THE DOLLARS AND SENSE OF ANTITRUST ENFORCEMENT
William J. Baer(1)
Bureau of Competition
Federal Trade Commission
New York State Bar Association
New York, NY
January 25, 1996
The last four months in Washington have seen an unprecedented debate over the future role the federal government will play in our lives. Antitrust enforcement has not been a major issue in that debate, probably because the resources required for it -- roughly $135 million for this year for the FTC and the Antitrust Division combined -- are quite small in the context of a U.S. budget that exceeds $2 trillion dollars and a FY-95 deficit of $163 billion. (2)But that likely will not last for long -- whether or not there is an agreement reached to balance the budget in seven years. Given the apparent consensus on the basic goal of a balanced budget, we are headed towards a considerably leaner federal government. That means that all federal agencies and all federal programs are in for intense scrutiny over the next few years as budgeteers try to find the dollar savings needed to honor their balanced budget commitment. This is zero-based budgeting with a vengeance. Some agencies will indeed find themselves zeroed out.
How will and should federal antitrust enforcement fare in this debate? That is the topic I’d like to review with you this evening.
It seems to me that antitrust enforcement -- like any federal program -- to prove its worth, will have to demonstrate to the public and the Congress that it can satisfactorily answer three basic questions:
- Does federal antitrust enforcement make a real difference to average consumers and taxpayers?
- Can antitrust enforcement occur without undue burden on businesses?
- Is antitrust enforcement sufficiently forward-looking and flexible to deal with changing marketplace realities, such as the increasingly globalized and technology-based nature of markets and competition?
Antitrust Enforcement Produces Positive Benefits for the American Consumer
Those of us who have studied and practiced antitrust probably quickly can agree on the benefits of a competitive free-market economy. We are also likely to agree on the importance of antitrust enforcement to the competitive marketplace. While we may have different opinions on the appropriate level of enforcement, or how the antitrust laws should be applied, the basic notion that antitrust enforcement is vital to the success of the U.S. economy seems well accepted, at least to those of us in the antitrust bar. As the political scientist Charles Lindbloom put it, a market without competition is not a free market. Private monopolies are no better than public ones -- all thumbs, no fingers.
But to people who are not members of the antitrust fraternity, antitrust must seem like a terribly complex and abstract concept, and they may have little way of knowing in concrete terms what actual benefits are produced by antitrust enforcement. Some may even misapprehend the nature of antitrust law and believe it to be an intrusive and restrictive form of regulation, when in fact the opposite is true -- effective and focused antitrust enforcement is a deregulatory, procompetitive force. Indeed, increasingly we see antitrust enforcement as the less intrusive alternative to regulation.
Part of the challenge for antitrust enforcement will be to demystify what we do for the average consumer. The task is sizeable. And to some extent, the confusion is the fault of antitrust enforcers who speak in jargon that obscures the real world impact of our actions. We need to translate that jargon into simple language to show how vigorous antitrust enforcement benefits the average citizen. To do that, its helpful to get into the dollars and cents of actual cases, to show how enforcement action can make a difference. Let me discuss a few recent cases that help make the point.
Hoechst/Marion Merrell Dow
The Commission recently took action that we believe will save consumers up to $30 million annually on prescription drugs. 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.(3) 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 Commission’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, a medication for hypertension & angina ................................ $ 1 billion
medication for intermittent claudication, a circulatory disease .............................. $180 million
oral dosage forms of mesalamine, a 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.
First Data/First Financial
Commission action in this case saved consumers an estimated $15 million to $30 million per year in money wire transfer fees. The case involve First Data Corporation’s acquisition of First Financial Management Corporation.(4) These firms owned the only two consumer money wire transfer services in operation in the United States. First Data owned MoneyGram, and First Financial owned Western Union. The merger would have resulted in a monopoly in this market and raised prices for millions of consumers who need these services, many of whom are lower income consumers with no other means of transferring money quickly and efficiently.
