Prepared Statement of the Federal Trade Commission
Committee on the Judiciary
Antitrust Task Force
United States House of Representatives
An Overview of Federal Trade Commission Antitrust Activities
July 24, 2003
Mr. Chairman and Members of the Task Force, I am Timothy
J. Muris, Chairman of the
Federal Trade Commission ("Commission" or "FTC"). I am pleased to appear before
you to discuss
the FTC's activities to promote competition.(1)
Our testimony today will outline the principles that underlie the Commission's agenda, and
describe a number of our accomplishments. While my colleagues and I bear the ultimate responsibility
for the agency's actions, we rely on a dedicated, professional, and highly-qualified staff.
Through vigorous enforcement of the antitrust laws and related activities, the Federal Trade
Commission helps ensure that markets operate freely and openly. Aggressive competition promotes
lower prices, higher quality, and greater innovation. The work of the FTC is critical in protecting and
strengthening the free and open competition that is the cornerstone of our economy. As the
Commission implements its competition agenda, we confer regularly with our colleagues in the
Department of Justice's Antitrust Division to ensure a consistent federal approach.
It is virtually undisputed today that the purpose of antitrust is to protect consumers, that
economic analysis should guide decisions, and that horizontal cases involving mergers and agreements
among competitors are the mainstays of antitrust. A freely functioning market, subject to the rules of
antitrust, provides maximum benefits to consumers.
To maximize our success, we need to articulate both our substantive aims and the strategies we
will employ to achieve them. By doing so, we can be proactive rather than reactive, and we can better
Our strategic framework includes the following key elements:
- The FTC concentrates on those segments of the economy that have the biggest impact on
consumers, which currently include health care, energy, and technology-related markets,
and on conduct that poses the largest threat to consumer welfare.
- We take full advantage of the uniquely broad set of powers and capabilities that Congress
has entrusted to us, including law enforcement, research and reporting, and advocacy on
behalf of consumers and competition.
- The Commission recognizes that the scope of its activities is as important as their content.
While certain immunities from the antitrust laws are necessary and appropriate, undue
expansion of those immunities, beyond the original intent and purpose, harms consumers.
- The FTC conveys to the public, with as much clarity as possible, the policies and standards
it applies in its decisions. To minimize the costs that our work imposes on the economy, we
also continuously seek to improve our processes.
- The FTC assists and cooperates with competition agencies in countries throughout the
Merger enforcement continues to be a major focus of
the FTC's competition workload. Stopping mergers that lessen competition
ensures that consumers will have the benefit of lower prices
and greater choices in their selection of goods and services. During the unprecedented
merger wave in the late 1990s through 2000, the agency was forced to divert
resources to meet its statutory
responsibilities under the Hart-Scott-Rodino Act ("HSR").(2) With the significant recent decline in
merger activity, the Commission has been able to restore the historical balance of enforcement efforts to
both merger and nonmerger areas. Since the peak in merger activity in 2000, when the agency opened
only 25 nonmerger investigations, the FTC has worked to reinvigorate its nonmerger enforcement
program. In 2001, the agency opened 56 new nonmerger investigations, and in 2002, the agency
opened another 59 nonmerger investigations. The results of this renewed investment in non-merger
enforcement are now emerging, and include a total of 16 non-merger enforcement actions taken thus far
in FY 2003, more than any year since 1980; as well as eight non-merger matters in administrative
In the remainder of this testimony, I will elaborate on both our strategic framework and the
results it has helped us obtain.
II. FOCUSING ON KEY SECTORS OF THE ECONOMY
As part of its proactive approach, the FTC concentrates resources on anticompetitive conduct
in areas of the economy that have a major impact on consumers' budgets, including energy, health care,
and technology. The FTC employs a variety of tools to promote and protect competition in these and
other areas. In addition to enforcing the antitrust laws, the agency holds workshops, conducts studies,
writes reports, and advocates on behalf of consumers and competition before other government
A. Health Care
Health-related products and services account for more than 15 percent of the United States
gross domestic product, an increase of 25 percent since 1990. Without effective antitrust enforcement,
those figures could grow even higher. In the twenty years since the Supreme Court affirmed the FTC's
jurisdiction over health care professionals in the American Medical Association case,(4) the FTC has
worked to enable new and more efficient arrangements for delivering and financing health care services
by challenging artificial barriers to competition among health care providers.
1. Law Enforcement Actions Involving Health Care
The FTC has placed renewed emphasis on stopping collusion and other anticompetitive
practices that raise health care costs and decrease quality.
a. Law Enforcement Involving Pharmaceutical Companies. The growing cost of
prescription drugs is a significant concern for patients, employers, and government. Drug expenditures
doubled between 1995 and 2000.(5) In response, the FTC has increased its pharmaceutical-related
investigations. In 1996, fewer than five percent of new competition investigations involved
pharmaceuticals, while in 2002, the percentage of new investigations involving pharmaceutical products
was almost 25 percent.
- Mergers Affecting the Pharmaceutical Industry. In April, the Commission settled with
Pfizer Inc., the largest pharmaceutical company in the world, and Pharmacia Corporation to
resolve concerns that their $60 billion merger would harm competition in nine separate and
wide-ranging product markets, including drugs to treat overactive bladder, symptoms of
menopause, skin conditions, coughs, motion sickness, erectile dysfunction, and three
different veterinary conditions.(6) The settlement required divestitures to protect consumers'
interests in those markets while allowing the remainder of the transaction to go forward.
Other recent FTC pharmaceutical industry merger actions include (1) Baxter/Wyeth, in
which the FTC obtained a settlement requiring divestitures to protect competition in the
market for propofol, a general anesthetic commonly used for the induction and maintenance
of anesthesia during surgery, and the market for new injectable iron replacement therapies
used to treat iron deficiency in patients undergoing hemodialysis;(7) and (2)
Amgen/Immunex, in which the FTC obtained an agreement settling allegations that Amgen
Inc.'s $16 billion acquisition of Immunex Corporation would reduce competition for three
important biopharmaceutical products used to treat rheumatoid arthritis, Crohn's disease,
psoriatic arthritis, and side effects of chemotherapy.(8)
- Pharmaceutical Firms' Efforts to Thwart Competition from Generic Drugs. To
address the issue of escalating drug expenditures, and to ensure that the benefits of
pharmaceutical innovation would continue, Congress passed the Hatch-Waxman
Amendments(9) ("Hatch-Waxman") to the Food, Drug and Cosmetic Act ("FDC Act").(10)
Hatch-Waxman established a regulatory framework that sought to balance incentives for
continued innovation by research-based pharmaceutical companies and opportunities for
market entry by generic drug manufacturers.(11) Hatch-Waxman has increased generic drug
entry, helping consumers save $8-10 billion on retail prescription drug purchases in 1994
alone, according to the Congressional Budget Office.(12) Hatch-Waxman
has been subject to some abuse, however. Some drug manufacturers have allegedly
attempted to "game" the system, securing greater profits for themselves without
providing a corresponding benefit to consumers. Many of the FTC's pharmaceutical
industry investigations have
focused on this problem.
