[Senate Hearing 112-629]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-629

NOMINATION OF WILLIAM JOSEPH BAER, OF MARYLAND, NOMINEE TO BE ASSISTANT 
    ATTORNEY GENERAL, ANTITRUST DIVISION, U.S. DEPARTMENT OF JUSTICE

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

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 26, 2012

                               __________

                          Serial No. J-112-91

                               __________

         Printed for the use of the Committee on the Judiciary



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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin                 CHUCK GRASSLEY, Iowa
DIANNE FEINSTEIN, California         ORRIN G. HATCH, Utah
CHUCK SCHUMER, New York              JON KYL, Arizona
DICK DURBIN, Illinois                JEFF SESSIONS, Alabama
SHELDON WHITEHOUSE, Rhode Island     LINDSEY GRAHAM, South Carolina
AMY KLOBUCHAR, Minnesota             JOHN CORNYN, Texas
AL FRANKEN, Minnesota                MICHAEL S. LEE, Utah
CHRISTOPHER A. COONS, Delaware       TOM COBURN, Oklahoma
RICHARD BLUMENTHAL, Connecticut
            Bruce A. Cohen, Chief Counsel and Staff Director
        Kolan Davis, Republican Chief Counsel and Staff Director












                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Kohl, Hon. Herb, a U.S. Senator from the State of Wisconsin......     1
Lee, Hon. Michael S., a U.S. Senator from the State of Utah......     2

                       STATEMENT OF THE NOMINEES

Baer, William Joseph, Nominee to be Assistant Attorney General, 
  Antitrust Division, U.S. Department of Justice, Washington, DC.     4
    Biographical information.....................................     5

                         QUESTIONS AND ANSWERS

Responses of William Joseph Baer to questions submitted by 
  Senators Coons, Durbin, Grassley, Klobuchar and Lee............    85

                       SUBMISSIONS FOR THE RECORD

Bipartisan Attorneys, February 28, 2012, joint letter............   105
Former Assistant Attorney Generals, February 16, 2012, joint 
  letter.........................................................   108

 
NOMINATION OF WILLIAM JOSEPH BAER, OF MARYLAND, NOMINEE TO BE ASSISTANT 
    ATTORNEY GENERAL, ANTITRUST DIVISION, U.S. DEPARTMENT OF JUSTICE

                              ----------                              


                        THURSDAY, JULY 26, 2012

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 1:07 p.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Herb Kohl, 
presiding.
    Present: Senators Kohl and Lee.

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

    Senator Kohl. We will commence. We welcome you here today, 
and we meet regarding the nomination of Bill Baer to be 
Assistant Attorney General to head the Antitrust Division. Mr. 
Baer possesses an impressive list of qualifications for this 
important position. A proud native of Wisconsin, he served as 
Director of the FTC's Bureau of Competition during the 1990s 
and for the last decade has been the head of the antitrust 
practice at the major Washington law firm of Arnold & Porter.
    Mr. Baer, we congratulate you on your nomination. Your 
nomination comes at a crucial time for antitrust enforcement. 
As our economy continues to face challenges and consumers' 
pocketbooks are stretched, we depend on vigorous competition to 
spur economic growth in our economy. Aggressive enforcement of 
our Nation's antitrust laws will ensure that competition 
flourishes and consumers obtain the highest-quality products at 
the lowest possible prices.
    The last 3 years have seen a revival of antitrust 
enforcement at the Justice Department. These efforts culminated 
in last year's courageous decision to file suit to oppose an 
anticompetitive AT&T/T-Mobile merger which led to the parties' 
abandoning the deal. But antitrust enforcement requires 
constant vigilance, and the issues facing the Antitrust 
Division today are no less serious.
    For example, the Division is currently examining 
transactions between Verizon and four of the Nation's largest 
cable TV companies. As my letter to the Justice Department in 
May pointed out, it is crucial that the Justice Department 
ensures that nothing in this deal will harm the competitive 
battle between Verizon and the cable companies for Internet and 
video service, often the only real choice for these vital 
telecom services for millions of consumers.
    And in other key industries as diverse as the Internet and 
high-tech, media and book publishing, aviation and agriculture, 
to name just a few, the Justice Department will be called upon 
to stand as a bastion protecting competition.
    Moreover, the Justice Department is currently implementing 
its plans to close four of its seven regional field offices. 
Many antitrust experts, including most of the senior leadership 
of these field offices, and also myself, have serious concerns 
about what this closure will mean for the detection and 
antitrust enforcement directed against local conspiracies. We 
will be closely watching your leadership and the Antitrust 
Division to ensure that you maintain the resources necessary to 
combat local antitrust conspiracies in the many areas of the 
Nation that will no longer have local antitrust offices.
    Mr. Baer, the position of Assistant Attorney General for 
Antitrust carries with it a special burden and a special 
responsibility. Companies over whom the Antitrust Division has 
jurisdiction have ample resources to hire skilled and talented 
counsel to represent their best interests. But no one 
represents the interests of the American consumer other than 
the Antitrust Division. If you are confirmed, millions of 
consumers will be depending on your efforts and your judgment. 
You will inherit a proud legacy at the Antitrust Division, and 
it is our sincere hope and full expectation that you will 
uphold this legacy once you are confirmed.
    Senator Lee, for your comments.