Consumer money wire transfers are two-party transfers of money between persons in different geographic locations. The sending party goes to an agent, such as a check casher, grocery store or convenience store, with the money to be transferred, completes a transaction form, and pays a transaction fee. The transaction information is fed into a computer network, and the money is available within minutes to the recipient at the other end, who simply must provide the correct identifying information to collect the funds. The service is fast, secure and convenient. Consumer money wire transfers are often used in emergency situations, as when a person loses a purse or wallet or when a college student or traveler runs out of money. They are also often used by consumers who do not have bank accounts -- which comprises 20-25% of U.S. households. The market is big, involving 13 million transactions per year and $275 million in fees.
Until 1989, the market was controlled solely by Western Union. First Data’s entry that year interjected substantial competition and forced Western Union to change its pricing strategy, which had included price increases of 5-8% per year until that time. Thereafter, Western Union had to forego some of its annual price increases, and it added incentive schemes to retain customers. It was clear that First Data’s entry resulted in substantial consumer benefits, and this would have been lost as a result of the merger. The consent agreement accepted by the Commission requires the divestiture of the MoneyGram business in order to retain that competition, and until that divestiture is completed, MoneyGram has to be operated as a separate business from Western Union. There are signs that the decision to maintain MoneyGram as an independent competitive entity is the correct one. I understand that MoneyGram recently advertised a promotional price that undercut Western Union’s prices by as much as 70%.
In another action that saved health care costs, the Commission sought a preliminary injunction to stop the creation of a monopoly in the market for intravascular ultrasound (IVUS) imaging catheters, used in the diagnosis and treatment of heart disease. The case involved the acquisition of Cardiovascular Imaging Systems, Inc. (CVIS) by Boston Scientific Corporation.(5) The two firms controlled about 90% of the rapidly growing IVUS catheter market. Boston Scientific agreed to settle the case by helping a new competitor enter the market to replace the displaced competition. Boston Scientific has licensed its technology to the new firm and is required to provide the licensee with IVUS catheters and technical support while the licensee seeks federal approval to market its own devices. The last time a competing product entered this market, prices fell by $45 per catheter. Based on that, we estimate that the Commission’s action could save consumers up to $15 million per year by the year 2000 by preventing an anticompetitive increase in prices.
Just a few days ago, the Commission accepted, subject to final approval, a proposed consent order settling charges that the members of a pharmacy organization in Tennessee violated Section 5 by agreeing to impose a “most favored nations” ("MFN") clause that restricted price competition among member pharmacies. The parties to the complaint and proposed consent order are RxCare of Tennessee, Inc., the largest pharmacy network in Tennessee, and the Tennessee Pharmacists Association ("TPA").(6) For those of you who are not familiar with them, pharmacy networks such as RxCare provide pharmacy services to consumers through contracts with pharmacy benefit managers ("PBMs") and third-party payers such as managed care plans, insurers and employers, and the participating pharmacies are compensated through the network at an agreed-upon reimbursement rate.
In this case, pharmacies that participated in the RxCare network were required to agree to an MFN clause as a condition of membership. Actually, the pharmacies agreed to impose the MFN clause upon themselves. RxCare is owned by TPA, which is the largest organization of pharmacists in the state. The MFN clause stipulated that if a pharmacy accepted a reimbursement rate from a competing network, that was lower than the RxCare reimbursement rate, the pharmacy would have to accept the same rate from RxCare. In some cases MFN clauses can benefit consumers by resulting in lower prices. But in this case the MFN clause likely had the opposite effect because of the market structure and the manner in which the MFN clause was enforced. RxCare has contracts with third-party payers that cover approximately 2.4 million residents of Tennessee -- more than half of Tennessee citizens with third-party pharmacy benefits. In addition, RxCare includes at least 95% of all chain and independent pharmacies in Tennessee. Because RxCare represents such a large portion of their business, those pharmacies would incur a substantial revenue loss by accepting lower rates from competing networks. The MFN clause therefore tends to set a floor on reimbursement rates, discourage member pharmacies from engaging in selective discounting, inhibit competition from competing networks, and deter entry of new networks. The proposed consent order requires RxCare to remove those MFN clauses from its agreements with pharmacies.
