The ABA Spring Meeting
Good morning, and thanks for inviting me back for my fourth report from the Bureau of Competition. This year, as in the past, my intent is to discuss a good portion of what has transpired on the antitrust side of the FTC over the last year or so.(1)
Probably the two most noteworthy aspects of recent government antitrust enforcement are the demands of the ongoing merger wave and the increase in government litigation. During the last year, the FTC had three merger cases in litigation in federal court -- Cardinal Health, Bergin Brunswig, and Tenet Healthcare; one merger in administrative litigation -- Monier Lifetile; two anticompetitive conduct cases in administrative litigation -- Intel and Summit; and one anticompetitive conduct case in federal court -- Mylan. We also defended the Ninth Circuit's affirmance of the Commission's decision in California Dental Association before the Supreme Court, the district court's decision in Tenet before the Eighth Circuit, and the Commission's Toys "R" Us decision before the Seventh Circuit.(2)
The merger wave continues to dominate our agenda. In Fiscal Year 1998, the Commission and the Antitrust Division reviewed a record 4,728 HSR filings, over three times as many as six years earlier. The total value of reportable transactions increased to almost $1.5 trillion -- seven times the 1991 level. Fiscal Year 1999 filings closely approximate last year's record pace. Some of the largest mergers in U.S. history are currently being evaluated by federal antitrust enforcers, mergers that impact millions of consumers and the products they purchase on a daily basis. It takes talent, dedication, commitment, and energy to keep pace. The staffs of both antitrust agencies deserve much praise for handling the increased workload, with only small increases in staffing.
This report reviews the Commission's efforts over the past year to promote competition. We entered into 18 merger consents, involving such diverse markets as grocery stores, sophisticated computer chips, and natural gas pipelines. Parties abandoned another nine transactions after we expressed competition concerns. We also challenged a variety of anticompetitive practices, securing nine consent agreements involving areas such as joint venture restrictions, health care restraints, and advertising restrictions. But let me start with our litigation efforts, where our successes both prevented anticompetitive behavior and helped clarify important aspects of antitrust law.
II. Making Law and Protecting Consumers
in the Courts and Administrative
Just a few years ago many practitioners expressed concern that antitrust law was being made by the agencies rather than the courts, because virtually every dispute was resolved by consent order. Critics said our substantive decision-making principles -- set forth in enforcement guidelines and in negotiated settlements -- weren't being tested in the crucible of litigation and subjected to the dispassionate scrutiny of the courts. Some questioned whether federal antitrust enforcers were settling matters cheaply in order to avoid litigation. In the last three years we've made substantial progress towards changing that picture, by going to court when necessary to achieve meaningful relief. Most of the time we've won, a tribute both to the Commission's careful case selection and to our hardworking and talented litigators.
Success in blocking an anticompetitive merger or outlawing an anticompetitive practice has immediate benefits to consumers and our economy. But the judicial analysis of antitrust principles also achieves some longer lasting benefits by helping reconcile long-standing judicial precedent with the current enforcement approach of federal antitrust agencies.
In the Spring of 1997, in perhaps the most controversial and well-contested merger case in decades, the FTC successfully challenged the merger of office supply superstores Staples and Office Depot.(3) I talked about that case at length a year ago,(4) but for present purposes let me just note that it resulted in an opinion that substantially clarified key legal issues. It reconciled the Merger Guidelines' unilateral effects analysis -- the proposition that there are varying degrees of substitutability among products, and that competition may be seriously injured by a merger of firms that produce or sell especially close substitutes even where many less-perfect substitutes are available -- with the "submarket" analysis of Brown Shoe.(5) Judge Hogan's opinion also harmonized the treatment of the "entry" issue in the D.C. Circuit's Baker Hughes(6) opinion (which held that the defendant must show entry "likely would avert" the anticompetitive consequences of the merger) with the Merger Guidelines requirement that to be counted, entry must be "timely, likely and sufficient."(7)Further, the opinion dealt for the first time with efficiency claims following the April 1997 amendment to the Merger Guidelines. And it made explicit the consistency between the case law and the Merger Guidelines framework, using both to assess whether the efficiencies claims of Staples and Office Depot were substantial, merger-specific, and likely to be passed through to consumers.
McKesson/Amerisource and Cardinal/Bergen Brunswig
For seven weeks last summer, my deputy, Rich Parker, led Bureau of Competition staff in a hard-fought challenge to two separate mergers of the four largest drug wholesalers in the United States: McKesson with AmeriSource and Cardinal Health with Bergen Brunswig. If allowed, the two successor firms together would have held more than 80% of the prescription drug wholesaling market in the U.S. We filed in district court here in March, and tried the cases on a consolidated basis in June and July before Judge Sporkin. At the end of July, the Judge issued a 73-page opinion enjoining both mergers.(8) His decision further elaborated how efficiencies should be assessed, the factors important to market definition, and the proof necessary to demonstrate easy entry.
While noting that the case law on the legitimacy of taking efficiencies into account was "mixed and indeterminate,"(9) Judge Sporkin, like Judge Hogan, elected to follow the approach of the 1997 Guidelines revisions.(10) Judge Sporkin's analysis makes clear that the efficiency claims of the merging firms will be carefully considered, but also will be weighed in light of the competitive concerns raised by increases in market power.
The defendants claimed several different sources of efficiencies: (1) distributional efficiencies through the closing of overlapping centers, (2) superior purchasing practices, (3) increased buying power, and (4) reduction in overhead and inventory costs.(11) But the court found strong evidence that many of these efficiencies could be produced in the absence of the merger, and that the parties would pass only 50% of the savings on to consumers (instead of their historical average of 80%). The court noted that "the history of the industry . . . demonstrates the power of competition to lower cost structures and garner efficiencies as well," and expressed concern that the mergers would remove the pressure to be more efficient and price competitive. Ultimately, Judge Sporkin concluded that the defendants "ha[d] not made their case" on the "critical question . . . whether the projected savings from the mergers are enough to overcome the evidence . . . that possibly greater benefits can be achieved . . . through existing, continued competition."(12)
Judge Sporkin looked closely at the argument that the mergers would remove excess capacity from the market. Although conceding those actions would produce cost savings, he used the framework of the Merger Guidelines to assess how the proposed efficiencies would affect competition in the market.(13) He noted that company documents equated excess capacity with pricing pressures and stiff competition and expressed hope that consolidation at the top of the industry would bring "a more orderly market" and "rational pricing." He relied as well on customer testimony that affirmed the competitive role of excess capacity. Judge Sporkin concluded that the "mergers would likely curb downward pricing pressures and adversely affect competition in the market."(14)
Judge Sporkin's decision also used the tools of both Brown Shoe and the Merger Guidelines to define a product market that conformed to everyday business realities.(15) We alleged that the relevant market consisted of the cluster of services provided by drug wholesalers to institutional customers -- hospitals, for example -- and retail pharmacies, including warehousing, distribution and other value-added services. Defendants argued for a broader market that would include such other means of distribution as direct purchases from manufacturers and self-warehousing. The court found the narrower market that we urged.(16)
The key question was whether customers had economically viable substitutes for wholesale distribution services. The court found that many customers -- hospitals and independent drugstores, for instance -- would not turn to supposed substitutes, such as direct delivery and self-warehousing, to defeat an anticompetitive price increase. The court, observing that "different classes of customers have varied ability to substitute the services currently provided by wholesalers," concluded that "the majority of Defendants' customers cannot replicate the wholesalers' services themselves nor obtain them from any other source or supplier."(17) It relied not only on testimony from customers, but also on defendants' documents reflecting that they "d[id] not view the other forms of distribution to be viable competitors or substitutes."(18) In other words, Judge Sporkin relied on evidence of the practical, rather than the theoretical, boundaries of substitutability to define the relevant product market.
