[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
RECENT TRENDS IN INTERNATIONAL ANTITRUST ENFORCEMENT
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HEARING
BEFORE THE
SUBCOMMITTEE ON REGULATORY REFORM,
COMMERCIAL AND ANTITRUST LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
JUNE 29, 2017
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Serial No. 115-26
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Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan,
Wisconsin Ranking Member
LAMAR SMITH, Texas JERROLD NADLER, New York
STEVE CHABOT, Ohio ZOE LOFGREN, California
DARRELL E. ISSA, California SHEILA JACKSON LEE, Texas
STEVE KING, Iowa STEVE COHEN, Tennessee
TRENT FRANKS, Arizona HENRY C. ``HANK'' JOHNSON, Jr.,
LOUIE GOHMERT, Texas Georgia
JIM JORDAN, Ohio THEODORE E. DEUTCH, Florida
TED POE, Texas LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah KAREN BASS, California
TOM MARINO, Pennsylvania CEDRIC L. RICHMOND, Louisiana
TREY GOWDY, South Carolina HAKEEM S. JEFFRIES, New York
RAUL LABRADOR, Idaho DAVID CICILLINE, Rhode Island
BLAKE FARENTHOLD, Texas ERIC SWALWELL, California
DOUG COLLINS, Georgia TED LIEU, California
RON DeSANTIS, Florida JAMIE RASKIN, Maryland
KEN BUCK, Colorado PRAMILA JAYAPAL, Washington
JOHN RATCLIFFE, Texas BRAD SCHNEIDER, Illinois
MARTHA ROBY, Alabama
MATT GAETZ, Florida
MIKE JOHNSON, Louisiana
ANDY BIGGS, Arizona
Shelley Husband, Chief of Staff & General Counsel
Perry Apelbaum, Minority Staff Director & Chief Counsel
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Subcommittee on Regulatory Reform, Commercial and Antitrust Law
TOM MARINO, Pennsylvania, Chairman
BLAKE FARENTHOLD, Texas, Vice-Chairman
DARRELL E. ISSA, California DAVID CICILLINE, Rhode Island
DOUG COLLINS, Georgia HENRY C. ``HANK'' JOHNSON, Jr.,
KEN BUCK, Colorado Georgia
JOHN RATCLIFFE, Texas ERIC SWALWELL, California
MATT GAETZ, Florida PRAMILA JAYAPAL, Washington
BRAD SCHNEIDER, Illinois
C O N T E N T S
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JUNE 29, 2017
OPENING STATEMENTS
Page
The Honorable Tom Marino, Pennsylvania, Chairman, Subcommittee on
Regulatory Reform, Commercial and Antitrust Law, Committee on
the Judiciary.................................................. 1
The Honorable David Cicilline, Rhode Island, Ranking Member,
Subcommittee on Regulatory Reform, Commercial and Antitrust
Law, Committee on the Judiciary................................ 2
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the
Judiciary...................................................... 4
The Honorable John Conyers, Jr., Michigan, Ranking Member,
Committee on the Judiciary..................................... 5
WITNESSES
Ms. Deborah A. Garza, Esq., Partner and Co-chair, Antitrust and
Competition Law Practice Group, Covington & Burling LLP
Oral Statement............................................... 8
Prof. Koren W. Wong-Ervin, Esq., Director of the Global Antitrust
Institute (GAI), Adjunct Professor of Law at Antonin Scalia Law
School, George Mason University
Oral Statement............................................... 10
Mr. Alden Abbott, Esq., Deputy Director and the John, Barbara,
and Victoria Rumpel Senior Legal Fellow Edwin Meese III Center
for Legal and Judicial Studies, The Heritage Foundation
Oral Statement............................................... 11
Prof. Eleanor M. Fox, Esq. , Walter J. Derenberg Professor of
Trade Regulation, New York University School of Law
Oral Statement............................................... 13
Mr. Randy M. Stutz, Esq., Associate General Counsel, American
Antitrust Institute
Oral Statement............................................... 14
OFFICIAL HEARING RECORD
Responses to Questions for the Record from Deborah A. Garza,
Esq., Partner and Co-chair, Antitrust and Competition Law
Practice Group, Covington & Burling LLP........................ 32
Responses to Questions for the Record from Prof. Koren W. Wong-
Ervin, Esq., Director of the Global Antitrust Institute (GAI),
Adjunct Professor of Law at Antonin Scalia Law School, George
Mason University............................................... 35
Responses to Questions for the Record Mr. Alden Abbott, Esq.,
Deputy Director and the John, Barbara, and Victoria Rumpel
Senior Legal Fellow, Edwin Meese III Center for Legal and
Judicial Studies, The Heritage Foundation...................... 43
Responses to Questions for the Record from Prof. Eleanor M. Fox,
Esq., Walter J. Derenberg Professor of Trade Regulation, New
York University School of Law.................................. 46
Responses to Questions for the Record from Mr. Randy M. Stutz,
Esq., Associate General Counsel American Antitrust Institute... 48
Additional Material Submitted for the Record
Statement for the Record from Greg S. Slater Vice President & Director
of Antitrust, Standards and IP Policy Intel Corporation submitted
by the Honorable Tom Marino, Pennsylvania, Chairman, Subcommittee
on Regulatory Reform, Commercial and Antitrust Law, Committee on
the Judiciary. This material is available at the Committee and can
be accessed on the Committee Repository at:
http://docs.house.gov/meetings/JU/JU05/20170629/105986/
HHRG-115-JU05-20170629-SD010.pdf
Hills & Company Letter submitted by the Honorable Tom Marino,
Pennsylvania, Chairman, Subcommittee on Regulatory Reform,
Commercial and Antitrust Law, Committee on the Judiciary. This
material is available at the Committee and can be accessed on the
Committee Repository at:
http://docs.house.gov/meetings/JU/JU05/20170629/105986/
HHRG-115-JU05-20170629-SD011.pdf
ACT/The App Association Letter submitted by the Honorable Tom Marino,
Pennsylvania, Chairman, Subcommittee on Regulatory Reform,
Commercial and Antitrust Law, Committee on the Judiciary. This
material is available at the Committee and can be accessed on the
Committee Repository at:
http://docs.house.gov/meetings/JU/JU05/20170629/105986/
HHRG-115-JU05-20170629-SD012.pdf
International Competition Policy Expert Group Report submitted by the
Honorable Tom Marino, Pennsylvania, Chairman, Subcommittee on
Regulatory Reform, Commercial and Antitrust Law, Committee on the
Judiciary. This material is available at the Committee and can be
accessed on the Committee Repository at:
http://docs.house.gov/meetings/JU/JU05/20170629/105986/
HHRG-115-JU05-Wstate-GarzaD-20170629-SD001.pdf
RECENT TRENDS IN INTERNATIONAL ANTITRUST ENFORCEMENT
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THURSDAY, JUNE 29, 2017
House of Representatives
Subcommittee on Regulatory Reform, Commercial and Antitrust Law
Committee on the Judiciary
Washington, DC.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 2141, Rayburn House Office Building, Hon. Tom Marino
[Chairman of the Subcommittee] presiding.
Present: Representatives Marino, Goodlatte, Collins, Buck,
Ratcliffe, Cicilline, Conyers, Johnson of Georgia, and
Schneider.
Staff Present: Ryan Dattilo, Counsel; Andrea Woodard
(Lindsey), Clerk; Slade Bond, Minority Counsel; Joe
Ehrenkrantz, Minority Professional Staff Member; and Perry
Apelbaum, Minority Chief Counsel and Staff Director.
Mr. Marino. Good morning. The Subcommittee on Regulatory
Reform, Commercial and Antitrust Law will come to order. On
behalf of Mr. Cicilline and myself, I apologize for the two,
three, or four times that this hearing has been postponed and
rescheduled, but it is not like we were not doing anything. We
had a lot of things going on and still do, but please accept
our apologies.
Without objection, the Chair is authorized to declare
recesses of the committee at any time. Welcome, everyone, to
today's hearing on recent trends in international antitrust
enforcement. And I now recognize myself for an opening
statement.
Antitrust and competition laws have existed in the United
States since the late 1800s. It was not until the last 30
years, however, that the adoption of such laws began to spread
globally. Today, nearly every Nation in the world has some form
of antitrust or competition law. As a result of this global
expansion, there have been efforts to enhance consistency and
advance best practices through the establishment of several
international organizations. These organizations include the
International Competition Network, the Organization for
Economic Cooperation and Development Competition Committee, and
the United Nations Conference on Trade and Development.
U.S. antitrust agencies have been active participants in
these international organizations, with the goal of promoting
consumer welfare and economic efficiency as the top priorities
of competition policy. Despite their efforts, consumer welfare
and economic efficiency are only one aspect of a multitude of
goals in the global antitrust regulatory environment.
These goals frequently include several other unrelated
factors. For example, competition rules in several foreign
jurisdictions include inherently subjective concepts, such as
protecting fair competition and social public interest, and
even promoting the healthy development of the socialist market
economy.
These subjective factors often result in legal treatment of
business conduct that differs profoundly on a case-by-case
basis, as it is driven by political considerations. These
differences have begun to have considerable impact on U.S.
companies and citizens. In particular, there have been recent
concerns relating to due process in foreign jurisdictions, the
treatment of intellectual property rights, the imposition of
extraterritorial remedies, and nonaction against state-owned
enterprises and national champions.
The recent report, issued by the International Competition
Policy Expert Group and commissioned by the Chamber of
Commerce, found that certain of our major trading partners
appear to have used their laws to actually harm competition by
U.S. companies, protecting their own markets from foreign
competition, promoting national champions, forcing technology
transfers, and, in some cases, denying U.S. companies
fundamental due process.
We convene today's hearing to examine the enforcement of
competition laws across the globe, with a focus on this report
and recommendations to address these prevalent issues. It is
essential we ensure that U.S. companies are treated fairly,
consistently, and objectively by international jurisdictions.
Today's hearings will help us inform the committee regarding
several recent trends in international competition law
enforcement.
Additionally, the hearing will provide us insight in how
the administration and the executive agencies can coordinate
with each other on the treatment of U.S. companies and citizens
abroad. We have an excellent set of witnesses before us today,
who will help us to evaluate these issues more fully and
consider the next steps in addressing them. I look forward to
our witnesses' testimony.
Mr. Marino. The Chair now recognizes the Ranking Member of
the Subcommittee on Regulatory Reform, Commercial and Antitrust
Law, Mr. Cicilline, former mayor in the State of Rhode Island,
my friend, for his opening statement.