(1) First Generation Cases. The Commission
has challenged conduct by firms that
allegedly have "gamed" the Hatch-Waxman framework to deter or delay generic
competition. Our "first generation" of such matters involved agreements through which a
brand-name drug manufacturer allegedly paid a generic drug manufacturer not to enter and
compete. One aspect of a recent major settlement with Bristol-Myers Squibb ("BMS"),
involved allegations of this type of conduct.(13) The FTC's complaint charged that BMS
engaged in a series of anticompetitive acts over the past decade to obstruct entry of low-price generic competition for three of BMS's widely-used pharmaceutical products: two
anti-cancer drugs, Taxol and Platinol, and the anti-anxiety agent BuSpar. The conduct
included a $72.5 million payment to a would-be generic rival to abandon its legal challenge
to the validity of a BMS patent and to stay out of the market until the patent expired.
The Commission has settled three additional cases of this type, including an April 2002
settlement resolving charges that American Home Products entered into an agreement with
Schering-Plough Corporation to delay introduction of a generic potassium chloride
supplement in exchange for millions of dollars.(14) An action against Schering-Plough and
Upsher-Smith, which remains in administrative litigation, raises similar issues.
(2) Second Generation Cases. Pursuant to
the Hatch-Waxman Act, a branded drug manufacturer must list any patent claiming
its branded drug in the FDA's "Orange Book"
list of approved drugs and their related patents. Companies seeking FDA approval to
market a generic equivalent of that drug before patent expiration must provide notice to the
branded manufacturer, which then has an opportunity to file a patent infringement action.
The filing of such an action within the statutory time frame triggers an automatic 30-month
stay of FDA approval of the generic drug. Our "second generation" of enforcement
activities has involved allegations that individual brand-name manufacturers
have delayed generic competition through the use of improper Orange Book listings
that trigger the
FDA's automatic 30-month stay of approval of a generic drug.
One facet of the FTC's BMS settlement involved allegedly
improper Orange Book listings. The complaint stated that BMS misled the FDA
about the scope, validity, and
enforceability of patents to secure listing in the FDA's "Orange Book"; breached
its duty of good faith and candor with the U.S. Patent and Trademark Office,
while pursuing new
patents claiming these drugs; and filed baseless patent infringement suits against
drug firms that sought FDA approval to market lower-priced drugs.(15) Because of BMS's
alleged pattern of anticompetitive conduct and the extensive resulting consumer harm, the
Commission's proposed order necessarily contains strong - and in some respects
unprecedented - relief.(16)
Another recent FTC success in this area is an October 2002 settlement with Biovail
Corporation, which resolved charges that Biovail illegally acquired a license to a patent and
improperly listed the patent in the FDA's Orange Book as claiming Biovail's high blood
pressure drug Tiazac.(17)
(3) Agreements Between Generic Manufacturers. In a case against Biovail and Elan
Corporation, plc (Elan), the Commission alleged that the companies entered into an
agreement that provided substantial incentives for the two firms not to compete in the
market for the 30 mg and 60 mg dosage strengths of generic Adalat CC, an anti-hypertension drug. The Commission approved a consent order in August 2002 requiring
the firms to terminate their agreement and prohibiting them from entering similar agreements
in the future.(18)
b. Other Merger Enforcement Involving Health Care. In June 2002, the
Commission authorized the staff to seek a preliminary injunction blocking Cytyc Corporation's
proposed acquisition of Digene Corporation, involving the merger of two manufacturers of
complementary cervical cancer screening tests.(19) The complaint alleged that the combined firm would
have an incentive to use its market power in one product to stifle increased competition in the
complementary product's market. Thus, if the merger had been consummated, rivals would have been
substantially impeded from competing. Following the Commission's decision, the parties abandoned
c. Law Enforcement Involving Health Care Providers. For decades, the FTC has
worked to facilitate innovative and efficient arrangements for the delivery and financing of health care
services by challenging artificial barriers to competition among health care providers. These efforts
continue. In the past three months alone, the FTC has settled with seven groups of physicians for
allegedly colluding to raise consumers' costs(20) and issued an administrative complaint against another.(21)
Many of these cases involve significant numbers of doctors -- more than three-quarters of all doctors in
the Carlsbad, New Mexico area in one matter, over 1,000 physicians in Dallas, Texas in another, and
an organization consisting of more than 1,500 San Francisco physicians in the case in administrative
litigation. The Commission's consent orders put a stop to allegedly collusive conduct harming
employers, individual patients, and health plans by depriving them of the benefits of competition in the
purchase of physician services.
2. Other Health Care Initiatives
In addition to enforcement action, the FTC has used its research and reporting capabilities as
well as its powers of persuasion to foster competition in health care.
- In re Buspirone Amicus Brief. In January 2002, the FTC filed an amicus brief in pivotal
private litigation involving allegations of improper Orange Book listing practices.(22) In re
Buspirone involves allegations that BMS violated the antitrust laws by wrongfully listing a
patent on its branded drug, BuSpar, in the FDA's Orange Book, thereby foreclosing
generic competition. BMS argued that the conduct in question was covered by the Noerr-Pennington doctrine
- a legal rule providing antitrust immunity for conduct that constitutes "petitioning" of
a governmental authority. In its amicus brief opposing Noerr immunity,
the Commission argued that submitting patent information for listing in the Orange
Book did not
constitute "petitioning" the FDA and that, even if it did, various exceptions
immunity applied. The district court subsequently issued an order denying Noerr immunity
and adopting much of the Commission's reasoning.(23) The Court's ruling does not mean
that all improper Orange Book filings will give rise to antitrust liability. An antitrust plaintiff
still must prove an underlying antitrust claim. The Buspirone decision merely establishes
that Orange Book filings are not automatically immune from antitrust scrutiny.
