    [Senate Hearing 108-190]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 108-190

        CONFIRMATION HEARING ON THE NOMINATION OF R. HEWITT PATE TO BE
     ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION, DEPARTMENT OF JUSTICE

    =======================================================================

                                    HEARING

                                   before the

                           COMMITTEE ON THE JUDICIARY
                              UNITED STATES SENATE

                          ONE HUNDRED EIGHTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  MAY 21, 2003

                                   __________

                              Serial No. J-108-13

                                   __________

             Printed for the use of the Committee on the Judiciary

                            U.S. GOVERNMENT PRINTING OFFICE
    90-459                         wASHINGTON  : 2003
    ____________________________________________________________________________
    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800
    Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001

                           COMMITTEE ON THE JUDICIARY

                         ORRIN G. HATCH, Utah, Chairman
    CHARLES E. GRASSLEY, Iowa            PATRICK J. LEAHY, Vermont
    ARLEN SPECTER, Pennsylvania          EDWARD M. KENNEDY, Massachusetts
    JON KYL, Arizona                     JOSEPH R. BIDEN, Jr., Delaware
    MIKE DeWINE, Ohio                    HERBERT KOHL, Wisconsin
    JEFF SESSIONS, Alabama               DIANNE FEINSTEIN, California
    LINDSEY O. GRAHAM, South Carolina    RUSSELL D. FEINGOLD, Wisconsin
    LARRY E. CRAIG, Idaho                CHARLES E. SCHUMER, New York
    SAXBY CHAMBLISS, Georgia             RICHARD J. DURBIN, Illinois
    JOHN CORNYN, Texas                   JOHN EDWARDS, North Carolina
                 Bruce Artim, Chief Counsel and Staff Director
          Bruce A. Cohen, Democratic Chief Counsel and Staff Director

                                C O N T E N T S

                                  ----------

                        STATEMENTS OF COMMITTEE MEMBERS

                                                                       Page

    Craig, Hon. Larry E., a U.S. Senator from the State of Iowa......    32
    DeWine, Hon. Mike, a U.S. Senator from the State of Ohio.........    44
        prepared statement...........................................   132
    Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......     1
        prepared statement...........................................   134
    Kohl, Hon. Herb, a U.S. Senator from the State of Wisconsin......     3
        prepared statement...........................................   136
    Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.    31
        prepared statement...........................................   138
    Specter, Hon. Arlen, a U.S. Senator from the State of
      Pennsylvania...................................................    31

                                   PRESENTER

    Allen, Hon. George, a U.S. Senator from the State of Virginia
      presenting R. Hewitt Pate, Nominee to be Assistant Attorney
      General, Antitrust Division, Department of Justice.............     2

                            STATEMENT OF THE NOMINEE

    Pate, R. Hewitt, Nominee to be Assistant Attorney General,
      Antitrust Division, Department of Justice......................     5
        Questionnaire................................................     7

                             QUESTIONS AND ANSWERS

    Responses of R. Hewitt Pate to questions submitted by Senator
      DeWine.........................................................    50
    Responses of R. Hewitt Pate to questions submitted by Senator
      Leahy..........................................................    54
    Responses of R. Hewitt Pate to questions submitted by Senator
      Kennedy........................................................    59
    Responses of R. Hewitt Pate to questions submitted by Senator
      Kohl...........................................................    61

                           SUBMISSIONS FOR THE RECORD

                            U.S. GOVERNMENT PRINTING OFFICE
    89-018                         wASHINGTON  : 2003
    ____________________________________________________________________________
    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800
    Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001

    Singh, Seema, Legal Counsel, Office of Hon. Arlen Specter, May
      20, 2003, memorandum...........................................   139
    Specter, Hon. Arlen:
        letter to Hon. Mike DeWine, April 21, 2003...................   141
        letter to R. Hewitte Pate, Esq., May 13, 2003................   143
    Warner, Hon. John, a U.S. Senator from the State of Virginia,
      statement of support for R. Hewitt Pate, Nominee to be
      Assistant Attorney General, Antitrust Division, Department of
      Justice........................................................   144

      NOMINATION OF R. HEWITT PATE, OF VIRGINIA, TO BE ASSISTANT ATTORNEY
               GENERAL, ANTITRUST DIVISION, DEPARTMENT OF JUSTICE

                                  ----------

                            WEDNESDAY, MAY 21, 2003

                                  United States Senate,
                                    Committee on the Judiciary,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 10:19 a.m., in
    room SD-226, Dirksen Senate Office Building, Hon. Orrin G.
    Hatch, Chairman of the Committee, presiding.
        Present: Senators Hatch, Specter, DeWine, Craig, Leahy, and
    Kohl.

     OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM
                           THE STATE OF UTAH

        Chairman Hatch. We're happy to welcome you all out here to
    this nomination hearing this morning. We are honored to have
    Senator Allen here. It is our pleasure to consider the
    nomination of Hugh Pate to be Assistant Attorney General for
    the Antitrust Division at the United States Department of
    Justice.
        I would like to start by welcoming Mr. Pate to the
    Committee and congratulating him for being nominated by
    President Bush. Your impressive background and past government
    service make me very confident that you will be a great asset
    to the Department of Justice, this Committee, and, of course,
    the people of our country.
        Over the last decade, the position of the Assistant
    Attorney General for the Antitrust Division has grown in very
    great importance. The rapid transformation of our country's
    economy, particularly in new technologies and international
    markets, has raised public attention and policy focus on a
    variety of important antitrust issues. The Assistant Attorney
    General in charge of the Antitrust Division plays a crucial
    role in formulating competition policy and enforcing the
    existing antitrust laws to make sure that our free market
    economy survives efficiently and serves the public.
        Now, I think I will reserve the rest of my remarks until
    later, and if could--can you reserve yours until we let Senator
    Allen say his remarks? And let me just mention, Senator Warner
    is managing the DOD authorization bill on the floor, and he
    particularly caught me and said, Mr. Pate, he wanted to be here
    and asked me if I would put his very complimentary statement
    into the record because he fully supports you and believes that
    you will make a great Antitrust Division chief.
        So if we can do that without objection, and if you will
    forgive Senator Warner, there is not much he can do. He has to
    be there. So we are going to count on Senator Allen doing the
    job here, and we will turn to him at this time.

        PRESENTATION OF R. HEWITT PATE, NOMINEE TO BE ASSISTANT
       ATTORNEY GENERAL, ANTITRUST DIVISION, U.S. DEPARTMENT OF
    JUSTICE, BY HON. GEORGE ALLEN, A U.S. SENATOR FROM THE STATE OF
                                VIRGINIA