The court's opinion also provided a detailed and thoughtful analysis of the timeliness, likelihood, and sufficiency of entry. Judge Sporkin found that entry could be timely, observing that firms could acquire the necessary personnel and distribution facilities because the merger would result in the consolidation of numerous distribution centers. But he doubted whether entry would be likely or sufficient. There had been little entry historically, and continual decline of profit margins suggested that new entry or expansion was unlikely. He implicitly concluded that each of the Guidelines factors must be shown before a defendant can use ease of entry as a defense to a presumptively illegal merger.
Tenet/DRMC (Poplar Bluff)
We also made some progress in an area of merger law where the government's track record has been a little spotty in recent years, hospital mergers. In July 1998, the Commission and the State of Missouri secured a preliminary injunction in the proposed merger of two hospitals in Poplar Bluff, Missouri.(19) Tenet Healthcare Corporation, the second-largest hospital chain in the country, owns Lucy Lee Hospital, a for-profit general acute care hospital in Poplar Bluff, and sought to acquire Doctors' Regional Medical Center ("DRMC"), a physician-owned for-profit hospital and the only other general acute care hospital in Poplar Bluff.
This case turned on three main issues: geographic market; whether DRMC, while not failing, was a so-called "flailing" firm; and the efficiencies defense. The case is currently on appeal before the Eighth Circuit, where the parties have dropped their last two arguments and focused exclusively on the geographic market issue.
Geographic market has been a difficult issue in hospital merger cases -- not conceptually, but difficult to litigate because the facts can be complicated. We think the court in Tenet got it right. We argued for a geographic market consisting of 31 zip codes in southeastern Missouri from which the two hospitals draw 90% of their patients, an area with a radius of roughly 50 miles. The defendants sought to include hospitals that were well over an hour's drive from Poplar Bluff, such as hospitals in Cape Girardeau and St. Louis, which offer more sophisticated services than the Poplar Bluff hospitals. As the district court observed, the critical question was "whether the surrounding hospitals are 'practical alternatives' to whom patients would turn if the merged entity raised prices."(20)
One problem the government has confronted in other hospital merger cases is evidence that patients sometimes travel outside the geographic market for hospital procedures that are listed in the same Diagnostic Related Groups -- DRGs -- also provided in the market. Parties argue that this proves the government's asserted market is too narrow. We offered evidence showing that DRGs are a broad category that encompassed both basic services, offered by the merging hospitals, and sophisticated services offered only outside the market. DRG data alone would not serve to distinguish between patients leaving for services they could not obtain in Poplar Bluff, and those seeking services that were available locally. The court agreed, and concluded that patients went outside that market predominantly to obtain services above the secondary-care level available at DRMC and Lucy Lee, and wouldn't seek primary- and secondary-care from the more distant hospitals in response to a 10% price increase.(21)
The appeal was argued before the Eighth Circuit on December 14, 1998. You can find the Commission's brief on our website.
We used the administrative process as well in the last few years to address important anticompetitive conduct issues such as those involved in California Dental Association(22) and Toys "R" Us.(23) Both cases are still on appeal, California Dental with an opinion due any time from the Supreme Court, and Toys "R" Us pending before the Seventh Circuit.
California Dental Association
We have talked a lot about California Dental in previous years. Let me just note here that the issues before the Supreme Court in that case are pretty fundamental to what we do, and have done for many years, in the area of horizontal restraints imposed by professional associations. The first issue on which certiorari was granted questions the basic metes-and-bounds of our jurisdiction, under section 4 of the FTC Act, over non-profit associations that are nonetheless organized for the profit of their members. I won't try to parse the arguments here. Suffice to say that we have done a large number of cases attacking anticompetitive restraints that were based on such jurisdiction. The second issue has even broader significance: it involves the question of how the rule of reason analysis should be applied in particular cases, as well as the sufficiency of the Commission's application of the rule of reason in this particular case. The decision should give us all plenty to talk about in the near future.
Toys "R" Us
The Toys "R" Us case was hard fought on nearly every possible issue including agreement, market power, anticompetitive effects, and the free rider defense. In October 1998, the Commission held that Toys "R" Us had violated Section 5 by inducing major toy manufacturers to agree -- both with Toys "R" Us and among themselves -- to deal with warehouse clubs, like Costco and Sams Club, on less favorable terms. By the early 1990s, Toys "R" Us found that it faced a new competitive threat: the warehouse clubs, with their innovative, low cost, no frills approach, had begun selling toys at prices that were lower than Toys "R" Us prices, which affected the Toys "R" Us low-price image and threatened its market position. In response, Toys "R" Us orchestrated agreements with and among toy manufacturers to withhold from the clubs toys they were selling to Toys "R" Us. The agreements permitted the manufacturers to package two or more toys into more expensive, less desirable "club specials," or to sell other differentiated products. The effect was to eliminate the pricing pressure that the clubs were putting on Toys "R" Us.
The Commission noted that these agreements could be per se illegal under Klor's, Inc. v. Broadway-Hale Stores, Inc.,(24) which was very similar on its facts, but the Commission chose to apply the more critical analysis under the Supreme Court's more recent decision in Northwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co.(25) to determine whether the per se rule was appropriate for this case. After undertaking a detailed examination of the factors outlined in Stationers, the Commission concluded that it was. The Commission also found that the agreements were unlawful under a full rule of reason analysis.
