[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]







                      OVERSIGHT OF THE ANTITRUST 
                          ENFORCEMENT AGENCIES

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         INTELLECTUAL PROPERTY,
                     COMPETITION, AND THE INTERNET

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 7, 2011

                               __________

                           Serial No. 112-98

                               __________

         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

                      LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina         JERROLD NADLER, New York
ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT, 
BOB GOODLATTE, Virginia                  Virginia
DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana                  MAXINE WATERS, California
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
TED POE, Texas                       JUDY CHU, California
JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
TOM MARINO, Pennsylvania             JARED POLIS, Colorado
TREY GOWDY, South Carolina
DENNIS ROSS, Florida
SANDY ADAMS, Florida
BEN QUAYLE, Arizona
MARK AMODEI, Nevada

      Sean McLaughlin, Majority Chief of Staff and General Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel
                                 ------                                

  Subcommittee on Intellectual Property, Competition, and the Internet

                   BOB GOODLATTE, Virginia, Chairman

                   BEN QUAYLE, Arizona, Vice-Chairman

F. JAMES SENSENBRENNER, Jr.,         MELVIN L. WATT, North Carolina
Wisconsin                            JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina         HOWARD L. BERMAN, California
STEVE CHABOT, Ohio                   JUDY CHU, California
DARRELL E. ISSA, California          TED DEUTCH, Florida
MIKE PENCE, Indiana                  LINDA T. SANCHEZ, California
JIM JORDAN, Ohio                     JERROLD NADLER, New York
TED POE, Texas                       ZOE LOFGREN, California
JASON CHAFFETZ, Utah                 SHEILA JACKSON LEE, Texas
TIM GRIFFIN, Arkansas                MAXINE WATERS, California
TOM MARINO, Pennsylvania             HENRY C. ``HANK'' JOHNSON, Jr.,
SANDY ADAMS, Florida                   Georgia
MARK AMODEI, Nevada

                     Blaine Merritt, Chief Counsel

                   Stephanie Moore, Minority Counsel



















                            C O N T E N T S

                              ----------                              

                            DECEMBER 7, 2011

                                                                   Page

                           OPENING STATEMENTS

The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Subcommittee on 
  Intellectual Property, Competition, and the Internet...........     1
The Honorable Melvin L. Watt, a Representative in Congress from 
  the State of North Carolina, and Ranking Member, Subcommittee 
  on Intellectual Property, Competition, and the Internet........     3
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, Ranking Member, Committee on the 
  Judiciary, and Member, Subcommittee on Intellectual Property, 
  Competition, and the Internet..................................     4

                               WITNESSES

Jon Leibowitz, Chairman, Federal Trade Commission
  Oral Testimony.................................................     6
  Prepared Statement.............................................     9
Sharis A. Pozen, Acting Assistant Attorney General, Department of 
  Justice Antitrust Division
  Oral Testimony.................................................    27
  Prepared Statement.............................................    29

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, Ranking 
  Member, Subcommittee on Intellectual Property, Competition, and 
  the Internet, and Member, Subcommittee on Intellectual 
  Property, Competition, and the Internet........................     5
Prepared Statement of the Honorable Michael Grimm, a 
  Representative in Congress from the State of New York..........   173

                                APPENDIX
               Material Submitted for the Hearing Record

Response to Post-Hearing Questions from Jon Leibowitz, Chairman, 
  Federal Trade Commission.......................................   176
Response to Post-Hearing Questions from Sharis A. Pozen, Acting 
  Assistant Attorney General, Department of Justice Antitrust 
  Division.......................................................   179

 
            OVERSIGHT OF THE ANTITRUST ENFORCEMENT AGENCIES

                              ----------                              


                      WEDNESDAY, DECEMBER 7, 2011

              House of Representatives,    
         Subcommittee on Intellectual Property,    
                     Competition, and the Internet,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:04 a.m., in 
room 2141, Rayburn House Office Building, the Honorable Bob 
Goodlatte (Chairman of the Subcommittee) presiding.
    Present: Representatives Goodlatte, Quayle, Sensenbrenner, 
Coble, Chabot, Issa, Jordan, Adams, Amodei, Watt, Conyers, Chu, 
Deutch, Lofgren, Jackson Lee, and Johnson.
    Staff Present: (Majority) Holt Lackey, Counsel; Olivia Lee, 
Clerk; and (Minority) Stephanie Moore, Counsel.
    Mr. Goodlatte. Good morning. This hearing of the 
Subcommittee on Intellectual Property, Competition, and the 
Internet will come to order. This hearing will conduct 
oversight of the two agencies that share responsibility for 
enforcing America's antitrust laws, the Department of Justice 
Antitrust Division and the Federal Trade Commission's Bureau of 
Competition.
    When applied in a predictable fashion based on sound 
economic principles, the antitrust laws preserve a free and 
competitive economy. Antitrust laws protect against monopolies, 
cartels, and combinations that would abuse market power to 
enrich themselves at the expense of competition and American 
consumers. If the antitrust laws go unenforced, competition and 
consumers will suffer. If they are over enforced, they can give 
unfair advantage to specific competitors and thwart pro-
competitive practices that benefit consumers. But when applied 
correctly, the antitrust laws protect competition rather than 
competitors and intervene in our free market economy only to 
the extent necessary to preserve competition.
    Thanks to an improved understanding of economics and the 
history of antitrust laws' original intent, antitrust case law 
and enforcement has become much clearer and more predictable 
over the past 40 years. Today's hearing is about Congress 
ensuring that the two Federal agencies charged with enforcing 
the antitrust laws, the Department of Justice and the FTC, 
continue to do so in the most balanced, clear, and predictable 
way as possible.
    Particularly in this difficult economy, the antitrust laws 
must set clear rules of the road by which job creators and 
consumers can do business, and although antitrust is more 
predictable than it was 40 years ago, there are still areas of 
inefficiency and uncertainty that I hope to explore in today's 
hearing.
    I am particularly concerned that merging companies are 
often uncertain about which agency will review their merger. 
The two antitrust agencies share responsibility for the merger 
review process and decide between themselves which agency will 
review any given merger by a process known as clearance. In 
many cases, clearance is reasonably clear because one agency or 
the other has expertise in the industry involved. However, 
jurisdiction may be hotly disputed in high profile matters or 
when neither or both agencies have relevant expertise.
    The process by which the agencies resolve clearance 
disputes is opaque. There are stories which do not inspire 
confidence of clearance disputes being settled by coin tosses, 
jump ball arrows or back room deals. This uncertainty about 
clearance can affect Americans' ability to predict whether a 
given merger will be approved. Because of different rules that 
apply to the two agencies, it is widely believed that mergers 
that are reviewed by the Federal Trade Commission are less 
likely to win approval than mergers that are reviewed by the 
Department of Justice.
    The first step in a merger challenge for both agencies is 
to apply in court for a preliminary injunction blocking the 
merger pending further proceedings, but courts apply a lower 
standard to preliminary injunction requests by the FTC than to 
the DOJ. After the preliminary injunction phase, the FTC may 
challenge the merger in an administrative proceeding while the 
DOJ must bring its challenge in Federal Court. This also makes 
it easier for the FTC to block a merger.
    These disparities harm the predictability of the merger 
review system. That is why the prior Obama administration 
Assistant Attorney General for Antitrust, Christine Varney, 
said, and I quote, ``I don't think we want to foster a system 
where the legal review, the result of your merger depends on 
which agency it's in front of. I would recommend to the 
Congress that they start to think about how to rationalize 
that.'' I would like to accept Ms. Varney's recommendation and 
invite today's witnesses to help this Committee think about how 
to rationalize these disparities.
    There are a number of other oversight issues respecting the 
transparency, predictability, and fairness of the antitrust 
system that this Committee should explore today. These issues 
include but are not limited to the scope of the FTC's authority 
under Section 5 of the FTC Act, how the proposed closure of DOJ 
field offices will affect the budget, DOJ's increasing reliance 
on conduct remedies in merger cases, and whether the agency's 
recent guidance regarding the antitrust treatment of 
accountable care organizations will provide clarity and 
certainty to health care providers trying to adjust to the new 
health care law.
    All of these issues are important to creating the clear and 
predictable rules for free market competition that are 
necessary to grow the economy.
    I look forward to today's hearing, and it's now my pleasure 
to yield to the Ranking Member of the Subcommittee, the 
gentleman from North Carolina, Mr. Watt.
    Mr. Watt. Thank you, Mr. Chairman, and I want to thank you 
for convening this hearing, and I want to enthusiastically 
welcome our witnesses today.
    Since the beginning of this session of Congress, this 
Subcommittee and/or the full Judiciary Committee have held 
hearings on pending mergers before your agencies. We have 
evaluated, predicted, and sometimes second guessed how a 
particular proposal should be processed and investigated by you 
and your staffs. My philosophy in this context has always been 
to try to participate in the process to actively educate our 
constituents on complex matters that are in the process of 
being analyzed beyond the public eye. I appreciate the fact 
that we will never have access to all the facts and data on 
which you base your determinations of whether to approve or 
disapprove a given merger with or without conditions, and we 
are therefore ill equipped to pass definitive judgment on any 
pending proposal. So I am pleased that you are here today to 
provide us with insight on your leadership, collaboration, and 
approaches to enforcement of the laws within your respective 
and sometimes joint jurisdiction.
    Your written submissions have certainly raised specific 
areas appropriate for congressional oversight. For example, 
what is the effectiveness of behavioral conditions imposed on 
approved mergers? Should Congress enact legislation prohibiting 
pay-to-delay settlements? How should we evaluate the 
intersection between patent protection and competition, and are 
there policy gaps for Congress to fill in that space? What 
challenges do we face in coordinating antitrust policy 
internationally?
    I hope that some of my colleagues will explore some or all 
of these issues, but my interests are particularly dominated by 
one merger in particular, not with respect to the specifics of 
the merger but the debate it inspired within the FTC and in the 
academic literature. That merger is the Google/DoubleClick 
merger and the debate it has ignited about whether or to what 
extent privacy should be an element of antitrust enforcement, 
especially in the online environment. I believe that the 
prospect of compromising privacy is a price consumers pay for 
most online services. Simply by logging on to a computer, 
consumers surrender their privacy. Personal information is 
required, collected, shared, used, sold, tracked, and retained 
frequently without our knowledge.
    Chairman Leibowitz, as you noted in your concurring 
statement approving the Google/DoubleClick merger, quote, 
``This rampant tracking of our online conduct as well as the 
resulting consumer profiling and targeting raises critical 
issues about the sufficiency of companies' disclosure, the 
depth of consumers' understanding and control of their personal 
information, and the security and confidentiality of the 
massive collection of sensitive personal data.'' And former 
Commissioner Pamela Jones Harbour in dissent noted that while, 
quote, ``A minority of consumers will share their most intimate 
details with anyone on the Internet, on the radio or on 
national television, privacy principles should protect the 
majority of consumers who do care about their privacy and who 
would prefer greater transparency about the use of their 
personal information.''
    Various academics have also weighed in on these issues, 
posing the question whether traditional antitrust enforcement 
is currently inadequate to protect privacy and whether the 
Department of Justice and the FTC should expand the scope of 
analysis to include privacy and other sociopolitical issues in 
the competition calculus. Because I am ever more convinced that 
one of the most important things we can do as policymakers is 
to preserve our privacy protections online, I'm very interested 
in your perspectives on the future of privacy and how it 
relates to or plays out under the antitrust laws.
    Just yesterday we liberalized the prospect or the manner in 
which consumers can give up their privacy online, and I note 
also that you recently approved a privacy settlement involving 
Facebook, and if I have some time I may want to inquire into 
that further.
    Mr. Chairman, I thank you for convening this hearing. I 
think it's a very important hearing, and I yield back the 
balance of my time.
    Mr. Goodlatte. I thank the gentleman, and it's now my 
pleasure to recognize the Ranking Member of the Judiciary 
Committee, the gentleman from Michigan, Mr. Conyers.
    Mr. Conyers. Thank you, Chairman Goodlatte. We welcome the 
witnesses. It's worth noting that both of your agencies have 
done more to enforce our antitrust laws than in previous years, 
but that doesn't give me much comfort. American and 
transnational conglomerates are getting away with incredible 
violations of the law. Companies--Google, Monsanto, Goldman 
Sachs--have acted repeatedly with impunity, engaging in 
unlawful, anticompetitive practices knowing that they can 
exploit the loopholes in a government system whose antitrust 
and criminal enforcement resources and commitment are not very 
strong.
    So it's my hope that this is the first of a series of 
hearings that will go on in terms of antitrust enforcement. 
Strong antitrust enforcement is critical because free markets 
and competition, which are supposed to be the foundation of our 
system, can only thrive when there is a strong enforcement in 
this area of the law. Weak antitrust enforcement stifles job 
creation and weakens the economy. The previously accepted 
phrase ``too big to fail'' sums it all up. When companies like 
AIG, CitiGroup, and a number of Wall Street predators become so 
large that our entire economy depends on their continued 
success, which may incorporate unethical or illegal activity, 
then the economy has become too concentrated and too distorted.
    Three years after the financial distress Wall Street has 
put us in, not one Wall Street CEO has been imprisoned. In each 
case when our Federal antitrust enforcers have stepped up, they 
have helped restore competition to the market and protect 
consumers. The challenge to block H&R Block and TaxACT merger, 
the ongoing suit to block the AT&T proposed acquisition of T-
Mobile, the FTC last year settlement with Intel are all 
consumer wins. We wait to see what will happen with today's 
headlines, the Aetna-Blue Cross dispute in Michigan that the 
Justice Department has actively intervened into, the FTC's work 
on anticompetitive pay-for-delay agreements among 
pharmaceutical manufacturers that have so far frequently kept 
generic drugs off the market. Only action will protect American 
consumers and jobs, and so I am aware of enforcement efforts 
have increased over the last couple years.
    This year the Federal Trade Commission challenged 17 
mergers believed to be anticompetitive, but it isn't enough. 
Google attempts to purchase Motorola, Verizon teams up with the 
new Comcast NBC Universal on shared service ventures, and as 
the whims of Wall Street investment firms wreak havoc on the 
global economy, we need antitrust to become a top priority for 
our law enforcement system.
    I'll put the rest of my statement in the record, and I 
think you get my drift. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative 
 in Congress from the State of Michigan, Ranking Member, Committee on 
   the Judiciary, and Member, Subcommittee on Intellectual Property, 
                     Competition, and the Internet
    Thank you Chairman Goodlatte for convening this oversight hearing 
today.
    Although it is worth noting that both of your agencies have done 
more to enforce our antitrust laws than the previous one, this gives me 
little comfort. American and transnational conglomerates get away with 
murder. Companies like Google, Monsanto, and Goldman Sachs often act 
with impunity when it comes to engaging in unlawful and anti-
competitive practices because they know they can exploit gaping 
loopholes and a government whose antitrust and criminal enforcement 
resources and commitment are weak.
    Strong antitrust enforcement is critical to our Nation. Free and 
competitive markets are the foundation of our economy.
    Weak antitrust enforcement stifles job creation and brings weakness 
to the economy. The phrase ``Too-big-to-fail'' sums it all up: when 
companies like AIG, CitiGroup, and the Wall-Street-Robber-Barrons 
become so large that our entire economy depends on their success: the 
economy has become too concentrated and distorted. It is shocking that 
three years after Wall Street bludgeoned the US and world economy, not 
one Wall Street CEO has gone to prison.
    In each case when our federal antitrust enforcers have stepped up, 
they have helped restore competition to the market to protect 
consumers. The Justice Department's successful challenge to block the 
H&R Block/TaxACT merger, ongoing suit to block AT&T's proposed 
acquisition of T-Mobile, and the FTC's 2010 settlement with Intel are 
wins for consumers. Promising developments may come with the Justice 
Department's challenge against Blue Cross Blue Shield's conduct in 
Michigan and the FTC's work on the anti-competitive pay-for-delay 
agreements among pharmaceutical manufacturers that keep generic drugs 
off the market.
    Only action will protect American consumers and American jobs. Now 
I am aware that enforcement efforts have increased over the last two 
years. For example, during Fiscal Year 2011, the Federal Trade 
Commission challenged 17 mergers believed to be anti-competitive.
    But this is not enough. As Google attempts to purchase Motorola, as 
Verizon teams up with the new Comcast-NBC-Universal on shared service 
ventures, and as the whims of Wall Street Investment firms wreak havoc 
on the global economy, we need consumer- and competition-oriented 
antitrust to become a top priority for our government.
                               __________

