[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
 FINDINGS AND RECOMMENDATIONS OF THE ANTITRUST MODERNIZATION COMMISSION

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

                                HEARING

                               BEFORE THE

                          ANTITRUST TASK FORCE

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 8, 2007

                               __________

                           Serial No. 110-23

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov

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                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. SCOTT, Virginia            HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
MAXINE WATERS, California            DANIEL E. LUNGREN, California
MARTIN T. MEEHAN, Massachusetts      CHRIS CANNON, Utah
WILLIAM D. DELAHUNT, Massachusetts   RIC KELLER, Florida
ROBERT WEXLER, Florida               DARRELL ISSA, California
LINDA T. SANCHEZ, California         MIKE PENCE, Indiana
STEVE COHEN, Tennessee               J. RANDY FORBES, Virginia
HANK JOHNSON, Georgia                STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
BRAD SHERMAN, California             TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota

            Perry Apelbaum, Staff Director and Chief Counsel
                 Joseph Gibson, Minority Chief Counsel
                                 ------                                

                          Antitrust Task Force

                 JOHN CONYERS, Jr., Michigan, Chairman

HOWARD L. BERMAN, California         STEVE CHABOT, Ohio
RICK BOUCHER, Virginia               RIC KELLER, Florida
ZOE LOFGREN, California              F. JAMES SENSENBRENNER, Jr., 
SHEILA JACKSON LEE, Texas            Wisconsin
MAXINE WATERS, California            BOB GOODLATTE, Virginia
STEVE COHEN, Tennessee               CHRIS CANNON, Utah
ANTHONY D. WEINER, New York          DARRELL ISSA, California
ARTUR DAVIS, Alabama                 J. RANDY FORBES, Virginia
DEBBIE WASSERMAN SCHULTZ, Florida    STEVE KING, Iowa
                                     LAMAR SMITH, Texas, Ex Officio


            Perry Apelbaum, Staff Director and Chief Counsel

                 Joseph Gibson, Minority Chief Counsel
    







                        C O N T E N T S

                              ----------                              

                              MAY 8, 2007

                           OPENING STATEMENT

                                                                   Page
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Chairman, Antitrust Task Force.     1
The Honorable Steve Chabot, a Representative in Congress from the 
  State of Ohio, and Ranking Member, Antitrust Task Force........     3

                               WITNESSES

Ms. Deborah Garza, Chair, Antitrust Modernization Commission
  Oral Testimony.................................................     4
Mr. Johnathan R. Yarowsky, Vice Chair, Antitrust Modernization 
  Commission
  Oral Testimony.................................................     6

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Joint Prepared Statement of Deborah Garza, Chair, Antitrust 
  Modernization Commission; and Johnathan R. Yarowsky, Vice 
  Chair, Antitrust Modernization Commission......................     8

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of the Honorable Lamar Smith, a Representative 
  in Congress from the State of Texas, and Ranking Member, 
  Committee on the Judiciary.....................................    79
Prepared Statement of the Honorable Sheila Jackson Lee, a 
  Representative in Congress from the State of Texas, and Member, 
  Antitrust Task Force...........................................    81
Biographies of Deborah Garza, Chair, Antitrust Modernization 
  Commission; and Johnathan R. Yarowsky, Vice Chair, Antitrust 
  Modernization Commission.......................................    90
Prepared Statement of Glenn English, CEO, National Rural Electric 
  Cooperative Association and Chairman, Consumers United for Rail 
  Equity.........................................................    91