Several factors distinguish this case from the typically benign non-price vertical restraint. As an initial matter, the Commission found little doubt that the Toys "R" Us conduct was in no way unilateral conduct protected by Colgate. Toys "R" Us did not simply announce a policy and see if its suppliers would follow. The record was full of references to requests for commitments by Toys "R" Us, and the manufacturers committed. So there were agreements, a finding Toys "R" Us has not challenged on appeal. As is well-recognized, vertical non-price agreements generally increase competition. But here, an important distinguishing factor was that the key manufacturers committed to go along with the restraints only when they received assurances that their competitors were adopting substantially similar restrictions. No individual toy manufacturer wanted to give up this promising new retail outlet unless its competitors would do the same. This significantly reduced any likelihood that competition would be increased by the restraints. And, indeed, the Commission found that Toys "R" Us' actions both deprived consumers of a low price competitor and insulated Toys "R" Us from competitive pressures the club stores had begun to provide.
Two other factors distinguish this case from the typical vertical restraint case. First, Toys "R" Us had significant power to influence the manufacturers. Indeed, the manufacturers testified that it would be very difficult to replace sales accounted for by Toys "R" Us. This is easy to understand because Toys "R" Us accounted for well over 30% of sales in most major metropolitan areas.
Second, this was a case where the Commission took on a vigorously asserted free rider defense and found it wanting. Toys "R" Us argued its actions were justified to combat free riding by the clubs on services provided by Toys "R" Us. The Commission found, however, that the clubs did not free ride. The evidence on this point was convincing. Toys "R" Us argued that the clubs free ride on Toys "R" Us advertising. But the Commission found that Toys "R" Us received cooperative advertising dollars that covered over 98% of the costs of advertising. Toys "R" Us argued that the clubs free ride on the fact that Toys "R" Us carries product much earlier in the year. But the Commission found that Toys "R" Us was specifically compensated for early purchases by not having to pay for the product till the end of the year. Finally, Toys "R" Us argued that the manufacturers testified at trial that they adopted the restraints in response to free riding. But the Commission found that manufacturers feared being placed at a competitive disadvantage unless their competitors adopted the same restraints. This interdependence severely undercuts any notion that the manufacturers restrained sales to the clubs for unilateral reasons such as stopping free riding.
As I mentioned earlier, the case is on appeal in the Seventh Circuit, and our brief was filed earlier this week. A copy of the brief should be available at our website soon.
The Pending Mylan Pharmaceuticals Case
Late last year we sued Mylan Laboratories and three other companies in federal court, alleging that their exclusive supply agreements for the key active ingredients of two widely prescribed anti-anxiety drugs, lorazepam and clorazepate, resulted in unlawful restraints of trade, monopolization, attempted monopolization, and conspiracy to monopolize in the markets for generic versions of those drugs.(26)We allege that the violations charged allowed Mylan to raise the price of these drugs by 2,000 to 3,000%. What is notable about this case, of course, is that we filed in court under section 13(b) of the FTC Act, seeking both permanent injunctive relief and ancillary relief, including disgorgement of ill-gotten gains and/or restitution to those injured of $120 million. Although the Commission has secured such relief in a number of litigated unfair-or-deceptive-acts-or-practices cases, and in unfair-methods-of-competition cases through settlements, this would be the first unfair-competition case in which we secured that relief through litigation. We have a sound case to do so, and may seek similar relief in other cases where appropriate.
In March 1998, the Commission filed an administrative complaint against Summit Technology and VISX, the only two firms that built the lasers used in radial keratotomy eye surgery. There were two aspects of the case, an illegal patent pool and fraudulent procurement of a patent. The Commission challenged the patent pool, charging that both companies had the intellectual property and other assets to enter the market as independent competitors, but instead formed the pool and used it to fix prices by agreeing to charge a $250 licensing fee that was paid into the pool each time laser eye surgery was performed using either firm's equipment. The proceeds of the pool were split according to a formula. The result was that prices were far higher than they would have been if the two firms had been competing with each other.
Early in the litigation the parties agreed to dissolve the patent pool to resolve the Commission's concerns. Consistent with the Intellectual Property Guidelines, under which patent pools or licensing arrangements may be procompetitive if "reasonably necessary to achieve procompetitive efficiencies," the order in this case would prohibit Summit and VISX from agreeing in any way to fix the prices they charge for the use of their lasers and patents. The two companies also are prohibited from taking any action inconsistent with the dissolution of the patent pool.
The litigation on the fraudulent procurement issue continued and an administrative trial was held for six weeks this winter. The Commission charged VISX with fraudulent procurement of a patent relating to the use of lasers for vision correction.(27) Specifically, the complaint alleges that VISX intentionally withheld from the Patent and Trademark Office highly material "prior art" that might prove that the claimed invention was not patentable because it was already known to others in the field. This fraudulent and inequitable conduct, we allege, unreasonably restricted competition in the markets for laser vision correction equipment and services. The complaint asks that VISX be enjoined from enforcing its patent. The trial was completed in March and we expect a decision in the near future.(28)
Some litigated cases settled before trial because we were able to obtain the relief we needed. Even though no court decision issued, these settlements are important because they say something about what the Commission thinks the law requires. Two recent noteworthy settlements are: Intel Corporation(29) and Monier Lifetile LLC.(30)
The Intel case involved the difficult question of what tactics a monopolist may use to maintain its monopoly. Intel, as you know, makes general purpose microprocessors, the brains of personal computers that process system data and control other devices integral to the system. It is a market that has expanded dramatically each year for more than a decade and in which product generations are measured in months, not years. Despite this fast growth and high rate of innovation, Intel has managed to maintain a market share of approximately 80% of dollar sales. Barriers to entry are high due to sunk costs of design and manufacture, substantial economies of scale, customers' investments in existing software, the need to attract support from software developers, and reputational barriers.
The microprocessor market has several unique features. Computer design and manufacture requires complex coordination between a number of different disciplines, almost always spread among many different firms. Microprocessors, memory components, core logic chips, graphics controllers, various input and output devices, and software must all work effectively with each other in order for the final product to work. To achieve effective integration, computer manufacturers require product specifications and other technical information about each component, and they require such information in advance of designing the computer in order to test and debug to insure the reliability and performance of each component and the system as a whole. This information is provided by all component makers, including Intel, subject to formal nondisclosure agreements. This information sharing has substantial commercial value to both sides of the agreement, the component makers and the computer OEMs.
