FINDINGS AND RECOMMENDATIONS OF THE

ANTITRUST MODERNIZATION COMMISSION

HEARING
BEFORE THE

ANTITRUST TASK FORCE

OF THE

COMMITTEE ON THE JUDICIARY

HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION

MAY 8, 2007

Serial No. 11023

Printed for the use of the Committee on the Judiciary

(
Available via the World Wide Web: http://judiciary.house.gov
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WASHINGTON

35243 PDF

2007

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COMMITTEE ON THE JUDICIARY

JOHN CONYERS, JR., Michigan, Chairman
HOWARD L. BERMAN, California
LAMAR SMITH, Texas
RICK BOUCHER, Virginia
F. JAMES SENSENBRENNER, JR.,
Wisconsin
JERROLD NADLER, New York
HOWARD COBLE, North Carolina
ROBERT C. SCOTT, Virginia
ELTON GALLEGLY, California
MELVIN L. WATT, North Carolina
BOB GOODLATTE, Virginia
ZOE LOFGREN, California
STEVE CHABOT, Ohio
SHEILA JACKSON LEE, Texas
DANIEL E. LUNGREN, California
MAXINE WATERS, California
CHRIS CANNON, Utah
MARTIN T. MEEHAN, Massachusetts
RIC KELLER, Florida
WILLIAM D. DELAHUNT, Massachusetts
DARRELL ISSA, California
ROBERT WEXLER, Florida
NCHEZ, California
MIKE PENCE, Indiana
LINDA T. SA
J. RANDY FORBES, Virginia
STEVE COHEN, Tennessee
STEVE KING, Iowa
HANK JOHNSON, Georgia
TOM FEENEY, Florida
LUIS V. GUTIERREZ, Illinois
TRENT FRANKS, Arizona
BRAD SHERMAN, California
LOUIE GOHMERT, Texas
TAMMY BALDWIN, Wisconsin
JIM JORDAN, Ohio
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota
PERRY APELBAUM, Staff Director and Chief Counsel
JOSEPH GIBSON, Minority Chief Counsel

ANTITRUST TASK FORCE

JOHN CONYERS, JR., Michigan, Chairman
HOWARD L. BERMAN, California
STEVE CHABOT, Ohio
RICK BOUCHER, Virginia
RIC KELLER, Florida
ZOE LOFGREN, California
F. JAMES SENSENBRENNER, JR.,
Wisconsin
SHEILA JACKSON LEE, Texas
BOB GOODLATTE, Virginia
MAXINE WATERS, California
CHRIS CANNON, Utah
STEVE COHEN, Tennessee
DARRELL ISSA, California
ANTHONY D. WEINER, New York
J. RANDY FORBES, Virginia
ARTUR DAVIS, Alabama
STEVE KING, Iowa
DEBBIE WASSERMAN SCHULTZ, Florida
LAMAR SMITH, Texas, Ex Officio
PERRY APELBAUM, Staff Director and Chief Counsel
JOSEPH GIBSON, Minority Chief Counsel

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CONTENTS
MAY 8, 2007
OPENING STATEMENT
Page

The Honorable John Conyers, Jr., a Representative in Congress from the

State of Michigan, and Chairman, Antitrust Task Force .................................
The Honorable Steve Chabot, a Representative in Congress from the State
of Ohio, and Ranking Member, Antitrust Task Force ......................................

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3

WITNESSES
Ms. Deborah Garza, Chair, Antitrust Modernization Commission
Oral Testimony .....................................................................................................
Mr. Johnathan R. Yarowsky, Vice Chair, Antitrust Modernization Commission
Oral Testimony .....................................................................................................

4
6

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Joint Prepared Statement of Deborah Garza, Chair, Antitrust Modernization
Commission; and Johnathan R. Yarowsky, Vice Chair, Antitrust Modernization Commission ...................................................................................................

APPENDIX
MATERIAL SUBMITTED

FOR THE

HEARING RECORD

Prepared Statement of the Honorable Lamar Smith, a Representative in

Congress from the State of Texas, and Ranking Member, Committee on
the Judiciary .........................................................................................................
Prepared Statement of the Honorable Sheila Jackson Lee, a Representative
in Congress from the State of Texas, and Member, Antitrust Task Force .....
Biographies of Deborah Garza, Chair, Antitrust Modernization Commission;
and Johnathan R. Yarowsky, Vice Chair, Antitrust Modernization Commission ........................................................................................................................
Prepared Statement of Glenn English, CEO, National Rural Electric Cooperative Association and Chairman, Consumers United for Rail Equity ...............

79
81
90
91

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FINDINGS AND RECOMMENDATIONS OF THE

