Antitrust, Modernization, and Justice

1. Antitrust, Modernization, and Justice Presentation Before the Antitrust Law Section of the Minnesota State Bar Association Minneapolis, Minnesota Deborah Garza Deputy Assistant Attorney General, U.S. Justice Department, Antitrust Division and Former Chair, U.S. Antitrust Modernization Commission September 20, 2007

2. The U.S. Antitrust Modernization Commission Created by Congress in 2002 to determine “whether the need exists to modernize [federal U.S.] antitrust laws” Bipartisan commission of twelve experts drawn from government and the private sector Commissioners appointed by the President and respective majority and minority Leadership of the House Representatives and Senate

3. Who Were the Commissioners? Six Republicans, five Democrats, one independent Six commissioners with DOJ or FTC leadership experience in Republican and Democratic administrations Three commissioners with substantial legislative experience and eight with substantial litigation experience One economist (Dennis Carlton, President Bush’s nominee to head Council of Economic Advisors)

4. What Did The Commission Do? • Three years (April 1, 2004 – April 30, 2007) • 192 comments from 126 individuals and organizations • 18 hearings over 13 days • 120 witnesses • Informal interviews with judges and enforcers • Substantial independent staff research • Several days of public deliberation

5. Strong Consensus Forged on Rigorous Discussion and Debate • 377- page Report making 80 recommendations • No Commissioner dissented from the Report • At least nine Commissioners agreed in whole or part with 96% of the recommendations • 57% of the recommendations were unanimous • The AMC Report should continue to be relevant whatever happens in the next election

6. Why “Modernize,” Why Now? • U.S. tradition of continuous evaluation • Seventh such federal commission since 1938 • Past commissions spurred significant changes • Pre-merger notification • Expanded use of the Rule of Reason • Improved processes for complex litigation • Deregulation of important industry sectors • Improvements in the merger review process • International cooperation (ICN)

7. Why “Modernize,” Why Now? • The AMC was also a response to issues raised by a few specific high-profile cases • GE-Honeywell and Microsoft, for example, demonstrated the possibility for conflict arising out of multinational jurisdiction over the same conduct and transactions • Microsoft and other antitrust and IP cases highlighted questions about the effect of antitrust enforcement on innovation and the antitrust/IP interface • Still an issue in light of recent EU decision on Microsoft, as to which the US DOJ has expressed concern

8. What Did the AMC Say? • Endorsed free trade unfettered by unreasonable private or governmental restraints • Concluded that the state of U.S. antitrust enforcement is essentially sound • Current U.S. antitrust enforcement is appropriately focused on fostering innovation, promoting competition and consumer welfare (rather than competitors)

9. What did the AMC Say? • The state of U.S. antitrust enforcement is essentially sound (cont.) • Aggressively punishing cartels, while more carefully assessing other, potentially beneficial conduct • Current law is sufficiently flexible as written to evolve with new learning and changing conditions • But, we need to continue to study the bases for and efficacy of enforcement policy

10. What Did the AMC Say? • No need to change the antitrust laws for industries in which innovation, intellectual property, and technological change are central features • In assessing the competitive effects in such industries, however, it is essential to employ a dynamic analysis sensitive to market realities • No need to change the antitrust laws to reflect the global economy, but there should be even greater cooperation among the world’s enforcers and greater convergence (toward appropriate standards)

11. Recommendations with Respect to Civil Litigation • Majority of commissioners recommended no change to current system of treble damages, pre-judgment interest, or the award of attorneys’ fees • But the Commission did recommend overhauling joint and several liability • Non-settling defendants in antitrust conspiracy should be able to obtain claim reduction by the amount of settlements or the allocated shares of liability of settling defendants, whichever is greater • Congress should allow claims for contribution among non-settling defendants

12. Recommendations with Respect to Civil Litigation (cont.) • The Commission also recommended comprehensive reform of indirect purchaser litigation • Overrule Illinois Brick and Hanover Shoe to the extent necessary to allow both direct and indirect purchasers to sue to recover damages under the Sherman Act • Damages could not exceed the overcharge to direct purchasers, trebled • Damages should be apportioned among all purchaser plaintiffs –direct and indirect–in full satisfaction of their claims in accordance with the evidence as to actual damages suffered

13. Recommendations with Respect to Civil Litigation (cont.) • Allow the removal of indirect purchaser actions brought under state law to federal court to the full extent permitted under Article III • Allow consolidation of all direct and indirect purchaser actions in a single federal forum for trial. • Allow for certification of classes of direct purchasers, consistent with current practice, without regard to whether the injury alleged was passed on to customers of the direct purchasers

14. DoJ HSR Merger Review --Some Statistics (10/1/06 to 8/1/07) • Preliminary investigations opened with respect to four percent of reported transactions • Since October 1, 2006,As a general principle, purchases made outside the U.S. from a seller outside the U.S. should not be deemed to give rise to the requisite effects under the Foreign Trade Antitrust Improvements Act.