 FINDINGS AND RECOMMENDATIONS OF THE ANTITRUST MODERNIZATION COMMISSION

                              ----------                              


                          TUESDAY, MAY 8, 2007

                  House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Task Force met, pursuant to notice, at 2:19 p.m., in 
Room 2141, Rayburn House Office Building, the Honorable John 
Conyers, Jr. (Chairman of the Task Force) presiding.
    Present: Representatives Conyers, Berman, Jackson Lee, 
Chabot, Smith, Keller, and Issa.
    Staff present: Stacey Dansky, Majority Counsel; Stewart 
Jeffries, Minority Counsel; and Brandon Johns, Staff Assistant.
    Mr. Conyers. Good afternoon. The hearing on the Antitrust 
Task Force will come to order.
    We are now examining the findings and recommendations of 
the Antitrust Modernization Commission.
    And I yield first to the Ranking Member of the full 
Committee, Lamar Smith.
    Mr. Smith. Mr. Chairman, I thank you very much for 
yielding. All I want to do is thank you for convening this very 
first hearing of the Antitrust Task Force and for your 
initiative on creating one.
    I unfortunately have to be over at the Capitol in 10 
minutes, so I am not going to be able to stay, so I would like 
to ask unanimous consent that my particularly articulate and 
persuasive opening statement be made a part of the record.
    I thank you, Mr. Chairman.
    Mr. Conyers. Without objection, so ordered.
    I apologize for my lateness. President Preval of Haiti has 
just arrived in the Capitol, and I was detained longer than I 
thought I would be.
    We are delighted to welcome both the chair and vice chair 
of the Antitrust Modernization Commission and appreciate both 
of you being here to report on the Commission's findings and 
recommendations: Ms. Deborah Garza and, of course, John 
Yarowsky, the vice chair.
    For the past 3 years, our witnesses, along with 10 other 
commissioners, have been analyzing the antitrust laws to 
determine whether they are fully effective as is or if they 
could benefit from refinement to reflect changes in technology 
and the marketplace.
    For over a century now, antitrust laws have served as our 
economic bill of rights, providing the ground rules for fair 
competition. The antitrust laws are our chief bulwark against 
schemes by cartels and monopolists to deprive consumers and our 
economy of the benefits of competition and innovation--that is 
lower prices, better products, and greater efficiency.
    The AMC's report is an ambitious one with over 300 pages of 
analysis and recommendations. The AMC covered a lot of ground. 
Some of their recommendations are particularly useful; for 
example, its recommendation that immunities from antitrust laws 
should be disfavored and only created when the heavy burden is 
met of clearly demonstrating that the exemption is necessary to 
satisfy a specific societal goal that trumps the benefits of a 
free market.
    It is a good starting point for Congress as it moves 
forward with various proposals.
    Other recommendations do not receive such glowing reports. 
I lower my head to mention the Robinson-Patman Act. That 
provides a set of guidelines for marketplace behavior by 
guaranteeing that everyone competing in any given marketplace 
has a level playing field. It does this by prohibiting sellers 
from offering different prices to different purchasers of 
commodities where there is no pro-competitive justification.
    Robinson-Patman helps ensure that small businesses and mom-
and-pop stores have the ability to compete with big power 
retailers like Wal-Mart. In its recommendations, the AMC 
suggests repeal of Robinson-Patman, claiming it is not 
performing its intended function and that it conflicts with the 
goals of modern antitrust law.
    Admittedly, the Act has flaws, is structurally complex and 
very hard to administer, and it is not used often as an 
enforcement tool. But these problems should not mean we should 
repeal the law altogether. Instead of repealing the act, it is 
my hope that we can find a way to make it work better.
    I also have concerns about the Commission's ambiguous 
recommendation on the repeal of Illinois Brick and Hanover Shoe 
Supreme Court cases. In these two cases, the Supreme Court 
ruled that only direct purchasers, not indirect purchasers, may 
sue for damages from price fixing and that antitrust defendants 
in these cases cannot use the defense that the direct purchaser 
passed on the over-charge to the indirect purchaser or the 
consumer.
    Illinois Brick has been controversial since it was adopted, 
but many States have adopted policies that allow indirect 
purchasers to sue. I applaud the Commission for attempting to 
resolve this issue and I agree that allowing indirect 
purchasers to sue will enhance consumer welfare.
    I am more skeptical, however, of the Commission's proposal 
because of the potentially adverse effect it could have on 
direct purchaser actions. If each direct purchaser must 
determine how much of the over-charge was passed on downstream, 
it might be very difficult for them to pursue these actions. 
The result could be an overall decrease in holding price-fixers 
and monopolists accountable. This is an issue we shall continue 
to study carefully.
    I also want to mention that no matter how current or modern 
the antitrust laws are, the positive effects of such laws 
cannot be felt without adequate enforcement by the agencies. 
The AMC says that the U.S. merger policy is fundamentally sound 
and that there does not appear to be a systematic bias toward 
either over-enforcement or under-enforcement. Yet in the past 
few years with technological and marketing innovation occurring 
at breakneck speed, we have seen a wave of consolidation in 
some of our key industries.
    According to Thomson Financial, this year was the fourth 
largest in history for mergers and acquisitions. The fact that 
the Department of Justice has failed to challenge any of these 
massive industry-consolidating mergers makes me worry about the 
AMC's conclusion here.
    I look forward to hearing from the two senior commissioners 
and appreciate the incredible amount of work that has gone into 
this endeavor over the last 3 years. And I want to continue our 
dialogue about the importance of our antitrust laws. This 
Antitrust Task Force was created specifically to get us into 
the inquiring of how we can make this area of our law better.
    I would now recognize Steve Chabot, our Ranking minority 
Member on this Task Force, for an opening statement.
    Mr. Chabot. Thank you. And I would like to thank the 
distinguished gentleman from Michigan, Chairman Conyers, for 
holding this important hearing.
    I was privileged to speak a few weeks ago at the American 
Bar Association's Annual Spring Antitrust Conference, and I 
happened to be seated next to our witnesses. One of our 
colleagues, one of your colleagues, Commissioner Valentine, had 
the opportunity to discuss with some of the folks there the 
significance of the Antitrust Modernization Commission report.
    And in particular, I acknowledged the importance of the 
Commission's report to Congress, specifically as it provides us 
with a backdrop against which this Task Force can better 
analyze the specific antitrust issues which we have identified 
for review over the next 6 months. This report is very timely 
for this Task Force.
    At the very heart of the creation of the Commission and its 
directive to study our Nation's antitrust laws was Congress's 
concern that rapidly advancing technology was incompatible with 
competition and consumers. As we have all witnessed, technology 
has dramatically changed the marketplace and the nature of 
competition. Technology that we viewed as science fiction years 
ago has now become a part of our daily lives.
    Our first hearing reviewing the XM and Sirius Satellite 
Radio merger held just a few months back highlighted the 
uncertainty that consumers, businesses, regulators and the 
courts face in the 21st century.
    Most of the issues that the Commission examined and will 
report on today were not contemplated at the time of our 
Nation's antitrust laws upon their enactment almost 118 years 
ago and while the courts have done a good job in balancing 
innovation against competition within the antitrust framework, 
this new information-driven economy has forced us all to take a 
look at the effectiveness of our antitrust structure.
    The good news is that the Commission, after a thorough 
review, found our Nation's antitrust laws to be ``fundamentally 
sound.'' This finding of soundness is important because it 
reaffirms that competition and consumers continue to be 
adequately protected even in this new age of technology and 
innovation. It also alleviates concern that our laws are not 
flexible enough to respond to change.
    Our challenge in the 110th Congress is to ensure that 
competition continues to flourish. However, we must be mindful 
that too much Government intervention and regulation can also 
be harmful. The Commission's report, findings and 
recommendations provide us with a much needed starting point to 
move forward.
    Again, I thank our witnesses for being here.
    And I want to thank the Chairman. I know we all look 
forward to hearing in more detail the findings and 
recommendations of the Commission.
    And, Mr. Chairman, I might note that I have to appear 
before the Rules Committee at 3:00, so I will have to leave, 
but I will come right back as soon as I appear.
    I yield back.
    Mr. Conyers. Thank you, Steve Chabot.
    Our witnesses: Deborah Garza has been a member of the 
Antitrust Modernization Commission in Washington, where she 
served as chair. She was a member of the law firm where she was 
a partner at Fried, Frank, Harris, Shriver & Jacobson, handling 
antitrust counseling and litigation. She has also been a 
partner at Covington & Burling and was in the antitrust 
division of the Department of Justice as Chief of Staff and 
Counsel to the Assistant Attorney General through the years of 
1987 and 1989.
    In addition, of course, she is now the Deputy Assistant 
Attorney General for Regulatory Affairs at the Antitrust 
Division. We offer our congratulations, although she is not 
testifying here in that capacity, of course.
    John Yarowsky, became a member of Patton Boggs Public 
Policy Practice Group in 1998, after serving 3 years as special 
associate counsel to President Bill Clinton. His practice at 
the firm is diverse, spanning a broad range of legislative and 
public policy areas while at the same time providing strategic 
counseling to clients on antitrust, telecommunications, 
intellectual property and administrative practice and 
procedure.
    I am going to submit both of their bios for the record and 
proceed to hear them.
    Both Ms. Garza and Mr. Yarowsky have submitted a joint 
statement to the Task Force. Without objection, it will be made 
a part of the record and any other opening statements will be 
included as well.
    And I would like to include for the record the other 
members on the Antitrust Modernization Commission and the 
Commission staff.
    We welcome you today. We are here to talk about the high 
points and the points where there might be differences of view. 
And I think I would ask the former chairperson, Ms. Garza, to 
begin, please.