ANTITRUST MODERNIZATION COMMISSION
TUESDAY, MAY 8, 2007

HOUSE OF REPRESENTATIVES,
COMMITTEE ON THE JUDICIARY,
Washington, DC.
The Task Force met, pursuant to notice, at 2:19 p.m., in Room
2141, Rayburn House Office Building, the Honorable John Conyers,
Jr. (Chairman of the Task Force) presiding.
Present: Representatives Conyers, Berman, Jackson Lee, Chabot,
Smith, Keller, and Issa.
Staff present: Stacey Dansky, Majority Counsel; Stewart Jeffries,
Minority Counsel; and Brandon Johns, Staff Assistant.
Mr. CONYERS. Good afternoon. The hearing on the Antitrust Task
Force will come to order.
We are now examining the findings and recommendations of the
Antitrust Modernization Commission.
And I yield first to the Ranking Member of the full Committee,
Lamar Smith.
Mr. SMITH. Mr. Chairman, I thank you very much for yielding.
All I want to do is thank you for convening this very first hearing
of the Antitrust Task Force and for your initiative on creating one.
I unfortunately have to be over at the Capitol in 10 minutes, so
I am not going to be able to stay, so I would like to ask unanimous
consent that my particularly articulate and persuasive opening
statement be made a part of the record.
I thank you, Mr. Chairman.
Mr. CONYERS. Without objection, so ordered.
I apologize for my lateness. President Preval of Haiti has just arrived in the Capitol, and I was detained longer than I thought I
would be.
We are delighted to welcome both the chair and vice chair of the
Antitrust Modernization Commission and appreciate both of you
being here to report on the Commissions findings and recommendations: Ms. Deborah Garza and, of course, John Yarowsky,
the vice chair.
For the past 3 years, our witnesses, along with 10 other commissioners, have been analyzing the antitrust laws to determine
whether they are fully effective as is or if they could benefit from
refinement to reflect changes in technology and the marketplace.
For over a century now, antitrust laws have served as our economic bill of rights, providing the ground rules for fair competition.
The antitrust laws are our chief bulwark against schemes by cartels and monopolists to deprive consumers and our economy of the
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2
benefits of competition and innovationthat is lower prices, better
products, and greater efficiency.
The AMCs report is an ambitious one with over 300 pages of
analysis and recommendations. The AMC covered a lot of ground.
Some of their recommendations are particularly useful; for example, its recommendation that immunities from antitrust laws
should be disfavored and only created when the heavy burden is
met of clearly demonstrating that the exemption is necessary to
satisfy a specific societal goal that trumps the benefits of a free
market.
It is a good starting point for Congress as it moves forward with
various proposals.
Other recommendations do not receive such glowing reports. I
lower my head to mention the Robinson-Patman Act. That provides
a set of guidelines for marketplace behavior by guaranteeing that
everyone competing in any given marketplace has a level playing
field. It does this by prohibiting sellers from offering different
prices to different purchasers of commodities where there is no procompetitive justification.
Robinson-Patman helps ensure that small businesses and momand-pop stores have the ability to compete with big power retailers
like Wal-Mart. In its recommendations, the AMC suggests repeal
of Robinson-Patman, claiming it is not performing its intended
function and that it conflicts with the goals of modern antitrust
law.
Admittedly, the Act has flaws, is structurally complex and very
hard to administer, and it is not used often as an enforcement tool.
But these problems should not mean we should repeal the law altogether. Instead of repealing the act, it is my hope that we can find
a way to make it work better.
I also have concerns about the Commissions ambiguous recommendation on the repeal of Illinois Brick and Hanover Shoe Supreme Court cases. In these two cases, the Supreme Court ruled
that only direct purchasers, not indirect purchasers, may sue for
damages from price fixing and that antitrust defendants in these
cases cannot use the defense that the direct purchaser passed on
the over-charge to the indirect purchaser or the consumer.
Illinois Brick has been controversial since it was adopted, but
many States have adopted policies that allow indirect purchasers
to sue. I applaud the Commission for attempting to resolve this
issue and I agree that allowing indirect purchasers to sue will enhance consumer welfare.
I am more skeptical, however, of the Commissions proposal because of the potentially adverse effect it could have on direct purchaser actions. If each direct purchaser must determine how much
of the over-charge was passed on downstream, it might be very difficult for them to pursue these actions. The result could be an overall decrease in holding price-fixers and monopolists accountable.
This is an issue we shall continue to study carefully.
I also want to mention that no matter how current or modern the
antitrust laws are, the positive effects of such laws cannot be felt
without adequate enforcement by the agencies. The AMC says that
the U.S. merger policy is fundamentally sound and that there does
not appear to be a systematic bias toward either over-enforcement

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3
or under-enforcement. Yet in the past few years with technological
and marketing innovation occurring at breakneck speed, we have
seen a wave of consolidation in some of our key industries.
According to Thomson Financial, this year was the fourth largest
in history for mergers and acquisitions. The fact that the Department of Justice has failed to challenge any of these massive industry-consolidating mergers makes me worry about the AMCs conclusion here.
I look forward to hearing from the two senior commissioners and
appreciate the incredible amount of work that has gone into this
endeavor over the last 3 years. And I want to continue our dialogue
about the importance of our antitrust laws. This Antitrust Task
Force was created specifically to get us into the inquiring of how
we can make this area of our law better.
I would now recognize Steve Chabot, our Ranking minority Member on this Task Force, for an opening statement.
Mr. CHABOT. Thank you. And I would like to thank the distinguished gentleman from Michigan, Chairman Conyers, for holding
this important hearing.
I was privileged to speak a few weeks ago at the American Bar
Associations Annual Spring Antitrust Conference, and I happened
to be seated next to our witnesses. One of our colleagues, one of
your colleagues, Commissioner Valentine, had the opportunity to
discuss with some of the folks there the significance of the Antitrust Modernization Commission report.
And in particular, I acknowledged the importance of the Commissions report to Congress, specifically as it provides us with a backdrop against which this Task Force can better analyze the specific
antitrust issues which we have identified for review over the next
6 months. This report is very timely for this Task Force.
At the very heart of the creation of the Commission and its directive to study our Nations antitrust laws was Congresss concern
that rapidly advancing technology was incompatible with competition and consumers. As we have all witnessed, technology has dramatically changed the marketplace and the nature of competition.
Technology that we viewed as science fiction years ago has now become a part of our daily lives.
Our first hearing reviewing the XM and Sirius Satellite Radio
merger held just a few months back highlighted the uncertainty
that consumers, businesses, regulators and the courts face in the
21st century.
Most of the issues that the Commission examined and will report
on today were not contemplated at the time of our Nations antitrust laws upon their enactment almost 118 years ago and while
the courts have done a good job in balancing innovation against
competition within the antitrust framework, this new informationdriven economy has forced us all to take a look at the effectiveness
of our antitrust structure.
The good news is that the Commission, after a thorough review,
found our Nations antitrust laws to be fundamentally sound.
This finding of soundness is important because it reaffirms that
competition and consumers continue to be adequately protected
even in this new age of technology and innovation. It also alleviates
concern that our laws are not flexible enough to respond to change.

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4
Our challenge in the 110th Congress is to ensure that competition continues to flourish. However, we must be mindful that too
much Government intervention and regulation can also be harmful.
The Commissions report, findings and recommendations provide us
with a much needed starting point to move forward.
Again, I thank our witnesses for being here.
And I want to thank the Chairman. I know we all look forward
to hearing in more detail the findings and recommendations of the
Commission.
And, Mr. Chairman, I might note that I have to appear before
the Rules Committee at 3:00, so I will have to leave, but I will
come right back as soon as I appear.
I yield back.
Mr. CONYERS. Thank you, Steve Chabot.
Our witnesses: Deborah Garza has been a member of the Antitrust Modernization Commission in Washington, where she served
as chair. She was a member of the law firm where she was a partner at Fried, Frank, Harris, Shriver & Jacobson, handling antitrust
counseling and litigation. She has also been a partner at Covington
& Burling and was in the antitrust division of the Department of
Justice as Chief of Staff and Counsel to the Assistant Attorney
General through the years of 1987 and 1989.
In addition, of course, she is now the Deputy Assistant Attorney
General for Regulatory Affairs at the Antitrust Division. We offer
our congratulations, although she is not testifying here in that capacity, of course.
John Yarowsky, became a member of Patton Boggs Public Policy
Practice Group in 1998, after serving 3 years as special associate
counsel to President Bill Clinton. His practice at the firm is diverse, spanning a broad range of legislative and public policy areas
while at the same time providing strategic counseling to clients on
antitrust, telecommunications, intellectual property and administrative practice and procedure.
I am going to submit both of their bios for the record and proceed
to hear them.
Both Ms. Garza and Mr. Yarowsky have submitted a joint statement to the Task Force. Without objection, it will be made a part
of the record and any other opening statements will be included as
well.
And I would like to include for the record the other members on
the Antitrust Modernization Commission and the Commission
staff.
We welcome you today. We are here to talk about the high points
and the points where there might be differences of view. And I
think I would ask the former chairperson, Ms. Garza, to begin,
please.
TESTIMONY OF DEBORAH GARZA, CHAIR,
ANTITRUST MODERNIZATION COMMISSION

Ms. GARZA. Thank you, Chairman Conyers, Ranking Member

Chabot, Members of the Antitrust Task Force, for inviting us to
testify today on the findings and recommendations of the Antitrust
Modernization Commission.