    Mr. Goodlatte. I thank the gentleman, and the opening 
statements of other Members of the Committee will be placed in 
the record without objection.
    Before I introduce the witnesses, as is the custom of the 
Committee, I would ask them to stand and be sworn.
    Do you and each of you swear that the testimony you're 
about to give is the truth, the whole truth, and nothing but 
the truth, so help you God?
    [Witnesses sworn.]
    Mr. Goodlatte. Thank you very much. Our first witness today 
is Federal Trade Commission Chairman Jon Leibowitz. Mr. 
Leibowitz was sworn in as an FTC Commissioner in 2004 and was 
designated Chairman by President Obama in 2009. Before joining 
the Commission, Chairman Leibowitz served in several capacities 
as Chief Counsel to Senator Herb Kohl from 1989 to 2000, 
including as Democratic Chief Counsel and Staff Director of the 
U.S. Senate Antitrust Subcommittee from 1997 to 2000. Leibowitz 
also worked for Senator Paul Simon from 1986 to 1987. Before 
joining the Commission, Mr. Leibowitz served most recently as 
Vice President for Congressional Affairs for the Motion Picture 
Association of America from 2000 to 2004. A Phi Beta Kappa 
graduate in American history from the University of Wisconsin, 
Leibowitz graduated from the New York University School of Law 
in 1984.
    Our second witness is Acting Assistant Attorney General for 
Antitrust, Sharis Pozen. Ms. Pozen became the acting head of 
the Antitrust Division in August 2011 upon the resignation of 
Assistant Attorney General Christine Varney. Previously Ms. 
Pozen served as Chief of Staff and Counsel to Ms. Varney. 
Immediately prior to joining the Department, Ms. Pozen was a 
partner in the Washington, D.C. office of Hogan & Hartson, LLP, 
where she served as Director of the firm's Antitrust Practice 
Group. Prior to joining Hogan & Hartson in 1995, Ms. Pozen held 
several positions at the Federal Trade Commission, where she 
began her professional career in 1989. Ms. Pozen received her 
JD from Washington University Law School in St. Louis in 1989 
and her BA from Connecticut College in 1986.
    I want to welcome both of our witnesses, and Mr. Leibowitz, 
we'll begin with you.

 TESTIMONY OF JON LEIBOWITZ, CHAIRMAN, FEDERAL TRADE COMMISSION

    Mr. Leibowitz. Thank you, Chairman Goodlatte, Ranking 
Member Watt, Mr. Conyers, Mr. Sensenbrenner, Mr. Deutch, and 
Ms. Lofgren for inviting me here to testify today on the FTC's 
current antitrust activities, and I'm happy to be here with my 
colleague Ms. Pozen.
    Let me start with what I hope is modestly good news for the 
economy, premerger filings are up. In fact, there were twice as 
many filings this year as compared to 2 years ago. That means 
companies are beginning to feel more confident about the 
future, and it's also good news for consumers because the vast 
majority of mergers don't raise competitive issues, and indeed 
some may create benefits. Of course, we review merger filings 
to determine which ones may substantially lessen competition. 
That's our standard under the Clayton Act.
    In fiscal year 2011 we brought, as Mr. Conyers noted, 17 
merger enforcement actions. Most of the time that means we 
negotiated divestiture of assets to remedy a problem, and we 
let the rest of the acquisition go forward, but this year the 
FTC went to Federal Court four times to stop mergers, so it has 
been a busy year for us.
    As this Committee knows, the FTC has jurisdiction over a 
wide swath of the economy. Mr. Watt noted that we spend a lot 
of time thinking about and involved in privacy issues on our 
consumer protection side, and in both our consumer protection 
and our competition missions, we try to focus on sectors where 
our action will do the greatest good for the greatest number of 
people. It's a utilitarian approach, and these include energy 
technology and of course health care.
    As spending on health care approaches 18 percent of our 
GDP, the FTC has redoubled its efforts to combat illegal pay-
for-delay pharmaceutical settlements, prevent harmful 
consolidation, and formulate policies that will support 
innovative health care collaborations. One area of health care 
competition that has required particular attention this year is 
hospital mergers. Several years ago under Republican Chairman 
Tim Muris we conducted retrospective studies of consummated 
hospital mergers to examine their effects, and we found in some 
instances that prices had gone up substantially. That formed 
the basis of the Commission's challenge to a previously 
consummated hospital merger of two hospitals serving Evanston, 
Illinois. Since then the Commission has successfully challenged 
an impending hospital merger in Northern Virginia, and this 
year alone we have challenged three others, leading us to 
believe we might be witnessing the start of a wave of 
consolidation that could raise prices and reduce quality of 
care for American consumers and patients. Sometimes we've 
alleged these. Hospital mergers have used what we think is a 
misapplication of what's known as the State action doctrine as 
a fig leaf for their deals.
    Another area of focus at the FTC is high tech industries. 
The proper application of competition principles in the high 
tech arena can be difficult, but it is critical. Antitrust 
enforcement can stop illegal conduct that chokes off avenues 
for new firms to challenge incumbents and that was the crux of 
our case against Intel, and we resolved it in a way that's good 
for consumers and also allowed Intel to continue to innovate 
going forward.
    Sometimes, however, market facts suggest that the FTC take 
a wait-and-see approach, as we did when we determined not to 
challenge Google's purchase of AdMob. I think we made the right 
call here. Competition between Apple's iPhone and Google's 
Android platforms has led to an explosion of mobile 
applications. We will continue to pursue this balanced course, 
intervening only, as you mentioned, Chairman Goodlatte, when 
warranted to protect consumers and competition for the 
competitive process.
    Energy markets continue to demand the Commission's 
attention. There's only so much that households can do to 
reduce their gasoline consumption, so higher fuel prices 
severely cut into a family's ability to buy other necessary 
goods or save for the future. Recently we opened an 
investigation when we observed unusual behavior among certain 
oil refiners. Their profit margins were going up while 
simultaneously their utilization rates were going down.
    Let me also touch upon our authority under Section 5 to 
stop unfair methods of competition. As you know, Congress 
granted Section 5 authority to the FTC when it created our 
agency in 1914. Section 5 is a carefully balanced tool that 
allows us to go modestly beyond the ambit of the antitrust laws 
to stop anticompetitive conduct, but it limits the remedies we 
may apply, and it makes it more difficult to bring follow-on 
private class action lawsuits. We have unanimous, bipartisan 
support within the Commission to use Section 5 in appropriate 
circumstances, circumstances in which competition itself is 
harmed.
    For example, we used Section 5 to challenge invitations to 
collude most recently against U-Haul. This attempt to fix 
prices in the truck rental market in Florida couldn't be 
reached under the antitrust laws because there was no actual 
agreement or meeting of the minds about raising prices, but it 
is conduct that can and should be stopped.
    Finally, let me mention our antitrust policy work. We are 
in the midst of what might be called an antitrust renaissance. 
The working partnership with our colleagues at the Antitrust 
Division has recently produced two significant policy 
documents, a revision to the horizontal merger guidelines and a 
statement of enforcement policy for accountable care 
organizations. These joint efforts help to bring clarity and 
consistency to the law, guidance that benefits the business 
community and law-abiding companies.
    We look forward to continuing to work side by side with the 
Department of Justice as well as with State attorneys general 
to promote competition for the benefit of American consumers 
and businesses.
    Thank you. Happy to take questions after Ms. Pozen speaks.
    [The prepared statement of Mr. Leibowitz follows:]
Prepared Statement of Jon Leibowitz, Chairman, Federal Trade Commission



                               __________

    Mr. Goodlatte. Thank you, Mr. Leibowitz.
    Ms. Pozen, welcome.

