[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






                     ANTITRUST ENFORCEMENT AGENCIES

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                           REGULATORY REFORM,
                      COMMERCIAL AND ANTITRUST LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 15, 2013

                               __________

                           Serial No. 113-67

                               __________

         Printed for the use of the Committee on the Judiciary






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                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
HOWARD COBLE, North Carolina         ROBERT C. ``BOBBY'' SCOTT, 
LAMAR SMITH, Texas                       Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
SPENCER BACHUS, Alabama              ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
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                     JUDY CHU, California
TED POE, Texas                       TED DEUTCH, Florida
JASON CHAFFETZ, Utah                 LUIS V. GUTIERREZ, Illinois
TOM MARINO, Pennsylvania             KAREN BASS, California
TREY GOWDY, South Carolina           CEDRIC RICHMOND, Louisiana
MARK AMODEI, Nevada                  SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas              HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina
DOUG COLLINS, Georgia
RON DeSANTIS, FLORIDA
JASON T. SMITH, Missouri

           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel
                                 ------                                

    Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                   SPENCER BACHUS, Alabama, Chairman

                 BLAKE FARENTHOLD, Texas, Vice-Chairman

DARRELL E. ISSA, California          STEVE COHEN, Tennessee
TOM MARINO, Pennsylvania             HENRY C. ``HANK'' JOHNSON, Jr.,
GEORGE HOLDING, North Carolina         Georgia
DOUG COLLINS, Georgia                SUZAN DelBENE, Washington
JASON T. SMITH, Missouri             JOE GARCIA, Florida
                                     HAKEEM JEFFRIES, New York

                      Daniel Flores, Chief Counsel

                      James Park, Minority Counsel






















                            C O N T E N T S

                              ----------                              

                           NOVEMBER 15, 2013

                                                                   Page

                           OPENING STATEMENTS

The Honorable Spencer Bachus, a Representative in Congress from 
  the State of Alabama, and Chairman, Subcommittee on Regulatory 
  Reform, Commercial and Antitrust Law...........................     1
The Honorable Steve Cohen, a Representative in Congress from the 
  State of Tennessee, and Ranking Member, Subcommittee on 
  Regulatory Reform, Commercial and Antitrust Law................     2
The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Committee on the Judiciary     4
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Ranking Member, Committee on 
  the Judiciary..................................................     8

                               WITNESSES

The Honorable William J. Baer, Assistant Attorney General, 
  Antitrust Division, United States Department of Justice
  Oral Testimony.................................................    10
  Prepared Statement.............................................    13
The Honorable Edith Ramirez, Chairwoman, Federal Trade Commission
  Oral Testimony.................................................    23
  Prepared Statement.............................................    25

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Material submitted by the Honorable Steve Cohen, a Representative 
  in Congress from the State of Tennessee, and Ranking Member, 
  Subcommittee on Regulatory Reform, Commercial and Antitrust Law
    Letter from the Professional Flight Attendants...............     6
    New York Times Article.......................................    50
Material submitted by the Honorable Blake Farenthold, a 
  Representative in Congress from the State of Texas, and Vice-
  Chairman, Subcommittee on Regulatory Reform, Commercial and 
  Antitrust Law..................................................    62
Material submitted by the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, and 
  Ranking Member, Committee on the Judiciary.....................    71

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of the Honorable Steve Cohen, a Representative 
  in Congress from the State of Tennessee, and Ranking Member, 
  Subcommittee on Regulatory Reform, Commercial and Antitrust Law    83
Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, and 
  Ranking Member, Committee on the Judiciary.....................    84
Response to Questions for the Record from the Honorable William 
  J. Baer, Assistant Attorney General, Antitrust Division, United 
  States Department of Justice...................................    86
Response to Questions for the Record from the Honorable Edith 
  Ramirez, Chairwoman, Federal Trade Commission..................    93

 
                     ANTITRUST ENFORCEMENT AGENCIES

                              ----------                              


                       FRIDAY, NOVEMBER 15, 2013

                       House of Representatives,

                  Subcommittee on Regulatory Reform, 
                      Commercial and Antitrust Law

                      Committee on the Judiciary,

                            Washington, DC.

    The Subcommittee met, pursuant to call, at 9:10 a.m., in 
room 2141, Rayburn House Office Building, the Honorable Spencer 
Bachus (Chairman of the Subcommittee) presiding.
    Present: Representatives Bachus, Goodlatte, Farenthold, 
Marino, Collins, Smith, Cohen, Conyers, Johnson, DelBene, and 
Jeffries.
    Staff Present: (Majority) Anthony Grossi, Counsel; Ashley 
Lewis, Clerk; Philip Swartzfager, Legislative Director for Mr. 
Bachus; Jennifer Lackey, Legislative Director for Mr. Collins; 
Justin Sok, Legislative Assistant for Mr. Smith; Jonathan 
Nabavi, Legislative Director for Mr. Holding; and (Minority) 
James Park, Minority Counsel.
    Mr. Bachus. Good morning. The Subcommittee on Regulatory 
Reform, Commercial and Antitrust Law hearing is called to 
order. We will first do our opening statements. My revisions 
have arrived just in time.
    Today's oversight hearing is an example of this 
Subcommittee and the Congress exercising one of its fundamental 
responsibilities. Oversight is essential to promoting 
accountability and transparency, and it brings to light the 
checks and balances envisioned by our Founding Fathers. George 
Washington noted in his farewell address that, and I quote, 
``The necessity of reciprocal checks in the exercise of 
political power has been events by experiments ancient and 
modern. To preserve them must be necessary as to institute 
them.''
    Before us today are the two Federal antitrust enforcement 
agencies and their representatives, the Federal Trade 
Commission through its Bureau of Competition and the Department 
of Justice through its Antitrust Division. I welcome you, and I 
am glad that our agencies are back at work after a brief 
interruption.
    These agencies are entrusted with protecting consumers and 
free markets from harmful anticompetitive conduct and 
practices. Their mission is best accomplished in a way that is 
transparent, fair, predictable, and reasonably stable. When 
enforcement is arbitrary and businesses are unclear about what 
the rules of the road really are, competition can actually be 
impeded, and it is the consumer who ultimately suffers.
    One area where there could be an improvement in 
transparency and predictability is the FTC's unfair methods of 
competition authority under Section 5 of the FTC Act. The FTC's 
failure to establish a clear standard for Section 5 has created 
uncertainty for businesses and resulted in costly litigation 
that could be avoided. And this is not a recent development. 
This has been over multiple Administrations. Concerns regarding 
the FTC's Section 5 authority have been raised by two of the 
four sitting Commissioners, as well as my colleagues in 
Congress. To this end, I recently joined Chairman Goodlatte, 
Vice Chairman Farenthold, Senator Grassley and Senator Lee and 
others in a letter urging FTC to issue guidance on its Section 
5 authority. Today's hearing will provide an opportunity to 
explore this issue.
    We will also use this opportunity to explore the rationale 
used by the DOJ when it decides to pursue injunctive relief to 
prevent a proposed transaction. The DOJ's recent settlement and 
indeed its original decision to file a lawsuit against the 
proposed American Airlines and US Airways merger raises 
questions about how it makes the determination to intervene in 
a proposed merger.
    This matter raises questions for some of us in light of the 
fact that the Department has approved several similar or even 
more problematic airline mergers in the past. It appears to me 
to be the case of overcompensating for past omissions, and that 
is just my personal view. When an executive agency undertakes 
an action that appears to suddenly turn new ground, you wind up 
with confusion and uncertainty, and leave businesses wondering 
whether to expend significant time and resources pursuing a 
strategy that might be thwarted by the government for very 
unclear reasons.
    There have also been concerns raised regarding the FTC's 
record and its administrative proceedings. In a recent column, 
the former Policy Director of the FTC, David Balto, found it 
troubling that since 1995 the agency has found a violation in 
every single case in which it has voted to issue a complaint. 
With this kind of record and unbeaten streak that Perry Mason 
would envy, a company might wonder whether it is worth putting 
up a defense at all in a system where the FTC brings the 
complaint, the case is tried before an administrative law judge 
at the FTC, and the FTC holds the authority to overturn a 
decision adverse to the agency. And I will add to that and 
does. My hope is that Chairman Ramirez will address my concerns 
about a process that appears to be very favorable to the FTC in 
all cases.
    Today's hearing will allow for an open discourse on these 
and other issues, with the aim of ensuring that Federal 
antitrust authority is being properly exercised.
    At this time I recognize the Ranking Member for his opening 
statement.
    Mr. Cohen. Thank you, Mr. Chair.
    The Supreme Court has referred to the Federal antitrust 
laws as the Magna Carta of free enterprise, saying that the 
comprehensive charter of economic liberty aimed at preserving 
free and unfettered competition is exactly what that is.
    Effective antitrust enforcement is key to ensuring a 
vibrant competitive marketplace that rewards innovation and 
creativity and offers consumers greater choice and lower 
prices. In the absent of antitrust enforcement, companies have 
less incentive to compete, more incentive to maintain high 
profit margins at the expense of consumer welfare, just like 
Delta airlines in Memphis.
    At the forefront of the effort to ensure that competition 
remains free and fair are the Nation's principal antitrust 
enforcement agencies, the Antitrust Division of the Department 
of Justice and the Federal Trade Commission's Bureau of 
Competition. Each agency has applied efforts to enforce Federal 
antitrust laws in recent years. The Justice Department won a 
near total victory in the issues with Apple and stopped it from 
conspiring with publishers to raise prices for consumers. 
Thanks to the Department's work, the consumers will enjoy e-
books that are 40 percent cheaper than they might have been.
    The Department has also successfully obtained criminal 
fines of more than a billion dollars and obtained prison 
sentences for 28 people for criminal antitrust violations, 
which are the most harmful types of anticompetitive behavior 
like price fixing and bid rigging. Similarly, the FTC has had a 
number of notable successes on behalf of consumers, including 
the victory before the Supreme Court in FTC v. Actavis, which 
found so-called pay-for-delay agreements to be subject to the 
antitrust laws.
    Meanwhile, both agencies established the principle that 
holders of standard essential patents may not seek to exclude 
competitors who rely on the standard technology covered by such 
patents and must license such technology on reasonable and 
nondiscriminatory terms.
    My constituents, those in Memphis, Tennessee, are all too 
well aware of the consequences of ineffective antitrust 
enforcement. As I noted back in February and I noted 2 minutes 
ago, the merger of Delta Airlines and Northwest Airlines has 
been nothing short of a disaster for Memphis after the merger. 
Before the merger they had 240-some-odd flights in and out of 
Memphis, or departing Memphis, I think. Now they have but about 
40, although Mr. Anderson did come before this Committee and 
say it won't affect Memphis, we love Memphis, but we apparently 
love something else more.
    Those promises in 2008, no hub closures, which just as I 
heard in the assurances for American and US Air, and hopefully 
they will be more fitting and they were tailored to 3 years, 
and Delta waited about 3 years before they finally put the lid 
on, that this merged airline would not make that difference. 
But Mr. Anderson said we would also have a flight, continue our 
flight to Amsterdam and may have a flight to Paris, and, wow, 
JFK was going to be in Memphis, the airline at least. Of 
course, none of that was true and the Amsterdam flight no 
longer exists.
    There is a string of broken promises that could have been 
avoided if we wouldn't have permitted that merger. They did 
everything they could to hurt Memphis, and have. The results, 
my constituents are very hurt, very upset, a substantial loss 
of air service and a loss of jobs, an airport constructed and 
expanded for Delta as an economic hub, much of it is vestigal.
    Protecting consumers from antitrust violations is 
important. In addition, though, I also hope that Mr. Baer will 
tell the Attorney General--and I know it is not your subject 
matter and it is not your job to be a messenger, that is not 
your job--but there are a lot of individuals in prison with 
unjust sentences for mandatory minimums and for people who are 
there for crack cocaine disparities, that when they went in 
prison they are 100 to 1, they are now 18 to 1. When we changed 
law it was called the fair sentencing law. The House passed it, 
the Senate passed it, the President signed it. That means it is 
the public policy of the United States.
    There are people in prison for sentences that are void 
against the public policy of the United States. They should 
have commutations. There should be somebody heading up the 
Commutations Department whose job should be tomorrow, because 
there is no time that the fierce urgency of now is more urgent 
than people whose liberties are being deprived and for the 
taxpayers to spend $30,000-plus to keep these people 
incarcerated when it is void against public policy.
    So I hope you will take my message back to my good friend 
Mr. Holder, who should not be impeached and should remain as a 
fine active Attorney General, that he does need to release some 
people from prison because they don't need to be there.
    I look forward to hearing from our witnesses as to what 
efforts the antitrust enforcement agencies are currently 
undertaking to help ensure free and fair competition in all 
industries, and at some point today I will get on a Delta 
airplane and fly through Atlanta to go home.
    And I yield back the balance of my time.
    Mr. Bachus. At this time I would like to recognize the 
Chairman of the full Committee, Chairman Goodlatte.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    The protection of our free markets is vital to the success 
of the American economy. By creating an environment in which 
companies are allowed to compete freely and consumers can 
select products without restriction, the allocation of 
resources is maximized in accordance with free market 
principles. Vigorous, intelligent and predictable antitrust 
enforcement promotes these principles by preventing the misuse 
of monopoly power. Further, as former Judiciary Committee 
Chairman Henry Hyde advocated, strong antitrust enforcement 
dissipates political pressure for government regulation.
    This Committee has a long and robust effort of oversight of 
the antitrust laws and their enforcement agencies. I thank 
Chairman Bachus for continuing the tradition by holding today's 
hearing. The Committee's history includes legislation that was 
enacted into law in 2002 to form the bipartisan Antitrust 
Modernization Commission, the AMC. In 2007, after conducting a 
comprehensive review of the antitrust laws and their 
enforcement, which was done in coordination with leading 
antitrust experts and practitioners, the AMC issued a lengthy 
report detailing its recommendations for improving antitrust 
enforcement.
    One of the recommendations contained in the AMC report 
focuses on removing the disparities contained in the merger 
review processes between the Department of Justice and the 
Federal Trade Commission. As the AMC report states, parties to 
a proposed merger should receive comparable treatment and face 
similar burdens, regardless of whether the FTC or the DOJ 
reviews their merger.
    A divergence undermines the public's trust that the 
antitrust agencies will review transactions sufficiently and 
fairly. More importantly, it creates the impression that the 
ultimate decision as to whether a merger may proceed depends in 
substantial part on which agency reviews the transaction. I 
believe this recommendation merits additional attention, and I 
look forward to examining this issue with Assistant Attorney 
General Baer and Chairwoman Ramirez.
    Another area that deserves further examination is the FTC's 
involvement in looking into abusive patent litigation 
practices. On October 23, 2013, I introduced a bill with a 
number of my colleagues to address the growing problem of 
abusive patent litigation. I have been following the efforts by 
the DOJ and the FTC on this front as well, including the recent 
announcement by the FTC that it was seeking certain information 
from patent assertion entities. I would be interested to learn 
additional details about the FTC's plans regarding this 
information collection effort.
    I look forward to hearing the testimony today from our 
witnesses of the agencies' antitrust enforcement efforts as 
well as on these other important issues.
    And, Mr. Chairman, thank you and I yield back the balance 
of my time.
    Mr. Bachus. Thank you.
    Mr. Cohen. Mr. Chair, if I can ask for unanimous consent--
--
    Mr. Bachus. Absolutely. Then I am going to recognize the 
former Chairman and Ranking Member of the full Committee.
    Mr. Cohen. Unanimous consent to submit a letter from Ms. 
Laura Glading, who is the head of the professional flight 
attendants, and she is in love with Mr. Baer and says he did a 
great job.
    Mr. Bachus. Oh, she says he did a great job? Okay, yeah, we 
will introduce that for sure and get him a copy of it. Without 
objection, it is introduced into the record. Thank you.
    [The information referred to follows:]



