Antitrust Division’s Activities Preserve and Promote Competition: Agency Official

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter, and John W. Arden.

A report on the Department of Justice Antitrust Division's recent activities was presented by Carl Shapiro, the Deputy Assistant Attorney General for Economics at the Antitrust Division, on November 18 at the American Bar Association Section of Antitrust Law Fall Forum in Washington, D.C.

In prepared remarks entitled “Update from the Antitrust Division,” Shapiro focused on the Division’s attempts to preserve and promote competition through criminal enforcement, civil non-merger enforcement, competition advocacy, and merger enforcement (including an explanation of the new Horizontal Merger Guidelines).

Criminal Cases

Shapiro observed that during Fiscal Year 2010, the Antitrust Division concentrated on “rooting out and prosecuting cartels and other collusive agreements.” It filed 60 criminal cases, involving 84 corporate and individual defendants, and obtained fines in excess of $550 million. While the fines obtained were down from previous years, "the Division's commitment to criminal enforcement remains steadfast," Shapiro said.

He added that of the individual defendants sentenced, 76% were given prison time, including an average 10-month prison term for foreign nationals, whose incarceration continues to be a priority of the Division.

Civil Non-Merger Suits

Shapiro stated that reviewing and challenging anticompetitive conduct “is a critical component of the Division’s mission to preserve and promote competition.” During Fiscal Year 2010, the Division resolved competitive concerns with negotiated consent decrees in four civil non-merger cases—U.S. v. Smithfield Foods and Standard Farms LLC (2010-1 Trade Cases ¶76,880); U.S. v. Idaho Orthopedic Society(2010-2 Trade Cases ¶77,142); U.S. v. Adobe Systems, Inc. (CCH Trade Regulation Reporter ¶50,982); and U.S. v. KeySpan Corporation (CCH Trade Regulation Reporter ¶50,975).

In addition, the Division filed civil antitrust lawsuits against Blue Cross Blue Shield of Michigan and (together with seven states) against American Express, MasterCard, and Visa.

In the first suit, the Division challenged “most-favored nations” (MFN) clauses in Blue Cross’s agreements with hospitals that allegedly limit the discounts the hospitals can offer to Blue Cross’s competitors. These MFN clauses raise prices, prevent other insurers from entering the marketplace, and discourage hospital discounts, Shapiro said.

The second suit challenged rules, policies, and practices imposed by the three largest credit and charge card networks in the U.S. These rules “impede merchants from promoting or encouraging the use of a competing credit or charge card with lower acceptance fees,” he explained.

MasterCard and Visa were willing to resolve these antitrust concerns at the time the Division filed the compliant, agreeing to allow merchants to offer consumer discounts and rebates; express a preference for a particular credit card; promote particular cards through communications to customers; and communicate the cost incurred by the merchant when a consumer uses a particular credit card.

Litigation continues against American Express, which has stated its intention to fully litigate the matter.

Competition Advocacy

The official trumpeted the Antitrust Division's recent competition advocacy efforts, involving a wide range of industries and topics, including telecommunications, financial markets, health care, agriculture, and patents.

Shapiro highlighted the agency's involvement in a proposal by Delta and US Airways to swap more than 300 takeoff and landing slots at LaGuardia and Ronald Reagan Washington National Airport.

The Division filed formal comments with the Department of Transportation, supporting a proposed DOT order that would permit the slot transfers, subject to the carriers’ disposal of 14 pairs of “slot interests” at Ronald Reagan Washington National Airport and 20 pairs of slot interests at LaGuardia Airport to “eligible new entrant and limited incumbent carriers.”

The divestiture of these slot interests eased concerns that the transaction would have reduced competition between Delta and US Airways on a number of routes at the two airports, thereby harming consumers.

Merger Enforcement

According to Shapiro, Hart Scott Rodino filings reached only 716 for Fiscal Year 2009, down from 2,201 during Fiscal Year 2007. Newly released figures show a 50% increase in Fiscal Year 2010 to 1,170. About 1.9% of the filings resulted in a Department of Justice Second Request. The Division challenged 19 mergers.

Shapiro discussed the Antitrust Division's recent issuance of revised Horizontal Merger Guidelines. The guidelines were the product of a lengthy and collaborative process with the Federal Trade Commission. The primary motivation behind their creation was to “promote transparency by describing more accurately how the Agencies actually evaluate horizontal mergers.”

He illustrated the principles articulated in the revised Guidelines through an analysis of the agency's investigation into the proposed merger of United Airlines and Continental Airlines and of the agency's complaint challenging the merger proposal between Baker Hughes Inc. and BJ Services Company.

Text of the prepared remarks appears here on the Antitrust Division’s website.