While we don’t have precise numbers, we have no doubt that our action in this case will save the citizens of Tennessee substantial sums. We know that reimbursement rates in Tennessee are higher than in other states, that RxCare pharmacies that operate in other states accept lower rates in those states, and that at least 2.4 million consumers are potentially affected (and probably more, since entry deterrence would have market-wide effects).
These four cases alone potentially engender $60 million or more in annual savings, substantially exceeding the Commission’s total FY-95 budget of $49 million for antitrust enforcement.
These are not isolated examples. Many enforcement actions have a more indirect public benefit. Defense mergers and cases involving intermediate products rather consumer goods are examples.(7) But others translate directly to the consumer’s bottom line. In the last year the Commission has taken action that made a difference to the average consumer, whether you shopped for groceries in Boston or on Cape Cod,(8) needed hospital services in Florida, Louisiana, Texas or Utah,(9) bought a pair of Reeboks or Rockports,(10) needed natural gas in Salt Lake City(11) or prescription drugs anywhere in the U.S.1(12) In short, a hard look at the Commission's enforcement actions shows that there indeed is substantial value added.
I recognize it is not enough to point to isolated cases as a measure of the FTC’s success in the antitrust arena. We are only as good in the public’s eye as the last case we brought or failed to bring. We need to show as well going forward that we are choosing sound cases where the consumer injury is demonstrable and where we are providing clear guidance to the business community about acceptable, and unacceptable, standards of conduct.
But, as I said at the outset, the agency also must demonstrate that the burdens incurred as a result of enforcement activities are kept to a minimum.
Antitrust Enforcement With Minimum Burden
Here, too, the Commission’s record speaks well. In recent months, both the Commission and its enforcement arm, the Bureau of Competition, have taken major steps to implement procedural reforms to make the enforcement process more efficient and to minimize unnecessary burdens. It is perhaps beyond reasonable expectation to seek an enforcement process that is “user friendly” from the standpoint of those who receive the Commission’s attention, but we can reasonably be expected to make the process as minimally “user hostile” as possible. We have made substantial progress.
Expanded HSR Exemptions
We have begun by making the merger review process fairer and more efficient. In July 1995 the Commission issued a notice of proposed rulemaking to create five new categories of exemptions from the premerger notification and waiting period requirements of the Hart-Scott-Rodino Act.1(13) The proposed rules cover transfers of goods or realty in the "ordinary course of business," the acquisition of carbon-based mineral reserves valued at $200 million or less, the acquisition of securities whose underlying value is represented solely by those kinds of exempt assets, and acquisitions by certain investors of rental real property. For each of these categories, the issue is whether the cost of requiring transactions to be reported is justified by the small prophylactic value of the requirement. The Commission believes that the costs are no longer justified, and final rules are expected to be issued in the near future. These exemptions will permit those transactions to proceed without incurring the costs of preparing the premerger notification documents, without observing the statutory delay period, and of course, without the need to pay the premerger filing fee. We are in the process of reviewing the substantial and helpful comments received on those proposals and hope to present final rule proposals to the Commission in the very near future.
There was considerable skepticism among some as to whether those rule changes would ever get proposed given their potential impact on revenue for the Antitrust Division and the FTC. As you may know, HSR fees represent a substantial part of the funding for our budgets. Well, the agencies intend to make those rule changes anyway. And we are prepared to consider further exemptions for categories of transactions that can be shown to pose no serious antitrust risk.
The Commission has also worked with the Antitrust Division to streamline the HSR review process. One goal has been to expedite the process of determining which of the two agencies will investigate a particular merger transaction. This “clearance” process has occasionally resulted in substantial delay in commencing an investigation, and attendant difficulties in completing an investigation in timely manner. One possible consequence of that delay is the issuance of a second request in cases where further investigation during the initial waiting period might have produced information that would result in a decision to close the investigation.
