Source: http://www.techlawjournal.com/alert/2003/10/31.asp
Timestamp: 2019-04-22 09:57:23+00:00

Document:
TLJ Daily E-Mail Alert No. 769, October 31, 2003.
October 31, 2003, 10:00 AM ET, Alert No. 769.
10/29. Sen. Mike DeWine (R-OH) and Sen. Herb Kohl (D-WI) introduced S 1797, the "Antitrust Criminal Penalty Enhancement and Reform Act of 2003". The bill would amend the Tunney Act to provide that the courts are to independently determine that civil antitrust settlements negotiated by the Department of Justice (DOJ) are in the public interest. It would also increase penalties for some criminal antitrust violations. It would also enhance the DOJ's existing leniency program.
Sen. DeWine is the Chairman of the Senate Judiciary Committee's Subcommittee on Antitrust, Competition Policy and Consumer Rights. Sen. Kohl is the ranking Democrat on the Subcommittee. The two typically work together on antitrust issues.
Sen. Kohl spoke in the Senate about the bill. He stated that "The Tunney Act was passed in 1974 in response to concerns that some Justice Department settlements were motivated by inappropriate political pressure and were simply inadequate to restore competition or protect consumers. Congress concluded that review by the district courts to be an essential safeguard to deter the Justice Department from settling cases without regard for the public interest or the interest of affected consumers. The Tunney Act was enacted to end the then-prevalent practice of district judges ``rubber stamping´´ antitrust consent decrees." See, Congressional Record, October 29, 2003, at S13519.
The Tunney Act is Section 5 of the Clayton Act, as amended, and is codified at 15 U.S.C. § 16. The bill would amend the Tunney Act to require that "The Court shall not enter any consent judgment proposed by the United States under this section unless it finds that there is reasonable belief, based on substantial evidence and reasoned analysis, to support the United States' conclusion that the consent judgment is in the public interest."
Sen. Kohl did not discuss the government antitrust case against Microsoft. However, he stated that "Unfortunately, in recent years, many courts -- including specifically the U.S. Court of Appeals for the District of Columbia Circuit -- have misconstrued the plain meaning of the Tunney Act and have returned to the practice of ``rubber stamp´´ review of antitrust settlements. The controlling precedent in the D.C. Circuit is now that trial courts must enter antitrust consent decrees as long as they do not make a ``mockery of the judicial power.´´ This standard is contrary to the intent of the Tunney Act and effectively strips the courts of the ability to engage in meaningful review of antitrust settlements."
He elaborated that "Our bill will restore the original intent of the Tunney Act by First, providing that courts are to independently determine that antitrust settlements are in the public interest, second, setting forth a specific list of factors that a court must examine in the course of its public interest review -- rather than may consider as the statute is currently written, and third, requiring the government establish that substantial evidence and reasoned analysis supports the government's belief that the consent judgment is in the public interest."
Sen. Kohl stated that the bill will also "increase the maximum corporate penalty from $10 to $100 million, will increase the maximum individual fine from $350,000 to $1 million, and increase the maximum jail term for individuals who are convicted of criminal antitrust violations from three to ten years. These changes will send the proper message that criminal antitrust violations -- crimes such as price fixing and bid rigging -- committed by business executives in a boardroom are serious offense that steal from American consumers just as effectively as does a street criminal with a gun."
Finally, he addressed the leniency program provisions of the bill. He said that "The leniency program rewards the first member of a criminal antitrust conspiracy to admit its crime to the Justice Department by granting the wrongdoer criminal amnesty. This is an important tool for law enforcement officials to detect and break up cartels that fix prices and limit supply in our economy. This new provision will give the Justice Department the ability to offer those applying for leniency the additional reward of only facing actual damages in civil suits arising out of the antitrust conspiracy, rather than the treble damage liability to which they would otherwise be subject."
10/30. Secretary of Commerce Donald Evans discussed his talks with representatives of the government of the People's Republic of China. He spoke and answered question at events in Beijing and Tokyo on October 29 and 30. He stated that he talked about, among other issues, the Doha round, protection of IPR in China, and U.S. restrictions on high-tech exports to China.
