[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
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                       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
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____________________________________________________________________________
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.
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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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