Our reforms have produced results. Under our new expedited clearance procedures, the time taken for clearance has been reduced by one week, from an average of 17 days to 10 days. This has permitted investigations to get started that much sooner, and the HSR waiting period can be terminated at an earlier date if the investigation indicates that the transaction does not raise substantial competitive concerns. In addition, since the expedited clearance procedures were implemented last March, I am convinced we are issuing fewer second requests in close cases because early clearance has allowed us to answer tough questions without resorting to a second request in many cases. The statistics appear to bear this out. The issuance of second requests has decreased as a percentage of HSR transactions investigated by the Commission. Statisticians will say that the numbers alone cannot establish a cause-and-effect relationship, but I am confident that our reforms have reduced both HSR waiting periods and second request burdens.
The Commission also has reduced burdens imposed by orders that may no longer be necessary. In 1994, the Commission adopted a new policy limiting the duration of the “core” injunctive provisions of its competition orders -- for example, prohibitions on per se price-fixing and RPM, and rule-of-reason prohibitions on restrictive association by-laws, etc. Under the new policy, these provisions will terminate, or “sunset,” after twenty years. Previously, those order provisions did not have an expiration date, so they were perpetual.1(14) The Commission adopted the new policy because “core” order provisions ordinarily have served their purpose within 20 years, and retaining them longer generally serves no useful purpose. In fact, unnecessary order provisions can become unreasonably restrictive, and inhibit a firm’s ability to compete.
In August 1995, the Commission expanded the policy by making it retroactive to old (pre-existing) orders.1(15) As of January 2, 1996, the effective date of the new policy, old orders will sunset automatically when they reach 20 years; previously, respondents had to file a petition to make it happen.
This new policy affects a large number of orders. Before sunsetting became automatic, we received 21 petitions to sunset orders more than 20 years old. The Commission granted 16; four were withdrawn because of mootness when sunsetting became automatic, and one was withdrawn for other reasons. Over the years, the Commission has issued roughly 3000 antitrust orders. We don’t have a precise estimate of the number that had outstanding core provisions that were more than 20 years old -- as you can imagine, many of the orders were issued before we entered the new electronic information age -- but I’m sure the number is quite large. The Commission has retired those old orders, and it accomplished this without imposing a paperwork burden.
One caveat should be noted, however: respondents who violate a Commission order will not be entitled to termination of the order after 20 years. If the FTC files, or has filed, a complaint for a violation of the order, then the order will run for 20 years from the date of that filing. This is an important safeguard to prevent recidivists from avoiding their responsibilities under Commission orders.
Prior Approval Policy
The Commission also adopted a less restrictive "prior approval" policy in connection with Commission orders in merger cases.1(16) You’re probably familiar with such orders -- previously, the Commission routinely included a requirement that the respondent obtain the Commission's prior approval for future transactions in the same market, usually for a period of 10 years. In some cases, the Commission also required prior notice of transactions that would not be reportable under HSR.
The new policy largely eliminated those requirements. The general rule now is that the Commission will not use prior approval or prior notice requirements except in special cases. And those special cases are limited. First, if there is a credible risk that the respondent may renew its acquisition attempt, the Commission will require a narrow prior approval requirement limited to such a transaction. Second, if there is a credible risk that the respondent may attempt a non-HSR-reportable transaction that would be anticompetitive, the Commission will impose a prior notice requirement for non-reportable transactions.
The Commission gave up some benefits when it adopted the new policy. Prior approval makes it somewhat easier to review proposed acquisitions, and in some cases it may save the Commission the costs of re-litigating certain issues. But a prior approval requirement also imposes some costs on private parties. Given our accumulated experience with the HSR premerger program, which would cover most of the transactions, the Commission concluded that a general policy of requiring prior approval was no longer needed. Since the adoption of the new policy, we have received approximately 33 petitions to eliminate a prior approval requirement. Twelve petitions have been granted, at least in part; one petition was withdrawn; and 20 more recent petitions are pending.
