of the great legacies, I think, of Christine Varney and the 

people who succeeded her as Assistant Attorney General, was to 

work closely with the talented people in the Antitrust Division and 

bring in some outsiders with proven courtroom litigation skills and 

success. And I actually think that helps in the investigative stage. 

We ask tougher questions. How will this theory, how will these 

facts play out in court? But it also lets the people proposing a 

merger or involved in an investigation know that we are serious 

and prepared to go to court. 

I think that is the right place for the Government to be in a law 

enforcement capacity, and I hope to be able to very much continue 

that proud tradition. 

Chairman KLOBUCHAR. Very good. 

Chairwoman Ramirez, any comment? 
21 

Ms. RAMIREZ. Senator, I concur wholeheartedly. I think you did 

a very good job of identifying the reasons why it is important for 

the agencies to be ready to litigate in order to obtain the best possible outcome for American consumers. 

I have a litigation background, and I understand very well how 

important this is, and I think the FTC has also done a good job 

of making sure that litigation readiness is part and parcel of—is 

a top priority, and that we have litigators who are, in fact, ready 

to take a matter to trial. 

I do think there can be a danger when one is dealing day in and 

day out with antitrust experts and economists to lose sight of the 

importance of being able to tell a compelling story and to be able 

to present that to a judge in Federal court. So I do believe that is 

critical and important. 

Chairman KLOBUCHAR. Very good. I will put some follow-up 

questions about beer on the record, although I know you cannot 

comment on it. Minnesota is the home of Schell’s, Summit. Need 

I go on. But we do care that that market stays competitive. 

[The questions of Chairman Klobuchar appear as submissions for 

the record.] 

Chairman KLOBUCHAR. Switching to airlines, last week the Wall 

Street Journal published an article about how in the wake of recent 

airline mergers we have seen price hikes on routes where carriers 

have merged and now dominate. For example, United Airlines and 

Continental Airlines used to compete for customers flying between 

Chicago and Houston. After the 2010 merger, the combined company now carries 79 percent of the traffic traveling between Houston Bush Intercontinental Airport and O’Hare, not counting connecting passengers. 

United’s average fare on that route soared 57 percent in the 

three months ending September 2012 compared to that same period three years ago. By comparison, United’s total average domestic price per mile over the same three-year period went up only 16 

percent. 

I know you cannot comment on the pending American/ 

USAirways merger. We had a very good hearing on that and got 

a lot of facts out there on that, including the concerns about some 

of the slots at Reagan Airport. But we have seen remarkable consolidation in this industry over the past decade. 

Do you want to comment just generally about the airline industry and any concerns you have about consolidation? Mr. Baer. 

Mr. BAER. Thank you, Madam Chair. Because it is an ongoing 

matter, I need to be very careful. 

Obviously, in looking at a transaction in any sector of the economy, we take into account our learning from prior transactions, 

whether they were approved or challenged. We also do not limit 

ourselves to looking just backward or taking a snapshot of competitive conditions. In evaluating a transaction, we really need to look 

at where things are evolving, where is competition going. And probably the best example of doing that was the challenge to the AT&T/ 

T-Mobile merger, where looking at the state of competition, what 

that merger would have done going forward to the state of competition, the Justice Department made the judgment and, along with 

the FCC, successfully blocked that transaction. 
22 

We looked both at competition very locally, but also looked at national impact of the transaction. And that is part of our job, and 

we will do it with the pending matters as well. 

Chairman KLOBUCHAR. Okay. Thank you. 

Chairman Ramirez, I would like to talk with you about Section 

5 of the FTC Act. Everyone agrees that it has broader jurisdiction 

than the antitrust law, but with more limited remedies. And I was 

wondering—I talked a little bit to Mr. Baer about this, this international issue—if somehow that could be used to help level the 

competitive playing field on the international level. 

As you know, over the last 10 years, the United States has lost 

more than two million manufacturing jobs, representing a loss of 

billions of dollars in manufacturing wages to countries such as 

China, and even though manufacturing is coming back strong in 

our State, one of the issues that we face all the time is piracy. China’s piracy rate exceeds 80 to 90 percent. Foreign manufacturers 

use pirated software and other stolen technologies to gain significant cost advantages over their U.S. competitors who pay for the 

IT and comply with intellectual property and try to do everything 

right, and copyright laws. 

Do you think Section 5 could be used in any way to combat this 

problem? 