 STATEMENT OF HON. MIKE LEE, A U.S. SENATOR FROM THE STATE OF 
                              UTAH

    Senator Lee. Thank you, Mr. Chairman. Today we consider the 
nomination of William Baer to be the next Assistant Attorney 
General over the U.S. Department of Justice's Antitrust 
Division. This is a position of enormous significance. Since 
its establishment nearly 80 years ago, the Antitrust Division, 
together with the Federal Trade Commission, has been tasked 
with the enforcement of our Nation's antitrust laws.
    As head of the Antitrust Division, the Assistant Attorney 
General oversees the Department's criminal and civil 
enforcement of antitrust laws, assisted by five Deputy 
Assistant Attorneys General and hundreds of attorneys and 
economists.
    Over the past decade, the Division has conducted an average 
of 90 merger investigations and 28 non-merger investigations 
each year. And over the last decade, the Division has levied 
$4.4 billion in fines on individuals and on corporations.
    Obviously much is at stake as the Division establishes 
enforcement priorities, reviews mergers, investigates conduct, 
and litigates cases. The Antitrust Division's charge is to 
administer our Nation's antitrust laws faithfully so as to 
safeguard our free market economy.
    Robust competition maximizes consumer welfare by ensuring 
access to a broad variety of products at low prices. 
Competition is also essential to innovation as businesses have 
access to markets and are able to secure a reasonable return on 
productive investments.
    There is much good for the economy and for consumers that 
can be accomplished through antitrust enforcement. But there is 
also potential for abuse. As a result, I believe the role of 
antitrust is important, but it is also limited.
    Although much of antitrust law is by necessity forward 
looking, onward speculation about the potential effects that a 
transaction may have on various markets must not be allowed to 
overtake fundamental economic analysis.
    Antitrust regulators must also be wary of attempts to 
subvert their investigation or review process to advance 
political objectives or private financial ends.
    I believe the Division should resist efforts by politicians 
to encourage antitrust enforcement as a back-door means to 
implement desired policy outcomes. Antitrust officials must 
also be on guard against the inevitable attempts of competitors 
to use investigatory and enforcement processes primarily to 
harm their rivals.
    In short, antitrust officials must stay focused on the true 
purpose of our antitrust laws, which is to safeguard 
competition rather than competitors so as to maximize consumer 
welfare.
    The Government has a proper role in ensuring that 
businesses compete fairly and do not collude. Such enforcement 
can forestall the need for more burdensome regulatory 
structures that impose greater costs on our economy and on our 
society as a whole. But it is improper for antitrust enforcers 
to pick winners and losers in the marketplace or to interfere 
with private enterprise where robust market forces are in 
operation.
    I look forward to discussing these principles with Mr. Baer 
as we consider his nomination. Thank you, Mr. Chairman.
    Senator Kohl. Thank you, Senator Lee.
    I would like now to introduce our witness, Bill Baer. Since 
January 2000, Mr. Baer has worked as a partner at Arnold & 
Porter, LLP, where he led the firm's antitrust practice group. 
Prior to this position, he served as the Director of the Bureau 
of Competition at the FTC from 1995 to 1999.
    A native of Milwaukee, Wisconsin, Mr. Baer has strong ties 
to my own State. He attended college at Lawrence University in 
Appleton, Wisconsin, and currently serves as the university's 
vice chair of the board of trustees.
    Mr. Baer's father, Joe Baer, is also present at the hearing 
today. He resides in Milwaukee and is a retired teacher and 
high school guidance counselor. He is a World War II veteran 
and a Purple Heart recipient.
    Thank you, Mr. Baer, for appearing to testify today. I now 
ask you to rise and raise your right hand as I administer the 
oath. Do you swear that the testimony you are about to give 
will be the truth, the whole truth, and nothing but the truth, 
so help you God?
    Mr. Baer. I do.
    Senator Kohl. Thank you.
    We now ask you, Mr. Baer, to make your statement and if you 
would wish to introduce some of your family members who are 
here.

   STATEMENT OF WILLIAM JOSEPH BAER, NOMINEE TO BE ASSISTANT 
   ATTORNEY GENERAL, ANTITRUST DIVISION, U.S. DEPARTMENT OF 
                   JUSTICE, WASHINGTON, D.C.

    Mr. Baer. Thank you, Mr. Chairman. Thank you, Senator Lee.
    I am pleased that my spouse, Nancy Hendry; my two boys, 
grown boys, Michael and Andrew are here; Nancy's dad, my 
father-in-law, Jim Hendry, from Chestertown, Maryland; my 
brother, Mike, who came in from Portland, Oregon; my sister, 
Kathy, from Sherwood, Wisconsin, whose son Nick happens to work 
for the Milwaukee Bucks organization and is proud of it. And I 
am especially glad that Dad, Joe Baer, could be here.
    I am also honored, Mr. Chairman, Senator Lee, that a couple 
of dear friends, current and former antitrust officials, took 
the time to be here. Behind me are FTC Chairman Jon Leibowitz; 
the former Assistant Attorney General for Antitrust under 
George Herbert Walker Bush, my friend Jim Rill; and the former 
FTC Chair under President George W. Bush, Tim Muris. They, 
together with my dear friend Bob Pitofsky, former Chair of the 
FTC and a long-time friend of this Committee, have been 
mentors, colleagues, and friends for years, and I am grateful 
for that.
    It is an honor to be here, Mr. Chairman, Senator Lee, and I 
thank the President for his expressing his confidence by 
nominating me to this very important law enforcement position. 
I thank the Committee for the opportunity to appear before you 
here today.
    I have been privileged to spend a number of years working 
in the antitrust field, including two 5-year stints at the FTC. 
Mr. Chairman, you mentioned my time there between 1995 and 
1999. Previously, right out of law school, I was there between 
1975 and 1980.
    Over that time, I have seen firsthand the importance of our 
antitrust laws to American consumers. I have learned a lot over 
the years--and it has been pretty many years--most importantly 
that antitrust enforcement is best when it has a sound 
analytical foundation and when it focuses on behavior that 
poses serious risk of economic harm to the American people.
    If confirmed, I would hope to use that learning to work 
with the Antitrust Division and its very talented and dedicated 
staff to pursue enforcement policies that are vigorous, that 
are effective, and that are fair.
    Once again, thank you, and I look forward to answering your 
questions.
    [The biographical information follows:]