Clarified Policy Regarding Administrative Litigation in Merger Cases
In June 1995 the Commission also issued a statement that clarified its policy regarding the use of administrative litigation following the denial of a preliminary injunction.1(17) Although the actual number of administrative merger litigations has been relatively low, some have charged that the Commission invariably goes into administrative litigation when it loses a PI, and that it uses its administrative jurisdiction to coerce parties into consent agreements. I don't agree with those criticisms, but public perception sometimes is nine-tenths of the problem. To address that concern, the Commission issued a statement that clarified its policy, and it adopted new procedures to facilitate the reconsideration of the public interest in going forward with an administrative proceeding when it loses a preliminary injunction.
The Commission’s policy statement makes clear that a case is not on automatic pilot once the Commission decides to challenge the transaction through a preliminary injunction action. If the Commission is not successful in the injunction action, it decides on a case-by-case basis whether to pursue administrative litigation. The Commission could conclude that further proceedings would not be in the public interest. On the other hand, preliminary injunction proceedings are not intended to be full trials on the merits, and the evidentiary record, by design, is more limited than would be available after a full trial. The Commission may still have reason to believe that the merger poses a serious threat to competition and to consumers, and that the public interest would be advanced through a full airing of the issues on a fully developed evidentiary record. The Commission reserves the right to make that determination, but it is by no means a foregone conclusion.
The Commission also added a new rule to its Rules of Practice to facilitate the reconsideration of the public interest in an administrative proceeding if a complaint has already been issued when a preliminary injunction is denied.1(18) Reconsideration was possible even before the Commission issued its policy statement, but the new Rule provides a clearer roadmap.
Speeding Up Administrative Litigation
The Commission also is striving to make the administrative litigation process faster and more efficient. In May 1995 Chairman Pitofsky announced the formation of a special task force to review agency rules and policies governing litigation in administrative cases. Chaired by FTC General Counsel Steven Calkins, the Task Force invited comments from interested members of the bar, the business community and the general public, as well as experienced Commission litigators. The result will be a more effective and efficient enforcement process.
Antitrust Enforcement Is Forward-Looking
The third challenge to antitrust enforcement I posed at the outset is whether antitrust analysis and enforcement are sufficiently forward-looking and flexible enough to deal with changing marketplace realities, such as the increasingly globalized and technology-based nature of markets and competition. In other words, is antitrust in tune with procompetitive change, or it is a barrier to it?
The Commission has demonstrated in a number of ways that it is sensitive to the changing dynamics of the marketplace. There is no doubt that antitrust analysis has become increasingly sophisticated, and the Commission’s litigated decisions reflect that. The Commission also has been at the forefront in providing guidance to the business community that reflects both economic sophistication and marketplace realities. In 1993 and 1994, for example, the Commission, together with the Justice Department, issued statements of antitrust enforcement policy in the health care area.1(19) In April of this year the Commission and the Department issued new guidelines for international operations1(20) and intellectual property.1(21) These policy statements and guidelines provide businesses greater assurance that they may proceed with procompetitive transactions that are not likely to raise antitrust concerns, as well as alert them to transactions that may present competitive risks.
Perhaps most important are the Commission’s just concluded hearings on the contemporary competitive environment and the role antitrust and consumer protection enforcement should play. These were unprecedented hearings involving an impressive list of leading businessmen, economists, practitioners and academicians. The hearings focused on eleven major groups of issues:
- the measurement of market power
- the ability of firms to enter new markets
- treatment of efficiencies in merger and nonmerger areas
- treatment of efficiencies in innovation, particularly those resulting from collaboration
- failing firms or distressed industries
- the impact of antitrust and consumer protection law on small businesses
- the relationship of antitrust to intellectual property law
- foreclosure, access and efficiency issues related to networks and standards
- strategic conduct in the context of innovation-based competition
- cross-border consumer protection issues (such as standard setting, product labeling harmonization, and/or technology-related scams)
- agency institutional processes (such as quality of evidence and burden of proof; safe harbors; evidence gathering).2(22)
The hearings did not begin with a predetermined notion of what changes might be appropriate. Rather, in holding the hearings, the Commission sought to provide a forum for constructive debate on the future of antitrust analysis and enforcement. It was indeed a healthy and constructive debate.