Mr. Cicilline. Thank you, Mr. Chairman, and welcome to our
witnesses, and I too apologize for the inconvenience in
scheduling, but really grateful that you are here.
Today's hearing will focus on a recently-issued report by
the International Competition Policy Expert Group, concerning
the need for fair, transparent, and impartial enforcement of
competition laws internationally. The U.S. Chamber of Commerce
commissioned this report for the purposes of developing
recommendations for a potentially more effective and better-
integrated international trade and competition law strategy.
According to the report, there is increasing concern among
American businesses that some major trading partners are, in
some cases, denying foreign companies fundamental due process
and, in other cases, applying their competition laws to protect
their home markets from foreign competition, promote national
champions, and/or force technology transfers.
Although this report did not engage in fact finding or
study of specific cases involving procedural unfairness, it
made a series of recommendations to address this overarching
concern. These recommendations include the establishment of a
White House working group to study and address these concerns
through targeted sanctions. While I agree that resolving
procedural divergence in international antitrust enforcement is
a laudable goal, I am concerned that the use of extraordinary
trade remedies to resolve minor disputes may undermine our
national interests. This is particularly true given that
nations may not apply their own laws in a discriminatory manner
against American companies under current law.
For example, the dispute settlement body at the World Trade
Organization has provided the U.S. with an avenue to pursue or
defend trade disagreements. As of 2015, the United States was a
direct party to 232 cases either as a complainant or as a
respondent. The U.S. has won or settled without litigation a
majority of these active cases. The United States has more than
a century of experience in developing and expanding the
antitrust laws.
Over the past several decades, the United States antitrust
agencies have relied on this experience to engage their
international counterparts in ongoing, thoughtful dialogue to
build consensus on advancing competition and reduce cross-
border inconsistencies. These relationships are built on a
foundation of trust and mutual respect. Whether it is a
memorandum of understanding, a joint investigation, or just a
phone call, international cooperation in criminal and civil
enforcement depends on effective communication of shared goals
to protect and promote competition. Bilateral cooperation may
not work in every case, but it does preserve and strengthen the
relationships that will be so crucial to successfully working
together in the future, as former Assistant Attorney General
Renata Hess observed last year.
In contrast, using trade remedies to resolve the procedural
concerns of American businesses in international proceedings
could backfire. Abusive sanctions could have serious,
unforeseen consequences and should be reserved, in my
judgement, for egregious misconduct. I would also note that
working toward substantive and procedural consistency should
not be confused with seeking identical outcomes among the more
than 130 international competition authorities.
Earlier this year, together with Ranking Member Conyers and
leaders of the Congressional Progressive Caucus, I sent a
letter urging additional congressional appropriations for the
purpose of reducing corporate concentration through the
vigorous enforcement of the antitrust laws. As I noted then,
there is mounting evidence of overall decline of antitrust
enforcement in the United States over the past several decades,
and the alarming result of this decline is increased costs and
less choice for consumers, wage stagnation and depression for
workers, diminished private investment, innovation and small
business ownership, particularly among minorities, and reduced
political freedom due to the outsized political influence of
large corporations.
American companies should receive fair treatment abroad,
but antitrust scrutiny is not in and of itself unfair or
discriminatory. As Professor Fox will testify today, ``Since
standards of misuse of power differ, and the U.S. has one of
the least interventionist monopoly laws in the world, these
American firms may understandably feel that they are unfairly
targeted by our sister trading partners.'' Just like Congress
may establish enforcement priorities through appropriations or
antitrust exemptions, international systems may adjust their
own enforcement priorities to align with national policy goals.
I look forward to exploring these issues in today's
hearings. I thank our panel of expert witnesses for their
testimony and input on this topic. I thank the Chairman for
holding today's hearing, and I yield back the balance of my
time.
Mr. Marino. The Chair now recognizes the Chairman of the
full Judiciary Committee, Mr. Goodlatte of Virginia, for his
opening statement.
Chairman Goodlatte. Thank you, Mr. Chairman, I appreciate
your holding this hearing.
The Judiciary Committee routinely exercises its oversight
authority to ensure that our Nation's antitrust laws are
applied in a manner that is transparent, fair, predictable, and
reasonably stable over time. A natural extension of this
oversight is ensuring that our Nation's companies and citizens
receive comparable treatment in foreign jurisdictions. As
commerce becomes an increasingly global enterprise, the manner
in which antitrust and competition laws are applied to
companies and citizens located or engaged in business outside
of the United States also grows in importance.
Over the past several years, reports have surfaced that
certain jurisdictions are deploying their antitrust and
competition laws in manners that strain the boundaries of due
process, focus on advancing domestic industrial policies, or
seek to extract valuable American innovations without fair
compensation. I would like to thank Chairman Marino for holding
today's hearing to delve into these potentially serious abuses
and address potential solutions.
Today's testimony will help the committee gain a better
understanding of the seriousness of these issues, and how they
might be addressed. Furthermore, it will provide a record
regarding how the administration and our executive agencies,
including our antitrust enforcement agencies, can coordinate
among each other and engage with foreign countries on
international competition law enforcement.
This hearing also serves as a reminder that the United
States should be a leader in fair and reasonable antitrust
enforcement. To that end, enacting important antitrust reforms,
such as the SMARTER Act, will help to ensure that the U.S.
continues to be an example to international competition law
authorities.
I look forward to hearing from today's excellent panel of
expert witnesses on these important issues, and I yield back.
Thank you, Mr. Chairman.
Mr. Marino. Thank you. The Chair now recognizes the Ranking
Member of the full Judiciary Committee, Mr. Conyers of
Michigan, for his opening statement.
Mr. Conyers. Thank you, Mr. Chairman. Top of the morning to
the witnesses. We have got a full slate here, and it is
appropriate, because international antitrust enforcement is a
subject that we have not really neglected; we just have not got
around to yet. And this is a good first step toward the inquiry
and reexamination of a very complex subject.
Now, given the increasingly interconnected economic
relationships among nations, American firms depend on the fair
enforcement of antitrust and competition laws by other
countries as a critical factor with respect to their ability to
do business abroad. Yet some American firms believe, in my
view, that certain countries do not consistently apply their
competition laws in a sound and nondiscriminatory manner. They
allege a lack of due process and transparency, when these firms
have become the target of antitrust investigations by
competition authorities in those countries. Accordingly, we
should keep the following points in mind as we discuss foreign
antitrust enforcement practices.
My greatest concern is whether and to what degree these
problematic foreign antitrust enforcement practices impact
American jobs. To the extent that foreign antitrust enforcement
actions unfairly disadvantage American firms, and to the extent
this results in American companies going out of business and
American workers losing their jobs, I, of course, am deeply
concerned, since jobs, justice, and peace is one of my rallying
presentations across the years.
The witnesses should provide us guidance on just how real
and extensive this problem is. That being said, however, there
are and should be limits to what we can insist on from other
countries. When it comes to antitrust and competition policy,
divergences in outlook and philosophy are not always rooted in
a desire to protect national champions, or to discriminate
against American firms. Various countries may be at different
stages of development, with laws shaped by culture and
historical circumstances that, of course, differ from ours.
Where complaints about other countries' laws simply reflect
such differences, rather than concerns about discrimination,
due process, or transparency, we should be careful about
overstating our criticism and reaction.
And finally, we must be careful not to provoke retaliation
against American businesses with any effort to penalize or
pressure any countries to change their enforcement practices.
Many helpful recommendations have been made regarding how to
address the concerns of American businesses about foreign
antitrust enforcement practices. The best ones emphasize
dialogue, multicultural standards, and agreements on best
practices, and the promotion of cooperation among international
antitrust enforcement agencies.
An excessively punitive approach, however, may ultimately
prove counterproductive and be harmful to American interests in
the long run. So, I thank you for your presence here, and look
forward with anticipation to this discussion. Thank you, Mr.
Chairman.
Mr. Marino. Thank you. Without objection, other members'
opening statements will be made part of the record.
Mr. Marino. I will begin today's hearing by swearing in our
witnesses before I introduce you. If you would all please stand
and raise your right hand.
Do you swear that the testimony that you are about to give
before this committee is the truth, the whole truth, and
nothing but the truth, so help you God?
Please let the record reflect that all the witnesses have
responded in the affirmative. Please be seated. Thank you. And
if I mispronounce anyone's name, please do not hesitate to tell
me.
Ms. Garza. Thank you, Chairman.
Mr. Marino. Ms. Garza, I am going to introduce each of you
first, and then ask you to make your statements. Ms. Garza is a
partner at Covington & Burling, and the co-chair of the firm's
antitrust and competition law practice group. Ms. Garza has
been involved in some of the largest antitrust matters,
including the merger of Exxon and Mobil, and the U.S.
Government's suit against Microsoft, the USFL suit against the
NFL, and many other litigation and regulatory matters on behalf
of Fortune 500 companies.
Before working at Covington, Ms. Garza served as Acting
Assistant Attorney General in charge of the Antitrust Division
at the Department of Justice, and also as Deputy Assistant
Attorney General for Regulatory Affairs overseeing the matters
in the telecommunications, transportation, energy, health care,
agricultural, insurance, broadcast radio, real estate, and
other industries.
During two prior tours of service, Ms. Garza served as a
special assistant, and as Chief of Staff and counselor to the
Assistant Attorney General in charge of the Antitrust Division.
Ms. Garza was also appointed by President George W. Bush to
chair the Antitrust Modernization Commission, a bipartisan,
blue-ribbon panel created by Congress to study and report to
the President and Congress on the state of antitrust
enforcement in the United States. Ms. Garza received her B.S.
from Northern Illinois University and her J.D. from the
University of Chicago. Welcome this morning.
Professor Wong-Ervin is the Director of the Global
Antitrust Institute and an adjunct professor of law at the
Antonin Scalia Law School at George Mason University. Prior to
joining GAI, Professor Wong-Ervin served as counsel for
intellectual property and international antitrust in the Office
of International Affairs at the Federal Trade Commission. She
also served as an attorney advisor to Federal Trade
Commissioner Joshua D. Wright.
Prior to working at the Commission, Professor Wong-Ervin
spent almost a decade in private practice, focusing on
antitrust litigation and government investigations. She
currently serves on the International Antitrust Task Force, the
Antitrust Due Process Task Force of the ABA, and was previously
co-chair of the ABA's 2016 Antitrust in Asia Conference.
