The Federal Trade Commission and International Antitrust

The Fordham Corporate Law Institute, 23rd annual conference on International Antitrust Law & Policy

New York, N.Y.

Date:
By: 
Christine A. Varney, Former Commissioner

The views expressed herein are those of the Commissioner and do not necessarily reflect the views of the Federal Trade Commission or any other Commissioner.

Introduction

I am very pleased to have this opportunity to offer an FTC perspective on current issues in international antitrust. My remarks represent my own views and do not necessarily represent those of the Federal Trade Commission or any other Commissioner.

During the past year, since Chairman Pitofsky addressed this Institute, the Federal Trade Commission has taken a number of actions to respond to challenges that at times highlight - but at other times blur - distinctions between domestic and international antitrust. Advances in technology, transportation, and deregulation have been critical factors in a number of FTC enforcement proceedings in industries that are responding to those advances. These advances also prompted the FTC to hold public hearings last Fall to consider whether our current laws and methods of competitive analysis remain appropriate to fulfilling the goals of antitrust policy -- specifically, protecting consumer welfare without unduly impeding efficiency. The FTC has issued a staff report containing a resume of what we learned in those hearings and recommendations for the Commission's consideration.

As we confront these challenges, we are now being asked to consider whether antitrust policy should be enforced by an international regime such as the World Trade Organization. This is a topic that has often been mentioned in fora like this in recent years -- but never before with the immediacy of a meeting like the upcoming World Trade Organization Ministerial in Singapore which may consider this question.

My paper begins by highlighting the principal findings and recommendations of the staff report on our hearings on global and innovation-based competition. It then reviews recent Federal Trade Commission decisions in industries marked by innovation, deregulation, and restructuring or rationalization -- specifically, the pharmaceutical, communications media, and defense and auto parts industries, respectively. The paper's final section addresses some of the pros and cons of considering antitrust policy at the WTO. Along the way, the paper highlights numerous examples of cooperation between US and other antitrust enforcers, which demonstrate that balancing domestic and international interests in antitrust enforcement can be achieved through cooperation.

I. FTC hearings on Global and Innovation-based Competition

Last Fall, the Federal Trade Commission conducted 23 days of public hearings to consider whether changing economic factors, such as the development of a global economy and the growth of high-tech industries, require adjustments in current antitrust and consumer protection enforcement.(1) We took testimony from over 200 prominent members of the business, legal, and academic communities. Based upon that testimony, we issued a report by the FTC staff in May of this year.(2)

Why did we do it; and, why should those of you from outside the United States care about this report? Paraphrasing remarks made by FTC Chairman, Robert Pitofsky, at the opening of the hearings, one of the principal responsibilities of government regulators is to ensure that the laws they enforce are regularly reviewed, and occasionally adjusted, to take account of changing conditions in the world.

That responsibility is especially important in antitrust and consumer protection enforcement because:

1. the statutes that the government agencies enforce are broad and sweeping, leaving much to prosecutorial discretion;

2. judicial decisions on competition policy issues can be sparse or outdated, in part because negotiated settlements often replace the costly and time-consuming alternative of judicial resolution;

3. many of the industries and the issues we deal with have become highly technical and specialized; and

4. patterns of international trade and ways of doing business have changed rapidly as a result of global competition and technological advances.

In these hearings, the FTC did not call into question the core elements of antitrust and consumer protection enforcement - hostility to cartels and unreasonable exploitation of monopoly power, protection of consumers from overreaching and abuse through fraud and deception. We believe that these principles have served us well.

These hearings, instead, focussed on the question of whether there are adjustments that should be made, in substantive law enforcement and in procedure, to take into account the vast changes that have occurred in commercial markets in recent years.

One general message we received was that the enforcement agencies need to explain not only what their enforcement policies are, but how those policies are applied in particular cases. One comment that comes to mind is that there should be more transparency in enforcement decisions -- we are asked to explain how and why we reach particular decisions, not only to justify what we did, but also to provide guidance for future transactions. That is a fair request. That kind of guidance is particularly important these days, when there are relatively few litigated cases and the application of enforcement policy is reflected largely in consent decrees. There are significant limitations on what we can disclose -- largely for reasons of confidentiality -- but we are trying to explain in greater factual detail the nature of the competitive concerns. We are trying to do that, for example, in the Analysis to Aid Public Comment that accompanies our proposed consent agreements or, in some cases, in more detailed complaints accompanying consent agreements.

Specifically, in the realm of merger analysis, we received testimony on the subjects of efficiencies and failing firms as well as on the role of imports in connection with market definition. A significant number of our merger investigations involve foreign firms, either as parties or as suppliers, customers, or competitors.(3) Furthermore, as we have refined our methods of economic analysis (as expressed in our Merger Guidelines(4)), we increasingly seek more data from third parties, oftentimes located in foreign countries.(5) With respect to foreign suppliers, we also examined our ability to obtain the information we need.(6) If imports are a price-constraining factor in a market -- or, if overseas capacity is likely to be quickly utilized to supply the US market -- we need to know that in order to make the right decision in a merger case. Given the economic opportunities fostered by trade and technology, the right decision may well turn on whether we are able to obtain relevant information from overseas.

Regarding consideration of efficiencies in mergers, the Staff Report proposes that merger analysis ask how any credible, merger-related efficiencies are likely to affect the post-merger competitive dynamics of a relevant market. Under this "competitive dynamics" framework, the proposed efficiencies analysis would involve a two-step inquiry: (1) is the merger likely to result in credible efficiencies, and (2) if so, are those efficiencies likely to change the merged firm's abilities and incentives so as to deter the likelihood of lessened competition, or even to increase competition in the relevant market post-merger?(7)

The FTC and DOJ have formed a task force which has begun work to examine whether and, if so, how the antitrust analysis of mergers should take into account any probable cost savings from a merger. The task force will consider whether to recommend any change in the treatment of efficiencies in the agencies' joint 1992 Horizontal Merger Guidelines.(8)

The Fordham Institute has provided a forum for views on this subject; in particular, presentations in 1992 and 1993 by Frédéric Jenny. And, last year, the OECD conducted a Roundtable on the subject. Thus, we have lots of thinking to bring to the task.

The Staff Report also contains a chapter on joint ventures that demonstrates the complexity of bringing rationality and clarity to joint venture analysis - and it doesn't even mention the "concentrative vs. cooperative" conundrum of European Community law. Yet, comparable characterizations plague US law according to some.(9) Indeed, some have expressed a desire for more guidance in this area than we have provided in the Intellectual Property and the Healthcare Guidelines.

Another major subject of these hearings was the role of innovation in markets. As I stated in an article last year on this subject,(10)

"This role is especially vital in the area of merger policy, where the merger of two innovating corporations can, depending on the circumstances, have either pro- or anticompetitive effects. For example, pro-competitive benefits may ensue where combining complementary research and development assets may make successful innovation more likely or bring it about sooner. Conversely, a merger may restrict innovation in a way that can have adverse consequences for consumers. Innovation can be suppressed or promising alternative technological approaches can be abandoned. Indeed, having more than one company undertaking research and development has the potential of producing an innovation that might not otherwise be discovered."