        Senator Allen. Thank you, Mr. Chairman. And I have Senator
    Warner's statement here that I would like to have put in the
    record for my colleague.
        Chairman Hatch. Without objection.
        Senator Allen. Mr. Chairman, Senator Kohl, members of the
    Committee, thank you for this hearing on Hugh Pate. I should
    say Mr. R. Hewitt Pate, a fellow Virginian, to be Assistant
    Attorney General of the Antitrust Division of the U.S.
    Department of Justice. He is joined here by his wife, Lindsey,
    and his daughters, Lizzie and Ellen. And I know they are very
    proud of their father, and we are proud to have you all here
    with us for this--
        Chairman Hatch. We are happy to have you here, too, and,
    Lizzie and Ellen, you are beautiful young women. And you blush
    beautifully, too.
        [Laughter.]
        Senator Allen. As you said, Mr. Chairman, the enforcement
    of the antitrust laws is very important and essential for the
    protection of competition in our free market economy, and I
    have known Mr. Pate for many years, and I can confidently say
    without any reservation whatsoever that he is very well
    qualified, and I am confident that he will be effective, he
    will handle the job and leadership positions and decisions with
    dignity and impartiality in enforcing the law.
        I, when I was Governor of Virginia, appointed Mr. Pate to
    the Virginia Commission on Higher Education and to the
    Governor's Commission on Self-Determination and Federalism. You
    may see from his record that he did get his undergraduate
    degree from the University of North Carolina. I got to know
    Hew--that is what we call him, ``Hew'' Pate--when he was at law
    school at the University of Virginia in Charlottesville and I
    was a member of the House of Delegates at that time
    representing the Charlottesville area. And Mr. Pate at the
    University of Virginia at the law school graduated first in his
    class in 1987 and then went on to clerk for Fourth Circuit
    Judge J. Harvie Wilkinson. In addition, Mr. Pate clerked for
    Justice Lewis Powell and Justice Anthony Kennedy on the Supreme
    Court of the United States.
        After these impressive clerkships, Mr. Pate went on to
    practice antitrust law for 10 years at Hunton and Williams,
    which is a highly respected and one of the largest law firms in
    the Commonwealth of Virginia. It is an international firm,
    actually.
        He also taught competition law at the University of
    Virginia Law School, and since 2001, Mr. Pate has worked in the
    Department of Justice's Antitrust Division and has been the
    Acting Assistant Attorney General for Antitrust since November
    of 2002.
        In fact, there was one case that Senator Warner and I had
    one position and the Justice Department and Antitrust had
    another position. And Mr. Pate came and briefed us on it.
    Applying the law and the facts of that situation, he said,
    ``Here's why we come down this way,'' contrary to the way that
    Senator Warner and I were advocating. After that meeting, we
    felt that that issue had been given fair consideration. He
    applied the law logically and understandably, and there was no
    more grousing appeals for reconsideration and all the rest.
        So when you have a friend who has to tell two other friends
    that applying the law in the question of a judgment call
    contrary to what you desire, it is not an easy task to do. And
    that is why I am confident that he will impartially adhere to
    the laws, provide for proper competition in our economy, and I
    ask you, Mr. Chairman and members of the Committee, to move as
    swiftly as possible for the confirmation of R. Hewitt Pate,
    because I know he is a man of integrity, of capability, and
    with the qualifications we would want to be heading up this
    important Division.
        And I thank you, Mr. Chairman and members of the Committee,
    for having this hearing.
        Chairman Hatch. Well, thank you, Senator Allen. I worry
    about a nominee, though, that doesn't hew the line for two
    powerful Senators from Virginia like the two of you.
        [Laughter.]
        Senator Allen. Well, I am still for him, and I respected
    that he argued the case very well and in a logical way in
    applying the law.
        Chairman Hatch. I appreciate that, and that is what we
    want. We want people who are going to do what is right.
        Senator Allen. And I will present to you, to the clerk,
    Senator Warner's testimony or his introduction, unless you--do
    you already have it, Mr. Chairman?
        Chairman Hatch. We do, and thank you.
        Senator Allen. You do? Good.
        Chairman Hatch. You can leave it there, and we will make
    sure it is in the record.
        Senator Allen. I will leave it here.
        Chairman Hatch. Thanks, Senator Allen. We know you are
    busy, and we will excuse you. We know how busy you really are.
        Senator Allen. We know how busy you are as well, Mr.
    Chairman, and thank you.
        Chairman Hatch. Thank you so much. We appreciate it.
        Well, I will finish my opening remarks, and I will turn to
    the Ranking Member of the Antitrust Subcommittee, Senator Kohl.

     STATEMENT OF HON. HERB KOHL, A U.S. SENATOR FROM THE STATE OF
                               WISCONSIN

        Senator Kohl. Thank you so much, Mr. Chairman. We meet
    today to consider the nomination of Hew Pate to be Assistant
    Attorney General for Antitrust. The mission of the Justice
    Department's Antitrust Division has never been more important.
    In our challenging economic times, we depend on the dynamism
    and competition to provide the economic growth and jobs
    necessary to propel our economy forward. Only aggressive
    enforcement of our Nation's antitrust laws will ensure that
    competition flourishes and consumers obtain the highest quality
    products and services at the lowest possible prices.
        If confirmed, Mr. Pate will assume the leadership of the
    Antitrust Division at a very crucial time. One example is the
    ferment in the media sector. In the next few weeks, the Federal
    Communications Commission is expected to adopt new rules that
    will fundamentally relax the limits on media ownership that
    have existed for decades. This ruling is likely to unleash a
    wave of media consolidation and media acquisitions that have
    the potential to reshape the way Americans receive their news,
    information, and entertainment programming. Only by maintaining
    diversity in media ownership can we ensure the diverse
    marketplace of ideas so essential to our democracy. The
    Antitrust Division will stand as our last line of defense
    against excessive media concentration.
        Our work in the last year has also uncovered serious
    allegations of anti-competitive practices in the ways hospitals
    buy the medical devices essential to delivering quality health
    care to millions of Americans. Group purchasing organizations
    have been accused of adopting exclusionary contract practices
    which benefit dominant suppliers to the detriment of innovation
    and patients.
        While the Federal Trade Commission has taken the lead in
    investigating this industry, the Antitrust Division's
    cooperation in revising the joint FTC-DOJ health care
    guidelines will be essential to restoring competition to this
    vital sector.
        Mr. Pate, the performance of the Antitrust Division over
    the last 2 years under your predecessor's leadership does
    concern me. From the defects in the Microsoft settlement, which
    many believe was unnecessarily weak and riddled with loopholes,
    to the general decline in the Division's enforcement
    activities, we are left to wonder if the Division was truly
    committed to its crucial mission of protecting competition.
        It is essential that the next head of the Antitrust
    Division be committed to restoring the proud tradition of
    vigorous antitrust enforcement to the Justice Department. Your
    impressive record of achievement and your fine reputation
    demonstrate that you are well qualified to restore our
    confidence and lead the Antitrust Division. I have been
    impressed with your dedication since you have been the acting
    head of this Division.
        Mr. Pate, the position of Assistant Attorney General for
    Antitrust carries with it a special burden and a special
    responsibility. The companies over whom the Antitrust Division
    has jurisdiction have ample resources to hire skilled and
    talented counsel to represent their best interests. But no one
    represents the interest of the American consumer other than the
    Antitrust Division. Millions of consumers will depend on your
    efforts and your judgment. It is my sincere hope and full
    expectation that you will meet this challenge when you are
    confirmed.
        Thank you very much, Mr. Chairman.
        Chairman Hatch. Well, thank you, Senator Kohl.
        Mr. Pate, we will just swear you in at this point, if we
    can. Do you solemnly swear to tell the truth, the whole truth,
    and nothing but the truth, so help you God?
        Mr. Pate. I do.
        Chairman Hatch. Thank you, sir. We would be happy to take
    any statement you would care to give at this time.

     STATEMENT OF R. HEWITT PATE, NOMINEE TO BE ASSISTANT ATTORNEY
        GENERAL, ANTITRUST DIVISION, U.S. DEPARTMENT OF JUSTICE