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                               __________
    Mr. Bachus. And I will say I think that it was a successful 
conclusion, the merger. Obviously when everybody is not 
completely satisfied, that is probably a good result.
    At this time I would like to introduce our two witnesses--
--
    Mr. Cohen. Mr. Chairman?
    Mr. Bachus. Oh, I am sorry, that is right. I did a Barney 
Frank.
    Mr. Conyers. Thank you, Chairman Bachus.
    Mr. Bachus. Mr. Conyers is recognized.
    Mr. Conyers. Thank you very much.
    Today's oversight hearing provides an excellent opportunity 
for us to focus on the critical purpose of antitrust law: to 
ensure that businesses do not behave in ways that injure 
markets and ultimately consumers. As to mergers, this means 
that any transaction that would result in a company obtaining 
an unfettered ability to raise prices or otherwise harm 
consumers is contrary to basic antitrust policy. So we should 
be especially skeptical about the potential detriment presented 
by a rapid succession of big mergers in a given industry, and, 
unfortunately, antitrust scrutiny of mergers has been woefully 
insufficient, in my view, over the past 30 years, until only 
recently.
    The fact that many industries are now dominated by just a 
handful of very large firms attests to this failure of 
aggressive scrutiny. There has been a wave of mergers in 
industry after industry. I won't name all of the examples that 
come to mind, but in the banking industry alone there have been 
47 mergers since 2001. Basic economics and common sense should 
tell us that a few dominant firms forces consumers to pay 
higher prices and to accept suboptimal products or services. 
This hands-off approach to antitrust merger enforcement 
reflects the misguided view that corporate power should trump 
other interests, including the public interest, and as a result 
the trend in antitrust law has been against the American 
consumer.
    Fortunately, recent antitrust enforcement initiatives of 
both the Justice Department and the Federal Trade Commission 
appear to reflect a positive change from prior practice. I am 
heartened by the renewed vigor in antitrust enforcement that 
these agencies have exhibited in the past year or so. Under the 
Obama administration, the Justice Department has aggressively 
pursued litigation to block large, high profile, and 
potentially anticompetitive mergers, including lawsuits to 
block the proposed mergers of AT&T and T-Mobile, Anheuser-
Busch, InBev and Grupo Modelo, and most recently American 
Airlines and US Airways. Such actions would for the most part 
have been unexpected in previous Administrations going back a 
generation.
    Even more important is the fact that these suits have 
achieved pro-consumer results. AT&T and T-Mobile dropped their 
plans to merge, while Anheuser-Busch agreed to divest itself of 
all Grupo Modelo's U.S. business in response to the Department 
of Justice's lawsuit.
    The FTC, meanwhile, was able to achieve an important 
victory for consumers before the United States Supreme Court 
this year in the FTC v. Actavis case, which held that 
agreements between brand name and generic drug manufacturers to 
delay the introduction of cheaper generic drugs can be subject 
to antitrust laws.
    Such successes, however, do not necessarily mean further 
oversight is unnecessary. For instance, the Justice 
Department's tentative settlement agreement announced earlier 
this week with respect to the proposed American Airlines-US 
Airways presents some concerns. While this settlement agreement 
leaves consumers somewhat better off than they would have been 
had the merger gone through as proposed, I remain concerned 
that the new merged carrier, which would be the largest in the 
world, will result in only four domestic airlines controlling 
more than 80 percent of the market. As The New York Times noted 
in yesterday's editorial, the agreement simply ignores the 
central concern the Department of Justice expressed in its 
lawsuit. The four big airlines, United, Delta, Southwest, and 
the merged American, will have an even greater incentive to 
raise fares and fees because consumers will have fewer choices.
    In closing, I note that strong antitrust enforcement is not 
possible without adequate resources, and as with other Federal 
agencies, the DOJ and FTC must have sufficient funding to pay 
for high caliber attorneys, economists, and other staff, and 
for vigorous and thorough investigations, and, when necessary, 
even litigation.
    The continuing budget battles in Congress, including 
sequestration and the recent fight over a continuing resolution 
that led to the shutdown of the Federal Government, threaten to 
sap already limited resources for all of our Federal agencies. 
Some of the recent successes in antitrust enforcement would be 
undermined and future enforcement efforts could be compromised. 
That could return us to the bad old days of lax antitrust 
enforcement, with higher prices and fewer choices for 
consumers. I urge my colleagues to make every effort not to go 
down the road.
    I thank the Chairman and return any balance of time I may 
have.
    Mr. Bachus. I thank the gentleman.
    At this time I will introduce our two witnesses. We are 
very fortunate to have both of them here this morning. We 
appreciate your attendance. Both of them share a common 
accomplishment. Both of them were editors of their law reviews, 
at Stanford and Harvard. That is quite an accomplishment, and I 
commend both of you for being diligent students and obviously 
intelligent.
    Mr. Baer was sworn in as an Assistant Attorney General for 
the Department of Justice Antitrust Division on January the 
3rd, 2013. Prior to his appointment, he was a partner at Arnold 
& Porter, where he was head of the firm's antitrust practice 
group. Prior to his time at Arnold & Porter, he was the head of 
the FTC's Competition Bureau from 1995 to 1999. Mr. Baer 
received his JD from Stanford Law School in 1975 and served as 
editor of Stanford's Law Review. He received his BA from 
Lawrence University in 1972, and that is in Wisconsin, where he 
graduated cum laude and Phi Beta Kappa.
    Our next witness is Chairwoman Edith Ramirez. She was sworn 
in as Commissioner of the FTC in April 2010 and designated 
Chairwoman by President Obama on March the 4th of this year. 
Before joining the Commission, Ms. Ramirez was a partner at 
Quinn Emanuel in Los Angeles, representing clients in 
intellectual property, antitrust, and unfair competition suits. 
Chairwoman Ramirez graduated from Harvard Law School cum laude, 
where she served as an editor of the Harvard Law Review and 
holds an AB in history magna cum laude from Harvard University.
    I welcome both our witnesses. I will go from tradition, 
left to right, by recognizing Mr. Baer for your opening 
statement.