Diversity tends to be a natural result of promoting competition in innovative markets. In particular, at the research and development stage, diversity is frequently the only way to ensure that innovation is in fact successful. Even as we conducted these hearings, we were facing some of the same issues in cases pending before the Commission. I will turn to those cases now.

II. Innovation Markets and the Pharmaceutical Industry

Globalization and domestic innovation dovetail with the fundamental tenet of antitrust enforcement policy: competition fosters innovation and efficiency over the long run. However, in applying competition policy to high-tech markets, we must be cautious not to unwittingly impede innovation. The scale economies and other efficiencies to be derived from integration may be essential to ensure the success of emerging markets. Therefore, our primary goal must be to achieve a balance -- the balance of maintaining competition in, and access to, high-tech markets, while ensuring that innovation is not inhibited.

Technology and innovation seem to arise as key elements in the competitive analysis in more and more of our merger cases. This was especially true in the series of mergers in the pharmaceutical industry that the FTC reviewed during the past year - most of which were also reviewed and acted upon by the European Commission.

A. American Home Products/American Cyanamid

The FTC attempted to ensure that innovation would be successful, rather than stifled, in the consent agreement we reached with American Home Products Corporation's ("AHP") regarding its acquisition of American Cyanamid Company.(11) The FTC's order is aimed at preserving competition in the markets for tetanus and diphtheria vaccines, for research for a vaccine to treat rotavirus, and for certain biotechnology drugs used to treat cancer known as cytokines. However, I want to focus on just one aspect of the consent order: the provision dealing with the research and development of a rotavirus vaccine. Rotavirus is a diarrheal disease that causes thousands of children's deaths annually; finding a vaccine is vitally important to stop the spread of this disease.

In the complaint, the FTC alleged that a market exists for the research and development of rotavirus drugs in which AHP and American Cyanamid are two of only three competitors with research projects either in or near the clinical trial stage required before drugs are approved by the Food and Drug Administration (FDA). Moreover, Cyanamid's project was using a different research approach that could lead to a superior vaccine.

The competitive concern was that the merged entity might have reduced incentives to innovate along both research approaches as a result of the merger. To assure that both the AHP and Cyanamid rotavirus projects continue independently, the consent agreement requires AHP to license Cyanamid's vaccine research to a Commission-approved licensee and provide the licensee with certain technical assistance; on October 1, 1996, the FTC approved AHP's proposal to divest its rotavirus research assets to Korea Green Cross Corporation. In this way, the Commission sought to ensure the continuation of different approaches to developing this important vaccine which will hopefully speed the day when a vaccine is found.

B. Glaxo/Wellcome

Glaxo's $15 billion acquisition of Wellcome last year raised antitrust concerns in both the U.S. and the EC in the market for acute migraine headache treatments. EC and FTC staff members consulted to identify the product markets of mutual concern, the likely competitive effects, and the best available remedy.

The most effective migraine treatment currently approved for sale in the United States is an injectable drug, Sumatriptan, that is marketed and sold by Glaxo as Imitrex®. Both Glaxo and Wellcome had non-injectable migraine treatments under development.

Although the EC found a Wellcome product in Phase III clinical trials(12) to be a potential competitor of Glaxo's Imitrex, it also found other companies developing potentially competing products and concluded that Glaxo's acquisition of Wellcome would not significantly reduce potential competition in the market for antimigraine products. To allay doubts about the compatibility of the transaction with EC law, Glaxo offered to grant an exclusive license to a third party to develop and market independently either Wellcome's non-injectable product under development or the next-generation Glaxo product, maratriptan (also in clinical trials).(13)

Meanwhile, the FTC continued its investigation, consulting along the way with EC staff pursuant to the 1991 US-EC cooperation agreement.(14) The FTC concluded that the relevant market was the R&D market for the next-generation migraine treatments, and reached a consent agreement with Glaxo whereby it agreed specifically to fully divest Wellcome's research and development program for its non-injectable migraine remedy.(15)

The difference in the respective analyses of the product market between the EC and the US reflects some differences in the application of potential competition doctrine and possibly some differences in approach to innovation markets. At the US-EC bilateral consultations last November, a discussion of approaches to innovation market analysis was conducted. We expect further discussion of these issues with the EC.

C. Hoechst/Marion Merrell Dow

In an action with more immediate effects for consumers, the FTC recently took action that we believe will save consumers up to $30 million annually on prescription drugs, by preserving the possibility of competing products reaching the market. The case involved Hoechst AG's acquisition of Marion Merrell Dow Inc. ("MMD") late last year creating the third largest pharmaceutical firm in the world.(16)That itself was not a concern, but the merger raised serious competition issues with respect to four kinds of prescription drugs. Among those who could have been harmed by the transaction were millions of consumers who suffer from hypertension, angina, arteriosclerosis and tuberculosis. The FTC's action prevented that harm by obtaining substantial relief in four markets with annual sales of over $1.25 billion:

 
Sales
once-a-day diltiazem, medication for hypertension & angina $1 billion
medication for intermittent claudication, a circulatory disease $180 million
oral dosage forms of mesalamine, medication for certain gastrointestinal diseases $70 million
rifampin, a medication for tuberculosis $18 million

Diltiazem is one of the top 10 drugs sold in the U.S. and is used by millions of patients who suffer from high blood pressure and angina. It is a $1 billion market, in which consumers paid $500 to $1000 per year for their medication. MMD marketed the leading product, Cardizem. Hoechst was on the verge of introducing a competing product, Tiazac. Hoechst sought to avoid this horizontal overlap by turning over its rights to Tiazac to a third company, Biovail, prior to the acquisition. But the merger still presented competitive concerns because Hoechst and MMD had control over certain obstacles that could have significantly delayed FDA approval of the new drug. For example, Hoechst could deny or delay access to toxicology data needed for FDA approval of Tiazac; Hoechst retained certain competitively sensitive information regarding Biovail; and MMD had an outstanding patent infringement suit relating to Tiazac. These obstacles, and others, were removed in an order agreed to by Hoechst.

This consent agreement produced immediate benefits for patients who need once-a-day diltiazem. A few days after the Commission issued the order, Hoechst removed the obstacles to effectively marketing the drug, and the FDA approved Tiazac 24 hours later. This means that within months, patients will have an alternative to Hoechst/MMD's Cardizem, at a savings of up to 50% in prescription drug costs. For the average patient who switches, that means a yearly savings of $250 to $500. Market wide, that is a savings of up to $30 million per year.

The consent agreement also preserved the potential for significant consumer benefits in the three other markets. In the market for treatment of intermittent claudication -- a painful leg cramping caused by arteriosclerosis -- Hoechst markets Trental, currently the only FDA-approved drug. Over 5 million people in the U.S. suffer from the ailment. Trental's sales were about $120 million in 1994, making it one of the top 50 drugs in terms of sales. MMD was developing one of the few potential alternatives, Beraprost. Hoechst will have to divest either Trental or Beraprost in order to preserve this prospective competition.

Similarly, in the $70 million market for oral dosage forms of mesalamine -- for treatment of the gastrointestinal diseases of ulcerative colitis and Crohn's Disease -- MMD markets Pentasa, one of only two forms of mesalamine currently approved. These diseases affect over 1 million people in the U.S. Hoechst was one of only a few firms developing a generic formulation of mesalamine. Hoechst will have to divest either Pentasa or the generic formulation in order to preserve the potential competition between the two.

