Putting the Antitrust Modernization Commission into Perspective

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Putting the Antitrust Modernization Commission into Perspective Putting the Antitrust Modernization Commission into Perspective

Putting the Antitrust Modernization Commission into Perspective

late

there

funds,

funding will occur

Congress has enacted a law to establish the Antitrust Modernization Commission1 ("AMC"). Although Congress has not yet appropriated is a general expectation in 2003.2 Meanwhile, some of the Commissioners have already been appointed,3 and so it is probably worthwhile to begin thinking about how the AMC might go about its work. In this Essay, we first set out the statutory framework for the AMC. Next, we put this latest antitrust study commission into historical perspective, by recalling its predecessors: the 1938-41 Temporary National Economic Commission, the 1955 Attorney General's National Committee to Study the Antitrust Laws, the 1969 White House Task Force on Antitrust Policy (producing the "Neal Report"), the 1979 National Commission to Review Antitrust Law and Procedures, and the 1998 International Competition Policy Advisory Committee. Finally, in light of prior history, we

propose an approach for the AMC, first in terms of a process, then in terms of specific topics for substantive consideration.

The specified duties of the AMC are only four:

The report must be submitted not later than three years after the first meeting of the Commission, and shall contain detailed findings and conclusions, together with recommendations for legislative or administrative action.5

The AMC will have twelve members, four appointed by the President;' two by the majority leader of the Senate; two by the two by the minority leader of the Senate; Speaker of the House of Representatives; and two by the minority leader of the House of Representatives.7 Before appointing members, the appointers are required to consult with each other "to ensure fair and equitable representation

2003] ANTITRUST COMMISSION PERSPECTIVE 1031

of various points of view in the Commission."8 The President will select the chairperson from among the members and the leaders of Congress from the opposing party will select the vice-chairperson from among the remaining members. The chairperson may appoint and terminate an executive director, and may the compensation of the executive director and the staff.9 The Commission may procure the services of experts and consultants," hold hearings, and administer oaths to witnesses." It may request and obtain information from any executive agency.

Four generalizations

this review. First, the statute gives almost no direction as to the focus of the AMC. It will be entirely up to the Commission itself to define its scope and priorities. This task will be the first to confront the new Commissioners.

seem appropriate

from

fix

the

Second, Congress sought to create a Commission that would be balanced politically and representative of a wide range of views. However, whether this will be achieved ultimately depends on the Commissioners or consultants-that are actually made.

the appointments-both

the experts

staff and

it will be

Third, if one early decision is critical, it will be the President's identification of the chairperson, primarily because the executive director and staff. The members will be parttimers whose agenda, priorities, spending choices, and report wording will be strongly influenced by the full-time staff.

the chairperson who controls

And fourth, the AMC's ability to hold a large number of meetings, hear substantial amounts of testimony, obtain the specialized help of experts, and recruit a top quality

[Vol. 5 1

staff will all be influenced by the amount of funding that Congress eventually appropriates. Four million dollars is a drop in the federal bucket, and will not pay for a lavishly operated Commission; but will Congress make even this limited funding available for a study of antitrust at this particular time in history and in light of a statute that is so open-ended as to its very purpose?

II. THE PAST AS PROLOGUE

This will not be the first study commission to be assigned to make a broad-ranging review of the status of the antitrust fact, the American antitrust community has gone through similar processes at least five times, including as recently as 1998. What can we learn from experience?

laws.

In

A. The Temporary National Economic Committee (1938-41)

The Temporary National Economic Committee ("TNEC") began to hold hearings in 1938, about the same time that Thurman Arnold was starting to revitalize the Antitrust Division in the second New Deal. Its final report was issued in 1941.1' This was a period of economic crisis and little agreement on what direction the government should take. The Administration was split between those who favored planning and those who favored antitrust. President Roosevelt addressed Congress on April 29, 1938, with a message that the country was suffering from a "concentration of private power without equal in history."

As New Deal historian Ellis Hawley described TNEC's

legislative genesis, "[mien of widely divergent viewsantimonopolists, economic planners, proponents of business rationalization, and advocates of compensatory spendingcould all agree that an investigation might do some good. And even if it did not, it could not do much harm."15

In Congress, most of the debate centered on the question of legislative versus executive control, not the itself. Senator Joseph desirability of the investigation O'Mahoney, who emerged as the leading sponsor of the TNEC legislation and then became chairman of the TNEC, modified the President's proposal by giving legislators a role. His resolution, which formed the basis for the law, included a committee of eleven, three from the Senate, three from the House, and one each from the SEC, the FTC, and the Departments of Justice, Labor, and the Treasury. The Commerce Department was later added, so that the membership was evenly balanced between Congress and the Administration.16 When actual appointments were made, it was clear that antimonopolists had secured a tremendous majority of the positions, but there was diversity of opinion not only among the official members, the but also among alternate members (these included some important heavy weight thinkers and doers),7 and the research directors.8

the committee's key personnel,

TNEC conducted hearings in 1938, 1939, and 1940. Senator O'Mahoney kept insisting that the inquiry was an economic study, not a political inquisition, and the hearings

were said to be characterized by their seriousness.19 There was little in the way of harassment of business, indulgence in publicity stunts, or other actions to offend the business community. Businesses reluctantly cooperated. The debate on policy continued through the period of the hearings, as the TNEC compiled a massive study of the business system, described by one historian as "the most dramatic and sweeping ever undertaken."2 Witnesses presented testimony and were examined about all aspects of the economy, including, for example, income and wages, trade associations, antitrust, textiles, insurance, and so on.

of American

investigation

industry

Ultimately, hearings were published in twenty-nine parts (eleven bound volumes), including tables, charts, graphs, maps, illustrations, and more. Another twenty volumes of monographs, prepared by experts in their fields, were also published. Many resources went into this production. According to Wagner, for instance:

2003] ANTITRUST COMMISSION PERSPECTIVE 1035

What was the ultimate contribution of the TNEC? Professor Hawley writes in The New Deal and the Problem of Monopoly:

In retrospect, Hawley observes that the TNEC was not so much a victory for the antitrusters as it was a way of avoiding the issue, a means of minimizing the policy conflict the Administration and postponing any final within decision.