What have we learned from the hearings? You'll have to stay tuned for a complete report, because the testimony and comments we have received to date are still being analyzed, but I'll venture a few tentative observations of my own.
First, I think it is fair to say that there is a lot that is right about antitrust enforcement. It was not argued that the antitrust laws should be scrapped, or that we need not be concerned about cartel behavior, the accumulation of unjustified dominant market power, or the ways in which market power is exercised. The debate was not about what the agencies are doing wrong, but what they might do better.
Second, it is clear that many markets are changing very rapidly. This can result in very dynamic competition, but the pressures of a high-tech market and fast-paced innovation also can lead to new competitive strategies that present new issues for antitrust. What kinds of strategies raise major concerns, what kinds of enforcement actions are appropriate, and at what stage of a market’s development is enforcement action most appropriate -- those are major issues that require careful study.
Third, efficiencies were a recurring theme throughout the hearings. Both global competition and domestic competitive pressures have increased the need to be efficient, and firms have responded in numerous ways. Do the antitrust laws -- and the antitrust agencies -- take proper account of efficiency claims? There appears to be some uncertainty about what the antitrust policies are in this regard, and considerable debate about what the policies ought to be. The kinds of efficiencies that should be credited, and how they should be considered in the analysis -- e.g., as an affirmative defense or as part of the competitive effects analysis -- are two of the issues. They are critically important and will receive close study..
Fourth, I think it came across very clearly 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 to justify what we did, but to provide further guidance for future transactions. I think that’s 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. If you look at the Analysis to Aid Public Comment that accompanied the RxCare enforcement action announced last week, you will see that it tries to explain why this MFN posed serious competitive concerns and how it differed from the MFN’s the courts upheld in the Ocean State and Marshfield Clinic cases.
A fifth and related observation is that the business community would like more antitrust certainty, but at the same time, they are properly wary of rigid rules. There is an obvious tension here, because as we move away from rigid rules and presumptions, and into a fact-specific rule of reason kind of analysis that takes into consideration all relevant factors, there is bound to be more uncertainty about what the ultimate “bottom line” will be. Here again, to provide some guidance for the future, I think a partial response to the problem would be a more detailed explanation of how we reached a particular decision under a specific set of facts. Also, I think its helpful to have an open and candid communication between the business community and the enforcement staff.
Those are a few general observations about policy issues and the enforcement process. We are still assessing the many substantive issues discussed at the hearings, and I hope to have some comments on some of those in the near future.
In sum, there clearly is a case to be made for antitrust enforcement. It produces major benefits for consumers, and it can occur without undue burden on businesses. But it will take a lot of energy and an effort to translate accomplishments into plain English if we want the public to accept it. It also will require commitment to focused, efficient actions and sensitivity to business/economic trends. The Commission begins the future with a sound foundation, and I am looking forward to continuing the dialog on what needs to be changed or improved. And we welcome your participation in that process.
(2) These views are my own, and not necessarily those of the Federal Trade Commission or any individual Commissioner.
(3) Hoechst AG, Dkt. C-3629 (consent order, December 5, 1995).
(4) First Data Corp., Dkt. C-3635 (consent order, January 16, 1996).
(5) Boston Scientific Corp., Dkt. C-3573 (consent order, April 28, 1995).
(6) RxCare of Tennessee, Inc., File No. 951 0059 (consent order accepted for comment, January 19, 1996).