Professor Wong-Ervin is also coeditor of Competition Policy
International's North American column, and also serves as co-
chair of the Federalist Society Antitrust and Consumer
Protection Working Group for the Law and Innovation Project.
Professor Wong-Ervin received her bachelor's degree from Santa
Clara University and graduated second in her class from the
University of California, Hastings College of Law, where she
was associate editor of the Hastings Law Review. Welcome.
Mr. Alden Abbott is the Rumpel Senior Legal Fellow and
deputy director of the Meese Center for Legal and Judicial
Studies at the Heritage Foundation. Prior to joining the
Heritage Foundation, he served as director of patent and
antitrust strategy for Blackberry and in a variety of senior
government positions, including director of antitrust policy
for the Federal Trade Commission, acting general counsel of the
Commerce Department, chief counsel for the National
Telecommunications and Information Administration, and senior
counsel in the Justice Department.
Mr. Abbott is an adjunct professor at the Antonin Scalia
Law School at George Mason University and was a Visiting Fellow
at All Souls College, Oxford University, and a Wasserstein
Fellow at Harvard Law School. He is also a member of the
leadership of the American Bar Association Antitrust Section,
and a nongovernmental advisor to the International Competition
Network. Mr. Abbott received his bachelor's degree from the
University of Virginia, his master's degree in economics from
Georgetown University, and his J.D. from Harvard Law School.
Nice to have you with us.
Ms. Eleanor Fox is the Walter J. Derenberg Professor of
Trade Regulation at the New York University School of Law.
Before joining NYU Law, Professor Fox was a partner at the New
York law firm Simpson Thacher & Bartlett. She has advised
numerous younger antitrust jurisdictions, including South
Africa, Egypt, Tanzania, Gambia, Indonesia, Russia, Poland, and
Hungary, and the Common Market for Eastern and Southern Africa.
Professor Fox was awarded an Inaugural Lifetime Achievement
Award in 2011 by the Global Competition Review for substantial
lasting and transformational impact on competition policy and
or practice. She has served as a member of the International
Competition Policy Advisory Committee for the Attorney General
of the United States, Department of Justice, and as a
Commissioner on President Carter's National Commission for the
Review of Antitrust Laws and Procedures.
Professor Fox received her bachelor's degree from Vassar
College, her law degree from the New York University School of
Law, and an honorary doctorate from the University of Paris
and, here it goes, Dauphine. I did not take French. Welcome.
Randy M. Stutz is the associate general counsel of the
American Antitrust Institute, or AAI. Mr. Stutz has broad
responsibilities across all of AAI's research, education and
advocacy programs. He has published numerous white papers,
amicus briefs, and journal articles on important competition
issues. He has also served as the coeditor of two handbooks,
including the International Handbook on Private Enforcement of
Competition Law.
Prior to joining AAI, Mr. Stutz practiced antitrust law in
the Washington, D.C., Office of Skadden, Arps, Slate, Meagher,
& Flom LLP, where he consulted on merger and cartel
investigations and multidistrict class actions. Mr. Stutz
earned his bachelor's degree in English from Washington
University in St. Louis, and his J.D. with honors from the
Catholic University Columbus School of Law. Welcome, sir.
Each of our witnesses' statements will be entered into the
record in its entirety, but I ask each of you to summarize your
statements in 5 minutes or less. And to help you, you see the
lights in front of you; that will keep time. The light will
switch from green to yellow, indicating that you have 1 minute
to conclude your testimony, and when the light turns red, it
indicates that your 5 minutes have expired. And I know you are
going to be concentrating on your comments, so when we start to
get over the 5-minute mark, I will very diplomatically and
politely raise the end of the gavel and give a little tap to
give you an indication to please wrap up.
Ms. Garza, please.
STATEMENTS OF DEBORAH GARZA, ESQ., PARTNER AND CO-CHAIR,
ANTITRUST AND COMPETITION LAW PRACTICE GROUP, COVINGTON &
BURLING LLP; KOREN WONG-ERVIN, ESQ., DIRECTOR, GLOBAL ANTITRUST
INSTITUTE (GAI), ADJUNCT PROFESSOR OF LAW, ANTONIN SCALIA LAW
SCHOOL, GEORGE MASON UNIVERSITY; ALDEN ABBOTT, ESQ., DEPUTY
DIRECTOR, EDWIN MEESE III CENTER FOR LEGAL AND JUDICIAL
STUDIES, JOHN, BARBARA, AND VICTORIA RUMPEL SENIOR LEGAL
FELLOW, THE HERITAGE FOUNDATION; RANDY STUTZ, ESQ., ASSOCIATE
GENERAL COUNSEL, AMERICAN ANTITRUST INSTITUTE; AND ELEANOR FOX,
WALTER J. DERENBERG PROFESSOR OF TRADE REGULATION, NEW YORK
UNIVERSITY SCHOOL OF LAW
STATEMENT OF DEBORAH GARZA
Ms. Garza. Thank you, Chairman Marino, Chairman Goodlatte,
Ranking Member Cicilline, Ranking Member Conyers, and members
of the Subcommittee. Thank you for inviting me to appear here
today. I have had the pleasure of appearing before the
Subcommittee in the past to testify on recommendations of the
Antitrust Modernization Commission and in support of the
SMARTER Act, and it is always an honor to be invited to address
the Subcommittee and to witness the good, thoughtful work of
its members and its staff.
I am here today in my capacity as the antitrust co-chair of
the International Competition Policy Expert Group, so named so
that we could abbreviate it as ICPEG. ICPEG was a bipartisan
volunteer group of 13 competition and international trade
policy experts that was convened by the U.S. Chamber of
Commerce in August of 2016 for this purpose: to consider how
the U.S. can most effectively address the perceived misuse of
competition law by some foreign jurisdictions that distorts
international trade and harms U.S.-based companies.
ICPEG's members included distinguished academics and
thinkers, like Professor Eleanor Fox, who is here today, who
have studied and participated in the development of
international competition and trade policy for decades, and
former enforcers and policymakers from every prior Republican
and Democratic administration in the past 36 years. And I would
like to pause here to recognize Jim Rill, who was a member of
ICPEG, that is here with us today.
The chamber asked this diverse group to leverage our
collective experience to develop practical and actionable steps
forward that will serve to advance sound trade and competition
policy. And that is what we did, with a remarkable degree of
consensus. A copy of ICPEG's resulting report and
recommendations in our transmittal letter to the President and
to the 115th Congress is attached to my statement.
My testimony today is limited to ICPEG's report and
recommendations. I am not speaking today on behalf of any
specific client interest, and I am not prepared to talk about
any particular investigation or enforcement matter. My
testimony will be brief, because the ICPEG report and
recommendations speak for themselves, and are consistent with
my personal views.
Simply put, there is a concern that certain of our major
trading partners have, in some cases, denied foreign companies
fundamental due process and, in other cases, applied their
competition laws to protect their home markets from foreign
competition to promote national champions, and/or to force the
transfer of technology at royalty rates that favor local
technology implementers. Such conduct has a significant unfair
adverse impact on the ability of U.S. firms to compete at home
and in global markets. Koren Wong-Ervin, who is here testifying
today, and Alden Abbott, have provided examples of some of
these things in their testimony.
Prior administrations have devoted substantial resources of
the very highest political levels to address the problem, with
some success. But it has been a difficult nut to crack, and
requires persistent efforts and a multifaceted approach that
engages both the competition and the trade law levels. Even for
those who are wary of the use of trade rules recognize the need
for a careful, integrated competition and trade law approach.
As Professor Fox put it in her testimony, ``It is time that
officials from trade and competition sat down at the table and
discussed strategies for the good of the country. We need to
work toward a coherent trade and competition policy that, among
other things, tackles unjustified State restraints and the
distorting competition of privileged and cronyistic SOEs,'' and
I say, ``Hear, Hear,'' Eleanor.
I will not go into any great length in describing the
recommendations that ICPEG made. But I will say that the first
six recommendations focused on the coordination of competition
and international trade policy within the U.S. Government. We
suggested that it be through a White House working group. Among
other things, the working group would determine which
international agreements should include competition chapters,
including through amendment of existing agreements, what
provisions should be included, and how those provisions should
be enforced. The working group would also focus on how to most
effectively ensure that other countries apply their competition
laws in a manner that is consistent with accepted standards of
process to ensure transparent, accurate, and impartial
enforcement decisions.
I recognize the concerns of some of the members of the
Subcommittee about the effects of using trade sanctions and the
effects of overreacting to issues. I will note that our report
suggested many things that fall far short of imposing
sanctions, and an example would be to have these competition
chapters in these trade agreements that will create a framework
for discussion and a less explosive way to deal with these
problems as they arise.
I thank you for your attention and look forward to
answering your questions.
Ms. Garza's written statement is available at the Committee
or on the Committee Repository at: http://docs.house.gov/
meetings/JU/JU05/20170629/105986/HHRG-115-JU05-Wstate-GarzaD-
20170629.pdf
Mr. Marino. Thank you. Professor Wong-Ervin.
STATEMENT OF KOREN WONG-ERVIN
Ms. Wong-Ervin. Thank you, Chairman Marino, Chairman
Goodlatte, Ranking Member Cicilline, Ranking Member Conyers,
and members of the Subcommittee. Thank you for the honor of
appearing before you today. My testimony will begin with the
discussion of the problem as framed by the chamber's expert
report, and then I will move on to possible solutions.
To begin, I agree with the report that certain foreign
governments appear to be using their competition laws in ways
that unfairly harm U.S. companies and inappropriately reduce
incentives to innovate. These include, first, denying U.S.
companies fundamental due process. Second, in the case of
intellectual property rights, using competition laws to reduce
royalty payments by U.S. companies to unduly favor domestic
manufacturers. And third, imposing unwarranted extra-
jurisdictional remedies, namely global, portfolio-wide remedies
on foreign conduct involving foreign patents.
Examples of denials of due process include failure to
notify the parties of the legal and the factual basis of an
investigation, lack of an independent tribunal to review
decisions, and the ability to stay remedies pending appeal.
Refusal to allow parties to cross-examine witnesses at
hearings, and failure to protect confidential information, and
recognize attorney-client privilege and other important legal
privileges. One case example from earlier this year is the
Korea Fair Trade Commission's decision against Qualcomm, in
which the agency allegedly refused to allow the company to
fully cross-examine witnesses at hearings, and sought to act as
the world's competition police by imposing global, worldwide
remedies, including on U.S. patents.