- Generic Drug Study. In July 2002,
the FTC issued a report entitled "Generic Drug Entry
Prior to Patent Expiration: An FTC Study," which evaluated whether Hatch-Waxman
is susceptible to strategies to delay or deter consumer access to generic alternatives
to brand-name drug products.(24) The report recommended changes in the law to ensure that generic
entry is not delayed unreasonably, including through anticompetitive activity. In October
2002, President Bush directed the FDA to implement one of the key findings identified in
the FTC study.(25) Last month, the FDA approved a new rule to curb one of the abuses
uncovered by the FTC study - pharmaceutical firms' alleged misuse of the Hatch-Waxman
patent listing provisions - to speed consumer access to lower-cost generic drugs.(26) In
addition, both the Senate and House of Representatives recently passed bills that
incorporate the FTC study's two major legislative recommendations.(27)
- Hearings on Health Care and Competition Law and Policy.
To explore developments in the dynamic health care market, the FTC, working
with DOJ's Antitrust Division,
commenced a series of hearings on "Health Care and Competition Law and Policy" on
February 26, 2003.(28) Over a seven-month period, the FTC and DOJ are spending almost
30 days of hearings in a comprehensive examination of a wide range of health care issues,
involving hospitals, physicians, insurers, pharmaceuticals, long-term care, Medicare, and
consumer information, among others. To date, the hearings have focused on the specific
challenges and complications involved in applying competition law and policy to health care;
issues involved in hospital merger cases and other joint arrangements, including geographic
and product market definition; horizontal hospital networks and vertical arrangements with
other health care providers; the competitive effects of mergers of health insurance
providers; and consumer information and quality of care issues.(29) A public report that
incorporates the results of the hearings will be prepared after the hearings.
- Hospital Merger Retrospectives. In addition, the Bureaus of Economics and
Competition are evaluating the effects of consummated hospital mergers in several cities.
The agency will announce the results of these retrospective studies whether the mergers in
question may have been beneficial or harmful to consumers. If the analysis reveals that one
or more of the mergers considered were anticompetitive, then the Commission will carefully
consider whether an administrative enforcement action would be warranted. The
availability of an appropriate remedy will obviously influence the FTC's decision(s). In any
event, the agency will obtain useful real-world information about the consequences of
particular transactions and the nature of competitive forces in health care, which will be
enormously helpful in analyzing and possibly challenging future hospital mergers.
Energy is vital to the entire economy and represents a significant portion of total U.S. economic
output. The FTC has focused considerable resources on energy issues, including conducting in-depth
studies of evolving energy markets and investigating numerous oil company mergers.
1. Law Enforcement Actions Involving Energy
As a complement to the analysis based on OPIS data, the FTC staff also regularly reviews
reports from the Department of Energy's Consumer Gasoline Price Hotline, searching for
prices significantly above the levels indicated by the FTC's econometric model or other
indications of potential problems. Throughout most of the past two years, gasoline prices in
U.S. markets have been within their predicted normal bounds. Of course, the major factor
affecting U.S. gasoline prices is the substantial fluctuation in crude oil prices. Prices outside
the normal bounds trigger further staff inquiry to determine what factors might be causing
price anomalies in a given area. These factors could include supply disruptions such as
refinery or pipeline outages, changes in taxes or fuel specifications, unusual changes in
demand due to weather conditions and the like, and possible anticompetitive activity.
To enhance the Gasoline Price Monitoring Project, the FTC has recently asked each state
Attorney General to forward to the FTC's attention consumer complaints they receive
about gasoline prices. The staff will incorporate these complaints into its ongoing analysis of
gasoline prices around the country, using the complaints to help locate price anomalies
outside of the 360 cities for which the staff already receives daily pricing data.
The goal of the Monitoring Project is to alert the FTC to unusual changes in gasoline prices
so that further inquiry can be undertaken expeditiously. When price increases do not
appear to have market-driven causes, the FTC staff will consult with the Energy
Information Agency of the Department of Energy. The FTC staff also will contact the
offices of the appropriate state Attorneys General to discuss the anomaly and the
appropriate course for any further inquiry, including the possible opening of a law
The continuing development of "high-tech" industries
and the significance of intellectual property rights influence our antitrust
agenda. The U.S. economy is more knowledge-based than ever. While
the fundamental principles of antitrust do not differ when applied to high-tech
industries, or other industries in which patents or other intellectual property
are highly significant, the issues are often more
complex, take more time to resolve, and require different kinds of expertise.
To address these needs, we now have patent lawyers on staff, and we sometimes
hire technical consultants in areas such as
electrical engineering or pharmacology.
1. Law Enforcement Actions Involving Technology
As technology advances, there will be increased efforts to establish industry standards for the
development and manufacture of new products. While the adoption of standards is often
procompetitive, the standards setting process, which involves competitors' meeting to set product
specifications, can be an area for antitrust concern. In a complaint issued in June 2002, the
Commission has charged that Rambus, Inc., a participant in an electronics industry standards-setting
organization, failed to disclose - in violation of the organization's rules - that it had a patent and several
pending patent applications on technologies that eventually were adopted as part of the industry
standard.(35) The standard at issue involved a common form of computer memory used in a wide variety
of popular consumer electronic products, such as personal computers, fax machines, video games, and
personal digital assistants. The Commission's complaint, which is currently being litigated before an
Administrative Law Judge, alleges that once the standard was adopted, Rambus was in a position to
reap millions in royalty fees each year, and potentially more than a billion dollars over the life of the
patents.(36) Because standard-setting abuses can harm robust and efficiency-enhancing competition in
high tech products and innovation, the Commission will continue to pursue investigations in this
2. Other Technology Initiatives
- Intellectual Property Hearings. In
2002, the FTC and DOJ commenced a series of
ground-breaking hearings on "Competition and Intellectual Property Law and Policy
Knowledge-Based Economy."(38) These hearings, which took place throughout 2002 and
were held in Washington and Northern California, involved testimony from academics,
industry leaders, technologists and others about the increasing need to manage the issues at
the intersection of competition and intellectual property law and policy. The FTC
anticipates releasing a report on its findings later this year.