  THE HONORABLE WILLIAM J. BAER, ASSISTANT ATTORNEY GENERAL, 
    ANTITRUST DIVISION, UNITED STATES DEPARTMENT OF JUSTICE

    Mr. Baer. Mr. Chairman, Ranking Member Cohen----
    Mr. Bachus. I think we will probably not have a clock, so 
if you need 6 minutes, 7 minutes, take that. I don't want you 
to rush through your remarks. But if you want 4 minutes, that 
is fine.
    Mr. Baer. Right. Thank you, sir. It is not the Senate and 
we will try not to observe a filibuster approach to our 
statements.
    It is a pleasure to be here. We thank you for the 
opportunity to discuss the work of the Antitrust Division. And 
I am very much honored to be here with Chairwoman Ramirez at 
the FTC. We for the last 10 months or so have been privileged 
to work together on behalf of American consumers.
    Competition, as the Chairman and a number of other Members 
said in their opening remarks, is the cornerstone of our 
Nation's economic system. When markets work properly, consumers 
benefit from lower prices and higher quality goods and 
services. The antitrust laws serve to promote and protect a 
robust free market economy by prohibiting anticompetitive 
agreements, anticompetitive conduct, and anticompetitive 
mergers that have a potential to distort market outcomes and 
ultimately harm consumers.
    Let me start with our efforts at the Antitrust Division to 
uncover and prosecute cartel behavior. Price fixers and bid 
riggers do serious and demonstrable harm to consumers and to 
our economy. It is a persistent problem. But we are making 
progress in getting at it. Our efforts have resulted in a 
dramatic increase in exposing the world's largest price-fixing 
cartels, involving such products as air transportation, liquid 
crystal displays that are used in flat panel TVs, iPads, 
computer screens, and the like, and, most recently, auto parts.
    In the last fiscal year alone, the Division filed 50 
criminal cases. We charged 21 corporations and 34 individuals 
for antitrust crimes that affected tens of billions of dollars 
of U.S. commerce. The Division obtained criminal fines totaling 
over $1 billion in the last fiscal year, and we sentenced, with 
the help of the courts, 28 individuals to jail terms that 
average more than 2 years per defendant.
    Now, large monetary criminal penalties against corporations 
make cartel behavior less attractive, but the threat of jail 
time for senior company officials responsible for injuring the 
consumers is also in my experience a very powerful deterrent. 
Today, the average prison sentence for defendants charged with 
crimes by the Antitrust Division is 25 months, over 2 years in 
jail. That is three times the average jail sentence in the 
1990's.
    Taxpayers are well served by the vigorous prosecution of 
criminal cartels. The Antitrust Division continually produces 
results that more than justify its annual appropriation. In 
other words, we think we give your constituents, your 
taxpayers, a good return on the scarce dollars you entrust to 
us. In the last 5 fiscal years we averaged $850 million in 
criminal penalties against an average direct appropriation of 
about $85 million.
    Now, these dollars that come into the Treasury don't go to 
the Antitrust Division, regrettably. They go to the Crime 
Victims Fund, which actually helps victims of all types of 
crimes throughout the country in each and every State that 
Members represent on this Subcommittee.
    Civil enforcement of the antitrust laws also protects 
competition and consumers by challenging conduct that shackles 
free competition and by going after anticompetitive mergers. 
For example, earlier this year a Federal court in New York held 
that executives at the highest levels of Apple orchestrated a 
conspiracy with five major book publishers to raise eBook 
prices and end eBook retailers' freedom to compete on price 
terms. This was a big win for U.S. consumers. Once our orders 
went into place against the book publishers and they were 
forced to compete with one another, the price of the average 
eBook bestseller, New York Times bestseller, has dropped from 
$11 on average down to just about $6 within a year. Once the 
illegal agreement stopped, consumers benefited from an open, 
free, competitive market.
    In addition, the redress, the civil redress that the book 
publishers thus far have agreed to pay, will result in hundreds 
of millions of dollars being automatically credited to the 
accounts of consumers that went to iTunes to buy a book or 
bought a book elsewhere online.
    Anticompetitive mergers are also important to consumers, 
and stopping them is another key part of our job. In January of 
this year, as Mr. Conyers mentioned, we filed suit to stop the 
merger of the largest and third-largest firms that sell beer in 
the United States. We ended up reaching a settlement that 
required InBev ABI, the old Anheuser-Busch, to divest the 
entire U.S. business of Grupo Modelo--those are the folks that 
make Corona and other beers--and create an independent, fully 
integrated and economically viable competitor, saving consumers 
from the risk of billions of dollars in increased prices.
    Also, as has been mentioned, in August the Antitrust 
Division and several State attorneys general filed suit to 
block the proposed merger of US Airways and American Airlines. 
This deal, our complaint alleged, would have harmed competition 
for airline travel in local markets throughout the country.
    Earlier this week we announced a proposed settlement with 
the carriers that if approved by the court would resolve our 
lawsuit challenging that merger. Under the agreement US and 
American will divest important facilities at seven key airports 
across the country. The settlement will enable low-cost 
carriers to buy those facilities and expand their presence all 
across the country, injecting a new form of competition into 
places that have never had it before.
    The low-cost carriers have a tremendous price effect where 
they are able to fly today, but there are constraints, slots, 
gates at various airports, and by giving them access to those 
airports we have the potential to inject much more extensive 
competition into that marketplace.
    At the same time, the settlement allows the new American, 
the combined American Airlines and US Airways, to retain all of 
the commuter slots that they currently have at Reagan National. 
Commuter slots are reserved for small jets and designed to 
serve small and medium-sized communities. We let the airline 
keep those slots because they weren't important to our remedy, 
but obviously the service is important to those communities. At 
the same time, the Department of Transportation secured a 
binding commitment from the new American that they will 
continue to use those airplanes to serve small and medium-sized 
communities.
    Effective enforcement is critical to what we do, but close 
collaboration with other parts of the government also achieves 
positive results for American consumers. We work closely with 
the Patent and Trademark Office to address issues involving the 
International Trade Commission and standard essential patents 
subject to voluntary FRAND commitments.
    Together with the FTC, we are examining whether there are 
legitimate antitrust concerns associated with the growth of 
these patent assertion entities. It is the subject of the 
legislation that the full Committee Chairman mentioned in his 
opening remarks. Together with the FTC, we engage very actively 
with foreign antitrust enforcers to promote cooperation, 
transparency, and evenhanded application of the antitrust laws 
around the world.
    Now, while effective and efficient antitrust enforcement 
makes our markets more competitive and saves consumers money, 
we appreciate that antitrust enforcement itself has to be 
efficient and sensitive to the costs we may impose on the 
business community. We are working on that.
    For example, at the Antitrust Division we have been a 
pioneer among government agencies in the use of predictive 
coding methods in large volume document productions. I have 
only learned about this in the last few months. But it is 
essentially allowing search, like Google search terms, to have 
companies under investigation, whether it is a merger or a 
cartel, to more efficiently identify the documents that are 
responsive to us. We have used that in mergers this year. One 
law firm told me that we saved their client $2 million by 
working together with them on getting efficient production of 
the information we need to do our jobs.
    Finally, the Antitrust Division, sir, has a longstanding, 
consistent, and nonpartisan commitment to American consumers. 
We are committed to ensuring that companies adhere to the 
antitrust laws so that consumers benefit from lower prices and 
higher quality goods and services. I am honored to be part of 
the hard-working Antitrust Division team, all of whom are glad 
to be back at work. And these dedicated public servants are 
fulfilling a law enforcement mission that is delivering every 
day real benefits to American consumers. Thank you, sir.
    Mr. Bachus. Thank you.
    [The prepared statement of Mr. Baer follows:]



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                               __________
    Mr. Bachus. And I was going to actually wait until the end, 
but let me say this. I do want to express just personally as a 
Member of Congress that I was somewhat embarrassed that the 
government did shut down, and I feel like it was a failure of 
the Article I body to do what needed to be done. So there were 
many of us that were quite disappointed that that happened. So 
I personally believe an apology is in order and I do want to 
say that, and I hope that we will avoid that in the future.
    At this time I will recognize Chairman Ramirez. Yeah, 
another Barney Frank thing.

 TESTIMONY OF THE HONORABLE EDITH RAMIREZ, CHAIRWOMAN, FEDERAL 
                        TRADE COMMISSION

    Ms. Ramirez. Thank you. Chairman Bachus, Ranking Member 
Cohen, and Members of the Subcommittee, I appreciate the 
opportunity to testify today regarding the Federal Trade 
Commission's current antitrust and competition policy efforts.
    I want to begin by thanking the Members of this 
Subcommittee for the support you have given the FTC. As you 
know, competition promotes economic growth and overall consumer 
welfare by keeping prices competitive, expanding output and 
choices, and promoting innovation. The FTC works closely with 
the Department of Justice's Antitrust Division to ensure that 
the American economy remains competitive through vigorous 
antitrust enforcement, and I am grateful for the excellent 
working relationship that we have with Assistant Attorney 
General Bill Baer and his colleagues at the Antitrust Division. 
We are going to continue to work closely with the Antitrust 
Division, as well as with our counterparts in the States, to 
enhance antitrust consistency, clarity, and transparency.
    One of the agency's principal responsibilities is to 
prevent mergers that may substantially lessen competition. In 
fiscal year 2013, we challenged 23 mergers that were likely to 
have anticompetitive effects. In most of these cases, we 
negotiated a divestiture or other remedy that allowed the 
transaction to go forward, but in five instances we went to 
Federal court to stop the merger.
    We also seek to identify and stop anticompetitive business 
conduct. Last year we brought four enforcement actions to stop 
harmful conduct such as unlawful exclusive dealing and improper 
information sharing among competitors.
    In an effort to be most effective with limited resources, 
we pay particular attention to sectors where our action will 
provide the greatest benefit to the largest number of 
consumers. Chief among those are the healthcare and technology 
sectors.
    Anticompetitive mergers and conduct can threaten to 
undermine efforts to control healthcare costs. It is therefore 
critical that the Commission preserve and promote healthcare 
competition, including in healthcare provider and 
pharmaceutical markets. The FTC has been at the forefront of 
these issues, preventing proposed mergers that threaten higher 
costs without related improvements in quality of care. We have 
recently successfully litigated three hospital mergers, and 
parties abandoned a number of deals after the FTC threatened a 
challenge, resulting in significant benefits to consumers.
    We also continue to target efforts by brand name drug 
companies to stifle generic competition. As has been mentioned, 
in June we achieved a significant victory for consumers when 
the Supreme Court overturned the so-called scope of the patent 
test, which virtually immunized pay-for-delay settlements from 
antitrust scrutiny. Now we are in a much stronger position to 
protect consumers from anticompetitive drug patent settlements 
resulting in higher drug costs.
    Given its increasing importance to consumers' lives, the 
Commission also seeks to ensure robust competition and 
innovation in the technology sector. Among other things, the 
Commission has sought to preserve the integrity of the 
standard-setting process. The Commission will continue to 
engage in an ongoing dialogue with stakeholders in this 
important area and bring enforcement actions when necessary to 
prevent the distortion of the standard-setting process.
    The Commission applies a fact-based approach to enforcement 
in markets with new technologies or evolving business models. 
Sometimes a changing competitive landscape will lead the 
Commission to conclude that a proposed merger is likely to harm 
competition now or in the future, as it did recently when 
challenging Nielsen's proposed acquisition of Arbitron.
    Other times the evidence leads the Commission to close an 
investigation without taking action. This was the case in the 
Commission's recent decision to close the investigation of 
Office Depot's acquisition of rival OfficeMax. Back in 1997, 
the Commission stopped the merger of Staples and Office Depot 
based on evidence that office supply superstores mainly 
competed with each other. But today office supply superstores 
face competition from other types of retailers, including big 
box and online merchants. This led the Commission to conclude 
that the transaction should be allowed to proceed.
    These examples demonstrate the enduring vitality of the 
antitrust laws. Markets can and do change, but the antitrust 
laws remain a powerful tool to protect consumers and to promote 
competition.
    The Commission also remains active in research and policy. 
We recently announced that we will conduct an in-depth study of 
the impact of patent assertion entities on technology markets. 
Our aim is to expand the information that is currently 
available about PAEs and how they operate in order to shed 
light on the likely costs and benefits of PAE activity. We 
believe this research will help inform the ongoing policy 
debate about PAEs.
    Thank you, and I am happy to respond to any questions that 
you may have.
    Mr. Bachus. Thank you, Chairwoman Ramirez.
    [The prepared statement of Ms. Ramirez follows:]