        Mr. Pate. Thank you, Senator. I do have a brief opening
    statement.
        It is a great honor to me to have been nominated by the
    President to serve in the Justice Department as Assistant
    Attorney General for Antitrust, and I thank you, Mr. Chairman,
    and the Committee for the opportunity to appear today. I would
    like to thank Senator Allen and also Senator Warner for their
    support and for the warm introductions that they've given.
        Senator Allen mentioned my family. I would like to
    recognize the support that my wife, Lindsey, and my daughters,
    Ellen and Lizzie, provide me, which is valuable beyond measure,
    and I thank them for that.
        Chairman Hatch. We are happy to have them with you here
    today.
        Mr. Pate. I have with me today also my mentor as a young
    lawyer, Tom Slater, from my former firm, who taught me a great
    deal about antitrust litigation. And the Committee may be
    interested to know that John Shenefield, whose presence I
    really appreciate here today, was the head of that firm's
    antitrust practice when he left in the late 1970's to become
    the AAG for Antitrust during the Carter administration. Tom
    Slater then succeeded him as head of the firm's antitrust
    practice. I went to work for Slater, and now here some 13 years
    later, if confirmed, I have the opportunity to succeed Mr.
    Shenefield to be--
        Chairman Hatch. That sounds like nepotism to me.
        [Laughter.]
        Chairman Hatch. We have one law firm controlling all the
    antitrust rules in this country.
        Mr. Pate. Well, in fairness, Mr. Shenefield moved on and
    has had an illustrious career elsewhere, but I do appreciate
    being associated with that lineage.
        Chairman Hatch. We are happy to have both of you here, and,
    Mr. Shenefield, we remember your term. I was here when you
    served, and you did a very good job, and we just appreciate
    having both of you. Both of you have done good jobs, and we are
    grateful to have you in this position as well.
        I am going to have to turn this over to Senator DeWine--it
    looks like we have another vote--because I am in the middle of
    the tax conference. I hate to leave, but I am totally in
    support of your nomination. I think it is one of the best
    nominations we could possibly have. But Senator DeWine, who
    himself has been an Attorney General, and Senator Kohl do an
    excellent job on our Antitrust Subcommittee, and I am going to
    turn it over to Senator DeWine. It looks like we have a vote,
    and I will tell them to hold it for you.
        Mr. Pate. Well, thank you, Senator. I appreciate your being
    here to open the hearing.
        Chairman Hatch. Thank you so much. We are honored to have
    you accept this position, and we appreciate your wife and
    family, because we know the long hours that you have to put in,
    and it is very, very difficult for you. So we appreciate the
    service that you give as well.
        Go ahead. I am sorry to interrupt you.
        Senator DeWine. [Presiding.] I think what we are going to
    do, since we just started a vote, I think that we will stop at
    this point so we don't break the questioning.
        Mr. Pate. Okay. And should I complete my brief statement at
    that time when you resume?
        Senator DeWine. We are going to do that. We are going to
    have to just break it right now. We are going to go vote.
    Senator Kohl and I will vote, and we will be back.
        Thank you very much.
        Mr. Pate. Thank you, Senator.
        [Recess 10:33 to 10:59 a.m.]
        Senator DeWine. The hearing will come to order. We
    apologize for the interruption. We didn't count on--at least, I
    didn't count on a second vote.
        Mr. Pate, will you please continue your opening statement?
        Mr. Pate. I will. Thank you, Senator. Having introduced my
    family and Mr. Slater and Mr. Shenefield earlier, let me just
    continue by saying this, Mr. Chairman:
        The antitrust laws are truly a cornerstone of our market
    economy. We in the United States rely to a great extent on
    competition to ensure that citizens get the benefit of higher
    quality and lower prices in the goods and services that they
    need, and sound enforcement of our antitrust laws protects this
    competition.
        The Antitrust Division's Criminal Enforcement Program
    detects, punishes, and deters price fixing and other illegal
    conduct by those who conspire to cheat consumers rather than
    compete to win their business. Our Merger Review Program
    prevents anti-competitive combinations that can lead to higher
    prices or can lead to greater opportunities for collusive
    behavior. And our Civil Non-Merger Program prevents the
    unlawful creation or abuse of monopoly power.
        This year marks the 100th anniversary of the appointment
    under President Roosevelt of the first Assistant to the
    Attorney General responsible for antitrust. This organizational
    step laid the foundation for the current Antitrust Division,
    and the Division has a great history of vigorous enforcement of
    our antitrust laws. My work at the Division for just about 2
    years now has made me appreciate that it is the extraordinary
    public service of our dedicated career attorneys and career
    economists who make the Division's enforcement record possible.
    And I am very humbled to think that, if confirmed by the
    Senate, I will have the opportunity to do all that I can to
    help the Division carry forward its important work.
        I'd like to thank you again, Mr. Chairman, for the
    opportunity to appear before the Committee, and I would be
    happy to answer any questions that Senators may have.
        [The biographical information follows:]
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        Senator DeWine. Let me turn to my colleague, Senator Leahy,
    for any opening statement he would like to make.

      STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE
                            STATE OF VERMONT

        Senator Leahy. Thank you, Mr. Chairman. I am glad to be
    here with you and with Senator Kohl. Both of you, as I have
    said before, do such a superb job in handling this
    Subcommittee, and I will put most of my statement in the
    record. But I do worry about the geographic boundaries of our
    marketplace being pushed further and further out, and many of
    the competitive issues that were once only local have become
    regional, national, or even global in their nature. And when
    the economy is suffering and in down times, then you have a
    temptation to act anti-competitively. We are in a world
    dominated by high-tech information industries. Technological
    change is coming at a dizzying speed. And so we have to have
    fair and efficient enforcement of our antitrust laws. We think
    of mergers of competitors, but more and more vertical
    arrangements are entered into, and we have to look at those. It
    doesn't mean they are all bad by any means, and in some cases
    they can give consumers a greater range of choice. In others,
    they can very much limit it. And we have to make sure in the
    digital age that consumers are covered.
        I have raised concern about the recent proposal by H.P.
    Hood and National Dairy Holdings to join, which would have had
    one entity, Dairy Farmers of America, in control of 90 percent
    of the milk market in my part of the country, at a time when
    milk prices are at an all-time low.
        I might conclude with this, Mr. Chairman. On the question
    of media concentration, I have talked before this hearing with
    Mr. Pate. I sent a letter, along with Senator Jeffords, to
    Chairman Powell at the FCC expressing our concerns about media
    concentration. And I will arrange to give Mr. Pate a copy of
    that letter because, as he has pointed out to me, there are
    different rules that involve the Department of Justice and the
    FCC on that, and they have different concerns, expressing it as
    you do.
        And the last thing I would say: it is so nice to see your
    family here, and as I told you earlier, you are blessed with a
    wonderful family, and I hope these two lovely 8-year-olds gain
    something from this. This is not what they would normally be
    doing in school, so we are delighted to have you here.
        Mr. Pate. Thank you, Senator.
        Senator Leahy. Thank you, Mr. Chairman.
        Senator DeWine. Senator Specter.

    STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM THE STATE
                            OF PENNSYLVANIA

        Senator Specter. Well, just a word or two. Welcome, Mr.
    Pate. You are taking on a very major assignment here. The
    modern trends on mergers and acquisitions and concentrations
    really pose a very, very different economic picture for America
    today than when Jefferson raised a question about whether big
    was bad and Brandeis raised about the same issue. So it is a
    very, very important matter.
        One of the subjects that has been of continuing concern to
    me has been the monopoly practices of OPEC oil, and when we
    have a chance to talk about it, I would like to get your views
    on what might be done on an aggressive policy, because I think
    that OPEC does not qualify for any of the exclusions from the
    antitrust laws under sovereign immunity, et cetera. But I will
    save most of my comments for the Q and A.
        Thank you, Mr. Chairman.
        Senator DeWine. Senator Craig?