The Commission complaint charged that Intel suspended its traditional information sharing with three customers -- Digital Equipment Corporation, Intergraph Corporation, and Compaq Computer Corporation -- in order to force those customers to end disputes with Intel concerning the customers' asserted intellectual property rights and to grant Intel licenses to patented technology (not just microprocessor technology) developed and owned by those customers. Digital and Compaq capitulated quickly and entered into cross-license arrangements with Intel. Intergraph was able to resist only because it succeeded in obtaining an injunction against Intel's conduct in a federal court.(31)
We alleged that Intel's conduct reinforced its dominance of the general purpose microprocessor market in at least three ways. First, Intel's alleged conduct would give it access to technology being developed by others in the industry, disadvantaging other microprocessor manufacturers who are trying to challenge Intel's dominance. Second, forcing other firms to license away rights to their proprietary technology would dull the incentive to innovate, thus harming competition in several ancillary markets. Third, Intel's forced acquisition of technology from computer OEMs reduces the ability of those OEMs to support a non-Intel microprocessor platform by taking away an OEM's proprietary technology that could have been used to market its machines. Thus, Compaq would be much less able to support an AMD or Digital microprocessor system by advertising its own non-microprocessor technology because Intel has forced Compaq to license that other technology and Intel could in turn license it back to other OEMs that support an Intel microprocessor platform.
The proposed order remedies all of the concerns in the Commission's complaint. It prohibits Intel from withholding or threatening to withhold certain advance technical information or microprocessors from a customer for reasons relating to an intellectual property dispute with that customer. This requirement is limited to the types of information that Intel routinely gives to customers to enable them to use Intel microprocessors, and it does not impose a "compulsory licensing" requirement in the first instance. The order allows companies in disputes to continue to receive relevant information except where the customer elects to seek an injunction against Intel's manufacture, use, sale, offer to sell, or importation of its microprocessors. The order is also careful to protect Intel's legitimate intellectual property rights. Intel will not be required to continue providing information or products with respect to the microprocessors that the customer is seeking to enjoin. In addition, Intel may withhold information for legitimate business reasons, such as a breach of the disclosure agreement.
The Intel settlement is important to maintaining competition in several areas. It defines as an abuse of monopoly power the use of that power to extract proprietary, legally-protected intellectual property from potential competitors. Absent this rule of law, a dominant firm in a high tech industry could use its current market power to extend its dominance to complementary products and to next generation products. For instance, as the selling of PCs becomes more commoditized, there is a danger that an unchastised Intel could own the only valuable brand in the industry, which would be "Intel inside." Thus, Intel might come to dominate an even larger market than microprocessors.
Chairman Pitofsky's statement on the issuance of the proposed consent summed up its importance:
The heart of the Commission's complaint against Intel was the principle that a monopolist cannot withhold products or information about products in order to retaliate against customers who find themselves in an intellectual property dispute. We recognize that there is an essential balance to be struck between protecting the incentives of smaller rivals to innovate and unduly constricting a dominant firm's conduct of its business. The settlement would fully resolve those competitive concerns without interfering with Intel's legitimate business activities. This is the result that the staff would have sought after a full and successful trial.(32)
Monier was also settled prior to administrative trial. The proposed settlement would resolve charges that the formation of Monier Lifetile, a joint venture between Boral Ltd. and LaFarge S.A., violated antitrust laws by combining the two largest producers of concrete roofing tile ("CRT") in the United States. CRT is the dominant roofing material used in new home construction in the southwest United States and southern Florida. According to the FTC complaint, Boral and Redland PLC (later acquired by LaFarge) formed Monier Lifetile, a limited liability CRT joint venture, in August 1997. At the time, the joint venture wasn't reportable under the Hart-Scott-Rodino Act (HSR) because it was formed as a limited liability corporation.(33)
The absence of a premerger filing meant that we had to challenge the deal after the fact, but we had no choice when we saw a transaction that had brought most of the excess capacity in the industry under the control of the joint venture which was systematically reducing capacity, reducing services, and raising prices. Unfortunately -- and this is one reason why HSR is so important -- some damage had already been done. Customers reported that the remaining competitors followed Monier's price increases. In addition, customers experienced severe delays in receiving shipments of roofing tile because of the capacity reductions, a reminder that nonprice aspects of a product can be as important to consumers as price.(34) To remedy the anticompetitive effects of the merger, the proposed order requires Monier to sell production facilities in Arizona, California, and Florida to a new entrant in these markets and also requires Monier to reopen closed capacity in the Florida facility.
III. Other Major Areas of Enforcement
Now I'd like to discuss our consent orders in a few specific areas where consumer interests are very much at stake: high-tech markets and retail markets, including the Internet and supermarkets.
A. High-Tech Markets
In the past few years, an increasing amount of Bureau resources have gone into enforcement in high tech industries. That makes sense. High tech industries have become a more important part of the American economy, in terms of the size of the sector, the number of firms, and the number of jobs created. The high tech sector is also important to the economy in terms of innovation, the relative efficiency of U. S. companies versus foreign competitors, and its function as a key component of economic growth.
Some critics question the application of the antitrust laws to fast-moving industries where products may be quickly outmoded and market share may evaporate seemingly overnight. Many high tech markets do possess these characteristics and in these markets antitrust enforcers have stayed their hand.(35) But in some cases, our investigations have found that market power can be illegally accumulated and abused in some high tech industries as it can in more traditional industries. Even among products and industries where competition is based on innovation, dominance in one generation may enable a firm to gain exclusive control over critical inputs that would enable monopoly power to be carried over from generation to generation without regard to the relative merit of later generation products. Dominance may also persist due to large sunk costs, network effects, an installed base of customers, and other entry barriers.(36) These effects, and more, require antitrust vigilance in both the merger and nonmerger areas. I have already discussed two prominent nonmerger cases -- Summit and Intel. Now let me turn to merger enforcement.
The potential for anticompetitive effect in mergers of high technology companies is readily apparent. In a number of industries, cutting edge technology is owned by only a few firms and mergers among those firms could eliminate the only substantial actual or potential competitors. The forward looking emphasis of high tech industries requires an equally forward looking antitrust policy. Frequently, the focus of competition in these industries is not over price but innovation of the next generation products. Competition in innovation markets must be protected even where merging parties are not current competitors, and the Commission has brought a number of cases in the past few years in order to protect the innovation process.
Adaptec/Symbios. In this case, these two companies were each other's chief competitor in the manufacture, sale, and development of SCSI host adapter chips, which manage the transfer of information between computers and SCSI peripheral devices. SCSI chips are used primarily in higher end computers and the acquisition would have given Adaptec an effective monopoly over a crucial interface component used in workstations and servers. The merger threatened to eliminate not only price competition but also innovation competition, since Adaptec and Symbios were responsible for most of the innovation in these chips and were the two firms most likely to innovate in the future. The acquisition was abandoned in face of Commission opposition and, shortly thereafter, Symbios was acquired by another firm that did not compete directly in SCSI chips. The market thus retains two highly competitive firms.
