Monday, January 31, 2011

Three Antitrust Bills Are Among First Introduced in New Senate Session

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

Senator Herb Kohl (D, Wis.), chairman of the Judiciary Committee's Antitrust, Competition Policy and Consumer Rights Subcommittee, on January 25 introduced three pieces of legislation that would impact the antitrust laws. Each of the measures has been reintroduced in the 112th Congress, after failing to pass in earlier legislative sessions.

Resale Price Fixing

Senator Kohl introduced a bill to restore the rule of per se illegality for minimum resale price fixing. The proposed “Discount Pricing Consumer Protection Act” (S. 75) would reinstate a rule that was overturned by a 5-4 decision of the U.S. Supreme Court in Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007-1 Trade Cases ¶75,753). Under Leegin, resale price fixing agreements must be judged under the rule of reason.

The measure is identical to legislation introduced in the last two Congresses. It would amend Sec. 1 of the Sherman Act by adding after the first sentence the following:

“Any contract, combination, conspiracy or agreement setting a minimum price below which a product or service cannot be sold by a retailer, wholesaler, or distributor shall violate this Act.”

Senator Kohl first introduced the legislation in 2007, not long after the Supreme Court decision was handed down. “The experience of the last three years since the Leegin decision has begun to confirm our fears regarding the dangers from permitting vertical price fixing,” Senator Kohl said introducing the measure.

“Pay-for-Delay” Pharmaceutical Settlements

Another antitrust measure introduced on January 25 by Senator Kohl is the proposed “Preserve Access to Affordable Generics Act.” The bill (S. 27) is aimed at so-called “pay-for-delay” agreements between brand name and generic drug companies that delay entry of low-cost generic competition.

Under the proposal, agreements under which brand-name drug companies compensate generic drug companies to delay the entry of generic drugs to the market, a practice known as an “exclusion payment settlement,” would be presumed illegal. The FTC would have the authority to challenge such an agreement as a violation of Sec. 5 of the FTC Act, and the drug companies would have an opportunity to convince a judge why the agreement was not anticompetitive.

If an agreement is found illegal, the FTC could assess civil penalties up to three times the profits gained by the drug companies. The current legislation includes changes made by the Judiciary Committee when it approved similar legislation in the 111th Congress.

Railroad Antitrust Exemption

The proposed “Railroad Antitrust Enforcement Act of 2011” (S. 49) would repeal the antitrust exemption enjoyed by freight railroads. The legislation is identical to a bill that was unanimously approved by the Judiciary Committee in the last Congress. That measure was
never voted on by the full Senate.

“Consolidation in the railroad industry in recent years has resulted in only four Class I railroads providing nearly 90 percent of the Nation's freight rail transportation, as measured by revenue,” according to Senator Kohl. “The ill-effects of railroad industry consolidation are exemplified in the case of ‘captive shippers’—industries served by only one railroad. Over the past several years, these captive shippers have faced spiking rail rates.”

The measure would bring railroad mergers and acquisitions under the purview of the Clayton Act, allowing the federal government, state attorneys general, and private parties to file suit to enjoin anticompetitive mergers and acquisitions. Moreover, it would eliminate the exemption that prevents FTC's scrutiny of railroad common carriers and the antitrust exemption for railroad collective ratemaking.

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