The booming economy has contributed to a dramatic increase -- from 1,500 to 3,700 -- in the number of merger filings received by the Federal Trade Commission in the last six years, said William J. Baer, Director of the Federal Trade Commission's Bureau of Competition, in his remarks before the American Bar Association's Antitrust Section meeting yesterday in Washington, DC. While the agency's fiscal year 1998 merger filings are 25 percent ahead of last year's record of 3,700 and have stretched the FTC's resources, Baer noted that the agency has reduced significantly the time it takes to complete divestiture orders. He also cited an impressive record of non-merger law enforcement actions.
"Our non-merger actions covered a spectrum of different kinds of conduct, but like our merger cases, they share a common characteristic: the facts tell the story. Some of them are not your garden variety antitrust violation, and some arose in settings that are somewhat out of the ordinary. But each of the situations presented a significant threat to competition," Baer stated.
Among the examples he cited were the agency's case against Toys R Us for exclusionary conduct, a recent complaint filed against Summit Technology/VISX for anticompetitive patent pooling, and cases involving price fixing by health care professionals.
"Because our merger workload has almost tripled in the last few years, we are selective in deciding where to use our nonmerger resources and what types of cases to bring," Baer explained. "We carefully analyze both the facts behind a complaint and the legal theory before committing substantial agency resources. The statistics suggest we are on track. In over seventy percent of the formal investigations completed in the past three years, we have found a law violation and secured relief."
In discussing the agency's merger activity, Baer said, "Our goal, as always, is to focus our energies on stopping the small handful of mergers which raise the risk of significant harm to consumers." In addition, he said the FTC has worked hard to make sure the Hart-Scott-Rodino process works. "We try to ensure timely and effective divestitures, enforce compliance with HSR requirements and order provisions, and reduce or eliminate unnecessary burdens on business." As a measure of the FTC's effectiveness, Baer pointed out that roughly 85 percent of HSR filings are cleared in the 30 day waiting period without a significant investment of investigative resources. Three-fourths of the remainder are looked at closely but also cleared within that first 30 days.
The agency also regularly evaluates its efforts. As an example, he cited the FTC's new emphasis on identifying buyers before a divestiture order is approved, making increased use of "crown jewel" and trustee order provisions, and shortening the time period for parties to complete divestitures.
"The latest evidence suggest that these approaches continue to pay off. Two years ago, the average time from issuance of a final order in a merger case to divestiture was 15 months. By last year, we reduced that number to seven months. For Fiscal Year 1997 and 1998 to date, we have reduced that time to an average of only three months. It is hard to demonstrate conclusively a comparable qualitative difference in our divestiture orders. But we have seen fewer post-divestiture compliance problems than in recent years. So we think we are on the right track," Baer said.
He added that the FTC also has undertaken some studies to evaluate the qualitative operation of earlier divestiture orders, including a comprehensive look at all Commission divestiture orders issued during Fiscal Years 1990 through 1994. Among the early findings of this study, Baer noted that in roughly half the divestitures that have been reviewed, the Commission required divestiture of a free-standing business; in the other half, the Commission required divestiture of selected assets. "Almost all of the divestitures of a free-standing business succeeded; on the other hand, almost half of the divestitures of selected assets exhibited problems. And smaller buyers did better than multi-divisional corporations as purchasers of selected asset packages," he said.
Baer also discussed a smaller, industry-specific study of the effectiveness of divestiture relief the FTC has obtained in pharmaceuticals markets. "Probably no single area has been the subject of as many of our merger investigations as pharmaceuticals production. Since the Roche-Genentech case in 1990, the Commission has brought 13 cases involving pharmaceutical mergers, all of which resulted in consent decrees." In these cases, the FTC's enforcement often has involved an evaluation of research and development issues. And the agency has examined the assets required to be divested, the effect of ongoing relationships between the merged parties and the acquirer of the divested assets, the timing of divestitures, the use of preapproved buyers, and the role of interim trustees.
In his conclusion, Baer highlighted areas where the Commission will continue to devote resources in an effort to improve its effectiveness, including working with other governments on antitrust issues. "At any given time, about one-half of our pending merger matters have involved contact with foreign antitrust authorities," he said. "Parties increasingly recognize that we do communicate, cooperate, and where possible, coordinate our enforcement efforts with foreign authorities. In addition to our cooperation in investigations, we are pursuing matters on the policy and procedure fronts."
NOTE: The views expressed by Mr. Baer are his own and do not necessarily reflect the views of the Federal Trade Commission or any Commissioner.
Copies of the full text of the speech are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
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