Ms. RAMIREZ. Senator, I do appreciate the concerns that you 

have raised, and it is an area that the agency is examining at this 

time, so I really cannot comment with details. But I can tell you 

that we are looking very closely at it to see if our Section 5 authority permits potential action in this regard. 

Chairman KLOBUCHAR. Okay. One last question, following up on 

what you raised earlier in your testimony. The FTC worked with 

the Justice and Health and Human Services Departments on 

guidelines for accountable care organizations. Last week, Secretary 

of Health and Human Services Kathleen Sebelius said—and this is 

a quote—‘‘there is a tight balance between a coordinated care strategy and a monopoly,’’ and that aspects of the Affordable Care Act 

were ‘‘in constant tension’’ with antitrust laws. 

Do you agree with that characterization? 

Ms. RAMIREZ. Senator, I believe that the antitrust laws are very 

much compatible with the objectives of the Affordable Care Act, 

which are to raise the quality of health care, lower cost, increase 

choices for consumers. So I do not believe that they are inconsistent. I know that when we are examining transactions—looking 

at consolidation, integration, collaboration—we will take into account any pro-competitive benefits, and that would include raising 

quality of health care and any efficiencies, any efforts that succeed 

in lowering costs. 

So in my mind, they are not in tension, and I think that vigorous 

competition helps the aim and objectives of the Affordable Care 

Act. 

Chairman KLOBUCHAR. All right. It is just interesting because 

Kathleen Sebelius has actually talked about this tension that I 

have heard about, because either some incentives toward consolidation and then at the same time you have the antitrust laws. Would 

you argue that those incentives just might create more mergers for 

you to look at? Or how would you characterize it? 
23 

Ms. RAMIREZ. Our aim is to make sure that health care quality 

is improved, that costs are low. I think vigorous competition assists 

that. At the same time, we are not going to stand in the way of 

pro-competitive collaboration. 

Chairman KLOBUCHAR. Okay. Senator Lee. 

Senator LEE. Thank you very much. 

First of all, I wanted to respond briefly to the railroad antitrust 

bill that you discussed just a moment ago. I do have some concerns 

with this legislation and just wanted to run through those really 

quickly. 

One, it would limit the doctrine of primary jurisdiction in antitrust cases involving railroads. I think that could have some troubling implications. It would also repeal antitrust immunity for rail 

rate bureaus, but not just that but also it would repeal certain procedural protections that facilitate lawful rail transportation services, and it would effectively lead to retroactive application of antitrust laws, allowing a Government agency or private plaintiff to 

bring a case attacking past railroad activities that were expressly 

immunized from antitrust laws. So I do have some concerns about 

that. We will address that on a different day, but I wanted to mention that briefly. 

Chairwoman Ramirez, I wanted to ask you a question about 

something that concerned me recently. I was concerned by the 

FTC’s decision to accept a series of voluntary commitments from 

Google in lieu of a consent order, and I worry a little bit about the 

precedent that that decision might set, if, in fact, it is setting a 

precedent. Accepting such voluntary commitments may represent a 

break from decades of Commission practice. 

Typically, if there is problematic behavior, as three Commissioners seem to suggest is the case, you would institute enforceable 

commitments. If, on the other hand, there is not a violation of antitrust laws, then the Government should not be involved in informal 

market regulation. 

Now, I noticed in a footnote to the Commission’s decision that 

you indicated that although you were pleased that Google has decided to change certain of its practices, you objected to the form of 

the commitments. 

Given this set of circumstances, what I have just described, how 

is the FTC going to assure that Google adheres to these commitments? And if you determine that Google is not adhering to the voluntary commitments, will you consider making the commitments 

mandatory instead of voluntary? 

Ms. RAMIREZ. Senator, thank you for your question and for allowing me an opportunity to address this issue. 

I share your concern, as I expressed in that footnote that you referenced, that the voluntary commitment would create confusion 

over settlement practices at the Commission. What I can tell you 

is that that matter should not be considered a precedent. When 

there is a majority of Commissioners who find there has been a violation, any remedy should be embodied in a formal consent order. 

That is what happened before the Google matter, and that is what 

is going to continue to happen following the Google matter. 

At the same time, Google did make these voluntary commitments 

to the agency, and I expect that they will fulfill them. 
24 

Senator LEE. And if they do not? 

Ms. RAMIREZ. The agency will take appropriate action if Google 

does not. 

