Pozen Named Acting Head of Antitrust Division

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

With Assistant Attorney General Christine Varney scheduled to step down as head of the Department of Justice Antitrust Division today, the Department of Justice has named Deputy Assistant Attorney General Sharis Arnold Pozen as Acting Assistant Attorney General.

“Sharis is a highly experienced antitrust enforcer and I am confident that she will continue to lead the Antitrust Division in its mission to vigorously enforce the antitrust laws,” said Attorney General Eric Holder.

Pozen has played a lead role in a number of civil merger and non-meger enforcement matters since joining the Antitrust Division. Pozen was also involved in the federal antitrust agencies’ update of the Horizontal Merger Guidelines and the Antitrust Division’s revision of its Merger Remedy Guidelines.

Prior to coming to the Antitrust Division, Pozen was a partner in the Antitrust, Competition and Consumer Protection Group of Hogan & Hartson (now Hogan Lovells). She also worked for five years at the Federal Trade Commission as an attorney advisor, as assistant to the Bureau of Competition Director, and as a staff attorney.

The appointment was announced in an August 4 news release.

Varney announced her departure from the Antitrust Division, effective as of August 5, on July 6. For further details regarding Varney’s move, see the July 7 posting on Trade Regulation Talk (“Antitrust Chief to Leave Justice Department for Private Practince”).

Antitrust Chief to Leave Justice Department for Private Practice

This posting was written by John W. Arden.

Christine Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, is stepping down from her government post on August 5 to return to private practice.

Varney joined the Justice Department in April 2009, after being confirmed by the Senate. She previously served as Federal Trade Commissioner from 1994 to 1997. She is reportedly joining the law firm of Cravath, Swain & Moore LLP.

“Christine Varney led the Antitrust Division with great distinction through a period when the department confronted a number of proposed mergers and other matters that could have led to higher prices, lower quality products and less innovation in a recovering economy,” said Attorney General Eric Holder. “There is no doubt that her tireless work helped protect consumers and businesses from anticompetitive conduct and preserved competition in America’s economy. I will miss her leadership.”

The Assistant Attorney General came to the job after the Obama administration pledged to reinvigorate antitrust enforcement. During confirmation hearings, she set out three main areas of focus: (1) the rebalance of legal and economic theories in antitrust analysis and enforcement; (2) a renewed collaboration between the Antitrust Division and the Federal Trade Commission; and (3) continued cooperation with worldwide antitrust authorities.

When asked whether strong antitrust enforcement was appropriate during an economic crisis, Varney responded 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.”

Sherman Act, Section 2 Enforcement

Soon after her confirmation, Varney made news by withdrawing the Antitrust Division’s September 2008 report (“Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act,” CCH Trade Regulation Reporter ¶50,231), which examined how specific types of single-firm conduct violate Section 2 of the Sherman Act. When issued, the report was severely criticized by three FTC Commissioners, who called it “a blueprint for radically weakened enforcement” of monopoly law.

Varney said that withdrawing the report was “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.”

Merger Guidelines

Her desire to work in collaboration with the FTC may be seen in the agencies’ update to the Horizontal Merger Guidelines (CCH Trade Regulation Reporter ¶13,100), issued in August 2010. The joint guidelines, which hadn’t been thoroughly overhauled since 1992, were intended to outline for merging parties, courts, and antitrust practitioners how the federal antitrust agencies evaluate the likely competitive impact of mergers and whether those mergers comply with U.S. antitrust law.

According to both the FTC and the Antitrust Division, the revised guidelines better reflected the agencies’ actual practices, providing more clarity and transparency to the process.

Just last month, the Antitrust Division issued an update to its 2004 guidance on merger remedies. The Policy Guide to Merger Remedies (CCH Trade Regulation Reporter ¶13,172) is used by Antitrust Division staff in analyzing proposed remedies in merger matters and is intended to provide transparency into the Division’s approach for the business community, antitrust bar, and the broader public.

Merger Enforcement

In a June 24 speech examining “whether the Antitrust Division has been steadfast in ensuring vigorous enforcement of the antitrust law, as I promised upon confirmation," Varney highlighted the Division’s merger enforcement efforts. The Antitrust Division was committed to going to court “where the parties have been unwilling to resolve the anticompetitive aspects of their transactions,” she said.

She cited two current merger challenges: H&R Block Inc.’s proposed acquisition of the maker of TaxACT do-it-yourself tax preparation software and the combination of point-of-sale (POS) terminal sellers VeriFone Systems Incorporated and Hypercom Corporation. She also noted the recent settlement of a third matter involving the acquisition of a Tyson Foods Harrisonburg chicken processing complex by George’s, Inc.

Varney also discussed mergers that involved vertical theories, including Ticketmaster Entertainment’s acquisition of concert promoter Live Nation, Inc.; a joint venture between Comcast Corp. and General Electric Co.’s subsidiary NBC Universal Inc.; and Google’s acquisition of ITA Software Inc.

The Antitrust Division reviewed these vertical transactions "in light of their specific facts and market conditions and evaluated the competitive harms," said Varney. "In each case, we concluded that the transactions, as proposed, would give rise to competitive harm, and while we were prepared to sue, the parties agreed to consent decrees that addressed our concerns."

Partnerships with Other Agencies, Governments

Varney also focused on her efforts to strengthen partnerships with other federal agencies, state agencies, and other governments, particularly those foreign countries with emerging economies. The Division worked collaboratively and provided input on competition issues with the Department of Transportation, the Federal Energy Regulatory Commission, the Securities and Exchange Commission, and the U.S. Commodities Futures Trading Commission, she said. The Division cooperated with states and foreign governments in pursuing civil and criminal investigations and in competition policy matters.

"I am grateful for my two and a half years of service as Assitant Attorney General of the Antitrust Division," said Varney. "From the start of my time here, it has been a tremendous privilege to work with the department's leadership and the dedicated professionals in the Antitrust Division."

A news release announcing the Assistant Attorney General’s departure from the Justice Department appears here on the Antitrust Division’s website.

Antitrust Chief Details Accomplishments of Last Two Years

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

Christine Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, told attendees of a U.S. Chamber of Commerce event on June 24 in Washington, D.C. that after more than two years on the job, "the time is ripe to examine whether the Antitrust Division has been steadfast in ensuring vigorous enforcement of the antitrust law, as I promised upon confirmation." Varney talked about civil merger and non-merger enforcement, among other topics.

Merger Enforcement

With respect to merger enforcement, Varney said the Antitrust Division was committed to going to court “where the parties have been unwilling to resolve the anticompetitive aspects of their transactions.”