Brinkley largely concurs. "In the end," he writes, "the inquiry was notable above all for its conceptual poverty on the monopoly issue: for its inability to produce any coherent prescription for dealing with the problem .... It had

gathered the data. It would be up to others to decide how to use it."24

A more positive view is taken by antitrust historian Rudolph J.R. Peritz. He places the TNEC, along with the tenure of Thurman Arnold as head of the Antitrust Division, in the context of the Roosevelt Administration's move away from the NRA's corporatism and toward an adversarial relationship with business. Peritz focuses in particular on one of the TNEC studies, "the influential TNEC No. 13, entitled 'Relative Efficiency of Large, Medium-Sized, and Small Business' (1941)." The study, says Peritz, pointed "to the consumer as the rightful beneficiary of public policy in the later New Deal."25 It influenced New Deal policy makers to question the view that corporate trade organization produced efficiency. Peritz also credits TNEC with emphasizing economic concentration and economic power (not market power), to the CellerKefauver Act's amendments to the Clayton Act, which strengthened the law against anticompetitive mergers.26

size and industrial

leading ultimately

B. The Report of the Attorney General's National Committee

to Study the Antitrust Laws (1955)

Within a few years after TNEC, writes Brinkley, "concern about monopoly and commitment to expanding the regulatory and administrative functions of the state had largely disappeared from liberal rhetoric."27 But antitrust was not dead. Cases were being brought with regularity

20031 ANTITRUST COMMISSION PERSPECTIVE 1037

and in 1950 the Clayton Act was strengthened by the Celler-Kefauver Act.

to "provide an important instrument

The Eisenhower Administration appointed the Attorney General's National Committee to Study Antitrust Laws to ("Committee") prepare the way for modernizing and strengthening our laws to preserve American free enterprise against monopoly and unfair competition,"8 and to set out "as clear as possible the path antitrust has traveled and what it augurs for the future."" The Committee was co-chaired by Stanley N. Barnes, the Assistant Attorney General for Antitrust, and Professor S. Chesterfield Oppenheim of the University of Michigan Law School, and included fifty-nine leading antitrust lawyers and economists, government officials and law professors." The Report, released in 1955, was basically descriptive, an examination of all facets of antitrust doctrine and enforcement, but not an empirical analysis of the impact of antitrust on the economy."

The Report examined

the whole landscape of the antitrust laws of 1955. It reflected a high degree of consensus among antitrust experts2 and pronounced that "the health of antitrust is good.33 Although the Report some suggested no amendments to the Robinson-Patman Act), it asserted that to reinterpretation the antitrust statutes were open resulting from extra-legislative sources.4 The Committee believed that "the federal agencies and courts would be the agencies of change without legislative help.35

legislative

changes

(except

for

Two aspects of the Attorney General's Report stood out. First, it was primarily concerned with distribution issues, such as refusal to deal, tying, and exclusive dealing, and the Robinson-Patman Act, suggesting amendments the latter. Second, it contemplated that, except for "the existing and well-established per se rules with respect to horizontal and vertical price fixing, relatively harsh treatment of tying arrangements and an ambiguity as to whether concerted refusals to deal should be per se illegal (they are to be viewed as 'routine unreasonable restraints'), Standard Oil's rule of reason is to govern cases under section one of the Sherman Act."36

to

While it cannot be said that the Report had much influence on today's antitrust, the Antitrust Civil Process Act of 1962"7 followed its proposals.38

Professor Thomas E. Kauper summarized the 1955

Attorney General's Report in a recent article:

2003] ANTITRUST COMMISSION PERSPECTIVE 1039

C. The White House Task Force Report on Antitrust Policy

(the "Neal Report") (1967-69)

The White House Task Force Report on Antitrust Policy," known as the Neal Report, was submitted to President Johnson in July 1968, and released in May 1969. The Task Force was appointed in December 1967, chaired by Phil C. Neal, dean of the University of Chicago Law School. The members of the Task Force were three practicing three law professors.4"

economists

lawyers,

six

Unlike the TNEC, an open-ended legislative vehicle aimed at information gathering, and unlike the Attorney General's National Committee, an administrative initiative focused vaguely on modernization of the antitrust laws, the White House Task Force was an administrative vehicle with a mandate "to identify the most important areas in which antitrust policy might be strengthened by new legislative or administrative measures."42 It made a number of recommendations, including: (1) "specific legislation on the concentrated industries"; (2) "additional legislation prohibiting mergers in which a very large firm acquires one of the leading firms in a concentrated industry"; (3) "a thorough revision of the Robinson-Patman Act to remove features that unduly restrict the free play of competitive forces"; (4) "legislation to establish the principle that a patent which has been licensed to one person shall be made available to all other qualified applicants on equivalent terms"; and (5) steps "to improve the quality and availability of economic and

subject of oligopolies,

or highly

financial data relevant to the formulation of antitrust policy, the enforcement of the antitrust laws, and the operation of competitive markets."43

is most famous

The Neal Report

for endorsing legislation to break up oligopolies or high market concentrations, focusing on market structure rather than anticompetitive behavior or consumer welfare." The proposed Industries Act" would have established criteria and procedures the effective for reduction of industrial concentration.5

"Concentrated

The Neal Report proposed dramatic

legislative recommendations to achieve deconcentration and generated a great deal of discussion but no successful legislative initiatives. Professor William E. Kovacic suggested that the Justice Department's challenge to IBM's dominant position in the electronic computer manufacturing market on the final day of the Johnson Administration may have been the first result of the report's strong market structure orientation.46 Other structural cases followed.