Moving on to possible solutions. Based on my experience at
the U.S. Federal Trade Commission, it is my belief that public
exposure, including expressions of concerns at the highest
levels of our government, is one effective means to achieve the
desired change. To that end, I favor the report's
recommendation to consider creating a listing mechanism for
competition enforcement, akin to the USTR's annual Special 301
listing of foreign nations that have inadequate IP protections.
In my experience, the good news is that most foreign
jurisdictions seem to want to be considered part of the
international mainstream and respond to public statements of
concerns. For example, the egregious alleged violations in
China against U.S. companies, for example, reportedly locking
them in rooms and ordering them to confess their sins under
threat of refusing to return their passports, were remedied
through a multipronged approach, which included a letter from
the then-Secretary of the Treasury Department, followed by
statements by President Obama to China's President Xi. These
public statements were followed by reportedly better process in
China and also China abandoning its previously stated intention
to impose extra-jurisdictional remedies.
Lastly, I agree with the report about the dangers of using
vague and subjective standards such as fairness in other
noncompetition goals, such as employment, or the healthy
development of an economy. And I agree that the U.S. should
continue to advocate for a consumer welfare standard as set
forth by our Supreme Court. Consumer welfare is a broad concept
that values what consumers are willing to pay for. It is also
an important standard because it connects competition to the
methodological commitments of economics in terms of giving
theories that can be tested and rejected. Yet, as has been
mentioned here today, many foreign jurisdictions currently
explicitly provide for the consideration of noncompetition
factors. I believe that an effective interim measure is to
require transparency from these governments as to what factors
they consider and how they are weighed and balanced.
I have often found myself, when I am reading foreign
competition decisions, as if there is missing pages. The
analysis may start off sounding like mainstream competition
analysis, but then the conclusions often lack any evidentiary
support and leave me puzzling as to what industrial policy
concerns or noncompetition factors may have influenced, or
perhaps dictated, the outcome. I believe that requiring
transparency and decision-making will go a long way to
requiring accountability by foreign jurisdictions and providing
some measure of predictability for our companies. Thank you.
Ms. Wong-Ervin's written statement is available at the
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20170629/105986/HHRG-115-JU05-
Wstate-Wong-ErvinK-20170629.pdf
Mr. Marino. Thank you. Mr. Abbott.
STATEMENT OF ALDEN ABBOTT
Mr. Abbott. Well, thank you. Chairman Marino, Chairman
Goodlatte, Ranking Member Cicilline, Ranking Member Conyers,
distinguished members of the Subcommittee, I am delighted to be
asked to participate here today, and I applaud you for holding
this hearing on a very important topic. I am here because I was
asked to serve as rapporteur, or principal drafter, of the
ICPEG report, which has already been discussed, which
represented a consensus opinion of all the ICPEGs members, not
anybody's personal opinion. And by the way, again, I want to
stress the views expressed today are my own and not necessarily
those of the Heritage Foundation.
As already emphasized, this was a bipartisan effort, and
because it represented the views of trade experts as well as
antitrust experts, it is not too surprising to find some report
recommendations touching on the possible role of trade law as a
remedy for harmful foreign misapplication of competition law.
Now, as already mentioned, a key aspect of the report is
its extensive discussion of consensus U.S. understanding of
consumer welfare as the heart of antitrust law. This is
reflected in the report's first recommendation, which calls for
the Trump administration to expressly confirm that, as an
organizing principle, competition law and policy should focus
on eliminating artificial impediments to competition, both
private and governmental, as a way of promoting economic
growth, innovation and consumer welfare.
And let me underscore the fact, the report strongly
supports the ongoing excellent work, domestic and international
work, of the two Federal antitrust agencies, the Federal Trade
Commission and the Justice Department's Antitrust Division. In
calling for a White House working group, it does not call for
the involvement of non-antitrust agencies or the White House in
carrying out American antitrust agency investigations, or in
the antitrust agencies making any policy determinations, in the
antitrust agencies' regular cooperation with foreign
counterparts, or in any of the antitrust agencies' periodic
consultations involving competition authorities from around the
world.
Simply put, the report contains no language that would
support curbing the independence of the Federal antitrust
agencies in carrying out their statutory roles, which encompass
antitrust-related law enforcement and policy functions.
Basically, what the report calls for is better coordination of
work on situations where a foreign nation's alleged misuse of
its competition law seriously impedes international trade and
investment by posing an unreasonable, unjustified, or
discriminatory burdens or restrictions on U.S. commerce. And it
does this through a working group, the idea not being that the
working group is going to seize authority, but that it is going
to come up with sort of a measured, thoughtful way of looking
at allegations, whether or not there is a working group.
If a major U.S. company is concerned it is being treated
unfairly overseas, people in Congress and in the administration
from different agencies will be hearing about it. The notion of
the working group is to create a structure by which the orderly
views of the different departments around the executive branch
and the independent agencies can be heard. And again, the
notion of the working group is not to get in the way of what
the U.S. antitrust agencies are doing in trying to improve
things with their counterparts.
The report also calls for additional work by multilateral
institutions in which the U.S. is already heavily involved,
including the Organization for Economic Cooperation
Development, the World Bank, the International Competition
Network, and the World Trade Organization. In particular, as
already mentioned, the concern about shaming and naming, it
calls for more peer-review studies, open analysis of the
application of competition law, because I think it is safe to
say there is sort of a general consensus view among
international economists worldwide that consumer welfare is of
central importance, so this is perhaps a way to point out to
other agencies their need to keep that in mind.
Already, reference has been made to intellectual property.
I will just briefly mention, put in a plug for, the current
Acting Chairman of the FTC, who has done a recent article in
the Harvard Journal of Law and Technology on the problem of
intellectual property and competition; well worth reading.
That closes my statement. I would be pleased to take any
questions you might have. Thank you so much.
Mr. Abbott's written statement is available at the
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20170629/105986/HHRG-115-JU05-
Wstate-AbbottA-20170629.pdf
Mr. Marino. Thank you. Professor Fox.
STATEMENT OF ELEANOR FOX
Ms. Fox. Thank you very much. Chairman Marino, Chairman
Goodlatte, Ranking Member Cicilline, Ranking Member Conyers,
and distinguished members of the Subcommittee, thank you very
much for the invitation to appear before you today. I was
honored to be a member of the committee of experts that was
organized by the U.S. Chamber of Commerce on which Deborah
Garza and Andrew Shoyer were co-chairs, and Alden Abbott was
reporter, and I want to thank them for the excellent work that
they have done on the problem that we have before us.
So, the problem that we have before us has, let us say,
three parts. One is definition: what is the problem? Second is,
how big is the problem? What kind of response does it call for?
And third is what to do about it. So, I want to say a word
about each.
How big is the problem of U.S. trading partners using their
competition laws in ways that are illegitimate and that hurt
American business? I would like to enlarge the picture. The
problem is that nations may use antitrust laws illegitimately
outside of the bounds of proper antitrust, hurting other
countries and their citizens. I want to include the U.S. in
that paradigm. I think we are in a position today where we have
to watch that our own country does not use antitrust
politically. It has not yet, but one has to be alert, and the
problem is on all sides.
What exactly is the problem, and how big? First, there is a
question of substantive law; our trading partners', using
substantive law, antitrust law, in an inappropriate way.
Second, one could ask about industrial policy. Third, one could
ask about nation-state restraints, like Chinese SOEs, or any
country's national government use of policy that is creating
competition. And lastly, a word about discrimination or putting
it to U.S. trading partners; is there discrimination against
us? As to substantive law, my view is slightly different from
the rest of my committee in terms of, should there be one
particular focus, such as consumer welfare, for antitrust law?
In my view, the problem is a bit larger in that almost every
nation agrees that they are trying to make markets work better
by their competition law that is just a little more elastic,
giving countries and jurisdictions, even our own jurisdiction,
a little more elbow room in defining what is hurting
competition.
Because I have a broader view of what is legitimately
called ``harming competition'', I also have a view that the
problem before us may be a little narrower than many of my
colleagues think. I think that we must respect how our trading
partners formulate their competition laws, and it is not always
how the U.S. formulates it. We must have respect for
formulations that are, in general, within the confines of a
good competition policy.
Industrial policy: I think we should have respect for other
nations' choices except where nations are using their antitrust
laws specifically to target us, and to hurt us. State
restraints I will pass on now because of time. Discrimination,
I think, is very hard to prove, that our trading partners are
applying different rules to us than they are to their own
companies, and, therefore, the problem as I see it is smaller.
But there is a problem, and the problem, as my colleagues
and panel members have said, includes lack of due process.
There is definitely a problem of illegitimate antitrust and
antitrust without due process. What to do about it? In my view,
the first best attack is to keep talking. Our competition
agency heads in the United States have been very clear and very
persuasive to other countries. Talking about good standards has
worked; at least it has worked sometimes. I think that is
definitely the first line of defense.
I do not believe that trade remedies ought to be used as
sanctions. I do not think they will work. They may lead to a
race to the bottom. So, I do think there should be a working
group. It might or might not be called a White House working
group. There is a benefit to taking it out of a possibility of
thinking of it politically. But there must be better
integration between trade and competition.
I want to recognize Jim Rill, who is here. When Jim Rill
was head of the Antitrust Division and Carla Hills was the
United States' Trade Representative we saw perhaps the high
point in the integration of trade and competition used at that
time to open the Japanese market, among other things.
Lastly, I want to say: I think the main thing that we have
to do in antitrust is keep our eye on the fact competition does
not know borders, and should not. We all gain when competition
is free and open without borders, and not politicized. We all
lose if we become sucked into a circle of tit-for-tat; you do
this to us, we will do it to you. I trust our heads of
competition, Department of Justice and Federal Trade
Commission, who believe strongly in that principle. I trust
them very much to carry on the conversation to call out
illegitimate antitrust and to press on with what we have always
had: a cosmopolitan antitrust. Thank you.
Ms. Fox's written statement is available at the Committee
or on the Committee Repository at: http://docs.house.gov/
meetings/JU/JU05/20170629/105986/HHRG-115-JU05-Wstate-FoxE-
20170629.pdf
Mr. Marino. Thank you. Mr. Stutz.
STATEMENT OF RANDY STUTZ
Mr. Stutz. Thank you. Chairman Marino, Chairman Goodlatte,
Ranking Member Cicilline, Ranking Member Conyers, and members
of the committee, I appreciate the opportunity to appear today
on behalf of the American Antitrust Institute.