- Internet Task Force. The Internet boom,
heralded by many as the next industrial revolution, has immense potential
as an engine for commerce and offers consumers
enormous freedom. Contrary to the perception of the Internet as a virtually
unfettered free market, however, extension of pre-existing state regulations
to the Internet or potentially
anticompetitive business practices may be limiting the cost savings or convenience
that the Internet affords, without offsetting benefits. The FTC's Internet
Task Force has been
analyzing state regulations that may have pro-consumer or pro-competition rationales,
but that nevertheless may restrict the entry of new Internet competitors.
It also is examining barriers that arise when private parties employ potentially
anticompetitive tactics, such
as when suppliers or dealers apply collective pressure to limit online sales.
- Internet Competition Workshop. In October 2002, the Commission hosted a three-day
public workshop examining potential barriers to e-commerce in ten different industries.(39)
The purpose of the workshop was to (1) enhance the Commission's understanding of the
nature of competition in e-commerce; (2) help educate policymakers about the effects of
overly restrictive state regulations; and (3) help educate private entities about the types of
business practices that may or may not be viewed as problematic. The workshop included
panel discussions addressing specific industries that have grown via the Internet, but where
competition may be constrained by state regulations or business practices.
- E-commerce Advocacy. The Internet Task Force has taken the lead in drafting a number
of competition advocacy pieces. Two have had a clear impact in helping decision-makers
take consumers' interests into account: (1) the Connecticut Board of Examiners for
Opticians decided in June 2003, in accordance with our advice, that out-of-state sellers
who ship contact lenses to Connecticut residents need not have a Connecticut optician's
license, provided that the lenses are sold pursuant to a lawful prescription;(40) and (2) on
January 24, 2003, the North Carolina State Bar released two opinions eliminating the
requirement that an attorney be physically present at real estate closings, and allowing non-attorneys to obtain signatures and receive and disburse funds, as we had recommended in
joint comments with the DOJ.(41)
- Report on Internet Wine Sales. Earlier this month, the Commission released a staff
report concluding that e-commerce offers consumers lower prices and more choices in the
wine market, and that states could expand e-commerce by permitting direct shipping of
wine to consumers.(42) The empirical study found that state bans on direct shipping prevent
consumers from saving as much as 21 percent on some wines and from conveniently
purchasing many popular wines from suppliers around the country. The report also
concluded that states may be able to limit sales to minors through less restrictive means than
an outright ban on direct shipping, such as by requiring that a supplier verify the recipient's
age and obtain an adult's signature before delivering the wine.
III. THE SCOPE OF ANTITRUST
A. Antitrust Immunity Generally
As a general matter, immunity from the antitrust laws is exceptional and disfavored.(43) The
antitrust laws, "a comprehensive charter of economic liberty aimed at preserving free and unfettered
competition," rest on the premise that "the unrestrained interaction of competitive
forces will yield the best allocation of our economic resources, the lowest prices,
the highest quality and the greatest
material progress, while at the same time providing an environment conducive
to the preservation of our
democratic political and social institutions."(44) Accordingly, few industries or competitive situations are
not subject to the antitrust laws. In fact, there has been a trend to deregulate industries and remove
antitrust immunities rather than to create more of them.(45)
Proponents of antitrust immunity frequently claim a need for special treatment because firms
engaged in a particular industry or activity need to collaborate on matters that have special value or
importance to our economy, national security, or other societal interests. They assert that the antitrust
laws will impose burdensome compliance obligations or chill beneficial activity. They also frequently
claim that an exemption would only clarify that the conduct, which is already permissible, does not
violate the antitrust laws. They therefore assert that the situation warrants special treatment.
We do not believe these reasons provide a sound basis for an antitrust exemption. Antitrust
analysis today is highly capable of distinguishing harmful and unreasonable conduct from conduct that
has a legitimate justification, and can therefore accommodate any legitimate needs for competitor
collaboration. Further, case precedents, interpretive Guidelines, and advisory opinions from the FTC
and the DOJ, along with advice from antitrust counsel, can enable firms to make well-informed
judgments about whether a proposed activity will present antitrust risks. Therefore, antitrust
exemptions generally are not necessary.
Moreover, unnecessary antitrust exemptions have significant potential to be harmful. First, an
exemption for conduct that does not violate the antitrust laws inevitably will encourage more demands
for similar treatment, gradually eroding the fundamental principle that antitrust constitutes the
cornerstone of a competitive market economy. Second, an unnecessary exemption can create
confusion or uncertainty whether the relevant conduct would otherwise violate the antitrust laws. Third,
unnecessary, imprecise, or excessively broad antitrust immunities may harm consumers by providing a
pretextual reason for parties inappropriately to discuss and collaborate on matters that are not, or
should not be, exempt.(46) Such conduct is difficult to detect and prosecute and can hinder, rather than
facilitate, the important economic and security contributions that it was hoped the particular industry
would make. Therefore, we believe that selective antitrust exemptions generally are unwise as well as
B. The State Action and Noerr-Pennington Doctrines
The state action doctrine - first articulated in Parker v. Brown(48) - provides a defense to
certain antitrust claims involving the regulatory conduct of state governments. Similarly, the Noerr-Pennington doctrine - first articulated in Eastern R.R. Presidents Conf. v. Noerr Motor Freight(49)
and United Mine Workers of America v. Pennington(50) -
provides immunity for private parties'
efforts to "petition" the government. When properly applied, both doctrines
serve important Constitutional interests. The state action defense is grounded
in principles of federalism and is intended
to prevent antitrust enforcement from interfering with legitimate state regulatory
immunity, on the other hand, is grounded in First Amendment principles and is intended to protect a
citizen's right to petition the government for the redress of grievances.
While the core principles underlying these doctrines have validity, some lower court decisions
have expanded the reach of both doctrines beyond the precepts originally articulated by the Supreme
Court. Moreover, when the governing standard is unclear, enforcement (and deterrence) can be
problematic. Thus, for example, the American Bar Association Antitrust Section's 2001 report on
antitrust policy recommended a reexamination of the scope of the state action doctrine.(51)
The scope of these doctrines has important consequences for consumers. Through study and
analysis, and by bringing carefully-selected enforcement actions, the FTC can help to clarify the limits of
the state action and Noerr-Pennington doctrines. To that end, we established FTC Task Forces to
examine state action and Noerr issues. The work of both Task Forces has resulted in a variety of
actions, including antitrust enforcement, amicus briefs, and competition advocacy.