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    Senator Kohl. Thank you very much, Mr. Baer.
    Mr. Baer, the Justice Department is in the process of 
closing four of its seven regional offices: the offices in 
Atlanta, Cleveland, Dallas, and Philadelphia. Many antitrust 
experts, including the senior leadership of these offices, are 
very concerned about the impact of these office closures on the 
detection and prosecution of local antitrust conspiracies. I 
myself, I must say, share these concerns.
    While we hear about the big national and international 
investigations brought by the Justice Department here in 
Washington, these local conspiracies involving such things as 
gas price fixing, construction bid rigging, and rigged school 
milk bids, for example, often affect local consumers most 
directly.
    So, Mr. Baer, does closure of these offices worry you for 
its impact on antitrust enforcement? What will you do as head 
of the Antitrust Division to ensure that there is no lessening 
of effects to detect and prosecute local antitrust conspiracies 
in the regions now covered by the offices to be closed.
    Mr. Baer. Mr. Chairman, I appreciate the importance of 
having a plan in place to ensure effective local and regional 
enforcement. The press tends to focus on international and 
national antitrust issues, but there are serious local and 
regional problems that need to be addressed. A top priority for 
me, if confirmed by the Senate, would be to make sure those 
plans are in place.
    I should add, Mr. Chairman, when I was at the Federal Trade 
Commission, we went through a similar experience of reducing 
the number of, they are called, regional offices, and it was my 
job as Director of the Bureau of Competition to make sure we 
continued to have effective local and regional enforcement. And 
I think we were able to do that. There are a couple of FTC 
Chairs, current and former, behind me who can indicate whether 
that is correct or not. But I appreciate that that is important 
and will be a top priority for me, if and when confirmed.
    Senator Kohl. All right. Mr. Baer, while you served as 
Director of the Bureau of Competition at the FTC for 4 years in 
the 1990s, during most of your legal career you have worked in 
private practice. For the past decade, you have served as head 
of the antitrust group at a major Washington law firm. In this 
capacity, you have been very skilled at representing your 
private clients in antitrust matters and defending against 
allegations that your clients have violated antitrust law.
    The position of Assistant Attorney General for Antitrust is 
very different, as you well know. You will be the Government's 
chief antitrust prosecutor on behalf of consumers, bringing 
antitrust cases against parties that are alleged to have 
engaged in anticompetitive practices. How can you assure us 
that you will be an aggressive antitrust enforcer in your new 
role and will prosecute antitrust cases with all the vigor that 
you have brought to defending your private clients?
    Mr. Baer. Mr. Chairman, I hope past is prologue in that I 
made that transition from private practice, as you noted, in 
the 1990s and I believe came to be appreciated for 
understanding very quickly that I had a different client and it 
was the American public. And that is the attitude I would 
bring.
    Over the years, in dealing with senior officials and staff 
of both the FTC and the Antitrust Division, I think they see me 
as a fair-minded and dedicated lawyer, and I have heard many 
encouraging words from staff at the Antitrust Division looking 
forward to my arrival. And I hope I live up to those 
expectations.
    Senator Kohl. All right. Mr. Baer, you have been interested 
in and worked in the field of antitrust for nearly your entire 
professional career going back to your graduation from law 
school in 1975, when you went to work at the FTC. And so I 
would like to ask you why are you interested in antitrust. Why 
do you want the job of Assistant Attorney General for the 
Antitrust Division at the Justice Department, understanding, 
among other things, that you will suffer a great reduction in 
your remuneration?
    Mr. Baer. Senator, I come from a proud family tradition of 
public service, and I came to Washington hoping I would have 
multiple opportunities to pursue public service, and so this is 
a great opportunity for me.
    Why antitrust? I think over the years I have come to 
appreciate--Senator Lee referred to this in his opening 
remarks--that removing both governmental and private restraints 
on free market competition actually pays off. It makes a 
difference in human lives. And to be able to do something in 
public service that you can point to, you can sit down with a 
consumer and say here are the ten things that the Antitrust 
Division did that maybe just on the margins but made a 
difference in your life. It is a privilege to be in that 
position. It is a huge responsibility to make the judgments so 
you can actually confidently say that at the end of the day. 
But I love the challenge. I welcome the challenge.
    Senator Kohl. Good. Mr. Baer, based on your years of 
experience as an antitrust lawyer with cases before the Justice 
Department, as well as your time as Director of the Bureau of 
Competition at the FTC in the 1990s, are there any specific 
policies or procedures of the Antitrust Division that you will 
change if you become confirmed at the Assistant Attorney 
General?
    Mr. Baer. Mr. Chairman, I would take this job, if 
confirmed, with a little bit of humility about what might need 
to be changed. I think the Antitrust Division has been well run 
in recent years. Christine Varney is the Assistant Attorney 
General, and then two Acting Assistant Attorneys General, 
Sharis Posen and now Joe Wayland, those are people I admire and 
respect and think they have done a very good job.
    And so the first task for me, I think, would be to go in 
with ears open and talk about where we are at, understand 
whether there are challenges that require some changes, but I 
do not go down with a preset agenda.
    Senator Kohl. Before I turn it over to Mr. Lee, I would 
like to ask you your opinion over the past decade or two. Do 
you feel that we have had too much consolidation in this 
country, that there has been a reduction in competition, that 
we need more vigorous competition, and in order to do that, 
your Division will be required to be even stronger than it has 
been in seeing to it that mergers are examined very carefully 
and competition is maintained to its fullest?
    Mr. Baer. I agree, Senator, that a key part of this job is 
to be vigilant in investigating consolidation, not just in 
high-tech or evolving markets but in established markets as 
well.
    I have also learned, though, that merger decisionmaking is 
tremendously fact specific, that understanding and making an 
accurate prediction about what might happen in the future if 
consolidation is allowed is a challenging job. I have been 
impressed with the work the Justice Department has done these 