Two current merger challenges were cited: H&R Block Inc.’s proposed acquisition of the maker of TaxACT do-it-yourself tax preparation software, and the combination of point-of-sale (POS) terminal sellers VeriFone Systems Incorporated and Hypercom Corporation. She also noted the recent settlement in a third matter involving the acquisition of a Tyson Foods Harrisonburg chicken processing complex by George’s, Inc.

Varney also discussed mergers and acquisitions that involved vertical theories. Among the transactions that have arisen in the past few years were: ticket seller Ticketmaster Entertainment, Inc.’s acquisition of concert promoter Live Nation, Inc.; a joint venture between Comcast Corp. and General Electric Co.’s subsidiary NBC Universal Inc.; and Google’s acquisition of ITA Software Inc.—a company that develops and licenses a search software product used by the travel industry to perform flight searches and offer airfare comparison and booking websites.

The transactions demonstrate that “business is frequently looking for strategic acquisitions that offer the synergies and efficiencies presented by combining various levels of production.”

As with the purely horizontal transactions, the Antitrust Division reviewed these transactions "in light of their specific facts and market conditions and evaluated the competitive harms," said Varney. "In each case, we concluded that the transactions, as proposed, would give rise to competitive harm, and while we were prepared to sue, the parties agreed to consent decrees that addressed our concerns."

Civil Non-Merger Enforcement

Varney also mentioned that the Antitrust Division remained active in civil non-merger enforcement. She pointed to two matters in ongoing litigation—the Antitrust Division’s lawsuit challenging Blue Cross Blue Shield of Michigan’s Most Favored Nation Clauses with hospitals, and the Antitrust Division’s challenge to merchant fees in its lawsuit against American Express.

Another example of civil enforcement was the recent settlement in the Justice Department’s first case since 1999 challenging a monopolist with engaging in traditional anticompetitive unilateral conduct against United Regional Health Care System of Wichita Falls—a dominant health care provider.

Competition Advocacy

The antitrust chief discussed competition advocacy and regulatory outreach across the government. The Division works with a broad range of federal and state agencies to promote competition principles in important industries, including agriculture, telecommunications, energy, financial services, and healthcare.

“Among my competition advocacy priorities when I arrived at the Division was to explore the appropriate role for antitrust and regulatory enforcement in American agriculture, and this required collaboration at many levels,” said Varney, citing a series of workshops hosted by the Antitrust Division and the U.S. Department of Agriculture.

The Division has worked collaboratively with the Department of Transportation, the Federal Energy Regulatory Commission, the Securities and Exchange Commission, and the U.S. Commodities Futures Trading Commission, said Varney.

An example of cooperation with other federal and state agencies has been the ongoing municipal bonds investigation. The Division played a “key role” in obtaining an agreement from Bank of America to pay $137.3 million in restitution and disgorgement to state and federal agencies for its participation in a conspiracy to rig bids in the municipal bond derivatives market and as a condition of its admission into the Department of Justice’s Antitrust Corporate Leniency Program.

Bank of America entered into agreements with the SEC, the Internal Revenue Service, Office of the Comptroller of the Currency, and 20 state attorneys general.

Text of the remarks (“Vigorously Enforcing the Antitrust Laws: Developments at the Division”) appear here on the Department of Justice Antitrust Division website.

Antitrust Division Updates 2004 Merger Remedy Guidance

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

To reflect changes in the merger landscape and lessons learned over the last seven years, the Department of Justice Antitrust Division has updated its 2004 guidance on merger remedies.

The Policy Guide to Merger Remedies is used by Antitrust Division staff in analyzing proposed remedies in its merger matters. It also provides transparency into the Antitrust Division’s approach to merger remedies for the business community, the antitrust bar, and the broader public, according to the Justice Department’s June 17 announcement of the update. The text of the updated policy guide appears at CCH Trade Regulation Reporter ¶13,172.

The key principles the Antitrust Division applies in analyzing merger remedies remain the same:

(1) Effectively preserving competition;

(2) Focusing on preserving competition, not protecting individual competitors; and

(3) Carefully applying legal and economic principles to the particular facts of a specific case.

Structural, Conduct Provisions

The policy guide states that effective merger remedies typically include structural provisions, conduct provisions, or a combination. In horizontal merger matters, the Antitrust Division continues to rely predominantly on structural remedies, sometimes in combination with conduct remedies, which usually prescribe certain aspects of the merged firm’s post-consummation business conduct. However, the Antitrust Division has found that, in many vertical transactions, tailored conduct relief can prevent competitive harm while allowing the merger’s efficiencies to be realized.

The most common forms of conduct relief are firewall, nondiscrimination, mandatory licensing, transparency, and anti-retaliation provisions, as well as prohibitions on certain contracting practices, according to the policy guide.

Misinterpretation of 2004 Guidance

The policy guide notes that some had misinterpreted the Antitrust Division’s 2004 guidance on remedies to mean that if a structural remedy is not available in a particular merger matter, or would be ineffective, the Antitrust Division must let the transaction proceed. That interpretation does not accurately reflect the policy or practice of the Antitrust Division, it was noted.

“In every case, the Antitrust Division focuses on the specific facts of the proposed transaction,” said Christine Varney, Assistant Attorney General in charge of the Antitrust Division. “We are prepared to clear a merger, block a merger or accept a remedy that maintains efficiencies as long as the result eliminates any competitive harm. In the current environment of increasing transnational mergers and complex vertical transactions, the Antitrust Division must be ever nimble in its efforts to ensure that any remedies effectively preserve competition, promote innovation and protect consumers. The updated policy guide takes into account these changes.”

Fix-It-First Remedies

In most merger cases, the Antitrust Division will require identification of a package of assets to be divested pursuant to a consent decree. However, the policy guide explains that the Antitrust Division will consider a fix-it-first remedy—a structural solution implemented by the parties that the Antitrust Division accepts before a merger is consummated—so long as the remedy need not be monitored.

A fix-it-first remedy may preserve competition in the market more quickly and effectively than a decree and provide the parties with the maximum flexibility in fashioning the appropriate divestiture, it was noted.

A news release on the issuance of the updated policy guide appears here on the Department of Justice Antitrust Division website. Text of the updated policy guide appears here.

Antitrust Agency Heads Discuss Recent Enforcement Efforts at ABA Spring Meeting

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

Attendees of the American Bar Association Section of Antitrust Law 59th Annual Spring Meeting on April 1 heard from the heads of the two federal antitrust agencies on recent enforcement efforts.