Subsequently, a second commission, a group of University of Chicago academics led by George Stigler, taking issue with Dean Neal, wrote a report for the incoming Nixon administration (the "Stigler Report") and denounced the feasibility of attacking conglomerates using the existing antitrust the Nixon Administration did not release the Stigler Report and seemed to base its anti-conglomerate policies on the Neal

laws.7 Although

2003] ANTITRUST COMMISSION PERSPECTIVE 1041

Report, Robert Bork, who had served on the Neal task force, and other Chicago School adherents continue to attack the Neal Report as a kind of icon of what they consider to be wrongheaded structuralism."

D. The National Commission for Review of Antitrust Laws

and Procedures (NCRALP) (1977-79)

The National Commission for Review of Antitrust Laws ("NCRALP" here but sometimes also and Procedures referred to as "The Shenefield Commission" after its able chair), unlike the TNEC or the AMC, but like the 1955 and 1968 committees, was a Justice Department initiative. It was established by Executive Order of President Jimmy Carter49 and was chaired by the Assistant Attorney General for Antitrust, John Shenefield (who has been named to the AMC). It was staffed by Antitrust Division employees. The NCRALP consisted of twenty-two members appointed by the President, including the Assistant Attorney General for Antitrust, the Chairman of the Federal Trade Commission (Michael A. Pertschuk), one other independent regulatory agency chairman (Alfred E. Kahn of the Civil Aeronautics Board), five members of the Senate, five members of the House, one judge, one state representative, and the remainder from the private sector.""

of

The mandate

the NCRALP was

relatively circumscribed and specific,' summarized by President Carter as covering two main policy areas: "the unreasonable protraction of some complex antitrust cases and the need for reevaluation of existing immunities and exemptions from the antitrust laws.' 1 In contrast to the Attorney General's National Committee to Study the Antitrust Laws, which had run from 1953 to 1955, only six months was allocated for completion of the NCRALP's study, with another thirty days for preparation of a report."

its

first month

The Commission

to devoted informational hearings on the major subject areas within its charter. The public was invited to submit papers and the staff was given research assignments, the preparation of options papers. Over seventy witnesses submitted by participated, individuals and groups, and various lawyers from the private bar undertook pro bono projects to support the Commission's efforts. A consultant, supervised by a in committee of Commissioners particularly litigation, was retained to prepare an empirical study of complex antitrust litigation.

additional papers were

including

expert

After the initial hearings, the Commission decided on its agenda, selecting seven areas of antitrust immunity for coverage in the report and three-surface transportation, insurance, and agriculture-for additional hearings. In all, the Commission met on thirteen days to receive public 200 written from testimony submissions were received, the consultant's report on protracted cases, lengthy interviews with judges and lawyers, and reports of the Ethics Panel, Economic Advisory Panel, and Business Advisory Panel. The

169 witnesses. Over

including

Commission held four meetings to reach a consensus on its recommendations and the contents of the final report.54

What was accomplished? Probably the most important contribution of the NCRALP was to underscore, at a pivotal time, the desirability of continuing the nation's incipient movement toward deregulation. The NCRALP spoke out strongly for the principle of free market competition protected by the antitrust laws, wherever feasible, and made specific recommendations for a number of regulated sectors, as well as stating principles of general applicability. It endorsed legislation to require increased consideration of competitive issues in regulatory decision making.

Also of importance was the NCRALP's conclusion that complex antitrust cases could be handled better than in the past through application of "best practices" and other procedures that it spelled out. The final report included numerous recommendations on judicial management and control; the use of time limits to expedite litigation; the channeling of discovery; methods for early focusing and resolution of issues; sanctions and disincentives for dilatory behavior; and and preliminary relief. None of these recommendations involved other than technical legislative changes or modifications to the Federal Rules of Civil Procedure.

improvement of structural

the

NCRALP also looked at two substantive standards relating to the Sherman Act. Specifically, it proposed an amendment to section two to clarify that the "dangerous probability of success" necessary to establish an illegal attempt to monopolize does not require proof of a high probability of actual monopoly, but rather a determination of whether the defendant has significantly threatened competition. No such change has been legislated.

The Commission

the appropriate Congressional committees should undertake an inquiry aimed at strengthening the ability of the Sherman Act to deal with persistent monopoly power. No legislation

recommended

also

emerged and indeed the next Administration would almost certainly have opposed such a project."

E. International Competition Advisory Committee

("ICPAC") (1998-2000)

The International Competition Advisory Committee ("ICPAC") was established by Attorney General Janet Reno and Assistant Attorney General for Antitrust Joel I. Klein in 1998. It was chaired by James F. Rill and Paula Stern, one with an antitrust background, the other with a trade background. There were ten members.6 The Executive Director was Merit E. Janow of Columbia University.

ICPAC held two sets of public hearings, including as witnesses senior competition officials from around the world and business, legal, and trade associations who reported on the findings of special tasks forces. There was also outreach through surveys. Taking advantage of new technology, the full proceedings were available to the public on a Web site. The Report was presented on February 28, 2000, in the form of a bound book with 302 pages of text and six annexes."