              TESTIMONY OF DEBORAH GARZA, CHAIR, 
               ANTITRUST MODERNIZATION COMMISSION

    Ms. Garza. Thank you, Chairman Conyers, Ranking Member 
Chabot, Members of the Antitrust Task Force, for inviting us to 
testify today on the findings and recommendations of the 
Antitrust Modernization Commission.
    We really are delighted to be here to be able to respond to 
any questions you have and to open what we hope will be a very 
productive dialogue, because as you recognized, Chairman 
Conyers, these are very difficult issues deserving of a lot of 
discussion and consideration.
    Before I begin, I would like to acknowledge that the AMC 
staff is all sitting behind us in the first row. They are 
really the backbone and the reason why we were able to get the 
report out at all much less on time and under budget.
    I think that I can speak for all of the commissioners in 
saying that it was an honor to be entrusted with the large task 
of studying the U.S. antitrust laws and reporting to the 
President and Congress on whether they need to be modernized 
for today's economy. We took that trust seriously and we took 
to heart Congress's direction that we solicit and consider the 
views of all interested persons.
    We did that, and after 3 years of work and many, many days 
of hearings and deliberation, we produced a consensus report in 
which all the commissioners joined.
    Our Nation's antitrust laws have served the U.S. well for 
more than 100 years and are a model for the rest of the world. 
In fact, I spent this morning discussing with the members of 
the delegation of the Chinese National People's Congress, which 
is considering adopting their own antitrust laws, what our 
antitrust laws provide. And this I think is an indication that 
the whole world appreciates the role, thanks to I think the 
U.S., of competition law and the role it has played in helping 
to ensure innovation and investment that is essential to a 
healthy and growing economy.
    The report is over 500 pages long. In total, we made about 
80 recommendations. Rather than trying to summarize our 
findings and recommendations in 5 minutes, I thought I would 
touch on just a very few high points, or what I consider to be 
high points and important points.
    First and foremost, the report is an endorsement of free 
market principals. Free trade unfettered by either private or 
Government restraints promotes the most efficient allocation of 
resources and the greatest consumer welfare.
    Second, the report concludes that the state of U.S. 
antitrust law is essentially sound. Certainly there are ways in 
which enforcement can be improved, and we suggest some of 
those. On balance, however, the Commission believes that U.S. 
antitrust enforcement has achieved an appropriate focusing on: 
one, fostering innovation; two, promoting competition and 
consumer welfare rather than protecting competition; and, 
three, aggressively punishing criminal cartel activity while 
carefully assessing other conduct that may officer substantial 
benefit.
    And, third, the Commission does not believe that new or 
different rules are needed to address so-called ``new economy 
issues.'' Consistent applications of the principals that I just 
noted will ensure that the antitrust laws remain relevant in 
today's environment and tomorrow's as well.
    The U.S. antitrust laws, as written, are sufficiently 
flexible to be consistently modernized through the 
interpretations and actions of the courts, the enforcement 
agencies and under the supervision of Congress.
    And with that, to leave us with plenty of time the address 
specific questions we have, I will complete my statement.
    Mr. Conyers. Thank you so much. Excellent beginning.
    Mr. Yarowsky, we welcome you back again to the Committee, 
where you have been before, and we would appreciate hearing 
from you now.