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                               __________
    Mr. Bachus. At this time, in lieu of me asking questions, I 
am going to recognize the gentleman from Georgia, Mr. Collins, 
for 5 minutes.
    Mr. Collins. Thank you, Mr. Chairman. I appreciate that.
    Thanks for being here this morning on this early Friday 
morning.
    I appreciate what has been said on the airline mergers. I 
would just, however, continue to remember, as we look at 
monitoring that for all players in the market, not just a 
single set called low-cost markets, all the players in that, as 
well as I would encourage you to do that.
    Also one of the things, Ms. Ramirez, you just brought up 
was health care, and this is something for me this morning as I 
was thinking about this hearing, it was something that has come 
across. And you spoke of drug costs, and I read about your 
decision, especially in the opening statements in oversight. 
What concerned me however was the attention to the drug and the 
drug costs and the issue that you just brought up.
    But the really disappointment in my opinion on the drug 
delivery side, and that is where I am going to focus a little 
bit this morning, is that I believe there are legitimate 
concerns about the conduct of PBMs in the pharmaceutical arena. 
I was disappointed by the FTC statement on the ESI-Medco 
merger. In my opinion it didn't sufficiently protect the 
customers and pharmacy competition. The concerns of independent 
pharmacists didn't appear to hold much weight in the statement, 
which seemed to be focused more on the effects on entry into 
the PBM market and the anticompetitive behavior in regards to 
plan sponsors.
    There was little mention of the leverage that ESI-Medco 
could and I believe will have over pharmacists and pharmacies. 
Since the FTC did not act to address the negative impact to 
pharmacies that would result from the ESI-Medco merger, there 
doesn't seem to be any recourse other than Congress stepping in 
and passing legislation to protect the pharmacies and the 
consumers.
    Just to give everyone here a snapshot of what type of 
behavior PBM engaged in, between 2004 and 2008 three major PBMs 
were subject to six major Federal or multidistrict cases over 
allegations such as fraud, misrepresentation, and failure to 
meet ethical and safety standards, just to name a few. These 
cases have resulted in over $371 million in damages. I have 
heard from consumers that the merger has led to higher prices 
and that they have been forced into mail order. This is a very 
significant problem for consumers who need specialty drugs.
    My question, and I want to sort of preface it, is will the 
FTC look into this situation and the problems that are 
developed, and we can hold that for just a second, but I am 
also very concerned about patients who have critical conditions 
and need specialty drugs. It is my understanding through a good 
bit of discussion that the major PBMs forced them into receive 
these drugs through mail order, which endanger their health. 
And what I would like to have is assurances, a commitment to 
look into this situation. This is a particular concern for me 
in rural northeast Georgia where I am from.
    I understand that some PBMs force consumes to use only this 
PBM's mail order. Many of my constituents view this as negative 
because they rely so heavily on their community pharmacist, who 
is often the most accessible healthcare professional and 
provides invaluable support to them.
    In looking at this, like I said, I applaud both of you for 
what your work is, this one is a concern to me, and especially 
when you look at some of the things that I have just mentioned 
that have come across in the last few years to give basically 
a, not necessarily a pass, but a lack of scrutiny to this 
delivery system, is what I will call it, that is disparately 
impacting community pharmacists and also rural neighborhoods.
    Basically I am not asking for an in-depth answer. I am just 
wanting that you would take more of a look at the impact not 
just on that, but the whole healthcare delivery system that we 
have a problem with. And, Ms. Ramirez, I would love for you to 
speak to that, and from the processes before on the 
prosecutions and other things in that case, I would love just 
to hear briefly, and just say that I want to know if my 
concerns are going to be taken seriously.
    Ms. Ramirez. Yes, absolutely, Congressman. We certainly 
understand the concerns that have been expressed by independent 
pharmacies when it comes to the PBM market. It is an area that 
the agency has looked at very closely in a number of different 
settings. Most recently we did examine the merger between ESI 
and Medco, and I will say that we looked very closely at three 
main aspects of that transaction and what effects they would 
have. That included looking on the seller side whether the 
transaction would allow the merged entity to exploit market 
power in the delivery of services to employers; but we also 
looked at the impact on the buyer's side, what impact would it 
have on the ability of the merged entity to negotiate with 
pharmacies. And we also examined----
    Mr. Collins. I apologize for interrupting, but one of the 
concerns I have there, and I appreciate you bringing this up, 
is there is not a lot of negotiating going on. It is we are 
going to do it this way, you will conform to us, or we are just 
going to send you to our preferred provider care and we are 
shutting out the independent market altogether, and that has 
been a concern.
    What I would like to do in the short time we have, and I 
don't want to take any, is I would love for my office to begin 
an open dialogue on further issues that we can see some resolve 
here, because I believe that the Congress is going to have to 
step in here because undoubtedly we are not getting that I feel 
support at this time outside of that. So I appreciate your 
answer. And I apologize, I just wanted to make sure that we 
could have that dialogue, and that is what I would like to see.
    Ms. Ramirez. Let me just say that I am aware of the 
concerns and I will assure you that the Federal Trade 
Commission will continue to be vigilant in this area.
    Mr. Collins. Thank you.
    Mr. Chairman, I yield back.
    Mr. Bachus. I thank the gentleman.
    At this I recognize Mr. Cohen for 5 minutes.
    Mr. Cohen. Thank you, Mr. Chair.
    Mr. Baer, the stewardess folk said you were most courteous 
and saw them personally and they were most appreciative. And 
the American Airlines folk I know were very interested and the 
flight attendants were very happy about the merger. I hope it 
works out well, and I hope it works out well for Memphis. 
American has limited service out of Memphis, US Air has some.
    But we saw disastrous effects with Delta and Northwest. 
While Justice didn't examine that merger as this one was 
examined and require certain slots to be given maybe to 
Southwest or AirTran at the time or whatever, The New York 
Times was fairly excoriating on the decision to allow the 
merger to go forth. I am going to give you 1 minute to respond 
to The New York Times.
    Mr. Baer. I think I managed in 24 hours to get negative 
editorials out of The New York Times and The Wall Street 
Journal, so I don't know what that says.
    Mr. Cohen. One of them is a good thing and one of them is a 
bad thing.
    Mr. Baer. Okay. And depending on where you sit.
    This settlement we ended up concluding was actually better 
than a full-stop injunction. Why would I say such a thing? It 
is because a full-stop injunction would have kept the legacy 
carriers in their current position, which was already pretty 
cozy. We did not see lots of meaningful competition on price, 
on service, on ancillary fares like baggage fees. And where 
there was significant competition and expansion of seats, of 
planes being flown from here to there, it was where the low-
cost carriers over the last 10 or 15 years have begun to 
establish a presence.
    But the problem is the low-cost carriers don't fly 
everywhere today, and one reason they don't is that they can't 
get access to key airports like LaGuardia, like National. You 
open up those airports just a little bit. When the United-
Continental merger concluded, United had to give up all of its 
slots at Newark, and within a year they had added nonstop 
service to six different cities and driven prices way down. But 
in addition they could then connect one stop to other cities 
all around the country and there were within a year 60 more 
cities benefiting from low-cost service from Southwest.
    That is why we thought this settlement, opening up service 
and getting rid of capacity constraints at seven major 
airports, not only was going to benefit the nonstop travel 
between those airports, but there is then the next stop for 
Southwest or for AirTran, which still is flying under its name 
a little bit, JetBlue, Virgin America. So we think there is 
real opportunity here to positively change the competitive 
dynamic.
    Mr. Cohen. Well, I appreciate that you did something. I 
mean, the Justice Department did nothing but allow the Delta-
Northwest to go forth. Of course, the statements made, we would 
have thought it was going to be fine. You said that the hubs, I 
think in your agreement they had to stay open for 3 years, is 
that right, or a minimum of 3 years?
    Mr. Baer. There was agreement with the States which 
provided that they had to keep their hubs open for an extended 
period of time. It didn't mean they couldn't reduce some 
service, though.
    Mr. Cohen. Yeah, which may happen.
    Let me ask you this. I read a story in The New York Times, 
and it was published elsewhere, I guess, about several big 
banks, including Goldman Sachs, having consolidated ownership 
of aluminum warehouses, and they are possibly conspiring to 
prop up aluminum prices and shifting these around. This affects 
a lot of consumer goods, cars and beer and other cans and 
others that are aluminum products, soda cans, so it has an 
impact on consumers. Are you aware of this particular issue and 
is your Division investigating these concerns?
    Mr. Baer. Well, I can't comment on any details. I will tell 
you that this is a matter we are looking at.
    Mr. Cohen. I would ask unanimous consent to submit this 
article entitled ``A Shuffle of Aluminum, but to Banks, Pure 
Gold.''
    Mr. Bachus. Without objection.
    [The information referred to follows:]



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                               __________
    Mr. Cohen. Thank you, sir.
    Ms. Ramirez, I sometimes get a little confused on where 
your jurisdiction lies and General Baer's. But are there areas 
that you think there is legislation needed to give either you 
or General Baer, to give you all more authority?
    Ms. Ramirez. Generally speaking I think our authority is 
appropriate. There are small areas where we think we should 
have more jurisdiction. One issue that comes up periodically 
has to do with our ability to litigate independently when we 
are seeking civil penalties. Right now we have to refer those 
particular matters to the Department of Justice. There are also 
certain other areas, such as antitrust exemptions, that both 
antitrust agencies, and I certainly, think should be removed, 
for example McCarran-Ferguson. But for the most part I think 
the authority that the agency has is appropriate for the work 
that we are doing.
    Mr. Cohen. My red light has gone off, but if the Chairman 
would indulge me with one last question, and it is somewhat 
like I guess Cato the Elder, but I want to come back to the 
sentences. You said that these folks that you convict, 25 
months is the average sentence. These folks are mostly business 
people, predominantly White, white collar?
    Mr. Baer. Yes, sir.
    Mr. Cohen. If they had had a gram or two grams of crack, 
they might have gotten a life sentence. Don't you just think 
that is just unconscionable, that people who rip off the 
American consumer and price fixing, et cetera, get 25 months, 
and a couple of grams of crack gets you life?
    Mr. Baer. Mr. Congressman, I made a note about the message 
you wanted me to convey to Attorney General Holder, and I am 
going to convey that message.
    Mr. Cohen. I appreciate it very much. Because if you read 
Nick Kristof yesterday, ACLU just had a report and cited some 
cases that are just awful, and there are lots of them.
    Mr. Marino. Would the gentleman yield for a moment, please?
    Mr. Cohen. Sure.
    Mr. Marino. First of all, I agree with my colleague that 
The Wall Street Journal was right. And, number two, that----
    Mr. Cohen. They are always on the right.
    Mr. Marino. And number two, I couldn't agree with him more. 
As a prosecutor for 18 years, a DAUS attorney, it is appalling 
to me what white-collar criminals get away with and how much 
they have caused financial drain on our economy, but, more 
importantly, our seniors and middle class working people who 
invest the little money that they have into these businesses 
that they are hoping that at least generate a little return on 
their investment.
    So I would insist that the Attorney General's office with a 
vengeance go after these individuals, take everything that they 
have, follow the money, and then put their tails in prison for 
as long as they can.
    Mr. Baer. Message received, sir.
    Mr. Cohen. Thank you, Mr. Chairman.
    And thank you, Mr. Baer.
    Mr. Bachus. They told you that they don't expect you to be 
a messenger, but then they have sent messages back with you.
    At this time Mr. Farenthold is recognized. He actually, I 
mentioned before you got here, that you joined several of us on 
a letter expressing some concerns with Section 5 and maybe a 
lack of guidance.
    Mr. Farenthold. Thank you very much, Mr. Chairman.
    And, Chairwoman Ramirez, as you are aware, this Committee 
has been following the patent troll issue pretty closely, or 
actually the entire Committee is working through the Innovation 
Act to solve some of the problems that we see with the 
litigation process. Congresswoman Chu and I sent letters to you 
in June of this year, we had 18 Members signing on to this.
    And without objection, Mr. Chairman, I would like to make 
that letter a part of the record.
    Mr. Bachus. Without objection.
    [The information referred to follows:]