1. State Action Task Force
The State Action Task Force has been conducting a
careful analysis of existing case law on the scope of the state action defense.
The Task Force has observed that some courts have applied the
doctrine too broadly, thereby protecting anticompetitive conduct of parties acting
in their own interest,
rather than the interest of "the state itself." An overbroad application can be especially problematic
when the party purportedly acting pursuant to a delegation of state authority is a private market
participant with strong incentives to restrain trade. The Task Force's work has resulted in investigations
that we hope will clarify the two key elements of the state action defense - "clear articulation" of the
state's intent to displace competition, and "active supervision" of any anticompetitive
private agreements. In the Analysis to Aid Public Comment in the Commission's
recent Indiana Movers consent order, for example, we described three
factors relevant to showing that the state has "actively
supervised" the conduct for which the state action defense is asserted: (1)
the development of an adequate factual record, including notice and opportunity
to be heard; (2) a written decision on the
merits that would provide analysis and reasoning, and supporting evidence, that
the private conduct furthers the legislature's objectives; and (3) a specific
assessment - both qualitative and quantitative -
of how the private action comports with the substantive standards established
by the state legislature, particularly when the standards include competition
or consumer welfare.(52) Earlier this month, the
Commission issued administrative complaints in three similar cases involving associations of household
goods movers in three states.(53) The complaints allege that the associations have violated the FTC Act
by engaging in collective action in the form of filing tariffs containing collective rates on behalf of their
members. One or more of these cases may eventually present an opportunity for further clarification of
the contours of the state action doctrine.
2. Noerr-Pennington Task Force
The Noerr-Pennington Task Force is conducting a similar analysis of existing case law
regarding Noerr-Pennington immunity. As in the state action context,
the Task Force has observed that some courts have applied the doctrine too broadly.
In some instances, parties have been granted
immunity in spite of the fact that the anticompetitive conduct at issue had no "petitioning" component
whatsoever. In other instances courts have immunized abusive tactics, such as
repetitive lawsuits and misrepresentations, that clearly were intended to delay
a competitor's entry or raise its costs, rather
than legitimately to petition the government. The Task Force has worked to identify
situations that may
be inconsistent with the underlying rationale for Noerr immunity even when petitioning of the
government may be involved. For example, members of the Task Force played a key role in
preparation of the Commission's amicus brief in In re Buspirone, discussed above.
Several recent FTC enforcement actions also involve Noerr issues. For example, in the
Commission's BMS settlement, discussed above, most of the acts challenged involved use of
governmental processes.(54) Thus, the complaint affirmatively pled that Noerr did not immunize BMS's
actions. Among other reasons cited, the complaint indicated that BMS's alleged knowing and material
misrepresentations to the FDA fell outside of Noerr protection. The Commission's Unocal case, also
discussed above, raises a similar issue.(55) If proven, the allegation that Unocal urged the California
air-quality board to adopt a standard for clean-burning gasoline, while misrepresenting its intentions
regarding any intellectual property rights in the standard may present the Commission with an
opportunity to evaluate more fully the significance of misrepresentations to a government entity for a
Noerr immunity claim.
BMS also raised the question whether Noerr protects conduct that merely triggers ministerial
government action rather than seeking a discretionary decision.(56) Noting the court's observation in In
re Buspirone Antitrust Litigation,(57) the Commission stated that Orange Book filings are not entitled to
Noerr protection because they involve no petitioning; the FDA merely accepts the NDA holder's
representations and exercises no intervening judgment.(58)
In addition, the Commission noted in BMS that a clear and systematic pattern of anticompetitive
misuse of governmental processes - such as BMS's alleged inequitable conduct at the PTO, wrongful
Orange Book listings, sham litigation, and payments for generics not to enter is inconsistent with Noerr
protection - caused the challenged conduct to fall outside the scope of Noerr protection. In the
Commission's view, the logic and policy underlying the Supreme Court's California Motor
Transport(59) decision, which held a pattern of filings undertaken without regard to their merits to be
outside the protections of Noerr, supported the application of a pattern exception for BMS's alleged
pattern of conduct.(60)
IV. IMPROVING INTERNAL PROCESSES AND TRANSPARENCY
A. Electronic Premerger Filing
As part of an overall movement to make government more accessible electronically, the FTC,
working with the DOJ, is conducting final refinement and testing of an electronic system for filing HSR
premerger notifications. The system, along with rules changes necessary to allow filing electronically,
should be complete and ready for use this fall. E-filing will reduce filing burdens for businesses and
government and create a valuable database of information on merger transactions to inform future
B. Improving HSR Merger Investigations
The agencies have taken steps to reduce the burden on merging parties in document
productions responsive to Second Requests. In response to legislation amending the HSR Act,(61) the
Commission amended its rules of practice to incorporate new procedures.(62) The amended rules
require Bureau of Competition staff to schedule conferences to discuss the scope of a Second Request
with the parties and also establish a procedure for the General Counsel to review the request and
promptly resolve any remaining issues. Measures adopted include a process for seeking modifications
or clarifications of Second Requests, and expedited senior-level internal review of disagreements
between merging parties and agency staff; streamlined internal procedures to eliminate unnecessary
burdens and undue delays; and implementation of a systematic management status check on the
progress of negotiations on Second Request modifications.
In 2002, the Bureau of Competition held a series of "brown bag" meetings
in cities around the country to obtain comments and suggestions from experienced
antitrust practitioners on additional
possible improvements in the merger investigation process.(63) In December 2002, the Bureau
announced new Guidelines for Merger Investigations that incorporate the learning from those sessions.(64)
The new measures include promptly releasing investigational hearing transcripts to testifying witnesses,
simplifying how documents responsive to a Second Request are produced, easing the burdens
associated with parties' claims of privilege, avoiding or minimizing additional document searches,
providing information about the standards used in evaluating Second Request compliance, and
facilitating the search for and submission of electronic materials.
C. Facilitating Negotiation of Merger Remedies
A parallel series of public workshops held last year
focused on issues involved in fashioning remedies, especially in merger cases.