last few years, and I welcome the opportunity to be part of 
that.
    Senator Kohl. Good. Mr. Lee.
    Senator Lee. Thank you very much, Mr. Chairman, and thanks 
again for being here, Mr. Baer.
    During much of the 20th century, a lot of our antitrust 
analysis in this country tended to focus much more on 
protecting competitors and on equalizing the market, paying 
relatively little regard to economic consequences of having 
Government intervention. But due in large part to the Chicago 
School of Economics and Robert Bork and others like him, during 
the last few decades antitrust law has undergone something of a 
shift and has tended to focus more on maximizing consumer 
welfare and achieving optimal economic outcomes.
    But in recent years, some have started calling for an 
abandonment of what might be described as the Chicago School 
approach. For instance, in 2010, President Obama's first 
Assistant Attorney General over the Antitrust Division, 
Christine Varney, stated that the Chicago School should be 
``retired.''
    So, first, I would like to know whether you agree with that 
assessment? And, second, I would like to know whether you 
intend to rely on sort of the Chicago School approach more or 
less than this office has tended to rely on it over the last 
few years?
    Mr. Baer. Senator, I think sound economic analysis is 
fundamental to good antitrust enforcement. That means being 
able to articulate a theory of harm that has occurred from past 
behavior or is likely to occur from future behavior. That for 
me has been the core discipline or learning from what is called 
Chicago School economic thinking.
    I confess to being a little confused about Chicago School 
and post Chicago School because, in fact, post Chicago School 
also demands--talks about that same discipline. And I think we 
may be talking about differences on the margin and judgment 
calls about when to enforce and not to enforce. But my sense is 
that--and I think it is why one can have some bipartisan folks 
in the background here today--antitrust enforcers do see, 
whether Republican or Democrat, Chicago School or post Chicago 
School, do tend to see the target area of enforcement in very 
similar terms, and I would go down to the Justice Department, 
if confirmed, with that attitude in mind.
    Senator Lee. OK. So to the extent that Ms. Varney was 
saying that the approach that needed to be retired was one that 
took into account and focused heavily on consumer welfare and 
on the economic consequences of Government intervention, the 
need to shoot for optimal economic outcomes, you would not 
agree with that. You would not agree that we need to retreat 
from that kind of analysis.
    Mr. Baer. I agree that we do need to continue to have sound 
analytical analysis. I worked, Senator, with Assistant Attorney 
General Varney, as did a number of other private practitioners, 
on revisions to the merger guidelines, updating the merger 
guidelines, and the Antitrust Division and the Federal Trade 
Commission were both in agreement that that notion of making 
sure we had a story of real economic harm is fundamental to 
sound antitrust enforcement.
    Senator Lee. OK. And that inquiry, then, the resulting 
inquiry from that starting point, leads you to the consumer 
welfare analysis. Inevitably there is----
    Mr. Baer. At the end of the day, it is all about consumers. 
It is not about competitors.
    Senator Lee. OK. Great.
    Now, on the subject of Ms. Varney, she stated separately 
that in antitrust enforcement, ``there is no such thing as a 
false positive.'' In other words, I think what she was 
suggesting was that there are never instances in which 
overzealous antitrust enforcement mistakenly condemns 
efficient, procompetitive behavior of the sort that ought to 
be, you know, allowed to exist in the marketplace.
    Ms. Varney went on to say, ``I think that this ruse that we 
have to be restrained in our enforcement because false 
positives will chill innovation take an economic toll on 
society and overall result in negative economic consequences, 
slowing output, increasing cost. I just think it is false. I 
think the more people start rejecting this idea of false 
positives, the better off we are going to be.''
    Do you tend to agree or disagree with Ms. Varney's 
statements regarding false positives and overdeterrence?
    Mr. Baer. I do not recall reading that before, but let me 
say while I think there is a risk of being too cautious about 
taking action where you see a problem, there is a risk from 
being overly aggressive. And that really, as you said in your 
opening remarks, Senator, is how antitrust has gotten better, 
more disciplined over the years to take into account the 
possibility that an action could have adverse consequences, 
that an action being pushed by some people actually is an 
action that will not necessarily improve market conditions but 
may help a competitor.
    So bearing those considerations in mind it seems to me is 
critical to being successful in these law enforcement jobs.
    Senator Lee. OK. So you would agree, then, that overzealous 
enforcement of antitrust laws could cause harm.
    Mr. Baer. Yes. In short, yes.
    Senator Lee. Are there steps you can describe that you 
would take as the head of this office, if confirmed, that would 
help protect against such overzealous enforcement?
    Mr. Baer. I think a lot of those safeguards are in place 
right now, which is the discipline of making sure the lawyers 
and the economists, who are very helpful in making sure that 
the target zone is actually the right target zone, trying to 
work through the theory of how are consumers going to be better 
off if we act, worse off if we do not, that having that 
discipline in each and every matter--and I frankly think the 
professional staff down there is good at it. That is the 
approach one needs to take.
    Senator Lee. OK. I am pleased to hear that. I am pleased to 
hear that you acknowledge there is some limit to that and that 
there are some risks associated with overzealous enforcement. 
There is, in my opinion, definitely such a thing as a false 
positive.
    I see my time has expired, Mr. Chairman.
    Senator Kohl. Mr. Baer, recent years have seen an increased 
consolidation among providers of telecommunications services, 
including cell phone companies, cable providers, and phone 
companies. Many consumers complain of rising bills for cable 
and Internet service. Many have little or no choice of cable 
companies or high-speed Internet providers. This consolidation 
trend includes last year's attempt by AT&T and T-Mobile to 
merge, which I was pleased to see the Justice Department and 
the FCC successfully took action to block, and the currently 
pending transactions between Verizon Wireless and four of the 
Nation's leading cable companies.
    Given the importance for millions of consumers of 
connecting to the Internet, I believe that ensuring competition 
in telecom should be of the highest priority. Do you agree with 