The expert report commissioned by the Chamber of Commerce
recognizes that U.S. businesses operating internationally face
difficult challenges posed by the enforcement of foreign
competition law. The report addresses allegations involving due
process violations, foreign enforcement under subjective legal
standards, and problematic extraterritorial remedies. But as I
explain in more detail in my written testimony, there is a
good-faith species and a bad-faith species of each of these
allegations. It is important to distinguish between a foreign
authority's bad-faith denial of basic rights in pursuit of
protectionism and its good-faith disagreements over appropriate
legal standards, and how to assess market facts.
With this in mind, there are four key points I wish to
leave you with today. First, bad-faith conduct by foreign
competition enforcers likely does require better coordination
between U.S. trade and competition agencies. The AAI agrees
that trade law, including possibly the threat of trade
sanctions, could be a valuable tool in addressing the bad-faith
denial of fundamental rights like due process and equal
protection in competition proceedings. Trade agencies have a
strong claim to authority in these circumstances, because, in
many respects, these are competition issues in name only. The
behavior is equally problematic regardless of the antitrust
standard that is being applied and regardless of whether a U.S.
company has actually committed an antitrust violation.
Second, the good-faith conduct of foreign enforcers
requires a different policy response, even if some may think a
foreign enforcer's standards or remedies are very misguided.
The most effective way to deal with good-faith divergences from
U.S. standards is to empower the U.S. antitrust agencies to
cooperate effectively with their foreign counterparts. I want
to stress that this is not just a theory. The U.S. antitrust
agencies know this from decades of experience, and they have
the benefit of hindsight.
Cooperative relationships with foreign enforcers going back
to the 1970s have also helped preempt such divergences in the
first place. Through cooperation, U.S. competition experts have
been invited to participate directly in foreign policymaking.
They have helped draft foreign competition laws, jointly
develop best practices, and even train foreign judges and
agency staff, and much more. Progress is sometimes slow and
incremental, but I think everyone on this panel would agree it
has been enormously successful in the long run.
Third, creating a working group to improve coordination
between U.S. trade and competition agencies is a good idea, in
principle, but it has its limits. Generally speaking, the
concept of a working group sounds mostly benign. But if we were
to put a working group in the White House and give it
government wide power to set international competition policy,
we would create a massive lobbying target and risk politicizing
competition law enforcement internationally. We would also send
the wrong message to the rest of the world.
In our words, we would be telling our trading partners to
use an apolitical consumer welfare antitrust standard that
protects competition, not competitors. But in our actions, we
would be putting a political body in charge of international
competition policy. And implicitly, we would be putting the
threat of trade sanctions on the table at the behest of U.S.
competitors.
Our actions would speak louder than our words. We can
expect our counterparts to respond in kind. We would risk
losing our antitrust leadership status in the world, and worst
of all we would imperil the U.S. antitrust agencies'
international cooperation efforts which have been most
effective. Alternative approaches to a politicized working
group, such as an interagency working group that has an
advisory role, are worth exploring.
Fourth and finally, it is important to remember that U.S.
businesses operating internationally are sometimes mistreated
in their capacity as buyers, not only in their capacity as
sellers. Many U.S. manufacturers, for example, are dependent on
global supply chains and have to do business with foreign
cartels. When they do, foreign governments sometimes harm
competition and U.S. competitors by refusing to enforce their
antitrust laws.
To be fully effective, international competition policy
reform should ensure that U.S. business victims are empowered
to seek appropriate relief in U.S. court in these
circumstances. Reform of this kind can help deter the
proliferation of international cartels that are targeting
American businesses and consumers. Finally, these reforms would
complement many of the reforms discussed in the ICPEG report.
I thank you for your time, and look forward to your
questions.
Mr. Stutz's written statement is available at the Committee
or on the Committee Repository at: http://docs.house.gov/
meetings/JU/JU05/20170629/105986/HHRG-115-JU05-Wstate-StutzR-
20170629.pdf.
Mr. Marino. Thank you very much. Now, it is time for
Congress members to ask their 5 minutes of questioning. And we
will begin with the Chairman of the full committee, Congressman
Goodlatte.
Chairman Goodlatte. Thank you very much, Mr. Chairman. Mr.
Abbott, I will start with you on this question, but I will ask
all the panelists to chime in on this as well.
So, we have been hearing a lot in this hearing about the
problem of overly aggressive antitrust enforcement in some
countries. But is it not true that weak or nonexistent
antitrust enforcement can also be an international issue? For
example, in May of 2015, 20 members of this committee wrote a
letter urging that the U.S. take action to remedy unfair
competition from the three major Gulf Air carriers, Qatar,
Emirates, and Etihad. In this instance, the three airlines are
completely exempted from their countries' competition laws, and
as a result, they are able to control aspects of the airline
industry in ways making it impossible for others to compete.
So, are there not two sides to this problem? Is there
precedent for antitrust enforcement against state-sponsored or
state-owned enterprises?
Mr. Abbott. Thanks for that question, Mr. Chairman. I think
in principle, there should be. I will start with a quick
analogy. The U.S. Foreign Sovereign Immunities Act does not
apply to the commercial activities, say, of instrumentalities
of a foreign sovereign. And it seems to me that if there is a
direct, substantial, reasonably foreseeable effect on U.S.
commerce from the activities of such instrumentalities, in
principle there is a strong argument for applying jurisdiction.
I will not get into it, there are some questions about
doctrines such as foreign sovereign compulsion or the Act of
State Doctrine, which are limitations, they are not really
international law rules. They are really rules of abstention,
in which courts, U.S. courts, agree not to interfere in foreign
policy decisions committed to the executive branch. But it
seems to me that there is no constitutional reason why we could
not, if we chose, take jurisdiction when jurisdictional harm
and appropriate contacts could be made out.
Chairman Goodlatte. Mr. Stutz.
Mr. Stutz. Thank you. This is, I think, a really important
question. Non-enforcement is problematic in a variety of
different ways. One of the issues that arises is an incentive
problem. When, for example, a foreign cartel is injuring a U.S.
business, oftentimes the host country of foreign cartel has no
incentive to prosecute it. It is actually benefitting from the
wealth transfer that is occurring from a U.S. business to the
host country. And so, that is why we have the effects test. It
is a doctrine created in the 1940s by Judge Learned Hand.
Chairman Goodlatte. I have only got 2 minutes left, and I
want three more people to chime in, so.
Mr. Stutz. Just to sum up, it is incredibly important that
U.S. victims and the U.S. government have the ability to bring
cases internationally.
Chairman Goodlatte. Thank you. Ms. Garza.
Ms. Garza. Not to repeat what has already been said, but to
say something new: this is an example, I think, of where you
can use the trade function of our U.S. government to help solve
a problem. For example, in trade agreements it is not uncommon
in the competition chapter or another jurisdiction to commit to
the enforcement of antitrust laws to allow for a non-distortive
free competition, including by SOE. So, I agree with you that
in some cases, trade can be distorted by the fact that you do
not have sound antitrust enforcement within another
jurisdiction. That is something that we should continue to work
on, both from the antitrust enforcement and from the trade
perspective.
Chairman Goodlatte. Thank you. Professor Wong-Ervin.
Ms. Wong-Ervin. Thank you for the question. So, I agree
with the report that addresses this, that calls for the Trump
administration to support the establishment of an ICN working
group on this serious issue of anticompetitive harm caused by
state-owned enterprises. The OECD in a 2010 study reported that
SOEs are often the recipients of State aids, and, in many
countries, the largest share of these subsidies is devoted to
preserving lossmaking SOEs.
Chairman Goodlatte. Thank you. And Professor Fox.
Ms. Fox. Thank you. I agree there is a problem of under-
enforcement, and this is a particular problem in cases where
there are State measures, or SOEs, state-owned enterprises, to
which the antitrust laws are sometimes not applied. Our laws
should be applied against state-owned enterprises when they are
acting in a commercial interest.
In addition, I agree with Deborah Garza. There is much room
for an integrated trade and competition committee to focus on
exactly the problem of State restraints, which is usually
foreign restraints that hurt us, it could be vice versa. And I
would cite in particular, the Vitamin C case in which, so far
in the litigation, China has been allowed essentially to
immunize an export cartel into the United States, hurting
Americans directly.
Chairman Goodlatte. Thank you. Mr. Chairman, my time has
expired, but I do think that it is well worth exploring the
underlying issue here, which is allowing state-owned
enterprises to do business in the United States. We shy
strongly away from, not that we have never done it, but we have
very little in the way of State-run enterprises in the United
States domestically. But they have to compete with foreign
competition, and that has all the benefits of that State
subsidy, and sovereignty that goes with it. Thank you, Mr.
Chairman.
Mr. Marino. Mr. Cicilline has graciously deferred to the
Ranking Member, but Mr. Collins has to the Rules hearing
meeting, and Mr. Conyers has graciously agreed to allow Mr.
Collins to ask his questions for 5 minutes. So, thank you, both
of you.
Mr. Collins. Thank you all for the courtesy of both sides,
and I appreciate it, Mr. Chairman. And again, I think, just
focusing on the issue here of developing, you know, what is
happening in the international realm, and how they are
antitrust, and keeping this very open as far as how do we
address this and how do we not. I think, you know, it is really
also something we need to understand. Antitrust laws were
enacted for the protection of competition, not competitors. And
I think that is something as we look at, and this is, you know,
Supreme Court actually saying that as well, so. And the concern
is foreign countries are not doing that. They are using it
basically to harm, in many ways, the markets, or shake the
markets, if you would.
And Ms. Garza, in your testimony, there was a
recommendation from the White House working group that was
meant to produce a form in which sound and coherent trade and
competition policies could be forged, not create an antitrust
czar to direct antitrust enforcement decisions. Can you
elaborate on that, please?
Ms. Garza. Sure. I was really addressing the concern that
was raised by Randy and Eleanor and that I have heard in the
past. That is not what we are calling for, an antitrust czar in
the White House to direct antitrust policy. That is definitely
not what our recommendation is. Our concern is, basically, as
has been said here today, to address this question of the
misuse, potential misuse, of antitrust law and lack of process
that we have experienced in other jurisdictions, and to make
sure that the administration, through all of its resources,
including on the trade side as well as on the antitrust
enforcement side, are marshaled to focus on this issue.
So, the focus of our group was not domestic antitrust
enforcement. It was a question of how do we help to further our
efforts to ensure that the 130 other nations that have
antitrust laws are not misusing them in a way that distorts
trade and harms U.S. companies.