In the market for rifampin, which is used in the treatment of tuberculosis, MMD markets Rifadin, and Hoechst was one of only a few firms developing a generic formulation. The importance of this market is underscored by the growing incidence of TB, due in part to complications from HIV/AIDS. Hoechst will have to divest either Rifadin or the generic formulation in order to preserve the potential competition between the two.

D. Future developments

Mergers and collaborations in the pharmaceutical industry are continuing. The FTC has several investigations pending in this industry at the moment and most involve consideration of products in the pipeline. They challenge us to refine our analysis of innovation in assessing the competitive effects of mergers and joint ventures.(17)

III. Communications media mergers

In the communications industry, deregulation and technical advances have increased communication and program distribution opportunities. They have also led to mergers in different industry segments. Communications media mergers - not surprisingly - got a lot of attention in the past year; for example, the Walt Disney Company's acquisition of Capital Cities/ABC television network, and Time Warner's acquisition of Turner Broadcasting System ("Turner").(18)

The recent enactment of legislation deregulating the U.S. communications industry(19) is intended to foster competition in, and between, the telephone and cable television industries.(20)

It is also expected to result in mergers - for example, the proposed merger of US West (one of the so-called "Baby Bell's") and Continental Cablevision, the third largest cable system operator in the US.(21)

The first and second largest cable system operators in the US - Tele-Communications, Inc. ("TCI") and Time-Warner - recently agreed to settle Federal Trade Commission charges that Time- Warner's acquisition of Turner would restrict competition in cable television programming and distribution, in violation of federal antitrust laws.(22) According to the FTC's complaint detailing the charges, the proposed merger would combine Time Warner and Turner, two of the country's largest cable programmers, thus reducing competition among cable programmers in the United States. The two companies account for about 40 percent of all cable programming in the country today. Overall, the merger also would tie together (by merger and contract) Turner's programming business with the cable distribution systems of the nation's two leading cable operators -- TCI and Time Warner respectively, whose systems together reach nearly half of American cable households -- thus making it more difficult for competitors to get into either business successfully.

As a result, the FTC complaint states, Time Warner could unilaterally raise prices for its own programming, as well as for programming offered by Turner. In addition, given TCI's ownership interest in Time Warner and its complementary long-term contractual obligations to carry Turner programming, the deal would undermine the incentives of TCI, the nation's number one cable operator, to run better or less expensive programming competitive with that offered by Time Warner, thereby augmenting Time Warner's programming market power even further. The FTC also alleged that, because the deal could lead to substantial increases in wholesale programming costs for cable systems and for alternative service providers -- including direct broadcast satellite services and other forms of non-cable distribution(23) -- it could lead to higher cable service prices for consumers, and reduce the programming choices available to them.

To resolve the FTC's charges and avoid a court battle over the deal, Time Warner, Turner, TCI and its subsidiary Liberty Media Corp. (LMC) have agreed to make a number of structural changes and abide by certain restrictions designed to break down the entry barriers created by the deal. The agreement would:

(1) require TCI to divest its interest in Time Warner to a separate company (or accept a maximum of 9.2 percent nonvoting interest in Time Warner);

(2) require TCI, Turner and Time Warner to cancel their long-term carriage agreements;

(3) reduce significantly Time Warner's enhanced opportunities for bundling Time Warner and Turner programming;

(4) bar Time Warner's programming interests from discriminating in price against rival cable systems;

(5) prohibit Time Warner's cable interests from discriminating in carriage decisions against rival programmers; and

(6) require Time Warner's cable interests to carry a rival to Cable News Network (CNN).

In announcing the settlement, FTC Chairman Pitofsky said:

"While the proposed merger of Time Warner and Turner Broadcasting is one of the biggest and most complicated deals that antitrust officials have reviewed, the central issue it raises can be summarized in one word: access. This settlement would preserve competition and protect consumers from higher cable service prices and reduced programming choices by ensuring that competing cable operators, new technologies and future programmers can gain access to Time Warner/Turner's customers and programming."

The Chairman's one word summary is remarkably similar to the concern that apparently led the European Commission to block the creation of the proposed "MSG" joint venture between Bertelsmann, Deutsche Telekom, and the Kirch Group.(24) At last year's Fordham conference, EC Competition Commissioner, Karel Van Miert, said that the joint venture, had it been approved, would have put the venturers in a "gatekeeper" position, and thus dominance, in the German pay-tv market.(25)

As I mentioned earlier, we expect to see more mergers in the wake of enactment of the Communications Act of 1996. The Act permits telephone companies to provide cable television service and cable companies to provide telephone service. The Act places some restrictions on acquisitions of telephone companies by cable TV companies and vice-versa; however, the Act provides exemptions that apply to, inter alia, acquisitions of systems in rural areas and in "competitive markets."(26) As you can imagine, there are a lot of questions about how the legislation will be applied. The Federal Communications Commission has a big job ahead of it and so do the Department of Justice and the FTC in seeing that competition is maintained as the communications industry restructures. All I can say at this point is - stay tuned.

IV. Industries marked by Rationalization

The defense and auto parts industries are undergoing rationalizations in response to technological change and consumer demand. Consolidation in those industries has led to antitrust scrutiny.

A. Defense Industry

With the end of the Cold War, the United States has pursued a policy of sharply reducing military procurement. In real terms, the military procurement budget was estimated to fall 68% from its 1986 peak to 1995.(27) These budget cuts have led to overcapacity, which the defense industry is seeking to eliminate through downsizing, consolidation, or conversion to commercial production.

The FTC's successful challenge to the proposed merger of Olin and Alliant in 1992(28) raised questions in the minds of some about the compatibility of antitrust policy and defense policy. Cool heads prevailed. The Defense Department established a Task Force -- headed by Robert Pitofsky, who is now FTC Chairman -- to examine what role the Defense Department should play in the antitrust review of mergers and acquisitions in the defense industry.(29)

Among the most important conclusions of the Task Force was that the Merger Guidelines "are flexible enough to take into consideration the special circumstances of downsizing in the defense industry."(30) The Defense Science Board Report then describes the constructive role that the Department of Defense (DOD) can and should play in assisting the antitrust agencies when they review defense industry mergers; for example, in providing information to help the competition agencies to define markets, identify market participants and barriers to entry, and evaluate national security claims.

The antitrust agencies understand that with changing defense priorities and declining budgets, the issue is not how to introduce additional competition into existing programs but rather how to maintain competition for as long as possible while downsizing these programs. Many programs can no longer sustain the number of suppliers that existed in the past. For some programs, projected future demand may indicate that a process called a "downselect" to one supplier is necessary.(31)

1. Olin/Alliant

It was just such a process that led to the FTC's successful challenge of the merger between Olin and Alliant. The two companies were the only contractors providing 120mm tank ammunition. The US Army decided that in the future it would only be able to support one supplier of such ammunition and therefore that it would hold a winner-take-all multi-year competitive downselect. Alliant and Olin decided they would preempt this final competition by merging. The FTC voted to challenge the merger. In considering the FTC's request for a preliminary injunction, the U.S. District Court reviewed an extensive record of evidence, including testimony from DOD witnesses. The Court found that the elimination of competition between Alliant and Olin could "raise the cost of the contract for the Army between five and 23 percent, or $25 to $115 million."(32) The Court, thereupon, enjoined consummation of the transaction and the parties decided to abandon the transaction.