The Report is a comprehensive document, full of factual information and discussion of issues large and small. Its most important effect, thus far, appears to be the launching of the International Competition Network which is the materialization of what the Report recommended as "the Global Competition Initiative"-"a new venue where governmental firms, nongovernmental organizations and others can exchange ideas and work towards common solutions of competition law and policy problems."58

as private

as well

officials,

These six different schemes offer a variety of interesting comparisons. AMC can be visualized as the uncontroversial child of a single Congressional Committee Chairman, in response to a general sense that important aspects of the economy had changed and that the nation should therefore determine whether the antitrust laws need reform. While AMC has no obvious political opposition, it also appears to lack intensive or widespread support within or without the Congress. Its proposed makeup is structured to be evenly balanced between the major political parties, with membership likely to be characterized by expertise (necessarily colored by ideology) rather than partisanship.

TNEC's genesis was the Great Depression and the urgent national quandary as to what direction government policy should take. Both the President and the Congress were engaged in the shaping of the TNEC, whose balancing focused not so much on partisan politics as on assuring an equal role for the executive and the legislative branches. In fact, the executive branch played much the stronger role.

The next four antitrust study undertakings were not statutory, but executive initiatives, in each case emanating from the Attorney General or the White House. The 1955 National Committee and the 1967 Task Force seemed to respond less to economic crisis than to a vague sense that the economy was moving along, changes had occurred, and it was time to take another look at the antitrust laws. Today's Antitrust Modernization Commission shares this heritage of responding to a vague awareness of change,

although its genesis is the Congressional rather than the Executive Branch.

NCRALP, established approximately ten years after the Neal Report, represents yet a third story. It was the brainchild of the Executive Branch, responding both to growing concerns arising largely out of United States v. International Business Machines Corp.," a particularly unwieldy monopolization suit, that something needed to be done with "big" antitrust cases, and also to the opportunity for generating expert and political support for an important new de-regulatory direction, already off to a start in the airline industry. The makeup of the NCRALP combined politicians who would in theory be able to convert the final recommendations into legislation with experts from within and without the government.

ICPAC, in the late 1990s, was even more sharply delimited in its mission than NCRALP. Initiated by the Attorney General, it responded to dramatic increases in world the creation of new market economies throughout the world, and the increasing complexity of adopting antitrust ideas and institutions to these changes.

trade,

landscaping: TNEC,

Two different models emerge from this overview. One model might be called the 1955 National Committee, and the 1967 Task Force were designed to review the general landscape and propose any needed changes. The alternative model might be called targeting: NCRALP and ICPAC had assignments that were more carefully delimited. The AMC on paper seems to more closely resemble the landscaping model. That is, the proposed timeframe of three years and budget of four million dollars, should give it ample time and resources to build a substantial record, and the lack of pre-determined direction places it in the tradition of the TNEC, with a principal difference being that it comes into being as a blueribbon body of experts with no Members of Congress participating.

In terms of output, TNEC produced its many-volumes of testimony and monographs, which are much-praised and provided the later developments, the historic Celler-Kefauver Amendment to the Clayton Act. But the recommendations of the TNEC themselves were considered to be of relatively

information including

into many

fed

2003] ANTITRUST COMMISSION PERSPECTIVE 1047

little importance. The 1955 and 1967 efforts also had little direct legislative impact. The NCRALP, by comparison to two relatively slender volumes, TNEC, produced only helped stave off incipient efforts to undermine "big case" litigation, and contr.buted to the de-regulation movement. But NCRALP, even with many influential politicians as members, did not lead to any significant legislation.

What can be predicted for the AMC? Lacking a political membership, a particular constituency, or a compelling need, it would seem unlikely that the AMC will be any more successful than its predecessors at giving birth to specific legislative proposals that will be rushed into law. Of course, the scenery can change dramatically in three years. The current economic doldrums could degenerate into a fullblown depression. International relations could become so acrimonious that global antitrust progress grinds to a halt, even as the number of serious antitrust regimes multiplies. Intellectual property could continue to expand its role at the expense of antitrust law. It is just possible that the AMC could be at the right place at the right time to make a legislative difference.

But, it is important not to overemphasize legislation as an objective. TNEC teaches us the value of periodically taking an inventory of what we know about our economy. It would be a proud accomplishment of AMC if it could answer three questions: (1) What role does competition currently play in our economy? (2) How has this changed since the TNEC Report and what can we predict? And (3) what, if any, reforms are appropriate to reflect these changes?

In the next section, I lay out a proposed modus operandi for the AMC. The final section contains my suggestions for the substantive program of the Commission.

A. Phasing the Work

There are, of course, many different ways in which the AMC could proceed. My proposal is that it adopt a plan of operation with four distinct phases: (1) Initial Agenda Building and General Fact Gathering, (2) Targeted Fact Gathering, (3) Public Policy Analysis, and (4) Report Writing. The first three phases would invite participation

by specific witnesses, supplemented by written submissions from anyone else. The Internet should be used to assure the widest knowledge of the AMC's activities.

Phase One could be targeted for six months, during which period the administrative structure would be put into place, rules of procedures would be adopted, and the members would determine the overall agenda. Witnesses would present suggested topics, much as I will do in the final section of this Essay, but in greater detail, with justifications. The agenda should be formulated as a series of questions that are capable of being answered within the life of the AMC. (The most difficult task will likely be to decide what questions not to pursue.) While the agenda is being considered, staff can begin assembling factual material of a background nature.

Phase Two could be. targeted for the next sixteen months. The objective is to pull in a wide range of potentially relevant facts, a la TNEC, in order to answer specific questions adopted in the agenda.

Phase Three would take up the next six months of the Commission's life. In this phase, testimony would be taken on the public policy implications of the evidence compiled in the first two phases.