Topics about which the FTC sought the public's views included:
identifying which assets should be divested and the terms of a proposed divestiture;
evaluating proposed buyers; when "up-front" divestiture is necessary or desirable; use of "crown jewel"
provisions; third-party rights; pre-divestiture risks to competition; and divestiture success. Information
gained from these workshops formed the basis of the "Statement of the Federal Trade Commission's
Bureau of Competition on Negotiating Merger Remedies," issued this past March.(65) The Statement is
designed to streamline merger settlement negotiations by increasing the transparency of the process.
D. Transparency in FTC Decision Making
The Commission's law enforcement efforts are also made more effective by public awareness
of what types of conduct are likely to be challenged as law violations. Transparency helps to serve the
FTC's objectives in a number of ways: understanding fully what kinds of transactions or conduct the
Commission is likely to challenge, and why, greatly facilitates antitrust lawyers' counseling of their
clients, and prevents many harmful mergers or anticompetitive practices without need for government
intervention. Each successful enforcement action not only promotes competition in the specific
market(s) at issue, but also serves to communicate to the business and legal communities that the FTC
can and will move successfully to challenge the type of merger transaction or conduct at issue. The
Commission has sought to expand public awareness and understanding of its actions in several new
ways (in addition to its traditional means of communicating, including adjudicative opinions, press
releases announcing enforcement actions, analyses to aid public comment on consent agreements,
speeches, guidelines, and other policy statements).
While it may seem obvious that documents associated with enforcement actions (e.g., press
releases, analyses to aid public comment, and pleadings) convey important information to the public, it
is also true that explaining why the Commission decided not to take action in a particular case may well
provide at least as much useful information. Thus, on several occasions in the recent past, the
Commission issued statements explaining why it declined to take actions involving mergers for which the
agency had issued a second request or otherwise conducted a significant inquiry.(66) The agency has also
put more emphasis on drafting informative analyses to aid public comment. Most recently, the
Commission published on its Web site its responses to comments submitted by members of the public
on a consent agreement (in addition to the comments themselves, which the Commission has published
for some time).(67)
V. INTERNATIONAL ACTIVITIES: NEW INITIATIVES, ENFORCEMENT AND ASSISTANCE
Because competition increasingly takes place in a worldwide setting, cooperation with
competition agencies in the world's major economies is a key component of our enforcement program.
Given differences in laws, cultures, and priorities, it is unlikely that there will be complete convergence
of antitrust policy in the foreseeable future. Areas of agreement far exceed those of divergence,
however, and instances in which our differences will result in conflicting results are likely to remain rare.
The Commission has increased its cooperation with agencies around the world, both on individual cases
and on policy issues, and is committed to addressing and minimizing policy and enforcement
- ICN. In 2001, the FTC, the DOJ,
and 12 other antitrust agencies from around the world launched the International
Competition Network ("ICN"). The ICN is an outgrowth of a
recommendation of the International Competition Policy Advisory Committee ("ICPAC")
that competition officials from developed and developing countries convene
a forum in which to work
together on competition issues raised by economic globalization and the proliferation
of antitrust regimes. ICN provides a venue for antitrust officials worldwide
to work toward consensus on
proposals for procedural and substantive convergence on best practices in
antitrust enforcement and policy. Seventy-one jurisdictions have joined the
ICN. The FTC
is a leading participant in the ICN's
projects, which include multi-jurisdictional mergers, capacity building and
implementation, and antitrust enforcement in regulated sectors.
- Trade Agreements. The FTC co-chairs the U.S. delegation
to the WTO working group on trade and competition policy and is actively
involved in the preparations for the Cancun
Ministerial Conference. We also continue to work with the nations of our
hemisphere to develop competition provisions for a Free Trade Agreement of
the Americas, and are actively involved in the
development of competition chapters of bilateral free trade agreements such
as those concluded with Chile and Singapore and under negotiation with Australia.
- OECD. The FTC is participating in the valuable continuing
work of the OECD Competition Committee on, among other things, merger process
convergence and regulatory reform.
- Technical Assistance. For the past
12 years, the FTC, along with the DOJ, has assisted developing nations
that have made the commitment to market and commercial law reforms.
With funding from the U.S. Agency for International Development and the U.S.
Trade & Development
Agency, the two antitrust agencies have provided technical assistance to
about 30 nations to help them develop their competition and consumer
laws. The program is presently active in South
America, Mexico, South Africa, North Africa, Indonesia, Southeastern Europe,
and the former Soviet Union. The program emphasizes the development of
investigative skills, and relies on a combination of
resident advisors, regional workshops, and targeted short-term missions.
These activities have enabled a large number of career staff to share
although great care is taken to avoid any
intrusions on time and planning for domestic enforcement projects.
VI. CONCLUDING REMARKS
Mr. Chairman and Members of the Task Force, we appreciate this opportunity to provide an
overview of the Commission's efforts to maintain a competitive marketplace for American businesses
and consumers. We believe that the Commission's antitrust enforcement has demonstrable benefits for
consumers and the American economy - benefits that far outweigh the resources allocated to
maintaining our competition mission. I would be pleased to respond to any questions you may have.
1. This written statement represents the views of the Federal Trade Commission. My oral
presentation and responses are my own and do not necessarily reflect the views of the Commission or
of any other Commissioner.
2. 15 U.S.C. § 18a, as amended,
Pub. L. No. 106-553, 114 Stat. 2762 (2000).
3. Throughout the 1990s, the FTC typically had no more than one or two antitrust cases in
administrative litigation. The eight nonmerger administrative cases currently pending are Schering-Plough Corp., Dkt. No. 9297 (July 2, 2002) (Initial Decision); Polygram Holding, Inc., Dkt. No.
9298 (June 28, 2002) (Initial Decision); Rambus, Inc., Dkt. No. 9302 (June 18, 2002) (complaint);
Union Oil Co. of California, Dkt. No. 9305 (Mar. 4, 2003) (complaint); California Pacific Medical
Group, Inc. dba Brown and Toland Medical Group, Dkt. No. 9306 (July 8, 2003) (complaint);
Alabama Trucking Association, Inc., Dkt. No. 9307 (July 8, 2003) (complaint); Movers
Conference of Mississippi, Inc., Dkt. No. 9308 (July 8, 2003) (complaint); and Kentucky
Household Goods Carriers Association, Inc., Dkt. No. 9309 (July 8, 2003) (complaint).