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5
We really are delighted to be here to be able to respond to any
questions you have and to open what we hope will be a very productive dialogue, because as you recognized, Chairman Conyers,
these are very difficult issues deserving of a lot of discussion and
consideration.
Before I begin, I would like to acknowledge that the AMC staff
is all sitting behind us in the first row. They are really the backbone and the reason why we were able to get the report out at all
much less on time and under budget.
I think that I can speak for all of the commissioners in saying
that it was an honor to be entrusted with the large task of studying the U.S. antitrust laws and reporting to the President and Congress on whether they need to be modernized for todays economy.
We took that trust seriously and we took to heart Congresss direction that we solicit and consider the views of all interested persons.
We did that, and after 3 years of work and many, many days of
hearings and deliberation, we produced a consensus report in
which all the commissioners joined.
Our Nations antitrust laws have served the U.S. well for more
than 100 years and are a model for the rest of the world. In fact,
I spent this morning discussing with the members of the delegation
of the Chinese National Peoples Congress, which is considering
adopting their own antitrust laws, what our antitrust laws provide.
And this I think is an indication that the whole world appreciates
the role, thanks to I think the U.S., of competition law and the role
it has played in helping to ensure innovation and investment that
is essential to a healthy and growing economy.
The report is over 500 pages long. In total, we made about 80
recommendations. Rather than trying to summarize our findings
and recommendations in 5 minutes, I thought I would touch on just
a very few high points, or what I consider to be high points and
important points.
First and foremost, the report is an endorsement of free market
principals. Free trade unfettered by either private or Government
restraints promotes the most efficient allocation of resources and
the greatest consumer welfare.
Second, the report concludes that the state of U.S. antitrust law
is essentially sound. Certainly there are ways in which enforcement can be improved, and we suggest some of those. On balance,
however, the Commission believes that U.S. antitrust enforcement
has achieved an appropriate focusing on: one, fostering innovation;
two, promoting competition and consumer welfare rather than protecting competition; and, three, aggressively punishing criminal
cartel activity while carefully assessing other conduct that may officer substantial benefit.
And, third, the Commission does not believe that new or different
rules are needed to address so-called new economy issues. Consistent applications of the principals that I just noted will ensure
that the antitrust laws remain relevant in todays environment and
tomorrows as well.
The U.S. antitrust laws, as written, are sufficiently flexible to be
consistently modernized through the interpretations and actions of
the courts, the enforcement agencies and under the supervision of
Congress.

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And with that, to leave us with plenty of time the address specific questions we have, I will complete my statement.
Mr. CONYERS. Thank you so much. Excellent beginning.
Mr. Yarowsky, we welcome you back again to the Committee,
where you have been before, and we would appreciate hearing from
you now.
TESTIMONY OF JONATHAN R. YAROWSKY, VICE CHAIR,
ANTITRUST MODERNIZATION COMMISSION

Mr. YAROWSKY. Thank you, Chairman Conyers, Ranking Member

Chabot, Subcommittee Chairman Berman and other Members of
the Task Force who may appear.
I am honored to have had your confidence to serve on this Commission, and I am honored to have served with such distinguished
individuals from such diverse backgrounds and with such an amazing staff, as you have heard. You will hear a lot about that.
Ever since 1938, Commissions have been created, primarily by
Congress, to review the state of antitrust policy. This has happened
with almost clockwork precision every 20 or 25 years. And I think
as you stated in your opening statement, and as Chairwoman
Garza has said, yes, the state of antitrust is good.
That is not a small statement, because after 13 days of hearings,
over 120 witnesses and many days of public deliberations, the Commission found that no changes were needed in the following areas:
changing Section 7 of the Clayton Act, that sets out the merger
standard; changing Section 2 of the Sherman Act, that creates the
monopolization standard; changing the filing requirements, the initial filing requirements for the Hart-Scott-Rodino Act; whether to
create different rules for different industries; answer, no; changing
the fundamental enforcement architecture of the antitrust laws
that provides for dual enforcement roles for both the Federal Government and the States; for having two separate agencies, the DOJ
and the FTC; and for leaving the central features of the remedial
system, treble damages and attorneys fees, in place.
It is easy to say everything ultimately was recommended to stay
the same, at least in these main features, but it was not easy to
get to that point. There were very vigorous debates about leaving
the current structure in place, and where we have come out took
a lot of dynamic energy, to say the least.
But you know what is interesting to me, having lived up here for
a long time, is that many of the things I just listed are really the
handiwork of Congress. Much of the architecture of what you all
have done in past Congresses has been recommended to stay in
place. Where we have advocated changeand we have advocated
a number of, I think, important legislative changesthese other
areas are where there is either confusing case law or administrative issues, whether in the courts or in the agencies.
However, this vote of confidence for leaving so much of the underlying policy in place, comes in the face of a torrent of developing
economic reasoning into the competitive analysis in the past 25
years. The central role of economics is no longer an ideological debating point. It certainly was 20 years ago, about the right weight
to give to economic analysis. And it has led to more institutional

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continuity and enforcement over a series of different Administrations in the past 15 years. I think this is all for the good.
But with the central role played by economics, comes a real possibility that the courts and Congress may be left behind when it
comes to discussing issues such as the three-part test to determine
whether bundled discounts or rebates violate section 2 of the Sherman Act. What I mean by that is that Congress must stay deeply
involved with all of the economic discussions that are going on with
the larger policy views, so that Congress continues to shape the
contour and structure of the antitrust laws.
For about a year and a half in the White House I was connected
with judicial selection, and one of the observations I had, personal
observations, was that very few of the candidatesand this is not
a criticismfor the bench really had very little background in antitrust and were particularly daunted by the economics that were developing and whether they would be up to dealing with that.
They did take some comfort, however, in reviewing the statutes
of Congress as well as the legislative history as a starting point,
and that was their entry point. And that just reinforced for me
what I came to believe, working here and since then, that we need
a very active Committee here.
The Committee has fought long and hard to make sure that they
will stay relevant. Some of the great moments of this Committee
history and in this room, for Members now on the dais and those
looking down from the walls, have come from the often bipartisan
coming together to defend the antitrust laws, to vigorously assert
jurisdiction over certain regulatory initiatives that are occuring in
other Committees for which they have primary jurisdiction.
If it had not been for the effort of this Committee, then telecommunication policy, energy policy and many other policies would
not have had the benefit of a competitive slant. That is going to
be increasingly more important as we go forward.
So with that, I can say that I am honored to be here again. We
look forward to your questions.
[The joint prepared statement of Ms. Garza and Mr. Yarowsky
follows:]