It is important to note that the antitrust agencies do not intrude on DOD's determination of when a downselect may be appropriate. InOlin/Alliant, for example, the FTC did not question in any way the Army's decision that it could support only one supplier in the future. Instead, the antitrust challenge was limited to the companies' attempt to preempt the Army's planned competition through a merger.

2. Lockheed/Martin Marietta

Similar competitive concerns arise where merging parties have entered into so-called "teaming agreements" with the top -- or only -- viable subsystem suppliers for an upcoming program competition. The Lockheed/Martin Marietta merger last year raised such concerns. Lockheed and Martin-Marietta had entered into exclusive teaming agreements with Hughes and Northrup-Grumman, respectively, in order to compete for DOD's upcoming space-based early warning system procurement known as SBIR. Under the Lockheed/Hughes teaming agreement, Lockheed was responsible for developing the satellite bus, while Hughes was responsible for developing a highly-sophisticated electro-optical sensor. Likewise, under the Martin-Marietta/Northrup-Grumman teaming agreement, Martin/Marietta was responsible for developing the satellite bus, while Northrup-Grumman was responsible for developing the sensor. These two teams were considered to be the leading contenders, by far, for the SBIR program -- not because Lockheed and Martin were the top satellite bus suppliers, but instead because Hughes and Northrup-Grumman are the two top suppliers of the satellite's critical sensor component. In any event, the merger of Lockheed and Martin-Marietta would almost certainly have assured the merged firm winning the SBIR competition.

Because the competitive concerns here stemmed from their exclusive teaming agreements with the top two sensor suppliers -rather than from their own satellite capabilities - the FTC required Lockheed and Martin-Marietta to enter into a Consent Agreement with the FTC that remedies the merger's anticompetitive effects by prohibiting them from enforcing the exclusivity provisions of their SBIR teaming agreements. This allows them to continue working with their current teammates, but it also frees Hughes and Northrup-Grumman to bid for the SBIR program either on their own or by teaming with other satellite companies.(33)

3. Lockheed/Loral

In April of this year, Lockheed Martin Corporation settled Federal Trade Commission charges that its $9.1 billion acquisition of Loral Corporation would violate antitrust laws.(34) The FTC charged that the proposed deal would violate antitrust laws by reducing competition in the markets for the research, development, manufacture, and sale of air traffic control systems, commercial low earth orbit (LEO) satellites, commercial geosynchronous earth orbit (GEO) satellites, military tactical fighter aircraft, and unmanned aerial vehicles.

Lockheed Martin and Loral are two of the largest U.S. defense and space contractors. In January, 1996, Lockheed Martin proposed to buy Loral. As part of the transaction, Loral's space and telecommunications businesses would be transferred to a new entity, Loral Space & Communications Ltd., that would be "linked" to Lockheed Martin in the following ways: Lockheed Martin would purchasing a 20 percent convertible preferred equity interest in Loral Space; Bernard Schwartz, CEO and Chairman of the Board of Loral Space, would be appointed Vice Chairman of the Board of Lockheed Martin; and, Lockheed Martin would provide certain technical services to Loral at cost.

The terms of the settlement provide for Lockheed Martin to divest its systems engineering and technical services (SETA) contract with the Federal Aviation Administration, and require modification of the "links" between Lockheed Martin and Loral Space: specifically, they prohibit Lockheed Martin from providing certain technical services or information to Space Systems/Loral, a subsidiary of Loral Space & Communications Ltd.; restrict participation and compensation of persons who serve as directors or officers of both Lockheed Martin or Loral Space; limit Lockheed Martin's ownership of Loral Space; and require "firewalls" to limit information flow about competitors' tactical fighter aircraft and unmanned aerial vehicles.

This acquisition was also subject to review by the European Commission. In the course of that review, extensive discussions took place between EC and FTC staff on the terms of the proposed transaction - particularly as to commercial satellites, and the effect of the proposed links between Lockheed Martin and Loral Space in that market. Ultimately, the EC decided that the links that would exist after the proposed merger between Lockheed Martin and Loral Space would not confer upon Lockheed Martin the possibility of exercising decisive influence on Loral Space, and thus control of Loral Space within the meaning of the EC Merger Control Regulation; however, the EC stated that it is possible that those links will infringe the competition rules of the EC treaty, and it reserved its position in relation to that question.(35) Both sides benefitted from the dialogue over the issues raised by the terms of the transaction.

4. Further Consolidation Here and in Europe

Despite the decline in the procurement budget, the need to maintain a strong military force remains - and that means development of replacements for aging systems. As reported earlier this year in the Washington Post,(36) three teams of contractors are developing plans to compete for the procurement of the so-called Joint Advanced Strike Technology fighter. This fighter jet is to replace the Air Force's F-16, the Navy's F-14 and A-6, and the Marine's AV-8 - some of which are as much as 35 years old. Of the teams competing for the procurement, one is headed by Lockheed Martin, another is headed by Boeing, and a third consists of McDonnell Douglas, Northrup Grumman, and British Aerospace.

Certainly, DOD has other replacement needs which will call upon the talents of many of these same, as well as many other, firms. Meanwhile, the effort of the industry to rationalize its productive capacities continues. I suspect that some of the issues I have described here will reappear in future transactions. And, judging by the press reports that I have seen from the other side of the Atlantic -- of, for example, French President Chirac's proposals(37) and those of the European Commission concerning the challenges facing the European defense industry(38) -- Europe may soon face more challenges on the application of competition policy to the defense industry.

B. The Auto Parts Industry

Much has been written and said about the changes in the manufacturing of automobiles that have occurred over the last ten to twenty years in response to regulation and foreign competition -- more stringent safety, fuel economy, and environmental protection requirements; advances in technology; just-in-time production; and increased outsourcing and joint-venturing. To get a before-and- after picture of the changes in the U.S. auto industry over a decade, one could read the FTC's then-controversial 1984 decision and order, permitting the General Motors-Toyota Joint Venture,(39) and then read the FTC's 1993 Decision in the same matter, terminating the 1984 Order.(40)

These changes have rippled downstream to the independent parts suppliers. Just this year we have witnessed consolidations of companies that produce brakes and a couple of attempts to consolidate in the piston industry.

The marriages of Bosch with AlliedSignal and Lucas with Varity in braking systems did not raise competitive concerns requiring enforcement action, either by the European Commission or the Federal Trade Commission. There are several other strong competitors in this market which is increasingly marked by the development and procurement by auto makers of entire braking systems, including anti-blocking systems, or "ABS."