    STATEMENT OF HON. LARRY E. CRAIG, A U.S. SENATOR FROM THE STATE
                                OF IDAHO

        Senator Craig. Welcome before the Committee.
        Mr. Pate. Thank you, Senator.
        Senator Craig. Your reputation tells me that you are going
    to be confirmed, and we will look forward to working with you.
    I do say that I reflect some of the concerns expressed by my
    colleagues here. Dominant in them is the consolidation of the
    segments of the agricultural economy that have offered great
    frustration to the producers in the last decade or two. And
    while that frustration doesn't go away, there is ongoing study
    as to whether, in fact, it affects market price and whether all
    of this activity fits within the antitrust laws of our country
    or does not.
        My guess is that during your tenure some of those issues
    will be visited, and we will look forward to working with you
    on them.
        Thank you.
        Mr. Pate. Thank you, Senator.
        Senator DeWine. Since I am presiding today on behalf of
    Chairman Hatch, and since I am going to be here throughout the
    hearing, I know some of my colleagues do have to leave because
    they have other hearings going on. I am going to hold my
    opening statement and I am going to hold my questions until the
    end.
        So we will start with Senator Leahy for the first round of
    questions.
        Senator Leahy. I would just as soon go to Senator Kohl.
        Senator DeWine. That is fine. Senator Kohl? Senator Kohl is
    the ranking member, as you know, of the Antitrust Subcommittee,
    and Senator Kohl and I have exchanged gavels back and forth a
    number of times. And I suspect we may at some time in the
    future do that again, although I hope that doesn't occur too
    soon.
        [Laughter.]
        Senator Leahy. I hope it does.
        Senator DeWine. Well, we understand.
        Senator Kohl?
        Senator Kohl. Thank you very much, Senator DeWine.
        Mr. Pate, as you know, over the last year, our Subcommittee
    has investigated disturbing allegations of anti-competitive
    practices among the large buying organizations that purchase
    medical equipment and devices for hospitals, what are known as
    group purchasing organizations or GPOs. We held a hearing last
    year and received evidence of GPO contracting practices and
    conflicts of interest that can effectively prevent competitive
    medical device manufacturers from gaining access to hospitals
    for their devices, innovative products like retractable
    needles, for example, or advanced pacemakers.
        As a result, it appeared that in many cases hospitals were
    not getting the best products at the best prices for their
    patients. The situation is quite disturbing. We cannot
    tolerate, as you know, a situation in which patients and
    physicians could be well denied the best medical devices
    because of anti-competitive practices by these GPOs.
        We are pleased that in response to our concerns, several of
    the largest GPOs, including the industry leader Premier, have
    now committed to voluntarily change many of their contracting
    practices and end conflicts of interest. We commend Premier and
    the other GPOs that have worked with us over the last year to
    reform their practices. However, we also believe that vigorous
    antitrust enforcement is required of this industry and that the
    joint FTC-DOJ health care guidelines covering the activities of
    GPOs need to be reviewed and updated in light of the industry
    practice we uncovered and the consolidation that has taken
    place in this industry. I have a question for you regarding
    this issue and then a follow-up.
        First, do you share our concern, Mr. Pate, regarding the
    possibility of anti-competitive practices by GPOs which could
    well result in device manufacturers' being denied access to the
    hospital marketplace?
        Mr. Pate. Senator, the issue you raise is one of great
    importance. The ways in which hospitals can purchase medical
    supplies affects not just the price of medical care but also
    access to new and innovative products, as you mention. This is
    an issue of concern and attention at the Division.
        As you know, the Federal Trade Commission has an open
    investigation in this area. It would be inappropriate for me to
    make comments directly about that, but I will say that the
    Division works cooperatively with the Federal Trade Commission
    in this area. We have joint health care hearings, open, with
    the Federal Trade Commission in which this a subject on which
    we're going to be seeking evidence. And if as a result of that
    we find that there is a need for changes to the health care
    guidelines as they relate to GPOs particularly, then we have
    pledged to work with the Federal Trade Commission on that. So
    this is an area in which you can expect us to be active.
        Senator Kohl. So what you are saying is that, if and when
    you are confirmed, we can expect your very prompt re-
    examination of the health care guidelines to begin and would
    expect it to be finished in a fairly quick and effective way?
        Mr. Pate. You can expect we'll be very active in this area.
    I think that it would be most likely that we would try to
    conclude the joint health care hearings and the collection of
    evidence on health care issues before, frankly, there would be
    a revision of the guidelines. But what I'm talking about there
    is a period of several weeks during which those hearings are
    going to continue. And after that, if there is a need to move
    forward, we'll be doing that together with our colleagues at
    the Federal Trade Commission.
        Senator Kohl. Okay. One more question on this round. Mr.
    Pate, the Federal Communications Commission is about to
    conclude perhaps the most fundamental revision to its media
    ownership rules that we have ever seen and expects to issue its
    new rules in the next few weeks.
        It has been reported in the press that the new rules will
    be a major relaxation of current media ownership limits, even
    though we have recently seen a great amount of consolidation in
    the media. And these reports trouble many of us.
        Mr. Pate, if these ownership limits are lifted, then we can
    imagine an even greater wave of media mergers and acquisitions.
    Indeed, the investment firm of Merrill Lynch has just released
    a report predicting just such a merger and acquisition binge.
    The antitrust enforcement agencies will then be our last line
    of defense against excessive media concentration.
        Some believe that there is nothing special about mergers
    and acquisitions in the media marketplace and that they should
    be treated just like any other merger. For example, when I
    discussed this issue with your predecessor, Charles James, last
    year, he said that the only thing that mattered in reviewing
    such a media merger was the economic consequences of the
    transaction.
        I respectfully disagree. First, mergers in the media are
    different because they affect competition in the marketplace of
    ideas which are so central to our democracy, and diversity in
    ownership is essential to ensuring that such competing views
    are heard. Therefore, I believe that we must give media mergers
    special and more exacting scrutiny than when we review mergers
    in other industries which do not affect the free flow of
    information. Former FTC Chairman Robert Pitofsky agrees with
    this view.
        What is your view, Mr. Pate? Is the conventional view of
    antitrust review of media mergers focused solely on, for
    example, ad rates, correct? Or do you agree with me that the
    Justice Department should consider a media merger's impact on
    diversity of views and information and not limit your analysis
    to a merger's likely effect on economic interests such as
    advertising rates?
        Mr. Pate. Well, Senator, this is an important issue, one on
    which I know members of the Committee have been very active.
    There are different predictions as to what may follow from the
    FCC's rulemaking. I recall the report you mentioned. I know
    that an analyst group, I believe called the Precursor Group,
    issued a report a couple of days ago, suggesting that there
    would not be consolidation following the rulemaking.
        We're not in the business of predicting what will happen
    but dealing with transactions that do come before us. What I
    would say on that front is that--I know you characterize us as
    the last line of defense, but I can certainly assure you that
    we will be in place, and if there are transactions that present
    anti-competitive consequences, we will stop them. We have been
    active in the media area in whatever size case, including big
    cases such as DirecTV-EchoStar.
        As to the specific diversity issue that you mentioned, it
    is the case that we have a different statutory mandate than the
    Federal Communications Commission, which, for example, right
    now is looking at a diversity index that would look directly at
    diversity of voices, to some extent at local production. Our
    statute, the Sherman Act, is different and is directed
    specifically at competition. But I would say that when we step
    in to stop an anti-competitive transaction, that may as a by-
    product also preserve diversity of voices. And that's all to
    the good.
        Senator Kohl. I appreciate that. And, finally, I would like
    you to offer me some response that is somewhat specific to my
    suggestion that media activities, because they relate to
    something so central to democracy, deserve more than just an
    economic review, that there is another level of review that is
    proper and necessary when it comes to media diversity.