    TESTIMONY OF SHARIS A. POZEN, ACTING ASSISTANT ATTORNEY 
       GENERAL, DEPARTMENT OF JUSTICE ANTITRUST DIVISION

    Ms. Pozen. Thank you and good morning. Is this on? Thank 
you and good morning, Chairman Goodlatte and Members of the 
Subcommittee, and thank you for the opportunity to appear 
before you. It's an honor to serve as Acting Assistant Attorney 
General and to work with the Department's leadership and the 
dedicated, talented division career staff, and our front office 
team.
    When the Attorney General announced my appointment, he said 
it would be a seamless transition. That is my focus, continued, 
vigorous antitrust enforcement, transparency, and certainty for 
consumers and businesses.
    Echoing what's been said this morning, competition drives 
our economy. Vigorous antitrust enforcement preserves 
competition and delivers American consumers lower prices, 
higher quality goods, and more innovation. We take a measured 
approach to the antitrust law enforcement and rely on sound 
competition and economic principles. We evaluate each matter 
carefully, thoroughly, and in light of the particular facts.
    The division's major competition initiatives include civil 
merger and nonmerger enforcement, criminal enforcement, 
competition advocacy, and international activities. We have 
focused on mergers and conduct that harm consumers and stymie 
innovation in critical industries. Efficient and effective 
merger review and enforcement are among our core priorities.
    When reviewing mergers, we quickly identify those 
transactions that raise no competitive issues and let them 
proceed, and fiscal year 2011 demonstrates that. We cleared 98 
percent of the transactions we reviewed without requesting more 
information. For the remaining 2 percent we identified the 
transactions that required enforcement. In many of these the 
parties proposed remedies to resolve the competitive problems, 
and we entered into consent agreements. In other cases, when 
the parties did not propose effective remedies, we went to 
court.
    As was noted, among these is our successful lawsuit to stop 
H&R Block from acquiring TaxACT, a transaction that would have 
left American taxpayers with only two major digital do-it-
yourself tax preparation providers, leading to higher prices, 
lower quality products, and less innovation. The court agreed 
and blocked the proposed merger, which was an important victory 
on behalf of the 40 million American consumers who use this 
type of tax software.
    We also sued AT&T regarding its proposed acquisition of T-
Mobile. While I can't provide details of the pending court 
matter, I can say, as articulated in our complaint that was 
filed in court, this transaction, if consummated, would 
substantially reduce competition in mobile wireless 
telecommunications services across the United States, resulting 
in higher prices, less innovation, and lower quality services 
in an industry that is important to millions of American 
consumers and businesses.
    In addition, we continually seek to improve our 
transparency in merger enforcement. The revised horizontal 
merger guidelines the Chairman referred to which were released 
with the FTC last year and our updated policy guide on merger 
remedies have helped achieve this goal.
    Our civil, nonmerger enforcement is an important way we 
vigilantly police the Nation's markets against anticompetitive 
conduct. For example, we have an ongoing court challenge to 
Blue Cross/Blue Shield of Michigan's use and enforcement of 
most favored nations clauses in its hospital contracts, which 
distort the competitive process. We also challenged a Texas 
hospital's use of exclusionary contracts with health insurers 
through which the hospital maintained its market power, and our 
litigation against American Express concerning merchant fees 
continues, and we are also investigating the electronic book 
industry along with the European Commission and with States 
attorneys generals.
    Our criminal enforcement program continues to achieve 
remarkable successes. In fiscal year 2011 the division filed 90 
criminal cases, which is up from 60 cases filed in fiscal year 
2010. We obtained over $520 million in criminal fines, we 
charged 27 corporations and 82 individuals, and courts imposed 
21 jail terms, totaling more than 10,000 days of jail time. 
These cases were brought in a range of important industries, 
including real estate, auto parts, financial services, and the 
air transportation services.
    One example is the division's ongoing international cartel 
investigation into price fixing and bid rigging in the auto 
parts industry. This has already resulted in one corporation 
and three individual guilty pleas, a $200 million fine, and 
three separate jail terms for executives. This case involved 
hard core, pernicious price fixing that could only have 
resulted in inflated prices on the parts found in every 
American consumer's car.
    Also thriving is our competition advocacy program. Our 
competition advocacy efforts focus on sectors important to 
Americans' everyday lives, such as health care, agriculture, 
and finance.
    On the international front, we remain mindful of 
international issues in our day-to-day investigations and 
policy work, recognizing that our decisions can affect 
consumers and businesses elsewhere. We have looked to 
strengthen relations with emerging economies such as China and 
India. Last summer we, along with the Federal Trade Commission, 
signed a memorandum of understanding with all three Chinese 
competition agencies. We and the FTC expect to sign an MOU with 
India in 2012. We are a leader in international competition 
groups, and since 2009 we have led the global dialogue on 
procedural fairness and transparency issues in these 
organizations. The accomplishments I have highlighted today and 
my testimony depend on the dedication of our division career 
staff. I can tell you it is an honor and a privilege to serve 
with them.
    Chairman Goodlatte, Ranking Member Watt, and Members of the 
Subcommittee and Committee, thank you again. I am pleased to 
answer your questions.
    [The prepared statement of Ms. Pozen follows:]
    
    
    