Senator LEE. Okay. More broadly, I worry that such voluntary 

commitments take the Commission away from enforcing antitrust 

standards according to the rule of law, and instead toward an informal, and in my mind illegitimate, regulatory approach. Will voluntary commitments become a more commonly used practice at the 

FTC under your leadership? And if not, how do you avoid the concern articulated by Commissioner Rosch’s dissent that the decision 

creates very bad precedent and may lead to the impression that 

well-heeled firms such as Google will receive special treatment by 

the Commission? 

Ms. RAMIREZ. Senator, that would not be the right takeaway 

from the Google matter. As I mentioned, I think there is consensus 

among my colleagues that when there is a majority of Commissioners who find that there is a violation, any resulting remedy will 

be embodied in a formal consent order. So, in my view, what transpired in the Google matter does not change the practice of the 

Commission. 

Senator LEE. Okay. 

Mr. Baer, at your confirmation hearing last July, when asked 

how you would examine allegations that Google was engaged in 

anticompetitive conduct in the future, you answered by saying that 

you did not fully understand the precise division of responsibility 

for certain Internet-related subject matter between FTC and the 

Antitrust Division. But anytime a dominant firm is in a position 

to hit a tipping point and abuse its position of dominance, Antitrust 

ought to be looking. That was your statement at that hearing. 

Am I correct in understanding your answer to mean that you believe it is within the scope of the Antitrust Division’s responsibilities to examine allegations that might arise in the future that 

Google is engaged in anticompetitive conduct? 

Mr. BAER. Senator, we have a clearance process between the FTC 

and the Antitrust Division that ensures that we are not investigating the same thing at the same time, or even the same thing 

seriatim. 

To the extent concerns come up about behavior by any dominant 

firm, the protocol we have is the staff and, if we cannot agree at 

the staff level, the Chair and I will have a discussion about who 

is best equipped to take a look at behavior by a dominant firm. 

That process is working quite well, and one of the things we agreed 

on the first day that I heard that the President had designated 

Edith Ramirez as Chair was we were going to continue to make 

sure that process worked quickly and efficiently. This stuff is too 

important for there to be any delay in terms of addressing anticompetitive behavior in the marketplace. 

Senator LEE. Based on what you have learned regarding the division of authority between the Antitrust Division and the FTC since 

becoming the Assistant AG, am I correct in assuming that if new 

facts came to light suggesting Google was abusing its dominant position, the FTC’s prior investigation would not necessarily prevent 

the Department of Justice from investigating these allegations in 

the future? 
25 

Mr. BAER. We would have a prompt conversation about who is 

best equipped to do it. 

Senator LEE. Okay. 

Chairwoman Ramirez, the Commission found evidence that 

Google biases its search results against websites that compete with 

Google’s secondary offerings, but ultimately concluded that because 

Google’s preferential display of its own content would plausibly be 

viewed as an improvement in the overall quality of Google’s search 

product, the conduct was not anticompetitive. 

Can you help me understand what standard the Commission 

used in reaching this conclusion? Because, obviously, circumstances 

of innovation do not automatically overcome or override evidence of 

competitive harm. 

Ms. RAMIREZ. Senator, in my view, the pertinent standard that 

governs product improvements is the standard that was applied by 

the D.C. Circuit in the Microsoft case. And I want to clarify that 

what we found was that the design changes were, in fact, pro-competitive changes designed to improve the overall search experience 

for the user, and that pro-competitive justification was supported 

by ample evidence, even though it also had the impact of negatively 

impacting rivals. So just to clarify the way you had structured your 

question. 

Senator LEE. Okay. Now, Commissioner Rosch made clear that 

he was prepared to litigate against Google on antitrust and consumer protection principles for deceiving consumers by ‘‘telling 

half-truths to maintain a monopoly or near monopoly position.’’ 

Was this an issue the FTC investigated in its examination of 

Google’s business practices? 

Ms. RAMIREZ. The issue that was raised by Commissioner Rosch 

in his statement had a privacy dimension. It was one that we 

looked at but that the majority of the Commission felt was not a 

violation of the antitrust laws. 

Senator LEE. Okay. Thank you. 

Madam Chair, I have got one more question, with your leave. 

Chairman KLOBUCHAR. Go ahead. 

Senator LEE. This one is for Mr. Baer. 

There are reports coming out of Europe that Google is abusing 

its search dominance for the Android operating system to exclude 

competitors in mobile markets there. Should we be concerned about 

these issues in the United States? And what is your view about the 

importance of robust competition in mobile technology markets? 