On October 29, Evans held a press conference in Beijing, China. See, transcript. He stated that "One of the specific issues we focused on while we were here was the protection of intellectual property rights. There is too much piracy of intellectual property, too much counterfeiting, too much stealing. Over 90 percent of the intellectual property -- that is DVDs and CVDs and software -- that is sold is counterfeit. Some of it is being exported outside the country."
On October 30, Evans (at right) gave a speech and answered questions at an American Chamber of Commerce in Japan luncheon in Tokyo, Japan. He said that "We need to continue to work very hard on the Doha Round and WTO. Those are the kinds of places you can go to create standards, rules, laws, regulations so we're all on the same playing field. Another example that I used a lot when I was in China was the enforcement of the agreements that we signed. Intellectual Property Right protection, that's a huge, huge deal. About 90 percent of the CDs, DVDs, software sold in China are pirated, or they're stolen or they're counterfeit. That means wherever that intellectual property, that knowledge, that value is coming from, is being disadvantaged or on an unlevel playing field. So it's a matter of not only signing agreements where we all know what the rules are going to be, but it's also enforcing the rules -- effective enforcement of the rules."
He also addressed U.S. export controls on the 29th. He said that "China is the only country in the world, the only country in the world where we have difficulty in having access to the companies that are buying this high-technology equipment, what we would call end-use visits. As soon as we can get an end-use visit agreement in place so that we can tell the Congress of the United States and the American people that we are being provided access to visit the plants and the facilities and the businesses that are buying this high-tech equipment, I feel confident that it will improve the environment, improve the conditions for increasing high-technology trade between our two countries."
He also commented on the consequences of information technologies. He stated that "In the 21st century, because of technology, our borders are going to be connected by computer terminals all around the world. Borders are becoming more eroded all around the world, and that kind of way, the free flow of information and knowledge, is one of the reasons that we're seeing this incredible increase in productivity. Information is readily available, and doesn't cost you a lot to get it. I'm optimistic that we'll continue to see this power drive a more competitive, more productive global economy that will eventually get us to where we're all trying to be."
He also addressed other issues. He said that "it's essential that trade be fair, and we're all playing by basically the same rules."
"What I did talk about was that you have to enforce intellectual property rights, because 90 percent of what's being sold is stolen. It's pirated. That's not fair to American workers", said Evans. "I did talk about the fact that China has been relatively slow in establishing the regulations for allowing distribution systems to be set up in China, and trading licenses to be established in China, so that American companies can find ways to move their products into the China economy. I did talk about ways that this economy needs to continue to move towards free-market principles. Government needs to be less involved in trying to micromanage the economy, and you need to put the fiscal policies in place, the monetary policies in place, the regulatory policies in place that allow the private sector, the workers of the country to do what they do so well, which is to create the wealth and create the prosperity."
He added that there is a "VAT rebate tax that discriminates against foreign competition. We talked about standards that are being established that discriminate against foreign competition." He also said that "we didn't come over to talk about any differential in labor costs."
10/30. The House Commerce Committee's Subcommittee on on Commerce, Trade, and Consumer Protection held a hearing titled "E-Commerce: The Case of Online Wine Sales and Direct Shipment". Rep. Clifford Stearns (R-FL) presided. The Subcommittee received testimony from the Federal Trade Commission (FTC), which has studied various state laws that impede e-commerce, the Wine and Spirits Wholesalers of America (WSWA), which opposes Internet sales of wine and other alcohol, and WineAmerica, which represents small wineries and opposes state prohibitions of Internet wine sales.
The FTC issued a report [139 pages in PDF] titled "Possible Anticompetitive Barriers to E-Commerce: Wine" on July 3, 2003. See, story titled "FTC Report Concludes That Allowing Direct Sales of Wines Would Enhance Consumer Welfare" in TLJ Daily E-Mail Alert No. 692, July 7, 2003. This report concluded that consumer welfare would be enhanced by allowing direct shipment of wines.