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                               __________
    Mr. Farenthold. So we were urging you to use your Section 5 
authority to help end-users of technologies who are facing 
patent troll litigation for purchasing products off the shelf. 
I know you are now conducting a Section 6(b) study to 
investigate the patent troll problem. But in response to the 
letter you said most PAE activity is likely to lend itself to 
antitrust or consumer protection law enforcement. Therefore, I 
am wondering what you are hoping to accomplish with this study 
and what does the FTC plan to do with the collected 
information?
    Ms. Ramirez. This is an area that the Federal Trade 
Commission has been looking at for some time, and most 
recently. last year we cohosted a workshop with the Department 
of Justice to examine PAE activity. What came out of that 
workshop mainly were two things. One, that there is an 
increasing concern about PAE activity. It appears that PAEs are 
engaging in activities that now reach a number of different 
sectors rather than just the IT sector, and we are, of course, 
aware of concerns about----
    Mr. Farenthold. We have had some State attorneys general 
actually filing lawsuits against patent control. Do you think 
maybe we could get the FTC to take a little bit more aggressive 
approach to protecting consumers in this area?
    Ms. Ramirez. I can't talk about any details about 
investigations, but what I can tell you is that we are aware of 
the issue. We are looking at it closely. If we find that there 
is either anticompetitive conduct by PAEs or conduct that comes 
within our consumer protection authority under Section 5, 
deceptive or unfair practices, we will take action.
    Mr. Farenthold. Thank you very much.
    Mr. Baer, I would like to talk a little bit about the 
American Airlines merger as well. I think I made a comment in 
another hearing, I don't remember if it was in this Committee 
or Transportation, that approvals between United and 
Continental and between Delta and Northwest had been approved 
and it seemed only fair that American be allowed the 
opportunity to grow its network as well. And I am happy to see 
that you have gotten to that point and reached a settlement.
    I do want to ask about the gate divestitures, particularly 
at DCA and LaGuardia. My question is, it seems like we are 
giving a preference to low-cost carriers. I have got to be 
careful here because I am a big fan of Southwest Airlines and 
they have done a real good job keeping the fares down in my 
hometown of Corpus Christi.
    At what point is it appropriate for the government to pick 
winners and losers there, and do we actually have a three-tier 
system of the legacy carriers that have merged and the 
Southwest-type carriers that are established and becoming more 
like legacy carriers every day, and then you move into the 
ultra low-cost carriers who basically get all their revenue 
from ancillary fees, charge you for a carry-on bag, and the 
next thing you know they will be charging you for a seatbelt.
    Mr. Baer. Thanks for the question, sir.
    In crafting this remedy and requiring these divestitures, 
our job, and we do this in any merger settlement where we 
require divestitures, we sit down with the merging parties and 
make sure that the buyers of those assets are the people that 
are going to compete those assets most aggressively for the 
American consumer.
    Mr. Baer. And we will have a process----
    Mr. Farenthold. But is it fair to American to require 
testimony to sell to a certain person if they are not, say, the 
highest bidder?
    Mr. Baer. They have agreed to it, and I think it is fair 
because this is a settlement designed to avoid future 
competitive problems in an industry. The alternative, which 
American and US Air had available to them, was to go to court 
and ask the judge----
    Mr. Farenthold. I am almost out of time. I just want to 
follow up. You made a point that you consider it adequate 
service to have a one-connection flight between two cities. 
That is kind of out of joint with some of the ideals we have 
with DCA, Reagan National trying to get nonstop services to as 
many cities as possible. How do you reconcile that desire with 
perhaps the more cost-effective one-stop hub-and-spoke system 
that even to some degree Southwest is adopting these days?
    Mr. Baer. All we are trying to do is to make sure that 
consumers get the benefit of competition wherever possible. And 
there are many airports where competition is limited because 
there are slots that aren't sold, can't be bought, or that 
there are gates, O'Hare is a good example, where carriers can't 
get in there because there is just not enough room. So by 
freeing up some opportunity and letting competition flourish 
more than it is able to flourish today, we think we are going 
to get a good result for the American consumer.
    Mr. Farenthold. I see my time has expired. So thank you 
very much, Mr. Chairman.
    Mr. Bachus. Thank you, Vice Chair.
    At this time I recognize my friend and colleague Mr. John 
Conyers.
    Mr. Conyers. Thank you, Chairman Bachus.
    Mr. Baer, can you give any examples offhand about how 
sequestration has affected the Department of Justice? I 
understand it has been pretty severe.
    Mr. Baer. We had within the Antitrust Division, because of 
the rules limiting who could come to work, we had at any one 
time, only had about 20 or 25 percent of our employees in able 
to do work. And what effect did that have? It meant on mergers, 
where we were trying to move mergers along as part of our 
responsibility to the business community, we could not do our 
job. We could not get back to the lawyers and tell them what 
questions we had. There was a delay for the business community.
    On matters of litigation, we had to ask the court to stay 
things. That slowed things down for us, very inefficient, it 
slowed things down for the defendant, and it delayed the day we 
get the outcomes and we think that is poor for the consumers.
    But, Mr. Conyers, for me it was the fact that I had to tell 
people that I did not know if they were going to get paid for 
the time they were at home. This was a decision Congress had 
not made yet. And we had one pay period where people only got 
about 50 percent of their pay for that pay period. It got made 
up. But if you were living paycheck to paycheck, that was a 
very, very serious consequence to the individual.
    So it was a slowdown in our ability to do the job you asked 
us to do. But it hurt innocent people. And that is part of what 
we all felt and felt badly about.
    Mr. Conyers. Thank you so much.
    Chairwoman Ramirez, critics, including the Chamber of 
Commerce, contend that the FTC's use of its authority under 
Section 5 of the FTC Act has been inappropriate to the extent 
that it reaches conduct that doesn't violate the Sherman or the 
Clayton Acts, and they contend that the FTC's failure to issue 
guidelines on its use of section 5 has created uncertainty and 
is simply unfair.
    Can you comment on that position that they have asserted?
    Ms. Ramirez. Certainly. And you will not be surprised to 
hear that I disagree with that position. Number one, Congress 
very deliberately granted the FTC authority to go beyond the 
literal scope of the antitrust laws under its Section 5 
authority. The agency in its recent history has used that 
authority in a very limited and restrained way. The vast 
majority of the enforcement actions that we bring are, in fact, 
brought under either the Sherman Act or the Clayton Act, and it 
is only in very limited situations that we have used what we 
refer to as our stand-alone Section 5 authority.
    I also don't believe that the way we have used it has 
created uncertainty to the extent that it limits pro-
competitive behavior on the part of businesses. I think we have 
acted appropriately in the times that we have used it, and I 
also believe that we have provided appropriate guidance about 
what motivates our use of Section 5--which ultimately is harm 
to competition or harm to the competitive process--the times 
that we have used it.
    Mr. Conyers. Thank you.
    Mr. Baer, is there or are there occasions in which mergers 
could be good for consumers.
    Mr. Baer. The answer I think is yes, sir. In situations 
where markets are not all that concentrated merging parties 
sometimes can become more efficient and offer a broader range 
of products and services.
    We issue joint merger guidelines, guidance to the business 
community and the American public jointly with the FTC. We 
recently updated those, 2 years ago, and we talked about the 
standards we employ, how we look at mergers, when we think we 
might have a problem, and what level of concentration in the 
market could be a warning sign. So we work very hard to be up 
front about what we are looking at, and we recognize that some 
mergers, particularly mergers where it is not two competitors 
getting together, are likely to have no competition issues and 
have the potential, actually, to produce more efficient 
companies.
    Mr. Conyers. Can I ask you, my last question to both of 
you, just a yes or no, do you believe that the McCarran-
Ferguson Act should be repealed with respect to health 
insurers?
    Ms. Ramirez. I do.
    Mr. Conyers. Thank you.
    Mr. Baer. The Administration, I think in 2010, communicated 
that view to the Congress as a Statement of Administration 
Policy.
    Mr. Conyers. Very good. Thank you both.
    I yield back, Mr. Chairman.
    Mr. Bachus. Thank you.
    Mr. Marino is recognized for 5 minutes.
    Mr. Marino. Thank you, Chairman.
    I thank the two of you for being here. I want to get right 
to the point. I have three questions I want to bring, three 
issues. The first one is search engines, the big companies. The 
second one is going to be addressing the issue of patent troll 
letters. And the third one is going to be the merger of Express 
Scripts and Medco merger.
    So let's get into search engines. In the past, the FTC has 
addressed concerns about the manner in which certain major 
search engines are aggregating information. Do you see or do 
you feel that these major companies are currently adhering to 
the best practices of the way search engines should be 
operating?
    Ms. Ramirez. Well, Congressman, as you know, earlier this 
year, we, the Commission, issued a unanimous decision closing 
its search investigation of Google, and we outlined the reasons 
for that decision in a closing statement. But what I can tell 
you is that we are going to continue to monitor the 
marketplace, and if we see that a company, whether it is a 
company that engages in search or any other company, engages in 
anticompetitive activities, we are going to take action.
    Mr. Marino. Is there a time or is there an area where you 
are watching as to whether the percentage of the market that a 
particular search engine group or entities in combination would 
control that market? Is that a factor?
    Ms. Ramirez. Sure. When we are evaluating whether there is 
a violation of the Sherman Act and specifically Section 2 of 
the Sherman Act, we would be looking at the issue of dominance, 
and that would be a factor in our analysis.
    Mr. Marino. General, as an attorney and as a U.S. attorney 
I know you can't get into the details or give an opinion, but 
what are you looking for in the computer tech age now with 
companies that dominate a major portion of the market? And I am 
not indicating in any way that I think that is always bad.
    Mr. Baer. Thank you, sir. What we look for, similar to the 
FTC, is where somebody has not just been successful, because 
you don't want to penalize success--companies get big because 
they are better, they are more efficient, they price lower, and 
we don't want to deter that behavior at all--but sometimes 
people get big and they start pulling up the ladder or grease 
the ladder so nobody else can get up.
    It really is the behavior on top of being successful, when 
you are using your elbows a little bit to muscle people out of 
the way, that in sort of plain talk is where we start to get 
interested.
    Mr. Marino. Please keep an eye there. Okay.
    Chairwoman, let's switch to patent trolls. What, if 
anything, is FTC doing concerning patent troll letters? Have 
you been actually reading patent troll letters? Do you have any 
suggestions as to what can be done with them?
    As far as I am concerned the information--the demand 
letters are really vague. We don't know who really is pursuing 
this. And can you tell me any plans you may have concerning 
patent troll letters?
    Ms. Ramirez. So I think there are two main areas where the 
agency can be of assistance when it comes to this issue about 
the activities of patent assertion entities.
    One is that we can be vigilant in monitoring the 
marketplace to ensure that there is no violation of the 
antitrust laws, and also under our consumer protection 
authority under Section 5. And we are doing that. I can't 
comment on any details of investigations, but I can tell you 
that we are aware of the issue, and where there has been 
deceptive conduct we would be in a position to take action.
    At the same time, we aren't an agency that is evaluating 
the strength of particular IP, so there are limitations in what 
we can do in addressing some of the issues that are raised by 
PAE activity.
    Mr. Marino. Okay. What do you think of this idea: What do 
you think of making it mandatory that whoever is sending a 
patent patent troll letter out has to state boldly on that 
letter that you are not required by law to respond to this 
letter? 
    Ms. Ramirez. Let me say that I would have to think more 
about it. I have heard about this idea and I would need to get 
more details and be able to study it. But I----
    Mr. Marino. I am pushing this. This is an aspect that I am 
pushing on these letters.
    Ms. Ramirez. I understand. I am supportive of efforts that 
are being made to reform the patent system to weed out weak IP 
and also efforts to allow companies to defend against frivolous 
litigation.
    Mr. Marino. My last question is to Express Scripts and 
Medco mergers. Is the commission planning to take any steps to 
look into the anticompetitive behavior currently that I am 
seeing and could you speak on that about the anticompetitive 
behavior in this merger that I feel has taken place?
    Ms. Ramirez. As you know, we did decide to close the 
investigation and allow the merger to go forward last year. We 
issued a very detailed closing statement outlining the areas 
that we examined and the reasons why we felt that it was 
appropriate to close the investigation. There hasn't been much 
time that has elapsed. I am not aware of any evidence----
    Mr. Marino. Okay.
    Ms. Ramirez [continuing]. Of their being anticompetitive 
conduct that has transpired since the merger. But I am happy--
--
    Mr. Marino. I am sorry. I see my time is running out. But I 
would ask unanimous consent, I would like to submit some other 
questions to our distinguished panel----
    Mr. Bachus. Without objection.
    Mr. Marino [continuing]. And expanding on the questions 
that I did ask. So it will be in detail. And thank you very 
much. I yield back.
    Mr. Bachus. And all Members will be given an additional 5 
days to do that.
    At this time, I recognize Mr. Johnson for 5 minutes.
    Mr. Johnson. And I will yield to Ranking Member Conyers for 
a second.
    Mr. Conyers. I would just like permission to put into my 
statement the New York Times editorial of yesterday commenting 
on the unwise airline merger.
    Thank you very much.
    Mr. Bachus. Thank you.
    [The information referred to follows:]