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66
Mr. CONYERS. Thank you so very much.
I wanted to bring to your attention from the outset, and you
probably know it, that the Commission itself was the work product
of Jim Sensenbrenner, the former Chairman of this Committee,
and it is one of the issues we agreed upon. And I just wanted his
name to get into the record, because I think that it was a good
idea, and we frequently agree on many of the antitrust issues.
I am going to just raise a few and let you field them as you will.
The first thing that I congratulate you on is trying to figure out
how to narrow the exemptions. To me, that is worth celebrating,
because with more than 30 exemptions on the books, more being
applied for and also sometimes given other names, I think that this
is very, very important.
I also agree with the regard for a division, a more efficient division of labor between the two antitrust enforcement agencies, the
Department of Justice and the Federal Trade Commission, FTC.
And here your recommendations were very well received.
Transparency was another one that was very important.
Now, the Robinson-Patman repeal leads me to temper some of
my enthusiasm for the list of things that I supported. You confused
me on repealing Illinois Brick but sticking Hanover Shoe onto it,
which seems to me to make things more difficult. The contribution
in claims reduction provision attracted some negative feedback in
some quarters.
And so let me ask you to comment on any of those items that
you choose to.
Ms. GARZA. Well, I will start off with easy, with something you
like, immunities and exemptions.
I mentioned that earlier this morning we were with the delegation from China and actually the discussion was all about immunities and exemptions. And the question they had is, we see your
antitrust law, we understand it, but can you please explain why
you have 30 statutory exemptions. And then also they had questions about State action, another issue.
And so we discussed with them a little bit the history of exemptions and immunities and, you know, some of the most sweeping
exemptions I think exhibited an ambivalence about the antitrust
laws and a fear, even, of competition. There was a concern that
some industries just werent fit for competition and there was a belief that some industries were national monopolies. That thankfully
has changed a lot beginning in the 1970s and into today as we
have recognized that very few industries if any are not suitable for
competition.
So what we have seen over time is actually a contraction, I think,
in the immunities and exemptions and a focus on much more limited immunities for specific conduct or immunities that limit liability to single damages, et cetera.
With that as the background in recognizing how difficult it can
be to take away an immunity that has been granted, we decided
rather than to attack specific immunities and exemptions, to try to
offer you all a framework that you might be able to use in considering whether to adopt immunities and exemptions in the future,
but also to use in considering perhaps the repeal of existing exemptions.

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And one of the things that we do recommend as well is that to
the extent Congress does decide that other societal values have to
trump the antitrust laws in a particular area and does enact an exemption, we recommend it that there be considered a sunset provision, which would change the dynamics perhaps that exist today
and ensure that after some period of time, in order to keep on,
there has to be a reevaluation and the parties who were the proponents of the immunity have to come forward to you with evidence to show that there is a net gain to the U.S. economy consumers as a result of the exemption.
Mr. YAROWSKY. I would just add one thing. Many of those 30 exemptions did not come from this Committee. A number of them did.
But where they came from were other Committees, looking at other
initiatives, and then they threw them in, because they happened to
have jurisdiction over those industries, or they were thrown in during the process of a conference report. Which again reinforces that
your vigorous assertion of jurisdiction, even if it has to be sequential referrals, is absolutely critical to guard against further erosion
in this area.
Mr. CONYERS. You know, the wave of mergers and consolidation
and the lack of challenges is something I have to raise on my list.
I dont want you to try to address it now. Maybe I will get it a little
bit later.
But I now choose to turn to Mr. Chabot, the Ranking Member.
Mr. CHABOT. Thank you very much, Mr. Chairman.
Hopefully I can get in a few quick questions and things here and
get your responses.
First of all, I think we all are aware that gas prices are on the
rise once again, causing real harm to real people in this country,
all across this country. And obviously when this happens, there are
calls for Congress to increase regulation of the oil and gas industry
or modifying the standards for oil and gas mergers.
What are the implications of the Commissions recommendations
regarding regulated industries with respect to such calls for increased regulation, for oil and gas, for example?
Ms. GARZA. Well, the Commission specifically found and recommended that there should not be a separate standard for evaluating mergers in various industries, and while we didnt specifically
mention the oil and gas industry, that was something that we were
obviously conscious of. We were aware of the fact that Congress
was considering whether it was appropriate to have a different or
higher standard for mergers in the oil and gas industry.
And the Commissions conclusions were that there wasnt any
need to do that. Section 7 and the way that it is enforced by the
courts and enforced by the antitrust authorities, is sufficiently
flexible in order to take account of all of the relevant acts.
Now, in the regulated industries area, which we also looked at,
we recommended that the antitrust agencies should have the primary role of assessing the competitive implications of mergers and
that the regulatory agencies, the non-antitrust regulatory agencies,
such be involved only to the extent that there are some other noncompetition related societal goals that are important to ensure that
cannot be safeguarded through application of the antitrust laws.

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Mr. CHABOT. What are the implications of the increasing
globalization of antitrust law? What are some likely consequences,
for example, if America retains its shipping antitrust exemption in
light of the E.U.s recent decision to rescind its exemption? And
what are the implications for potential internationalization of the
Robinson-Patman Act, also?
Mr. YAROWSKY. I will just start out with that, Mr. Chabot.
Obviously, there is a convergence in many ways now with some
of the foreign antitrust laws and the U.S. antitrust laws. In some
ways, that will be a very good thing, I think, is the general sense,
procedural aspects of, lets say, merger review. There has been a
lot of discussion about why, in a global merger, where it is being
reviewed here in America as well as at the E.U., why are there different time frames for review? It would be much better if there was
a more consistent, harmonized procedure that people could rely on
and get results and answers quickly.
The issue of substantive antitrust law convergence is a really difficult one. Do we really want it to be an issue like the GATT talks,
trade talks, where suddenly there is a uniform global antitrust law
in this area. We have different traditions. I guess one could say
that about trade and everything else.
But I think the general sense is you have got to go much more
cautiously about imposing a substantive standard across the board
and certainly being very careful about throwing antitrust into kind
of trade talks that could be decided in kind of an international diplomatic situation instead of a substantive situation with antitrust
analysis.
Mr. CHABOT. Thank you.
Go ahead, Ms. Garza.
Ms. GARZA. I just quickly wanted to react to two things you mentioned. One was ocean shipping and the other was the RobinsonPatman Act.
On the ocean shipping front, I think the commissioners did feel
that the fact that we are now the only developed Nation that continues to support an exemption for ocean shipping price setting
should be a bit of an embarrassment to us, and we think that the
action that the Europeans took is perhaps a good opening for us
to follow and do the same.
On the Robinson-Patman Act, I guess I will be brave enough to
address that, Chairman Conyers. The one thing that moved me, at
least, in agreeing with my fellow commissioners on our recommendation was the fact that it does become difficult to explain
to non-U.S. competition authorities what the Robinson-Patman Act
does.
As the report indicates, we think that in many ways the Robinson-Patman Act operates in a way that is antithetical to the antitrust laws. And we try to discourage foreign competition authorities
from enacting strict price regulations when they are looking at
adopting competition regimes.
But it becomes very difficult for us to in effect say, Well, dont
do as we do; do as we say, while we have got the Robinson-Patman Act on the books, but it is really not enforced very much and
there are ways to enforce it so it is not as harmful. And it makes

