ANTITRUST DEVELOPMENTS IN THE U.S.

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ANTITRUST DEVELOPMENTS IN THE U.S.

• George A. HayCornell Law School

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INTRODUCTION

• At the mid-point of the 20th century the United
  States was almost unique country with a
  commitment to antitrust enforcement.
• Antitrust is now a global phenomenon and
  countries around the world have come to realize
  the critical role that the maintenance of a
  competitive environment plays is the long term
  health of an economy.

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SOME OF THE RECENT ANTITRUST DEVELOPMENTS AROUND
THE WORLD

• 3 October 2008 Russia's Federal Antimonopoly
  Service has established a new department that
  will focus solely on combating cartels.
• 1 October, 2008 -- The European Commission has
  hit nine parafin wax producers - including Exxon
  Mobil, Sasol and ENI - with more than 676
  million in fines, the fourth-largest cartel fine
  the regulator has levied.
• 1 October 2008 Estonia's Competition Authority
  has launched an investigation of several travel
  agencies that it suspects may have entered into
  an anti-competitive agreement.
• 29 September 2008 Israel's Antitrust Authority
  yesterday raided the offices of four health funds
  suspected of operating a cartel.

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SOME OF THE RECENT ANTITRUST DEVELOPMENTS AROUND
THE WORLD

• September 30, 2008 -- The Norwegian government's
  Market Council is set to take a close look at
  Apple Inc.'s decision to make songs from its
  iTunes music store play only on the iPod, a move
  that is seen as a test case for other European
  countries that believe Apple's practice violates
  their laws.
• 29 September 2008 - Korea's Fair Trade Commission
  has told rival online auction sites eBay and
  Gmarket that if they want to strike a deal, they
  must maintain the commissions they charge sellers
  for three years.
• 26 September 2008- Ghana and Nigeria are under
  pressure to introduce fully functioning
  competition laws, after key stakeholders met in
  each country to discuss the competition
  landscape.
• 19 September 2008 -Brazil's antitrust tribunal
  CADE has approved the sale of Anheuser-Busch to
  InBev without restrictions.
•  

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SOME OF THE RECENT ANTITRUST DEVELOPMENTS AROUND
THE WORLD

• 15 September 2008 -Austria's Competition
  Authority has held an international conference on
  resale price maintenance. 
• 10 September 2008 - New Zealand's Commerce
  Commission has blocked a merger between Southern
  Cross Health Trust and Aorangi Hospital.
•  
• 9 September 2008 - South Africa's Competition
  Commission has blocked four mergers in the steel
  industry in part to prevent the strengthening of
  what it suggests is "widespread collusion" in
  parts of the steel sector.
• 5 September 2008 - Japan's Fair Trade Commission
  will ask for information on BHP Billiton's
  proposed US170 billion acquisition of rival Rio
  Tinto, even though the deal does not have to be
  notified in Japan.

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THE STRUCTURE OF ANTITRUST IN THE UNITED STATES
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THE RULES

•  
• The Rules in the U.S. are roughly similar in
  concept to the rules that have emerged in various
  countries around the world. There are essentially
  three basic rules and each one can be expressed
  in a single sentence
• a) agreements in restraint of trade are unlawful
•  
• b) it is unlawful to monopolize or to attempt to
  monopolize a market
•  
• c) mergers are unlawful if the effect is
  substantially to lessen competition or to tend
  toward the creation of a monopoly.

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THE PLAYERS

• Perhaps unique in the world, the U.S. has two
  separate federal enforcement agencies
• The Antitrust Division of the Department of
  Justice
• The Federal Trade Commission
• Both have essentially the same jurisdiction and
  powers.
• The most important distinction is that the
  Federal Trade Commission cannot impose criminal
  penalties, such as a prison sentence or a fine
  (which is a criminal penalty in the U.S.).
• Each of our 50 states has some version of
  antitrust enforcement under its own state law.
• Private plaintiffs (90)
• Defendants can include, obviously, major
  corporations, but also individuals, professional
  organizations (e.g., The American Medical
  Association or state and local bar associations),
  universities and other non-profit organizations,
  and sporting leagues, both amateur and
  professional.