“Balanced Activism”

FTC Chairman Jon Leibowitz described the past year as another one of “balanced activism.” He suggested that, when viewed in tandem, the FTC’s review of the Google/AdMob transaction and the settlement with Intel Corporation demonstrate this balanced enforcement.

In May 2010, the FTC announced that it would not challenge Google’s proposed acquisition of mobile advertising network company AdMob because the transaction was unlikely to harm competition in the emerging market for mobile advertising networks. The agency’s concerns about the deal were outweighed by Apple’s planned entry into the market (CCH Trade Regulation Reporter ¶16,453).

In August 2010, the agency announced that Intel Corporation agreed to settle FTC charges that it unlawfully maintained its monopoly by stifling competition in the market for computer chips in violation of Sec. 5 of the FTC Act (CCH Trade Regulation Reporter ¶16,483). Chairman Leibowitz cautioned that businesses run the risk of facing a Sec. 5 case if they “compete by sabotaging competitors” instead of using innovation.

Injunction in Hospital Merger Case

The FTC’s recent victory in the federal district court in Toledo, Ohio, in its challenge to ProMedica Health System Inc.’s proposed acquisition of St. Luke’s Hospital was also discussed. Chairman Leibowitz told attendees that he was very pleased with the decision (2011-1 Trade Cases ¶ 77,395). He mentioned that Judge Katz cited extensively to the recently issued Department of Justice/FTC Horizontal Merger Guidelines (CCH Trade Regulation Reporter ¶13,100).

Chairman Leibowitz noted that the decision is the first preliminary injunction win in an FTC hospital merger challenge since a federal district court in Missouri temporarily blocked the merger of the only two commercial hospitals in Poplar Bluffs, Missouri (1998-2 Trade Cases¶72,227). That decision was reversed by the U.S. Court of Appeals in St. Louis (1999-2 Trade Cases ¶72,578), however, and the FTC eventually dismissed that matter.

“Last Dollar Fraud”

On the consumer protection front, the FTC’s efforts to combat “last dollar fraud” were highlighted. According to Chairman Leibowitz, the agency is focusing on loan modification, foreclosure rescue, and other scams that are taking the last dollar from consumers suffering from the economic downturn.

Sherman Act, Section 2 Enforcement

Saying that “Section 2 is alive and well,” Assistant Attorney General Christine Varney touted the Justice Department Antitrust Division’s recent settlement with United Regional Health Care System of Wichita Falls (CCH Trade Regulation Reporter ¶50,988). This is the first case in over a decade challenging a monopolist with engaging in traditional anticompetitive unilateral conduct

Criminal Enforcement

In the criminal area, the antitrust chief said that, while the air cargo price fixing inquiry was entering its last chapter, attendees should continue to pay attention to the ongoing municipal bonds industry investigation. The Justice Department has already obtained nine guilty pleas as a result of this investigation. Additionally, a number of former executives at financial service companies and financial institutions have been indicted and are awaiting trial.

AAG Varney also noted Bank of America’s December 2010 agreement to pay a total of $137.3 million in restitution to federal and state agencies as a condition of admission into the Department of Justice's antitrust corporate leniency program for its role in the conspiracy.

State Enforcement

James A. Donahue III, Pennsylvania Chief Deputy Attorney General and Chair of the National Association of Attorneys General Antitrust Task Force, discussed the states’ efforts to ensure that their citizens were “getting the benefits of competition.” Donahue noted the states’ cooperation with the U.S. Justice Department in the municipal bonds investigation.

He also highlighted state actions targeting resale price maintenance. In particular, Donahue noted two settlements between the California attorney general’s office and cosmetics firms in the last year (2010-1 Trade Cases ¶76,922 and 2011-1 Trade Cases ¶77,306).

Donahue also pointed out that the State of New York was appealing a state court’s denial of an order enjoining mattress manufacturer Tempur-Pedic International, Inc. from restricting discounting by its authorized retailers (2011-1 Trade Cases ¶77,311).

Competition Can Serve Newspaper Industry, Public Interest: Varney

This posting was written by Mark Engstrom.

Christine A. Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, addressed the Newspaper Association of America on March 21 concerning the role of the antitrust laws and the Antitrust Division in promoting competition in the newspaper industry.

Her remarks, “Dynamic Competition in the Newspaper Industry,” offered a perspective on competition issues for newspapers in light of the technological developments that have accompanied the advent of the Internet.

Preservation of Competition

After reminding listeners that the newspaper industry survived the explosive growth of radio and television through the use of competitive innovations, Varney discussed the Antitrust Division's role in preserving competition in the industry and explained the method of analyzing collaborations and mergers.

According to Varney, “vigilant antitrust enforcement” was needed to ensure that anticompetitive conduct did not “tip the market” in a particular direction. Vigorous competition would best serve consumer interests. Calls for antitrust immunity for news organizations have therefore been rejected.

Immunity for Joint Operating Agreements

Although the Newspaper Preservation Act (NPA) extended antitrust immunity to newspapers that signed joint operating agreements, many newspaper owners still faced significant difficulties.

Indeed, the NPA exemption “may well have contributed to industry sluggishness.” Any new exemption from the antitrust laws would thus appear to be “particularly inappropriate at this point” in time.

Mergers

Addressing the issue of mergers, Varney stated that the goal of the Antitrust Division was to identify and challenge competitively harmful mergers while avoiding unnecessary interference with mergers that were competitively benign.

Merger-specific efficiencies that would offset the potential harm posed by an increase in market concentration would be considered. Further, parties to a merger could defend the merger on the ground that one of them was failing.

Non-merger collaborations among newspapers did not raise competition issues when they enabled newspapers to cut costs, improve services, or offer new or better content, Varney assured.

The Antitrust Division's “agile” approach to newspaper collaborations allowed companies to request a business review by the division if the companies were uncertain about the legality of their collaborative conduct.

The text of the remarks is available here at the Department of Justice Antitrust Division’s website.

New Charges Brought in Antitrust Division's Municipal Bond Investigation

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

A federal grand jury in New York City indicted three former executives of a financial services company for their participation in fraud schemes and conspiracies related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced on December 9.

One executive also was indicted for witness tampering in connection with the Justice Department’s ongoing investigation into anticompetitive and fraudulent conduct in the municipal bond industry.

Fraud Schemes and Conspiracies

“The individuals charged today allegedly participated in complex fraud schemes and conspiracies that subverted competition in the market for municipal finance contracts and deprived municipal bond issuers of the benefits of their investments to the detriment of the public,” said Christine Varney, Assistant Attorney Generl in charge of the Department of Justice Antitrust Division.