Phase Four, lasting the final eight months (including two months at the end for completing the drafting and editing of the Final Report), would be allotted to preparation of the report of the Commission. This would entail: (1) completing assemblage of the principal findings of fact, (2) laying out a summary of the public policy discussions, fairly presenting all sides, (3) debating and voting on the Commission's findings of fact, majority recommendations and minority statements.

recommendations,

reporting

(4)

B. A Proposed Substantive Agenda for Investigation

At the end of Phase One, the AMC would define the principal areas of investigation it wants to pursue. Here is my personal preliminary list of ten topics (with some subsidiary questions) to be investigated. My list begins with the more contextual topics and moves toward more specific antitrust topics. I have not attempted to suggest the types

of policy analysis that would make use of the information obtained in the course of this inquiry.60

the present

1. Changes in the economy since TNEC. Begin by putting into perspective. Then, answer questions including: How have the roles of the following factors changed: big business, small business, organized labor, governance, concentration of wealth, international trade, major sectors of the economy?

associations,

corporate

trade

2. Aggregate measures of concentration. Look at the past, present, and likely trends. Examples of such trends include: Is the economy as a whole becoming more or less concentrated? What about different industrial sectors? What role is played by convergence of industrial sectors? What have been the causes of changes in aggregate measures of concentration?

3. Market concentration. Again, look at the past and present trends, focusing this time on a variety of narrowly defined (antitrust) markets. The antitrust agencies could pull this information from their investigatory files to compile a comprehensive profile. Examples of such trends include: What have been the causes of changes in market concentration?

4. Measures of economic performance. By various measures (including profits, prices, innovativeness, and productivity), how has the performance of the economy changed, in terms that throw light on the effectiveness of competition? What do we know about the relative efficiency

differently

of organizations?

sized

differently

structured

(e.g.,

5. Technological change. In what ways are technological changes computers, telecommunications, transportation) affecting competition? How has the creation of network industries affected competition? How has the relationship between antitrust and intellectual property changed?

6. The regulatory environment. In what ways are changes in the regulatory environment (e.g., deregulation of sectors, liberalization of international trade, governmental policies involving intellectual property, taxation, securities, state regulation) affecting competition? How has the relationship between antitrust and sectoral regulation changed?

7. Globalization. How do the expansion of transnational commerce and the development of antitrust regimes around the world affect U.S. competition? How has the relationship between antitrust and trade regulation changed?

8. Business strategy. What changes are occurring with respect to the way businesses conduct themselves as competitors? Examples of such changes may include, but would not be limited to, mergers, joint ventures and alliances, or disintegration, trade associations and internet, leveraging of market power, price discrimination, and standard setting.

buying, information

integration through

vertical sharing

power

9. Antitrust administration and process. The AMC should review measures of resources and effectiveness of antitrust (federal, state, and private) over time. Such measures include: What types of impact evaluation are available and what do they suggest?

10. Antitrust enforcement policies. The AMC should describe ways in which antitrust enforcement policy has changed over time. Such changes include: What types of mergers, single-firm, and multi-firm activities have or have not been challenged? How have criminal penalties changed? In what ways have civil remedies changed?

2003] ANTITRUST COMMISSION PERSPECTIVE 1051

issues

reference on many

Executed diligently by a capable Commission and high quality staff, the process described above could result in a landmark study that would form the basis for fact-based policy recommendations and intelligent formulation of later legislative initiatives. Like the TNEC, it would be an to authoritative competition policy for years to come. But based on past it would be a mistake to gear the inquiry experience, toward near-term legislation. Prior blue ribbon antitrust leaders study commissions participating) have not generated much or important immediate legislation, but at their best have contributed to the on-going national dialogue about the role of competition in our economy, clarifying what is generally accepted and what is open to debate. Given the multitude of questions today being asked about antitrust, both by that are advocates of more and advocates of less enforcement, this type of clarification will more likely than not be useful.

those with political

relating

(even

--- FOOTNOTES ---

Volume 51Number 4

Article 6

10-1-2003

Albert A. Foer The American Antitrust Institute

Part of the Antitrust and Trade Regulation Commons

This Symposium Article is brought to you for free and open access by the Law Journals at Digital Commons @ University at Buffalo School of Law.

ALBERT A. FOERt

t President, The American Antitrust Institute. The author served as stand-in for FTC Chairman Michael Pertschuk on the National Commission for Review of Antitrust Laws and Procedures. The author thanks Hiromitsu Miyakawa, an AAI Research Fellow, for his contributions on the 1955 and 1969 commissions, and Spencer Weber Waller of Loyola Chicago Law School, for his suggestions regarding the TNEC.

1. 21st Century Department of Justice Appropriations Authorization Act,

Pub. L. No. 107-273, 116 Stat. 1758 (2002).

2. The authorization

is for $4 million over the three-year

life of the Commission; however, a lesser amount could actually be appropriated. If there is no appropriation, there will be no Commission. As of September 12, 2003, according to various sources, the House had committed to $1.5 million for the first year's operations and the Senate was expected to provide some level of funding.

3. As of September 12, 2003, appointees by the Democrats were John Shenefield, Debra Valentine, John Yarowsky, and John Jacobson. Appointees by the Republicans in the Senate were Steve Cannon and Makan Delrahim. There will yet be two Republicans appointed by the House and the White House will appoint four members.

I. THE STATUTORY FRAMEWORK

(1) to examine whether the need exists to modernize the antitrust laws and to identify and study related issues; (2) to solicit views of all parties concerned with the operation of the antitrust laws; (3) to evaluate the advisability of proposals and current arrangements with respect to any issues so identified; and (4) to prepare and to submit to Congress and the President a report.