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it more difficult for us, basically, to convince other Nations that
they should not enact similar statutes that really police pricing.
Mr. CONYERS. Thank you so much.
Howard Berman?
Mr. BERMAN. Thank you, Mr. Chairman.
I would like to focus the witnesses attention on the recommendations and the antitrust and patents section and have you expand
a little on the recommendations. I mean, you come down on the
side of saying that while there is a tension, we can have our patent
laws and have our antitrust laws and maintain a climate that
incentivizes innovation and at the same time avoid the most negative anticompetitive implications of granting exclusive rights. But
you worry about features of our current patent system.
Could you highlight for us which of the recommendations of the
Federal Trade Commission and the National Academy of Sciences
that would constitute reforms of the patent system that you think
are the most important and that Congress should pay attention to
adjusting? Either of you.
Mr. YAROWSKY. I will take the first crack at this, but I do want
to say before I do that I am working on patent reform and so I
want that
Mr. BERMAN. Is that why you look familiar?
Mr. YAROWSKY. Yes, that is probably why I look familiar.
The recommendations of the FTC, the National Academy of
Sciences and other expert groups really focus initially on patent
quality. If too many patents are issued with not precise quality,
that has a devastating affect on competition, because remember,
patents do have exclusive rights, monopoly rights.
If too many patents are issued, that space, the competition space,
gets filled with these little monopolies, and so they better be defined very carefully and precisely so that you dont occupy any
more space than you have to.
Obviously, the first look then is at the patent office. Applications
have gone up probably 300 percent in the last 15 years for the
PTO. That is fine. We have great examiners. But that is a terrible
burden for them. There is a 500,000, 600,000 patent backlog that
is currently hanging over everyones head, which then delays the
issuance of patents.
If patents are of poor quality or questionable quality, that leads
to disputes later on. Well, disputes then spill over into our courts
for many years. If there was an alternative dispute mechanism
that was expeditious, that would be wonderful, but there isnt really one that currently exists in the Patent and Trademark Office.
And so at that point, the patent system, which is supposed to drive
economic growth, competition and innovation becomes a problem in
and of itself and drags down kind of the competitiveness of many
companies.
So I think the first strand is to enhance the resources of the PTO
to keep up with this increase in applications, then have clarification about quality. The Supreme Court just came out last week
with a decision about clarityabout what is novel and what is just
obvious. I think it will be very helpful. And then look at how dispute resolution is being handled both in the courts and at the PTO.
Ms. GARZA. I dont know that I have anything to add to that.

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We do recognize that a patent doesnt necessarily signify an antitrust monopoly. And so we think that is important to keep in mind.
But on the other hand, there can be a problem if the patent system
is abused, if obvious inventions are patented.
And so our recommendation is that in particular the recommendations of the Federal Trade Commission and the National
Academy of Sciences that direct themselves to ensuring the quality
of patents be taken up by Congress. And I do agree with John that
the Supreme Court seems to be taking steps itself to adjust some
of what it apparently believes is, if not an abuse, a problem with
the current patent system.
But we agree that, you know, if the patent system is out of
whack, then you could potentially have a competitive impact, and
we agree however that both systems should be able to coexist and
both systems should have as the common goal stimulating innovation and competition.
Mr. CONYERS. Thank you.
The gentleman from Florida, Ric Keller?
Mr. KELLER. Thank you, Mr. Chairman.
Ms. Garza and Mr. Yarowsky, I want to just ask you about the
Robinson-Patman Act repeal. I dont necessarily disagree with your
recommendation, but just to draw out that a little bit.
Ms. Garza, can you give us the top three policy reasons why your
Commission recommended that the Robinson-Patman Act should
be repealed in its entirety?
Ms. GARZA. Well, you know, I dont know that I have a list of
three, but the reason we think that it should be repealed is because
it does arguably prohibit the kind of price discounting that the
antitrust laws otherwise are intended to encourage.
Mr. KELLER. When you say price discounting, are you talking
about volume discounting essentially?
Ms. GARZA. Volume discounting. Various kinds of discounting can
be vulnerable under the Robinson-Patman under the Robinson-Patman Act, and because of difficulties that defendants can have in
proving justification and meeting other standards of the act, it can
really just have a chilling effect.
And I think that, you know, you may not see a lot of litigation
nowadays, but in my experience, and maybe other peoples experience, is that it does have a chilling effect, and in a way it provides
almost an excuse for not competing as hard as companies can compete.
Mr. KELLER. Let me cut you off there.
Mr. Yarowsky, do you have anything to add to that? Any other
policy reasons other than it inhibits volume discounting?
Mr. YAROWSKY. No. But at some point, now or later, I would like
to explain my position on Robinson-Patman.
Mr. KELLER. Let me ask you a couple of questions, and then I
will give you a chance.
It is my understanding from talking with friends of mine who are
car dealers that a car dealer, say, who sells Toyota Corollas, and
he sells 1,000 cars a year, versus a smaller car dealer who sells
Toyota Corollas at only 100 per year, both pay the exact same
amount from the manufacturer and they dont get a volume discount from the manufacturer.