“This type of anticompetitive activity in our financial markets will not be tolerated and the Antitrust Division will continue to prosecute those who engage in this illegal conduct,” Varney remarked. “This includes individuals who purposely seek to obstruct the government’s investigation.”

Investment Agreements

The charged conspiracies and schemes all related to a type of contract—known as an investment agreement—and other municipal finance contracts provided to public entities, such as state, county, and local governments and agencies throughout the United States.

Major financial institutions—including banks, investment banks, insurance companies, and financial services companies—are among the providers of investment agreements and other related municipal finance contracts.

Public entitles typically hire a broker to conduct a competitive bidding process among various providers prior to awarding these agreements and contracts, according to the Justice Department.

One of the defendants, a Belgian national currently residing in Moscow, was arrested at John F. Kennedy International Airport in New York City on December 1 on a criminal complaint that was filed under seal on September 16.

The criminal complaint charged that the individual participated in a scheme to defraud a municipal bond issuer with respect to the investment of municipal bond proceeds.

Superseding Indictment

The indictment alleges that these three individuals conspired with Beverly Hills-based Rubin/Chambers, Dunhill Insurance Services Inc. (CDR), and others in order to obtain from CDR information about the prices and other information related to competiting bids. They then used the information to determine their employer's bid, according to the indictment.

Charges against CDR and some of its current and former executives were the first to be filed in the Justice Department's ongoing investigation. A superseding indictment was filed on December 7 in the case against CDR to include violations of the honest services statute in three counts alleging wire fraud.

A news release on the charges appears here on the Department of Justice Antitrust Division’s website. Further details will appear in CCH Trade Regulation Reporter.

Bank of America Agrees to Pay $137 Million to Avoid Charges in Bid Rigging Probe

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

As a condition of admission into the Department of Justice's antitrust corporate leniency program, Bank of America has agreed to pay a total of $137.3 million in restitution to federal and state agencies for its role in a conspiracy to rig bids in the municipal bond derivatives market.

As a result of its agreement to make full restitution, as well as its voluntary disclosure of its anticompetitive conduct and its ongoing cooperation, Bank of America will not be required to pay penalties for the bidding activity, according to a December 7 Justice Department announcement.

Antitrust Leniency Program

Bank of America reported the bidding irregularities to the Justice Department in 2004. The illegal conduct took place between 1998 and 2003. The Antitrust Division accorded Bank of America conditional leniency in 2007.

The antitrust leniency program protects applicants from criminal conviction for a violation of the U.S. antitrust laws. The program protects the first offender to come forward, so long as the company was not the originator or leader of the conspiracy and the company cooperates with the investigation and meets other obligations, including the payment of restitution.

Bank of America has now entered into restitution agreements with the U.S. Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS), the Office of the Comptroller of Currency (OCC), and 20 state attorneys general.

Bank of America agreed to pay the IRS $25 million. Through its resolutions with the OCC and SEC, Bank of America will make payments of $9.2 million and $36.1 million, respectively, to the counterparties affected by the practices, according to Bank of America.

Multi-State Settlement

Bank of America has agreed to pay the state attorneys general $62.5 million in restitution and to refrain from conspiring to rig bids for municipal bond derivatives. The states will also receive $4.5 million for the costs related to the investigation.

The states involved in the multi-state settlement are: Alabama, California, Connecticut, Florida, Illinois, Kansas, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, and Texas.

Text of the state settlement agreement appears here on the California Attorney General’s website.

Bank of America Statement

Bank of America said in a December 7 statement that it was “pleased to put this matter behind it, and has already voluntarily undertaken numerous remediation efforts.” The financial institution said that it: “continues to cooperate with all agencies on their inquiries into practices by various companies participating in the municipal derivatives markets during this time period.”

Ongoing Investigation

The Justice Department's ongoing investigation into bidding practices in the municipal bond derivatives market has resulted in guilty pleas by from eight executives for antitrust and related federal crimes.

Indictments have been brought against other alleged participants in the conspiracy, and a trial of Beverly Hills-based Rubin/Chambers, Dunhill Insurance Services Inc. and some of its current and former executives is expected to begin in September 2011. Municipal bonds are used by state agencies, municipalities, and others to finance a variety of projects, including school construction and street repairs.

During a conference call, Christine Varney, Assistant Attorney General in charge of the Antitrust Division, declined to indicate whether other banks were cooperating with the government on this issue, noting only that “the investigation continues apace.”

Antitrust Chief Addresses New Merger Guidelines, Global Cooperation

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

At Georgetown’s Global Antitrust Enforcement Symposium in Washington, D.C. on September 21, Assistant Attorney General Christine A. Varney, chief of the Department of Justice Antitrust Division, delivered remarks concerning international cooperation in antitrust investigation and enforcement.

Varney began by discussing the issuance of revised Horizontal Merger Guidelines by the Antitrust Division and the FTC in August 2010. While the revised Guidelines “provide transparency into the agencies’ current enforcement analysis,” they “contain no surprises,” setting forth concepts and considerations that had long been central to the agencies’ merger review and incorporating much of the Commentary the agencies issued in 2006 for the then-extant Guidelines.

The revised guidelines merely reflected a refinement in approach to merger review to incorporate advances in economic learning and changes in business realities, according to Varney.

The assistant attorney general then focused on future global enforcement, providing the historical context of international cooperation, explaining the challenges of achieving convergence with other competition agencies around the world, describing the state of cooperation at present, and offering initial thoughts on the direction that cooperation efforts should take in the coming decade and beyond.

The efforts at convergence in the past decade have been “a very positive step,” she said, because convergence reinforces international case cooperation and helps businesses operate more efficiently. However, Varney acknowledged, convergence on everything was “unlikely,” owing to the wide range of competitive landscapes found in different jurisdictions.

“The Antitrust Division has been working hard to bring greater cooperation to international cooperation enforcement by facilitating discussion of important issues,building bilateral and multilateral relationships, and learning how best to coordinate investigations and remedies in a globalized age,” according to Varney.

Within these efforts has been a “special emphasis on encouraging procedural fairness and transparency, as evidenced by the agency’s involvement in two OECD Working Party roundtables focused on those topics.

Varney cited the combination of Cisco and Tandberg as an example of the Antitrust Division taking into account remedies secured by the European Commission (EC) in closing its own investigation. She noted that the Justice Department has also enhanced its relationships with numerous other competition enforcers, including China, Russia, and the EC.

Looking toward the next decade, Varney stated that the concept of convergence should focus on substantive legal and economic analysis, rather than uniformity of processes and procedures, because of the differing legal proceedings and traditions employed by the competition regimes around the world.