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                               __________
    Mr. Bachus. Mr. Johnson.
    Mr. Johnson. And I also would like to submit for the record 
with unanimous consent a letter from the flight attendants of 
American Airlines----
    Mr. Bachus. Without objection.
    Mr. Johnson [continuing]. Voicing their strong support for 
the merger.*
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    *Material previously submitted, see page 6.
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    Mr. Bachus. Their strong support for the merger?
    Mr. Johnson. Yes.
    Mr. Bachus. Okay.
    Mr. Johnson. Between American Airlines and US Airways.
    Mr. Cohen. And their love of Mr. Baer.
    Mr. Johnson. Well, no comment on that.
    Mr. Bachus. Something for everything in these submissions.
    Mr. Johnson. But I would take us back to the days of Ronald 
Reagan coming in. Ronald Reagan said that government is not the 
solution, government is the problem. He said government is the 
problem, not the solution.
    And that kind of was in keeping with a wave going across 
the American economy, a wave, a Milton Friedman economic wave 
of laissez-faire capitalism. Let the fox guard the henhouse 
basically is what that economic philosophy holds. And we have 
been following that for the last, what, 30 years? And we have 
been incessantly and sometimes drunkenly cutting the Federal 
budget and trying to make government smaller, downsizing, 
privatizing, you know, making government so small that you 
could drown it in a bathtub. That is what Grover Norquist has 
advocated. And, in fact, many Members of Congress have signed 
on that pledge and have adhered to it.
    What impact does this historical shredding of government's 
capacity to enforce antitrust laws, what impact has it had on 
your ability to guard the henhouse, government's ability to 
guard the henhouse, as opposed to turning it over to the 
private sector to guard themselves and then let everything 
trickle down, it is going to work out according to the free 
market principles? Where are we as far as that is concerned.
    Mr. Baer. Thank you for the question.
    In our prepared statements, both of us talked about the 
fact that as antitrust enforcers, we are actually policing the 
free market so that the business community can compete 
aggressively and deliver better products, better service at 
lower prices. So we obviously are committed to the view that 
there is tremendous value added.
    In my prepared remarks, I noted that in criminal penalties 
alone against corporations for price fixing and bid rigging, 
and we have unveiled serious conspiracies involving 
international companies, we are generating an average of $850 
million in criminal penalties.
    Mr. Johnson. But my question is, I know that the work is 
effective and that it inures to the benefit of consumers, as 
well as the competition in the business community, small 
businesses versus larger businesses. But what is the impact of 
the incessant and drunken budget cutting that has been taking 
place over the last 30 years?
    Mr. Baer. We are privileged, I think, as antitrust 
enforcers--I am not dodging the question--but we have actually 
had fairly good bipartisan support for antitrust enforcement 
over the years. That hasn't always translated into dollars.
    Mr. Johnson. How has this impacted your ability to carry 
out your mission, the budget cuts?
    Mr. Baer. Let me give you good examples, sir. Because of 
the current sequester, I have been unable to hire the criminal 
prosecutors that I need to return the sorts of criminal 
penalties I referred to earlier in my statement. We are down 
from about 125 criminal prosecutors to 85 right now.
    If the budget situation resolves itself, the Justice 
Department is going to hire those people and get them back on. 
But when the uncertainty is hanging over us all, there is a 
hiring freeze that has had to be imposed. So there is a real 
world example of how uncertainty can affect our ability to get 
the troops we need to go out and do a good job for the American 
consumer.
    Mr. Johnson. All right. Thank you. And that affects our 
overall ability to be competitive with other Nations, companies 
in other Nations around the world.
    So I do want to thank also you both for working with my 
office on the APPS Act and also arbitration fairness. But now 
arbitration fairness with this recent U.S. Supreme Court 
ruling, American Express v. The Italian Colors Restaurant, 
wherein it was ruled that arbitration, a mandatory or forced 
arbitration agreement can trump the antitrust laws. What is 
your analysis----
    Mr. Bachus. You can briefly answer.
    Mr. Johnson. Thank you, Mr. Chairman.
    Mr. Baer. What I will do is get you an answer for the 
record, sir, because when I was at a private law firm I 
represented some credit card companies. That is one area where 
other people do the thinking and do the communicating for me.
    Mr. Johnson. All right. How about you, Ms. Ramirez?
    Mr. Bachus. Thank you.
    Mr. Smith from Missouri.
    Mr. Johnson. Could I have an answer from Ms. Ramirez to 
that question, Mr. Chairman?
    Mr. Bachus. Yes. I am sorry.
    Mr. Johnson. Thank you.
    Ms. Ramirez. Let me just say that we, the Federal Trade 
Commission, I believe this general view is also shared by the 
Department of Justice, are concerned when private litigants 
aren't permitted to enforce the antitrust laws. We believe that 
that is an important component and complement to the public 
enforcement that we engage in which we believe is quite vital 
to ensure that there is a fair and level marketplace.
    Mr. Johnson. Thank you.
    Mr. Bachus. Mr. Smith.
    Mr. Johnson. Thank you, Mr. Chairman.
    Mr. Smith. Thank you Mr. Chairman.
    Madam Chairwoman, my question, over the last two decades 
the Commission ruled in its own favor in every single case it 
has brought in its internal court, even when its administrative 
law judges ruled in favor of the defendant.
    Can you comment on the Commission's record and inform the 
Committee whether there are any actions at the FTC plans to 
take to address this imbalance?
    Ms. Ramirez. Let me say first that I believe that is too 
narrow a lens with which to examine concerns about whether or 
not the procedures under the FTC's administrative processes are 
fair and efficient. I believe that they are. There have been 
instances both where the administrative law judge has disagreed 
with the FTC staff that is litigating the matter before them, 
what we refer to as complaint counsel. There have also been 
instances when the Commission has in turn ruled against 
complaint counsel.
    But I think the question to be asked here really is to look 
more broadly and to look at the process as a whole. And when 
you take into account the fact that there is a very thorough 
investigation that is performed by FTC staff, before even 
proceeding with an enforcement action, then you have a 
bipartisan expert commission who is examining the matter and 
making a determination about whether to proceed, then at that 
point in time we are able to proceed either by going to Federal 
court or administratively, when we go administratively, the 
matter is tried before an administrative law judge. It can then 
be appealed to the Commission and we would, at that point in 
time, look at the whole trial record before making a 
determination. And then that, in turn, can be appealed to the 
court of appeals.
    So I think when you examine the process as a whole, in my 
view, it is quite clear that the process is fair.
    In addition, I will note that there had been concerns 
expressed about delays in that process. We took those to heart, 
and in 2009 the Commission streamlined its administrative 
processes. And I believe that now the time that it takes to 
litigate under our process is comparable to the time that it 
would take to litigate in Federal court.
    So when looking at the process as a whole, I do believe 
that the agency approaches matters and makes decisions on a 
fair and equitable basis.
    Mr. Smith. You know, I read here that Commissioner Wright 
before he joined the Commission published in a report saying 
the Commission has reversed at a rate that is four times that 
of a general Federal judge. To me that seems like that is an 
imbalance. Do you not agree with that statement?
    Ms. Ramirez. A court of appeals is obviously going to be 
examining issues that the agency looks at and may have a 
different view of what the law is.
    Just by way of example, I will note that in the pay-for-
delay arena, the FTC lost before the courts a number of 
different times, but ultimately made its way to the U.S. 
Supreme Court, and the Supreme Court ended up agreeing with our 
view that reverse payment settlements ought to be subjected to 
antitrust scrutiny.
    So sometimes we need to be persistent in pursuing the 
development of antitrust doctrine when we believe that there is 
anticompetitive conduct at issue. I recognize that we have been 
reversed on occasion, but I think we look at these matters very 
closely and proceed only when we believe there is harm to 
competition or harm to the competitive process.
    Mr. Smith. I do think that it is something you need to look 
into being that two decades is a long time. That is 20 years. I 
am 33 years old. So in 20 years the Commission has found every 
case on their side. I think that is an imbalance and I think 
that is something you all need to look at.
    Mr. Bachus. Thank you.
    Ms. DelBene.
    Ms. DelBene. Thank you very much, Mr. Chair. You are 
working on pronouncing my name.
    Mr. Bachus. That is right.
    Ms. DelBene. You did a great job.
    I thank both of you for taking the time to be here today.
    Mr. Baer, I am on the Agriculture Committee as well as this 
Committee, and my district has many farmers, dairy and berry 
farmers, specialty crop farmers. And I understand that the 
Department of Justice and the Department of Agriculture 
corroborated in 2010 on a series of hearings on competition 
issues which affected the agricultural sector. And I know that 
farmers and producers all across our country and as well as 
consumers of our Nation's food supply rely on the benefits of a 
competitive and fair marketplace.
    So how have the 2010 hearings influenced the DOJ's 
enforcement strategy in this area? What are your plans to 
ensure fair, open, and equitable markets for our Nation's 
farmers?
    Mr. Baer. Thank you for the question.
    Those hearings resulted in a report which we sent to both 
this Committee and the Senate Judiciary Committee laying out 
our findings. We have used that report to work together with 
the State Attorneys General, who sometimes are a little closer 
to the ground in terms of being able to communicate with 
farmers, producers, including livestock producers, for example, 
who have issues.
    We have a team of lawyers and economists who specialize in 
agricultural antitrust, agricultural economics. And we have had 
some investigations. We continue to look at this matter. We 
realize that this is an important part of our ongoing antitrust 
responsibility.
    Ms. DelBene. Thank you.
    I also had a question, I know last year The Wall Street 
Journal reported that the DOJ was investigating whether cable 
companies were acting improperly to stifle competition from 
online video services. And to the extent that you can discuss 
this, I was interested in why you looked into this matter and 
any feedback you have for us.
    Mr. Baer. I can't get into the details, other than to say 
in any industry if there are agreements being made that injure 
consumers unfairly, inappropriately, part of our mission is to 
take a look at them. And where those issues crop up, whether it 
be in the cable industry on delivery of programming or anywhere 
else, our job is to go in as fast as we can and determine 
whether or not there is a problem that requires attention.
    Ms. DelBene. Thank you. I know we are short on time so I 
will yield back.
    Mr. Bachus. I appreciate that.
    Mr. Jeffries, I am going to go ahead and let you go next 
and then I will wrap up. An d they can tell me how much time I 
have.
    Mr. Jeffries. Okay. Thank you very much, Mr. Chairman.
    And thank you to the two witnesses. And I will try to 
expedite my questioning given the calling of votes.
    Let me start with Chairwoman Ramirez. So the FTC I guess 
announced on September 30 that you are going to move forward 
with a 6(b) study of the PAE problem. Is that correct?
    Ms. Ramirez. About PAE activity, yes.
    Mr. Jeffries. What is your understanding of the nature of 
the issue and/or problem, if you would characterize it as such, 
that you will be studying?
    Ms. Ramirez. So let me clarify what it is that we are 
doing. And, again, what we are doing with this study that we 
have just recently announced is to build on the prior work that 
the agency has done in connection with patent assertion 
entities, and that includes discussion and inquiry that we had 
and we addressed in a report we issued back in 2011. Then last 
year we had a joint workshop with the Department of Justice. 
And two things emanated from that workshop. One is that this is 
an area of growing concern. But secondly, we also found that 
there is very limited data about what PAEs are actually doing, 
what the business model is, what type of patents they hold.
    So we felt that it was appropriate to use our research 
function and our authority under 6(b) of the FTC Act to gather 
more information. So I want to make sure that it is clear that 
what we are doing is really information gathering and what we 
hope to do is shed light on what the costs and benefits are of 
PAE activity.
    There are supporters of what PAEs are doing who argue that 
PAEs allow particularly small inventors to monetize their 
patents. And then there are critics who say that this activity 
is really creating a burden and imposing undue costs on 
business. And so we are trying to examine and shed light on 
that broader policy question.
    Mr. Jeffries. Thank you. And when do you expect to complete 
that study?
    Ms. Ramirez. Studies that are analogous to this one in the 
past have taken approximately a year and a half to 2 years. We 
are going to move as quickly as we can, but that gives you a 
general idea about the possible timing.
    Mr. Jeffries. Thank you.
    And, Mr. Baer, the proposed settlement between American 
Airlines and US Air, in my understanding, requires that the 
combined airlines divest approximately 7 percent of their slots 
from LaGuardia Airport. Is that correct?
    Mr. Baer. I think that is correct, yes, sir.
    Mr. Jeffries. And how did the DOJ arrive at that 7 percent 
number?
    Mr. Baer. We asked them to divest certain slots that were 
already being leased to Southwest and that were actually 
producing significant consumer benefits. If the merger went 
forward, those slots would have reverted back to the new 
American. So we were able to maintain that competitive 
presence.
    There was a total of 34 slots. I believe that was the 
number of slots that American brought to the table, that we 
were basically saying that there cannot be growth on the part 
of the combined airline in terms of slots in and out of 
LaGuardia. That was certainly our position at National Airport 
here. I believe it was the same as to La Guardia.
    Mr. Jeffries. After the divestiture, will those 34 slots be 
held by Southwest Airlines or will they be open to a process by 
which other airlines will have an opportunity to secure them?
    Mr. Baer. Certain of the slots that are currently leased to 
Southwest, they will have the right of first refusal to come in 
and get those. The rest we will open up to other air carriers 
to come in and persuade us that they are going to compete those 
assets aggressively on behalf of the American consumer.
    Mr. Jeffries. Thank you.
    Thank you Mr. Chair. I yield back.
    Mr. Bachus. Thank you.
    I will now ask some questions, and at the end of that that 
will be the end of our hearing.
    I want to start with what I consider maybe the most 
important point, and that Mr. Smith brought up, and I know Ms. 
Ramirez, or Chairwoman, you responded that you think the 
process is fair. So I want to ask you to keep an open mind.
    As he said, every time that the FTC has decided to bring an 
action and it goes to the administrative law judge, in a 
certain number of those cases the administrative law judge 
rules in favor of the company that action is being brought 
against. But in all of those cases over the last 20 years when 
it went back to the Commission, there was a vote to proceed. So 
that was actually against the administrative law judge. And 
then when you proceeded with the case and it was appealed by 
the defendant and it went to a Federal district court, the 
Commission was reversed at four times the rate that Federal 
district judges normally reverse cases.
    So it does appear, I mean over the last 20 years, and I 
know that is, you know, you say, well, that is 20 cases, but it 
appears as if the Commission always proceeds, I mean, even if 
the administrative law judge says I have got serious questions. 
And I know some of those decisions by the administrative law 
judge have been 20 or 30 pages of saying, no, this isn't the 
case, and then the Commission decides to proceed.
    And then in a number of those cases where the company then 
appeals to the Article 3 courts, the Article 3 courts decide 
that the FTC has erred. And it at least in calling balls and 
strikes, it does appear as if it is somewhat stacked against 
the defendant. So I am not going to--I know you have already 
responded.
    And one thing, we said maybe what would clear this up is if 
you could issue guidance. And I know we got a letter back from 
you that the Senators and I, we wrote, saying that you didn't 
feel like you--instead of issuing guidance on the FTC's Section 
5 authority, you ought to just look at the cases. You have 
issued guidance on consumer unfairness. I am just going to urge 
you again to reconsider.
    Ms. Ramirez. So if I may very briefly say a couple of 
things. One is, in terms of the statistics, I think it is a 
more nuanced picture than has been described. And I am happy to 
provide more detail----
    Mr. Bachus. Sure, and I would love that. Let's start with 
that.
    Ms. Ramirez. But let me just say that I haven't examined 
the statistics that Commissioner Wright mentions.
    Mr. Bachus. Sure. And even, you know, not only two of the 
Commissioners, two of the four Commissioners have said they 
don't believe it is fair, but also the editorial. And he 
testified before this Congress, Mr. Balto, who was a policy 
director at the FTC, even he, you know, he says that there 
needs to be some changes, that it hadn't been fair. And what I 
am saying, you know, it is very costly when these cases are 
brought.
    Now, I want to say in that regard, I want to commend the 
Department of Justice for what you have done on discovery to 
lighten the cost. Because, as you know, and I am a former 
litigator, companies, you know, I represented the railroad, 
sometimes you settled just because the discovery is so 
expensive. And I commend that, that you have lessened that. I 
think that in and of itself makes a fairer system.
    But I am just saying to you, let's continue this dialogue. 
I note, you know, you appear to be sort of dug in on this 
issue.
    Ms. Ramirez. No.
    Mr. Bachus. And I understand you have looked at it. But 
let's continue to talk. Maybe what you do is you just give some 
clearer guidance if you could.
    Ms. Ramirez. If I may just take a minute to respond very 
briefly. I want to separate the two questions that you asked, 
one that relates to Section 5 guidance and the other about the 
concerns about our administrative process.
    I think they are separate because the issue that you raised 
and the issue that some of my fellow Commissioners have raised 
about Section 5 guidance relates to a very narrow, limited 
number of cases in which the agency has acted beyond the 
literal scope of the antitrust laws.
    Mr. Bachus. But in most cases, it is unanimous.
    Ms. Ramirez. So the broader question about----
    Mr. Bachus. It is not? Okay.
    Ms. Ramirez [continuing]. Those involve the Sherman Act. I 
want to clarify that the Section 5 issue about guidance really 
does relate to a small number of cases, and I am happy to 
provide you with additional information.
    And let me also say that I take your concerns very 
seriously and I am open to and we are going to continue to have 
an internal dialogue about that Section 5 issue.
    Mr. Bachus. That is all I ask for.
    The airline merger. You answered my most serious concern, 
Assistant Attorney General, when you said that you asked US Air 
and American to preserve those flights to smaller cities and 
towns, the commuter flights, and that is what a lot of our 
concern was, will those flights go away? Because I have even 
had Members of Congress come up to me and say, hey, they are 
now flying to Bangor. They have never done that. They are now 
flying to Knoxville, a direct flight. So I really appreciate 
that.
    I do wonder if, and two or three others mentioned the 
legacy carriers where you have kind of carved out the low-cost 
carriers, and I understand the benefit where that brings down 
the cost between Chicago and Washington and different large 
cities and Washington. But the legacy carriers also have the 
small commuter planes. For instance, Dallas, Love Field, there 
is a monopoly by Southwest there. And I join everybody else, 
Southwest brought down fares in Birmingham, they halved the 
fares.
    I do want to say I looked at this editorial and the third 
paragraph, I would never say The New York Times would mislead 
someone, but it says that competition would decline 
significantly on more than a thousand routes where the two 
companies currently compete head to head. They don't really 
compete effectively head to head. And there is only overlapping 
routes.
    I don't consider if you have to fly from here to Dallas and 
then back to Birmingham over an 8-hour period that that is head 
to head with a direct flight from here. So I think that is a 
little bit of a--it doesn't tell the complete story.
    And then it says that they would control 69 percent of the 
takeoffs at Reagan. Well, they control more than that now. So 
it is not like you made that decision.
    But do you have any further comment? But I do appreciate 
what you said about commuter airlines.
    Mr. Baer. Thank you, sir. And I think by the divestitures 
we are requiring at National we will ensure that not all of 
those slots--that it will be closer to about 56 percent of the 
slots--that new American will hold, and the rest of those slots 
we are going to make sure go out to folks who are going to 
provide more opportunity to go more places out of National 
Airport.
    Mr. Bachus. All right. Thank you.
    I want to quickly say that there are a lot of concerns 
among Members about the hospital mergers, which were brought 
up, and also the community pharmacist issue. And I appreciate, 
I know you all moved and took some action on a hospital merger, 
and I think that is a concern, so I appreciate your vigilance 
on that. And you have also said to other Members that you are 
aware of the importance of community and local pharmacists and 
the role they sometimes play on advising people, that ability 
to go in and talk to your local pharmacist.
    With that, I would just say Rachel at Card Services, you 
know, we get more calls on that than anything else. And that is 
a criminal enterprise. And I just urge you to make that a 
priority because Card Services, this so-called Card Services 
harasses millions of Americans. You know, their phone rings 18 
hours a day. And I know we have discussed that and you all are 
trying to innovative, and this is a sophisticated criminal 
enterprises. But they totally flaunt the law. Their arrogance 
is stunning.
    Let me close by saying what other Members have said, and 
Attorney General Holder I know is concerned about this issue 
and is addressing it. But we imprison more young Black men 
between the ages of 20 and 34 in this country than South Africa 
under apartheid, which was considered a very regressive regime 
against our black citizens and actually racist. And it is a 
national tragedy. It really is. And when the Bureau of Prisons 
says we are manufacturing prisoners, not reforming them, 
manufacturing criminals.
    Violence has dropped since 1980 by a third. In 1980 if you 
looked at the racial makeup of our Federal prisons there was 
very little demographic variant. Since 1980 suddenly young 
Black men, if you were to look at the statistics, have suddenly 
turned into hardened criminals. And I don't think that is the 
case. And a lot of it is the crack cocaine differential and we 
have moved against that.
    But I think we have a lot of work yet to be done. And even 
in certain regulations I think we are overcriminalizing, taking 
regulations that should be civil penalties. And I know you 
mentioned there are some that shouldn't and have to be careful.
    I am on a task force, in fact I was at the Supreme Court 
last night with the new members of the Sentencing Commission 
were being sworn in, and the Justices there know there is a 
real problem, they are looking for the Congress. I talked to 
two of the Justices.
    There is a bipartisan realization in the House and Senate 
that it is a very broken system. And I think it is a civil 
rights and a human rights issue and that it is not your 
Department. But it is, I think, one of the real human rights 
issues of our age.
    I actually know one Federal judge, a lady, whose husband, 
because of the story she tells him, goes to the Federal 
penitentiary in Alabama and visits prisoners every Monday. And 
I encourage the Administration to speak out on this.
    The American people don't understand it. I think they just 
say, well, you know let's--but these are not violent criminals 
or if they are, we have turned them into that by ago taking a 
young 19-year-old who might have been a mule. A lot of these 
people their mental capacity, they are actually retarded, and 
they have been taken advantage of. And they are not, once they 
come out of prison, sometimes their chances of advancing have 
pretty much, in many cases, dissipated.
    I think it is, and I have talked to Senator Leahy, the 
Senate is going to move legislation, and it is going to come 
over to the House. And it is going to have Rand Paul, Mike Lee, 
Barbara Mikulski. And how do you get people on opposite ends? 
And here, Mr. Cohen and I and Chairman Goodlatte, we are all 
committed, Raul Labrador. This is something that we need to 
address. And I know that Governor Perry in Texas has talked 
about need for change.
    So I don't think anything else we have discussed today 
affects as many people so dramatically. China has four and a 
half times more population, I think, than we are. We have more 
people in prison than China. We are giving the longest 
sentences today in the history of our country.
    So that concludes our hearing. Thank you very much.
    This is just for the record. You all can go ahead. This 
concludes today's hearing. Thanks to all our witnesses for 
attending. Without objection, all Members will have 5 
legislative days to submit additional written questions for the 
witnesses or additional materials for the record.
    This hearing is adjourned.
    [Whereupon, at 10:54 a.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