                               __________

    Mr. Goodlatte. Thank you, Ms. Pozen. Chairman Leibowitz, 
I'm going to start with a question that does not relate to your 
antitrust jurisdiction but is an issue of concern to this 
Subcommittee. In fact, we've held a hearing on it, and that is 
related to ICANN, the Internet Corporation for Assigned Names 
and Numbers, which is about to open an application window that 
could result in the creation of an unlimited number of new 
generic top level domains.
    In the past, you have spoken about how difficult it is to 
identify the true owner of domain names and how that causes 
harm and hampers law enforcement efforts in the case of 
Internet fraud and consumer deception. Do you have an opinion, 
Mr. Chairman, about ICANN's plan to roll out hundreds, maybe 
even thousands of new gTLDs, and how would that impact 
consumers and the FTC's consumer protection mission?
    Mr. Leibowitz. So this is an area, of course, where your 
intellectual property jurisdiction and our consumer protection 
jurisdiction intersect, and I would say at the Commission we 
are very, very concerned that this rollout of new gTLDs has the 
potential to be a disaster for consumers and for businesses, 
and let me tell you briefly why we think that's true.
    We bring a lot of Internet fraud cases, as do our sister 
law enforcement agencies around the world, as does the Criminal 
Division and CCIPS in the Department of Justice, and what we 
have found is that domain names are often registered under 
fraudulent or registered with using fraudulent names, using 
inaccurate contact information, and if you are a criminal or a 
scam artist, you want to do it that way because you want to 
make it harder for us to go after malefactors. We worry that if 
ICANN goes broadly and if it doesn't ensure accuracy in its 
Whois database, which is terribly inaccurate, again, when 
you're going after people engaged in ripping off consumers, 
this is going to be exponentially worse. And then there is also 
a burden on businesses.
    Of course, businesses don't want to go up against phishing 
sites, and think about how many different ways you can spell 
the name Marriott and now multiply it by all these new domain 
names, domains, but they also will have to--at I think $180,000 
per new gTLD, businesses will have to defensively register all 
of their names, and so our sense is it's burdensome to 
businesses, it could be very harmful to businesses and their 
brands as well as to consumers. We see enormous costs here to 
consumers and businesses and not a lot of benefit, and so we 
are working with consumer protection agencies around the world 
who also have concerns, and we want to work with this 
Committee. I know Senator Rockefeller and the Senate Commerce 
Committee is holding a hearing tomorrow, and we want to work 
with you. It's a real problem unless they make some changes and 
ensure accuracy.
    Mr. Goodlatte. Thank you. I have got to get some other 
questions in here, but let me just ask you one follow-up.
    Mr. Leibowitz. Sure.
    Mr. Goodlatte. We share your concern. Have you expressed 
your concerns to the Secretary of Commerce and others in the 
Administration who have maybe the last chance to exercise some 
influence here to get this changed?
    Mr. Leibowitz. We have been talking to the Commerce 
Department. We'll continue that. And I think in the not-too-
distant future, we will also be talking directly as a 
Commission to ICANN about this.
    Mr. Goodlatte. Thank you. And now to antitrust. The 
Antitrust Modernization Commission recommended that Congress 
enact legislation to require the agencies to clear all Hart-
Scott-Rodino merger cases within a short period of time to 
prohibit the FTC from pursuing administrative litigation in 
Hart-Scott-Rodino merger cases and to ensure that the same 
standard for the grant of a preliminary injunction applies to 
both agencies. Would you both agree that if the goal is to put 
parties on an even footing, regardless of which agency reviews 
their merger, then these are reasonable steps? Mr. Leibowitz?
    Mr. Leibowitz. I would say that the system that Congress 
has designed, which has some procedural differences but results 
in the same standards, you have to show you're going to win on 
the merits is one that works pretty well. I know back when the 
Commission issued its report, which I read very closely, there 
was a lot of concern about clearances fees, but particularly 
about the timing of resolution of merger reviews. I don't think 
those problems exist anymore, so I understand their 
recommendation. I don't believe that was a unanimous 
recommendation, although I will get back to you, but I think 
when the heads of the FTC and the Antitrust Division act in the 
best public interest we get these disputes resolved. And I 
think ultimately the----
    Mr. Goodlatte. Do you disagree with the principle that 
companies should have equal rights regardless of whether the 
merger happens to clear to the FTC----
    Mr. Leibowitz. No, of course I agree with that, but I 
think----
    Mr. Goodlatte. FTC or the DOJ?
    MR. Leibowitz. But I think that the different procedures, 
which again were set up by Congress, are ones that result in 
the same outcome. I don't think its outcome determinative 
whether you go to the FTC or whether you go to the Antitrust 
Division. We ask for a preliminary injunction and they ask for 
a permanent injunction. And in one of our last preliminary 
injunctions, by the way, the Commission got a preliminary 
injunction to block a hospital merger in Cleveland, Ohio, and 
the parties decided, as is their right, to come back and get a 
full trial before the FTC. So I agree with the baseline 
principle that parties deserve full, fair, and objective and 
speedy resolution by both the Commission and the Antitrust 
Division. They deserve the same standards. I think that they 
get them.
    Mr. Goodlatte. Let me ask Ms. Pozen to answer the same 
questions.
    Ms. Pozen. No, sure, and many experts have reviewed this 
process, you know, the shared jurisdiction between our two 
organizations. I think that typically in the reports you're 
citing to and others, folks agree that if you had to build this 
from scratch you might not build it in the same way it is 
today, with the overlapping jurisdiction and the clearance.
    Mr. Goodlatte. What's the impediment to rebuilding it to 
attempt to achieve that kind of fairness?
    Ms. Pozen. I would leave that in the hands of Congress, 
sir. It is in the hands of Congress.
    Mr. Goodlatte. And what would be your recommendation to us?
    Ms. Pozen. Well, I don't know if I have a specific 
recommendation on that. You know, we work with the system as it 
exists, and we try to work efficiently and effectively to clear 
transactions, to make it clear to the parties right away which 
agency will be handling that review. We each have expertise. 
There are times when our expertise----
    Mr. Goodlatte. Well, let me get back to my specific 
question at the outset. Do you think these specific 
recommendations of the Antitrust Modernization Commission are 
reasonable steps for the Congress to take?
    Ms. Pozen. I think that there are reasonable steps that can 
be taken to ensure that clearance is done in a timely manner. 
We do the best we can with the system that exists. If you 
determine that you want to change and Congress wants to change 
that system, we would be happy to work with you on how to do 
that.
    Mr. Goodlatte. That's helpful, but not in terms of the 
advice about the merits of the underlying question. But I'll 
now turn to the gentleman from North Carolina, Mr. Watt.
    Mr. Watt. Thank you, Mr. Chairman. Your questions remind 
me, I sit on the Financial Services Committee, too, and there's 
uniform agreement that the SEC and the CFTC should be merged, 
but we've got two Committees in Congress dealing with them, and 
they've got a history of existing, and nobody wants to 
undertake that. We didn't try to do it in Dodd-Frank because we 
knew it was a ballistic mine.
    So, anyway, I raised some issues about privacy in my 
opening statement, and I want to pose three questions that I 
hope you will address in writing because I don't think we can 
really deal with them sufficiently in the 5 or 6-minute time 
frame.
    First question, are the privacy concerns you, Mr. 
Leibowitz, and former Commissioner Harbour expressed in the 
Google/DoubleClick decision unique to online advertising or do 
they apply to the Internet generally?
    Second question, is the current privacy framework and 
enforcement mechanism sufficient to meet the challenges online?
    And, third, a similar question to the one Mr. Goodlatte 
asked, how would you integrate privacy protection into 
traditional antitrust analysis and help us define the role of 
Congress in that space?
    If you could respond to those off line and not take the 
time to do it this morning because I think it's far too complex 
to do, I would certainly appreciate it.
    Mr. Leibowitz. We will do that.
    Mr. Watt. All right. I know I can't ask Ms. Pozen this 
question, but I know you have an extensive background in the 
Antitrust Division also, and I was thinking maybe you could 
express your opinion about whether the Department of Justice 
did the right decision to proceed to litigation in AT&T/T-
Mobile merger, if you have one. I'm not trying to put you on 
the spot. Yes?
    Mr. Leibowitz. You know that Ms. Pozen can't talk about it.
    Mr. Watt. Yeah, I know she can't talk about that, right.
    Mr. Leibowitz. I'll just say this, it is a----
    Mr. Watt. Either you agree with it or you don't agree with 
it or you don't want to express----
    Mr. Leibowitz. Well, I don't think I can say I agree, but I 
certainly agree that it is a major merger, it has enormous 
effect on consumers, and we are very supportive of the work and 
the effort that the Antitrust Division has put into this 
matter, and it will be resolved, and I don't think I can say 
much more than that.
    Mr. Watt. Okay. All right.
    Mr. Leibowitz. So I think I'll stop there.
    Mr. Watt. Well, you punted, okay. I'm interested in the 
process by which you get to these policy statements such as the 
horizontal merger agreement that you all have worked out. This 
strikes me, and maybe I'm missing something here, as similar to 
a rulemaking process. Is that the process you are going 
through? Are people, is the public allowed to comment publicly 
on these processes or should they be or how do you 
differentiate this from a rulemaking process?
    And then the last question I'll have is about some concerns 
that were raised by Ms. Pozen about your hospital litigation 
because one of the concerns I'm having in my local community is 
that the hospitals have become pretty big operations, and they 
are now excluding physicians who have all of the qualifications 
to practice at, practice medicine from doing procedures in 
their hospitals because they have these exclusive agreements 
with a particular group of doctors, excluding all other 
doctors. It's an integrated operation up and down the line, but 
it seems to me that it has some policy implications. I'm 
wondering if you agree and, if so, what would be the 
appropriate process for a particular physician or somebody else 
calling your attention to this and getting a review of a 
particular situation?
    So those are my questions. I'll leave the rest of the time 
for you all to answer.
    Mr. Leibowitz. All right. Let me take the first question on 
horizontal merger guidelines. It's not a rulemaking. We do 
occasionally do rulemakings, although we're more of an 
enforcement agency usually on the consumer protection guide. 
This is more guidance, and it's guidance to courts and 
practitioners, and the reason we do it is courts like to look 
at the guidelines as they go through a merger analysis, it's 
helpful to them, and stakeholders, going back to the certainty 
point that the Chairman mentioned, want to know how we look at 
mergers. And so what we did beforehand was we went out and we 
talked to all the stakeholders, including Jim Rill, who was the 
head of the Antitrust Division when the 1992 guidelines were 
issued, and we said is it appropriate after 18 years for us to 
come back and take another look? And I think there was----
    Mr. Watt. How are you defining stakeholders in that 
context?
    Mr. Leibowitz. Stakeholders, businesses----
    Mr. Watt. Okay. All right.
    Mr. Leibowitz. Consumer groups.
    Mr. Watt. So you did get input?
    Mr. Leibowitz. We did. And then there was a general 
consensus that if we moved in an evolutionary and not a 
revolutionary way, that that would be a good thing for business 
certainty and a good thing for those who were involved in the 
merger process and ultimately also a good thing for consumers, 
and so there were some areas where there was a consensus to 
make some modest changes. One was to raise the HHIs for safe 
harbors because experience had told us that the old levels were 
too low and took some things out of safe harbors. Another was 
we wanted to have a little less emphasis on market shares. 
They're important, but they're not the be-all, the end-all. 
They're a starting point. And then----
    Mr. Watt. I didn't want to go into the details, I was just 
trying to----
    Mr. Leibowitz. Right, right.
    Mr. Watt. I was just trying to--I was discussing the 
process more than----
    Mr. Leibowitz. And then we had a vote. And then the only 
other point I would make is we had a vote, it was unanimous 
among Commissioners.
    Ms. Pozen. Yeah, I would add that this was distinction, 
this was an attempt to update guidance that had been in 
existence for many years but hadn't been updated for 17 years, 
so to your question we did initiate a process. Our agencies 
formed a working group. We had workshops throughout the United 
States. They included antitrust practitioners, corporations, 
international antitrust authorities as well participated in 
those. We took those comments back because our first question 
was should we update these? Should we spend our resources and 
time doing this? And we got a unanimous chorus from everyone 
out there saying yes, they should be updated. Then it was a 
careful process of updating. We did publish those actually on 
the FTC Web site for comment, and then took those comments into 
account to come out with what is our final 2010 Horizontal 
Merger Guidelines.
    I would note that the H&R Block case I talked about in the 
court opinion, it's about an 80-page opinion, a thorough 
analysis of that merger. The judge relied heavily on the 2010 
Horizontal Merger Guidelines in her analysis.
    Mr. Watt. Should you----
    Ms. Pozen. Do you want me to answer your question about the 
physicians?
    Mr. Watt. You can do it in writing if you would prefer, if 
the Chairman would prefer. I'm well over my time.
    Ms. Pozen. I'm happy to--I can make it quick if that helps. 
We both share jurisdiction in the health care markets. At the 
Department of Justice we have a group of experts who really 
know health care from both the insurance side and the provider 
side. As I mentioned, the Texas case, that was a hospital 
engaging in exclusive contracts with insurers. The kind of 
scenario that you're describing where you have physicians and 
you feel like they're being excluded, the process they would 
follow is to contact the chief of our Litigation 1 section, 
Josh Soven. The name is readily available on our Web site, and 
he would listen to any complaint and process it accordingly. So 
that's the process that someone would follow who has those 
issues.
    Mr. Watt. And I will follow up in writing with the first 
three questions I outlined just so you don't have to try to 
remember them.
    Mr. Leibowitz. Thank you.
    Mr. Watt. Thank you.