She observed that convergence has already largely occurred in some areas of competition thinking—such as price fixing, market allocations,and anticompetitive horizontal mergers—but not nearly as much in the substantive analysis of unilateral conduct.

Going forward,“we must above all focus our efforts on deep and meaningful dialogue and continued cooperation on the basic principles that the competition community has already accepted,” she concluded.

The complete text of Varney’s remarks,entitled “International Cooperation: Preparing for the Future,” appear here. The remarks will be reported at CCH Trade Regulation Reporter ¶ 50,260.

House Oversight Committee Hears from Antitrust Agency Heads

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

The heads of the federal antitrust agencies provided an update to members of the House Judiciary Committee's Courts and Competition Policy Subcommittee this morning on their agencies' enforcement priorities and recent actions.

The July 27 hearing was the subcommittee's first oversight hearing to examine antitrust enforcement under the Obama Administration.

FTC Competition Priorities

A top competition priority at the Commission is to stop “pay-for-delay” agreements between branded and generic drug makers, according to the FTC testimony delivered by FTC Chairman Jon Leibowitz. The agency estimates that these sweetheart deals cost consumers $3.5 billion a year.

Efforts are under way in the courts and congress to reign in patent settlement agreements under which the brand-name drug firm pays its potential generic competitor to abandon a patent challenge and delay entering the market.

The agency is currently pursuing two major pay-for-delay cases: one against Solvay Pharmaceuticals (owned by Abbott Laboratories) and generic manufacturers (Watson Pharmaceuticals, Par Pharmaceutical, and Paddock Laboratories) regarding AndroGel, a testosterone replacement drug often used by victims of testicular cancer, and the other against Cephalon regarding the drug Provigil, a sleep disorder medication with nearly $1 billion in annual U.S. sales.

According to the FTC testimony, the agency is continuing to initiate new investigations into other pay-for-delay agreements. However, the testimony noted that legislation would be the most effective way to stop these deals.

The FTC’s tactics in investigating the patent settlement agreements have come under scrutiny. At the House subcommittee’s oversight hearing and a Senate subcommittee oversight hearing in June, the FTC chairman was questioned about the agency’s misuse of a subpoena in the Cephalon case.

A U.S. Magistrate Judge on July 13 ruled that the president and CEO of Watson Pharmaceuticals made a “colorable claim that the FTC may have exceeded its authority by using its investigative power to pressure Watson to enter into a business deal that the FTC considers desirable.” The CEO was entitled to limited discovery to determine if the agency acted outside its authority.

Today's FTC testimony also outlined other agency priorities, including revising the Horizontal Merger Guidelines. The FTC and the Department of Justice Antitrust Division in April released for public comment a proposed update of the Horizontal Merger Guidelines.

Since the last major revision to the Guidelines was in 1992, the agencies proposed revisions to more accurately reflect the way the FTC and Department of Justice currently conduct merger reviews. Last month, the comment period closed. According to the testimony, the agencies are currently considering the viewpoints of 31 commenters as they work to finalize the new guidelines.

Antitrust Division Enforcement Activities

Christine A. Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, also noted the joint, ongoing review of the Horizontal Merger Guidelines in testifying on behalf of the Antitrust Division. She cited the effort as an example of the Antitrust Division's efficient and effective collaboration with the FTC on a number of fronts.

Assistant Attorney General Varney also discussed merger enforcement, which “continues to be a core priority for the Antitrust Division.” She cited the Antitrust Division's pending action against Dean Foods—the nation’s largest dairy processor—to undo the company's 2009 merger with Foremost Dairy.

“[T]his enforcement action is indicative of this Department of Justice's commitment to our nation's farming industries,” according to the testimony.

Commissioner Leibowitz’s testimony is available here on the FTC website. Assistant Attorney General Varney’s statement appears here on the Department of Justice website.

Federal Antitrust Agency Heads Testify at Senate Subcommittee Oversight Hearing

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

The Senate Judiciary Committee's antitrust subcomittee on June 9 held its first oversight hearing to examine antitrust enforcement under the Obama Administration. Subcommittee Chairman Herb Kohl (D, Wisconsin) began the hearing by saying that antitrust enforcement was sorely in need of revival at the beginning of the administration.

Christine A. Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, and FTC Chairman Jon Leibowitz testified on the enforcement efforts of their respective agencies. The FTC prepared statement appears here on the agency website, and the Antitrust Division statement appears here on the Department of Justice website.

Merger Enforcement

“Merger enforcement continues to be a core priority for the Antitrust Division,” Assistant Attorney General Varney told the subcommittee. She cited the Antitrust Division's pending action against Dean Foods—the nation’s largest dairy processor—to undo the company's 2009 merger with Foremost Dairy.

The antitrust chief also noted the recent settlement permitting Ticketmaster—the World’s largest ticketing company—to proceed with its proposed merger with Live Nation Inc.

In response to questioning from Senator Kohl about the way the Antitrust Division handled the Ticketmaster case, Varney said that settling the case was the right thing to do. The proposed relief has both structural and behavioral remedies, Varney noted.

The antitrust chief discussed other enforcement efforts, including anti-cartel efforts during what she described as a remarkable year.

“Pay-for-delay” Agreements

FTC Chairman Jon Leibowitz told the subcommittee that his agency's top competition priority was “stopping `pay-for-delay’ agreements between brand-name pharmaceutical companies and generic competitors that delay the entry of lower-priced generic drugs into the market.”

Section 5 of FTC Act

Leibowitz also discussed how “the Commission is actively considering how it can best use Section 5 of the FTC Act to enhance enforcement in a responsible and transparent manner.”

The chairman noted as an example of the agency's efforts in the Section 5 area its action—announced that same day—against U-Haul International, Inc. and its parent company for inviting it closest competitor, Avis Budget Group, Inc., to fix prices for truck rentals.

Ranking Member Senator Orrin Hatch (R, Utah) questioned the FTC's efforts in these areas. While acknowledging the importance of targeting “pay-for-delay” patent settlement that are anticompetitive, Senator Hatch said that it was important not to impose undue burdens on parties settling patent disputes.

With respect to the FTC's increasing use of Sec. 5 of the FTC Act to combat, Hatch noted that uncertainty inherent in the use of Sec. 5 might lead companies to compete less aggressively. Hatch said there was a need for clear, specific standards.

In response to Senator Hatch's concerns over Sec. 5 enforcement, Chairman Leibowitz agreed that there need to be standards and said that the agency was moving carefully. “Ultimately the courts will decide the outer limits of Sec. 5,” the Chairman said.

Public Workshop Will Focus on Intersection of Patent, Competition Policy

This posting was written by John W. Arden.