Todd Zywicki, Director of the FTC's Office of Policy Planning, wrote in his prepared testimony for this hearing that "Wine is a good example of how the Internet can permit fundamentally different business models to flourish. Through the Internet, many smaller vineyards, with limited distribution networks, can now market their wines to consumers around the country."
But, he continued, "many states limit or prohibit direct wine sales over the Internet. Under the common ``three tier´´ distribution system, many states require that wine pass through a wholesaler or a retailer before reaching the consumer. These states, and many commentators, contend that the distribution system furthers the state's interest in taxation, advances the Twenty-First Amendment's important public policy goal of temperance, and helps prevent alcohol sales to minors."
The 21st Amendment provides, in part, that "The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited."
Zywicki continued that the FTC has concluded that "consumers could reap significant benefits if they had the option of purchasing wine online from out-of-state sources and having it shipped directly to them. Consumers could save money, choose from a much greater variety of wines, and enjoy the convenience of home delivery. Indeed, in states that are litigating the constitutionality of direct shipping bans, several courts have found that the bans deprive the state’s consumers of lower prices and greater variety. In addition, many states appear to have found means of satisfying their tax and other regulatory goals that are less restrictive than an outright ban. These states generally report few or no problems with shipments to minors or with tax collection."
The WSWA submitted the prepared tesimony of Juanita Duggan. She emphasized the argument that direct sales of alcohol leads to purchases by minors, and that limiting sales to face to face transactions is the only way to enforce minimum age laws.
David Sloane of WineAmerica also submitted prepared testimony. He argued that the three tier distribution system, and bans on direct sales, harm small wineries.
He wrote that "While we do not recommend that Congress take any specific legislative action at this time to reduce barriers to online wine sales, given the importance and potential of the Internet, we do, however, recommend that Congress consider developing legislation to provide more generalized guidance to the states and courts in this area. Specifically, Congress could indicate that commerce -- especially e-commerce -- should be allowed in the absence of good, sufficient reasons to erect barriers, and when there is no alternative and less disruptive mechanism. The alternative -- that of allowing states to erect barriers without regard to the Commerce Clause -- will forever limit the potential of the Internet."
Rep. Stearns (at right) commented that in 26 states direct sales of alcohol is permitted interstate, although in some states it is conditioned upon reciprocity. He added that in 40 states direct sales of alcohol is permitted intrastate. He said that the WSWA argument "seems to me a little illogical". That is, direct sales works in these 26 and 40 states. He concluded that "all of these concerns that you have don't seem to be a problem" in those states.
The WSWA witness responded that with respect to the 40 states that allow intrastate direct sales, it is a matter of jurisdiction and control. When the winery or other retailer is in state, that state's courts have jurisdiction over that seller, and that state can revoke that retailer's license.
10/30. The Senate Commerce Committee held a hearing on the preservation and advancement of universal service. Michael Powell, Chairman of the Federal Communications Commission, wrote in his prepared testimony [MS Word] that "the FCC is currently reexamining nearly every aspect of the universal service program to ensure that the program is administered effectively and that it remains sustainable as major marketplace and technological developments take root."
Powell stated that "Traditional telecommunications services are migrating from old circuit-switched networks to new and advanced Internet protocol networks. The demand pull of consumer choice and technological push of network innovation mean that this migration is inevitable. Indeed, regulators cannot stop it, nor should we want to for it promises new competitive choices and spell-binding innovation for consumers. Our efforts to reform the nation's universal service programs must embrace change and provide sufficient, forward-looking flexibility to ensure that supported services remain affordable and ubiquitous."
But, he said, "Digital migration should not be seen as a threat to our universal service objectives, but an opportunity. Indeed, the fact that our Schools and Libraries program has succeeded in connecting 99 percent of public schools to the Internet is an example of universal service success in the Digital Age."
He offered several recommendations. First, he said, "we must reform the FCC’s contribution methodology for collecting Universal Service Funds to address changes in the market and to ensure a more stable funding base. Several trends have put pressure on the contribution factor: Interstate revenues have been flat or in decline since 1999 as a result of price competition, bundled packages and technology substitution. Moreover, expanding the base to include intra-state revenues may be needed to stem the declining tide."