        TESTIMONY OF JONATHAN R. YAROWSKY, VICE CHAIR, 
               ANTITRUST MODERNIZATION COMMISSION

    Mr. Yarowsky. Thank you, Chairman Conyers, Ranking Member 
Chabot, Subcommittee Chairman Berman and other Members of the 
Task Force who may appear.
    I am honored to have had your confidence to serve on this 
Commission, and I am honored to have served with such 
distinguished individuals from such diverse backgrounds and 
with such an amazing staff, as you have heard. You will hear a 
lot about that.
    Ever since 1938, Commissions have been created, primarily 
by Congress, to review the state of antitrust policy. This has 
happened with almost clockwork precision every 20 or 25 years. 
And I think as you stated in your opening statement, and as 
Chairwoman Garza has said, yes, the state of antitrust is 
``good.''
    That is not a small statement, because after 13 days of 
hearings, over 120 witnesses and many days of public 
deliberations, the Commission found that no changes were needed 
in the following areas: changing Section 7 of the Clayton Act, 
that sets out the merger standard; changing Section 2 of the 
Sherman Act, that creates the monopolization standard; changing 
the filing requirements, the initial filing requirements for 
the Hart-Scott-Rodino Act; whether to create different rules 
for different industries; answer, no; changing the fundamental 
enforcement architecture of the antitrust laws that provides 
for dual enforcement roles for both the Federal Government and 
the States; for having two separate agencies, the DOJ and the 
FTC; and for leaving the central features of the remedial 
system, treble damages and attorney's fees, in place.
    It is easy to say everything ultimately was recommended to 
stay the same, at least in these main features, but it was not 
easy to get to that point. There were very vigorous debates 
about leaving the current structure in place, and where we have 
come out took a lot of dynamic energy, to say the least.
    But you know what is interesting to me, having lived up 
here for a long time, is that many of the things I just listed 
are really the handiwork of Congress. Much of the architecture 
of what you all have done in past Congresses has been 
recommended to stay in place. Where we have advocated change--
and we have advocated a number of, I think, important 
legislative changes--these other areas are where there is 
either confusing case law or administrative issues, whether in 
the courts or in the agencies.
    However, this vote of confidence for leaving so much of the 
underlying policy in place, comes in the face of a torrent of 
developing economic reasoning into the competitive analysis in 
the past 25 years. The central role of economics is no longer 
an ideological debating point. It certainly was 20 years ago, 
about the right weight to give to economic analysis. And it has 
led to more institutional continuity and enforcement over a 
series of different Administrations in the past 15 years. I 
think this is all for the good.
    But with the central role played by economics, comes a real 
possibility that the courts and Congress may be left behind 
when it comes to discussing issues such as the three-part test 
to determine whether bundled discounts or rebates violate 
section 2 of the Sherman Act. What I mean by that is that 
Congress must stay deeply involved with all of the economic 
discussions that are going on with the larger policy views, so 
that Congress continues to shape the contour and structure of 
the antitrust laws.
    For about a year and a half in the White House I was 
connected with judicial selection, and one of the observations 
I had, personal observations, was that very few of the 
candidates--and this is not a criticism--for the bench really 
had very little background in antitrust and were particularly 
daunted by the economics that were developing and whether they 
would be up to dealing with that.
    They did take some comfort, however, in reviewing the 
statutes of Congress as well as the legislative history as a 
starting point, and that was their entry point. And that just 
reinforced for me what I came to believe, working here and 
since then, that we need a very active Committee here.
    The Committee has fought long and hard to make sure that 
they will stay relevant. Some of the great moments of this 
Committee history and in this room, for Members now on the dais 
and those looking down from the walls, have come from the often 
bipartisan coming together to defend the antitrust laws, to 
vigorously assert jurisdiction over certain regulatory 
initiatives that are occuring in other Committees for which 
they have primary jurisdiction.
    If it had not been for the effort of this Committee, then 
telecommunication policy, energy policy and many other policies 
would not have had the benefit of a competitive slant. That is 
going to be increasingly more important as we go forward.
    So with that, I can say that I am honored to be here again. 
We look forward to your questions.
    [The joint prepared statement of Ms. Garza and Mr. Yarowsky 
follows:]
 Joint Prepared Statement of Deborah A. Garza and Jonathan R. Yarowsky
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                              ATTACHMENT 1
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                              ATTACHMENT 2
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    Mr. Conyers. Thank you so very much.
    I wanted to bring to your attention from the outset, and 
you probably know it, that the Commission itself was the work 
product of Jim Sensenbrenner, the former Chairman of this 
Committee, and it is one of the issues we agreed upon. And I 
just wanted his name to get into the record, because I think 
that it was a good idea, and we frequently agree on many of the 
antitrust issues.
    I am going to just raise a few and let you field them as 
you will.
    The first thing that I congratulate you on is trying to 
figure out how to narrow the exemptions. To me, that is worth 
celebrating, because with more than 30 exemptions on the books, 
more being applied for and also sometimes given other names, I 
think that this is very, very important.
    I also agree with the regard for a division, a more 
efficient division of labor between the two antitrust 
enforcement agencies, the Department of Justice and the Federal 
Trade Commission, FTC. And here your recommendations were very 
well received.
    Transparency was another one that was very important.
    Now, the Robinson-Patman repeal leads me to temper some of 
my enthusiasm for the list of things that I supported. You 
confused me on repealing Illinois Brick but sticking Hanover 
Shoe onto it, which seems to me to make things more difficult. 
The contribution in claims reduction provision attracted some 
negative feedback in some quarters.
    And so let me ask you to comment on any of those items that 
you choose to.
    Ms. Garza. Well, I will start off with easy, with something 
you like, immunities and exemptions.
    I mentioned that earlier this morning we were with the 
delegation from China and actually the discussion was all about 
immunities and exemptions. And the question they had is, we see 
your antitrust law, we understand it, but can you please 
explain why you have 30 statutory exemptions. And then also 
they had questions about State action, another issue.
    And so we discussed with them a little bit the history of 
exemptions and immunities and, you know, some of the most 
sweeping exemptions I think exhibited an ambivalence about the 
antitrust laws and a fear, even, of competition. There was a 
concern that some industries just weren't fit for competition 
and there was a belief that some industries were national 
monopolies. That thankfully has changed a lot beginning in the 
1970's and into today as we have recognized that very few 
industries if any are not suitable for competition.
    So what we have seen over time is actually a contraction, I 
think, in the immunities and exemptions and a focus on much 
more limited immunities for specific conduct or immunities that 
limit liability to single damages, et cetera.
    With that as the background in recognizing how difficult it 
can be to take away an immunity that has been granted, we 
decided rather than to attack specific immunities and 
exemptions, to try to offer you all a framework that you might 
be able to use in considering whether to adopt immunities and 
exemptions in the future, but also to use in considering 
perhaps the repeal of existing exemptions.
    And one of the things that we do recommend as well is that 
to the extent Congress does decide that other societal values 
have to trump the antitrust laws in a particular area and does 
enact an exemption, we recommend it that there be considered a 
sunset provision, which would change the dynamics perhaps that 
exist today and ensure that after some period of time, in order 
to keep on, there has to be a reevaluation and the parties who 
were the proponents of the immunity have to come forward to you 
with evidence to show that there is a net gain to the U.S. 
economy consumers as a result of the exemption.
    Mr. Yarowsky. I would just add one thing. Many of those 30 
exemptions did not come from this Committee. A number of them 
did. But where they came from were other Committees, looking at 
other initiatives, and then they threw them in, because they 
happened to have jurisdiction over those industries, or they 
were thrown in during the process of a conference report. Which 
again reinforces that your vigorous assertion of jurisdiction, 
even if it has to be sequential referrals, is absolutely 
critical to guard against further erosion in this area.
    Mr. Conyers. You know, the wave of mergers and 
consolidation and the lack of challenges is something I have to 
raise on my list. I don't want you to try to address it now. 
Maybe I will get it a little bit later.
    But I now choose to turn to Mr. Chabot, the Ranking Member.
    Mr. Chabot. Thank you very much, Mr. Chairman.
    Hopefully I can get in a few quick questions and things 
here and get your responses.
    First of all, I think we all are aware that gas prices are 
on the rise once again, causing real harm to real people in 
this country, all across this country. And obviously when this 
happens, there are calls for Congress to increase regulation of 
the oil and gas industry or modifying the standards for oil and 
gas mergers.
    What are the implications of the Commission's 
recommendations regarding regulated industries with respect to 
such calls for increased regulation, for oil and gas, for 
example?
    Ms. Garza. Well, the Commission specifically found and 
recommended that there should not be a separate standard for 