The Federal Trade Commission, Department of Justice, and the Department of Commerce’s U.S. Patent and Trademark Office (USPTO) will hold a joint public workshop on Wednesday, May 26, on the intersection of patent policy and competition policy and its implications for promoting innovation.

In recent years, federal agencies and the courts have recognized that patents and competition share the overall purpose of promoting innovation and enhancing consumer welfare, according to the Commission.

The competitive drive of a dynamic marketplace fosters the introduction of new and improved products and processes, and high-quality patents promote investment in innovation. Delay, uncertainty, or poor patent quality can stifle innovation—as can unclear or inappropriate antitrust standards, said the FTC announcement.

Program Schedule

Opening remarks for the morning session will be delivered by Assistant Attorney General for the Department of Justice Antitrust Division Christine Varney; Under Secretary of Commerce for Intellectual Property and Director of the USPTO David J. Kappos; and U.S. Chief Technology Officer Aneesh Chopra. FTC Commissioner Edith Ramirez will open the afternoon session with introductory remarks.

The program will address (1) The Patent Backlog: The Competitive Challenges for Innovators; (2) Permanent Injunctions in the District Courts and the International Trade Commission; and (3) Standard Setting, Patent Rights, and Competition Policy.

A wrap-up discussion will be lead by Carl Shapiro, Deputy Assistant Attorney General for Economic Analysis at the Department of Justice Antitrust Division; Joseph Farrell, Director of the Bureau of Economics, Federal Trade Commission; and Stuart Graham, Chief Economist for the USPTO.

The all-day workshop will convene at 9 a.m. at the USPTO’s campus at 600 Dulany Street, Madison Building Auditorium, Alexandria, Virginia. Details appear here on the FTC website.

Agency Heads Discuss Revisions to Merger Guidelines at ABA Antitrust Meeting

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

Antitrust practitioners reviewing proposed revisions to the federal antitrust agencies’ Horizontal Merger Guidelines should have a better understanding of current agency practice, according to federal antitrust enforcers speaking April 23 at an enforcement roundtable during the American Bar Association’s Section of Antitrust Law Spring Meeting in Washington, D.C.

The proposed revisions to the guidelines, which outline how the federal antitrust agencies evaluate the likely competitive effects of mergers in order to determine compliance with U.S. antitrust law, were released on April 20 in anticipation of the meeting. The proposed revised guidelines appear at CCH Trade Regulation Reporter ¶ 50,252.

Reflection of Agency Practice

Christine Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, told meeting attendees at the enforcement roundtable that, while the proposed revised guidelines are not all that different in substance from the current 1992 guidelines, the 1992 guidelines do not reflect the actual practice at the agencies. This latest update is an effort to be transparent, according to Varney.

The antitrust chief reminded attendees that each transaction is viewed on the facts of that transaction. She noted the importance of direct evidence of a potential merger’s competitive effects in evaluating a merger. The role of direct evidence in merger analysis is reflected in the proposed updated guidelines, Varney said.

FTC Chairman Jon Leibowitz also described the proposed revisions to the guidelines as an effort to explain to practitioners and judges what the agencies are doing when evaluating the competitive effects of mergers.

Leibowitz discussed the role of direct evidence of competitive effects in actions challenging Evanston Northwestern Healthcare Corporation’s 2000 acquisition of Highland Park Hospital and Western Refining, Inc.’s proposed acquisition of rival energy company Giant Industries, Inc., in 2007. He suggested that the judge in the latter case took a mechanistic view of the Horizontal Merger Guidelines in rejecting the FTC’s request for a preliminary injunction blocking Western Refining’s acquisition of Giant Industries.

Market Concentration

The proposed updates also raise the Herfindahl-Hirschman Index (HHI) measures for market concentration in order to be more consistent with current agency practice, Leibowitz explained. As a result, mergers that would have appeared to be highly concentrated under the 1992 guidelines, based on HHI measures, would be considered only moderately concentrated under the proposed revised updates.

According to the guidelines, mergers that cause a significant increase in concentration and result in highly concentrated markets are presumed to be anticompetitive.

Merger Enforcement

Both agency heads took the opportunity to tout recent merger enforcement activity. Chairman Leibowitz said that the FTC was on “a little bit of a winning streak” in the merger enforcement area. He pointed to the decision of CCC Information Services Inc. to abandon its merger with Mitchell International Inc., in light of the agency’s challenge to the transaction.

The federal district court in Washington, D.C. had granted the FTC’s request for a preliminary injunction (PI) to block the transaction pending administrative litigation. The 2009 decision was the agency’s first PI win since 2003, according to the Commissioner.

Assistant Attorney General Varney discussed the Antitrust Division’s recent settlement with Ticketmaster Entertainment, Inc. In order to proceed with its proposed acquisition of concert promoter Live Nation, Inc., ticket seller Ticketmaster was required to license ticket software and divest a subsidiary ticketing business. In addition, behavioral remedies were imposed on Ticketmaster.

Varney told attendees that the agency’s preference was for structural relief, but that sometimes there is a need for both structural and behavioral remedies.

Canada Competition Bureau Merger Procedures

Canada Competition Commissioner Melanie Aitken, who was also on the roundtable panel, discussed recent changes to the merger review process north of the border. Aitken said that the changes “make for a far more effective merger review process.”

While she described the process as “Made in Canada,” Aitken noted that the reforms, which have to do with process and not substance, bring the merger review process more in line with U.S. practice. For instance, the two-stage review process replicates the second request process utilized by the federal antitrust agencies in the United States. Aitken said that the changes make coordination with her counterparts in the United States easier.

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

Agency Heads Discuss Antitrust Convergence, Recent Developments

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

Speaking on the topic of international convergence at Fordham University’s 36th Annual Conference on International Antitrust Law and Policy, the heads of the two federal antitrust agencies commented on increased convergence between their respective agencies.

Agencies “In Sync”

In his September 24 remarks, FTC Chairman Jon Leibowitz noted that the FTC and Department of Justice Antitrust Division were much more in sync in recent months, pointing to the recently announced decision for a joint review of the horizontal merger guidelines as an example.

Another indication of growing consensus between the agencies includes Assistant Attorney General Christine Varney’s decision to withdraw the Antitrust Division’s September 2008 report, entitled “Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act.”

When the Justice Department’s report was released last September, three of the four FTC members objected to it. According to Leibowitz, consistency at home will help efforts to promote international antitrust convergence.