Mr. Collins. Okay, and keeping with that, I think you
brought up a good point. And I think when you are looking at
our situation, Mr. Abbott, how can we, as the U.S., better
situate ourselves to deal with this emerging issue as it is
continued here, you know, to counter preventing proper foreign
enforcement actions? Then, we will go to Ms. Fox, we will just
sort of catch her on the line here.
Mr. Abbott. Sure, that is a good question, Congressman. I
think, you know, part of the recommendation was that we act a
lot more vigorously to get the international bodies we are
already involved in to highlight, to do peer review studies,
and to emphasize those issues. And perhaps, you know, a working
group could not just in the bilateral antitrust discussions,
but in perhaps higher-level government discussions, raise these
issues directly. I think it was already mentioned that
President Obama raised an issue with the Chinese government
about lack of due process, about locking people up in rooms.
There needs to be, perhaps, more of that, and perhaps more
public attention, and public statements about that, you know,
in context of international meetings, bilateral. Not to tell
governments what to do, but to raise the concerns at a much
higher level.
Mr. Collins. Ms. Fox, I am going to elaborate further. The
question here is, are we dealing, then, more with an emphasis
from the administration, from Congress? Is this a fix that we
need to do in more a diplomatic sense, or is this something
that there is a legislative fix, or is there a policy fix? Take
Mr. Abbott, and take that, that is a great answer, I was just
curious. Let us follow that logical step. What do you think?
Push the button. There you go.
Ms. Fox. One should first understand what one means by
misuse. It is used in at least two different senses. One sense
it is used is: our trading partners are not following, for
example, U.S. principles of monopolization law. Some people
call that misuse, and I do not. If that is the question and
some nations are applying their law in a way, for example, that
privileges contestability of markets, I think that the answer
is talk, between the competition agencies to try to get
accepted their point of view. If they do not get it accepted in
the international marketplace, maybe it is not right, or maybe
it is just not the way most people do it, and we have to live
with that if it is within the area of protecting robust
markets.
If it is, the kind of atrocities that Alden Abbott just
mentioned, that is a serious problem that probably does need a
higher level and a higher push. Starting with an integrated
committee of trade and competition is a good idea.
Mr. Collins. Well, you have definitely found the city for
talk and integrated committees. So, we can definitely look at
that. Ms. Wong-Ervin, I know I am running out of time. I think
the biggest thing what we need to focus on is those examples
that are always out there, but I think the focus of this
hearing is a proper one, and saying, ``What is our response,
what is the U.S.'s response, how are we dealing with it
internationally, how are we dealing with it, you know,
internally''. But also say, ``Is there ways that we can also,
as we already are, with the leaders, especially in many of
these areas where they are being challenged?'' I guess is the
best way to put that.
So, I think, we are the leaders there, let us continue to
do so, and I appreciate the opportunity to ask these questions.
And I appreciate again the kindness of the Chair and the
Ranking Member and others. Thank you. I yield back.
Mr. Marino. The Chair now recognizes the Ranking Member of
the full committee, Congressman Conyers.
Mr. Conyers. Thank you very much. I think today's hearing
is the beginning of an examination and, for some people a
reexamination, of antitrust laws, American antitrust laws. I
want to ask generally for any of you or all of you that want to
respond, how is our country doing in terms of developing a fair
antitrust policy in comparison to other countries? In other
words, how does this thing rank globally? And any of you may
start it off, and continue it.
Ms. Wong-Ervin. Thank you for the question. I think that
the U.S. is a leader in this field. We saw a revolution in our
courts in the '60s and '70s, aligning antitrust with economics,
with consumer welfare, which is a broad concept, which really
values what consumers are willing to pay for. And I think that
that linking it to an economic concept, and getting away from
vague and subjective standards that can be misused and abused
by agencies, really gave a credibility to the U.S., and really
helped to, you know, promote what competition is about, which
is about consumers and lower prices and better products.
Mr. Conyers. Yeah, but how do we stack up with other
countries? Are they looking to us for leadership? Or do they
think, as the leading capitalist Nation in the world, I mean,
we may come off in a poor light. I mean, after all, everybody
is not into capitalism. And you know, I am reading between
editions of review articles that we are failing in some
respects, and that we are doing great in others, and I have
never had five people with your backgrounds to give me a little
free advice. Which direction are we going in, and what more
should we be doing on this subject? And I will look at
Professor Fox to start us off, and let everybody who wants to
chime in. And if you do not want to answer it, that is okay,
too.
Ms. Fox. Thank you, Congressman, for that very interesting
question. How is the U.S. doing in its fair competition policy
compared with others in the world? In cartels, such as price-
fixing agreements, we are up there; gold standard; number one.
In monopolization, abuse of dominance, I think, unfortunately,
the U.S. has lost leadership by becoming very conservative, and
not finding very much that a dominant firm does is illegal. The
European Union standard has gotten more prominence in the
world. It focuses more on access to markets by those who have
been excluded. I think that is, in the world, perceived as more
fair.
What we should be doing, though, is a very difficult
question, because this is law formation, it goes through our
courts, it goes up to the Supreme Court. Our Supreme Court has
handed down decisions that fit with the narrow view of what
should be illegal as monopolization.
Mr. Conyers. Well, that is a good start. Where do you come
in, Attorney Stutz?
Mr. Stutz. Thank you for the question. I think it is
possible to admire the coherence and principled nature of the
U.S. Approach to antitrust law, and at the same time feel
concerned about some of the results it has wrought. We have a
large concentration problem in this country. Competition is
declining in a lot of sectors. It is understandable, perhaps,
that other countries would look to the United States and seek
to experiment. And there has been a lot of interest in finding
ways to more aggressively enforce the antitrust laws in a
principled way, and I support that.
Mr. Abbott. Very briefly, Congressman, I think with all due
respect, I do not believe that competition has diminished. I
think that some recent economic research, I know that claims
have been made in the last year, too. I just do not think the
best recent economic research supports that. And more
generally, I think there needs to be a real concern that
overemphasis on, and it is true, lots of countries emulate
Europe, they have an administrative system, but overemphasis on
analyzing actions that do not harm consumers directly or do not
deny access, and there has been some of that, could dis-
incentivize innovation, and then harm our leading competitors.
Mr. Conyers. Anybody else? We have 193 countries, and we
have 130 standards. The little countries, they look at a
discussion like the one we are having this morning, and say,
``We cannot even get in the door.'' I mean, there is such a
disparity between the big nations and the little nations. And I
feel a little bit uncomfortable, because the little nations, I
mean, people say, well, who cares, and who asked you to get in
here, anyway? This is my last try at trying to put this into
some perspective.
Ms. Garza. May I take a shot?
Mr. Conyers. Please.
Ms. Garza. So, two things. One is, just to be clear, I do
not think it is the smaller economies that are the problem
here. It is actually some of the larger economies that are
throwing their weight around.
But the other thing I would say is that competition law has
actually been very good for some of these younger and smaller
economies. I have had the honor of being able to participate
through the years in the International Competition Network and
other international fora, and have met and talked to, as have
other people here, Eleanor, Koren, Alden, Jim Rill, a lot of
those enforcers in countries in Africa, in South America, in
Asia. And they recognize that a sound competition law is
actually good for them, because it frees up the ability of
their economy to grow. It removes artificial barriers to
competition. It allows the spread of better distribution of
wealth. It allows for innovation.
So, competition law, we really feel, is good for not just
the big developed economies, but is good for the smaller
economies. Not having distortion of international trade, that
benefits them. So, I have actually seen that there is a fair
amount of consensus that has developed in all of these
international fora about the value of antitrust competition for
even those economies. For especially those economies.
Mr. Conyers. Mr. Chairman, I am troubled by the fact that
there is such an extreme difference between the big nations and
the little nations. And I resist the notion that the little
ones are going to be very grateful to us for being so thorough
and fair and concerned. Look, capitalism does not work like
that, I mean, in my political perspective. Everybody has got to
turn in some profit, or you are going to be hitting the door.
And this sounds like a very mild discussion we are having, and
for some reason I feel that there is some huge considerations
about the differences laying around out here that we have got
to get into, and we probably will. What can five members of
Congress do with five expert witnesses in a couple hours? So,
what can you tell me that will make me feel more satisfied than
I am at the present moment?
Ms. Fox. Congressman, thank you again. I think there is a
huge problem that you have put your finger on--that little
countries have needs that are not recognized, and not
recognized by the U.S. model of competition. This does not mean
the U.S. model is wrong for the U.S. There are some problems of
jurisdiction, there are some problems of simply inability of
the small countries to, for example, enforce their law against
cartels coming from the developed countries. The developed
countries ought to have a rule that they cannot have cartels
even they do not hurt Americans. If they hurt only Africans, if
they are clear, illegal cartels in the U.S., it should be
illegal in the U.S.; that should be stopped where the action
is. Right now, it is very hard for small countries to defend
themselves, and there are many actions that are targeted
against small developing countries.
Second, if you look at monopolization. As you pointed out,
there are many small countries that have very different
circumstances on the ground of what are the barriers to
competition. They have many more barriers, they have excluded
many, many people for a long time; they need laws that are more
inclusive; that focus more on exclusionary behavior. There are
laws, formulations, that can be against exclusionary behavior,
and helping competition, not protecting inefficient
competitors.
So, I think the first line is that we, as a country, ought
to recognize that, and we ought to recognize that some
countries need different standards than the way the U.S. has
applied them. Thank you.
Mr. Conyers. Mr. Chairman, you have been very good to me,
and I appreciate it. I want the witnesses to know that there is
going to be trouble with some people getting their full amount
of sleep tonight as a result of what has gone on here in the
House Judiciary Committee this morning, and I thank you very,
very much for your presence.
Mr. Marino. The Chair now recognizes the gentleman from
Colorado, Congressman Buck.
Mr. Buck. Thank you, Mr. Chairman. And I want to thank the
witnesses for being here. Professor Wong-Ervin, I listened to
your testimony, and you mentioned the Korean sanctions against
Qualcomm, and I read your testimony, and you also not only
mentioned the Korean sanctions against Qualcomm, but also the
Chinese sanctions against Qualcomm. I did not read in there a
dispute that Qualcomm had, in fact, engaged in anticompetitive
behavior, but rather an analysis of the sanctions against them
as being over broad. And I should note, I believe that Taiwan
is investigating Qualcomm's anticompetitive behavior. The
European Union as well as the United States FTC are all doing
that.
You are not suggesting, are you, that the fact that a
foreign government has found a United States corporation to
have engaged in anticompetitive behavior, that that in and of
itself is somehow wrong or unfair?