        Mr. Pate. Well, certainly as a statutory mandate, the FCC
    directly looks at those things. And in terms just of the
    general interest in citizens, no one can deny that there is a
    great interest in diversity of access to views in the media.
        When we go to court, which is what we need to do to
    challenge an anti-competitive transaction, we have to proceed
    under the standards of the Sherman Act. And those are
    specifically directed toward competition. But as I say, the
    work that we try to do in protecting competition may also from
    time to time help preserve diversity in the marketplace in
    terms of the output of views that are accessible to consumers.
        Senator Kohl. Thank you, Mr. Pate.
        Thank you, Mr. Chairman.
        Senator DeWine. Senator Specter?
        Senator Specter. Thank you, Mr. Chairman.
        Mr. Pate, at the outset, I thank you for your timely
    intervention with the Department on a matter of significance in
    Pennsylvania where we had a bankruptcy sale involving a company
    called Carbide Graphite, and you had the matter under study and
    intervened in a very timely way to forestall an antitrust
    potential violation which resulted in the continuation of the
    plant and the employment of some 120 people in a small town,
    St. Mary's in Pennsylvania. That was, I thought, unusual, very
    prompt action, and we thank you for that.
        Mr. Pate. Well, thank you, Senator. That was an important
    situation, one in which the Division had to act quickly. The
    Division's Principal Deputy, Debbie Majoras, was in charge of
    that and did a good job. We also had tremendous help from the
    U.S. Attorney's Office in Pennsylvania in that case as well. So
    I appreciate your comments on that.
        Senator Specter. Mr. Pate, back on October 11th, I wrote to
    President Clinton and, similarly--in 2000, and on April 25,
    2001, wrote to President Bush concerning the energy crisis and
    the high prices of OPEC oil. And, Mr. Chairman, I would like
    both of these letters to be made a part of the record.
        Senator DeWine. Without objection, they will be made a part
    of the record.
        Senator Specter. And these letters outlined the basis for
    pursuing OPEC, essentially pointing out that the governmental
    activity exemption did not apply and citing the case law on
    commercial transactions, and even an alternative suit from the
    International Court of Justice at The Hague. But the principal
    idea was to move under the antitrust laws, and we have seen the
    energy issue become even more complicated, difficulties in
    finding sufficient fuel, costs of using fossils, coal.
        I hope that you will take a very, very serious look at this
    issue because we now know with certainty that the Saudis are
    not our friends. And while there may have been some political
    factors to ease off in the past, I think that has all changed
    with 9/11 and the revelations of Saudi involvement.
        This is too complicated a subject to discuss at any length
    in the course of the 7 minutes allotted, so perhaps it might
    just as well be left with your commitment to study it and act
    if you think you have a case and can get permission from the
    White House.
        Mr. Pate. Well, Senator, I understand that this is a very
    difficult legal area. I know that FTC Chairman Pitofsky
    testified on this a few years ago and noted some of the legal
    hurdles that might be in the way of such a case. I know that it
    has been a subject of interest to you personally, Senator.
        Let me say this: Bringing an enforcement action against
    OPEC would certainly involve more than just the legal and
    policy considerations ordinarily involved in an antitrust case
    that the Division might bring. As the content of your question
    indicates, there are inherent diplomatic and international
    relations issues involved in such a case, and the issue would
    be one that would involve interests broader--not only broader
    than the Antitrust Division, but broader than the Department of
    Justice. And I believe that in the past administrations have
    pursued this issue through diplomatic and other means, but as
    with any topic, I would pledge to take a look at the antitrust
    law on this subject and to provide your staff with information
    on that if you believe our review would be appropriate.
        Senator Specter. Well, let's leave it this way: Would you
    make a commitment to within 90 days give a conclusion as to
    whether you think there is an antitrust violation? And if you
    do, then I think others in the Congress would weigh in--I
    certainly would--as a matter of policy in international
    relations take it up to the Secretary of State and really up to
    the President. But I think the threshold question is whether
    the Assistant Attorney General in charge of the Antitrust
    Division thinks there is a case.
        Mr. Pate. Well, Senator, as with any issue in which
    Senators seek our views, if you were to request those, I commit
    to you that the Division will get a response back to you
    promptly. And I certainly think 90 days is a reasonable amount
    of time to do that.
        Senator Specter. Okay. I am requesting it.
        Let me turn now to a matter of interest to Pennsylvania.
    There is a travel agency called Travelocity, which I visited
    recently because they had brought to my attention a very
    serious situation which appears to me to be an antitrust
    violation. I had written to you about this just a week ago, on
    May 13th, but the essential facts for the record at hearing are
    these: that there is a competitor of Travelocity's--and we are
    putting all the cards up on the table, it is a question of fair
    competition, legal competition--a company called Orbitz, which
    is jointly owned by five major airlines: United, American,
    Delta, Continental, and Northwest. And those five airlines
    together account for four of five tickets sold in the United
    States. And almost all major U.S. airlines, which account for
    more than 90 percent of domestic bookings, are represented to
    participate in Orbitz on similar terms with the five identified
    airlines.
        The key concern that Travelocity has is the so-called most-
    favored-nation agreement between Orbitz and air carriers which
    guarantees Orbitz access to the airlines' lowest fares to the
    exclusion of Travelocity.
        It sounds to me on its face like a restraint of trade. What
    do you think?
        Mr. Pate. Well, Senator, I appreciate an opportunity to
    address the Orbitz case, which I know has been one of interest
    among members. For the reasons you state, the Orbitz matter has
    been a subject of great concern at the Division. A joint
    venture involving an MFN among five horizontal competitors with
    70 percent or more of the traffic raises obvious antitrust
    issues.
        At the time we opened the investigation, however, the
    Division determined right about the time I came to the
    Division, correctly, I believe, that we should look at the
    market operation of Orbitz and make a determination based on
    that rather than do as some were suggesting at the time, try to
    seek an injunction to prevent Orbitz from coming into operation
    at all, because there were potential consumer benefits from
    this new venture that were being offered.
        At this point, our economists have been involved in trying
    to review large volumes of market evidence, but one of the
    problems we face is the post-September 11th environment in
    which the airline industry has faced a situation unlike any I
    am aware of. And, frankly, it has been difficult to come to a
    conclusion that we can be confident about in the case.
        But I assure you we are not sitting on it. We are working
    hard on it, and we want to bring the case to a conclusion to
    determine whether we need to try to take some action and
    whether that would be justified. It is a priority matter at the
    Division.
        Senator Specter. You might think 90 days is too short to
    come to a conclusion, unlike OPEC oil?
        Mr. Pate. Well, on a non-merger investigation of that
    importance, I know these things take longer than many would
    think is necessary. I can assure you we are working hard on it,
    but I would hesitate to put a timetable on it of that type
    because it is equally important that we get the answer right as
    that we act quickly in a case like this. We are working on it.
        Senator Specter. Orbitz is important, but not more
    important than OPEC.
        Mr. Pate. I wouldn't suggest that it is.
        Senator Specter. I am just jousting with you a little on
    time. If not 90 days, perhaps 180, but we would appreciate a
    close look.
        Mr. Chairman, I have just a little more, if I might
    proceed.
        Senator DeWine. Sure.
        Senator Specter. I am handed a note by staff reminding me
    that the investigation has been ongoing since May of 2000. Now,
    that is not under your watch, but I hope you will keep that
    factor in mind that we are 3 years into the matter.
        I note that the Department of Transportation is going to be
    issuing regulations here, and I am a little perplexed as to why
    the Department of Transportation has the lead role when this is
    really an antitrust issue. Will the Department of Justice and
    the FTC be giving the Department of Transportation your inputs
    as to the potential antitrust issue and the past violation?
        Mr. Pate. Senator, I believe what you are addressing there
    is the CRS rulemaking that's underway at the Department of
    Transportation, and, yes, we are looking right now at providing
    record comments to the Department of Transportation about how