    Mr. Goodlatte. I thank the gentleman.
    Mr. Watt. Yield back.
    Mr. Goodlatte. The gentleman from Arizona, Mr. Quayle, the 
Vice-Chairman of the Subcommittee, is recognized for 5 minutes.
    Mr. Quayle. Thank you, Mr. Chairman. Thank the witnesses 
for being here. Ms. Pozen, when we had Attorney General Holder 
here in May, I asked him a question regarding the jurisdiction 
between the FTC and DOJ when sometimes it overlaps and there's 
no clear barrier in terms of who is going to actually have that 
jurisdiction, whether it be a merger, an enforcement action, 
and sometimes it's actually been reported that it results in a 
coin flip or trade bargains to actually see who actually has 
the jurisdiction.
    Ms. Pozen. Uh-huh.
    Mr. Quayle. And I just wanted to see if there was an update 
because Attorney General Holder said that, you know, they have 
been working to try to alleviate that, and I wanted to see how 
that is going. Are there a more clear path on when the FTC is 
going to have jurisdiction and when the DOJ is going to have 
jurisdiction, when they both have experience in that area?
    Ms. Pozen. Well, and you're focused on exactly the first 
step. When a merger is notified, it's notified to both of our 
organizations. If it's in an industry where we do have 
overlapping expertise, because that is the starting point is 
expertise, we look to our staffs to try to articulate that 
expertise as it relates to the particular merger as quickly as 
possible. Our teams engage right away and start talking to each 
other about that expertise. If it ends up that it is equal, 
which is very, very rare--usually one agency has more expertise 
than the other, but there are, as I said, converging industries 
where just over time things have gotten blurred--I would work 
with the Chairman, and we have done so in the time since I've 
been Acting AAG, and we come to an agreement very quickly and 
effectively. So that's at least been my experience as Acting 
Assistant Attorney General.
    Mr. Leibowitz. So let me just follow up on your question, 
Mr. Vice Chairman, and Ms. Pozen's answer. If it comes up to 
our level, we are very unhappy because they need to resolve 
these issues and act like adults. We gave statistics I think 
last year to the Subcommittee, but I think in well over 95 
percent of the cases these are resolved on the basis of 
expertise, and just going back to what Ms. Pozen said, and 
we've said this before, you might not design this process from 
scratch to have two antitrust agencies with some overlapping 
jurisdiction on civil. We have slightly broader authority on 
the antitrust unfair methods of competition, they have criminal 
jurisdiction, but it's a system that Congress designed, and as 
long as we're working in the public interest and we're acting 
like adults, you don't see any or you don't see many problems. 
I can assure you that this might have been a bigger problem in 
the early oughts and the late 1990's when I worked on the 
Senate Antitrust Subcommittee. You know, Congress had a lot of 
questions about this and there were hearings I believe on this 
topic alone. So we understand, we have to work with the system 
that's been given us, but we better do a good job.
    Mr. Quayle. Okay, thanks. And, Ms. Pozen, I want to talk 
about the new remedy guide that was released on June 17th which 
changed previous policy to one which conduct or behavioral 
remedies are often used----
    Ms. Pozen. Uh-huh.
    Mr. Quayle [continuing]. To address merger concerns.
    Ms. Pozen. Uh-huh.
    Mr. Quayle. And an example of that was when DOJ approved 
Comcast, the NBC Universal merger that included a requirement 
that Comcast and NBC must abide by the net neutrality 
principles even if the FCC's regulation was struck down in 
court.
    Ms. Pozen. Uh-huh.
    Mr. Quayle. Do conduct or behavior remedies allow the DOJ 
to shift it from being a litigating agency to actually becoming 
a regulating agency, and could they require political policy or 
public policy of companies in order to actually approve of the 
merger?
    Ms. Pozen. That's an excellent question. We still consider 
ourselves a law enforcement organization, and we really are 
focused on finding the most effective remedy for the case 
that's before us, and so we are looking very carefully and very 
thoroughly at the competitive concerns, and then the parties 
typically come forward with a resolution, and we analyze 
whether that will resolve those concerns. In certain mergers, 
including the one that you mentioned, NBC-Comcast, there you 
had what we call verticality, right? You had one company having 
an input into the other company, and we wanted to ensure that 
that input was available on equal terms to others so that they 
couldn't be foreclosed, others wouldn't be foreclosed from that 
same input. So we chose----
    Mr. Quayle. Was there a history of that problem before with 
these companies or were you looking for a problem that didn't 
exist, solving a problem that didn't exist just because, hey, 
it could theoretically happen down the road?
    Ms. Pozen. We're very concerned with industries that are 
evolving and changing quickly to ensure that there's an open 
and fair playing field, and that was what we were concerned 
about with that merger, and so we believe our remedy allowed 
that. It allowed the playing field to be open and fair, it 
established a process for doing that, and we felt fortunate 
that the judge in that case, Judge Leon, who we went through 
the Tunney Act proceeding, agreed with that.
    Mr. Quayle. This actually goes to my final question, is 
this is something I asked the Attorney General, and he said he 
was going to get back to me, as to probably going to the 
Antitrust Division. I haven't heard back, but now since you're 
here I'm going to ask you the question which hopefully you can 
answer. I asked him if they've actually seen any activity of 
actual bottlenecks or gatekeepers on the Internet that are 
actually keeping content from consumers. So it kind of 
addresses a concern that you have. Have you actually seen that 
occur or is this a hypothetical of maybe it can occur, and we 
just want to stop it before it does?
    Ms. Pozen. Well, in a technological market that is emerging 
and in the Internet, as business is evolving and emerging and 
using the Internet more and more, we're very conscious of 
ensuring that we are diligent in reviewing whether or not there 
are bottlenecks, and your question is have we found those 
bottlenecks? I can't comment on any ongoing investigations at 
this point, but all I can say is bottlenecks have to worry us. 
If there isn't access to the Internet or to information or 
products or services that are needed by other businesses and it 
is being done through an exercise of market power and done in 
an illegal matter through some sort of agreement, then we are 
concerned and we will take action.
    Mr. Quayle. But in a general sense you can't talk 
specifically about a specific case, but it was just kind of 
have you seen actual bottlenecks? Because that I don't think 
would be violating any sort of--I mean, we're not getting into 
specifics. Have you seen bottlenecks that are occurring now?
    Ms. Pozen. Have I--there are bottlenecks that we have been 
alerted to that do exist, and when we are alerted to such, then 
we would investigate them thoroughly and carefully to 
determine, you know, whether or not, again, it is in violation 
of the Sherman Act, whether it's some sort of coordinated 
effort to create that bottleneck or, again, whether it's an 
exercise of market power in a way that violates the Sherman 
Act.
    Mr. Quayle. Okay, thank you very much. Thank you, Mr. 
Chairman.
    Mr. Goodlatte. I thank the gentleman. The gentleman from 
Michigan, Mr. Conyers, is recognized for 5 minutes.
    Mr. Conyers. Thank you, Mr. Chairman. Now, I've been 
working with antitrust law for as long as you have or longer, 
and this hearing--and I'm very pleased that the Chairman called 
it and the Ranking Member, both for whom I have high regard--is 
very disturbing. You know, it's almost like a little chit-chat 
back and forth. Here are the top prosecutors of the Federal 
antitrust law sitting before us, and we're having little 
discussions, and so I'm going to be in touch with both of you 
in writing and maybe in person, but I wish that I could have 
sent you my statement before you wrote your statement because 
we're all talking off on--we're talking past each other.
    Now, the first thing I would like to know is, is it correct 
for me to assume that our national and transnational 
conglomerates are getting away with a great deal of 
anticompetitive behavior?
    Mr. Leibowitz. National and transnational companies?
    Mr. Conyers. Companies.
    Mr. Leibowitz. Well, I would say, I think I can speak for 
both of us on this.
    Mr. Conyers. Well, you----
    Mr. Leibowitz. We go after----
    Mr. Conyers. You speak for yourself, I will talk with her 
later.
    Mr. Leibowitz. Congressman, you know----
    Mr. Conyers. Yes or no?
    Mr. Leibowitz. When we see a problem, we go after it. Are 
there companies that are getting away with antitrust 
violations? I am sure there are, but we do our best to go after 
malefactors wherever we find them, and we have big 
investigations going on, as you know, and we have tried to push 
the ball forward on behalf of consumers and competition. I 
think I'll stop there.
    Mr. Conyers. That's a totally unacceptable answer. I just 
want you to know that between us, and we'll be getting back to 
it later.
    Now could I ask you the same question, ma'am.
    Ms. Pozen. Sure, and I have to tell you, I am astonished, 
like you, at what I see because we have a criminal antitrust 
program at the Department of Justice, and as our criminal 
Deputy Assistant Attorney General says whenever he is asked, we 
have given corporations, international corporations one billion 
reasons not to violate the antitrust laws, and yet as I 
reported to you, we are still prosecuting international 
cartels.
    So I am astonished in the level of pernicious behavior, 
because I view cartel behavior where people are still sitting 
in smoke-filled rooms deciding what prices are going to be, and 
the example I gave you is in the auto parts industry where we 
have prosecuted Furukawa and its executives for this kind of 
conduct.
    Mr. Conyers. Well, today's headline in some papers was that 
Aetna and BlueCross/BlueShield in Michigan are at it again, but 
the Department of Justice is on the case. I want to give you 
some compliment for that.
    BlueCross/BlueShield has been before the courts in Michigan 
for so many times across the years that it seems to me that 
they regard that just as a part of doing business the way they 
want to, that you have got to go to court and somebody from law 
enforcement is going to tag you every now and then.
    But what bothers me, Chairman Goodlatte, is the reopening 
just the door a small way on a massive problem that the 
Judiciary Committee has got to go into far more deeply. And I'm 
hoping that this will be the Subcommittee that does it, because 
this is just far too complicated and the stakes are far too 
high.
    Let me just close with this one question. The Trinko 
decision. Is there anybody here that can justify what they did 
in suggesting that--the court suggesting that antitrust law is 
trumped by communications law? That decision is an impediment 
to antitrust enforcement of regulated industries, and that's 
something that maybe we can do something about. But do you feel 
hindered to any general as a result of that?
    Ms. Pozen. We are very conscious of the Trinko decision and 
it causes us pause quite often. However, we have continued to 
move ahead. We work very closely and effectively with the 
Federal Communications Commission. The reference to our NBC-
Comcast merger review, we worked with them. We came up with a 
solution that both agencies could endorse. And in the AT&T/T-
Mobile merger, again we worked--they have a different system, a 
different process, but again we worked with them to ensure that 
we are mindful of each other's processes and jurisdiction, but 
that we can work together and that we can assert the antitrust 
laws forward.
    Mr. Leibowitz. And I would agree with that. I would say 
taken to its logical extreme or extent, Trinko could make it 
very difficult to bring antitrust cases. It is a somewhat 
opaque decision, as you know, Mr. Conyers. And part of the 
reasons why we have begun to use our unfair methods of 
competition authority is because by its nature it is not an 
antitrust statute. So it takes us out from under the 
limitations on plaintiffs more clearly. And, again, you know, 
we are out there trying to stop anticompetitive conduct and in 
Trinko can be an impediment, but it is less of a impediment 
when we use our broader jurisdiction.
    Mr. Conyers. Did both of your agencies put out annual 
reports of what happened and how much you have been able to 
accomplish and even what some of the impediments may have been?
    Mr. Leibowitz. We do, yes.
    Mr. Conyers. Okay, well, I'm going to start looking at 
them.
    Thank you, Mr. Chairman.
    Mr. Goodlatte. I thank the gentleman. And I would note that 
both of the cases that Ms. Pozen referenced we have held 
hearings on in this Subcommittee and we are very interested in 
the aggressive enforcement of our antitrust laws. So we look 
forward to working with the gentleman from Michigan on other 
ideas he might have on these subjects.
    And now the Chair is pleased to recognized gentlewoman from 
Florida, Mrs. Adams, for 5 minutes.
    Mrs. Adams. Thank you, Mr. Chair. I am going to ask some 
questions and if you would be succinct, because I have a few 
questions.
    Chairman Leibowitz, earlier in your testimony you said 
briefly about the FTC's use of Section 5 in regards to 
collusion, I believe. Can you advise or share your views 
regarding the use of Section 5 authority and give us a sense of 
what you believe are the outer limits of Section 5.
    Mr. Leibowitz. Well, we can use Section 5 to bring a 
Sherman or Clayton Act case. We can go a little more broadly 
than that modestly to stop unfair methods of competition. The 
Congress gave us that authority in 1914 and we have used it in 
a couple of instances. So one in Florida, where you're from, 
where U-Haul engaged, we alleged, in an invitation to collude 
on trucking routes. Its executives called up their Budget 
executives and said let's raise prices and Budget said no, 
we're not going to do that. If they had said yes, we would have 
submitted it over to Department of Justice for criminal 
prosecution. But this is the kind of activity that is hard to 
bring an antitrust case on. That's why we use unfair methods of 
competition.
    Mrs. Adams. Outer limits?
    Mr. Leibowitz. I'm sorry?
    Mrs. Adams. Outer limits of Section 5?
    Mr. Leibowitz. The touchstone for Section 5 is always going 
to be harm to competition or harm to the competitive process. 
And we try----
    Mrs. Adams. Let me do this then. Do you agree that it would 
improve the clarity and predictability of the law if FTC 
provided guidance about the bounds of Section 5 before 
investigating or proceeding against businesses on the sole 
basis of your Section 5 authority.
    Mr. Leibowitz. Well, we do.
    Mrs. Adams. You do?
    Mr. Leibowitz. And so--we do. In our Intel decision, which 
was a unanimous, bipartisan decision, as are most matters of 
decision in our agency, and in our U-Haul decision we put out 
pretty clear guidance here. And----
    Mrs. Adams. Can you provide that to me, please?
    Mr. Leibowitz. Excuse me?
    Mrs. Adams. Can you provide that to me, please?
    Mr. Leibowitz. Of course we will.
    [The information referred to follows:]
    