"Second, we must control the growth of the Universal Service Fund, mindful that consumers ultimately pay for achieving our universal service objectives. Particularly, we need a more rational method of distributing universal service support that promotes competition, but preserves the fund. To this end, the Joint Board will soon make recommendations to the Commission on ETC eligibility and portability."
"Third, we must improve the administration of our vast and sometimes unnecessarily technical rules in our programs. Clarifying and simplifying our eligibility criteria in the Schools and Libraries program, Rural Health Care program and low income programs has been a priority. Indeed, at our November meeting, I will present to the Commission an item that will advance the important homeland security and public health interests of rural America by unlocking the funds that Congress designated for rural health care providers."
Fourth, he stated that "we must continue to diligently enforce the universal service rules that are currently on the books if we are to sustain universal service in a digital age, as well as maintain the accountability of these programs. Our recent enforcement activities are designed to ensure that every responsible entity pays their fair share. I am happy to announce that because of our stepped up enforcement efforts, the contribution factor for the first quarter of next year likely will drop below 9 percent, as opposed to increase to 10 percent as was feared."
Universal service subsidy requirements are codified at 47 U.S.C. § 254. See also, FCC's universal service web page.
There was no issue of the TLJ Daily E-Mail Alert on Thursday, October 30.
Day two of a three day convention of the American Intellectual Property Law Association (AIPLA). At 12:15 - 1:45 PM, Rep. Lamar Smith (R-TX), Chairman of the House Judiciary Committee's Courts, the Internet, and Intellectual Property Subcommittee will give a luncheon address. See, convention agenda [44 pages in PDF] Location: Grand Hyatt Washington, 1000 H Street.
9:00 - 11:00 AM. The Progressive Policy Institute (PPI) will release a paper titled "Confronting Digital Piracy: Intellectual Property Protection in the Digital Era" and host a panel discussion. The speakers will be Robert Atkinson (PPI), Shane Ham (PPI), and Gigi Sohn (Public Knowledge). See, notice. Location: PPI, 600 Pennsylvania Ave., SE, Suite 400.
Deadline to submit comments to the Federal Communications Commission (FCC) regarding its Fourth Notice of Proposed Rulemaking [49 pages in PDF] in which it proposes to make spectrum available to federal users that will be displaced from the 1710-1850 MHz band to make it available for advanced wireless services. See, notice in the Federal Register September 2, 2003, Vol. 68, No. 169, at Pages 52156 - 52168. See, also stories titled "FCC Releases NPRM Regarding Allocating Spectrum to DOD to Replace Spectrum Allocated for 3G Services" in TLJ Daily E-Mail Alert No. 694, July 9, 2003, and "FCC Sets Deadlines for Comments Regarding Spectrum Reallocations Relating to 3G Services" in TLJ Daily E-Mail Alert No. 731, September 3, 2003. This is ET Docket No. 00-258 and WT Docket No. 02-8.
Deadline to submit reply comments to the Federal Communications Commission (FCC) regarding the portion of the FCC's triennial review order [576 pages in PDF] that contains a notice of proposed rulemaking [NPRM] regarding modifications to the FCC's rules implementing 47 U.S.C. § 252(i), which requires local exchange carriers (LECs) to make available to other telecommunications carriers interconnection agreements approved under Section 252. See, notice in the Federal Register, September 2, 2003, Vol. 68, No. 169, at Pages 52307 - 52312, and September 2 FCC release [3 pages in PDF]. The Federal Register notice states that the reply comment deadline is October 23. However, the FCC release states that this was in error.
10:00 AM. The Senate Judiciary Committee's Subcommittee on Terrorism, Technology and Homeland Security on "database security". See, notice. Press contact: Margarita Tapia (Hatch) at 202 224-5225 or David Carle (Leahy) at 202 224-4242. Location: Room 226, Dirksen Building.
3:00 PM. The House Ways and Means Committee will hold a hearing titled "IRS Efforts to Modernize its Computer Systems". See, notice. Location: Room 1100, Longworth Building.