 Prepared Statement of the Honorable Steve Cohen, a Representative in 
Congress from the State of Tennessee, and Ranking Member, Subcommittee 
           on Regulatory Reform, Commercial and Antitrust Law
    The U.S. Supreme Court has referred to the federal antitrust laws 
as ``the Magna Carta of free enterprise,'' declaring them ``a 
comprehensive charter of economic liberty aimed at preserving free and 
unfettered competition.''
    Effective antitrust enforcement is key to ensuring a vibrant, 
competitive marketplace that rewards innovation and creativity and 
offers consumers greater choice and lower prices. In the absence of 
antitrust enforcement, companies have less incentive to compete, and 
more incentive to maintain high profit margins at the expense of 
consumer welfare.
    At the forefront of the effort to ensure that competition remains 
free and fair are the Nation's principal antitrust enforcement 
agencies, the Antitrust Division of the Department of Justice and the 
Federal Trade Commission's Bureau of Competition.
    I applaud both agencies for their vigorous efforts to enforce 
federal antitrust laws in recent years. For example, the Justice 
Department won a total victory against Apple and stopped it from 
conspiring with publishers to raise prices for consumers. Thanks to the 
Department's work, consumers will enjoy e-books that are 40% cheaper 
than they might have been.
    The Department has also successfully obtained criminal fines of 
more than $1 billion and obtained prison sentences for 28 people for 
criminal antitrust violations, which are the most harmful types of 
anti-competitive behavior like price-fixing and bid-rigging.
    Similarly, the FTC has had a number of notable successes on behalf 
of consumers, including its victory before the Supreme Court in FTC v. 
Actavis, which found so-called pay-for-delay agreements to be subject 
to the antitrust laws.
    Meanwhile, both agencies have established the principle that 
holders of standard essential patents may not seek to exclude 
competitors who rely on the standard technology covered by such patents 
and must license such technology on reasonable and non-discriminatory 
terms.
    My constituents are all too aware of the consequences of lax 
antitrust enforcement. As I noted back in February, the merger of Delta 
Airlines and Northwest Airlines has been nothing short of disastrous 
for Memphis.
    Richard Anderson, Delta's CEO, promised me in this very room back 
in 2008 that there would be ``no hub closures'' and that the merged 
airline would maintain the international flight to Amsterdam. At a 
meeting in Memphis, he pledged to city leadership that the Northwest/
Delta merger would be one of addition, not subtraction.
    Since then, there has been a string of broken promises. Delta cut 
the international flight, repeatedly cut service to Memphis and, this 
year, closed its Memphis hub. Service has been cut from 240 flights a 
day to 40.
    The result was that my constituents were hurt, with a substantial 
loss of air service and jobs, which ultimately harms Memphis's 
competitiveness as a business destination with other cities.
    Protecting consumers from antitrust violations is important. In 
addition, though, I also hope that Mr. Baer will tell the Attorney 
General that we also need to protect individuals from unjust sentences, 
as I outlined in a June 18, 2013 letter to the President, for which I 
am still awaiting a response.
    I look forward to hearing from our witnesses as to what efforts the 
antitrust enforcement agencies are currently undertaking to help ensure 
free and fair competition in all industries.