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THE REFEREES

•  General-purpose federal judge, with a limited
  staff and no claim of expertise or experience in
  antitrust matters (cases are essentially assigned
  randomly in the particular jurisdiction where
  they are filed).
• The parties are entitled to have the case tried
  before a lay jury (in most antitrust matters,
  those involving criminal penalties or money
  damages)
• One cannot read U.S. Supreme Court decisions
  intelligently unless one realizes that a
  significant purpose of the Court is to limit the
  scope of discretion that can be exercised by the
  jury and even to some extent by the trial judge.

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THE STAKES

• A defendant in an antitrust case can face a
  variety of different sanctions including
• Injunction,
• Divestiture of illegally acquired assets,
• Dissolution of a monopoly position via
  divestiture of assets,
• Substantial fines (up to 10 million for an
  individual person, and substantially higher, up
  to 100 million or even higher in some cases, for
  corporations), and
• Jail sentences (up to 10 years) for an individual
  defendant.

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THE STAKES

• Penalties that should be listed above damages
  are
• Injunction
• Divestiture
• Dissolution
• Fines
• Jail
• Damages (x3)

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RECENT DEVELOPMENTS
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A) CARTELS UNCOVERED

• The result has been a large number of significant
  fines (the Antitrust Division obtained fines of
  over 630 million in fiscal year 2007), jail
  sentences (in fiscal year 2007, defendants were
  sentenced to a total of 31,391 jail days) and, in
  subsequent private actions, billions of dollars
  in settlements. The use of amnesty and related
  settlement incentives to encourage cartel
  participants to confess and to provide evidence
  against fellow cartel members is now quite
  commonplace among modern economies. 

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B) THE REPORT OF THE ANTITRUST MODERNIZATION
COMMISSION

• In April 2007, the Antitrust Modernization
  Commission issued its final Report
  (http//govinfo.library.unt.edu/amc/report_recomme
  ndation/toc.htm).
• The Report, in declining to make any
  recommendations for substantive legislative
  changes, emphasized the common law nature of
  antitrust jurisprudence and expressed confidence
  that, over the long run, this was a sensible
  approach.
• One potentially influential section includes a
  recommendation about how the courts should
  analyze refusals to deal and bundling/loyalty
  discounts, which have featured prominently in a
  number of recent lower court decisions.

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C) THE DOJ REPORT ON SECTION 2 ENFORCEMENT

• Competition and Monopoly Single-Firm Conduct
  Under Section 2 of the Sherman Act.
  http//www.usdoj.gov/atr/public/reports/236681.htm
  
• The Division Section 2 Report covers many
  substantive aspects in great detail, including
  the concept and proof of market power, bundled
  discounts, product tying and bundling, exclusive
  dealing, predatory pricing, and exclusionary
  product design. The focus of the Report was not
  on legislative change but on how courts should
  examine various allegations of exclusionary
  conduct.
• An important and somewhat novel theme which is
  clearly reflected in the substantive
  recommendations is the risk of over-deterrence
  (false positives in the language of statistics)
  and the notion that substantive rules should be
  crafted in such a way as to reduce the incidence
  of false positives.

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D) THE CONVERGENCE EFFORTS OF THE OECD AND THE
ICN

•  
• A substantial part of the ICN effort has been
  aimed at harmonization of the merger review
  process. The Organization for Economic
  Co-operation and Development (OECD) is a more
  established organization but has been very active
  recently in convening discussions in which member
  countries share their experiences in antitrust
  enforcement with a view towards a best practice
  approach where there are no fundamental political
  obstacles to doing so.
• I attribute this is part to the very strong role
  economists play in the antitrust agencies of many
  of the member countries (often serving as the
  head of the agency).

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E) THE ACTIONS OF THE U.S. SUPREME COURT

• Beginning in 2004, the U.S. Supreme Court has
  been very active in examining antitrust cases.
• Reference George A. Hay, The Quiet Revolution
  in U.S. Antitrust Law, 26 University of
  Queensland Law Journal, pp. 27-37, available (via
  subscription) here http//papers.ssrn.com/sol3/pa
  pers.cfm?abstract_id1029401

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CASES

• Trinko
• Illinois Tool
• Weyerhaeuser
• Twombly
• Leegin