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Is that your understanding, Ms. Garza?
Ms. GARZA. I dont really have an understanding of how pricing
works in the auto industry, but I will say that our feeling is that
a manufacturer should havewe start with the proposition that
unless the manufacturer has market power, they have an incentive
to basically expand output, to basically make sure that they get
distributors who are selling a lot and that the volume discounts
and other things that they employ are meant to basically reward
the most efficient and successful distributors and distribution techniques.
Mr. KELLER. Well, that is my understanding, and I think it is
based on Robinson-Patman.
Do you disagree with that, Mr. Yarowsky?
Mr. YAROWSKY. No, not
Mr. KELLER. Okay. Let me give you a simple example. And I like
the corner grocery stores as much as anyone. I go to the one right
here on 4th and East Capitol every week. I am probably one of
their best customers.
But does Wal-Mart and the little corner grocery store both pay
the same amount for the same size can of Campbells Soup under
the Robinson-Patman Act, Mr. Yarowsky?
Mr. YAROWSKY. They may not necessarily pay the same amount.
I mean, it really is an individualized set of agreements about what
retailers pay. They may well pay the same amount. I think the volume discount exception to Robinson-Patman which could justify differential pricing, that was there from the very beginning, 1936. The
question is how it is interpreted and there is been a lot of confusion
even about that, which seems pretty obvious.
Mr. KELLER. I am somewhat confused for a couple reasons. It
seems like I gave you a chance to give me, both of you, three policy
reasons why you want to get rid of Robinson-Patman Act and you
can only come up with one, and that is volume discounting, and so
when I ask you does Wal-Mart pay a cheaper price that a corner
grocery store, I would kind of expect you to tell me no, they all pay
the same under this law.
Mr. YAROWSKY. There are some other reasons that have come
out. One, it may limit more discounting activity, and that would be
a perverse, ironic result. There have been a lot of studies showing
that fear of this act, and again I
Mr. KELLER. Take the remaining time to tell me what you wanted to get out about Robinson-Patman.
Mr. YAROWSKY. Here is my view of Robinson-Patman. I agree
with all of the commissioners that it is not working well and there
is a real problem. It is not being enforced by the agencies and there
is a lot of substantive confusion in the law.
However, rather than just closing your eyes and repealing Robinson-Patman, I dont agree with that. I think Congress needs to revisit Robinson-Patman, that the same forces, the same constituencies that have cried out for Congress to look at it, are still here.
The problem is, I think you need to downsize and re-sculpt the
act, if possible, so that it does work, it is lower to the ground, it
may not be so convoluted. Remember, what Congress is now having
to do is create mini-Robinson-Patman Acts because the larger one
doesnt work.

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The program access rulesCongress helped stimulate the production of those because, for example, satellite was at a perceived
disadvantage from cable in getting content, programming, when
they first started out. And the answer was, well, we are giving a
volume discount to cable, and the small satellite companies said,
well, we cant survive on that. So program access rules came into
effect just for that little sphere.
Net neutrality. This Committee really dug into that last year.
Without going into the pros or cons of net neutrality, there was
also concerns pushing that consideration about price discrimination. Again, if Congress had passed a net neutrality bill, it would
not have been a generic bill at all that would have applied across
our economy. It just would have been for a small sector.
I think if you repeal Robison-Patman, you are going to see a proliferation of these mini price discrimination regimes. I dont think
that is a good idea. I would rather see Congress draw back, do a
tough evaluation, spend the time, go over it and see if they can recraft a workable Robinson-Patman Act across the board.
Mr. CONYERS. Thank you so much.
The gentleman from California, Darrell Issa?
Mr. ISSA. Thank you, Mr. Chairman.
I dont want to sound like a one-trick pony, but I am going to
pick up on the patent reform and how it relates here. I think everyone that has been on the dais and probably everyone that will come
in and out during the hearing agrees that the major thrust of patent reform is to get better patents. And recognizing that we do
have a high failure rate when they stand the test of the brightest
sunshine in major litigation.
But one question I have is, lets assume for a moment that they
are valid and should be enforced. I think I was hearing, you know,
that there are still many antitrust violations, and I just want to
make sure that it is clear for the record that, assuming they are
valid, they are a right to a monopoly and a right to dominate an
industry and a right to get premium prices and the Federal Trade
Commission tends to resent that.
Is that a fair statement? I am noticing some wincing, so I will
assume that you are going to disagree.
Ms. GARZA. I dont know if everything you said is fair, but I dont
know
Mr. ISSA. If I were still a Chairman, it would be. But I am not.
Ms. GARZA. Here is the thing. I would say that you are right, and
I think the Commission agrees that a validly issued patent confirms the right of exclusion on the owner, and we say in our discussion of Section 2 as well as the patents that you have the right to
command whatever price you can command.
Now, having a patent doesnt mean that you have dominance by
any stretch of the imagination, because you could have a patent
but that doesnt mean that that technology that is embodied in that
patent is superior to other patented or non-patented technology.
So the one thing that is important to keep in mind is that a patent doesnt equal dominance. A patent equals the right to exclude.
It does not necessarily equal market power or dominance.

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Mr. ISSA. Sure. And following up on that, because you said exactly what I wanted said, in a sense, not because I asked you to
say it, because I was a devils advocate instead.
When we look at pharmaceuticals, it seems like in many Committees of Congress we are constantly trying to make them provide
medicines cheaper and thus breaking down the inherent right of
their patent to create exclusion for the life of the patent, and we
happen to have this life plus the time we took away in administrative function, but it is still life of the patent, and thus say that they
should not get the high price.
When we are looking at antitrust, isnt it fair to look at these
pharmaceuticals as not different for purposes of their right to get
what might be enormous profits if they hit a winner and of course
with the enormous loss if it isnt a dominant product or in fact it
doesnt get approved.
Ms. GARZA. Well, antitrust policy I think says that if you have
a valid patent, you have the right to recover whatever profits you
can, and if it is a winning drug, then thats an important incentive
to others to invest in developing other drugs.
And as you have indicated, and I dont know, I cant recall right
now what the percentage of success is, but the percentage of successes, but the percentage of success is really quite low for pharmaceuticals and the investment required is quite high. So that really
illustrates, in some sense, what we said in the report about the importance of preserving incentives to innovate.
So where there is a valid patent and you allow them to recover
the rewards of their investment, then you are in essence encouraging further innovation in new patents. That is assuming that
there is no other sort of abuses or anything.
Mr. ISSA. Sure. But it is not encouragement. It is a constitutional
right based on its encouragement. Did you have anything to add
on that?
Ms. GARZA. No.
Mr. ISSA. And I made this point, and the Chairman knows all too
well, because many of the Committees of Congress right now seem
to want to strip away some part of that for the greater good of society, not for the greater incentive to innovate.
Mr. Yarowsky, earlier, though, you said that the lack of an effective administrative process was part of the problem with patents.
And I know that wasnt on point to antitrust, but in the last
minute or so, if in fact the reexamination process were open, transparent, open in the sense that you could see and you could make
input, would that change your feeling on the administrative remedies?
Mr. YAROWSKY. From my view, as long as you can get a postgrant process, I mean, there are many names being hurled around
in the
Mr. ISSA. And I use reexamination because we understand what
they are that people arent using.
Mr. YAROWSKY. Right. But if I am able to just use a more general
phrase like post-grant process, if that process would allow more information to come in with a transparency so there is a public dimension, I think that would help crystalize more quickly the validity question, and the validity question is the key, because once you