                                

Prepared Statement of the Honorable John Conyers, Jr., a Representative 
 in Congress from the State of Michigan, and Ranking Member, Committee 
                            on the Judiciary
    Today's oversight hearing on the Department of Justice's Antitrust 
Division and the Federal Trade Commission's Bureau of Competition, 
provides an excellent opportunity for us to focus on the critical 
purpose of antitrust law: to ensure that businesses do not behave in 
ways that injures markets, and, ultimately, consumers.
    As to mergers, this means that any transaction that would result in 
a company obtaining an unfettered ability to raise prices or otherwise 
harm consumers is contrary to basic antitrust policy.
    Thus, we should be especially skeptical about the potential 
detriment presented by a rapid succession of big mergers in a given 
industry.
    Unfortunately, antitrust scrutiny of mergers has been woefully 
insufficient over the past 30 years until only recently.
    The very fact that many industries are now dominated by just a 
handful of very large firms attests to this failure of aggressive 
scrutiny.
    There has been a wave of mergers in industry after industry. Just a 
few examples include the Whirlpool-Maytag, AT&T-BellSouth, AOL-Time 
Warner, and JPMorganChase-BankOne mergers. In the banking industry 
alone there have been 47 mergers since 2001.
    Basic economics and common sense should tell us that a few dominant 
firms forces consumers to pay higher prices and to accept suboptimal 
products or services.
    This hands-off approach to antitrust merger enforcement reflects 
the misguided view that corporate power should trump other interests, 
including the public interest. As a result, the trend in antitrust law 
has been against the American consumer.
    Fortunately, recent antitrust enforcement initiatives of both the 
Justice Department and the Federal Trade Commission appear to reflect a 
positive change from prior practice.
    I am very heartened by the renewed vigor in antitrust enforcement 
that these agencies have exhibited in the past year or so.
    Under the Obama Administration, the Justice Department has 
aggressively pursued litigation to block large, high-profile, and 
potentially anticompetitive mergers, including lawsuits to block the 
proposed mergers of AT&T and T-Mobile, Anheuser-Busch InBev and Grupo 
Modelo and, most recently, American Airlines and US Airways.
    Such actions would, for the most part, have been unexpected in 
previous Administrations going back a generation.
    Even more important is the fact that these suits have achieved pro-
consumer results.
    AT&T and T-Mobile dropped their plans to merge, while Anheuser 
Busch agreed to divest itself of all of Grupo Modelo's U.S. business in 
response to the DOJ's lawsuit.
    The FTC, meanwhile, was able to achieve an important victory for 
consumers before the U.S. Supreme Court this year in the FTC v. Actavis 
case, which held that agreements between brand-name and generic drug 
manufacturers to delay introduction of cheaper generic drugs can be 
subject to antitrust laws.
    Such successes, however, do not necessarily mean further oversight 
is unnecessary. For instance, the Justice Department's tentative 
settlement agreement announced earlier this week with respect to the 
proposed American Airlines and US Airways presents some concerns.
    While this settlement agreement leaves consumers somewhat better 
off than they would have been had the merger gone through as proposed, 
I remain concerned that the new merged carrier--which would be the 
largest in the world--will result in only four domestic airlines 
controlling more than 80% of the market.
    As the New York Times noted in an editorial yesterday, ``the 
agreement simply ignores the central concern the Justice Department 
expressed in its lawsuit: the four big airlines--United, Delta, 
Southwest and the merged American--will have an even greater incentive 
to raise fares and fees because consumers will have fewer choices.''
    In closing, I note that strong antitrust enforcement is not 
possible without adequate resources.
    As with other federal agencies, the DOJ and the FTC must have 
sufficient funding to pay for high-caliber attorneys, economists, and 
other staff and for vigorous and thorough investigations and, when 
necessary, litigation.
    The continuing budget battles in Congress, including sequestration 
and the recent fight over a continuing resolution that led to the 
shutdown of the federal government, threaten to sap already limited 
resources for all of our federal agencies.
    Some of the recent successes in antitrust enforcement would be 
undermined, and future enforcement efforts could be compromised. That 
could return us to the bad old days of lax antitrust enforcement, with 
higher prices and fewer choices for consumers. I urge my colleagues to 
make every effort not to go down that road.





  Response to Questions for the Record from the Honorable William J. 
  Baer, Assistant Attorney General, Antitrust Division, United States 
                         Department of Justice




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Response to Questions for the Record from the Honorable Edith Ramirez, 
                  Chairwoman, Federal Trade Commission



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