New Administration Signals New Enforcement Priorities for 2009 Antitrust Division

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

A new administration meant new leadership and new enforcement priorities at the Department of Justice Antitrust Division in 2009.

Former FTC Commissioner Christine A. Varney was confirmed by the Senate in April to serve as Assistant Attorney General in charge of the Department of Justice Antitrust Division. Soon thereafter, Varney took steps to reverse some of the policies set by the prior administration.

First, in May, Varney withdrew a September 2008, Antitrust Division report, entitled “Competition and Monopoly: Single-Firm Conduct Under Section 2 of theSherman Act” (CCH Trade Regulation Reporter ¶50,231), which examined whether and when specific types of single-firm conduct violate Section 2 of the Sherman Act.

The antitrust chief said that withdrawing the report “is a shift in philosophy and the clearest way to let everyone know that the Antitrust Division will be aggressively pursuing cases where monopolists try to use their dominance in the marketplace to stifle competition and harm consumers.”

Patent “Reverse Payments”

The current Antitrust Division has also taken a tougher stand on patent litigation settlements involving a “reverse payments.” In July, the Department of Justice filed a brief with the U.S. Court of Appeals in New York City, considering an action challenging a settlement agreement between drug maker Bayer AG and the generic defendant Barr Laboratories, Inc.

The Justice Department said that a patent litigation settlement involving a “reverse payment” to the alleged drug patent infringer in exchange for its agreement to withdraw its challenge to the patent and delay bringing its generic drug to market should be viewed as presumptively unlawful.

The move brings the Justice Department’s position closer to that espoused by the FTC on “pay-for-delay” patent settlement agreements between drug makers.

Horizontal Merger Guidelines

Another example of increased coordination between the Antitrust Division and the FTC was the September announcement to explore the possibility of revising the agencies’ joint horizontal merger guidelines. The agencies kicked off workshops in December to consider changes to the guidelines. The workshops will continue in January 2010.

Mergers and Acquisitions

Despite the Antitrust Division’s efforts to strengthen antitrust enforcement, the agency still faced criticism. Some in the tech sector took issue with the Justice Department’s decision in August not to challenge the merger of Oracle Corporation and Sun Microsystems Inc., which is valued at $7.4 billion.

Since the Justice Department’s announcement approving the deal, Oracle has offered some proposed remedies in an effort to satisfy the competition concerns of the European Commission regarding the maintenance of MySQL as an open source database in competition with Oracle’s proprietary databases following the merger.

Cartel Enforcement

In 2009, as in past years, the Justice Department continued to make cartel enforcement a priority. The Justice Department continued to obtain guilty pleas from companies and executives in connection with investigations into conspiracies to fix cargo rates for international air shipments and to fix prices for Thin Film Transistor-Liquid Crystal Display panels.

A new focus for the Antitrust Division in 2009 was bid rigging in the municipal bonds industry

Antitrust Chief Withdraws 2008 Report on Single Firm Conduct

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Marking a shift in enforcement policy, Christine A. Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, on May 11 withdrew, effective immediately, the Antitrust Division's September 2008 report, entitled “Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act.”

The report reflected the Justice Department's enforcement policy with respect to single-firm conduct under Sec. 2 of the Sherman Act. The text of the withdrawn report (CCH Trade Regulation Reporter ¶50,231) appears here on the Department of Justice website.

“Withdrawing the Section 2 report is a shift in philosophy and the clearest way to let everyone know that the Antitrust Division will be aggressively pursuing cases where monopolists try to use their dominance in the marketplace to stifle competition and harm consumers,” said Varney. “The Division will return to tried and true case law and Supreme Court precedent in enforcing the antitrust laws.”

The report outlined an approach for analyzing unilateral conduct that was intended to avoid over-enforcement that would deter aggressive, but lawful conduct.

Thomas O. Barnett, the Assistant Attorney General in charge of the Antitrust Division, who signed off on the report, had suggested that the Antitrust Division took a middle ground in its enforcement policy toward dominant firms.

Varney said that the report advocated hesitancy in the face of potential abuses by monopoly firms. She said that implicit in this overly cautious approach is the notion that most unilateral conduct is driven by efficiency and that monopoly markets are generally self-correcting.

“The recent developments in the marketplace should make it clear that we can no longer rely upon the marketplace alone to ensure that competition and consumers will be protected,” Varney added. She announced the withdrawal of the report at a May 11 speech at the Center for American Progress.

The report was issued after a series of joint hearings, involving more than 100 participants, that the Department and the FTC held from June 2006 to May 2007 to explore the antitrust treatment of single-firm conduct.

When the Justice Department's report was released last September, three of the four FTC members—Commissioners Pamela Jones Harbour, Jon Leibowitz, and J. Thomas Rosch—jointly issued a statement saying that if the report were adopted by the courts, the it “would be a blueprint for radically weakened enforcement of Section 2 of the Sherman Act.”

The three commissioners contended that “[t]he Department's premises lead it to adopt law enforcement standards that would make it nearly impossible to prosecute a case under Section 2.” (See Trade Regulation Talk entry, September 8, 2008)

The May 11 news release on the withdrawal of the report appears here on the Department of Justice website.