Merger Review

Antitrust Division chief Varney noted that there has been a trend toward convergence in the area of merger review. Varney expressed her belief that “openness to others’ ideas and new approaches is critical to our efforts towards greater convergence.” This openness is reflected in the decision to hold joint Department of Justice/FTC workshops to review the horizontal merger guidelines, as well as the European Commission’s review of its merger review practices and remedies and subsequent 2004 issuance of guidelines regarding horizontal mergers and a 2005 Merger Remedies Study.

Varney also noted that, while there have been “strides towards convergence regarding the standards for single-firm conduct,” there was “a need to continue making progress on that front.” Varney pledged to work toward convergence, noting that a lack of unity regarding single-firm conduct standards presented significant issues for international businesses.

Varney’s September 24 speech is available here on the Department of Justice website.

Fines Imposed by the European Competition Commission

At a later session of the Fordham program, European Commission (EC) Competition Commissioner Neelie Kroes told attendees that fines are starting to deter cartel behavior. “Never, ever under-estimate the effect [of] large fines,” Kroes said. Despite the absence of the threat of jail terms for antitrust violations, “senior management across all sectors . . . are now starting to understand that we mean business.”

Kroes explained that fines were not deterrent in previous decades. “Now, taking better account of the economic impacts of abuses and cartels, we fine in order to deter, linking the fine to the relevant sales of the infringing company,” the official said. “If we catch recidivists—the French glass company Saint-Gobain is a good example—the fine increases are severe.”

Last November, Saint-Gobain was fined 896 million Euros for its role in an illegal market sharing agreement.

The fines are imposed without regard to the nationality of the company, according to Kroes. “I would like to point out that only 13 of the 180 companies fined by the European Commission in my term are based in the U.S.,” she added.

The Commissioner’s remarks appear here on the European Union’s “Europa” website.

Antitrust Division Commits to Examine Competition in Dairy Industry

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

Christine A. Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, told attendees of a field hearing of the Senate Judiciary Committee in St. Albans, Vermont, that the agency was "committed to a careful and comprehensive examination of the [agriculture] marketplace."

Varney's September 19 comments, entitled "Crisis on the Farm: The State of Cooperation and Prospects for Sustainability in the Northeast Dairy Industry," followed a call from Senator Herb Kohl (D.-Wis.) to scrutinize antitrust enforcement in the dairy industry.

Senator Kohl, Chairman of the Senate Agriculture Appropriations panel and Chairman of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights, on September 15 sent letters to Secretary of Agriculture Tom Vilsack and Assistant Attorney General Varney, asking them to look into the consolidation of milk processors and anticompetitive practices in agriculture.

Kohl urged them to hold a workshop on dairy issues in Wisconsin, as part of recently-announced workshop series to explore competition issues affecting the agriculture industry in the 21st century.

On August 5, the Justice Department and the Department of Agriculture announced that they would hold joint public workshops to consider the appropriate role for antitrust and regulatory enforcement in the industry.

In her remarks, Varney said that competition issues affecting agriculture were a priority for her. The upcoming hearings reflect this fact, she noted. According to Varney, two particular issues facing the dairy industry—buyer power and vertical integration—will be most likely among those explored in the workshops.

Text of Varney’s written statement appears here on the Department of Justice Antitrust Division’s website.

FTC, Justice Department to Explore Updating Merger Guidelines

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

The Horizontal Merger Guidelines, which are used by the federal antitrust agencies to evaluate the potential competitive effects of mergers and acquisitions, will be the subject of a series of upcoming public workshops.

The goal of the workshops will be to determine whether the Merger Guidelines accurately reflect the current practice at the Department of Justice and the FTC as well as to take into account legal and economic developments that have occurred since the last significant revision of the Merger Guidelines in 1992 (Trade Regulation Reporter ¶13,104). The agencies announced the workshops and request for public comment on September 22.

“The bulk of the Merger Guidelines is over 17 years old,” said FTC Chairman Jon Leibowitz in announcing the review. “The 1992 Guidelines explicitly stated that they would be revised from time to time. We think the time has come to do that.”

“In light of legal and economic developments that have occurred since the last major revision of the guidelines, it is an appropriate time for the antitrust agencies to conduct a review of the guidelines to determine whether any revisions should be made to better protect American consumers and businesses from anticompetitive mergers,” said Christine A. Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division.

“Having guidelines that offer more clarity and better reflect agency practice provides for enhanced transparency and gives businesses greater certainty when making merger decisions, resulting in a more competitive marketplace that benefits consumers,” she noted.

The first workshop will be held in Washington, D.C., on December 3, 2009, followed by workshops in Chicago, New York City, and San Francisco. A final workshop also will be held in Washington, D.C. in January 2010.

A September 22 news release on the workshops appears here on the FTC website. Further details appear here.

Trade Regulation Tidbits

This posting was written by John W. Arden.

News, updates, and observations:

 A recent article in The Economist magazine asks whether the Obama Administration will back up its “tough talk” on antitrust enforcement (“Return of the Trustbusters,” August 27 print edition). “Companies are likely to find themselves scrutinised at least as intensively as they were under the administration of Bill Clinton, when many senior antitrust officials in the justice department and Federal Trade Commission (FTC) cut their teeth on a celebrated anti-monopoly lawsuit against Microsoft.” While new antitrust chief Christine Varney believes that the Bush Administration’s lax antitrust enforcement contributed directly to the economic crisis, that view is “debatable, to say the least,” according to the article. The Bush Administration did pursue cartel activity enthusiastically, obtaining record convictions, jail sentences, and fines, the story contends. Varney’s efforts to ramp up enforcement will face several obstacles, including the U.S. Supreme Court (which has issued several decisions narrowing trustbusters’ room to maneuver) and the “possible disagreement within Mr. Obama’s cabinet.” Given the “wretched state of the economy,” some administration officials are questioning whether to “risk upsetting the few bits that are growing strongly with gratuitous antitrust cases.” Text of the article appears here.

 On August 17, the American Antitrust Institute filed an amicus brief, urging the U. S. Court of Appeals in New Orleans to adopt a presumption of illegality for resale price maintenance agreements and to overturn the lower court's dismissal of the amended complaint filed in PSKS, Inc. v. Leegin Creative Leather Products, Inc. The brief, which appears here, also argues that the lower court erred in requiring the plaintiff to meet a strict test of market definition. In 2007, the Supreme Court reversed the Court of Appeals’ decision (PSKS, Inc. v. Leegin Creative Leather Products, Inc., 2006-1 Trade Cases ¶75,166), applying the per se rule to uphold an award of $3,975,000 to a retailer that was terminated by its manufacturer for discounting. The high court declared that vertical price restraints are no longer per se illegal, but instead should be evaluated under the rule of reason standard (2007-1 CCH Trade Cases ¶ 75,753).