evaluating mergers in various industries, and while we didn't 
specifically mention the oil and gas industry, that was 
something that we were obviously conscious of. We were aware of 
the fact that Congress was considering whether it was 
appropriate to have a different or higher standard for mergers 
in the oil and gas industry.
    And the Commission's conclusions were that there wasn't any 
need to do that. Section 7 and the way that it is enforced by 
the courts and enforced by the antitrust authorities, is 
sufficiently flexible in order to take account of all of the 
relevant acts.
    Now, in the regulated industries area, which we also looked 
at, we recommended that the antitrust agencies should have the 
primary role of assessing the competitive implications of 
mergers and that the regulatory agencies, the non-antitrust 
regulatory agencies, such be involved only to the extent that 
there are some other non-competition related societal goals 
that are important to ensure that cannot be safeguarded through 
application of the antitrust laws.
    Mr. Chabot. What are the implications of the increasing 
globalization of antitrust law? What are some likely 
consequences, for example, if America retains its shipping 
antitrust exemption in light of the E.U.'s recent decision to 
rescind its exemption? And what are the implications for 
potential internationalization of the Robinson-Patman Act, 
also?
    Mr. Yarowsky. I will just start out with that, Mr. Chabot.
    Obviously, there is a convergence in many ways now with 
some of the foreign antitrust laws and the U.S. antitrust laws. 
In some ways, that will be a very good thing, I think, is the 
general sense, procedural aspects of, let's say, merger review. 
There has been a lot of discussion about why, in a global 
merger, where it is being reviewed here in America as well as 
at the E.U., why are there different time frames for review? It 
would be much better if there was a more consistent, harmonized 
procedure that people could rely on and get results and answers 
quickly.
    The issue of substantive antitrust law convergence is a 
really difficult one. Do we really want it to be an issue like 
the GATT talks, trade talks, where suddenly there is a uniform 
global antitrust law in this area. We have different 
traditions. I guess one could say that about trade and 
everything else.
    But I think the general sense is you have got to go much 
more cautiously about imposing a substantive standard across 
the board and certainly being very careful about throwing 
antitrust into kind of trade talks that could be decided in 
kind of an international diplomatic situation instead of a 
substantive situation with antitrust analysis.
    Mr. Chabot. Thank you.
    Go ahead, Ms. Garza.
    Ms. Garza. I just quickly wanted to react to two things you 
mentioned. One was ocean shipping and the other was the 
Robinson-Patman Act.
    On the ocean shipping front, I think the commissioners did 
feel that the fact that we are now the only developed Nation 
that continues to support an exemption for ocean shipping price 
setting should be a bit of an embarrassment to us, and we think 
that the action that the Europeans took is perhaps a good 
opening for us to follow and do the same.
    On the Robinson-Patman Act, I guess I will be brave enough 
to address that, Chairman Conyers. The one thing that moved me, 
at least, in agreeing with my fellow commissioners on our 
recommendation was the fact that it does become difficult to 
explain to non-U.S. competition authorities what the Robinson-
Patman Act does.
    As the report indicates, we think that in many ways the 
Robinson-Patman Act operates in a way that is antithetical to 
the antitrust laws. And we try to discourage foreign 
competition authorities from enacting strict price regulations 
when they are looking at adopting competition regimes.
    But it becomes very difficult for us to in effect say, 
``Well, don't do as we do; do as we say,'' while we have got 
the Robinson-Patman Act on the books, but it is really not 
enforced very much and there are ways to enforce it so it is 
not as harmful. And it makes it more difficult for us, 
basically, to convince other Nations that they should not enact 
similar statutes that really police pricing.
    Mr. Conyers. Thank you so much.
    Howard Berman?
    Mr. Berman. Thank you, Mr. Chairman.
    I would like to focus the witnesses attention on the 
recommendations and the antitrust and patents section and have 
you expand a little on the recommendations. I mean, you come 
down on the side of saying that while there is a tension, we 
can have our patent laws and have our antitrust laws and 
maintain a climate that incentivizes innovation and at the same 
time avoid the most negative anticompetitive implications of 
granting exclusive rights. But you worry about features of our 
current patent system.
    Could you highlight for us which of the recommendations of 
the Federal Trade Commission and the National Academy of 
Sciences that would constitute reforms of the patent system 
that you think are the most important and that Congress should 
pay attention to adjusting? Either of you.
    Mr. Yarowsky. I will take the first crack at this, but I do 
want to say before I do that I am working on patent reform and 
so I want that----
    Mr. Berman. Is that why you look familiar?
    Mr. Yarowsky. Yes, that is probably why I look familiar.
    The recommendations of the FTC, the National Academy of 
Sciences and other expert groups really focus initially on 
patent quality. If too many patents are issued with not precise 
quality, that has a devastating affect on competition, because 
remember, patents do have exclusive rights, monopoly rights.
    If too many patents are issued, that space, the competition 
space, gets filled with these little monopolies, and so they 
better be defined very carefully and precisely so that you 
don't occupy any more space than you have to.
    Obviously, the first look then is at the patent office. 
Applications have gone up probably 300 percent in the last 15 
years for the PTO. That is fine. We have great examiners. But 
that is a terrible burden for them. There is a 500,000, 600,000 
patent backlog that is currently hanging over everyone's head, 
which then delays the issuance of patents.
    If patents are of poor quality or questionable quality, 
that leads to disputes later on. Well, disputes then spill over 
into our courts for many years. If there was an alternative 
dispute mechanism that was expeditious, that would be 
wonderful, but there isn't really one that currently exists in 
the Patent and Trademark Office. And so at that point, the 
patent system, which is supposed to drive economic growth, 
competition and innovation becomes a problem in and of itself 
and drags down kind of the competitiveness of many companies.
    So I think the first strand is to enhance the resources of 
the PTO to keep up with this increase in applications, then 
have clarification about quality. The Supreme Court just came 
out last week with a decision about clarity--about what is 
novel and what is just obvious. I think it will be very 
helpful. And then look at how dispute resolution is being 
handled both in the courts and at the PTO.
    Ms. Garza. I don't know that I have anything to add to 
that.
    We do recognize that a patent doesn't necessarily signify 
an antitrust monopoly. And so we think that is important to 
keep in mind. But on the other hand, there can be a problem if 
the patent system is abused, if obvious inventions are 
patented.
    And so our recommendation is that in particular the 
recommendations of the Federal Trade Commission and the 
National Academy of Sciences that direct themselves to ensuring 
the quality of patents be taken up by Congress. And I do agree 
with John that the Supreme Court seems to be taking steps 
itself to adjust some of what it apparently believes is, if not 
an abuse, a problem with the current patent system.
    But we agree that, you know, if the patent system is out of 
whack, then you could potentially have a competitive impact, 
and we agree however that both systems should be able to 
coexist and both systems should have as the common goal 
stimulating innovation and competition.
    Mr. Conyers. Thank you.
    The gentleman from Florida, Ric Keller?
    Mr. Keller. Thank you, Mr. Chairman.
    Ms. Garza and Mr. Yarowsky, I want to just ask you about 
the Robinson-Patman Act repeal. I don't necessarily disagree 
with your recommendation, but just to draw out that a little 
bit.
    Ms. Garza, can you give us the top three policy reasons why 
your Commission recommended that the Robinson-Patman Act should 
be repealed in its entirety?
    Ms. Garza. Well, you know, I don't know that I have a list 
of three, but the reason we think that it should be repealed is 
because it does arguably prohibit the kind of price discounting 
that the antitrust laws otherwise are intended to encourage.
    Mr. Keller. When you say price discounting, are you talking 
about volume discounting essentially?
    Ms. Garza. Volume discounting. Various kinds of discounting 
can be vulnerable under the Robinson-Patman under the Robinson-
Patman Act, and because of difficulties that defendants can 
have in proving justification and meeting other standards of 
the act, it can really just have a chilling effect.
    And I think that, you know, you may not see a lot of 
litigation nowadays, but in my experience, and maybe other 
people's experience, is that it does have a chilling effect, 
and in a way it provides almost an excuse for not competing as 
hard as companies can compete.
    Mr. Keller. Let me cut you off there.
    Mr. Yarowsky, do you have anything to add to that? Any 
other policy reasons other than it inhibits volume discounting?
    Mr. Yarowsky. No. But at some point, now or later, I would 
like to explain my position on Robinson-Patman.
    Mr. Keller. Let me ask you a couple of questions, and then 
I will give you a chance.
    It is my understanding from talking with friends of mine 
who are car dealers that a car dealer, say, who sells Toyota 
Corollas, and he sells 1,000 cars a year, versus a smaller car 
dealer who sells Toyota Corollas at only 100 per year, both pay 
the exact same amount from the manufacturer and they don't get 
a volume discount from the manufacturer.
    Is that your understanding, Ms. Garza?
    Ms. Garza. I don't really have an understanding of how 
pricing works in the auto industry, but I will say that our 
feeling is that a manufacturer should have--we start with the 
proposition that unless the manufacturer has market power, they 
have an incentive to basically expand output, to basically make 
sure that they get distributors who are selling a lot and that 