Consultations between FTC and EC staff in these cases helped confirm our respective bottom line conclusions that neither merger raised competitive concerns requiring enforcement action. These discussions were particularly enlightening on the issue of geographic market. The European Commission's decision in the case of the Robert Bosch Company's acquisition of the worldwide hydraulic brake business of AlliedSignal provides a good treatment of this issue.(41) There the EC observed that only a small portion of total sales in Europe were imports; and, it noted the "arrival" in Europe of the American firm Kelsey-Hayes not through imports but rather through the building of a factory in the Netherlands. Likewise, on the other side of the Atlantic, Bosch's acquisition of AlliedSignal's braking business could be viewed as an effort to bolster Bosch's presence in the North American brake manufacturing market - also a market in which imports of brake parts are minimal.(42) The Lucas/Varity case raised issues outside of the field of automotive braking systems, but none that required enforcement action.(43)

Meanwhile, the piston industry has generated quite a bit of communication between the FTC and the German Federal Cartel Office (Bundeskartellamt) in Berlin. Mahle's acquisition of Metal Leve in June caught the attention of both agencies. Although he firms had failed to file the required H-S-R premerger notification, the FTC obtained from Mahle an agreement to hold Metal Leve separate pending the conclusion of the FTC's investigation of the acquisition, in consideration of the FTC's agreement not to seek judicial relief under subsection (g)(2) of the H-S-R Act which could include an order to divest the shares acquired in violation of the H-S-R Act.(44) The Hold Separate Agreement provides that Mahle place its shares of Metal Leve in trust; it also, inter alia, prohibits (1) Mahle from directing the voting of those shares; (2) Mahle and Metal Leve from exchanging confidential information; (3) Metal Leve from paying dividends to Mahle; and (4) Mahle employees or agents from participating in the conduct of Metal Leve's business or attempting to influence Metal Leve. A copy of the agreement was immediately transmitted to the Bundeskartellamt which had informed us of the opening of its own investigation of this matter.

The FTC's action to temporarily prevent irreversible consolidation of the firms, pending the usual antitrust review of the acquisition, was rather sensationally reported by the Süddeutsche Zeitung (one of Germany's prominent dailies, based in Munich) as a "Thunderclap from Washington."(45) Rather than a thunderclap, perhaps a better weather allusion is sunshine which illuminates the deal on both sides of the Atlantic and permits enforcement agencies to carry out their work.

The Mahle/Metal Leve deal also reminded everyone of T&N's efforts to acquire the German piston-maker, Kolbenschmidt. Last year, the Bundeskartellamt prohibited T&N from acquiring stock interests in Kolbenschmidt, a decision which remains on appeal in the German courts. Under the terms of a modified FTC order dating back to 1990, T&N is obliged to notify the FTC before acquiring any interest in a company that manufactures or sells certain engine bearings in the United States. T&N did notify the FTC in 1995 of its proposal to acquire Kolbenschmidt,(46) but subsequently withdrew the notice. In the wake of Mahle's acquisition of Metal Leve, T&N Chairman Sir Colin Hope reiterated T&N's desire to acquire Kolbenschmidt.(47) We will await the outcome of the appeal in Germany and watch for further developments.

V. International Rules or International Cooperation?

As I mentioned at the outset, the issue whether international antitrust rules should be adopted has been mentioned frequently in fora like this one, but the discussion has always been somewhat abstract. The WTO's first Ministerial meeting in Singapore in December makes this issue more real.

Is there a need for some kind of international antitrust regime? I don't think a convincing case has been made for it - at least not yet. I question whether there is a problem of a nature and magnitude that requires such a solution, and I do not believe that we have plumbed sufficiently the possibilities of cooperation between enforcement authorities.

A. Should the WTO Play a Role in Antitrust Enforcement?

When the World Trade Organization (WTO) holds its first ministerial conference in Singapore this December, antitrust may be on the agenda. In recent testimony before the U.S. Congress, Ambassador Charlene Barshefsky, Acting United States Trade Representative, presented an extensive review of preparations for the WTO's first ministerial conference.(48) Planning is still underway, but it is clear that the Singapore meeting will not call for the launch of a new trade round. Rather, it will provide an opportunity to assess what progress has been made in implementing the WTO Agreements and in establishing effective WTO institutions. The meeting will also give renewed emphasis to ongoing multilateral negotiations in various service sectors (i.e., financial services, basic telecommunications, and maritime transport) and on non-preferential rules of origin. Finally, the ministerial will determine what new areas the WTO must address to stay on the cutting edge of trade policy and to maintain a consensus for free and fair trade around the globe.

There is a significant amount of further liberalization that can be accomplished and that need not wait the launching of a comprehensive negotiation. Some possibilities suggested are accelerated or additional tariff reductions, future work on professional services, harmonization of technical standards, simplification of rules of origin, and trade in information technology.

More controversial, but arguably more important is the question of what new issues should be added to the WTO agenda. This is important because it is central to how the WTO can be made continually relevant to the ever-changing nature of international trade and the global economy. Under GATT, countries progressed from an exclusively tariff-based regime to one which included rules dealing with a variety of non-tariff issues, such as standards, subsidies, and government procurement practices. As a result of the Uruguay Round, issues such as services, trade-related investment measures (TRIMS), trade-related aspects of intellectual property rights (TRIPS) and the relationship between trade and the environment were added. Currently there are four issues that would expand the WTO's program of work that have attracted the most attention: trade and labor standards, government procurement, investment, and competition. In addition, the Committee on Regional Trading Arrangements is examining the possibility of a review of the role and relationship of regional agreements to the multilateral system.

The rationale for work on competition policy in the WTO is that, now that successive rounds of trade negotiations have significantly reduced government barriers to trade, it is private anticompetitive practices that may be impeding market access by foreign firms. In addition, competition issues have surfaced in the WTO because the TRIMS Agreement contains a mandate to consider the need for rules on competition policy and the US has been pushing for the inclusion of competition principles in the negotiations on basic telecommunications.

The European Commission proposes that Ministers at Singapore create a working group to explore integrating a new instrument in the WTO that would help address anticompetitive commercial practices with an international dimension.(49) The group would report to the 1998 Ministerial on the feasibility of conducting negotiations to develop a framework of rules on competition in the WTO. Under this proposed framework, all WTO countries would eventually adopt and enforce their own competition rules along common agreed principles. This framework would develop gradually, starting with the establishment of domestic competition structures and proceeding to the identification of common principles of competition policy, beginning with hard-core cartel conduct and working toward their international adoption. Initially, a more limited group of developed countries would create a means to exchange information as well as an instrument to request enforcement actions in foreign countries. In addition, WTO members would identify what procedural and substantive elements could be made subject to the WTO dispute settlement mechanism.

In addition, the Japanese government has tabled a paper at the WTO that calls for a thorough examination of the links between trade and competition policy. That proposal is at bottom directed towards preventing "competition-restricting trade measures, such as anti-dumping duties" from restraining competition. While the EU proposal focuses on private anticompetitive conduct, the Japanese paper suggests confining the scope of WTO deliberations on trade and competition to government measures, since WTO rules provide discipline for the rights and obligations between states.

The US Government is firmly of the view that competition issues are not ripe for negotiations in the WTO to establish a comprehensive new framework of rules. US Trade Representative Barshefsky recognizes that competition issues are extremely complicated, involve both private and governmental actions, and will require more study, in consultation with both private industry and Congress, before any sort of negotiating program is deemed appropriate. However, her testimony before Congress on September 11 left the door open a crack:

"At Singapore, we may want to consider joining a consensus to agree to begin a limited, educational program within the WTO. However, any such WTO work program would have to be modest and cautious, and done in careful coordination with other agencies, especially the Departments of Commerce and Justice and the Federal Trade Commission. In no such work would we alter our antitrust or our antidumping laws."