    the CRS rulemaking should go forward.
        We had a letter from Senator Kohl and from Senator DeWine
    jointly asking about that same topic, and it's a matter that
    our attorneys and economists are working on now.
        Senator Specter. Why does the Department of Transportation
    have what is really the lead role on a matter of this sort
    which is really an antitrust issue?
        Mr. Pate. Well, the rulemaking that I believe you're
    referring to is really a rulemaking that occurs under the
    Federal Aviation Act, and there are different aspects of
    aviation competition in which the DOT takes the lead and
    others, such as merger review, where the Justice Department
    takes the lead. So the reason for that division as it relates
    to the CRS rules is the content of the statute that they
    follow.
        Senator Specter. Well, I would just like to be sure that
    the real antitrust experts are at work on it, and I thank you
    for your assurances.
        Mr. Pate, I think you are an impressive nominee. You are an
    impressive witness. I look forward to supporting you and
    working with you.
        Mr. Pate. Thank you, Senator.
        Senator Specter. Thank you, Mr. Chairman.
        Senator DeWine. Thank you, Senator Specter.
        Senator Kohl?
        Senator Kohl. Thank you very much, Mr. Chairman.
        Mr. Pate, we were pleased last year when the Justice
    Department decided to block the merger between DirecTV and
    EchoStar. Now the media giant News Corporation, owners of the
    Fox television and cable networks, wants to acquire a
    controlling interest in DirecTV. While not a direct horizontal
    merger among competitors like the EchoStar-DirecTV deal, this
    merger does raise important vertical issues. One of the world's
    most powerful producers of news and entertainment would be
    acquiring one of the most important distribution vehicles.
        Mr. Pate, we recognize that you cannot comment on the
    specifics of the News Corporation-DirecTV deal as it will be
    reviewed by your agency when you are confirmed. But can you
    tell us generally how you will analyze vertical mergers in the
    media industry? Do combinations of content producers and
    distribution channels pose special dangers, especially for
    competitors who do not own a means of distribution?
        Mr. Pate. Well, thank you for that question, Senator. I
    appreciate your remarks on the DirecTV-EchoStar merger. We were
    very pleased with the outcome we got there. It was actually an
    instance where I was able to appear in court myself on that
    case and was especially pleased at the way it turned out.
        As to the transaction you mentioned, the upcoming News
    Corp. transaction, as you say, it would not be appropriate for
    me to comment on that. It involves obviously different
    circumstances from the purchase--or the merger of two direct
    horizontal competitors as we had in DirecTV-EchoStar. But we'll
    be looking at it closely.
        On the overall question about vertical mergers, as a
    general approach, vertical mergers, as you know, generally
    provide lesser concern under the antitrust laws than a merger
    of horizontal competitors. Nonetheless, there are instances
    where the vertical consequences of a merger can present a
    sufficient impediment to competition by one of the horizontal
    competitors that they do raise significant concerns.
        I would mention cases since I have been at the Division:
    Northrup-Grumman, TRW, we had a case called Prem Door in the
    door manufacturing area. So we have in recent times looked at
    vertical aspects of mergers, and we'll do that in any case that
    it's called for. But beyond that, I think it would be
    inappropriate to address specifically an upcoming transaction
    such as the one you mentioned.
        Senator Kohl. All right. In the 1996 Telecommunications
    Act, Congress essentially deregulated radio station ownership,
    ending national ownership caps and allowing one company to own
    up to eight radio stations in large markets. As you know, an
    enormous wave of consolidation followed, resulting in large
    corporations such as Clear Channel now owning more than a
    thousand stations across the country.
        Many people have decried this gigantic wave of radio
    consolidation and contend that it has homogenized radio
    ownership--radio across the country with the same formats and
    programming offered in every major city by the same owners.
    Many stations, critics do contend, care little about their
    local markets and are often programmed at one central and
    oftentimes one very distant location. Local news coverage has
    suffered perhaps the most. Radio stations once competed with
    different city hall or courthouse reporters, for example, and
    those same groups of eight stations now share one reporter and
    only one perspective. Many stations have eliminated news
    coverage altogether. Last Sunday's Washington Post reported,
    for example, that on 9/11 several of Washington's leading FM
    radio stations had nowhere to turn but to television, and they
    merely fed the sound from these television broadcasts.
        Does the experience of radio consolidation sound a warning
    bell for media consolidation in general? Doesn't this
    experience support examining a media merger's effect on the
    marketplace of ideas, to which I referred before, rather than
    just on the economic cost of advertising?
        Mr. Pate. Well, as we discussed with your earlier question
    about media consolidation, Senator, when we intervene to stop
    an anti-competitive merger, it can have the effect of
    preserving diversity. The specific treatment of issues such as
    local content generation, local ownership, and looking directly
    at the content of broadcasting is something that comes within
    the Federal Communications Commission's mandate. When we act,
    as I mentioned earlier, we act under the Sherman Act.
        In terms of doing that with respect to your concern about
    local communities, I will stress that we look at that on a
    local geographic, market-by-market basis. We don't simply look
    at a radio merger in a nationwide context; rather, we look from
    market to market at what the effects will be on a particular
    locality.
        As to my experience in this field with respect to radio
    mergers, the one recent transaction we've had was the
    Univision-HBC transaction, and in that case radio overlaps
    between HBC and a company called Entrevision, where the
    specific issue in which we intervened and required a
    divestiture. So these are issues that we're going to look at
    closely.
        Senator Kohl. Would you say you would tend to be, can we
    predict more in the mold of a Charles James or a Joel Klein, in
    terms of your activity? In terms of your activity. I am not
    talking about your philosophy, but he was perhaps, in my
    judgment, more energetic just in terms of his activity, not
    necessarily his political philosophy but--
        Mr. Pate. Well, Joel Klein has been, Senator, a friend of
    mine for a long time, and Charles James is a friend and my
    former boss, so I may be too close to the situation to comment.
        I guess if I were going to try to affiliate myself with two
    predecessors, I would take my friend, John Shenefield, who is
    here, and then James Rill, who was in charge of the Division
    and is also a good friend who served in the previous Bush
    Administration.
        Senator Kohl. Thank you.
        Mr. Pate. Thank you.
        Senator Kohl. Thank you, Mr. Chairman.
        Senator DeWine. Senator Leahy.
        Senator Leahy. Thank you, Mr. Chairman. I would hope you
    look very carefully at the issues that Senator Kohl and others
    have raised on this, and as I said, I will give you a copy of
    the letter that Senator Jeffords and I sent to Chairman Powell
    on this media concentration. Just from the article that Senator
    Kohl referred to from the Post over the weekend, plus what many
    of us who travel around the country see, I mean the
    homogenization of radio is terrible. When somebody can sit in a
    room in Maryland and pretend to give the traffic reports for a
    West Coast radio station, you realize how much they have lost
    touch. But you also find when the company, Clear Channel--I
    believe they will deny this, but I believe they have done
    this--actively censored different artists and others, I mean
    that is wrong, or even those who have talk shows, who have
    actively censored them or made sure they cannot compete with
    each other. I think one of the great things I found growing up
    was to find my own State having a number of radio stations that
    are each different. It is bad enough that our newspapers around
    the country have become very homogenized. Now if radio and
    television does the same thing, we have a real problem. Plus
    the public safety aspects. In my State we only have a couple,
    two or three radio stations left that can do the things when
    there is a flood, a massive snowstorm--and in Vermont, massive,
    you have to go about 15 or 20 inches. 15 inches the schools
    open an hour late. 20 inches it is possible to have some
    closings, but those are newcomers to the State.
        [Laughter.]
        Senator Leahy. And 25 inches I am willing to open the
    office three hours late, but you need these kinds of things.
    The best thing about this country is to have diversity of
    views, diversity of opinions, and it is not real competition if
    somebody is able to say in one place what is going to be heard
    all over the country. It does not help any of us. So please
    look at it carefully.
        I also would note that in December I wrote to you about
    opposing the proposed merger between HP Hood and National Dairy