4. 21st Century Department of Justice Appropriations Authorization Act, § 11053. There is no legislative history to speak of, as the bill, H.R. 2325, was inserted as an amendment at the last moment. At various times, Chairman F. James Sensenbrenner, Jr. (Republican from Wisconsin) the Chairman of the House Judiciary Committee and father of the Antitrust Modernization Commission, spoke of the need to study the intersections of antitrust and (1) high technology, (2) intellectual property, and (3) international law. Sources said the idea was modeled after the National Bankruptcy Review Commission. Jaret Sieberg, Bill Calls for Blue-Ribbon Antitrust Panel (Feb. 16, 2001), available at http://www.thedeal.com (copy on file with author).

5. 21st Century Department of Justice Appropriations Authorization Act, §

11058.

6. "[N]o more than [two] of the [four] shall be of the same political party ....

The President shall appoint members of the opposing party only on the recommendation of the leaders of Congress from that party. Id. § 11054(a)(1).

7. Members of Congress are ineligible for appointment. Id. § 11054(b). A member of the Commission who is an officer or employee of a government is eligible to serve, but without additional pay or benefits. Non-government members are entitled to be paid for each day during which such member is engaged in the actual performance of duties of the Commission, at the rate of Level IV of the Executive Schedule." Id. § 11055(a).

8. Id. § 11054(h). 9. Id. § 11056(a). The appointment of an executive director shall be subject

to approval by the Commission. Id. § 11056(a)(1).

10. Id. § 11056(b). Selecting experts and consultants will likely be of great importance in determining whether the Report is seen to be balanced and objective.

11. Id. § 11057(a). 12. Id. § 11057(b). Somewhat oddly, the Antitrust Division, the Federal Trade Commission, and the States are not represented on the Commission. (Makan Delrahim was a member of the Senate staff when he was appointed, but has since become employed by the Antitrust Division.) Some have suggested that this may undermine the law enforcement agencies' incentive for diverting their resources to the assistance of the Commission.

[H]e recommended [that] Congress should appropriate more money for antitrust enforcement; it should pass legislation to control bank holding companies; and it should provide a sum of $500,000 for a 'thorough study of the concentration of economic power,' a study that would include such items as antitrust procedure, trade

the merger movement,

financial controls,

13. Interestingly, although he was a Member of the TNEC representing the Justice Department, Thurman Arnold distanced himself from it. According to Spencer Weber Waller, who is writing a biography of Arnold, "[h]e was not deeply involved in the TNEC either in the planning or the hearing (except at the very beginning)... Arnold ultimately regarded the whole enterprise as a waste of time relative to case investigation and focused on that aspect of his job and delegated TNEC work to his subordinates." Personal correspondence from Spencer Weber Waller to Albert A. Foer (June 15, 2003) (on file with author).

association activities, patent laws, tax revision, and the feasibility of a Bureau of Industrial Economics.14

14. ELLIS W. HAWLEY, THE NEW DEAL AND THE PROBLEM OF MONOPOLY 412 (1966) [hereinafter HAWLEY]. Another important source on the TNEC is chapter six of ALAN BRINKLEY, THE END OF REFORM (1966) [hereinafter BRINKLEY].

15. HAWLEY, supra note 14, at 406. 16. Id. at 413-14; see also CHARLES R. GEISST, MONOPOLIES IN AMERICA 162 (2000) [hereinafter GEISST] ("The TNEC was unique since it was composed of representatives of both houses of Congress as well as the executive branch. In that respect, it looked more like a federal agency than a committee.").

17. One of whom was the economist Robert Nathan, whose set of report volumes the author now owns. Brinkley says that many of the administration alternatives played as significant a role as the full members. BRINKLEY, supra note 14, at 124.

18. HAWLEY, supra note 14, at 415-16.

Fully one-third of the [Federal Trade] Commission's economic reports activity from 1938 to 1941 was devoted to the preparation of testimony, exhibits, and special reports the TNEC investigations. The Commission also prepared monographs on the basing-point problem, the natural gas industry, and the relative efficiency of large, medium-sized, and small businesses.21

for

19. Brinkley concluded that there was a "vaguely dutiful quality to much of the investigation. Seldom did the hearings themselves crackle with the kind of fervor or anger that gave other great investigations ... their claim to public attention. Almost never did examination of witnesses depart from a respectful tone of academic information gathering to produce any real argument or debate." BRINKLEY, supra note 14, at 126. But according to Geisst, "[t]here were also elements of witch-hunting in the TNEC testimonies. Part of the lengthy proceedings were devoted to testimony about racketeering, although the avowed purpose of the hearings was to study the concentration of economic power." GEISST, supra note 16, at 164.

20. SUSAN WAGNER, THE FEDERAL TRADE COMMISSION 81 (Ernest S. Griffith & Hugh Langdon Elsbree eds., 1971) [hereinafter WAGNER]. Political scientist Marc Allen Eisner also concluded, "The TNEC hearings resulted in the most detailed analyses of the American economy ever conducted." MARC ALLEN EISNER, ANTITRUST AND THE TRIUMPH OF ECONOMICS 77 (1991). Brinkley credits TNEC with producing "what is arguably the most thorough, and certainly the most voluminous, study of the structure of the American economy, and of its monopolistic elements single organization." BRINKLEY, supra note 14, at 126.

in particular, ever undertaken by any

21. WAGNER, supra note 20, at 81.

In the beginning the agency had hopes of finding some magic formula that would cure the nation's ills to the satisfaction of to write the final report, everyone .... When it came time however, the mountain of facts had failed to produce any magic formula, and the policy conflict with which the Committee had begun was still unresolved. Each faction continued to view the problem from the standpoint of its own value judgments and to stick with its own ideas concerning the origins of monopoly, the extent and effects of it, and the remedial action that should be taken. The result was a report as timid as it was unoriginal. About all that a majority of the Committee could agree upon were some minor changes in the antitrust laws and minor reforms in patent procedures, and few of these were ever implemented.22

Essentially, the TNEC was a harmless device that could be used by each group to urge a specific line of action or no action at all.... In practice, the investigation became largely an effective duplicate of the frustrating debate that produced it, and by the time its report was filed, the circumstances had changed. Most of the steam had gone out of the monopoly issue, and antitrust sentiment was being replaced by war-induced patriotism.23

22. HAWLEY, supra note 14, at 464-65. 23. Id. at 488. Or, as Geisst summarized, "[tihe recommendations made by the TNEC after it finished its investigation in 1941 were very broad and sometimes vague. The committee did not propose or endorse any specific legislation. Antitrust and monopoly measures were roundly approved by most members of the commission but remained unspecific. The real purpose of the hearings was to expose the structure of the economy more than to remedy it." GEISST, supra note 16, at 165.