    
    


                               __________
    Mrs. Adams. In the past the FTC has promised to promulgate 
a Section 5 report clarifying the balance of your Section 5 
authority. Why haven't you provided that report? And when can 
we expect one?
    Mr. Leibowitz. Well, we did a workshop under former 
Chairman----
    Mrs. Adams. No, I asked you why haven't you provided that 
report and when can we expect one? I don't want--I'm just 
asking very specific questions.
    Mr. Leibowitz. What we have said as a Commission is that we 
were going to provide guidance and we have done that in 
specific cases.
    Mrs. Adams. Okay. When can we expect one?
    Mr. Leibowitz. Well, I think what I said again is that we 
will provide guidance----
    Mrs. Adams. Mr. Leibowitz, I believe that you had testified 
that we were going to be expecting one. I'm just asking you 
when can we expect it?
    Mr. Leibowitz. At a time, if and when the Commission 
decides it will issue a report, the Commission will do that. 
I'm sure that will be bipartisan and consensus driven.
    Mrs. Adams. So you haven't gotten a report together yet and 
so----
    Mr. Leibowitz. We sometimes write reports----
    Mrs. Adams. I will move on.
    Mr. Leibowitz. Let me just say this. We sometimes write 
reports after workshops; sometimes we do not. And again it is a 
decision of the Commission.
    Mrs. Adams. Well, I believe that you said that you were 
going to provide one in the past. So I am looking forward to 
seeing one, should one ever come about.
    Ms. Pozen, I was listening intently when you were asked 
some questions from my colleague, Mr. Quayle, and one of them 
that caught my interest because of my law enforcement 
background was the whole issue of will you remain also a 
Criminal Division and not just a Civil and become party to 
political issues. So I guess my question to you is because 
traditionally DOJ antitrust has devoted roughly equal resources 
to criminal antitrust enforcement and civil antitrust 
enforcement, it appears that civil enforcement has generally 
been concentrated in the offices that are remaining opened 
while other offices that are being closed focused primarily on 
your criminal prosecution enforcement. Will the DOJ Antifrust 
Division remain a 50-50 civil-criminal agency?
    Ms. Pozen. Yes, we will. I can talk more about the 
realignment and the office closures if you would like, but our 
plan is certainly to continue a vigorous enforcement of 
criminal parts of the antitrust law.
    Mrs. Adams. I kind of would like that. I mean, recently you 
announced a plan to close the field offices in Atlanta, Dallas, 
Cleveland, and Philadelphia and transfer those positions to 
divisions in Washington, New York, Chicago, and San Francisco 
offices. You projected this move would save $8 million rental 
costs of the closed offices. Did you calculate similar dollar 
value estimates of other figures that are necessary to 
determine whether this move will actually result in net 
increase or decrease to the Federal deficit, such as the cost 
of additional office space for transferred employees in the 
high rent cities for which the division will retain those 
offices, the impact of the move on the division's ability to 
generate criminal fines payable to the crime victims fund, and 
if not, how can we be confident that this move will not 
increase the deficit?
    Ms. Pozen. All questions and considerations that we have 
taken into account as we made what I can only characterize as a 
very difficult decision. As you said, we have seven criminal 
field offices. We are proposing closing four of those offices. 
There will be three remaining field offices, one in San 
Francisco, Chicago, and Philadelphia. And this was as I think 
about it, a three fold analysis that we undertook. First of 
all, I think----
    Mrs. Adams. Is it possible for me to see that analysis?
    Ms. Pozen. Sure, I'm happy to provide that to you.
    As I said it was a threefold analysis that we undertook. 
First of all, we looked at what we all are facing here in 
Washington and, in general, an economy that is requiring a 
shrinking of the Federal Government, and Congress has requested 
that we do that and so we have taken that very seriously. And 
the Attorney General announced a number of changes to 
streamline and have cost savings at the Department of Justice, 
one of which was the closure of our field offices. So one was 
being conscious of the budget and trying to reduce our budget 
effectively.
    The second----
    Mrs. Adams. While maintaining your ability as a law 
enforcement agency; correct?
    Ms. Pozen. Exactly. That is the second one I was getting 
to. Exactly. We have to maintain our program. We have had great 
successes in our program trying to ensure that we are as 
efficient and effective with the resources that we have.
    And the third, and again of equal importance, are our 
employees. The employees in those offices, the lawyers and the 
support staff, are terrific and they are an asset to our 
division and to the Department of Justice.
    So trying to thread the needle through all of these three 
we came up with the proposal to close the four field offices. 
In that process, we are able to guarantee jobs for all the 
employees in those offices and guarantee moving expenses. 
Certainly recognize that some people are not going to be able 
to move. And it ends up we can offer severance pay and 
insurance for up to 1 year as well as preference for Federal 
jobs in those localities.
    Again, we are very mindful of our law enforcement program. 
We are very mindful of the significant fines that we have 
collected. I was just reporting the $520 million for last year.
    Mrs. Adams. I think my time has expired. But I do have more 
questions. You said you were offering a severance pay for a 
year?
    Ms. Pozen. Yes.
    Mrs. Adams. One year's pay?
    Ms. Pozen. Yes, up to one year.
    Mrs. Adams. I yield back.
    Mr. Quayle. [Presiding.] I thank the gentlelady. The Chair 
recognizes the gentlelady from California, Ms. Lofgren, for 5 
minutes.
    Ms. Lofgren. Thank you, Mr. Chairman. You know, I just 
wanted to make a brief comment on the ICANN issue that the 
Chairman raised. Because we focus on IP, we focus on IP. I 
mean, and I certainly would not discount the trademark issues 
that have been raised.
    On the other hand, there are broader issues which is that 
China is clearly on the move to try and take over governance of 
the Internet. And the concern about phishing will hopefully be 
somewhat addressed by the rollout of DNSSEC that is happening 
here for authentication, but it won't take care of China's 
ambition to actually supplant the international effort. I'm not 
defending ICANN's every decision, but it certainly in my 
judgment is preferable to China running the Internet.
    How as an FTC commission will--your job is antitrust; ours 
is IP. How do you go about incorporating that other type of 
issue that is in----
    Mr. Leibowitz. That's a very good question. And I don't 
mean to disparage ICANN itself. I think they do a lot of good 
things and Internet governance has a lot of difference 
dimensions as you point out. Our concern on our consumer 
protection side is that it's going to lead, if there is a major 
rollout of gTLDs without accurate information required in the--
--
    Ms. Lofgren. That's not my question. There are legitimate 
issues. I am not discounting that. The question is as a process 
question, how do you go about incorporating the fact that we 
are in a faceoff, Western world to China, on Internet 
governance?
    Mr. Leibowitz. Well, I think we have to be mindful of those 
other atmospherics, those other variables that are important. 
At the same time we are a consumer protection antitrust agency 
and so we talk to all the stakeholders and we have our voice.
    Ms. Lofgren. I am just thinking ahead. Consumer protection 
is not going to be optimized if China controls the Internet.
    Mr. Leibowitz. Certainly will not be optimized. Again, what 
we are hoping is that the Internet remains under appropriate 
governance. And I think that you and I agree that ICANN 
generally does a good job. And two is that they tighten up 
these rules.
    Ms. Lofgren. Let me ask you, maybe both of you, we recently 
adopted a patent bill and at the same week that happened--I 
come from Silicon Valley, I mean companies are madly trying to 
buy other companies, not because of what they do, just to buy 
up their patent portfolios. I mean, there is a patent war that 
is going on that is unbelievable. And our certainly antitrust 
law is to break up monopolies; patent law is to grant 
monopolies.
    And the question is how do you approach these two issues 
that are at odds with each other? Should antitrust law ever 
constrain the use of IP rights by owners? And if so, how would 
that happen? Do you ever constrain the unilateral enforcement 
of valid patents or licensing agreements between two or more 
companies? I think this is a huge emerging issue in the tech 
sector and maybe others.
    Mr. Leibowitz. Congresswoman, you are absolutely right. And 
there is at some level a tension between antitrust and patents. 
Now, we like to think that they can work well together in a 
very complementary way. We wrote a report, before I came to the 
Commission, on the patent system in 2003. It has been cited by 
Members of this Committee, including Mr. Berman, as one of the 
bases for the patent legislation that Congress enacted and by 
the Supreme Court. So it is a complex interaction when you deal 
with things like standards setting and patent pools.
    Ms. Lofgren. We relied on that study very heavily in our 
many years of looking at that.
    Mr. Leibowitz. Right. So we try to work with stakeholders, 
understand the issues, do a lot of workshops, and hopefully we 
get this issue generally right.
    Ms. Lofgren. Maybe Ms. Pozen can address this.
    Ms. Pozen. Sure. I would only add to it this intersection, 
just as you identified it, the intersection of the rights 
holders versus antitrust. And I think where we find the rub is 
when there is abuse. And that is the standard the courts have 
applied, when there is an abuse of those patent rights, 
extending them in a way or using them in a way that is 
anticompetitive. We look at every case separately. We look at 
every case before us carefully and try to find that right 
balance. It is a challenge, I'll admit. But so far, so good.
    Mr. Leibowitz. If I may just follow-up. One of the areas 
where we found an abuse is in what we call pay-for-delay 
pharmaceutical settlements, where--this Committee has held 
hearings on it--where the brand literally makes a payment to 
the generic competitor and the generic stays out longer. So 
consumers are left footing the bill or holding the bag. We 
estimate that that is $3.5 billion a year in harm to consumers 
and to the Federal Government. I think the CBO scored the 
Senate legislation at almost $5 billion in savings for the 
government because the government buys generic drugs.
    Ms. Lofgren. Thank you very much, Mr. Chairman. My time has 
expired.
    Mr. Quayle. I thank the gentlelady. The Chair now 
recognizes the gentleman from North Carolina, Mr. Coble, for 5 
minutes.
    Mr. Coble. Thank you, Mr. Chairman. I arrived belatedly. I 
had another hearing. That is why I showed up late. Good to have 
you all with us.
    Ms. Pozen, define bottlenecks for me.
    Ms. Pozen. Define bottleneck?
    Mr. Coble. Yes.
    Ms. Pozen. A bottleneck is a term that is very loosely 
used, but in the context in which I was talking about it 
earlier was the context of the Internet where one Web site or 
some type of actor in the Internet space has access into or 
onto another place in the Internet and has a way of shutting 
off that access to other competitors to benefit itself. So 
that's how I would define a bottleneck in that context.
    Mr. Coble. That probably would be anticompetitive, would it 
not?
    Ms. Pozen. Yes, when you--when it's an exercise of market 
power, if you have dominance in a given area and you are 
exercising it in a way that forecloses your competitors, that 
can be a violation of the Sherman Act.
    Mr. Coble. Did you want to weigh in? Looks like you were--
--
    Mr. Leibowitz. Well, I generally agree that that is a 
definition of--appropriate definition of bottlenecks. We see it 
sometimes in generic entry in pharmaceuticals. We see it from 
time to time in the broadband space. And we work our best to 
try to respond to those bottlenecks if they violate the law and 
in the event we see them.
    Mr. Coble. I thank you both. Ms. Pozen, I want to talk 
about the Google-ITA transaction a minute. As I understand it, 
part of that agreement was that a Web site would be set up in 
which competitors could file complaints about whether Google 
was complying with the conditions of the consent decree. I was 
told recently that the consent decree allows Google to 
administer that Web site. Is this true?
    Ms. Pozen. As part of the consent agreement in Google-ITA 
we did require that they set up a Web site to obtain the 
complaints that came in and then they are obligated to report 
those to us. We will get our first report in April.
    Mr. Coble. Well, I may be missing something here, you may 
have to throw me a rescue line, but it seems to me this would 
discourage smaller competitors from availing themselves of the 
ability of going to the Web site. Am I right or wrong?
    Ms. Pozen. Well, I would say in this instance you can 
utilize that Web site that Google has set up, but we accept 
complaints directly at the Justice Department. We have a 
General Counsel's Office that is overseeing the implementation 
of that remedy and if folks have issues that they want to call 
to our attention, they should get in touch with Bob Kramer, who 
is our General Counsel in the Antitrust Division. He is charged 
with overseeing that remedy to ensure that it is effective.
    Mr. Coble. I am not trying to gang up on Google but at 
first blush that seemed a little irregular, but I guess not?
    Ms. Pozen. It was what we thought was the right solution in 
this instance, sir.
    Mr. Coble. Good to have you both with us. I yield back, Mr. 
Chairman.
    Mr. Goodlatte. I thank the gentleman. The Chair now 
recognizes the gentleman from Florida, Mr. Deutch, for 5 
minutes.
    Mr. Deutch. Thank you, Mr. Chairman. Thank you both for 
being here. In my State of Florida the agriculture industry has 
really been devastated by invasive insect pests that have 
profound negative implications on the farmers and consumers as 
well. And as you are aware, one method to protect crops from 
those pests involves the development of new seeds containing 
traits that are resistant to the insects. I am concerned with 
the business practices in the industry. Specifically it has 
been brought to my attention the lack of competition in the 
generically modified seed industry. And so I would like to 
commend the Department of Justice and the Antitrust Division 
for investigating the business practices of Monsanto in this 
area, given the dominant role that they play.
    I would ask if you could speak to the actions that could be 
taken to ensure that there is a strong innovation component and 
competition in the generically modified seed industry.
    Ms. Pozen. The industry you are referring to is actually 
interesting in the sense that it is the intersection of 
intellectual property, antitrust, and agriculture. And it is 
something that we have taken a very hard look at. As you know, 
we held workshops around the United States on agriculture, 
including these specific issues that you cited to. I can't 
comment on ongoing investigations but I can assure you that 
your concerns have been voiced by others and we are looking 
into that.
    Mr. Deutch. I appreciate that. Going back to some comments 
