Monday, February 16, 2009

Trade Regulation Tidbits

This posting was written by John W. Arden.

News, updates, and observations:

 In trying to predict the enforcement agenda of the new administration, it may be instructive to examine remarks made by Christine Varney, the nominee for Assistant Attorney General in charge of the Antitrust Division, at a conference last June. Speaking at the American Antitrust Institute’s annual conference on the topic “Re-energizing Section 2 of the Sherman Act,” Varney said she expected a Democratic administration to step up enforcement overall, warned that Section 2 enforcement would depend on the government’s creating the proper political climate, observed that she was “deeply troubled” by Google’s acquisition of DoubleClick and the potential use of its lawfully acquired monopoly power, spoke of the difficulty in enforcing Section 2 in the area of intellectual property, and indicated that the government’s failure to take an active role in dealing with dominant firms might result in ceding the territory to the Europeans. “What the next administration needs to do is to find the right cases to begin to push back on some of the doctrines that may have gotten too extreme in the last decade,” said Varney. She admitted that it is “very hard” to enforce Section 2 in a meaningful way in the current economy. An audio recording of Varney’s remarks are available here on the American Antitrust Institute’s web site. Launch “Audio from the 6.19 2:00 p.m. panel: Re-energizing Sec. 2 of the Sherman Act.” Varney’s presentation starts about 45 minutes into the session.

 The recently announced merger of Pfizer Pharmaceuticals and Wyeth Laboratories is not likely to benefit the public and will threaten the future competitiveness and creativity of the domestic pharmaceutical industry, according to a memorandum written by two former Directors of the FTC Bureau of Economics on behalf of the American Antitrust Institute (AAI). Authors William S. Comanor and F. M. Scherer find that (1) from a macroeconomic analysis, the deal is not likely to create the level of employment or increase consumer spending as if the financing were used for commercial bank loans for businesses; (2) the merger will cause anticompetitive effects in the markets for companies’ overlapping products; (3) pharmaceutical innovation will decline, as it has after other mergers in the industry; (4) health-enhancing drugs will be lost as a consequence of the increasing amalgamation of decision-making authority among the companies; (5) there are grounds for skepticism about the presence of appreciable synergies; and (6) “scant reason” supports the belief that the proposed merger is likely to improve their R&D productivity. The report concludes that “there is ample reason to believe that [the merger] will make an unsatisfactory bureaucratic situation even worse, while it enriches the company managers and the banks that allocate funds to support the merger—funds for which American taxpayers bear ultimate responsibility. There is also evidence supporting an inference of more traditional anti-competitive effects.” The authors assert that a “careful and skeptical investigation by the responsible antitrust agency is very much in the national interest.”

The memorandum was sent to Attorney General Eric Holder and the FTC Commissioners, with copies to Secretary of the Treasury Tim Geithner, EC Commissioner Neelie Kros, and Congressional leaders. Text of the memorandum and a letter from AAI President Albert A. Foer is available here on the AAI website.

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