24. BRINKLEY, supra note 14, at 127. Brinkley says that "[w]ithin a year of the TNEC's disbandment, discussion of its findings and recommendations on the monopoly issue had all but disappeared from public discourse." Id. at 128. He attributes credit to TNEC, however, for serving "quite deliberately, as a forum for promoting aggressive federal fiscal policies as a solution to the nation's economic torpor." Id.

25. RUDOLPH J.R. PERITZ, COMPETITION POLICY IN AMERICA, 1888-1992:

HISTORY, RHETORIC, LAW 159 (rev. ed. 2000).

26. Id. at 196-97; see also WAGNER, supra note 20, at 94 ("Politicians and government officials, schooled in the TNEC and influenced by revival of antitrust during the 'golden era' of the New Deal, pushed for stronger antitrust laws, particularly for a new antimerger statute.").

27. BRINKLEY, supra note 14, at 136. Antitrust, he quotes Richard Hofstadter, was becoming "one of the faded passions of American reform." Id. at 136.

28. REPORT OF THE ATTORNEY GENERAL'S NATIONAL COMMITTEE TO STUDY THE

ANTITRUST LAWS, at iv (1955).

29. Id. 30. See Thomas E. Kauper, The Report of the Attorney General's National Committee to Study the Antitrust Laws: A Retrospective, 100 MICH. L. REV. 1867, 1867-68 (2002) [hereinafter Kauper]. Economists were "a relatively small fraction of the group." Id.

31. Id. at 1869. 32. Spencer Weber Waller, Symposium, Cultural Conceptions of Competition: Article: Antitrust and American Business Abroad Today, 44 DEPAUL L. REV. 1251, 1260 (1995).

33. Kauper, supra note 30, at 1871. 34. Rudolph J. Peritz, The Predicament of Antitrust Jurisprudence:

Economics and the Monopolization of Price Discrimination Argument, 1984 DUKE L.J., 1205, 1228 (1984).

35. Kauper, supra note 30, at 1871.

It confirms that there is a constancy to the core of antitrust. Having detoured and experimented with new per se rules in the sixties and seventies, we have confined the use of such rules today to what they were in 1955. The rule of reason governs under section 1 of the Sherman Act. The general standards under section 2 remain the same, although in some cases somewhat more precise standards have developed.

Antitrust in 1955 was far simpler than it is today. Fewer cases, no guidelines, and little economic analysis cluttered things up. But for all of that, the core of antitrust has worked its way back to that which the Report describes. If Committee members reviewed the antitrust world of 2002 they would be pleased, even though if candid they would admit that their Report probably had little to do with it. They sought a world governed primarily by the rule of reason. And that is where we are today. Today's rule of reason

36. Id. at 1871-72. One other commentator stated that "the Report's 'central core' is a 'modern view of the Sherman Act [that] can start with Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911),' " and that "[a]ccording to the committee, the opinion's rule of reason 'clarified prior doubts about the relationship between the Sherman Act and the common law, and defined the connection between Section 1 and 2 offenses." Peritz, supra note 34, at 1224.

37. 15 U.S.C. §§ 1311-1314 (1994). 38. Kauper, supra note 30, at 1875-76.

may be truncated, structured or quick look, but it is still the rule of reason. And it dominates much of antitrust analysis today.39

39. Id. at 1896, 1898-99. 40. White House Task Force Report on Antitrust Policy, BNA ANTITRUST & TRADE REG. REP., No. 411, May 27, 1969, Part II, at 1 [hereinafter NEAL REPORT].

41. The members were William F. Baxter, Robert H. Bork, Carl H. Fulda, William K. Jones, Dennis G. Lyons, Paul W. MacAvoy, James W. McKie, Lee E. Preston, James A. Rahl, George D. Reycraft, Richard E. Sherwood, S. Paul Posner. See Richard Schmalensee, Symposium: Bill Baxter in the Antitrust Arena: An Economist's Appreciation, 51 STAN. L. REV. 1317, 1319-20 (1999).

42. NEAL REPORT, supra note 40, at 291.

43. Id. at 292-94. 44. See Schmalensee, supra note 41, at 1320; see also Peritz, op. cit. supra

note 34, at 233; GEISST, op. cit. supra note 16, at 240-241.

45. The proposed legislation, endorsed by eleven of the thirteen members of the Task Force, was designed to reduce concentration in any industry in which "any four or fewer firms had an aggregate market share of 70% or more during at least seven of the ten and four of the most recent five base years." ROBERT H. BORK, THE ANTITRUST PARADOX, A POLICY AT WAR WITH ITSELF, 176-77 (1978). A related recommendation would have supplemented section seven of the Clayton Act to prevent large conglomerate firms from acquiring leading firms in concentrated industries. NEAL REPORT, supra note 40, at 293.