that both of you have made, Mr. Leibowitz, I think you spoke 
about the importance of competition. You used the Google 
Android and iPhone area. Ms. Pozen, you spoke about competition 
advocacy that you do at Justice.
    So the question that I have is given that the Internet 
marketplace is where there is so much economic development and 
growth in the coming years, we obviously want to do everything 
we can to support competition and encourage start-ups. So I am 
worried about market dominance in the Internet search arena. 
Recently Ask.com exited the search market, cutting 130 
engineering jobs, stopping work on new algorithmic technology. 
The president of the company cited Google's dominance in the 
market as the reason for their exit. Google, as I understand 
it, controls more than 79 percent of the search market in the 
U.S. and over 90 percent in Europe.
    I know that the FTC, Mr. Leibowitz, is investigating these 
issues and I think it is an important investigation. If you 
could, to the extent that you are free to talk about this, 
generally at least, if you could address the issues of market 
dominance and the potential negative effect on Internet 
innovation and, more broadly, what impact that will have on 
future innovation in the Internet economy?
    Mr. Leibowitz. Well, I guess I would say this. As you know, 
we are conducting an investigation of Google. We are using both 
our consumer protection and our competition authority. We are 
moving forward on that mostly collecting documents and asking 
questions at this point. As a general matter, putting Google 
aside, whenever you see a dominant company, you wonder, if they 
are engaging in types of exclusionary or bad conduct, whether 
they are using that to stifle innovation and harm consumers in 
violation of the antitrust laws or in a way that is an unfair 
method of competition.
    So it is a critically important issue in the Internet space 
where there has been so much dynamism and so many benefits to 
consumers and you want that to continue. It is an important 
question to ask across different industries as well.
    Mr. Deutch. If I could follow up on the specific issue of 
exclusionary conduct in the Internet space. If you could speak 
to that in a little more detail.
    Mr. Leibowitz. I think I probably have gone about as far as 
I should involving exclusionary conduct in the Internet space, 
given our pending investigation. It is a fair question. It is 
fair for me to avoid answering it.
    Mr. Deutch. I was asking only in the broadest possible 
terms.
    Ms. Pozen. And I am happy to help if I can.
    Mr. Deutch. Please do.
    Ms. Pozen. Recently we reviewed Google's acquisition of 
Admeld and concluded that it didn't raise competitive concerns 
for a variety of reasons outlined in a statement that we 
issued. I believe that was last week.
    And in that statement we did say we are keeping a watchful 
eye on the space you have articulated to ensure that we look at 
transactions and other activities there to ensure that there is 
anticompetitive conduct that we take action. And we work 
extensively with the FTC on these kinds of issues.
    Mr. Deutch. I guess without going into detail, then, the 
idea of looking at exclusionary conduct in the Internet space 
specifically, is there a history of that analysis at the FTC or 
at Justice?
    Ms. Pozen. Well, at the Department of Justice I would cite 
you to our Microsoft case. It wasn't the Internet, but it was 
technology. And there we took action alleging that Microsoft 
had dominance in the operating system and was using that 
dominance in a variety of predatory ways that harmed 
competition.
    Mr. Deutch. I appreciate it.
    Mr. Leibowitz. This is an area we are constantly looking at 
because we think it is so important to consumers and we have 
seen so many benefits. We want to make sure that continues and 
so we have other investigations and sometimes we do quick looks 
when competitors come in or others come in and raise concerns. 
It's what we do.
    Mr. Deutch. Mr. Chairman, my time has expired. Thank you 
very much.
    Mr. Quayle. I thank the gentleman. The Chair now recognizes 
the gentleman from Georgia, Mr. Johnson, for 5 minutes.
    Mr. Johnson. Thank you, Mr. Chairman. Mr. Chairman, I'm 
concerned about the fact that in this country, in this day and 
time we have more and more opportunities for big business to 
engage in action that actually results in higher costs to 
consumers. Our free enterprise system is a system that 
requires, in order for it to function most effectively, 
competition. So I viewed the activities of the Department of 
Justice to be critical in the maintenance of our free market 
system and how it enables businesses to develop. That's one of 
the things that makes our country great.
    And so we must make sure that we don't have a situation 
where enterprises feel like they can do a lot of price fixing, 
bid rigging, territorial and customer allocation, bribery, 
subverting the competitive process and other things. These 
things send people to jail and people--when you start getting 
in people's pocketbooks that's one thing. But when you take the 
whole pocketbook from them and lock them up in jail, that is a 
sobering reality that many don't want to face if we have 
vigorous enforcement.
    But here we are talking about closing down four of the 
seven antitrust field offices throughout America, leaving the 
whole Southeast without any office of enforcement. We are doing 
this just simply to save money, are we not?
    Ms. Pozen. We are doing this to save money and to hopefully 
be more efficient in our law enforcement as well. It is 
twofold.
    Mr. Johnson. Well, you know in terms of efficiency, we have 
got, what, 90-plus experienced attorneys and staffers who are 
going to be asked to move to a new location, the other three 
office, Chicago, New York, and San Francisco.
    Ms. Pozen. Yes. I misspoke earlier. I said Philadelphia, 
not New York. Thank you for clarifying that.
    Mr. Johnson. And those locations have higher living costs 
so the people who move there would have to be compensated in 
accordance with those higher prices. So you're going to be 
looking at, assuming that everybody actually was able to move, 
relocate, you'd be looking at increased labor costs as opposed 
to less labor costs; is that correct?
    Ms. Pozen. When we announced----
    Mr. Johnson. And if you could----
    Ms. Pozen. Provide some background? Would that be helpful?
    Mr. Johnson. Well, I don't want any background. I just want 
you to answer yes or no if you could.
    Ms. Pozen. Sure. We believe that the realignment that we've 
set forth, which again was very difficult to come to--we are in 
difficult budgetary times at the Department of Justice, and it 
is not my preferred activities as acting AAG to do this at all, 
nor anyone at the Department of Justice. But when the Attorney 
General announced a number of office closures and realignments 
and streamlining, we were among those and the notification 
process was started for our closure.
    Mr. Johnson. But the Antitrust Division is actually an 
income generator; right?
    Ms. Pozen. Right, we are. We are----
    Mr. Johnson. So you are actually generating income for the 
use of the Department--or any other department, by the way, 
because it can be allocated to another department's use--we are 
actually raising revenue without raising taxes?
    Ms. Pozen. Right. In making this decision we considered all 
that you are raising.
    Mr. Johnson. So if we have got an office that is--the 
Atlanta office alone--responsible over the last 10 years for 
about 200--about a quarter of a billion dollars worth of fines 
and forfeitures and penalties that have been collected and if 
we cut that ability by cutting the office and the people who 
staff the office who know the industry that are potential 
targets, they know the local bar, they know the regional court 
systems, if we cut that efficiency and then place it in the 
hands of some newly hired lawyers that don't have the 
litigation experience, the legal experience of the attorneys 
and staffers who are currently working and who would not be 
able to relocate, then we are cutting the efficiency of the 
Department's law enforcement efforts. And that, I think, is a 
tragedy.
    I think at this point with the consolidation of industry 
and the effect that it has on prices for consumers, I think 
this is the wrong time to be shutting down for alleged cost 
cutting reasons. You are cutting the nose to spite your face 
really. I think it is a bad time to close down four of seven 
regional offices. It seems like what we are trying to do around 
here is just cut government and we are not really thinking 
about the effect of the cuts.
    Now, I know that big business wants to have an environment 
where they would not have any regulatory control over them so 
that they could make money hand over foot, quarter after 
quarter, and it increases dramatically year by year, but 
there's only so much that the American people can pay. And 
we'll get to a point where that will ruin the capitalist 
system. And so I want to protect our system. I want to protect 
the capitalist system. But it requires competition. And it 
requires the government to make sure that the little people are 
treated fairly because we can't rely on the fox to guard the 
hen house.
    And so I think it is a tragedy that we would talk about 
cutting antitrust enforcement. The criminal side is the first 
one that would suffer the most. The regulatory side. You can 
get some inexperienced lawyers to come in and having read law 
books and getting a little guidance from some senior folks they 
can make certain decisions but to actually prosecute.
    Mr. Amodei. [Presiding.] If I might to my colleague from 
Georgia, I want the record to reflect that he asked for and has 
received a minute of extra time which has expired. So the 
gentleman's time has expired. And I appreciate, Ms. Pozen, 
please feel free to get directly with Mr. Johnson on those 
things.
    Mr. Johnson. I'd like to have a bipartisan inquiry. Really 
a hearing.
    Mr. Watt. If the gentleman would yield, Mrs. Adams actually 
asked a lot of the same questions and she agreed to follow up 
with some specific written guidance that they applied in this 
context.
    Mr. Johnson. Well, I think we need a hearing on this very 
specific issue alone because it is of such gravity.
    Mr. Amodei. And that will be part of our record today for 
that request.
    Mr. Johnson. Thank you, Mr. Chairman.
    Mr. Amodei. The Chair now recognizes the lady from the 
Golden State, Ms. Chu, for 5 minutes.
    Ms. Chu. Thank you, Mr. Chair. I have a few questions that 
I'd like you to address. First for chairman Leibowitz. My 
constituents have expressed numerous concerns regarding the 
competitiveness of the PBM market, the pharmacy benefit manager 
market. They are concerned that the consolidation of the 
current marketplace harms patients by reducing choice, 
decreasing access to pharmacy services, and ultimately this 
could lead to higher prescription drug costs paid by plan 
sponsors and consumers. And I'm certainly concerned about 
patient well being and quality pharmacy care for my 
constituents as well as rising health care costs. How are you 
evaluating and addressing the concerns of patients and 
community pharmacies as it relates to the ongoing consolidation 
of this market?
    Mr. Leibowitz. Well, as you know, we are reviewing two 
matters now, and I can say this publicly because the companies 
have acknowledged that. One is Express Scripts-Medco, a major 
merger. We're collecting documents. We are asking questions and 
we will apply the law which says that if the agreement may 
substantially lessen competition, then we will challenge it in 
court.
    The other matter that we are looking at is CVS-Caremark, 
which is a consummated merger and we have an investigation 
going on. And so I think I need to leave it at that. Except to 
say that I have certainly met with community pharmacists and my 
father-in-law was a professor of pharmacology and my mother was 
a pharmacist, so I am intimately aware of the concerns of 
community pharmacists who provide enormous value.
    And I guess I would mention one other thing, which is that 
we look at price effects when we are reviewing a merger. But 
you can also look at nonprice effects like service and 
convenience. So I will leave it at that.
    Ms. Chu. I thank you for that. I want to turn to criminal 
issues. Ms. Pozen, in your testimony you mentioned that last 
year the Antitrust Division in DOJ filed 90 criminal cases, up 
from 60 cases in 2010, and obtained over $520 million in 
criminal fines. And you state that in those cases you charged 
27 corporations, 82 individuals and the court imposed 21 jail 
terms.
    Can you explain the cause behind the recent rise in 
criminal antitrust enforcement and give us some examples?
    Ms. Pozen. Sure, we--again, the cases that come to our 
attention or that we learn about we pursue vigorously on the 
criminal and civil side. In particular on the criminal side we 
see ebbs and flows in terms of activities and I don't know if 
there is any particular reason for the uptick other than we 
have continued to be vigilant and continue to prosecute where 
we thought it was necessary.
    We have some significant cartel matters that have been 
ongoing for some time and that continue. As I mentioned in my 
written statement--in my oral statement, the auto parts 
industry. We have announced a prosecution of Furukawa and a 
$200 million fine there. That investigation is ongoing. It is a 
large and significant investigation.
    We have others going in the air cargo industry, in the LCD 
industry, and also in muni bonds. That is we have had several 
agreements that we have reached with significant large banks 
ranging from $130 million to over $200 million in fines and 
restitution and we are working toward now--the trials are 
starting after the first of the year--prosecuting the brokers 
involved in those muni bond bid rigging and price fixing 
schemes. We are just continuing to be the cop on the beat. As I 
said earlier, I continue to be astonished that businesses 
continue to violate the law. But we continue to work to 
prosecute where we need to.
    Ms. Chu. Okay. And finally I wanted to ask about the global 
economy. Today we have about 120 antitrust agencies around the 
world, including new agencies in China and India, and it is 
becoming increasingly common and important for agencies to 
investigate the same matter. I understand your Antitrust 
Division has been cooperating with international counterparts 
and there was some example recently with the German Federal 
Cartel Office on this merger issue regarding patent 
applications for Novell by CPTN.
    What are you doing to form international partnerships and 
coordinate your efforts on these types of matters?
    Ms. Pozen. We continue to really work with our 
international counterparts around the world through a variety 
of means. We engage with them in international organizations 
like the OECD and like the International Competition Network. 
Those are great forums of different natures where we are active 
participants.
    We have also sought to, with the FTC, to engage with 
emerging economies, as you mentioned. We signed a memorandum of 
understanding with Russia first and then recently with the 
Chinese antitrust authorities in July and are planning on 
signing one with India in 2012. Those MOUs set out in very 
simple terms efforts that both or all agencies--in China it is 
a five-way agreement--are going to work together to have 
regularized meetings to comment on each other's guidelines and 
laws.
    And in addition to, I would note, we just celebrated our 
20th anniversary of our cooperation agreement with the EC. That 