Varney Confirmed by Senate to Head Department of Justice Antitrust Division

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

The U.S. Senate on April 20 confirmed the nomination of Christine Anne Varney to serve as Assistant Attorney General in charge of the Department of Justice Antitrust Division. Eighty-seven senators voted to confirm Varney. Only one, Senator Jim Bunning (Kentucky), voted no, with 11 senators not voting.

Varney will return to government service after more than a decade as a partner at Hogan & Hartson’s Washington, D.C. office. There she headed up the firm’s Internet Practice Group. She also recently served on President Barack Obama’s transition team.

During the Clinton Administration, Varney was an FTC Commissioner from 1994 to 1997. Prior to becoming an FTC Commissioner, Varney was Secretary to the Cabinet.

Varney received her J.D. from Georgetown University in 1986. She received her M.P.A. from Syracuse University in 1978, and her B.A. from The State University of New York, University at Albany in 1977.

Varney’s nomination was announced on January 22, along with three other assistant attorney general nominees: David Kris, Assistant Attorney General for National Security; Tony West, Assistant Attorney General for Civil Division; and Lanny Breuer, Assistant Attorney General for Criminal. West and Breuer were also confirmed by the Senate on April 20. Kris was confirmed on March 25.

In an April 20 news release, announcing the confirmations on April 20, Attorney General Eric Holder said: “These exceptional individuals will help lead the Department with dedication, sound judgment and integrity, whether it’s aggressively enforcing the antitrust laws, overseeing civil enforcement in the Department’s largest litigation division, or combating traditional crimes such as financial fraud or drug trafficking.”

He added, “I look forward to working with them to advance the interests of justice on behalf of the American people.”

A report on Varney's testimony at a Senate Judiary Committee confirmation hearing (Trade Regulation Talk, March 11, 2009) appears here.

Nominee Varney Describes Focus as Antitrust Chief

This posting was written by John W. Arden.

In a statement delivered in a confirmation hearing before the Senate Judiciary Committee on March 10, Christine Varney, nominee as Assistant Attorney General in charge of the Antitrust Division, described her focus and qualifications for the job.

“Strong antitrust enforcement and respect for our competition statutes are the primary safeguards of our distinctive free enterprise system,” said Varney, a Washington lawyer who served as Federal Trade Commissioner during the Clinton Administration. She set out three main areas on which she would focus if confirmed.

Areas of Focus

“First, we must rebalance legal and economic theories in antitrust analysis and enforcement,” she said. “The Antitrust Division can provide strong intellectual leadership in competition policy by advancing our collective understanding of competitive behavior and adapting our thinking to reflect our ever evolving markets.”

“Second, we need renewed collaboration between the Antitrust Division and the FTC, whose policies and processes have unfortunately diverged too frequently in recent years,” Varney observed. Such divergence and conflicts lead to uncertainty for consumers, businesses, and overseas antitrust enforcers.

“Third, we must continue our cooperation with worldwide antitrust authorities, discussing our differences with international enforcers respectfully and engaging with emerging antitrust regimes, such as China and India as they implement new antitrust laws.”

Antitrust Enforcement During Economic Crisis

Varney addressed the question of whether antitrust enforcement should be pursued in the current economic crisis. “I believe it is important to remember that robust antitrust enforcement is essential for the free market to function properly,” she said.

“In these tough economic times, more than ever, it is important to remember that clear and consistent antitrust enforcement—protecting competition and thus consumers while being conscious of the need for economic stability—is essential to a growing and healthy free market economy.”

The nominee expressed confidence that she is “well equipped” to meet the challenges of the position of chief antitrust enforcer. “I will approach the challenged we face from my unique vantage point as a former FTC Commissioner, which I believe will help me to bridge the gap that exists between the antitrust agencies on several crucial substantive and procedural issues.”

Varney’s written testimony appears here.

Merger Enforcement

The statement was followed by questions from the members of the Judiciary Committee, according to a posting to an ABA antitrust listserv by David Balto. Senator Herb Kohl (D-Wis.) asked Varney for her assessment of the "sharp cutback" in merger enforcement and enforcement against dominant firms during the Bush Administration. The nominee decline to discuss particular cases, but said she would enforce the law vigorously and stop horizontal mergers that cuase competitive harm.

Resale Price Maintenance

When asked about her view of the Supreme Court's decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., Varney said she was surprised by the decision but believed that the law allowed the Department of Justice room to prosecute resale price maintenance. If not, she might support further legislation on the issue.

DOJ Monopoly Report

Senator Russ Feingold (D-Wis.) asked if Varney would review and potentially repudiate the Department of Justice's September 2008 report on single firm monopoly conduct ("Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act”). The nominee responded that she would review the report and that she felt that the conclusions the report drew were not appropriate. She said she would work with te Division staff and the FTC to determine if the report should be revised or some other action taken.