 Maine’s new privacy law—which prohibits the collection of personal information for marketing purposes from a minor without parental consent and bans “predatory marketing” to minors—is being challenged in a lawsuit brought by media and online companies, including AOL, eBay, and Yahoo. The lawsuit, filed August 26 in the federal district court in Maine, claims that the law violates the First Amendment rights of adults, as well as minors and online operators. The Maine statute (“An Act to Prevent Predatory Marketing Practices Against Minors,” Public Law 230) was signed by the Governor on June 2, 2009, and will take effect on September 12, 2009. Text of the law appears here on the Maine State Legislature’s website. Further details about the law appear in an August 12, 2009 posting on Trade Regulation Talk.

Some Administration Officials Oppose DOJ's Antitrust Enforcement Efforts: News Report

This posting was written by John W. Arden.

Christine Varney, who has pledged stricter antitrust enforcement during her tenure as chief of the Department of Justice Antitrust Division, is “finding some resistance from officials within the administration,” according to a front page story in the Sunday, July 26, New York Times.

Varney has begun investigations in the telecommunications, agricultural, and pharmaceutical industries and is examining the competitive effects of the Google book search settlement agreement, according to Times reporter Stephen Labaton.

However, some of these efforts are being opposed by administration officials who “fear that the crackdown is coming at a bad time, as corporate America is reels from the recession” or believe that “larger companies and industry alliances can provide consumer benefits by making their businesses more efficient,” the story said.

One example of the differences in opinion cited by the story involved Continental Airlines’ attempt to join the Star Alliance, a global airline network. Against some of the Antitrust Division’s recommendations, the Transportation Department granted antitrust immunity to Continental to join the alliance and approved a new joint venture among four of the alliance’s members.

The Antitrust Division had filed comments indicating that the applicants failed to demonstrate the required elements for the broad immunity sought and suggesting that the Department of Transportation grant a more limited immunity.

This conflict “became so heated that the president’s chief economic adviser, Lawrence H. Summers, was called in to mediate,” the article stated.

Proposed legislation to eliminate the antitrust exemption for commercial railroads (The Railroad Antitrust Enforcement Act of 2009) also was referenced as the subject of potential disagreement. Although the proposal (H.R. 233, S. 146) is supported by senior Democrats, the administration has not taken a position.

In addition, the administration’s proposal to overhaul financial regulation rejected antitrust enforcement “as a way to reduce the size of large companies considered too big to be allowed to fail,” Labaton wrote.

The article (“Antitrust Chief Hits Resistance in Crackdown”) appears here on the New York Times website.

Varney Discusses Antitrust Enforcement in Distressed Economy

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

Antitrust chief Christine A. Varney made headlines last week when she announced, in a May 11 speech, the withdrawal of the Antitrust Division’s controversial report on single firm conduct. (See Trade Regulation Talk, May 11, 2009).

However, Varney’s comments on other significant issues—from the role of antitrust enforcement in a distressed economy to the Antitrust Division’s enforcement agenda—were not widely reported.

In a speech to the Center for American Progress, the Assistant Attorney General suggested that “a combination of factors, including ineffective government regulation, ill-considered deregulatory measures, and inadequate antitrust oversight contributed to the current conditions.” In light of the state of the economy, antitrust enforcers can no longer “sit on the sidelines.”

Prior Economic Crises

Varney noted that the federal government’s response to the Great Depression was to pass legislation, such as the National Industrial Recovery Act, that effectively foreclosed competition by setting industry prices and wages, establishing production quotas, and imposing restrictions on entry.

“Competition was relegated to the sidelines, as the welfare of firms took priority over the welfare of consumers,” she said. “It is not surprising that the industrial codes resulted in restricted output, higher prices, and reduced consumer purchasing power.”

By 1937, the Roosevelt Administration got back in the game of antitrust enforcement on a nationwide scale. This newly vigorous enforcement became a cornerstone of the New Deal’s economic agenda.

Lessons Learned

“The lessons learned from this historical example are twofold,” she said. “First, there is no adequate substitute for a competitive market, particularly during times of economic distress. Second, vigorous antitrust enforcement must play a significant role in the Government’s response to economic crises to ensure that markets remain competitive.”

In recent years, firms have been given “room to run with the idea that markets self-police and that enforcement authorities should wait for the markets to self-correct.” However, it is clear that this self-correction has not occurred, the official said. Instead, markets are distorted, firms fail, and American consumers are failing with them.

“I believe that these extreme conditions require a recalibration of economic and legal analysis and theories, and a clearer plan for action,” Varney stated.

Section 2 Enforcement

Varney spoke of her intention to aggressively pursue enforcement of Section 2 of the Sherman Act and explained the reasons for withdrawing the 2008 report, entitled “Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act.”

“In my view, the greatest weakness of the Section 2 Report is that it raises many hurdles to Government antitrust enforcement,” she said. It raises the concern that the enforcers and courts may fail to distinguish between anticompetitive acts and lawful conduct and their actions may lead to “overdeterrence” of potentially procompetitive conduct, she observed.

“I do not share these concerns. I strongly believe that antitrust enforcers are able to separate the wheat from the chaff in identifying exclusionary and predatory acts. As Judge Posner explained, ‘antitrust doctrine is supple enough to take in stride the competitive issues presented by the new economy.’”

She also noted that the report went too far in evaluating the importance of preserving possible efficiencies and underestimated the importance of redressing exclusionary and predatory acts that harm competition, distort markets, and increase barriers to entry.

Rather than any specific test to govern Section 2 analysis, Varney recommended that the Antitrust Division go “back to basics” in evaluating single-firm conduct within the fundamental principles of antitrust enforcement.

Section 1 Cases

Varney added that “continued criminal and civil enforcement under Section 1 of the Sherman Act will also be an important part of the Antitrust Division’s response to the distressed economy.”

“With the higher levels of concentration and economic instability, markets are increasingly vulnerable to collusion and other fraudulent activity,” the Assistant Attorney General said.

On the civil front, the new antitrust chief will emphasize both merger and non-merger investigations and explore vertical theories in other new areas, such as those arising in high-tech and Internet-based markets.

Besides enforcing antitrust laws, the Division will be asked to contribute expertise to the Obama Administration’s broad reforms over numerous industries. “Indeed part of our efforts will be to foster inter-agency discussions regarding competition-related issues posed by existing and proposed regulations and policies, and to play an active role in competition advocacy.”

Text of the speech (“Vigorous Antitrust Enforcement in This Challenging Era”) appears at CCH Trade Regulation Reporter ¶50,242 and here on the Department of Justice Antitrust Division website.