    Holdings, a dairy processing company largely owned by Dairy
    Farmers of America. Now, this is somewhat parochial, I will
    admit, but it would have allowed them to, as I said in my
    opening statement, control 90 percent of the fluid milk in New
    England. The Department of Justice now has launched an
    investigation of the proposed merger. HP Hood and National
    Dairy announced that they would restructure their merger, I
    think that because the Department of Justice was looking at it,
    that they were more careful. I hope I have your commitment that
    your Department will continue to look at it. I am not asking
    you to prejudge it, but would you at least continue to look at
    it carefully?
        Mr. Pate. Thank you, Senator. You do have that commitment,
    and we do not view agricultural issues as parochial ones or
    unimportant ones. As you know, at the Division, we have a man
    named Doug Ross, who is our special counsel full time on
    agriculture. With respect to milk specifically, we recently
    brought a case which was not a reported merger, but a
    transaction that was below the threshold called Southern Belle,
    which related to school milk markets primarily in Kentucky, in
    which joint control by DFA presented a concern. We were looking
    very closely at the NDH-Hood transaction when it was withdrawn,
    and to the extent that or a similar transaction in that
    industry comes back, you can rest assured we will be looking at
    it closely.
        Senator Leahy. I mention this because in 2001 Dean Foods
    and Suiza Foods merged. I was concerned about that, and
    expressed concern. They control about 30 percent of the milk
    nationally, about 70 percent in New England. Since that merger,
    what has happened is that farmers receive 25 percent less for
    their milk. The price in the supermarket is virtually the same
    for a gallon. It may change a cent or two, but most places it
    is the same. So I hope also that your Department will look and
    find out whether that merger brought about the severe drop in
    prices to the producers. It certainly has not made any change
    for the consumer, but whether that has anything to do with the
    severe drop to the producers.
        Mr. Pate. Well, just as you mentioned, Senator, in the
    agricultural area, this can be somewhat unlike other areas. We
    are concerned with issues of so-called monopsony power, an in
    order for farmers to have a fair market in which to sell their
    milk, there needs to be a choice of potential purchasers. So I
    think these are legitimate issues and they're ones that we'll
    continue to look at. With Respect to Suiza-Dean the Department
    did insist on some divestitures there, but as with any other
    case, if information comes to light about what has happened
    since the merger that can help us do a better job in the
    future, we would want to consider that as well.
        Senator Leahy. Thank you, Mr. Pate. I will put my other
    questions in the record. I do have one, if I just might, Mr.
    Chairman.
        Senator DeWine. Sure.
        Senator Leahy. You gave a speech in February, offering
    praise for a European Union initiative, whereby either the EU
    or a member country could investigate an antitrust matter, but
    not vote. You suggested, as I read it, the U.S. system where
    many States and Federal agencies launch investigation, is too
    cumbersome. But I look at things like Microsoft. That case came
    about because there had been cooperative State and Federal law
    enforcement officials working. Some of the things that come
    eventually to the Federal level began because of aggressive
    action at the State level.
        So would you like to speak a little bit to your speech?
        Mr. Pate. I would. I appreciate the opportunity to talk
    about that.
        Senator Leahy. I thought you might.
        Mr. Pate. The context in which I was mentioning that is one
    in which, as you know, we have from time to time been critical
    of our colleagues at the European Commission. On the other
    hand, the point I wanted to make there is that we need to be
    open to ideas in terms of what they are doing there, and Mario
    Monte, I think very ambitiously, is looking at how in a Federal
    system they can work together.
        With respect to what I have here, I guess I would refer you
    to my remarks at the ABA antitrust meeting more recently, in
    which I pointed out that one of the strengths of our antitrust
    system is the decentralization of that system. The Antitrust
    Division has a voice in making antitrust law. So do the courts.
    So do State attorneys general. And we work cooperatively very
    well with State attorneys general. We're doing that now in
    terms of enforcing the Microsoft settlement, even working with
    the so-called non-settling States who took a different view of
    the case than we did. As long as I'm at the Division, if I'm
    confirmed, you'll find that we're going to continue to
    cooperate with the States.
        There are situations in which having a very large number of
    enforcers looking at the same case can make it difficult to
    enforce in a nonduplicative way, and we want to work together
    with the States on that problem when it comes up as well.
        Senator Leahy. I will take a look. In fact, if you could
    have somebody send me over the ABA speech, I will actually read
    it.
        Mr. Pate. I'll make sure you have it.
        Senator Leahy. Not everybody will make that offer, but I
    will read it. Thank you.
        Thank you, Mr. Chairman.
        Senator DeWine. Senator Kohl.
        Senator Kohl. Thank you, Mr. Chairman. I have just one more
    question.
        Mr. Pate, the Government's landmark antitrust case against
    Microsoft was settled before you assumed your current
    responsibilities. As you may know, I expressed serious concerns
    regarding the loopholes and limitations in the settlement when
    it was announced, and I still hold some of these concerns
    today.
        A couple of questions. First, have you been satisfied in
    the manner with which Microsoft has implemented the settlement
    thus far? And can you point to any specific ways in which a
    settlement has improved competition in the computer software
    market today?
        Mr. Pate. Well, Senator, I appreciate your comments on
    Microsoft. I know there was a wide range of opinions about that
    case. We at the Division were very pleased about what Judge
    Kollar-Kotelly had to say about the ways in which the
    settlement did track very faithfully the findings of the D.C.
    Circuit Court of Appeals and did provide effective relief for
    consumers.
        Since that time we have worked together with the State
    attorneys general's offices who have been involved in the case
    to try to make sure that settlement is effective. I would say
    that it's an area in which we understand the need to be
    vigilant in making sure that the settlement is carried out. One
    recent example in which--that I would point out, where our
    lawyers who are in charge of enforcing that settlement,
    obtained some improvements was in the area of the licensing
    agreements that Microsoft uses. Through our efforts, together
    with our State colleagues, we obtained an agreement that
    Microsoft change those licensing terms, and also removed a
    nondisclosure agreement, so that the terms of the agreement
    could be available to the public so that we could get comment
    from interested parties.
        We're going to continue to do things like that, and Judge
    Kollar-Kotelly has set up a procedure that is going to try to
    make sure that the settlement is effective, and we're committed
    to doing that.
        Senator Kohl. And with respect to Microsoft, last week the
    International Herald Tribune reported an allegation that
    Microsoft had engaged in a number of questionable business
    practices during the last year in order to dissuade governments
    and large institutions from choosing cheaper alternatives to
    its dominant Windows operating system. The alleged practices
    include offering steep discounts for Windows or even offering
    it for free if necessary. In addition, the newspaper claimed
    that Microsoft representatives were attending trade fairs under
    false identities and purporting to be independent computer
    consultants in order to persuade customers to avoid buying
    competitive products.
        Do these allegations concerns you, Mr. Pate? And if true,
    do they raise questions regarding Microsoft's pledges to have
    undertaken reforms and obey the spirit as well as the letter of
    the settlement? Do you plan, when you are confirmed, to
    investigate these allegations?
        Mr. Pate. Senator, with respect to the reports you mention,
    our level of concern would depend on the actual facts that we
    were able to verify.
        With respect to discounting and other practices in Europe,
    I would suggest a caution in that the laws in Europe with
    respect to what sort of discounting is appropriate may differ
    from ours, and there may be instances in which things that are
    actually on-the-merits competition from our point of view, may
    run afoul of different local rules there.
        On the other hand, as to your general question, we have met
    in the past repeatedly with firms who have concerns about
    Microsoft. If I am confirmed, we will continue to welcome input
    from those who think there are matters that need to be
    addressed, and I can assure you, if we find anticompetitive
    conduct, we will take appropriate action to stop it.
        Senator Kohl. Thank you, Mr. Pate.
        Mr. Pate. Thank you, Senator.
        Senator Kohl. Thank you, Mr. Chairman. I return the floor
    to you.
        Senator DeWine. Senator Kohl, thank you very much.