(7) The stakes can be enormous. For example, Commission action in connection with Royal Dutch/Shell-Montedison, Dkt. C-3580 (consent order, May 25, 1995) potentially resulted in consumer benefit on the order of $106 million annually. The case involved a $6 billion joint venture between Montedison S.p.A., the world’s leading producer of polypropylene, and the Royal Dutch Petroleum Company and several of its affiliates, including the Shell Oil Company. The Commission charged that the joint venture would substantially lessen competition in the $4 billion domestic market for polypropylene, as well as a $250 million export market. Polypropylene is a leading plastic used in a wide variety of consumer goods including playground equipment, storage containers and toys. To settle the matter, the parties agreed to divest all of Shell’s U.S. polypropylene assets to a Commission-approved buyer in order to preserve competition. If the Commission action prevented even a 1-cent per pound increase in the price of polypropylene (it sells for 30-40 cents per pound), the consumer benefit is around $106 million based on annual sales in excess of 10.6 billion pounds. Earlier cases in the plastics industry produced similar benefits. In a case against the Occidental Petroleum Company, the potential consumer benefit is on the order of $118 million based on PVC sales in excess of 11.8 billion pounds per year. Similarly, a case against the B.F. Goodrich Company potentially saved consumers from a $118 million price increase on VCM, which is an intermediate product used in making PVC.
(8) Stop & Shop/Purity Supreme, File No. 951 0086 (consent order accepted for comment, October 30, 1995). See also Schnuck/National, Dkt. C-3585 (consent order, June 8, 1995); Schwegman/National, Dkt. C-3584 (consent order, June 2, 1995).
(9) Columbia/HCA/Healthtrust, Dkt. C-3619 (consent order, October 3, 1995).
(10) Cases involving price fixing obviously can have immediate effects on consumers. The Commission took action last year against Reebok International and its subsidiary, The Rockport Company, for alleged resale price-fixing. Reebok International, Dkt. C-3592 (consent order, July 18, 1995). The Commission charged that the companies agreed with certain retailers to maintain retail prices of Reebok and Rockport shoes at certain levels. In effect, the alleged agreements curtailed discounting and deprived consumers of lower prices. The companies’ sales volumes are not available, but Reebok is the second-largest supplier of athletic and casual footwear in the United States with about 25% of the market.
(11) Questar/Kern River, File No. 961 0001 (preliminary injunction action authorized, December 27, 1995; transaction abandoned).
(12) E.g., Eli Lilly and Co., Dkt. C-3594 (consent order, July 28, 1995) (acquisition of pharmacy benefits manager by manufacturer); Rite Aid/LaVerdiere’s, Dkt. C-3546 (consent order, December 15, 1994) (retail pharmacies); Revco/Hood-SupeRx, Dkt. No. C-3540 (consent order, October 31, 194) (retail pharmacies).
(13) 60 Fed. Reg. 38930 (July 28, 1995).
(14) The non-core provisions, such as order publication, records retention and notice or disclosure requirements have had shorter terms for quite some time, and were not affected by the new policy.
(15) Federal Trade Commission, Statement of Policy with Respect to Duration of Competition and Consumer Protection Orders (August 9, 1995), reprinted in 4 CCH Trade Reg. Rep. (CCH) ¶ 13,230.
(16) Statement of Federal Trade Commission Policy Concerning Prior Approval and Prior Notice Provisions (June 21, 1995), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,241 (Commissioner Azcuenaga dissenting).
(17) Statement of Federal Trade Commission Policy Regarding Administrative Merger Litigation Following the Denial of a Preliminary Injunction (June 21, 1995), and accompanying statement of the Commission, reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,242.
(18) 60 Fed. Reg. 39640 (Aug. 3, 1995); 16 C.F.R. § 3.26.
(19) U.S. Department of Justice and Federal Trade Commission, Statements of Enforcement Policy and Analytical Principles Relating to Health Care and Antitrust (Sept. 27, 1994), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,152, superseding U.S. Department of Justice and Federal Trade Commission, Antitrust Enforcement Policy Statements in the Health Care Area, reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,151.
(20) U.S. Department of Justice and Federal Trade Commission, Antitrust Enforcement Guidelines for International Operations (April 1995), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,107.
(21) U.S. Department of Justice and Federal Trade Commission, Antitrust Guidelines for the Licensing of Intellectual Property (April 6, 1995), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,132.
(22) 60 Fed. Reg. 37449 (July 20, 1995).