4. American Medical Assn., 94 F.T.C. 701 (1979), aff'd as modified, 638 F.2d 443 (2d Cir.
1980), aff'd by an equally divided Court, 455 U.S. 676 (1982) (order modified, 99 F.T.C. 440
(1982), 100 F.T.C. 572 (1982), and 114 F.T.C. 575 (1991)).
5. See National Health Expenditures, by Source of Funds and Type of Expenditures, Health
Care Financing Administration, available at <http://www.hcfa.gov/stats/nhe-oact/tables/t3.htm>.
6. Pfizer Inc., Dkt. No. C-4075 (May 27, 2003) (consent order).
7. Baxter International Inc. and Wyeth, Dkt. No. C-4068 (Feb. 3, 2003).
8. Amgen Inc. and Immunex Corp., Dkt. No. C-4056 (Sept. 3, 2002).
9. Drug Price Competition and Patent
Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (1984) (codified
as amended 21 U.S.C. § 355 (1994)).
10. 21 U.S.C. § 301 et seq.
11. See H.R. Rep. No. 98-857, pt. 1, at 14 (1984), reprinted in 1984 U.S.C.C.A.N. 2647,
12. Congressional Budget Office, How Increased Competition from Generic Drugs
Has Affected Prices and Returns in the Pharmaceutical Industry (July 1998), available at
13. Bristol-Myers Squibb Co., Dkt. No. C-4076 (Apr. 14, 2003) (consent order).
14. Schering-Plough Corp., Dkt. No. 9297 (Apr. 3, 2002) (consent order as to American
Home Products Corp.); see also Abbott Laboratories, Dkt. No. C-3945 (May 22, 2000) (consent
order), Geneva Pharmaceuticals, Inc., Dkt. No. C-3946 (May 22, 2000) (consent order);
Hoechst Marion Roussel, Inc., Dkt. No. 9293 (May 8, 2001) (consent order).
15. Bristol-Myers Squibb Co., Dkt. No. C-4076 (Apr. 14, 2003) (consent order).
16. The proposed order includes a provision prohibiting BMS from triggering a 30-month stay
for any BMS product based on any patent BMS lists in the Orange Book after the filing of an
application to market a generic drug.
17. Biovail Corp., Dkt. No. C-4060 (Oct. 2, 2002) (consent order).
18. Biovail Corp. and Elan Corp. plc., Dkt. No. C-4057 (Aug. 20, 2002) (consent order).
19. FTC Press Release, FTC Seeks to Block Cytyc Corp.'s Acquisition of Digene Corp.
(June 24, 2002), available at <http://www.ftc.gov/opa/2002/06/cytyc_digene.htm>.
20. Carlsbad Physician Association, Inc., et al., Dkt. No. C-4081, (June 13, 2003) (consent
order); Anesthesia Service Medical Group, Inc., Dkt. No. C-4085 (July 11, 2003) (consent order);
Grossmont Anesthesia Services Medical Group, Inc., Dkt. No. C-4086 (July 11, 2003) (consent
order); SPA Health Organization, doing business as Southwest Physician Associates, File No.
011-0197 (June 9, 2003) (proposed consent order accepted for public comment); Washington
University Physician Network, File No. 021-0188 (July 11, 2003) (proposed consent order
accepted for public comment); The Maine Health Alliance and William R. Diggins, File No. 021-0017 (July 18, 2003) (proposed consent order accepted for public comment); and Physician
Network Consulting, File No. 021-0178 (July 22, 2003) (proposed consent order accepted for
21. California Pacific Medical Group, Inc. dba Brown and Toland Medical Group, Dkt.
No. 9306 (July 8, 2003) (complaint).
22. In re Buspirone Patent Litigation/In re Buspirone Antitrust Litigation, Memorandum of
Law of Amicus Curiae the Federal Trade Commission in Opposition to Defendant's Motion to
Dismiss, available at <http://www.ftc.gov/os/2002/01/busparbrief.pdf>.
23. In re Buspirone, 185 F. Supp. 2d 363 (S.D.N.Y. 2002).
24. Generic Drug Entry Prior to
Patent Expiration: An FTC Study (July 2002),
available at <http://www.ftc.gov/opa/2002/07/genericdrugstudy.htm>.
25. White House Press Release, President Takes Action to Lower Prescription Drug Prices
by Improving Access to Generic Drugs (Oct. 21, 2002), available at
26. Applications for FDA Approval to Market a New Drug: Patent Submission and Listing
Requirements and Application of 30-Month Stays on Approval of Abbreviated New Drug Applications
Certifying That a Patent Claiming a Drug Is Invalid or Will Not Be Infringed, 68 Fed. Reg. 36675
(2003); see also FTC Press Release, Statement of FTC Chairman Supporting FDA's Final
Generic Drug Rule (June 12, 2003), available at
27. H.R. 1, 108th Cong. §§ 1101-1118
(2003); H.R. 1, incorporating S. 1, 108th Cong. §§ 701-706, 901-911
28. See FTC Press Release, FTC Chairman Announces Public Hearings on Health Care
and Competition Law and Policy to Begin in February 2003 (Nov. 7, 2002), available at
Public Hearings: Health Care and Competition Law and Policy, 67 Fed. Reg. 68672
29. Agendas, public comments,
transcripts, and other materials related to the hearings are available on
the FTC's Web site at <http://www.ftc.gov/ogc/healthcarehearings/index.htm>.
30. Conoco Inc. and Phillips Petroleum Company, Dkt. No. C-4058 (Feb. 7, 2003)
31. Southern Union Co., Dkt. No. C-4087 (July 16, 2003) (consent order).
32. Union Oil Co. of California, Dkt. No. 9305 (Mar. 4, 2003) (complaint).
33. FTC Press Release, FTC to Hold Public Conference/Opportunity for Comment on U.S.
Gasoline Industry in Early August (July 12, 2001), available at
FTC Press Release, Factors That Affect Gasoline
Prices To Be Discussed at FTC Conference (May 1, 2002), available at
Agendas, public comments, transcripts, and other materials related to the hearings
are available on the FTC's Web site at <http://www.ftc.gov/bc/gasconf/index.htm>.