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feel confident about that, then everybody goes about their own
business to innovate further, which is what we all want, and that
leads to a more competitive economy.
So I would agree with you, if that post-grant process could be
more transparent and lead to validity determinations more clearly
and more quickly, I think that would be a very positive result.
Mr. ISSA. Thank you.
And I know the Chairman is looking forward to the Subcommittee marking up just such a bill in the relatively near future.
With that, I yield back.
Mr. CONYERS. Thank you very much.
I apologize for not calling on Sheila Jackson Lee before Darrell
Issa, but I do now. The gentlelady from Houston is recognized.
Ms. JACKSON LEE. Thank you, distinguished Chairperson.
In our anteroom is a number of Russian parliamentarians. It
means that this room has many diverse opportunities and responsibilities, and as Chairman they are admiring your leadership. I
apologize if I was in and out dealing with a number of members
from the Russian Duma. I know that they are there as they are
listening to this process of democracy.
With that in mind, let me thank the commissioners for their
work. I think that the principals that you have enunciated, the
commitment that we have to the free market competition, should
remain a touchstone of the United States economic policy and the
recognition of the core antitrust laws, that they are sound and help
safeguard the competition of todays economy, are all good points.
And I think you had one other point that I am noting, possibly that
new or different rules are not needed for industries in which innovation, intellectual property and technological innovation are central features.
I have a second thought to that and I raise a particular industry.
I heard you mention in briefly and I would like to have some comment on that as well as to follow up some of the questions of my
colleagues.
We have watched the oil and gas industry over the decades have
a metamorphic change, whether it is caterpillar to butterfly, butterfly to caterpillar. But we see the large combinations of ExxonMobil. We see the large combinations of Chevron-Texaco, ConocoPhillips, and it goes on and on.
For some reason, I thought the innovativeness of the industry,
the broadness of the industry, was far more vibrant and challenging when there was less of this huge oil monopolies, and I happen to come from what has been claimed to be the energy capital
of the world and we proudly claim that in Houston, Texas. But I
have watched my independence be dominated and domineered, a
word that I have just crafted, by these large conglomerates.
It seems that rules do need to be changed in order to create a
vibrant, competitive industry. Where are the independents in the
energy industry? What value do we get out of the large conglomerates? Do we get new technology? We certainly dont get a sensitivity in pricing. In fact, that is one of the major challenges of our
legislative agenda this year, is gasoline pricing. Of course, some
people will look at it from the perspective of conservation, alter-

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native fuels, but why are we not looking at it in the very staid,
rigid monopolistic focus that the industry has crafted.
I know I cant see any real documentation of any new technology,
new intellectual innovation in the energy industry, based upon
their large size. Do you see any?
So my question would be, when is it time to look at a monopoly
or monopolies and sense that there needs to be new rules?
My second question would be to again try this question on Robinson-Patman. I am glad, Mr. Yarowsky, that you have indicated that
we dont need a repeat of it, but I am interested to find out how
price discrimination can be prohibited by the Robinson-Patman Act
or prevented by other antitrust laws.
And if you could start with those two questions. The first one,
I really want to have both of you elaborate on. I think we need to
keep an open mind on industries that seemingly have harmed the
consuming public through their largeness.
Mr. YAROWSKY. Sure, okay. Why dont I take a stab at going first
on both of those.
On the oil and gas mergers, Congresswoman, the only thing that
we definitively came up with that is relevant, and then I will mention another factor, but I dont mean to represent it as a Commission deliberation or recommendation but to be very responsive as
I can to you, is that we agree that the merger standard to evaluate
mergers shouldnt be different industry by industry. Because if you
started doing that, there might be some purpose served in the immediate time to do that for one industry, but then time would go
on and you would be left with different standards for different industries and it would be very difficult to run a uniform policy.
So that doesnt answer all your questions, but that was the one
recommendation we did have.
We had a second recommendation, I think it is relevant, though,
it is more general, but it goes to what you described. A second recommendation we had was that we recommended that the agencies
develop what we call kind of vertical merger guidelines. I mean,
what the guidelines mainly do, the merger guidelines, are horizontal mergers, and you were describing some of those, where the
same type of company merges with another like type of company
and creates a more powerful, consolidated entity.
But there are also vertical mergers, so that you then integrate
manufacturing, distribution and retailing. Those have powerful effects on innovation. I am not saying they are all bad or all good,
but they do have very strong effects on issues like innovation and
competition and can influence what happens downstream with the
consumer, the ultimate consumer, which is something we all live
with. Those guidelines, we think, need to really be revisited, because they really havent been looked at for many years, and reissued.
And I think they would have bearing on oil and gas mergers that
we have seen as well as other mergers. I think that is something
tangible that we recommended that should be done.
On Robinson-Patman, the real question, Congresswoman, is this.
The antitrust laws generally have a certain meaning, the words,
because they have been there now for over a century. So when
someone talks about antitrust injury under any of the antitrust

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laws, it has a meaning that the courts have developed over time.
Robinson-Patman, and this isnt a criticism, it is just what happened in 1936, used different words than existed in the basic antitrust law statutes, which had to do with restraints of trade and
monopoly.
And it was a much more intricately designed statute, and it was
really the result of a crying outthis was during the Depression
and post-Depression as small businesses were completely swallowed up. There was a real reason why Congress addressed this
and has continued to look at it seriously. But it was a very kind
of difficult statute to craft and courts in some ways have made the
effort to try to harmonize the words of that statute with the general antitrust statute. Some have tried, some have thrown up their
hands and said, well, they are different and so the meanings are
different.
Well, I dont think that is a good result. And my feeling is,
though it is going to be very difficult, I have seen that this Committee can do very difficult things and achieve them. And I just
think it is worth the energy, if there is time in the agenda, to devote a lot of time to seeing if there is a way to re-craft RobinsonPatman to get a more harmonized meaning that the courts will understand, probably downsize it because it is very voluminous, and
then I think you can build consensus that it should be enforced by
the agencies, which has not occurred. For 15 years, it has not been
enforced. That is a terrible thing because it builds no confidence in
the system.
And, you know, the States also have their little mini-RobinsonPatman Acts, some of them do, so even if you would just repeal
Robinson-Patman, those acts would still live on.
So I just think it is worth the effort and time to see what might
be done to re-craft Robinson-Patman. And so my vote on the Commission, not to defend my vote, was simply that it is not working.
I have to agree with that. It is not working. But my hope is that
you can revisit it, create definitions that would work and then
achieve the same social goals that people feel are very important.
Ms. JACKSON LEE. Mr. Chairman, I thank you for indulging
Mr. YAROWSKY. I am sorry for such a long answer.
Ms. JACKSON LEE. Can Ms. Garza make a quick response to
those two questions?
Thank you very much, Mr. Yarowsky. It was a very thoughtful
answer.
Ms. GARZA. Let me address your question about mergers in the
oil and gas industry.
To clarify, the reason we didnt think it was appropriate to have
a special standard is because the standard that exists today is very
broadthe statutory standard. It basically prohibits mergers and
acquisitions that would substantially reduce competition in any
line of trade. And the test that the courts and the agencies apply
are all focused on identifying whether a merger and acquisition
what effect it would have on output and price. So they are looking
at the right thing; what effect is this transaction going to have on
output and price. Is it going to reduce output and raise price?
And the analysis that they undertake itself is very complex. But
we are sensitive to the concerns that you raise. And it is not a good