the volume discounts and other things that they employ are 
meant to basically reward the most efficient and successful 
distributors and distribution techniques.
    Mr. Keller. Well, that is my understanding, and I think it 
is based on Robinson-Patman.
    Do you disagree with that, Mr. Yarowsky?
    Mr. Yarowsky. No, not----
    Mr. Keller. Okay. Let me give you a simple example. And I 
like the corner grocery stores as much as anyone. I go to the 
one right here on 4th and East Capitol every week. I am 
probably one of their best customers.
    But does Wal-Mart and the little corner grocery store both 
pay the same amount for the same size can of Campbell's Soup 
under the Robinson-Patman Act, Mr. Yarowsky?
    Mr. Yarowsky. They may not necessarily pay the same amount. 
I mean, it really is an individualized set of agreements about 
what retailers pay. They may well pay the same amount. I think 
the volume discount exception to Robinson-Patman which could 
justify differential pricing, that was there from the very 
beginning, 1936. The question is how it is interpreted and 
there is been a lot of confusion even about that, which seems 
pretty obvious.
    Mr. Keller. I am somewhat confused for a couple reasons. It 
seems like I gave you a chance to give me, both of you, three 
policy reasons why you want to get rid of Robinson-Patman Act 
and you can only come up with one, and that is volume 
discounting, and so when I ask you does Wal-Mart pay a cheaper 
price that a corner grocery store, I would kind of expect you 
to tell me no, they all pay the same under this law.
    Mr. Yarowsky. There are some other reasons that have come 
out. One, it may limit more discounting activity, and that 
would be a perverse, ironic result. There have been a lot of 
studies showing that fear of this act, and again I----
    Mr. Keller. Take the remaining time to tell me what you 
wanted to get out about Robinson-Patman.
    Mr. Yarowsky. Here is my view of Robinson-Patman. I agree 
with all of the commissioners that it is not working well and 
there is a real problem. It is not being enforced by the 
agencies and there is a lot of substantive confusion in the 
law.
    However, rather than just closing your eyes and repealing 
Robinson-Patman, I don't agree with that. I think Congress 
needs to revisit Robinson-Patman, that the same forces, the 
same constituencies that have cried out for Congress to look at 
it, are still here.
    The problem is, I think you need to downsize and re-sculpt 
the act, if possible, so that it does work, it is lower to the 
ground, it may not be so convoluted. Remember, what Congress is 
now having to do is create mini-Robinson-Patman Acts because 
the larger one doesn't work.
    The program access rules--Congress helped stimulate the 
production of those because, for example, satellite was at a 
perceived disadvantage from cable in getting content, 
programming, when they first started out. And the answer was, 
well, we are giving a volume discount to cable, and the small 
satellite companies said, well, we can't survive on that. So 
program access rules came into effect just for that little 
sphere.
    Net neutrality. This Committee really dug into that last 
year. Without going into the pros or cons of net neutrality, 
there was also concerns pushing that consideration about price 
discrimination. Again, if Congress had passed a net neutrality 
bill, it would not have been a generic bill at all that would 
have applied across our economy. It just would have been for a 
small sector.
    I think if you repeal Robison-Patman, you are going to see 
a proliferation of these mini price discrimination regimes. I 
don't think that is a good idea. I would rather see Congress 
draw back, do a tough evaluation, spend the time, go over it 
and see if they can re-craft a workable Robinson-Patman Act 
across the board.
    Mr. Conyers. Thank you so much.
    The gentleman from California, Darrell Issa?
    Mr. Issa. Thank you, Mr. Chairman.
    I don't want to sound like a one-trick pony, but I am going 
to pick up on the patent reform and how it relates here. I 
think everyone that has been on the dais and probably everyone 
that will come in and out during the hearing agrees that the 
major thrust of patent reform is to get better patents. And 
recognizing that we do have a high failure rate when they stand 
the test of the brightest sunshine in major litigation.
    But one question I have is, let's assume for a moment that 
they are valid and should be enforced. I think I was hearing, 
you know, that there are still many antitrust violations, and I 
just want to make sure that it is clear for the record that, 
assuming they are valid, they are a right to a monopoly and a 
right to dominate an industry and a right to get premium prices 
and the Federal Trade Commission tends to resent that.
    Is that a fair statement? I am noticing some wincing, so I 
will assume that you are going to disagree.
    Ms. Garza. I don't know if everything you said is fair, but 
I don't know----
    Mr. Issa. If I were still a Chairman, it would be. But I am 
not.
    Ms. Garza. Here is the thing. I would say that you are 
right, and I think the Commission agrees that a validly issued 
patent confirms the right of exclusion on the owner, and we say 
in our discussion of Section 2 as well as the patents that you 
have the right to command whatever price you can command.
    Now, having a patent doesn't mean that you have dominance 
by any stretch of the imagination, because you could have a 
patent but that doesn't mean that that technology that is 
embodied in that patent is superior to other patented or non-
patented technology.
    So the one thing that is important to keep in mind is that 
a patent doesn't equal dominance. A patent equals the right to 
exclude. It does not necessarily equal market power or 
dominance.
    Mr. Issa. Sure. And following up on that, because you said 
exactly what I wanted said, in a sense, not because I asked you 
to say it, because I was a devil's advocate instead.
    When we look at pharmaceuticals, it seems like in many 
Committees of Congress we are constantly trying to make them 
provide medicines cheaper and thus breaking down the inherent 
right of their patent to create exclusion for the life of the 
patent, and we happen to have this life plus the time we took 
away in administrative function, but it is still life of the 
patent, and thus say that they should not get the high price.
    When we are looking at antitrust, isn't it fair to look at 
these pharmaceuticals as not different for purposes of their 
right to get what might be enormous profits if they hit a 
winner and of course with the enormous loss if it isn't a 
dominant product or in fact it doesn't get approved.
    Ms. Garza. Well, antitrust policy I think says that if you 
have a valid patent, you have the right to recover whatever 
profits you can, and if it is a winning drug, then that's an 
important incentive to others to invest in developing other 
drugs.
    And as you have indicated, and I don't know, I can't recall 
right now what the percentage of success is, but the percentage 
of successes, but the percentage of success is really quite low 
for pharmaceuticals and the investment required is quite high. 
So that really illustrates, in some sense, what we said in the 
report about the importance of preserving incentives to 
innovate.
    So where there is a valid patent and you allow them to 
recover the rewards of their investment, then you are in 
essence encouraging further innovation in new patents. That is 
assuming that there is no other sort of abuses or anything.
    Mr. Issa. Sure. But it is not encouragement. It is a 
constitutional right based on its encouragement. Did you have 
anything to add on that?
    Ms. Garza. No.
    Mr. Issa. And I made this point, and the Chairman knows all 
too well, because many of the Committees of Congress right now 
seem to want to strip away some part of that for the greater 
good of society, not for the greater incentive to innovate.
    Mr. Yarowsky, earlier, though, you said that the lack of an 
effective administrative process was part of the problem with 
patents. And I know that wasn't on point to antitrust, but in 
the last minute or so, if in fact the reexamination process 
were open, transparent, open in the sense that you could see 
and you could make input, would that change your feeling on the 
administrative remedies?
    Mr. Yarowsky. From my view, as long as you can get a post-
grant process, I mean, there are many names being hurled around 
in the----
    Mr. Issa. And I use reexamination because we understand 
what they are that people aren't using.
    Mr. Yarowsky. Right. But if I am able to just use a more 
general phrase like post-grant process, if that process would 
allow more information to come in with a transparency so there 
is a public dimension, I think that would help crystalize more 
quickly the validity question, and the validity question is the 
key, because once you feel confident about that, then everybody 
goes about their own business to innovate further, which is 
what we all want, and that leads to a more competitive economy.
    So I would agree with you, if that post-grant process could 
be more transparent and lead to validity determinations more 
clearly and more quickly, I think that would be a very positive 
result.
    Mr. Issa. Thank you.
    And I know the Chairman is looking forward to the 
Subcommittee marking up just such a bill in the relatively near 
future.
    With that, I yield back.
    Mr. Conyers. Thank you very much.
    I apologize for not calling on Sheila Jackson Lee before 
Darrell Issa, but I do now. The gentlelady from Houston is 
recognized.
    Ms. Jackson Lee. Thank you, distinguished Chairperson.
    In our anteroom is a number of Russian parliamentarians. It 
means that this room has many diverse opportunities and 
responsibilities, and as Chairman they are admiring your 
leadership. I apologize if I was in and out dealing with a 
number of members from the Russian Duma. I know that they are 
there as they are listening to this process of democracy.
    With that in mind, let me thank the commissioners for their 
work. I think that the principals that you have enunciated, the 
commitment that we have to the free market competition, should 
remain a touchstone of the United States economic policy and 
the recognition of the core antitrust laws, that they are sound 
and help safeguard the competition of today's economy, are all 
good points. And I think you had one other point that I am 
noting, possibly that new or different rules are not needed for 
industries in which innovation, intellectual property and 
technological innovation are central features.
    I have a second thought to that and I raise a particular 