B. Cooperation among enforcement authorities

Despite all the talk about "globalization" and "internationalization," most antitrust enforcement -- like politics, according to the late Speaker of the U.S. House of Representatives, Thomas P. "Tip" O'Neill -- is local. When the U.S. authorities cite the fact that 25 percent of our premerger notifications involve foreign firms, it is worth noting that the remaining 75 percent do not. More importantly, even in cases involving foreign firms that are reviewed by more than one enforcement authority, more often than not the reviewing authorities find that the relevant geographical market is not the world, but two or more regional markets. And, as the FTC Staff Report notes, we have observed in some cases that products which might readily flow in a world market in fact are produced close to their ultimate destination, where suppliers can insure timely and reliable delivery.(50) I mentioned an example of this phenomenon earlier (in section IV.B.) with respect to the Bosch/AlliedSignal case.

Thus, while the several of the same players may be present in Europe, Asia, and the Western Hemisphere, consumers are not necessarily harmonizing or single-sourcing their demands - resulting in different markets for enforcers to analyze. Those demands may include safety or environmental standards that differ between, say, the United States and the European Union. In such circumstances, it is not inconceivable that an "international one-stop shop" could do a fair job of separately analyzing the different relevant markets and issuing a decision on a merger that would differentiate between those relevant markets. But, do we need it and, frankly, are we who represent sovereign authorities willing to give up that authority at this point? I think the answer to both questions is no and for good reasons.

First, I don't think we need it because we have not yet plumbed the depth of possibilities of cooperation between sovereign enforcement authorities. Cases like ATR/de Havilland,(51) in which enforcement interests collide, are exceedingly rare. Most cases are like the horde of pharmaceutical industry mergers where, because of national testing and licensing of new drugs, markets frequently contain different participants with differing shares of those markets. In such cases, the enforcement authorities consult - to the extent that their confidentiality laws or the parties' waivers of confidentiality permit - to foster complementary, rather than conflicting, decisions.

I will return to the issue of deepening cooperation after making the point that I doubt that most countries are prepared to concede sovereignty over their antitrust enforcement to the WTO yet. I recognize that some of the proposals - like some of those contained in the EC's paper - do not go so far; and, the United States and the other members of the WTO have already granted a fair amount of authority to the WTO in other areas. Nevertheless, there are significant differences between the antitrust laws -- and enforcement of those laws -- of major trading partners like the US, Japan, the EC, and many developing countries. Some of the differences are due to particular circumstances and policy goals in those countries. For example, the US premerger notification law, the Hart-Scott-Rodino Act, "catches" many more mergers than the EC Merger Control Regulation; also, US merger law condemns those mergers than are likely to significantly lessen competition - a standard more readily tripped than the creation of dominance standard in the EC and other European merger laws. Until these countries can divine some golden mean on which to harmonize their laws, there can be no agreement on a meaningful international enforcement regime.

It has also been suggested that procedural convergence would be easier to achieve than substantive convergence. I don't want to rule it out; but, we have looked carefully at some of our procedural differences - like the difference between EC and US premerger notification forms - and we find that those procedural differences are traceable to substantive differences between the laws. The Transatlantic Business Dialogue included among its many recommendations that the US and EU foster procedural convergence in merger reviews - but, it offered no specific suggestions on where convergence should occur.

I suggest that there is much more to be done by way of fostering communication and cooperation between enforcement authorities. The Antitrust Enforcement Guidelines for International Operations, issued jointly by the Justice Department and the FTC in April 1995,(52)respect the authority of foreign enforcement agencies over matters that may also fall within US jurisdiction. The International Guidelines declare that the agencies do, and will, cooperate with foreign authorities in the enforcement of competition policy.(53) While some continue to object to the fact that US antitrust law seeks to stop conduct abroad that harms US commerce,(54) the International Guidelines make it clear that the US agencies consider international comity in deciding whether to pursue a matter and that they will seek the assistance of foreign authorities in dealing with the matter.(55)

Recently, the FTC decided to suspend an investigation of a foreign cartel's effects on US consumers in view of a decision by the competition authority in the country where the cartel operates. Unfortunately, I am not at liberty at this time to identify the cartel or the country involved. But, it demonstrates that the US is willing to carry out the Guidelines' promise in appropriate cases.

That case and many others also demonstrate that cooperation in antitrust enforcement between the US agencies and their OECD partners has been mutually beneficial. US-European Community cooperation, in particular, received encouragement late last year when US President Clinton, European Commission President Santer, and then-Council President Gonzales agreed upon a New Transatlantic Agenda. Included in the Joint US-EU Action Plan that accompanies the Agenda are commitments to:

  • "pursue, and build on, bilateral cooperation in the immediate term based on the US-EC Agreement of 1991;"
  • "examine the options for deepening cooperation on competition matters, including the possibility of a further agreement;" and
  • "cooperate in working with other countries to develop effective antitrust regimes."(56)

Such top-level support for our efforts to cooperate in competition law enforcement is appreciated by those who work in the trenches on cases and do what they can to cooperate with other enforcement authorities. We firmly believe that such cooperation can make enforcement more effective and, with the help of the business community and the bar, more efficient as well.

As Chairman Pitofsky described in his remarks here last year, the Shell/Montedison(57) case offered several examples of how EC and US enforcement authorities can help each other. I want to reiterate a point the Chairman made in his discussion of that case: He queried how much easier it might have been for all concerned if the EC and US investigations could have been coordinated. Given current confidentiality constraints and notification requirements, that would have first required the consent of the parties. Looking at the outcome and the procedural history of this matter -- with 20-20 hindsight, of course -- it seems that we should be asking what would need to be done to enable -- and embolden -- all of us, enforcers and parties alike, to enter into such a coordinated effort.(58)

There have been instances in which a supplier of information has been willing to waive confidentiality for the limited purpose of consulting with another enforcement agency that is also investigating the matter. The coordinated settlement of the Microsoft case(59)two years ago by the Justice Department and the European Commission shows how matters subject to simultaneous investigations can be resolved where the parties are willing to waive confidentiality. In several cases during the past year, we have experienced -- at least with some parties and some counsellors -- more willingness to foster cooperation through the voluntary provision of foreign premerger notifications and, in some instances, voluntary waivers of confidentiality to permit substantive, practical consultations between the staffs of the enforcement agencies involved. In one merger case, Lucas and Varity, the parties waived confidentiality at the outset, permitting EC and FTC staff to consult on all the documents and information submitted by the parties in connection with the merger. In another case, the parties waived confidentiality as to particular aspects of the investigation.

Furthermore, parties have some degree of control over the extent of merger process convergence. It is possible to notify the US authorities well before notification is required in the EC, at the same time, or only after the EC has issued its decision on the merger. Parties need to recognize that the ability of US and EC authorities to cooperate with each other in mergers can be limited if the parties notify the EC before they notify the US. Philip Lowe, the former Director of the EC's Merger Task Force made this point at the 1994 Fordham Institute,(60) as has former FTC Chairman Janet Steiger.(61)

Clearly, this reflects a judgment call by the parties in each case as to how best allocate resources to secure the antitrust clearances necessary. We suggest however, that, in transactions that must be notified to both the EC and the US, parties should consider approaching both to see whether the investigation might be coordinated.