me regarding the importance of competition in these markets?
    Mr. Baer. I absolutely agree with you, Senator.
    Senator Kohl. Without asking for your views on any specific 
transaction, how will you evaluate transactions among telecom 
companies that do not involve mergers or acquisitions? For 
example, what will be your approach to evaluating marketing 
agreements among competitors?
    Mr. Baer. I think evaluating marketing agreements in any 
sector, there are two sides to the coin. One is, What are the 
procompetitive, efficiency-oriented justifications and do those 
really stand up to scrutiny?
    On the other hand, what is the risk there will be less 
competition, more coordination, and a less competitive, less 
effective marketplace for consumers going forward?
    When I was at the FTC in the 1990s, very often we had to 
make those sorts of assessments, evaluations of company 
justifications for a transaction, and to make sure that those 
were properly vetted and that they held up and that the risks 
to consumers were properly taken into account.
    It is a detailed, fact-specific inquiry, but it is one that 
needs to be done.
    Senator Kohl. All right. Mr. Baer, one of the very 
industries to enjoy wide-ranging exemptions from antitrust law 
is the freight railroad industry. Because of these exemptions, 
rail shippers have been victimized by the conduct of dominant 
railroads and have no antitrust remedies. Higher rail shipping 
costs are passed along to consumers, resulting in higher 
electricity bills, higher food prices, and higher prices for 
manufactured goods as well.
    So for years I sponsored legislation to abolish these 
obsolete antitrust exemptions for railroads. Our Judiciary 
Committee has approved this bill in each of the last three 
Congresses with only a single dissenting voice.
    Mr. Baer, do you agree with me that these antitrust 
exemptions should be repealed so that the railroads are subject 
to the same antitrust laws as virtually every other industry in 
our economy?
    Mr. Baer. Mr. Chairman, I am very sympathetic to the goals 
of that legislation. I do understand that the administration 
has not taken a position on the legislation, and I am not privy 
to exactly why that is. And I would hope that that is one area 
I could get up to speed on very, very quickly, if confirmed by 
the Senate.
    I will say generally, philosophically I am very much an 
advocate for deregulation, and I view part of the role as being 
a senior antitrust official in the administration would be to 
be a forceful advocate for deregulation.
    Senator Kohl. So I take it that your position will be that 
you generally support the legislation that we are trying to get 
passed. You cannot act entirely in a unilateral fashion, but 
your own sense is that we should move in that direction of 
removing that exemption.
    Mr. Baer. I think where deregulation can be accomplished 
effectively, it is a very good thing. And I am a little 
cautious on this one, Senator, simply because I do not know the 
ins and outs of the administration's thinking on it.
    Senator Kohl. All right. Recently, the Justice Department 
and the FTC have expressed concerns about how patent holders 
for high-tech products, especially those with so-called 
standard-essential patents, can act anticompetitively, for 
example, by going to the International Trade Commission seeking 
orders to exclude competitors' products from being imported. 
The antitrust agencies have also expressed concern about other 
forms of so-called patent holdup and its impact on competition.
    In March, Chairman Leahy and I wrote to the Attorney 
General urging the Justice Department to consult with the ITC 
to ensure that exclusion actions brought before the ITC not be 
misused for anticompetitive purposes.
    So what is your view regarding exclusion orders and 
injunctions sought with respect to standard-essential patents 
and the potential for the misuse of the ITC process in these 
situations?
    Mr. Baer. Mr. Chairman, I was privileged to watch online 
the hearing the Judiciary Committee recently held on these very 
issues, and I agree with the very thoughtful testimony of 
Acting Assistant Attorney General Wayland and FTC Commissioner 
Ramirez that exclusion orders out of 337 proceedings at the ITC 
can be a problem, can be a back-door way of avoiding the RAND 
commitments that patent holders often make in order to get a 
standard adopted. So it is a real concern.
    I thought the approach that Commissioner Ramirez and Acting 
Assistant Attorney General advanced, that is, consultation, 
working closely with the ITC to make sure in applying its 
public interest standard it did not allow itself to be used as 
a back-door vehicle to exclude the exercise of patent rights, 
that it become part of the standard, is the right way to go. It 
is a key and a growingly important area of our economy, and 
being all over it I think is critical for antitrust 
enforcement.
    Senator Kohl. Good. Senator Lee.
    Senator Lee. I want to make sure I understand your answer, 
particularly the last part of your answer, regarding this issue 
pertaining to standard-essential patents. How was it that you 
said you think you could balance this or you could come up with 
a standard that would prevent or at least discourage 
anticompetitive abuses of the standard-essential patent 
framework?
    Mr. Baer. My impression of the potential problem or real 
problem is that some companies participate in a standard-
setting organization, agree to donate their intellectual 
property and have that incorporated in the standard, and commit 
to licensing those patents subject to a reasonable and 
nondiscriminatory royalty; but that there have been occasions--
I actually learned from testimony before this Committee--where 
some of those people who made the RAND commitment over here 
might have then sought an exclusionary order over at the ITC in 
an effort to basically prevent people who had invested in 
developing products pursuant to a standard from actually coming 
to market. And to the extent that occurs, that can be seriously 
problematic.
    As I understand the ITC's mandate, in deciding whether an 
exclusionary order is appropriate, it has the ability to take 
in the public interest factors. My point was--and, again, I am 
really agreeing with what has been stated before this Committee 
by the current antitrust officials down the street--that 
applying the public interest standard to deny an exclusionary 
order where somebody is trying to back-door is the right way to 
go.
    Senator Lee. OK. And you think that would be sufficient, in 
other words, that the public interest consideration could be 
sufficient to give them authority to do that, to deny the 
exclusionary order on that basis under that circumstance you 
described?
    Mr. Baer. Senator, candidly this is an area I need to know 
and learn more about. Right now my sense is that that is the 
right way to go. If it turns out that is not working, then 
letting this Committee know and considering the possibility of 