Ms. Wong-Ervin. Thank you for the question. No, I am not.
So, many of the examples I gave, some were against Qualcomm,
some were involved with Microsoft, Nokia, there are several
others involving Merck, A.Z., Ericsson. They all have in common
the lack of an effects-based approach; the lack of evidence of
any actual harm to the competitive process or consumers. So,
for example, the Chinese decision against Qualcomm was based on
excessive pricing, something that we do not do in the United
States. We do not regulate price, particularly with IP, because
we do not want to harm incentives to innovate, and because high
prices alone do not harm competition. In fact, they can signal
to a market that this market is profitable, and you should
enter and increase entry.
Mr. Buck. And I do not mean to cut you off, but I only have
a limited amount of time, and I am not sure that I will receive
the same treatment from the Chair if I do go over, so I want to
make sure that I ask a few more questions. But Apple is also
suing Qualcomm, are they not, for a dispute concerning
competitive behavior with their licenses? Is that right?
Ms. Wong-Ervin. Yes, I believe that.
Mr. Buck. Okay. Do you know of any investigation of
Qualcomm's anticompetitive behavior by the EU, Taiwan, the
United States, that has been fully investigated, and where a
country has come to the conclusion that Qualcomm has not
engaged in anticompetitive behavior?
Ms. Wong-Ervin. Where an investigation has been dismissed?
Mr. Buck. After a full investigation?
Ms. Wong-Ervin. After a full investigation, I do not. And
many of the ones you mentioned, like you said, are just in the
beginning stages. The one in the U.S. is just, you know, the
government just pled its case; they still have to prove its
case.
Mr. Buck. But there is some threshold to even begin an
investigation. There has to be some evidence that would lead a
government agency to direct resources to do that, would there
not?
Ms. Wong-Ervin. Not in other countries. So, in China and
elsewhere, they are obliged to investigate when there are
complainants. So, remember, China is largely an implementer of
technology, not an innovator, and they have a lot of
manufacturers that complain and say, ``I want lower
royalties.'' And so, they are obligated; they do not have to
have a good-faith basis that they have to investigate.
Mr. Buck. Mr. Stutz, I want to ask you a quick question.
What are the ramifications to the United States in terms of
retaliation if the United States acts, either through a trade
policy or otherwise, with a foreign country to benefit a
particular United States corporation?
Mr. Stutz. Thank you for the question, Congressman. I think
the obvious, immediate risk is retaliation. And just the
adoption of a political stance toward competition policy,
rather than a law enforcement orientation.
Mr. Buck. Now, would that retaliation involve just one
United States company, or would it involve many United States
companies and affect our economy in terms of workers,
employment, and our ability to trade with that foreign country?
Mr. Stutz. Thank you for the question. I think it should be
seen as a risk, that there would be a policy response, rather
than an individual response to a particular matter. I do think
it bears mentioning, with respect to disputes involving
multiple authorities investigating, you know, a single entity
like Qualcomm, it is important to remember that oftentimes
there are not disputes in antitrust standards between
countries. Oftentimes, they agree. In the area of standard
essential patent abuse, there is a widespread consensus among
enforcers, at least, that this is problematic and that
competition law should address it.
So, oftentimes, when there is extraterritorial remedies,
lots of countries investigating a single defendant, you can
have a lot of efficiencies with a single remedy that can
resolve universal concerns. So, it cuts both ways.
Mr. Buck. Thank you for your answer, and Mr. Chairman, I
yield back.
Mr. Marino. The Chair now recognizes the Ranking Member of
the Subcommittee, Congressman Cicilline.
Mr. Cicilline. Thank you, and thank you again to the
witnesses. I would like to begin, Professor Fox, you mentioned
that the United States might well be on its way to using
antitrust laws to achieve nationalistic ends, and sort of
warned us about that. Could you speak a little more to that, of
what concerns you are referring to?
Ms. Fox. Yes, I mentioned I have this concern, and I also
mentioned I have not seen it happen yet. It is a general
concern that simply comes out of, for example, meetings of the
highest executive with merger parties, who agreed to invest in
America. I have the uneasy feeling that at some point that
might be taken into account in letting a merger through
lightly. So, I am only saying, be on alert.
Mr. Cicilline. I know. I understand.
Ms. Fox. I think the head, the acting Chair of our FTC, in
my view, clearly would not cave in lightly. The nominee for
Justice Department Antitrust would not cave in lightly. But I
just say, be on alert, because if that should happen, rule of
law unravels and tit-for-tat could happen.
Mr. Cicilline. Yeah, absolutely. And I think that is what
makes the suggestion that we do everything that we can, and I
think everyone has suggested, to depoliticize this work as much
as we can. And so, Mr. Stutz, you mentioned maybe the idea of
an integrated kind of interagency advisory role might be the
best way to preserve the integrity of the work, but also reduce
the likelihood that it becomes politicized in a way which would
undermine the arguments we are trying to make to our trading
partners around the world.
Mr. Stutz. That is right, thank you for the question. And I
want to stress, I very much agree and admire the expert
report's approach to thinking about the need for coordination
and to conduct an examination into how competition and trade
policies fit together, and how these agencies can more
effectively function by cooperating with one another.
I think there is a devil in the details in how you do the
working group. There is a way to approach achieving those
coordination benefits without putting the risk of politicizing
on the table. And so, you know, I think an important point to
remember is that not all decisions in competition and trade
policy are necessarily susceptible to group decisionmaking.
Sometimes, it is more effective to empower a single expert, or,
in this case, an expert agency, to lead. And in my view, when
you are dealing with good-faith disagreements over technical
questions like antitrust standards and antitrust remedies, the
U.S. agencies need to be empowered to set policy.
Mr. Cicilline. Yeah, and I think the thing that strikes me
from the testimony of all the witnesses is that we have really
four categories of cases in sort of our disagreements that
would arise. One would be for countries that share our
antitrust laws and the framework that we have, and enforce it
evenly against U.S. companies, and everyone else, which is of
no concern to us. That is sort of the best kind of trading
partner. The second group is people who share our standards,
and have a framework which is similar to the United States, but
apply it unfairly against the U.S. company as compared to their
own companies, which is bad-faith, and, I think, obviously of
concern. The third is a country that does not share our
standards, has a different set of standards than we might use,
but applies it evenly to everyone, which is complicated. And
then, the fourth area is maybe the worst, they do not share our
standards and they apply it worse against the U.S.
But it seems to me we have to have the ability to
understand those differences and shape remedies that reflect
that. And what I wonder if, Professor Wong-Ervin, you
mentioned, and I think Professor Fox, the notion of trying to
create at least some transparency in the way that we have seen
success with the TIP Report, obviously, in a different area,
trafficking in persons. Where at least there is a kind of
standard that has developed, and some information about how the
country meets a standard in terms of seriously responding to
the issue of human trafficking. This would be a lot more
complicated, because you have to acknowledge what is the
standard? Is due process available? Are there anticompetitive
policies? Are they being applied evenly even if they are bad
policies?
But it would seem like if we could agree on the creation of
that report, it might be a good way to, at least, educate kind
of the international community and American consumers and
businesses what the landscape is. And then, you know, encourage
people to kind of think about wanting to improve where they
stand on that report. And I would be curious to know what the
panel thinks about that kind of approach as part of what we
might do. Maybe start with Professor Fox.
Ms. Fox. Thank you, Congressman. Yes, transparency would go
a very long way. Transparency is a part of due process. If
standards are transparent, that is the first step. And a second
step is simply transparent but different. Lots of conversation
to argue one way or the other that there is a better standard,
and taking into account when countries cannot agree.
Ms. Wong-Ervin. I agree, thank you for the question, that
it would be an effective interim measure to require this
transparency. But in the long run, I think it is important for
trading partners to understand the tradeoffs, right, the
tradeoffs of considering noncompetition factors, are the
difficulties of weighing and balancing various factors across
different markets, it can actually undermine consumer welfare,
and undermine clear and predictable antitrust. So, I think we
should to continue to advocate for a consumer welfare standard,
but in the interim require transparency.
Mr. Cicilline. Thank you very much, and I yield back, Mr.
Chairman.
Mr. Marino. The Chair now recognizes the gentleman from
Texas, Congressman Ratcliffe.
Mr. Ratcliffe. Thank you, Mr. Chairman, I thank the
witnesses for being here. Ms. Garza, as you stated in your
written testimony, one of the concerns here is the
misapplication of foreign antitrust laws by some of our trading
partners to protect their home markets from competition, to
protect their national champions, and to force the transfer of
technology at royalty rates that favor local technology
implementers. One of the solutions that the ICPEG report talks
about is for the U.S. to consider recommending that the OECD
and other multilateral bodies adopt minimum due process
guarantees. And you in your testimony suggested that the
administration should continue and strengthen both bilateral
and multilateral efforts to establish standards, and ensure
that other countries abide by them.
So, in the context of trade law, I think we have seen that
this administration is emphasizing the need to shift away from
broader multilateral trade agreements towards more narrow,
bilateral trade agreements as a way to protect America's
interests. I want your perspective on how significant a role
bilateral agreements play compared to the multilateral
approaches in the context of antitrust law, and what would be
the impact of a shift that the administration is proposing.
Ms. Garza. Well, that may be a little bit above my ability
to respond. But I think what we recommended in the ICPEG report
was a combined approach. Basically, working within
multinational entities on multicountry agreements, but also on
a bilateral basis.
If the trend was to go to bilateral agreements, we could
achieve our ends through those bilateral agreements through
competition chapters. You know, having an understanding with
the other country that the agreement is with about standards.
And they could be if you had an effort to develop an
international consensus on certain minimum standards, that
could be a reference point. So, the multinational activities
should continue to take place, and they really create the
context and reference for the bilateral agreements. I do not
know if that answers your question.
Mr. Ratcliffe. It does. Let me move it from theoretical
into practice. So, one of the report recommendations is the
evaluation of trade agreements and the further assessment of
the inclusion of competition chapters, as you mentioned. And
right now, NAFTA is currently being renegotiated, so what is
your view on including a competition chapter in NAFTA?
Ms. Garza. So, the view of ICPEG was that it would be very
helpful. I think there may be a competition chapter in NAFTA,
too. But what has happened with these competition chapters, as
I understand it, is progressively they have gotten better and
better. And so, I think, one of the things that we had
suggested was that this working group take a look at what
should be in, ideally, these competition chapters. And to the
extent that the administration is about to renegotiate or
reopen any of these agreements, it would be good to have in
mind what could be put in these chapters.