The US-EC Agreement has been termed a "model." If so, then it's time for others to emulate it. Last year, the US and Canada entered into a new Agreement, modeled after the US-EC Agreement, but going a step further to include cooperation in deceptive marketing practices cases.(62) And, last year, the OECD Recommendation was revised.(63) That Recommendation contains the tools necessary for effective cooperation within certain limits -depending on the willingness of OECD Members to make full use of its provisions.

Then, there is the issue of taking cooperation a large step further - that is, though the exchange of confidential information. It has now been almost two years since President Clinton signed the International Antitrust Enforcement Assistance Act ("IAEAA").(64) We are getting closer to reaching the first such agreement, but are not ready to announce it yet. We hope to be able to do so soon and we hope that others will join us in this endeavor to expand cooperation.

OECD member countries need to show the way. We must be more willing to use the OECD Recommendation: notifying each other, sharing information, respecting comity, and cooperating in enforcement to achieve complementary results. And, the OECD needs to examine ways to make competition policy enforcement, as my FTC colleague, Janet Steiger put it, both more effective and more efficient.(65) If there are ways, for example, to make multijurisdiction merger reviews more efficient from the parties' standpoint without sacrificing effective enforcement, the OECD has the experience - based on the Wood-Whish study - to take on such a task and develop recommendations. And, if we are true to our belief that cartels are harmful, OECD countries should lead the way in clarifying their anti-cartel policies and then aggressively enforcing those policies in cooperation with their fellow OECD members. If developing countries are slow to adopt such measures, it is understandable when the developed countries are not willing to show the way.

The OECD also has an important role to play in the debate on the intersection of trade and competition policy. The OECD's experience and expertise as a practical think tank, and its six-plus years of studying the interrelationship of trade and competition policies, give it a comparative advantage over other organizations as the appropriate forum for analyzing and reaching consensus on the numerous issues that must be resolved before any serious international initiative is possible in this area. It is worthwhile to note that on other new trade issues -- trade and investment, for example -- the OECD has been in the forefront with its work on the Multilateral Agreement on Investment.

Concluding comments

This year marks the 20th anniversary of the US-Germany Cooperation Agreement and the Fifth anniversary of the US-EC Agreement. In the years since those Agreements have been in place -- as well as those with Australia and Canada -- we have upheld the goals of those agreements - namely, to avoid conflict and to cooperate in antitrust enforcement. But, we should neither rest on our laurels nor stand pat. Developed countries face similar challenges in their efforts to maintain competition in industries that are facing changes due to technology, deregulation, and reduced demand. It is in our mutual interest to clarify and build on the values we share and further our cooperation in enforcing our competition laws to the mutual betterment of our peoples.

1. Federal Trade Commission Hearings on Global and Innovation-Based Competition (hereafter "Hearings"); prepared testimonies and transcripts are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov

2. "Anticipating the 21st Century: Competition Policy in the New High-Tech, Global Marketplace," A Report by Federal Trade Commission Staff, May 1996 (hereafter "Staff Report").

3. About one-quarter of the transactions notified under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (hereafter "H-S-R Act"), 15 U.S.C. 18a et seq., involve foreign parties - either as the actual parties to the transaction or the ultimate parent entities. This percentage has remained fairly constant through the 1990s. These and many other transactions require inquiries to persons outside the U.S. See, e.g., Making International Antitrust Enforcement More Effective and More Efficient, prepared remarks of Janet D. Steiger, Chairman, Federal Trade Commission, before the American Bar Association and International Bar Association International Symposium on Competition Law and Trade Policy, Brussels, Belgium (June 22, 1994), at 5.

4. United States Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines (Apr. 2, 1992), reprinted in 4 Trade Reg. Rpt. (CCH) 13,104 (hereafter "Merger Guidelines").

5. See E. Glynn and B. Tahyar, Obtaining Data on Elasticities and Foreign Competitors under Hart-Scott-Rodino, 1988 Fordham Corp. L. Inst. 3-1 (B. Hawk ed. 1989).

6. Hearings, Ibid., transcript of October 18, 1995, afternoon session. Staff Report, Chapter 4.

7. For a further explanation of this proposal, refer to the Staff Report, Chapter 2, and to "Competition and Efficiencies in Merger Analysis," prepared remarks of Susan DeSanti, Director, FTC Office of Policy Planning, before the 1996 Annual Meeting of the American Bar Association's Section of Antitrust Law, Aug. 6, 1996, available on the FTC's Homepage on the World Wide Web.

8. "FTC, DOJ for Joint Task Force to Reexamine Treatment of Cost Savings in Merger Analysis," FTC Press Release, June 26, 1996.

9. Staff Report, Chapter 10, at notes 33-38.

10. Christine A. Varney, Innovation Markets in Merger Review Analysis, Antitrust 16 (Summer 1995). See also Robert Pitofsky, Proposals for Revised United States Merger Enforcement in a Global Economy, 81 Geo.L.J. 195, 243 (1992); Richard J. Gilbert and Steven C. Sunshine, Incorporating Dynamic Efficiency Concerns in Merger Analysis: The Use of Innovation Markets, 63 Antitrust L.J. 569 (1995); and Dennis Yao and Susan DeSanti, Innovation Issues Under the 1992 Merger Guidelines, 61 Antitrust L.J. 505 (1993).

11. American Home Products Corp., Docket C-3557, Decision and Order (Feb. 14, 1995); 59 Fed. Reg. 60,807, Proposed Consent Agreement (Nov. 29, 1994).

12. Phase III clinical trials are generally the final stage of human trials through which a drug is tested before an application is filed for approval with the US Food and Drug Administration (FDA).

13. Glaxo/Wellcome, Case No. IV/M.555, European Commission Decision of 28 Feb. 1995, 29 (public version).

14. Agreement Between The Government of the United States of America and The Commission of the European Communities Regarding the Application of Their Competition Laws (Sept. 23, 1991), reprinted at 4 Trade Reg. Rep. (CCH) 13,504; 61 Antitrust & Trade Reg. Rep. (BNA) 382-85 (Sept. 26, 1991); and OJ L 95/45 (27 Apr. 1995), corrected at OJ L 131/38 (15 June 1995).

15. Glaxo plc, Docket No. C-3586, Decision and Order (June 14, 1995).

16. Hoechst AG, Docket No. C-3629, Decision and Order (December 5, 1995).

17. For further elaboration of these issues, see Thomas N. Dahdouh and James F. Mongoven, The Shape of Things to Come: Innovation Market Analysis in Merger Cases, 64 Antitrust L.J. 405 (Winter 1996).

18. Some concerns have been raised in Europe over these American media mergers; see, e.g., "Der Apfel war reif," Der Spiegel (43/1995), at 118, 120, reporting that these deals have "alarmed" the Germans, apparently stimulating proposals to change media policy in view of the "threatened entrance of large American [media firms] into the German market."

19. Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56.