some legislative tweaking to make sure that power is there at 
the IT is something I think ought to be considered.
    Senator Lee. OK. Yes, that makes sense. That is helpful. 
Thank you.
    You have noted in the past that there is a debate inside 
and outside of Government about the extent to which agencies 
should work with merging parties to address concerns as opposed 
to blocking a transaction. Can you expand on your view of the 
proper circumstances in which conditions maybe should be 
imposed in lieu of blocking a particular transaction from being 
consummated?
    Mr. Baer. As a general proposition, it is always dangerous 
to be simplistic, but where there is a horizontal merger that 
is seriously flawed, I think the right way to go is to block or 
to seek a divestiture of the unacceptably concentrated parts of 
that acquisition. But when dealing with a vertical merger or a 
conglomerate merger, where there is the potential for some real 
efficiencies to flow to consumers, that may be a situation 
where some conduct, remedies, or restrictions on behavior is an 
appropriate way of allowing consumers to benefit from the cost 
reductions, the efficiencies or economies, at the same time 
make sure there is not an anticompetitive consequence.
    So, again, simplistically, that is how I see the world.
    Senator Lee. Right. There certainly are plenty of cases 
then in which conditions are going to be preferable to a block. 
Somewhere it may not be, but certainly plenty where it could 
be.
    Mr. Baer. Yes, sir.
    Senator Lee. A 2008 American Bar Association report to 
which you contributed noted that antitrust regulators currently 
do not have any mandated timelines that determine their conduct 
of non-merger investigations. As investigations have become 
drawn out, the cost for private industry has tended to 
increase, and lawful activity has a tendency, or at least a 
potential to be chilled. I think that is quite a fair 
assumption. The ABA report thus recommended that the antitrust 
agencies impose some kind of timelines for their 
investigations.
    Based on your experience as an antitrust official as well 
as in private practice, what are the problems and costs 
associated with the lack of reliable timelines for agency 
action or for non-merger investigations? And then going along 
with that, would you implement any timelines for such 
investigations at the Antitrust Division if you were confirmed?
    Mr. Baer. Senator, delay helps no one, right? If there is 
consumer harm occurring in the marketplace, a 3-year 
investigation to decide whether to go after or not does not 
help consumers. And if it turns out the harms are not there or 
are not provable, it is not fair to the companies to be under 
the spotlight for an indefinite period of time.
    A good manager works the caseload aggressively to make sure 
we are coming to outcomes as quickly as we can. There is--I 
have seen it in Government--a cost to putting the pen down and 
turning to a project over here and then coming back over here. 
There is a learning curve you have to go back up.
    So finding effective ways to make sure matters are disposed 
of quickly is good for everybody and it is good for the 
Government because people can move on to the next thing.
    The problem with too strict a time deadline scheme is that 
events happen. You know, a merger wave occurs, and because of 
the number of Hart-Scott-Rodino filings, resources need to be 
devoted to that time-sensitive and statutorily constrained time 
period. And so there may be periods where resources need to be 
redeployed. But the bottom line is it is a management 
obligation, and a manager ought to be held to a high standard 
of making sure things are investigated, decisions are made, and 
people get on to the next thing.
    Senator Lee. Right, right. That makes sense. And in the 
absence of a statutory time deadline, sometimes a good manager, 
sometimes the head of the office could impose that so that 
individuals are not running that on their own and it becomes a 
standardless exercise--subject, of course, to a waiver approved 
by the boss where circumstances necessitate that in order to 
accommodate the other caseload that is subject to a statutory 
time deadline.
    Thank you.
    Senator Kohl. Thank you, Senator Lee.
    Mr. Baer, over the last 5 years our Antitrust Subcommittee 
held three hearings on Google and competition in the Internet 
search and Internet advertising sectors. Last year, we examined 
allegations that Google was biasing its search results to favor 
its own products and services. Google has grown to become a 
dominant player in Internet search, a sector of vital 
importance to our economy as a whole. Many industry observers 
compare Google Now to the dominance possessed by Microsoft a 
decade ago.
    I recognize the FTC is currently investigating the search 
bias issue, but the Justice Department has and will likely 
continue to scrutinize many issues affecting Google.
    With this in mind, how will you scrutinize allegations of 
anticompetitive behavior by Google and the Internet sector in 
the future? And do you believe it has the capability to gain a 
stranglehold over this market?
    Mr. Baer. Mr. Chairman, first of all, I do understand that 
there is some division of responsibility for certain Internet-
related subject matters between the FTC and the Antitrust 
Division. I do not understand exactly how that is allocated. I 
am sure Chairman Leibowitz will educate me at the first 
opportunity.
    But anytime a dominant firm is in a position to hit a 
tipping point and abuse its position of dominance, Antitrust 
ought to be looking. It does not mean that they ought to be 
acting. It really depends on what the behavior is. And so being 
vigilant, whether it be a Microsoft or an Alcoa Aluminum, about 
firms that are successful--and we do not want to penalize 
success, but to make sure that success is not improperly 
translated into an unfair advantage in other markets is really 
a key part of what antitrust is all about.
    Senator Kohl. From time to time we hear calls that the old 
rules of antitrust do not apply to the so-called new economy. 
Others argue that antitrust principles remain sound and are 
flexible enough to take into account conditions in new 
industries. We are interested in your view. Do new high-tech 
industries such as this one require a different framework of 
antitrust enforcement? And what do you think that might look 
like?
    Mr. Baer. Senator, I actually think antitrust laws, as 
currently written and as interpreted by the courts, do give the 
flexibility to antitrust law enforcers to act effectively in a 
new economy. And the challenge simply is understanding what is 
going on, being able to ask the right questions, and, as 
Senator Lee and I were talking earlier, to be able to tell 
oneself a convincing and evidentially sound theory of consumer 
harm. And that is the challenge. But that is the challenge in a 
smokestack industry as well. And I think as I have watched 