Potential Competition: Zeneca/Astra
Zeneca's proposed acquisition of Astra raised competitive concerns over the loss of potential competition in a market for local anesthetics.(37) Prior to the acquisition, Zeneca had entered into an agreement with Chiroscience Group plc to market and assist in the development of levobupivacaine, a new long-acting local anesthetic being developed by Chiroscience. Long-acting local anesthetics are used to relieve pain during the course of surgical or other procedures by blocking pain impulses from reaching the central nervous system. Zeneca proposed to acquire the leading supplier of long-acting local anesthetics, Astra, which is one of only two companies approved by the FDA for the manufacture and sale of these kinds of drugs in the United States. Although Zeneca does not currently participate in the market for long-acting local anesthetics, by virtue of its agreement with Chiroscience, it is an actual potential competitor.
The U. S. market for these drugs is highly concentrated and barriers to entry are high due to the need to undertake the difficult, expensive and time-consuming process of researching and developing a new product, obtaining FDA approval, and gaining customer acceptance. The Commission alleged that the acquisition would result in the elimination of a significant source of new competition.
The consent order requires Zeneca to transfer and surrender all of its rights and assets relating to levobupivacaine to Chiroscience no later than 10 business days after the date the Commission accepts the agreement for public comment. The assets to be transferred to Chiroscience consist principally of intellectual property and know-how and include all of the applicable patents, trademarks, copyrights, technical information and market research relating to levobupivacaine. During a transitional period, Zeneca is required to continue carrying out certain ongoing activities relating to the commercialization of levobupivacaine, including manufacturing, regulatory, clinical, development and marketing activities. Zeneca is also required to divest its approximately three percent investment interest in Chiroscience.
These and other pharmaceutical cases illustrate potentially important and recurring fact patterns in mergers in this industry. Because of strong patent protection for drugs, along with a transparent FDA approval pipeline, we can sometimes project entry by brand name or generic manufacturers relatively far into the future. Thus, we can tell with some confidence that new competitors will enter, driving down the prices of the most popular drugs, providing substantial savings to consumers. In these cases, Section 7 enforcement gives consumers a lot of "bang for the buck." Effective enforcement at the merger stage can prevent the acquisition, and future exclusionary use of, monopoly power. This will save consumers from paying higher prices for potentially life-saving drugs later on, as well as prevent the reduction in incentives to innovate.
Standard horizontal merger theory is sufficient to protect competition in many of these cases. But where the Commission is trying to protect future competition, potential competition doctrine and the use of innovation markets may be necessary for effective enforcement. For instance, potential competition theory would seem to be applicable in pharmaceutical mergers if a patent-holder acquired a firm that had a generic drug in its pipeline to be used when the patent expired. There are numerous cases in which such markets are highly concentrated, barriers to entry are high, and the potential entry is highly likely. The problem is that the new entry may not be timely, as that term is defined in the Merger Guidelines. Can such an acquisition violate Section 7 even though the patent will not expire until 2004? 2006? Does the unusual certainty with which we can watch the future unfold mean that we should suspend or modify the timeliness requirement? Does the intent of the acquiring patent-holder make a difference? These are some of the questions we are considering in the pharmaceutical industry as competition becomes a more important factor in spurring innovation and controlling health care costs.
B. Retail Markets
Retail markets where anticompetitive activity can have direct and immediate consequences for consumers continue to generate interesting enforcement issues.
Retailing on the Internet
The fastest growing retail market is commerce on the Internet. Over the past few years the number of Internet retail sites has grown and many traditional retailers have responded with their own sites. During 1998 alone, the number of Internet domains grew by 45%, the great majority in the commercial sector, and the amount of online consumer spending roughly doubled, and now probably exceeds $11 billion annually. As the market has grown, so has the risk of fraud and deception. The Bureau of Consumer Protection has brought several enforcement actions involving electronic commerce and the Commission will hold hearings on the subject next month.
What is the role of antitrust in emerging markets such as electronic commerce? It should make sure that competitors have the opportunity to compete, to offer new products and services, and reach the consumer in an efficient manner. Experience teaches that when new markets arise, participants in traditional markets may act together to keep the new competitor off the block. Antitrust enforcement plays a valuable role in making sure these markets can develop and grow.
Last fall the FTC brought just such as case. A Chrysler dealership in Kellogg, Idaho, used the Internet to attract customers from Idaho, Eastern Washington, and Western Montana by creating a web site where consumers could shop for cars from the comfort of their home. The potential importance of Internet marketing in the rural northwest is significant. Shopping for cars involves substantial search costs and long drives to dealerships located in disperse parts of the state. A typical consumer's choices might be few in number. By advertising on the Internet, this dealer offered consumers in remote parts of the state -- and in other states -- the opportunity to comparative shop in a far less costly and time consuming fashion.
Some rival car dealers responded unfavorably. A group of 25 dealers formed an association called Fair Allocation System ("FAS") and collectively attempted to force Chrysler to change its vehicle allocation system to disadvantage the Internet advertiser. They threatened to refuse to sell certain Chrysler vehicles and to limit the warranty service they would provide customers unless Chrysler changed its allocation system to disadvantage dealers that sold large quantities of vehicles outside their local geographic area.
These types of boycotts have arisen in response to new forms of distribution in the past. Discount car dealers, mail order firms, and 800-number retailers, have all encountered illegal boycotts brought by associations of more "traditional" retailers. Here, the Commission obtained a consent decree barring FAS from coordinating or participating in future boycotts.(38)
This does not mean, of course, that a manufacturer is compelled to deal with any Internet retailer. The Colgate rule still applies: a manufacturer has the right to refuse to deal with whomever it chooses. Indeed, a manufacturer may choose not to deal with retailers on the Internet because those retailers may free ride on the efforts of full service retailers. In the FAS case, that justification was absent since Chrysler applauded this dealership and its use of the Internet.
The most important retail industry for many consumers is, of course, food. We devote significant enforcement resources to ensuring that this segment remains diverse and competitive. Two substantial supermarket-chain mergers moved to consent agreements in the past year. Albertson's/Buttrey(39) involved a merger that would have resulted in significant overlaps in eleven communities in Montana and Wyoming, where the affected commerce was over $850 million annually. We required divestiture of fifteen supermarkets in these markets. Closer to home, we secured a proposed consent with Ahold, resolving the Commission's concerns over its acquisition of Giant, with divestitures of 10 stores in eight geographic markets in the Middle Atlantic states.(40)
Supermarket and other retailing mergers will often raise Section 7 concerns. In most cases, we are able to negotiate an acceptable settlement with divestiture of retail assets. Here are some of the things we look for in fashioning relief in retail mergers.
