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From Antitrust Law Daily, November 15, 2013

Antitrust agency heads testify at House antitrust subcommittee oversight hearing

By Jeffrey May, J.D.

The heads of the federal antitrust agencies testified today about recent enforcement efforts at an oversight hearing held by the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law.

Subcommittee Chairman Spencer Bachus (R., Alabama) kicked off the hearing, calling for more transparency from the FTC on the agency’s authority over unfair methods of competition under Section 5 of the FTC Act. He noted a recent  letter, in which he and other members of Congress asked FTC Chairwoman Edith Ramirez to provide businesses with guidance on the agency’s Section 5 authority.

In his opening remarks, Bachus also questioned the Justice Department’s decision to challenge US Airways Group, Inc.’s $11 billion acquisition of AMR Corp., the parent corporation of American Airlines. He wondered whether the agency, in deciding to challenge this airline merger, when others received a pass, was just “over-compensating for past omissions.”

William Baer, Assistant Attorney General at the Department of Justice Antitrust Division, delivered his prepared statementfirst. He started his testimony by discussing the Antitrust Division’s cartel enforcement efforts. Baer reiterated many of the successes and fines in the cartel area that he discussed at a Senate subcommittee hearing a day earlier.

Baer followed up with a high-profile example of the Antitrust Division’s civil enforcement efforts. He pointed to the successful case against Apple, Inc. for orchestrating a conspiracy with major book publishers to raise e-book prices and end e-book retailers’ freedom to compete on price.

“This was a big win for U.S. consumers,” Baer said. “The average price of e-book bestsellers has already fallen from a little over $11 to closer to $6.”

Merger enforcement.

With respect to merger enforcement, Baer discussed the Justice Department’s recent challenges to the combination of Anheuser-Busch InBev and Grupo Modelo—the largest and third-largest firms selling beer in the United States—as well as the proposed merger of US Airways and American Airlines.

Discussing the proposed settlement in the American Airlines/US Airways case, Baer said the decree is better than a full-stop injunction. “A full-stop injunction would have kept the legacy carriers in their current position, which was already pretty cozy,” Baer said. According to Baer, by opening up key airports, such as New York’s LaGuardia and Washington’s Reagan National, the settlement will change the competitive dynamic in the industry.

Ramirez was up next. In her prepared testimony, Ramirez discussed her agency’s antitrust enforcement efforts in the health care and high tech industries. On the topic of merger enforcement, Ramirez said that in Fiscal Year 2013 the FTC challenged 23 mergers that were likely to have anticompetitive effects. While most of these challenges were settled, she noted that in five instances the agency went to court to stop the mergers. Specifically in the health care area, Ramirez noted that the agency had recently successfully litigated three hospital mergers and that parties had abandoned several proposed hospital transactions after the FTC threatened a challenge.

Congressman Doug Collins (R., Georgia) did not appear convinced that the FTC was adequately protecting consumers in the health care area in its merger enforcement efforts. He criticized the FTC’s decision not to challenge the combination of pharmacy benefit managers (PBMs) Express Scripts, Inc. and Medco Health Solutions. The FTC failed to protect consumers or competition, according to Collins.

Ramirez said the agency looked very closely at the transaction and promised to be vigilant in the area.

Patent assertion entities.

Ramirez also told the subcommittee members that the agency was conducting an in-depth study of the practices of patent assertion entities (PAEs). The agency intends to look into litigation undertaken by PAEs, sometimes called patent trolls, who acquire patents for the purpose of suing for alleged infringement.

Rep. Blake Farenthold (R., Texas) pondered when the FTC might take a more aggressive approach with respect to PAEs. Ramirez could not comment on current investigations; however, she said that she was aware of the situation.

FTC Section 5 authority.

As for FTC enforcement actions challenging unfair methods of competition under Section 5 of the FTC Act, Ramirez said that the agency has used its authority in limited situations and in a restrained way. “We’ve acted appropriately when we have used it,” said Ramirez. She also expressed her view that the agency has provided “appropriate guidance” on the issue.

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