Chairman Leibowitz and the Antitrust Division of the Justice 
Department over the years, I think they have done a pretty good 
job of meeting those standards; that is, understanding what is 
going on, asking the right questions, and intervening where it 
is appropriate.
    Senator Kohl. Good. Mr. Baer, for nearly a century it was a 
basic rule of antitrust law that a manufacturer could not set a 
minimum price for a retailer to sell its product. This rule 
allowed discounting to flourish and greatly enhanced 
competition for dozens of consumer products, everything from 
electronics to clothes. However, in 2007, in a 5-4 decision of 
the Supreme Court in the Leegin case, this was overturned, this 
rule was overturned, and it was held that vertical price fixing 
was no longer banned in every case.
    I believe this decision is very dangerous to consumers' 
ability to purchase products at discount prices and harmful to 
retail competition. I have introduced legislation to overturn 
the Leegin decision and restore the ban on vertical price 
fixing. So tell us, Mr. Baer, where do you stand on the issue?
    Mr. Baer. I would support legislative repeal of the Leegin 
decision, and I would support it for a couple of reasons.
    First, I thought Justice Breyer in his dissent in that 5-4 
decision had it pretty right. It was well-settled law, there 
was widespread industry understanding of where the lines were, 
and there was serious risk of antitrust harm to consumers from 
vertical price fixing.
    A second concern I had is that, however well intentioned 
the majority was in the Supreme Court, it created a major 
dichotomy between Federal law, which now is--vertical price 
fixing is subject to a rule of reason--and State law, which in 
most cases still considers it per se unlawful. And that creates 
enormous confusion and misunderstanding in the business 
community. And for antitrust-compliant companies--and there are 
a lot of them out there who really just want to know what the 
rules are--to create that kind of dichotomy on a rule of law 
per se unlawful resale price maintenance did not seem to be 
creating confusion I think was unfortunate.
    Senator Kohl. Good. Senator Lee.
    Senator Lee. So you would have kept Dr. Miles?
    Mr. Baer. I would have kept Dr. Miles, Senator.
    Senator Lee. Some have argued that this move away from the 
Dr. Miles per se rule might not have that much of an effect, 
anyway, you know, that the rule-of-reason analysis is usually, 
perhaps almost always going to yield the same result. So is 
your affinity for the per se rule just because it is easier to 
manage, if you are going to achieve that outcome anyway, you 
might as well state it in a per se rule that is easier to 
apply?
    Mr. Baer. I think there is enough risk of harm and enough 
familiarity with the rule that a change actually does create 
more confusion than it does provide more certainty. I frankly 
think it is much harder in a rule-of-reason case--the 
standards, the proof of anticompetitive harm is--it is higher 
and it is more difficult for the Government to intervene. And 
given what seemed to me to be a well-understood and highly 
complied with rule, I thought we were better off keeping it.
    Senator Lee. I understand. I think there are those who 
would argue that, consistent with the consumer welfare 
analysis, it might make sense to leave open the possibility 
that consumer welfare might in some instances be enhanced or 
not diminished as a result of a rule like this. Interesting 
fodder for discussion. We are probably not going to get there. 
But your affinity for Dr. Miles does not necessarily signal a 
disagreement with the Robert Bork approach of consumer welfare?
    Mr. Baer. It does not. I think one of the benefits of more 
hard-edged economic analysis in antitrust has been not to be 
automatically hostile, for example, to non-price vertical 
restraints. We have gone from a presumptively unlawful approach 
in the 1950s, 1960s, and early 1970s to a willingness to 
consider those as reasonable measures. And I think that is part 
of the contribution Judge Bork and others have made to 
antitrust analysis.
    Senator Lee. But it sounds like part of your analysis is 
based on the judicial manageability of the standard. It is a 
more traditionally manageable standard perhaps to stick to a 
per se rule, and I think that point is irrefutable, so I will 
not go down that. I appreciate your insight on that.
    Under the Obama administration, antitrust regulators have 
increasingly relied on behavioral law and economics, that 
school of thought that attempts to account for irrational 
behavior within economic models. One commentator referred to 
the Obama administration as the ``behavioral economics dream 
team.'' But some observers note that this approach fails to 
produce a consistent or a coherent model for antitrust 
enforcement and that it may, in fact, lead to excessive 
Government interference and intervention.
    For example, the recent commentary noted that behaviorists 
have no way to identify irrational decisions, cannot reliably 
discern an individuals true preferences, and fail to account 
adequately for the social costs of a proposed intervention.
    Do you agree or disagree? Do you sympathize in any respect 
with that commentary?
    Mr. Baer. One of the things I told myself is I would be 
very candid in this hearing, and I candidly am not sufficiently 
familiar with that debate to be able to offer much insights.
    Senator Lee. OK. That is good to know. So that probably 
answers my next question, which is: If confirmed, would you 
come into this job with an intention of relying on behavioral 
law and economics to a greater or a lesser degree than those 
currently in the Government have been relying on it?
    Mr. Baer. I think the right answer is, if confirmed, I 
would have to get a lot smarter on that issue a lot faster.
    Senator Lee. OK. It sounds, in any event, like you are not 
a behavioral law and economics fanatic.
    Mr. Baer. I think that is fair.
    Senator Lee. This is not something that defines you.
    Mr. Baer. I am a fanatic Green Bay Packer fan.
    [Laughter.]
    Senator Lee. OK. Thank you.
    Thank you, Chairman.
    Senator Kohl. Mr. Baer, gas prices are at historically very 
high levels with the national average of around $3.50 a gallon. 
The main cause of high gas prices is, of course, the price of 
crude oil, and the price of crude oil is in large part under 
the control of OPEC's production decisions.
    In the last few years, the Justice Department has spent an 
enormous amount of time and effort prosecuting price-fixing 
cartels. Yet the worst and biggest cartel in the world is the 
OPEC oil cartel, and we have not taken any action against them.
    So I sponsored a NOPEC bill which would permit antitrust 
actions by the Justice Department against any member nations of 
the OPEC cartel. This bill, NOPEC, has passed the Judiciary 
Committee five times in the last decade, and it passed the full 
Senate with 70 votes in 2007.
    So, Mr. Baer, do you agree that the actions of OPEC would 