20. Approximately 97 percent of subscribers to cable television programming in the United States receive it from distributors who obtained franchises from local governments. Those governments - cities, villages, townships, counties - possess the power to authorize the stringing of cable in their territory and thereby grant licenses (franchises) to companies that string the cable and distribute programming within that jurisdiction. About half of the subscribers in the U.S. receive their cable programming from a franchisee that is owned by TCI, Time-Warner, or Continental Cablevision, companies called "Multi-System Operators" or MSOs. Some local governments still grant exclusive franchises; but, increasingly, they grant more than one franchise in the hope of fostering competition in the provision of programming and quality of service. The remaining 3 percent of "cable" television subscribers receive their programming by direct broadcast satellite.

21. "US West and Cablevision: This time it might really work," The Economist (Mar. 2, 1996), at 61.

22. Time Warner, Inc., File No. 961-0004, Agreement Containing Consent Order (accepted for public comment, Sept. 12, 1996) (Commissioners Azcuenaga and Starek dissenting).

23. This is the reverse of the situation faced in the U.K. by cable operators who allege that they are being squeezed by the wholesale pricing practices of BSkyB which distributes its programming directly to customers by direct broadcast satellite. See "Brussels may re-enter cable TV price row," Financial Times (Aug. 20, 1996), 6.

24. MSG Media Services, Case No. IV/M.0469, European Commission Decision of 9 Nov. 1994.

25. Karel Van Miert, EU Competition Policy, 1995 Fordham Corp. L. Inst. (B. Hawk ed. 1996) 285, 287.

26. Telecommunications Act of 1996, Ibid., Note 19, 302, adding new 652 to Title 47, U.S. Code.

27. Perry, "Three Barriers to Major Defense Acquisition Reform," 8 Defense Issues, No. 65, p. 1 (1993), cited in "Report of the Defense Science Board Task Force on Antitrust Aspects of Defense Industry Consolidation (April 1994) (hereafter "Defense Science Board Report"), reprinted in 66 Antitrust & Trade Reg. Rpt., No. 1659 (Apr. 14, 1994) (Special Supplement), at S-6 -

S-7.

28. FTC v. Alliant Techsystems Inc., 808 F. Supp. 9 (D.D.C. 1992) (hereafter "Olin/Alliant").

29. Memorandum for Chairman, Defense Science Board from the Under Secretary of Defense (12 Oct. 1993), reprinted in Defense Science Board Report, op. cit., note 27, at Appendices A and B.

30. Ibid., at S-6.

31. Ibid., at S-7.

32. Olin/Alliant, 808 F. Supp. at 21.

33. Lockheed/Martin-Marietta, Docket no. C-3576, Decision and Order (May 9, 1995).

34. Lockheed Martin Corp., FTC File No. 961-0026, Agreement containing Consent Order (accepted for public comment, Apr. 12, 1996); Docket No. C-3685, Decision and Order (Sept. 19, 1996).

35. Lockheed Martin Corporation/Loral Corporation, Case No. IV/M.697, European Commission Decision of 27 March 1996.

36. "Aircraft Firms Go Wing to Wing in a $750 Billion Dogfight," Washington Post (Feb. 27, 1996), at C-1.

37. See, e.g., "A French projection," The Economist (Mar. 2, 1996), at 45-6.

38. Commission of the European Communities,"The Challenges Facing the European Defence-Related Industry, a Contribution for Action at European Level," COM(96) 10 final (24 Jan 1996).

39. In the Matter of General Motors Corp., et al., 103 F.T.C. 374 (1984).

40. Ibid., Docket No. C-3312, Order Granting Petition to Reopen and Set Aside Order (Oct. 29, 1993)(Commissioners Azcuenaga and Owen Concurring).

41. Bosch/AlliedSignal, Case No. IV/M.726, European Commission decision of 9 April 1996, 22.

42. The FTC Staff Report, Chapter 4, on the definition of geographic markets, at pp 19-21, acknowledges recent trends in manufacturing and retailing businesses that depend upon timely an reliable deliveries of supplies which have heightened the importance of geographic proximity between supplier and customer.

43. Lucas/Varity, Case No. IV/M.0768, European Commission Decision of 11 July 1996.

44. "FTC Negotiates Accord to Preserve Competition in Diesel Engine Pistons Market Pending Investigation Outcome," FTC Press Release, September 3, 1996.

45. "Donnerschlag aus Washington," Süddeutscher Zeitung, 10 September 1996.

46. See FTC Press Release, June 19, 1995.

47. Tim Burt, "T&N seeks clearance for stalled German bid," Financial Times, July 5, 1996, p. 20.

48. Statement of Ambassador Charlene Barshefsky, Acting United States Trade Representative, before the Subcommittee on Trade of the Committee on Ways and Means, U.S. House of Representatives, September 11, 1996.

49. Communication from the Commission to the Council of 18 June 1996, "Towards an international framework of competition rules, COM(96) 284 final.

50. FTC Staff Report, Chapter 4, pp 19-21.

51. Aerospatiale-Alenia/de Havilland, Case No. IV/M.053, European Commission Decision of 2 October 1991 (91/619/EEC), OJ L 334 (5 Dec. 1991), p 42.

52. U.S. Department of Justice and Federal Trade Commission, Antitrust Enforcement Guidelines for International Operations (April 1995), reprinted in 4 Trade Reg. Rpt. (CCH) 13,107 (hereafter "International Guidelines").

53. See International Guidelines, 1, 2.9.

54. See, e.g., Comments of the Government of the United Kingdom, submitted for the Public Record on the then-proposed International Guidelines, December, 1994.

55. International Guidelines, Illustrative Examples C (note 59), D, and H; 3.2.

56. New Transatlantic Agenda, Joint US-EU Action Plan (Dec. 3, 1995), III.2.j. and III.1.f.(iii), accessible in the European Commission's "Europa" Home Page: http://www.cec.lu/en/index.html.

57. Shell/Montecatini, Commission Decision 94/811/EC of 8 June 1994, Case IV/M.0269, OJ L 332/48 (22 November 1994);Montedison/Shell, FTC Docket No. C-3580, Decision and Order (May 25, 1995).

58. Robert Pitofsky, International Antitrust - An FTC Perspective, 1995 Fordham Corp. L. Inst. (B. Hawk ed. 1996) 1, 7-8.

59. European Commission, Press Release on Microsoft Case, IP/94/653 of 17 July 1994; U.S. v. Microsoft Corp., 56 F.3rd 1448 (D.C. Cir. 1995).

60. Remarks of Philip Lowe, Director, Merger Task Force of the European Commission, 1994 Fordham Corp. L. Inst. (B. Hawk ed. 1995) 188-193.

61. Remarks of FTC Chairman Janet D. Steiger before the ABA-IBA Symposium on Trade & Competition Policy, Brussels, Belgium (June 22, 1994) 11-16.

62. Agreement Between The Government of The United States of America and The Government of Canada Regarding The Application of Their Competition and Deceptive Marketing Practices Laws (Aug. 3, 1995), reprinted at 4 Trade Reg. Rep. (CCH) 13,503.

63. The 1995 Recommendation of the OECD Council Concerning Cooperation Between Member Countries on Restrictive Business Practices Affecting International Trade, OECD Doc. C(95)130/FINAL (27-28 July 1995).

64. Pub. L. No. 103-438, 108 Stat. 4597, codified at 15 U.S.C. 6201-6212 (Nov. 2, 1994).

65. Ibid., note 3.