46. William E. Kovacic, Symposium: The Sherman Act's First Century: A Historical Perspective, Failed Expectations: The Troubled Past and Uncertain Future of the Sherman Act as a Tool for Deconcentration, 74 IOWA L. REV. 1105, 1119 (1989); see also PERITZ, supra note 25, at 233 ("The anticoncentration policy subtending the Merger Guidelines, and recent Supreme Court doctrine provoked a series of cases designed to arrest pending conglomerate mergers.").

the NEAL REPORT,

47. See GEISST, supra note 16, at 240.

48. See PERITZ, supra note 25, at 233; see also ROBERT BORK, THE ANTITRUST PARADOX 125 (1978) (stating that the issue between the Neal Report and his opinion is "simply the way in which efficiencies are to be given weight by the law"). The enduring controversy of the Neal Report is reflected in the attention that it receives even in the 2001 edition of RICHARD A. POSNER, ANTITRUST LAW, 104 (2d ed. 2001), concluding that the Neal Report's proposed act "assigns far too much weight to the single fact of concentration by ignoring all the other considerations."

49. Exec. Order No. 12,022, 42 Fed. Reg. 61,441 (1977) (establishing the National Commission for the Review of Antitrust Laws and Procedures). This was amended on April 7, 1978 by Exec. Order 12,052, 43 Fed. Reg. 15133, which expanded the number of Commissioners from fifteen to twenty-two.

50. The Senators were Edward M. Kennedy, Jacob K. Javits, Howard Metzenbaum, Robert Morgan, and Orrin G. Hatch. Congresspersons were Peter W. Rodino, Barbara C. Jordan, Robert McClory, John F. Seiberling, and Charles Wiggins. The Judge was C. Clyde Atkins. Others were Chauncey H. Browning, Jr. (Attorney General of West Virginia, representing state government), Maxwell M. Blecher, Eleanor M. Fox, John Izard, James M. Nicholson, Craig Spangenberg, Gordon B. Spivak, and Lawrence A. Sullivan. Today's Advisory Board of the American Antitrust Institute includes Shenefield, Kahn, Metzenbaum, Fox, Blecher, and Sullivan. Senators Kennedy and Hatch, both

,

serving on Commissioners still in the Congress.

the Senate Judiciary Committee, are

the only NCRALP

51. The Executive Order listed with specificity the issues that the NCRALP

was instructed to take up.

52. NATIONAL COMMISSION FOR THE REVIEW OF ANTITRUST LAWS AND PROCEDURES, REPORT TO THE PRESIDENT AND ATTORNEY GENERAL 324 (1979). The two volumes of the Report are available in Antitrust Division conventional reading room in paper copy and at http://www.usdoj.gov/atr/foia/foiaroom.htm.

53. The budget for the NCRALP was $217,000, to cover travel, consultants, printing and other operating costs. Commissioners were not compensated and staff members were already employed by DOJ. The project actually came in below budget.

54. Despite the fact that NCRALP was established by Executive Order rather than by legislation, the author recalls that most of the members, including politicians from both parties, participated actively, especially in the decision-making meetings. This contrasts with the TNEC, in which the Chairman was apparently the only Member of Congress who showed consistent interest. BRINKLEY, supra note 14, at 124.

55. Richard Posner castigates

the Neal Task Force proposal, and by implication other similar proposals aimed at legislating limitations on concentration, saying, "[tioday it would be regarded, including by its principal authors, as completely off the wall. The two fundamental reasons are the growth of faith in the robustness, the efficiency, and the self-correcting tendencies of the free market and the growth of skepticism about the efficacy of ambitious governmental interventions in the economy." POSNER, supra note 47, at 117. I cite this as illustrative of the way in which thinking about antitrust can change from one political regime to the next, as both ideology and what we believe to be true changes. One function of an antitrust study commission could be to help clarify what the principal schools believe at a certain moment in time.

56. Zoe Baird, Thomas E. Donilon, John T. Dunlop, Eleanor M. Fox, Raymond V. Gilmartin, Vernon E. Jordan, Jr., Steven Rattner, Richard P. Simmons, G. Richard Thoman, and David B. Yoffie. Represented were U.S. business, industrial relations, academic, economic, and legal communities.

57. UNITED STATES DEPARTMENT OF JUSTICE, INTERNATIONAL COMPETITION POLICY ADVISORY COMMITTEE TO THE ATTORNEY GENERAL AND ASSISTANT ATTORNEY GENERAL FOR ANTITRUST: FINAL REPORT (2000). The Report contains six chapters: (1) Globalization and its implications for antitrust cooperation and enforcement; substantive convergence (3) Multijurisdictional mergers: rationalizing targeted (4) International anticartel enforcement and interagency enforcement cooperation; (5) Where trade and competition intersect; and (6) Preparing for the future.

and minimizing the merger

(2) Multijurisdictional mergers:

review process

facilitating

through

conflict;

reform;

III. SOME COMPARISONS OF BLUE RIBBON ANTITRUST COMMISSIONS

58. Id. at 29.

59. 475 F. Supp. 1372 (S.D.N.Y. 1979).

IV. A PROCESS FOR THE AMC

60. However, to provide examples of what I have in mind for Phase Two: What role should market concentration play in merger analysis? In what ways should efficiencies be taken into account in antitrust analysis? Has intellectual property become an anticompetitive factor? Does the growth of network industries require any change in antitrust policy or analysis? When should price discrimination be considered an antitrust issue? What should be the priorities of antitrust-taking into account such historic objectives as keeping prices low, increasing productivity, providing consumers with a reasonable range of choices, stimulating innovation, providing a level playing field to competitors, and combating centralized economic power? Are the criminal penalties sufficiently severe? Should the U.S. support efforts to have an international antitrust regime? Is the mix of antitrust and regulation working well in transitions from regulation to competition?

CONCLUSION