First, we continue to seek committed up-front buyers for divested assets. This approach promotes more prompt divestiture, critical in retailing, where reputation and good will are such an important part of the assets being transferred, and can easily be dissipated. We don't want a long delay, even in a divestiture to a known buyer. In last year's cases, buyers for each of the divested stores were identified in the proposed consent agreements, and the divested assets were sold to their new owners within 20 days of the agreements.
Second, we are open-minded in our consideration of proposed up-front buyers. We do not have a preference in favor of large-chain buyers, or a preference against small chains, independents, or wholesalers that will eventually spin off the stores to still other buyers. We look for buyers of whatever type that will effectively maintain competition.(41) For example, some of the divestitures in both Buttreyand Ahold were made to wholesalers who would operate the stores until they could find an independent retailer acceptable to the Commission.
Third, where we find a problem in a retail market we have a strong preference for divestitures that will spin off all of the buyer's assets or all of the seller's assets in particular markets. We used this "all of A" or "all of B" approach in both of the settlements discussed earlier. Our experience is that those packages are easier to sell, and give us greater confidence that we are preserving competition in the affected market. This approach still allows a buyer to "trade up" in a market to the higher market share of a seller. Some respondents have wanted the right to cherry-pick the best stores and increase their market share to 35% in each and every market. But the Merger Guidelines safe harbor is a lot lower than that. In a market where we are challenging the merger because the increase in concentration is likely to lead to anticompetitive effects, we are not going to negotiate settlements that would nevertheless allow for the buyer to secure a dominant or near dominant position in a retail market.
In addition, in most cases there is a real advantage to respondents in following this approach. We can get the consent negotiated much more quickly because the buyer of the divested assets steps into the shoes of one of the two incumbents and acquires stores with common operating procedures, policies and systems. Negotiating store by store is a longer, more complex process because we need to make sure that cherry-picking won't leave consumers with diminished choice. We will of course examine a settlement proposal that involves a mix of stores in a market. But our preference is for a divestiture package containing all of the retail assets of the buyer or seller in a problematic market.
IV. Compliance Enforcement
Another important part of protecting consumers is ensuring that firms comply with their obligations under the antitrust laws -- specifically, the premerger notification requirements of the Hart-Scott-Rodino Act, and the requirements of Commission orders. We had notable actions in both of those categories during the past year.
A. HSR Violations
In the past three weeks we brought two significant HSR civil penalty cases. The first, involving Blackstone Partners and Howard Lipson, concerns our ability to perform meaningful antitrust scrutiny of mergers before they occur. The second, involving Input/Output and The Laitram Corporation, concerns our ability to obtain meaningful antitrust remedies if we find competitive problems.
In Blackstone, our consent judgment obtained the maximum penalty available -- $2.785 million against the company, and for the first time, required an official of the company to pay a fine as well.(42) Blackstone filed an HSR notification prior to its acquisition of Prime Succession, Inc., but failed to include a document -- Blackstone's central decision-making document -- required by Item 4(c). That document would have alerted us to possible competitive problems. Without it the filing described no competitive overlap and Blackstone's request for early termination of the waiting period was granted. Only after the merger was consummated did the Commission learn of the competitive problem.
We sought the maximum penalty from Blackstone for this violation because the accuracy and completeness of Notification Forms, especially the responses to Item 4(c), are the keys to effective premerger antitrust review. These documents, which are prepared by or for the parties' decision makers, are by definition created to analyze the transaction. Thus, they can quickly reinforce or contradict competitive concerns that we might have, or alert us to some that we might miss.(43) Accordingly, we take very seriously any failure to submit important 4(c) documents. We have previously obtained $2.97 million from Automatic Data Processing, Inc.(45) for its failure to submit 4(c) documents, and we have stressed on numerous occasions the need to comply fully with the requirements of Item 4(c).
In this case, we also required the payment of a civil penalty from the Blackstone official who both certified the filing as "true, complete and correct" and was one of the authors of the 4(c) document that Blackstone failed to submit. There were a number of reasons we believed that individual should be held liable. He had primary responsibility for negotiating the underlying deal, knew it might raise antitrust questions, and knew that delaying the deal could jeopardize its closing. Moreover, he was one of the authors of the critical 4(c) document, knew of its importance to Blackstone's decision-making, and had a copy of it in his files. Finally, when questioned on Blackstone's failure to provide the document, he gave inconsistent answers. All told, we were convinced that he knew or should have known that the filing was not "true, complete and correct." We expect those who certify compliance with the HSR Act to take their responsibilities seriously, and we will enforce the Act against individuals who fail to exercise due care.
In Input/Output,(46) announced just this week, we filed a consent judgment for a firm effectively "jumping the gun," beginning to exercise control before the HSR period had expired. Input/Output acquired DigiCOURSE, a subsidiary of The Laitram Corporation, in return for eleven percent of the voting securities of Input/Output. Even before filing their HSR notifications, the parties began to implement their purchase agreement by integrating their personnel and operations. This kind of premature integration defeats the purpose of the HSR Act. We secured a civil penalty total of $450,000, which was close to the maximum we could have obtained in court.
The HSR Act was passed because it is difficult or even impossible to obtain effective antitrust relief after parties have merged their operations. In order to preserve the possibility of effective remedies for anticompetitive transactions, the Act establishes strictly limited waiting periods during which the antitrust agencies may conduct their premerger review of all proposed transactions. Parties must wait until the period expires or is terminated by the agencies before they may proceed with their transactions.
This case is important because it clarifies that once a purchase contract is signed, the parties may not proceed further with joint activity. In the jargon of HSR, signing the contract transfers some indicia of beneficial ownership. By itself, that transfer is entirely lawful. But the transfer of additional indicia of ownership during the waiting period -- such as assuming control through management contracts, integrating operations, joint decision making, or transferring confidential business information for purposes other than due diligence inquiries -- are inconsistent with the purposes of the HSR Act and will constitute a violation.