34. FTC Press Release, FTC Chairman Opens Public Conference Citing New Model To
Identify and Track Gasoline Price Spikes, Upcoming Reports (May 8, 2002), available at
35. Rambus Inc., Dkt. No. 9302 (June 18, 2002) (complaint).
37. In 1996, the FTC brought a similar case against Dell Computer, alleging that Dell had failed
to disclose that it had an existing patent on a personal computer component that was adopted as the
standard by a video electronics group. Dell Computer Co., 121 F.T.C. 616 (1996) (consent order).
38. FTC Press Release, Muris Announces Plans for Intellectual Property Hearings (Nov.
15, 2001), available at <http://www.ftc.gov/opa/2001/11/iprelease.htm>.
Agendas, public comments, transcripts, and other materials related to the hearings
are available on the FTC's Web site
39. FTC Press Release, FTC Releases Agenda for Public Workshop on Possible
Anticompetitive Efforts to Restrict Competition on the Internet (Sept. 30, 2002), available at
Agendas, public comments, transcripts, and other materials related to the hearings
are available on the FTC's Web site at <http://www.ftc.gov/opp/ecommerce/anticompetitive/index.htm>.
40. See Comments of the Staff of the Federal Trade Commission, Intervenor, In re:
Declaratory Ruling Proceeding on the Interpretation and Applicability of Various Statutes and
Regulations Concerning the Sale of Contact Lenses (Connecticut Board of Examiners for Opticians,
Mar. 27, 2002), available at <http://www.ftc.gov/be/v020007.htm>.
41. See Letter from Timothy J. Muris, Chairman, Federal Trade Commission and Charles A.
James, Assistant Attorney General, Department of Justice, to E. Fitzgerald Parnell III, President, North
Carolina State Bar (July 11, 2002), available at
42. Possible Anticompetitive Barriers to E-Commerce: Wine (July 2003), available at
43. Cf. Silver v. New York Stock Exchange, 373 U.S. 341 (1963) (implied antitrust
exemptions are not favored).
44. 44 Northern Pac. R. Co. v. United States, 356 U.S. 1, 4 (1958).
45. For example, Section 601(b)(2)
of the Telecommunications Act of 1996 repealed the FCC's ability to confer
immunity on telephone company mergers submitted to the FCC for review, and
the Department of Transportation's authority to approve domestic airline mergers
expired in 1989
pursuant to 49 U.S.C. App. §1551 (1988). Such mergers are now subject to ordinary
the antitrust laws.
46. Any meeting among competitors,
regardless of whether an antitrust exemption applies, carries some risk that
the discussion may spill over into competitively sensitive matters. An antitrust
exemption, however, may be perceived as providing shelter for firms inclined
to discuss off-limits
topics, particularly when there is some interpretive flexibility about what subject
matters are reasonably "related to" the objectives of the legislation.
47. We are aware, of course, that there have been rare instances in which Congress enacted
statutory grants of immunity for joint action of competitors. In those situations, the exemption typically
applied to specific industries or activities that were subject to a special regulatory regime, or to a
specific transaction or agreement that had been approved by a federal agency, again usually in the
context of a regulated industry. Prior approval of an agreement by a federal agency has not been
required when the scope of the immunity was very limited, but broader grants of immunity have been
accompanied by strict controls on the development and implementation of agreements. Without such
strict limits, the dangers of antitrust exemptions are even greater.
48. 317 U.S. 341 (1943).
49. 365 U.S. 127 (1961).
50. 381 U.S. 657 (1965).
51. American Bar Association Section of Antitrust Law, The State of Antitrust Enforcement -
2001, Report of the Task Force on the Federal Antitrust Agencies - 2001, at 42 (2001), available
52. Analysis of Proposed Consent Order to Aid Public Comment, Indiana Household Movers
and Warehousemen, Inc., Dkt. No. C-4077 (Apr. 25, 2003) (consent order).
53. Alabama Trucking Association, Inc. Dkt. No. 9307 (July 8, 2003) (complaint);
Movers Conference of Mississippi, Inc., Dkt. No. 9308 (July 8, 2003) (complaint); and Kentucky
Household Goods Carriers Association, Inc., Dkt. No. 9309 (July 8, 2003) (complaint).
54. Bristol-Myers Squibb Co., Dkt. No. C-4076 (Apr. 14, 2003) (consent order).
55. Union Oil Co. of California, Dkt. No. 9305 (Mar. 4, 2003) (complaint).
56. Bristol-Myers Squibb Co., Dkt. No. C-4076 (Apr. 14, 2003) (consent order).
57. 185 F. Supp. 2d 363, 370 (S.D.N.Y. 2002)
58. Bristol-Myers Squibb Co., Dkt. No. C-4076 (Mar. 7, 2003) (Analysis of Proposed
Consent Order To Aid Public Comment).
59. California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972).
61. See 15 U.S.C. § 18a,
as amended, Pub. L. No. 106-553, 114 Stat. 2762 (2000).
62. See 16 C.F.R. § 2.20
(Jan. 24, 2001).
63. See Press Release, FTC
Initiates "Best Practices Analysis" for Merger Review Process
(Mar. 15, 2002), available at <http://www.ftc.gov/opa/2002/03/bcfaq.htm>.
64. Federal Trade Commission, Bureau of Competition, Statement of the Federal Trade
Commission's Bureau of Competition On Guidelines for Merger Investigations (Dec. 11, 2002),
available at <http://www.ftc.gov/os/2002/12/bcguidelines021211.htm>.
65. FTC Press Release, FTC Competition Director Announces Guidelines for Negotiating
Merger Remedies (Apr. 2, 2003), available at
66. See, e.g., FTC Press Release, Investigation of Kroger/Raley's Supermarkets
Transaction Closed (Nov. 13, 2002) available at
Federal Trade Commission, Statement of the
Federal Trade Commission Concerning Royal Caribbean Cruises, Ltd./P&O Princess Cruises plc
and Carnival Corp./P&O Princess Cruises plc, File No. 021-0041 (Oct. 4, 2002), available at
<http://www.ftc.gov/os/2002/10/cruisestatement.htm> and <http://www.ftc.gov/os/2002/10/cruisedissent.htm> (Commissioners
Anthony and Thompson,
67. Wal-Mart Stores, Inc.,
Dkt. No. C-4066 (Feb. 27, 2003) (consent order), letters to commenters available