is an enduring relationship that we were celebrating in 
Brussels in October and as part of that we updated our best 
practices--our merger best practices guidelines which we use in 
those forums as well. It is a variety of means that we engage. 
We do it on investigations specifically, and have a great 
working relationship on a number of investigations today with a 
number of authorities and then more broadly as I described.
    Mr. Leibowitz. Just to follow up and Ms. Pozen is exactly 
right. We spend a lot of time thinking about the international 
dimension. And the more you have law enforcement authorities in 
other countries that work at the same time frames and where the 
law has generally converged, and we encourage that convergence, 
it is just better for American businesses and better really for 
American consumers and consumers in those country as well. So 
it is something we spend a lot of time on at both our agencies 
and we work really well together on it.
    Ms. Chu. Thank you. I yield back.
    Mr. Amodei. Thank you. The Chair recognizes the gentlelady 
from Texas, Ms. Jackson Lee.
    Ms. Jackson Lee. I thank both the Chair and the Ranking 
Member and I thank the witnesses as well. Let me just ask a 
pointed question for both of you. I heard my colleague, 
Congressman Johnson, raising a line of questioning about the 
return from your agencies in terms of making dollars for the 
U.S. Treasury. Tell me very quickly--to both the Chairman of 
the FTC and to the Department of Justice--what major budget 
cutting will do to your efforts on balancing the oversight over 
necessary antitrust issues.
    Mr. Chairman? And I've got a series of questions. I would 
like a quick answer on that financial part.
    Mr. Leibowitz. You know, knock on wood we might--we should 
be okay or we may be okay in our appropriations but if we have 
to cut personnel, it means that completing investigations 
rapidly, which every company deserves, will be a little bit 
harder. It means that other things that we do that are 
important like our international work will be tougher to do. 
And so an 8 percent budget cut which is what we get under 
sequestration would be very, very problematic. And not for us, 
but for the consumers we are supposed to protect.
    Ms. Pozen. I faced a $3 million budget cut in 2012 that I 
am starting to manage toward today. And part of our efforts in 
anticipation of that cut was the realignment of our field 
offices, trying to preserve the jobs for those 97 individuals 
in those four offices. Because I'm concerned if I waited any 
longer that I wouldn't be able to offer them jobs and moving 
expenses. So it has an impact. We are trying to do the same 
with less. We are trying to do the best that we can. We are 
trying to be more efficient and effective.
    Ms. Jackson Lee. We have a concept with our banks: Too big 
to fail. And it draw obviously a great concern by the public. 
They want to know what happened in terms of some issues that is 
probably more addressed to the Criminal Division but the 
question of too big to fail comes from the origins of our first 
breaking up of monopolies under Teddy Roosevelt.
    So let me ask these questions to both of you quickly so I 
can get answers from the two of you. I don't think we should be 
attacking bigness for bigness sake as much as we should be 
providing oversight. And I raise that question on the merger 
that has already been approved between United and Continental. 
And now the growing pains are being experienced. But in 
particular I'm interested in AT&T and T-Mobile. One, I'm 
interested because I really want to create jobs and there is a 
very strong argument that that creates jobs. And what I would 
argue is that there may be a valid--this is obviously something 
that is either behind us, we hear that it may be in front of 
us, it maybe in some engagement. But I'm wondering is there a 
concept of intense oversight while also protecting the American 
brand so that we can create these jobs and we can enhance the 
opportunities for a stronger entity?
    I would raise that came question with Google. I want to 
make sure that we have competitiveness, but I don't think we 
should have a particular company under the gun simply because 
it is big. I would like to give you the resources to intensify 
your oversight but to recognize that there is value in 
intellectual property, in inventiveness, in what largeness 
brings about. We have had largeness before. We need to be able 
to regulate.
    So speak to me about your regulatory aspects so that we are 
not killing jobs by going after companies who have innovative 
ideas about mergers and can actually be effective.
    And just quickly to Assistant Secretary Pozen, tell me 
about the victory that you have gotten with H&R Block coming up 
on the tax season by acquiring TaxACT and the regulation of 
that. So if you could answer those questions so that we can 
create jobs here in America.
    Ms. Pozen. Sure. I will start with H&R Block. That was in 
the digital do-it-yourself tax preparation software that was a 
merger of H&R Block with TaxACT. I think we filed our lawsuit 
in May and proceeded to court very quickly, had our trial in 
September, October, and the judge issued a decision at the end 
of October. That decision is an 80-page decision. And for us 
antitrust wonks or nerds or whatever you want to call it, it 
was incredibly written and detailed and really was an 
accumulation and a great resource I think to folks going 
forward of the state of the law in this circuit on merger and 
merger analysis.
    So we are very proud of that. It was our first successful 
merger challenge since 2004. So it has been a long time so it 
felt very good for lots of reasons. But I think it advanced 
antitrust jurisprudence significantly.
    In terms of your question about jobs, as you noted and I 
agree with you, it is competition that we are focused on. And 
with competition comes innovation, and with innovation comes 
expansion of our economy, and with that comes jobs. And so that 
is the way we analyze and look at those issues. If you build a 
better mouse trap in the United States, if you did it through 
legitimate means, you don't suffer antitrust consequences. It's 
how you use that market power. Or if you try to build it just 
that much too big that raise competitive concerns without 
countervailing efficiencies where we get involved.
    Mr. Leibowitz. Yes, and following up on that, being big 
alone is not an antitrust violation. But the antitrust laws I 
think are generally calibrated to promote job growth, to 
promote innovation. So the merger standard under the Clayton 
Act--Chairman Clayton was the Chairman of this Committee in 
1914 when Clayton was passed--says we challenge deals when they 
may substantially lessen competition. As we know, competition 
drives innovation, it drives job growth, it drives a lot of 
different things.
    And then when you look at the conduct standards, 
monopolization alone is not a violation. If you achieve a 
monopoly status by virtue of your excellent work or the way you 
market your product, that is not a problem. It is when you 
combine that with bad acts either to get to your monopoly 
status or to maintain it, that it is in violation of the law.
    So it is a ready good question and it is one that we ponder 
both in specific cases and at a general level all the time in 
our agencies.
    Ms. Jackson Lee. Well, thank you. I don't want us to be in 
the business of because something is big, created major jobs--
the auto industry was big in years past and probably still 
competitive, that bigness alone. I would like to have the kind 
of oversight and regulation addressing the question of 
competitiveness, but remember we are also competing worldwide. 
And so some of these issues relate to how we can compete 
worldwide and sometimes bigness requires that. As long as we 
are following the rules, I would hope that that would be part 
of our structure in dealing with some of the companies that are 
so much larger than others.
    Mr. Amodei. Would the gentlelady for Texas like to be 
recognized for an additional minute for purposes of wrapping 
up?
    Ms. Jackson Lee. How kind of the gentleman. Yes, I would. I 
would ask unanimous consent. I apologize for not----
    Mr. Amodei. Without objection, so ordered. Please proceed.
    Ms. Jackson Lee. The Chairman looked like he was trying to 
reach out and say something. I'm not sure.
    Mr. Leibowitz. I think I have said enough probably. But if 
you have another question I would be happy to answer it.
    Ms. Jackson Lee. I just will end on the note of the way I 
framed it, is that we are in this tight job market and we are 
in this tight creation market. I want to find room for 
competitiveness and I also find room for bigness. My initial 
premise is that people are mad at the finance industry because 
they believe that it wasn't regulated, there wasn't oversight, 
and I want to make sure we have oversight but we allow growth 
and opportunity. Is that my sense of antitrust effectiveness?
    Mr. Leibowitz. Agreed. Yes, I think that's well put.
    Ms. Jackson Lee. Madam Secretary--Madam Attorney General?
    Ms. Pozen. Yes, I agree that we are constantly being 
vigilant in the markets that we oversee to ensure that those 
companies that are large aren't abusing that dominance and 
again that those companies who engage in mergers that are 
legitimate and don't raise significant concerns, we let those 
go forward. But if a merger does raise a competitive concern 
and doesn't have countervailing efficiencies to overcome that, 
we do challenge them.
    Ms. Jackson Lee. I thank the Chairman for his courtesy.
    Mr. Amodei. Thank you. I'd like to thank the witnesses, Mr. 
Chairman, Madam Assistant Attorney General. I appreciate that 
on behalf of the Ranking Member and the Chairman, neither of 
which I am.
    Without objection, all Members will have 5 legislative days 
to submit to the Chair additional questions for witnesses, 
which we will forward and ask the witnesses to respond as 
promptly--I know Mr. Johnson had some other questions perhaps--
as they can and get their answers back and they will be made a 
part of the record.
    Also, Representative Michael Grimm has asked that his 
written statement be included in the record. Without objection, 
it will be made a part of the record for this hearing day.
    [The prepared statement of Mr. Grimm follows:]
          Prepared Statement of the Honorable Michael Grimm, 
        a Representative in Congress from the State of New York
    The increasing consolidation of hospital markets, and the federal 
antitrust response to those consolidations has been and will continue 
to be an issue that not only Staten Islanders face, but is an issue 
that is of significant community interest across the country. Changes 
in both public and private sector reimbursement systems as state 
budgets constrict, and dramatic transformation of health care markets 
take place due to the recently enacted health care law, will likely 
prompt unprecedented consolidation in the hospital industry and cause 
Congress and the Administration to reassess exactly how they approach 
hospital consolidation, and competition in the health care market.
    The substantial and persistent increases in the cost of health care 
services that began when Medicare was first established in the late 
1960s and have continued since then, have led directly to the changing 
market realities for hospitals. These market realities also call into 
question exactly how hospital mergers fit into traditional antitrust 
litigation, and how these mergers and acquisitions translate into a 
competitive marketplace for affordable and accessible health care 
services.
    Between the high cost of delivering any service in New York City, 
and the high cost of delivering health care services, New York hospital 
systems struggle to find a stable flow of capital, and forces these 
entities into an increased pace of hospital consolidation and/or 
sponsorship. By any criteria, the law concerning hospital market 
definition is in shambles. Common sense suggests that all health care 
is local. People want to be hospitalized near their families and homes, 
in hospitals in which their own--local--doctors have hospital 
privileges. However, various court decisions have stretched the 
geographic boundaries of markets into a fluid definition, which in many 
cases fails to heed the warnings of a failed institution, and allows 
the Department of Justice to pick winners and losers in the hospital 
market, not based on policy or community specific logistics, but based 
on the expertise of the litigators themselves.
    A fluid definition of market power and geographic boundaries allows 
a unique place, like Staten Island, to fall victim to the exact policy 
decisions the Federal Trade Commission seeks avoid on antitrust law. 
Medical antitrust law follows the same pattern as the law governing 
contracts between manufacturers and distributors of branded goods in 
other industries. The intricacies of the health care industry requires 
industry-specific policy that takes industry and community dynamics 
into context. Staten Island, as part of New York City is subject to 
extensive New York City taxes, but is often treated as a separate 
municipality. The ambiguous antitrust policies stemming from the 
Administration have resulted in the Federal Trade Commission and the 
Department of Justice to deny Staten Island a fair evaluation as a part 
of New York City in total. Absent of industry-specific policy changes, 
communities like Staten Island will be casualties of an anticompetitive 
market and will end up paying more for services and time spent 
traveling to another hospital in New York City or across state lines to 
New Jersey. In the end, this costs taxpayers more money, and is 
completely counter-intuitive if lawmakers plan on ensuring a vibrant, 
competitive, health care industry alive in all of New York City, and 
the country.
    These circumstances has resulted in limited hospital access on the 
Island, and forces Staten Island residents to become purchasers of high 
cost, less efficient care than other New York City residents. As our 
``anchor hospitals'' begin to feel the financial burden of payment cuts 
from the state and federal level, institutions will likely fail, 
leaving the hard working residents of Staten Island a de-facto 
anticompetitive market place for essential health services. Medical 
antitrust reform must be expedited in order to avoid the acceleration 
of hospital mergers and acquisitions that are likely to occur as the 
health care law goes into effect.
    The combination of these extenuating circumstances call on the need 
for federal legislators to concretely define the product market, 
geographic market, and market concentration and competitive effects 
based on the specific dynamics of the health care industry. By doing 
so, the FTC will be forced to analyze cases on the basis of an elastic 
health care industry and an evolving community-specific market rather 
than outdated and inconsistent logic that has been the Achilles' heel 
of medical antitrust law.
                               __________

    Mr. Amodei. And without objection, all Members will have 5 
legislative days to submit any additional materials for 
inclusion in the record. And with that, again I want to thank 
the witnesses and my colleagues and the hearing is adjourned.
    [Whereupon, at 11:55 a.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

        Response to Post-Hearing Questions from Jon Leibowitz, 
                   Chairman, Federal Trade Commission






    Response to Post-Hearing Questions from Sharis A. Pozen, Acting 
  Assistant Attorney General, Department of Justice Antitrust Division




                                 
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