be illegal if it was a group of private companies? Would you 
support the Justice Department in having the authority to bring 
antitrust lawsuits against OPEC member nations?
    Mr. Baer. Senator, I understand there are some significant 
international diplomatic issues embedded in that question, and 
I know this administration and prior administrations have had 
some concerns about the legislation. Everybody, I think, who 
understands this area knows that the American consumer does not 
benefit from a cartel, whether domestic or foreign, government 
sponsored or privately managed. And one of the challenges, I 
think, of being in this job, if confirmed, is to try and help 
the administration effectively deal with issues of government-
sponsored cartel behavior.
    Senator Kohl. Can I hear your answer?
    Mr. Baer. My answer is I think it is a serious issue, but 
what the right solution is is something I need to work closely 
with the administration on before expressing a view.
    Senator Kohl. Well, I appreciate that. I guess what I am 
asking is whether or not you see somewhat clearly or very 
clearly or not at all clearly that the fact that this operating 
cartel is occurring at the government level instead of at the 
private sector level and international, it does not make any 
difference. Now, how we deal with it, as you said, is another 
issue, but that it is serious and potentially is illegal as if 
it were a bunch of private companies.
    Mr. Baer. Mr. Chairman, I think you--I agree with what you 
said. There is no doubt that cartel behavior designed to raise 
prices, whether it be private or government sponsored, can have 
an adverse effect on the American consumer and ought to be a 
key focus of this administration as it has been in prior 
administrations. And my challenge is in knowing sitting here 
today what the right solution is. That I do not claim to know.
    Senator Kohl. All right. Mr. Baer, we have occasionally 
heard concerns from United States companies with global 
operations that they are being treated unfairly by other 
nations' antitrust enforcement agencies. These companies assert 
that complying with multiple antitrust review processes is very 
expensive, burdensome, and time-consuming. They are also 
concerned with conflicting results among international 
antitrust authorities, particularly between the European 
Commission and the United States.
    On the other hand, other commentators point out that many 
American companies seek the assistance of international 
antitrust authorities to remedy anticompetitive problems in 
foreign countries.
    Do you believe that this is an important issue for you to 
address? What will you do to achieve greater coordination and 
harmonization between the United States and foreign antitrust 
agencies?
    Mr. Baer. Mr. Chairman, I think it is a top priority for 
antitrust enforcers to engage internationally with competition 
agencies around the world. We actually--I have seen in the last 
20 or 25 years an enormous improvement in the communication, 
the coordination, and, indeed, some degree of convergence on 
standards, whether it be cartel behaviors, some to a lesser 
extent, but some convergence on how best to approach mergers. 
Progress is being made, but it takes a lot of time and energy. 
Both the Justice Department and the FTC have been committed to 
that in Republican and Democratic administrations. I applaud it 
and see that externally as one of the key issues for the 
Assistant Attorney General for Antitrust helping communicate 
that our transparency, our due process, our predictability of 
outcomes has value around the world.
    Senator Kohl. Good. Senator Lee.
    Senator Lee. A few years ago, you published an article in 
the Harvard Journal of Law and Public Policy. I think it was 
co-authored with David Balto. In that you argued that politics 
will not appropriately factor into antitrust enforcement. For 
example, you wrote that, ``Agency enforcement decisions and 
judicial outcomes are consistently and transparently made on 
the basis of the law, the facts, and sound economics.''
    I certainly hope this is true. I tend to want it to be 
true. And yet, you know, we see from one Presidential 
administration to another that the style of enforcement, the 
instances in which enforcement actions are brought might 
change. And so one does wonder whether and to what extent that 
does actually happen.
    You have also stated that, as a general matter, people have 
applied antitrust laws in a neutral fashion. If someone wants 
to impose a higher tax or discourage consumption, it is a 
separate public policy question than allowing a cartel or 
allowing a monopoly. Here again I agree with your statement. I 
think that is absolutely the right aspiration to have with 
regard to antitrust law and its enforcement.
    What assurances can you give this Committee that under your 
leadership, if you are confirmed, the Antitrust Division will 
not be seeking to achieve any particular social outcome, any 
particular policy or political outcome, separate and apart from 
those policies that are embedded without our antitrust body of 
laws?
    Mr. Baer. Again, I think, Senator, hopefully past is 
prologue in that the record in 4\1/2\ years of directing 
antitrust enforcement at the FTC demonstrated a certain level 
of objectivity and straightforwardness. I have seen that work 
with some of my colleagues behind me who have been in positions 
of public responsibility in the antitrust arena.
    Antitrust enforcement, law enforcement, loses credibility 
if it becomes seen as a political tool. These jobs are not 
totally without a partisan element to them in that there are 
different philosophies that people bring to bear that may 
affect on the margins decisions. Antitrust is best in the last 
20 or so years. It has been at its best when it is nonpartisan 
and focused on economically rigorous thought with consumer 
interests the bottom line.
    Senator Lee. That is great. That is great. And now that I 
think about it, your Dr. Miles analysis actually dovetails 
nicely with that. One of the more riveting discussions I have 
had about per se rules in a number of years, so I thank you for 
that.
    Mr. Baer. Thank you, Senator.
    Senator Lee. Thank you very much, Mr. Baer.
    Thank you, Chairman.
    Senator Kohl. Thank you, Senator Lee.
    We have no further questions of you, Mr. Baer. We are going 
to keep the record open for a week for followup questions from 
members of the Committee. We thank you for being here. Speaking 
just for myself, I think you have done a great job. You have 
got a great history and past, and I have very high hopes for 
your ability to perform at the highest level as head of the 
antitrust Division.
    Mr. Baer. Thank you, Mr. Chairman. Thank you, Senator.
    Senator Kohl. Thank you all for being here.
    [Whereupon, at 2:08 p.m., the Committee was adjourned.]
    [Questions and answers and submissions for the record 
follow.]


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