B. Order Violations
Even the most well-conceived merger case will not be successful if the firms involved do not carry out the terms of the orders, or if they delay their compliance with the orders and thereby continue the period of consumer harm. Here, again, we seek strong penalties to deter non-compliance. In Columbia/HCA Healthcare,(47) the Commission obtained a $2.5 million civil penalty to settle charges that the firm both violated a 1995 order to divest hospitals in Utah and Florida in a timely manner, and that it breached its obligations to hold the Utah hospitals separate pending divestiture. This was the second-largest penalty ever imposed for failure to divest within contemplated time periods.
V. State/Federal Cooperation
In each of the four years I've had this job, the number of cases jointly investigated by the States Attorneys General and FTC staff has increased. This past year, we worked closely with a number of states in funeral home, supermarket, oil and gas, and hospital mergers. We jointly litigated the Poplar Bluff case with Missouri and are joining forces with 32 states in the Mylan case. We were also fortunate to receive thoughtful amicus support in two important matters -- 30 State Attorneys General filed an amicus brief filed in federal court inDrug Wholesalers, and 28 State Attorneys General filed an amicus brief in the Supreme Court in support of the Commission's decision in California Dental Association.
We recognize that our nation's commitment to federalism means that the business community is sometimes expressed to simultaneous state and federal antitrust review. Those are costs associated with the process. But we are all committed to closely coordinating both our review and our substantive approach to these matters. Our record of close cooperation in recent years suggests we are making considerable strides toward that goal. We hope to continue to foster this constructive cooperation as we meet the challenges of new investigations in the coming year.
VI. International Cooperation
Our work increasingly has a significant international dimension, mirroring the increasing globalization of business. For example, approximately half of the Commission's second-stage merger investigations have an important international component such as a foreign-based party, essential information located abroad, or a foreign asset critical to an effective remedy. We deal with international issues through close cooperation with other antitrust agencies.
Our experience suggests it is often in the interest of the parties as well as the enforcement agencies to cooperate, including waiving confidentiality protections, particularly when transactions are subject to concurrent review. Two recent cases that illustrate the benefits of cooperation are the merger of the British and Swedish pharmaceutical firms, Zeneca and Astra, where waivers allowed FTC and EC staff to discuss documents relevant to a settlement proposal and develop compatible remedies acceptable to both authorities, and Lafarge Corporation's acquisition of a cement plant and related assets of Holnam, where confidentiality waivers allowed Canada's Bureau of Competition Policy to review documents submitted to the FTC and thus reduce the investigational burdens that would otherwise have been placed on the parties.
During the past year the FTC and the DOJ have taken significant steps to advance cooperation in international antitrust enforcement at bilateral and regional levels. On June 4, 1998, the FTC, the DOJ, and the European Commission signed an agreement elaborating on the positive comity provisions of the 1991 U.S.- EC antitrust enforcement cooperation agreement. The new agreement clarifies the circumstances under which the parties will refer cases of anticompetitive activities to each other, and sets forth the circumstances under which one party normally will defer to the other to investigate alleged anticompetitive practices in the other's territory. The agreement spells out the obligations that the competition authorities undertake in handling these cases while preserving the right of each authority to act independently.
Last month, Chairman Pitofsky, Attorney General Reno, and Minister Sharansky of Israel signed an antitrust cooperation agreement between the U.S. and Israel, which follows the model of our 1991 EC and 1995 Canada agreements. We are also engaged in discussions with Japan that we hope will culminate in an antitrust cooperation agreement.
VII. Improving the Enforcement Process
Let me close with an issue that is always at the top of our agenda, or at least close to it: improving the enforcement process so that it does not impose unnecessary burdens. Burden reduction is an important part of our enforcement policy and our goals under the Government Performance and Results Act. We recognize that the system is not perfect, and we are continually on the watch for ways to improve it. There is an open invitation for the private sector's participation in the process. We have benefitted from an open and frank dialog with the private sector in the past, and I am sure that will continue.
What are the areas of concern? Let me mention two of them -- both, not surprisingly, involving merger review. One is the speed of the process. The other is the burden of Second Requests.
A well-functioning clearance process between the FTC and the Department of Justice is important to the timely review of merger filings. Overall, the system works pretty well, but there have been a few cases that have taken too long and gained some notoriety. We are conscious of the need to resolve clearance issues promptly, and we'll keep working on it.
The occasional problem should not overshadow the overall positive results in timely merger review. The data indicate that we review mergers pretty quickly. In fiscal year 1998, 69% of the transactions were granted early termination of the waiting period, and the average time was 15.8 days to early termination. Almost all the transactions were cleared within 30 days. We aim to keep the average time from filing to completion of the review for all transactions to less than 20 days, our goal under the Government Performance and Results Act.
With respect to Second Requests, we have made significant efforts in the past few years to reduce those burdens. How well have we done? Again, let's look at some numbers. First, the percentage and number of cases in which Second Requests are issued are relatively small -- only 2.7% of the transactions received Second Requests in FY 1998, a percentage lower than in earlier years; in absolute terms the FTC issued only 46 Second Requests in FY 1998, the same number as in FY 1994 when there were less than half as many transactions. Second, we bring enforcement actions in over 60% of the cases in which we issue a Second Request.
But what about the perception that a Second Request invariably involves a massive document request. Some transactions do, but those are the minority. The reality is that most transactions do not involve huge document productions. In fiscal year 1998, almost 50% of the Second Requests resulted in productions smaller than 20 boxes for both parties combined, and over 70% had productions smaller than 50 boxes. This suggests that factors specific to the merger, such as the number of markets involved and the nature of the businesses involved have a lot to do with the size of the document production.
Having said that, we recognize that there continue to be concerns and that Second Request burdens warrant constant monitoring. I have instructed the staff to look for reasonable modifications sought by the parties, and to respond promptly -- even if not affirmatively -- to such requests. Moreover, we have observed that some practitioners are better than others at laying out the basis for modifications. In an upcoming article in the Section's Antitrust Magazine, Casey Triggs offers some suggestions to the private bar and government attorneys on how to make this difficult process easier. I expect that his article will be a catalyst for a continuing dialogue on this important issue.(48)
In summary, it has been a rather remarkable year for antitrust enforcement at the FTC, in terms of the number and kinds of cases we have litigated, and also in terms of the substantial settlements we have obtained in other cases. We have advanced the cause of applying forward-looking antitrust analysis to protect consumers, competition, and the marketplace. It has not been an easy road -- rigorous antitrust enforcement often elicits vigorous responses -- but a road well worth traveling.
1. The views expressed are those of the Bureau Director and do not necessarily reflect the views of the Federal Trade Commission or any Commissioner.