industry. I heard you mention in briefly and I would like to 
have some comment on that as well as to follow up some of the 
questions of my colleagues.
    We have watched the oil and gas industry over the decades 
have a metamorphic change, whether it is caterpillar to 
butterfly, butterfly to caterpillar. But we see the large 
combinations of Exxon-Mobil. We see the large combinations of 
Chevron-Texaco, Conoco-Phillips, and it goes on and on.
    For some reason, I thought the innovativeness of the 
industry, the broadness of the industry, was far more vibrant 
and challenging when there was less of this huge oil 
monopolies, and I happen to come from what has been claimed to 
be the energy capital of the world and we proudly claim that in 
Houston, Texas. But I have watched my independence be dominated 
and domineered, a word that I have just crafted, by these large 
conglomerates.
    It seems that rules do need to be changed in order to 
create a vibrant, competitive industry. Where are the 
independents in the energy industry? What value do we get out 
of the large conglomerates? Do we get new technology? We 
certainly don't get a sensitivity in pricing. In fact, that is 
one of the major challenges of our legislative agenda this 
year, is gasoline pricing. Of course, some people will look at 
it from the perspective of conservation, alternative fuels, but 
why are we not looking at it in the very staid, rigid 
monopolistic focus that the industry has crafted.
    I know I can't see any real documentation of any new 
technology, new intellectual innovation in the energy industry, 
based upon their large size. Do you see any?
    So my question would be, when is it time to look at a 
monopoly or monopolies and sense that there needs to be new 
rules?
    My second question would be to again try this question on 
Robinson-Patman. I am glad, Mr. Yarowsky, that you have 
indicated that we don't need a repeat of it, but I am 
interested to find out how price discrimination can be 
prohibited by the Robinson-Patman Act or prevented by other 
antitrust laws.
    And if you could start with those two questions. The first 
one, I really want to have both of you elaborate on. I think we 
need to keep an open mind on industries that seemingly have 
harmed the consuming public through their largeness.
    Mr. Yarowsky. Sure, okay. Why don't I take a stab at going 
first on both of those.
    On the oil and gas mergers, Congresswoman, the only thing 
that we definitively came up with that is relevant, and then I 
will mention another factor, but I don't mean to represent it 
as a Commission deliberation or recommendation but to be very 
responsive as I can to you, is that we agree that the merger 
standard to evaluate mergers shouldn't be different industry by 
industry. Because if you started doing that, there might be 
some purpose served in the immediate time to do that for one 
industry, but then time would go on and you would be left with 
different standards for different industries and it would be 
very difficult to run a uniform policy.
    So that doesn't answer all your questions, but that was the 
one recommendation we did have.
    We had a second recommendation, I think it is relevant, 
though, it is more general, but it goes to what you described. 
A second recommendation we had was that we recommended that the 
agencies develop what we call kind of vertical merger 
guidelines. I mean, what the guidelines mainly do, the merger 
guidelines, are horizontal mergers, and you were describing 
some of those, where the same type of company merges with 
another like type of company and creates a more powerful, 
consolidated entity.
    But there are also vertical mergers, so that you then 
integrate manufacturing, distribution and retailing. Those have 
powerful effects on innovation. I am not saying they are all 
bad or all good, but they do have very strong effects on issues 
like innovation and competition and can influence what happens 
downstream with the consumer, the ultimate consumer, which is 
something we all live with. Those guidelines, we think, need to 
really be revisited, because they really haven't been looked at 
for many years, and reissued.
    And I think they would have bearing on oil and gas mergers 
that we have seen as well as other mergers. I think that is 
something tangible that we recommended that should be done.
    On Robinson-Patman, the real question, Congresswoman, is 
this. The antitrust laws generally have a certain meaning, the 
words, because they have been there now for over a century. So 
when someone talks about antitrust injury under any of the 
antitrust laws, it has a meaning that the courts have developed 
over time. Robinson-Patman, and this isn't a criticism, it is 
just what happened in 1936, used different words than existed 
in the basic antitrust law statutes, which had to do with 
restraints of trade and monopoly.
    And it was a much more intricately designed statute, and it 
was really the result of a crying out--this was during the 
Depression and post-Depression as small businesses were 
completely swallowed up. There was a real reason why Congress 
addressed this and has continued to look at it seriously. But 
it was a very kind of difficult statute to craft and courts in 
some ways have made the effort to try to harmonize the words of 
that statute with the general antitrust statute. Some have 
tried, some have thrown up their hands and said, well, they are 
different and so the meanings are different.
    Well, I don't think that is a good result. And my feeling 
is, though it is going to be very difficult, I have seen that 
this Committee can do very difficult things and achieve them. 
And I just think it is worth the energy, if there is time in 
the agenda, to devote a lot of time to seeing if there is a way 
to re-craft Robinson-Patman to get a more harmonized meaning 
that the courts will understand, probably downsize it because 
it is very voluminous, and then I think you can build consensus 
that it should be enforced by the agencies, which has not 
occurred. For 15 years, it has not been enforced. That is a 
terrible thing because it builds no confidence in the system.
    And, you know, the States also have their little mini-
Robinson-Patman Acts, some of them do, so even if you would 
just repeal Robinson-Patman, those acts would still live on.
    So I just think it is worth the effort and time to see what 
might be done to re-craft Robinson-Patman. And so my vote on 
the Commission, not to defend my vote, was simply that it is 
not working. I have to agree with that. It is not working. But 
my hope is that you can revisit it, create definitions that 
would work and then achieve the same social goals that people 
feel are very important.
    Ms. Jackson Lee. Mr. Chairman, I thank you for indulging--
--
    Mr. Yarowsky. I am sorry for such a long answer.
    Ms. Jackson Lee. Can Ms. Garza make a quick response to 
those two questions?
    Thank you very much, Mr. Yarowsky. It was a very thoughtful 
answer.
    Ms. Garza. Let me address your question about mergers in 
the oil and gas industry.
    To clarify, the reason we didn't think it was appropriate 
to have a special standard is because the standard that exists 
today is very broad--the statutory standard. It basically 
prohibits mergers and acquisitions that would substantially 
reduce competition in any line of trade. And the test that the 
courts and the agencies apply are all focused on identifying 
whether a merger and acquisition--what effect it would have on 
output and price. So they are looking at the right thing; what 
effect is this transaction going to have on output and price. 
Is it going to reduce output and raise price?
    And the analysis that they undertake itself is very 
complex. But we are sensitive to the concerns that you raise. 
And it is not a good situation for public confidence in the 
laws, for example, for people not to understand the basis for 
enforcement decisions, and by that I mean both cases that are 
brought and cases that aren't brought.
    So we do actually make a number of recommendations that are 
designed to help ensure that the Congress in your oversight 
capacity understands the basis for enforcement generally, but 
also in respect to specific transactions, and also that the 
public does.
    Now, the FTC and the DOJ have done a very good incredible 
job at that with guidelines and speeches and others. But we 
have recommended that they go even further, with more closing 
statements, we call them, basically explanations when there is 
a transaction that people have an expectation might be 
challenged and there is a decision taken not to challenge it, 
that there be an effort to explain as well as can be done, 
respecting confidentiality concerns, why the agencies didn't 
take the steps they took.
    Now, that is a burden on the agencies, but we think it is 
very important for them to have to do that so people understand 
the bases for enforcement. Otherwise you lose your respect for 
the antitrust laws and the enforcement, and that would be 
problematic.
    We would like to see these laws as being basically as self-
enforcing as possible and we would like the public to have 
confidence that they are, that their welfare is being looked 
after. So we agree with you on that, and we think that one 
answer to that is substantially increase transparency.
    Ms. Jackson Lee. My only conclusion, Mr. Chairman, is that 
there is a great input by the merged oil and gas industries and 
there is a great price increase, and that seems to be ongoing.
    I thank the witnesses.
    I thank the Chairman.
    Mr. Conyers. I want to thank you all. This has been very 
helpful.
    I want to say that we raised some questions that certainly 
need to be examined even though this is a several-year product 
that you have before us. But it is an important one, because 
this Antitrust Task Force is committed to trying to generate a 
little more challenge to the enormous number of mergers that 
have taken place over the last period of years.
    And Chairwoman Garza, Vice Chairman Yarowsky, you have 
acquitted yourself well on behalf of your fellow commissioners 
and the staff that labored so diligently on this matter, but we 
want to keep 5 legislative days open for any questions that may 
come to you that we can include in the record.
    And so, without objection, the Members will have 5 
additional legislative days to submit questions which we will 
forward to you.
    And, without objection, the record will be open for 5 
legislative days for the submission of any other material.
    We thank you for your excellent testimony and hard work.
    The hearing is adjourned.
    [Whereupon, at 3:25 p.m., the Task Force was adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