Mr. BAER. Senator, part of our job is to make sure that there is 

robust competition in all markets, and part of the reason why—the 

reason why the Antitrust Division challenged AT&T’s proposed acquisition of T-Mobile was out of concern that that competitive marketplace would deteriorate if that transaction were allowed to go 

forward. 

Senator LEE. Okay. Thank you very much. 

Thank you, Madam Chair. 

Chairman KLOBUCHAR. Thank you very much, Senator Lee. 

I just wanted to respond on the antitrust front on the railroad 

issue. I was sitting here thinking of how best to describe it, and 

that is, there were once, I think, 63 railroads in this country, and 

now only four provide over 90 percent of the service for freight rail, 
26 

and that is four, which is the exact number on the Monopoly board, 

I was thinking to myself. And so I think the point here is when 

you talk about the retroactivity issue, it is simply that these are 

contracts that were entered into 20 years ago and Congress gets involved in those kinds of things from time to time. 

Just to give an example of what we are talking about, Blandon 

Paper, which is located in Minnesota, as everyone knows, the paper 

industry has not had the easiest time. It actually costs less for 

them to ship their paper to Finland, the country of Finland. There 

is a Finland, Minnesota, that probably you have not visited, Mr. 

Baer. But it costs less for them to ship their paper to Finland than 

it does to customers in Georgia and Pennsylvania and South Carolina because of the cost of being on a captive rail line from Grand 

Rapids, Minnesota. And so that is why we are talking about this, 

and there are obviously other ways to approach this as well with 

the Surface Transportation Board, but, unfortunately, we have not 

been able to move very far with that as well, and one of the reasons we keep pushing on this antitrust exemption, and we hope we 

can resolve this in the coming years. And Senator Vitter and I are 

working to do that. 

As you can see from our hearing—I do not know if you have any 

other questions, Senator Lee. We have covered everything from 

trains and planes and auto parts as well as beer, and a far-reaching discussion of the issues, the competitive issues facing this country. And just because there has not been a lot of drama in this 

hearing, it is probably because our witnesses have had no ‘‘gotcha’’ 

moments because they have been so able to answer these questions, as well as the fact that we have tried to bring a lot of civility 

to this Subcommittee, and we will continue to do that, because 

while we may not agree on everything, Senator Lee and I, we do 

agree that we have to have strong competition in this country for 

the country’s prosperity as well as for the consumers. So I want to 

thank you both for attending today and for answering our questions so thoroughly. 

The record will remain open for a week for anyone that wants 

to put things on the record. I thank you for attending, and this 

hearing is adjourned. 

Do you want to add anything, Mike? Okay. 

The hearing is adjourned. Thank you. 

Mr. BAER. Thank you. 

Ms. RAMIREZ. Thank you. 

[Whereupon, at 4:02 p.m., the Subcommittee was adjourned.] 

[Additional material submitted for the record follows.] 
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A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
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PREPARED STATEMENT OF HON. WILLIAM J. BAER
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PREPARED STATEMENT OF HON. EDITH RAMIREZ
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PREPARED STATEMENT OF CHAIRMAN PATRICK J. LEAHY
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QUESTIONS SUBMITTED TO HON. WILLIAM J. BAER BY SENATOR BLUMENTHAL
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QUESTIONS SUBMITTED TO HON. WILLIAM J. BAER BY SENATOR GRASSLEY
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QUESTIONS SUBMITTED TO HON. EDITH RAMIREZ BY SENATOR GRASSLEY
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QUESTIONS SUBMITTED TO HON. WILLIAM J. BAER BY SENATOR KLOBUCHAR
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QUESTIONS SUBMITTED TO HON. EDITH RAMIREZ BY SENATOR KLOBUCHAR
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QUESTIONS SUBMITTED TO HON. WILLIAM J. BAER BY SENATOR LEAHY
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QUESTIONS SUBMITTED TO HON. EDITH RAMIREZ BY SENATOR LEAHY
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QUESTIONS SUBMITTED TO HON. WILLIAM J. BAER BY SENATOR LEE
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QUESTIONS SUBMITTED TO HON. EDITH RAMIREZ BY SENATOR LEE
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RESPONSES OF HON. EDITH RAMIREZ TO QUESTIONS SUBMITTED

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RESPONSES OF HON. WILLIAM J. BAER TO QUESTIONS SUBMITTED

BY SENATORS KLOBUCHAR, BLUMENTHAL, GRASSLEY, LEAHY, AND LEE
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SUBMISSION FOR THE RECORD
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