2. We have also participated in an amicus capacity with the Department of Justice in two cases, NYNEX v. Discon, Inc., 119 S. Ct. 493 (Dec. 14, 1998), and Surgical Care Center of Hammond v. Hospital Service District No. 1 of Tangipahoa Parish, No. 97-30887 (5th Cir., March 24, 1999) (en banc).
3. FTC v. Staples, Inc., 977 F. Supp. 1066 (D.D.C. 1997).
4. See "New Myths and Old Realities: Perspectives on Recent Developments in Antitrust Enforcement," remarks of William J. Baer to the Bar Association of the City of New York (Nov. 17, 1997).
5. Brown Shoe Co. v. United States, 370 U.S. 294 (1962).
6. United States v. Baker Hughes, Inc., 908 F.2d 981 (D.C. Cir. 1990).
7. Merger Guidelines § 3.0.
8. FTC v. Cardinal Health, Inc., 12 F.Supp.2d 34 (D.D.C. 1998).
9. Id. at 61. The Court contrasted Supreme Court authority from the 1960s, seemingly rejecting such considerations, such as FTC v. Procter & Gamble, 386 U.S. 568, 580 (1967), and United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 371 (1963), with more recent cases such as FTC v. University Health, Inc., 938 F.2d 1206, 1222 (11th Cir. 1991); United States v. Baker Hughes Inc., 908 F.2d 981, 992 (D.C.Cir. 1990); and FTC v. Staples, 970 F. Supp. 1066, 1090 (D.D.C. 1997).
10. Cardinal, 12 F. Supp. 2d at 61-62.
11. Id. at 62.
12. Id. at 63.
13. Merger Guidelines § 4 ("The Agency will not challenge a merger if cognizable efficiencies are of a character and magnitude such that the merger is not likely to be anticompetitive in any relevant market").
14. 12 F. Supp.2d at 64.
15. Id. at 45-49.
16. Id. at 45-46. See Pepsico, Inc. v. Coca-Cola Co., 1998-2 Trade Cas. (CCH) ¶ 72,257 at 82,636-37 (S.D.N.Y. 1998) (relying on theStaples and Cardinal decisions (that a channel of distribution can define a market, notwithstanding the fact the products may be available from other sources) to hold that Pepsi's alleged relevant market of "sales of fountain-dispensed soft drinks distributed through independent food service distributors" was sufficient to survive a 12(b)(6) motion).
17. Id. at 48-49.
19. FTC v. Tenet Healthcare Corp., 17 F. Supp.2d 937 (E.D.Mo. 1998), appeal filed Aug. 10, 1998 (8th Cir, No.98-3123EML), oral argument held Dec. 10, 1998. The Commission issued an administrative complaint concerning this transaction, FTC Dkt. No. 9289, on August 19, 1998, which has been stayed by the Administrative Law Judge pending resolution of the appeal.
20. 17 F. Supp.2d at 942.
21. Id. at 942-45.
22. FTC Dkt. 9259, 121 F.T.C. 190 (1996), rev'd in part and aff'd in part sub. nom California Dental Assoc. v. FTC, 128 F.3d 720 (9th Cir. 1997), cert. granted 119 S. Ct. 29 (1998).
23. Dkt No. 9278 (Opinion and Final Order, Oct. 13, 1998) (Comm'r Swindle concurring in part and dissenting in part). The Decision and Order have been appealed to the Seventh Circuit. Toys "R" Us., Inc. v. FTC, Dkt. No. 98-4107 (7th Cir., filed Dec. 7, 1998).
24. 359 U.S. 207 (1959).
25. 472 U.S. 284 (1985).
26. FTC v. Mylan Laboratories, et al., No. 98CV03114 (D.D.C. filed Dec. 22, 1998).
27. FTC Dkt. No. 9286.
28. Recently, the PTO examiner issued a non-final office action in which he concluded that all five claims of the VISX patent were obvious and thus unpatentable.
29. FTC Dkt. No. 9288 (consent accepted for comment, March 17, 1999).
30. FTC Dkt. No. 9290 (consent accepted for comment, March 2, 1999).
31. Intergraph Corp. v. Intel Corp., 3 F.Supp.2d 1255 (N.D. Ala. 1998).
32. Press Release, March 17, 1999.
33. The Commission and the Department of Justice recently issued a formal interpretation of the HSR rules and, beginning March 1, 1999, the formation of an LLC will be reportable when it combines existing businesses and one of the members of the LLC has an interest of 50% or more.
34. See "Waiting for Roofing," Miami Herald (Jan. 6, 1999); "Roofing Tile Backlog Snarls Home Closings in South Florida," Palm Beach Post (Jan. 7, 1999).
35. See "Antitrust and High Technology Markets," prepared remarks of William J. Baer (Nov. 12, 1998).
36. See David Balto and Robert Pitofsky, "Antitrust and High-Tech Industries: the New Challenge," 43 Antitrust Bull. 583 (1998).
37. Zeneca Group plc, FTC File No. 991 0089 (March 25, 1999) (proposed consent order).
38. See Fair Allocation System, Inc.; Analysis to Aid Public Comment, 63 Fed. Reg. 43182 (1998).
39. Albertson's, Inc., FTC Dkt. C-3838 (Dec. 8, 1998) (consent order).
40. Koninklijke Ahold NV, FTC File No. 981 0254 (Oct. 15, 1998) (consent agreement accepted for public comment).
41. This point was emphasized in the Analysis to Aid Public Comment in Buttrey.
42. United States v. Blackstone Capital Partners II Merchant Banking Fund LP, Civ. Act. No. 99CV00795 (D.D.C. 1999).
43. Congressman Rodino recognized the critical importance of these kinds of documents when he sought passage of the premerger notification act that bears his name:
[T]he government will be requesting the very data that is already available to merging parties, and has already been assembled and analyzed by them. If the parties are prepared to rely on it, all of it should be available to the Government.(44)
45. United States v. Automatic Data Processing, Inc., 1996-1 Trade Cas. (CCH) ¶ 71,361 (D.D.C.) (consent judgment).
46. United States v. Input/Output, Inc., et al., Civ. Act. No. 1:99CV00912 (D.D.C. Apr. 12, 1999).
47. FTC v. Columbia Healthcare Corp., Civ. Act. No. 1:98CVO1889 (D.D.C. 1998).
48. We recently made it easier for parties to withdraw their filings if they have not been able to convince us within the first 30 days that a Second Request is not necessary. They can then re-file their HSR notification, which restarts the clock. That gives the parties more time to present their case, and it gives us time to consider additional information. This has worked well for both us and the merging parties in most cases. In fiscal 1998, 75% (9 out of 12) of the transactions that were re-filed after undergoing an initial review by the FTC did not receive a Second Request.