 Prepared Statement of the Honorable Lamar Smith, a Representative in 
Congress from the State of Texas, and Ranking Member, Committee on the 
                               Judiciary
    Mr. Chairman, thank you for convening this hearing of the Antitrust 
Task Force.
    Vigorous, unimpeded competition sustains our economy and keeps it 
strong. It leads to innovative products that better our lives and keep 
prices low. The Judiciary Committee has a long history of oversight to 
ensure that American markets retain healthy competition.
    At the heart of that competition is the Sherman Act, which the 
Supreme Court has dubbed the ``Magna Carta of free enterprise.'' 
Sections 1 and 2 of the Act, which Congress passed in 1890, are 
deceptively simple; each is only one sentence long.
    However, those two sentences have come to regulate all manner of 
business dealings in this country, including who a company can--and 
must--deal with, how it prices its goods, and whether it can merge with 
a rival company.
    The antitrust laws are unique in American legal culture in that 
they are enforced by two federal agencies, the Department of Justice 
and the Federal Trade Commission. In addition, each state's attorney 
general can bring suit under both federal and state antitrust laws.
    The antitrust laws can be enforced both criminally and civilly. 
Private citizens can also bring suit to recover damages and enjoin 
anticompetitive business practices.
    Antitrust enforcement has also expanded beyond America's borders. 
When the United States passed the Sherman Act over 100 years ago, it 
was alone in the world. Today over 100 countries have some sort of 
competition law, and more are considering them.
    In fact, China is currently debating its own antitrust laws, 
despite being a country that does not necessarily share America's 
fundamental economic principles.
    Antitrust law affects every industry as evident from the wide 
variety of hearings that the House Judiciary Committee has held under 
its antitrust jurisdiction. The Committee has held hearings on 
telecommunications, sports, oil and gas, utilities, ocean shipping, 
airlines, agriculture, and financial services.
    Given the impact of antitrust law on the American economy, it is 
vital that we examine how well these laws are working, particularly in 
light of the innovation that today's high tech economy has brought.
    The Antitrust Modernization Commission, which spent the last three 
years studying the antitrust laws, found that the Sherman Act is 
fundamentally sound and requires no major changes by Congress.
    That said, the Commission's 450 page report has more than 80 
recommendations on a variety of subjects, including repeal of Illinois 
Brick, repeal of the Robinson-Patman Act, modifications to the merger 
review clearance process, and amendments to the Federal Trade 
Commission's ability to bring injunctions and to pursue administrative 
litigation in merger cases.
    The Commission's report also provides a framework for Congress to 
assess immunities from the antitrust laws, such as the McCarran-
Ferguson Act and the Shipping Act, and exemptions related to regulated 
industries.
    Accordingly, today's hearing can help inform the Task Force's work 
on a number of issues that it may consider, including competition in 
the credit card, pharmaceutical, oil and gas, healthcare, professional 
sports, and telecommunications industries, just to name a few.
    I would like to congratulate Chairwoman Deb Garza and Vice-Chair 
Jon Yarowsky for their hard work. Together with the other 10 
Commissioners and professional staff, they produced an excellent report 
on time and under budget. The report is well written and helps make 
difficult concepts easy to understand. It also contains a wealth of 
supporting data and is an example of how such studies should be 
conducted in the future.
    I yield back the balance of my time.
       Prepared Statement of the Honorable Sheila Jackson Lee, a 
    Representative in Congress from the State of Texas, and Member, 
                          Antitrust Task Force
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     Biographies of Deborah Garza, Chair, Antitrust Modernization 
     Commission; and Johnathan R. Yarowsky, Vice Chair, Antitrust 
                        Modernization Commission
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   Prepared Statement of Glenn English, CEO, National Rural Electric 
 Cooperative Association and Chairman, Consumers United for Rail Equity
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