And so, the nice thing about having these chapters is that
you have a built-in framework for discussion, when you think
that there have been violations and potential solutions, how do
we resolve disputes. We do not necessarily have that right now,
so you can have a problem, but the antitrust enforcement
agencies are really ill-suited to do anything to really address
it. And you could address it on an ad hoc basis, but that has
difficulties, too.
So, the notion is, step back, look at what we would ideally
want, put it into these bilateral or multilateral agreements,
and increase your ability when things come up to address them
early, and to address them effectively to have a meeting of the
minds as to how you are going to address them.
So, we think that that could actually be very helpful in
resolving the issues going forward.
Mr. Ratcliffe. Thanks very much. Professor Wong-Ervin,
Professor Fox, as I understand her testimony, it is that she
does not think that the United States has the one right mold
for antitrust rules and standards, or the balance between
antitrust laws and intellectual property rights. Do you agree
with that assessment?
Ms. Wong-Ervin. I do not. I think that the U.S. is a leader
in innovation, and a lot of that is because of our incentives
to innovate. I also think the Supreme Court correctly
recognized the errors of the concerns about false positives, or
type one errors, and the idea that it is more dangerous to
intervene when it is unwarranted, than to not intervene,
because the market can more readily correct, than when courts
or agencies intervene inappropriately.
Mr. Ratcliffe. Thanks very much. I will yield back.
Mr. Marino. Thank you. The Chair recognizes the Congressman
from Georgia, Mr. Hank Johnson.
Mr. Johnson of Georgia. Thank you, Mr. Chairman, and I
thank you all for your testimony today. I think we can agree
that there should be more integration between global trade and
antitrust policies; laws and agreements between nations. I take
it from what you all have said that you all would agree with
that statement. And also, that we must respect how foreign
trading partners formulate and apply their antitrust laws. We
must respect that, but if they fall short, then there should be
name and shame applied from the highest levels of our
government. In other words, public disclosure of abusive
practices and applications by foreign governments of their own
laws. I think we can all agree on that.
What I want to ask the panel is, to what extent do the
Trump policies and pronouncements of ``America First,'' the
rhetoric and the policies that ensue from that, the policies to
withdraw from negotiations for the TPP, the threats surrounding
NAFTA made by the President; to what extent do the rhetoric and
practices of this administration have on foreign governments
and their mindset in terms of applying their own antitrust
laws? Professor Fox?
Ms. Fox. Thank you. I think the announcement of ``my
country first'' is not fortunate, and it is not limited to the
United States. We are in a world today where many countries
across the world have a ``my country first'' policy.
Mr. Johnson of Georgia. The U.S. being the leading trade
partner, and the preeminent antitrust enforcement regimen, what
does it say when we stoop to the level of ``America First?''
Ms. Fox. If it means that we will uphold conduct by our
companies and apply a different standard to the rest of the
world, it is a very negative message. It can mean other things.
I am hopeful maybe it would mean other things. But if it does
mean nationalism and parochialism, and this applies to the
trade agreements you mentioned, it is bad for America. America
gains from these trade agreements; America would have gained
from the Trans-Pacific Partnership.
I want to add here that the competition chapter and the SOE
chapter in the Trans-Pacific Partnership are very well done and
very important, and can be models for whenever we are ready
again to have multilateral agreements.
Mr. Johnson of Georgia. Okay, thank you. I hate to cut you
off, Professor Fox, but I wanted to get Professor Wong-Ervin's
view on that.
Ms. Wong-Ervin. Sure, thank you for the question. So as
part of my job, what I do is I train foreign enforcers and
judges around the world. My institute trained over 300 last
year, primarily in China. And I get this question a lot, and my
answer is that I am optimistic that antitrust has remained
largely nonpolitical, across administrations.
Mr. Johnson of Georgia. But it seems that we are headed in
the opposite direction under this current administration. Would
you agree?
Ms. Wong-Ervin. I am hopeful that the appointees for the
Department of Justice Antitrust and the Acting Chair,
particularly I know the Acting Chair of the FTC, that they
are----
Mr. Johnson of Georgia. I must interrupt you. Let me move
to Ms. Garza, and let me get a straight answer from Ms. Garza.
Ms. Garza. A straight answer, okay. All right, what I will
say is, I recognize the concern, but I do not think we have
seen any evidence yet of a problem.
Mr. Johnson of Georgia. Okay, thank you, thank you, Ms.
Garza. Mr. Abbott, I am trying to do this within my five
minutes.
Mr. Abbott. Congressman, I think I will second Ms. Garza. I
know there is some discussion, but I agree.
Mr. Johnson of Georgia. Okay, thank you, Mr. Abbott. And
last but not least, Mr. Stutz, who appeared to be very intense
in his desire to respond.
Mr. Stutz. Well, thank you, Congressman. Time being what it
is, I will just say that the merits of nationalistic policies
are more debatable in other contexts, but it is important to
remember that antitrust is law enforcement, and it needs to be
driven by facts and law. And that is critically important, and
it becomes dangerous to apply policy in a law-enforcement
context.
Mr. Johnson of Georgia. Thank you. I yield back, Mr.
Chairman.
Mr. Marino. Thank you. I recognize myself for questioning.
I am not a supporter of NAFTA. I have seen what it has done to
my district, significantly, and people on both sides of the
party, people not involved in politics, how much they have been
out of work. And I think it is about time we have a President
that stands up and says, ``U.S. First.'' We have tremendous
trade deficits with other countries, that we have not even
approached over the last 8 years.
So, each of you can respond if you would like to this
question, or the statement that I am going to make. How do you
deal with countries, whether they are democracies or whether
they are dictatorships, to follow the rules? Do you actually
think that China is going to sit down, and we throw this word
``transparency'' around like it is the panacea; do you actually
think China is going to be transparent with us? Do you actually
think other countries are going to be transparent? This is
about profit. This is about making sure that whoever, such as
China, as they did with Qualcomm; this is about profit. I
wonder if China is going to reduce its prices based on how they
force or are forcing U.S. companies to lower their prices. You
do not see that.
So, let us get down to where the rubber meets the road, and
give me just one example, other than penalizing countries,
whether it is through sanctions, whether it is through trade,
on how to play on a level playing field. Ms. Garza.
Ms. Garza. The issue that you have identified is really
part of the impetus for our report, which is to say that there
are some things that you can deal with through talk, and
through the antitrust enforcement agencies, and there are other
things, other instances, where you cannot. So, with respect to
China, China has an antitrust enforcement agency that the U.S.
and Europe have worked with, but a lot of their decisions are
not being driven by the conclusions of their competition law
enforcement agency, they are being driven by different
conclusions. And so, part of what the group felt was that when
you have decisions being taken at that level by another
jurisdiction, you have to meet them at that level. You know, it
is, like, I cannot take a knife to a gun fight, right? So, with
their dealing with it at that level, we have to deal with it at
that level.
And during the Obama administration, that happened, in
fact. And part of what we are saying is, to the new Congress
and to the new administration, let us talk about what we have
seen over the last 8 years, let us try to get this right. We
realize that there are a lot of issues competing for your
attention and resources, we think that this is a good issue.
You are focused on trade, you are focused on ``America First,''
this is a component of that, and why we recommended that there
be a focused look at that, integrate competition, and also
trade, and think about how to deal with the issue that you have
raised, in a smart way, and in an effective way.
Mr. Marino. Professor.
Ms. Wong-Ervin. Thank you for the excellent question. So, I
serve as a scholar in a prominent Chinese university, and there
is a member who is of the expert advisory committee. And I was
told by him by many other people that China was horrified when
President Obama and when others made these public statements of
concern, that they want to be considered as part of the
mainstream, they are worried about their credibility, and that
it did make a big difference. I agree, though, that it is about
profit and about lower prices for them, and I think this needs
a multipronged solution.
Mr. Marino. Mr. Abbott.
Mr. Abbott. Mr. Chairman, I sort of echo what Ms. Garza
said. If you really believe that something has been driven
purely politically, and it is doing real harm, certainly the
U.S. has some statutory authority. It is not saying when you
should use them, but there are things like Section 301 of the
Trade Act, which allows for some retaliation. Not saying in any
case, but it is out there, and in the appropriate times might
be weighed.
Also, there are cases, for instance the merger of two
state-owned Chinese enterprises we think will harm competition
in the U.S., you could take antitrust action against that.
There is also ways of blocking imports under Section 337 of the
Tariff Act if they violate U.S. patent rights and impair
competition. We have not raised that, but there are a number of
tools out there that at least merit consideration.
Mr. Marino. Professor.
Ms. Fox. Thank you. I think this is exactly the question
that an integrated working group would try to deal with. It is
very hard to deal with. I want to echo remarks that Professor
Wong-Ervin made about Chinese enforcers who really want to
abide by international standards, and the people on the ground
cannot always get their way. But they have made progress. The
more they really want to abide by international standards,
including holding SOEs to account, the more we gain somewhat in
a level playing field. How to deal with the fact that the
highest ministries of China are pushing for unlevel
nationalistic policy is a very big, high-level question.
Mr. Marino. Mr. Stutz.
Mr. Stutz. Thank you, Mr. Chairman. I want to read a short
quote from the Deputy Assistant Attorney General Debbie Platt
Majoras after a high-profile divergence in a high-profile
merger case between the United States and EU. They reached
different conclusions on the same merger. She said, ``We
recognize that we and the EU will not always agree, and that
our way is not always best. We have no power to change EU law
other than by persuasion, and vice versa.''
That is a really important point. Even when we are talking
about sanctions and more aggressive tactics, ultimately we have
no power other than to persuade. And so, I think it is
extremely important that we think about what is most effective,
and how we can persuade. And it is my view that when there are
aggressive bad-faith acts by our trading partners, we may want
to consider aggressive responses, but the past has shown that
when we are dealing with good-faith differences, cooperation is
more effective. Thank you.
Mr. Marino. I think the U.S. on its own would have a
tremendous impact on this, but we cannot change the minds of
the leaders in China. What that is going to take is a unified
effort of most of the countries around the world, to let China
know that we will come together and move as one, if China wants
to continue to abuse these antitrade issues. In numbers, there
is strength.
So, with that, this concludes today's hearing. I want to
thank all of you for attending. It has been very enlightening;
we could probably spend the next 6 hours here talking about
these issues. But I think we have started something here today
that we can take that ball and run with it.
So, 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. Thank you.
[Whereupon, at 11:49 a.m., the Subcommittee was adjourned.]
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