    STATEMENT OF HON. MIKE DEWINE, A U.S. SENATOR FROM THE STATE OF
                                  OHIO

        Senator DeWine. Mr. Pate, the good news or the bad news is
    you are down to me, I think, now.
        [Laughter.]
        Senator DeWine. Let me welcome you again to the Committee.
        Mr. Pate. Thank you, Senator.
        Senator DeWine. I appreciate you being here, and your wife
    Lindsey, and Ellen and Lizzie are doing pretty well I think
    there. I am not sure this is an improvement over school though.
        [Laughter.]
        Senator DeWine. School has got to be better than this, but
    I will not ask them to comment. They can tell you later, but
    school has got to be more exciting than this.
        But we do appreciate your leadership at the Department you
    provided as Acting Assistant Attorney General for Antitrust
    really during a period of great transition. The transition
    period has not only included the departure of your predecessor,
    Charles James, but also that of two different deputy attorney
    generals, deputy assistant attorney generals, one for
    international enforcement and one for economics. Really I think
    you are to be commended for the way that the Antitrust Division
    has functioned during this transition period, and we thank you
    for that.
        In today's challenging economic climate, vigorous antitrust
    enforcement we believe remains vitally important to ensuring
    that our markets function properly, and ultimately that
    American consumers get the benefit of better goods and services
    at better prices. The Antitrust Division is of course an
    integral part of our Nation's antitrust enforcement efforts. In
    fact, it is likely that the role of Antitrust Division will
    grow in importance in the near future. I am thinking in
    particular of the issue of media consolidation. Of course, we
    have already talked about that a little bit today. It has been
    widely reported that the FCC is likely to weaken its media
    ownership rules early next month. Accordingly, consumers will
    look increasingly to the Antitrust Division to carefully
    scrutinize potential mergers and acquisitions in the
    television, the radio, the cable news and the entertainment
    markets. We must take care to not allow consolidation in these
    markets to harm consumers' interest.
        The pending News Corp-DirecTV deal is an example of the
    type of media deal that creates the need for thorough review.
    Although the FCC rule-making may not directly implicate the
    deal, I think the proposed acquisition is really typical of the
    type of consolidation that we are seeing throughout the media
    sector. Because of this, Senator Kohl and I plan to hold an
    Antitrust Subcommittee hearing next month on the News Corp-
    DirecTV deal, and we will closely examine the proposal at that
    time. We have already begun to line up witnesses for that
    hearing. I think it is going to be a lively and I think a very
    positive hearing.
        For today, however, there are a number of other key areas
    that I think we need to examine. When your predecessor appeared
    before the Antitrust Subcommittee last September I stressed the
    importance of antitrust scrutiny for joint ventures. While
    joint ventures differ from full-fledged mergers, they often
    have significant competitive impact and require similar
    vigorous scrutiny from the antitrust agencies. Joint ventures
    also differ from mergers because Hart-Scott-Rodino Act does not
    cover them. As a result, the Antitrust Division is not required
    to examine joint ventures under the statutory merger timelines.
    Despite the lack of statutory timelines, however, it is
    important that the Antitrust Division review these arrangements
    within reasonable time periods without of course sacrificing
    careful, thorough, economically sound analysis.
        We also must recognize that the Antitrust Division and
    other American antitrust authorities are not the only important
    antitrust authorities in the world. As business becomes more
    global, and commerce flows more freely around the world,
    companies that do business worldwide face nearly 100 different
    antitrust enforcement agencies. Ongoing efforts to facilitate
    cooperation between various antitrust agencies around the world
    and efforts to coordinate procedural and substantive antitrust
    standards represent important advances in antitrust
    enforcement.
        I know you have worked a great deal in international
    coordination, and hope that those efforts continue. I look
    forward to discussing with you these and other issues today. In
    just a moment we are going to do that with just a few
    questions, although some of these areas have been really I
    think thoroughly examined by my colleagues.
        I also want to discuss this along with the successes of the
    Antitrust Division during your tenure as the Acting Assistant
    Attorney General and the challenges that still remain. So we do
    also look forward to working with you in the future, and really
    again, I want to just say I appreciate your work, look forward
    to your confirmation. I think you have done a very good job
    thus far, and I know you are going to continue that work after
    your confirmation.
        [The prepared statement of Senator DeWine appears as a
    submission for the record.]
        Senator DeWine. Let me just start. I just have a couple
    questions. First, I have expressed concern in the past about
    supplier-owned joint ventures. Now, I understand that the
    Antitrust Division has several ongoing investigations of these
    joint ventures, and as I have said before how I have some
    concerns about the length of time that some of these
    investigations go on, it is certainly important to thoroughly
    examine these issues, but the Orbitz investigation, for
    example, does seem to be taking quite a long time. I am
    particularly worried that the very existence of the
    investigation is starting to have an impact on the marketplace.
    I know, of course, that you cannot get into the details of an
    ongoing investigation, so I am not going to ask you to do that,
    but perhaps we could discuss the more general question of what
    if any impact does the existence of ongoing investigations into
    these joint ventures have in the market? In other words, does
    the existence of these investigations deter supplier-owned
    joint ventures from behaving in an anticompetitive manner, or
    does the existence of these investigation discourage legitimate
    precompetitive activities? How should the balance be struck,
    and more importantly, how can the Antitrust Division
    investigate these issues thoroughly enough to protect consumers
    but quickly enough to give businesses and the marketplace the
    certainty and the finality that they really need?
        Mr. Pate. Thank you, Senator. Let me address your joint
    ventures comment directly, but first, thank you for your
    comments about the Division's operation during the interim
    period since Charles James left in November. I really do
    appreciate that, and would like to recognize that that has been
    the result of a lot of hard work from Debbie Majoris, the
    principal deputy; Connie Robinson, our Director of Operations
    who stepped in; Ken Heyer, who served the function of Economics
    Deputy essentially prior to our filling that slot recently. But
    I appreciate your comments on that point.
        With respect to joint ventures, there were really two
    aspects of the importance that Charles placed on that that he
    talked about with you in an earlier hearing. One is the so-
    called sham joint venture, where two companies may characterize
    as a joint venture something that is really nothing more than
    an agreement to eliminate competition. We have been very active
    in that area and have moved very fast. Our alternative
    newspapers case and the case involving the Math Works, both
    were situations where the Division acted quickly to bring
    assets back into competition.
        As to the investigations that have taken a longer time, I
    am not sure that despite the long pendency of those
    investigations that they are really average examples. Orbitz,
    our foreign currency joint venture transaction, the music
    distribution investigations, all were situations involving the
    inception of brand new industries and the need on our part to
    collect and evaluate huge amounts of economic data. As I said
    earlier, they take a long time, but it is just as important to
    get the right result as it is to move quickly in a case like
    that.
        As to your very specific question, there are two sides to
    that coin. Some think--and this has been an opinion that has
    been expressed in the context of Orbitz--that the pendency of
    the investigation may have prevented anticompetitive conduct.
    Others equally, with respect to that very same case, say that
    the pendency of the investigation is an unfair burden on
    Orbitz. So we at the Division try not to look at either side of
    that coin. For an investigation to be open, we do not see
    ourselves as sitting as regulators with no end in sight.
    Rather, if an investigation is open, it needs to be driving
    towards some potential Sherman Act claim. These things can take
    some time, but we try to do them as expeditiously as possible.
    So I hope that is responsive.
        Senator DeWine. Good, good. Thank you very much.
        Mr. Pate, in passing the Telecommunications Act of 1996,
    Congress granted a role to the Antitrust Division in examining
    the applications of the Bell operating companies to provide
    long distance services in their local service areas, the so-
    called Section 271 applications. The Antitrust Division has
    adopted the standard that a regional Bell operating company
    should be permitted to provide long distance service in its
    local service area only when those local markets in a State
    have been fully and irreversibly opened to competition. In
    addition to providing a role to the Antitrust Division in
    examining the Section 271 applications, Congress also expressly
    included an antitrust savings clause in the 1996 Act to ensure
    that the antitrust laws continued to apply.
        Has the Antitrust Division undertaken any investigations of
    alleged anticompetitive conduct by the Bell operating companies
    in their local markets once 271 applications have been granted?
    Under what circumstances do you foresee the Antitrust Division
    undertaking such investigations to ensure that competition of
    local markets remain fully and irreversibly opened to
    competition?
        Mr. Pate. Well, Senator DeWine, as you mentioned, the
    Congress gave the Division a specific responsibility, a
    statutory responsibility under Section 271 of the
    Telecommunications Act in this field. We have been very active
    in the 271 process, and as you know, the statute requires the
    Federal Communications Commission to give weight to the
    comments expressed in our evaluations.
        We have in some cases recommended that, or concluded that
    markets are fully and irreversibly open, and recommended that
    the FCC grant those applications. In others we've been unable
    to support the applications, and we think our work in that
    field has been very important.
        You're very correct in what you say with respect to the
    savings clause, and since I've been at the Division we have
    filed several briefs reiterating the Department's position that
    the antitrust laws continue to apply. I don't think it would be
    appropriate to discuss any particular case, but I would just
    say generally that we hope that once we conclude that a market
    is fully and irreversibly open to competition, that means that
    the operating systems and other necessary attributes are
    present there, that the market will function and that as a
    commercial matter there will be access for local competitive
    firms, but if as you say, there is an allegation of
    anticompetitive conduct, we certainly believe, under the
    savings clause, that it's our job to be there to evaluate it,
    and we'll do that.
        Senator DeWine. Thank you very much. Let me turn to the
    issue that you have already discussed a little bit, and that is
    the international antitrust arena, which has so fundamentally
    changed really in the last decade. International antitrust
    enforcement has really increased in importance over the past
    few years as business has become more global and really the
    number of antitrust enforcement regimes around the world have
    increased. In fact, there are nearly, I believe there are
    nearly 100 antitrust enforcement regimes in the world today.
    This means that business has faced an array of different
    antitrust standards and procedural requirements. In specific
    cases this can lead to different jurisdictions reaching
    different conclusions on the same transactions. This happened,
    of course, in the GE-Honeywell merger case. In general it can
    create a great deal of uncertainty for businesses as they
    operate internationally.
        I am pleased to hear about the strides that you have made
    in facilitating cooperation among the different antitrust
    authorities, and let me also just congratulate you--we talked
    about this the other day in the office--but congratulate you on
    the successes that you have had in this area. You have stated
    that the U.S.-EU bilateral relationship is a good model for how
    a bilateral relationship should work. Recently Senator Kohl and
    I met with Mario Monte, European Commissioner for Competition,
    and he mentioned the positive working relationship as well.
        Let me just ask you how are we progressing with other
    bilateral relationships? What is the future there, do you
    think?
        Mr. Pate. I think, Senator DeWine, that the future is
    positive. We do have a particularly good relationship with the
    EU that's borne fruit in all aspects of our work, particularly
    on the criminal side, where we just this year for the first
    time have had joint investigations in terms of drop-in
    interviews, dawn raids, as they call those in the EC,
    coordinated with the EC, Japan, Canada, some of the other
    countries with whom we have a particularly strong bilateral
    relationship.
        On the broader front I would mention the International
    Competition Network to you, and that is an organization, not an
    organization composed of a number of private interests, not a
    bar organization, but an organization of enforcement
    authorities around the world. As you mentioned, there are about
    100 countries now that do have antitrust statutes. The ICN, as
    it's called, we think is a good forum for us to try to share
    the view that antitrust enforcement ought to be based on
    objective economics and objective law enforcement rather than
    any other considerations. And the best thing we can do is have
    a forum to try to discuss that. There's a meeting coming up
    next month in Mexico that's going to involve the jurisdiction,
    many of the jurisdictions with antitrust laws, and we think
    that is a good forum that can make improvements in the area
    that you mention.
        Senator DeWine. Mr. Pate, again, thank you very much. Let
    me just again say, as I did announce, that Senator Kohl and I
    do plan on holding an Antitrust Subcommittee hearing next month
    on the News Corp-DirecTV deal. We think that is a very
    important hearing. We intend to spend significant time on that
    hearing to thoroughly examine that issue.
        Another issue that Senator Leahy raised with you is the
    whole media consolidation issue. We also plan on holding a
    hearing on that issue in June, and we will examine that issue
    as well. I must say that I share many of the concerns that were
    expressed by Senator Leahy. I understand, Mr. Pate, that your
    jurisdiction, under our law, is of a limited jurisdiction. You
    do have jurisdiction in these areas, but it is somewhat
    limited, as you and I talked about the other day in my office.
    But we have an obligation I think in this Subcommittee to have
    an overview of this issue. I think from a public policy point
    of view that these consolidations present some very big, big
    public policy issues that frankly go beyond the economic issues
    that you are limited to looking at, and some of the antitrust
    issues that you are limited to looking at, and so we intend to
    look at the broad issues as well.
        Again, Mr. Pate, thank you very much. I think you are off
    to a great start in your job, and we look forward to moving
    forward on your confirmation.
        Mr. Pate. Thank you very much, Senator DeWine.
        Senator DeWine. Thanks for being with us.
        [Whereupon, at 12:04 p.m., the Committee was adjourned.]
        [Questions and answers and a submission for the record
    follow.]
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