TENTATIVE. The Senate Judiciary Committee will hold its second hearing on the USA PATRIOT Act, terrorism and civil liberties. Location: Room 226, Dirksen Building.
10/28. A collection of groups wrote a letter to the Paul Twomey, the P/CEO of the Internet Corporation for Assigned Names and Numbers (ICANN) "regarding the significant privacy issues surrounding the WHOIS database and the need to ensure that strong privacy safeguards are established".
The signatories include the the Electronic Privacy Information Center (EPIC), Media Access Project (MAP), American Library Association (ALA), and other groups.
They argue that "The WHOIS database was originally intended to allow network administrators to find and fix problems to maintain the stability of the Internet. It now exposes domain name registrants' personal information to many other users for many other purposes unrelated to network access. Anyone with Internet access can now have access to WHOIS data, and that includes stalkers, governments that restrict dissidents' activities, law enforcement agents without legal authority, and spammers. The original purpose for WHOIS should be reestablished."
10/27. The Senate confirmed Dale Susan Fischer to be a Judge of the U.S. District Court for the Central District of California.
10/30. The Progress and Freedom Foundation (PFF) released a "study [PDF] titled "Verizon v. Trinko: Reconciling FCC Regulation and Antitrust Enforcement", by William Adkinson of the PFF. He states that "This controversy is nothing new -- the 1996 Act was in large part intended to replace years of regulation under the antitrust consent decree entered by Judge Greene in United States v. AT&T with a new FCC regulatory regime." He argues that "although there is no implied preemption or immunity under the 1996 Act, the regulatory system must inform the application of the antitrust laws in these cases. Plaintiffs should not be permitted to assert antitrust claims against ILECs based on alleged denials of interconnection or other conduct subject to the 1996 Act. Such claims are negated by the regulatory system, which imposes far more extensive obligations on ILECs than the antitrust laws ever could. Theories of refusals to deal, denial of access to an essential facility and the like make no sense when the 1996 Act and implementing regulations require that ILECs provide reasonable access. Indeed, permitting CLECs or retail customers to bring antitrust actions will interfere with the access system established by the 1996 Act." The Supreme Court heard oral argument in the Trinko case on October 14, 2003. See also, story titled "Supreme Court Grants Certiorari in Verizon v. Trinko", March 10, 2003, also published in TLJ Daily E-Mail Alert No. 620, March 11, 2003.
10/30. The Department of Justice's (DOJ) Antitrust Division announced that it will give an award to Richard Posner. He is judge of the U.S. Court of Appeals (7thCir). The DOJ argues cases before the Seventh Circuit. The award ceremony and reception will be held on November 6, 2003 at 3:00 -5:30 PM. See, DOJ release.
10/31. The International Telecommunications Union (ITU) announced that it will host, in collaboration with the ISO (International Organization for Standardization) and the ETSI (the European Telecommunications Standards Institute), a workshop on the future of communication technologies in motor vehicles. The event will be held in Geneva, Switzerland on November 24-25. See, ITU release.
10/30. Federal Communications Commission (FCC) Chairman Michael Powell met with Muna Nijem, Chairman and Chief Executive Officer of the Hashemite Kingdom of Jordan's Telecommunications Regulatory Commission (TRC). See, FCC release.
10/29. The Federal Communications Commission (FCC) held a two day event on October 29-30 titled "E911 Coordination Initiative". See, speech [PDF] by FCC Chairman Michael Powell.
10/28. The U.S. District Court (DC) issued a short order [PDF] in USA v. First Data and Concord EFS, which states that "trial on the merits in this matter shall begin on December 15, 2003". See also, TLJ story titled "DOJ Sues to Stop Merger of PIN Debit Networks", October 23, 2003, also published in TLJ Daily E-Mail Alert No. 765, October 24, 2003.
10/28. Microsoft announced that it has settled four private class action lawsuits that allege violation of antitrust law. Microsoft previously settled suits in several other states. There remain five states in which there are pending, and certified, class action lawsuits. Also, in some other states class action complaints were dismissed, or class certification denied. See, Microsoft release regarding the latest settlements, and summarizing the status of antitrust litigation. See also, transcript of press conference.

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