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situation for public confidence in the laws, for example, for people
not to understand the basis for enforcement decisions, and by that
I mean both cases that are brought and cases that arent brought.
So we do actually make a number of recommendations that are
designed to help ensure that the Congress in your oversight capacity understands the basis for enforcement generally, but also in respect to specific transactions, and also that the public does.
Now, the FTC and the DOJ have done a very good incredible job
at that with guidelines and speeches and others. But we have recommended that they go even further, with more closing statements, we call them, basically explanations when there is a transaction that people have an expectation might be challenged and
there is a decision taken not to challenge it, that there be an effort
to explain as well as can be done, respecting confidentiality concerns, why the agencies didnt take the steps they took.
Now, that is a burden on the agencies, but we think it is very
important for them to have to do that so people understand the
bases for enforcement. Otherwise you lose your respect for the antitrust laws and the enforcement, and that would be problematic.
We would like to see these laws as being basically as self-enforcing as possible and we would like the public to have confidence
that they are, that their welfare is being looked after. So we agree
with you on that, and we think that one answer to that is substantially increase transparency.
Ms. JACKSON LEE. My only conclusion, Mr. Chairman, is that
there is a great input by the merged oil and gas industries and
there is a great price increase, and that seems to be ongoing.
I thank the witnesses.
I thank the Chairman.
Mr. CONYERS. I want to thank you all. This has been very helpful.
I want to say that we raised some questions that certainly need
to be examined even though this is a several-year product that you
have before us. But it is an important one, because this Antitrust
Task Force is committed to trying to generate a little more challenge to the enormous number of mergers that have taken place
over the last period of years.
And Chairwoman Garza, Vice Chairman Yarowsky, you have acquitted yourself well on behalf of your fellow commissioners and
the staff that labored so diligently on this matter, but we want to
keep 5 legislative days open for any questions that may come to
you that we can include in the record.
And so, without objection, the Members will have 5 additional
legislative days to submit questions which we will forward to you.
And, without objection, the record will be open for 5 legislative
days for the submission of any other material.
We thank you for your excellent testimony and hard work.
The hearing is adjourned.
[Whereupon, at 3:25 p.m., the Task Force was adjourned.]

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APPENDIX
MATERIAL SUBMITTED

FOR THE

HEARING RECORD

PREPARED STATEMENT OF THE HONORABLE LAMAR SMITH, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF TEXAS, AND RANKING MEMBER, COMMITTEE ON THE
JUDICIARY
Mr. Chairman, thank you for convening this hearing of the Antitrust Task Force.
Vigorous, unimpeded competition sustains our economy and keeps it strong. It
leads to innovative products that better our lives and keep prices low. The Judiciary
Committee has a long history of oversight to ensure that American markets retain
healthy competition.
At the heart of that competition is the Sherman Act, which the Supreme Court
has dubbed the Magna Carta of free enterprise. Sections 1 and 2 of the Act, which
Congress passed in 1890, are deceptively simple; each is only one sentence long.
However, those two sentences have come to regulate all manner of business dealings in this country, including who a company canand mustdeal with, how it
prices its goods, and whether it can merge with a rival company.
The antitrust laws are unique in American legal culture in that they are enforced
by two federal agencies, the Department of Justice and the Federal Trade Commission. In addition, each states attorney general can bring suit under both federal and
state antitrust laws.
The antitrust laws can be enforced both criminally and civilly. Private citizens can
also bring suit to recover damages and enjoin anticompetitive business practices.
Antitrust enforcement has also expanded beyond Americas borders. When the
United States passed the Sherman Act over 100 years ago, it was alone in the
world. Today over 100 countries have some sort of competition law, and more are
considering them.
In fact, China is currently debating its own antitrust laws, despite being a country that does not necessarily share Americas fundamental economic principles.
Antitrust law affects every industry as evident from the wide variety of hearings
that the House Judiciary Committee has held under its antitrust jurisdiction. The
Committee has held hearings on telecommunications, sports, oil and gas, utilities,
ocean shipping, airlines, agriculture, and financial services.
Given the impact of antitrust law on the American economy, it is vital that we
examine how well these laws are working, particularly in light of the innovation
that todays high tech economy has brought.
The Antitrust Modernization Commission, which spent the last three years studying the antitrust laws, found that the Sherman Act is fundamentally sound and requires no major changes by Congress.
That said, the Commissions 450 page report has more than 80 recommendations
on a variety of subjects, including repeal of Illinois Brick, repeal of the RobinsonPatman Act, modifications to the merger review clearance process, and amendments
to the Federal Trade Commissions ability to bring injunctions and to pursue administrative litigation in merger cases.
The Commissions report also provides a framework for Congress to assess immunities from the antitrust laws, such as the McCarran-Ferguson Act and the Shipping Act, and exemptions related to regulated industries.
Accordingly, todays hearing can help inform the Task Forces work on a number
of issues that it may consider, including competition in the credit card, pharmaceutical, oil and gas, healthcare, professional sports, and telecommunications industries, just to name a few.
I would like to congratulate Chairwoman Deb Garza and Vice-Chair Jon
Yarowsky for their hard work. Together with the other 10 Commissioners and professional staff, they produced an excellent report on time and under budget. The report is well written and helps make difficult concepts easy to understand. It also
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80
contains a wealth of supporting data and is an example of how such studies should
be conducted in the future.
I yield back the balance of my time.

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PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON LEE, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF TEXAS, AND MEMBER, ANTITRUST TASK FORCE

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BIOGRAPHIES OF DEBORAH GARZA, CHAIR, ANTITRUST MODERNIZATION COMMISSION;
AND JOHNATHAN R. YAROWSKY, VICE CHAIR, ANTITRUST MODERNIZATION COMMIS-

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PREPARED STATEMENT OF GLENN ENGLISH, CEO, NATIONAL RURAL ELECTRIC

COOPERATIVE ASSOCIATION AND CHAIRMAN, CONSUMERS UNITED FOR RAIL EQUITY

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