HEADLINE: HEARING OF THE SENATE JUDICIARY COMMITTEE
SUBJECT: NOMINATION OF R. HEWITT PATE TO BE ASSISTANT ATTORNEY GENERAL FOR THE ANTITRUST DIVISION, DEPARTMENT OF JUSTICE
CHAIRMAN: SENATOR ORRIN HATCH (R-UT)
SEN. HATCH: We're happy to welcome you all out here to this nomination hearing this morning, honored to have Senator Allen here. And it's our pleasure to consider the nomination of Hewitt Pate to be assistant attorney general for the Antitrust Division at the United States Department of Justice. And I'd like to start by welcoming Mr. Pate to the committee, and congratulating him for being nominated by President Bush. Your impressive background and past government service make me very confident that you will be a great asset to the Department of Justice, this committee, and of course the people of our country.
Over the last decade, the position of the assistant attorney general for the Antitrust Division has grown in very great importance. The rapid transformation of our country's economy, particularly in new technologies and international markets, has raised public attention and policy focus on a variety of important antitrust issues. The assistant attorney general in charge of the Antitrust Division plays a crucial role in formulating competition policy and enforcing the existing antitrust laws to make sure that our free market economy survives efficiently and serves the public.
Now, I think I'll reserve the rest of my remarks until later. And if I could -- can I -- can you reserve yours until we let Senator Allen say his remarks? And let me just mention Senator Warner is managing the DOD authorization bill on the floor, and he particularly caught me and said, Mr. Pate, he wanted to be here, and asked me if I would put his very complimentary statement into the record, because he fully supports you and believes you will make a great Antitrust Division chief. So, if we can do that without objection, if you'll forgive Senator Warner, there's not much he can do. He has to be there. So we are going to count on Senator Allen doing the job here, and we'll turn to him at this time.
SEN. GEORGE ALLEN (R-VA): Thank you, Mr. Chairman. I have Senator Warner's statement here that I'd like to have put in the record for my colleague. Mr. Chairman, Senator Kohl, members of the committee, thank you for this hearing on Hew Pate -- I should say Mr. R. Hewitt Pate, a fellow Virginian, to be assistant attorney general of the Antitrust Division of the U.S. Department of Justice. He is joined here by his wife Lindsey and his daughters Lizzie and Ellen, and I know they're very proud of their father, and we are proud to have you all here with us for this.
SEN. HATCH: We're happy to have you here too. And, Lizzie and Ellen, you're beautiful young women, and you blush beautifully too. (Laughter.)
SEN. ALLEN: I noticed that too. As you said, Mr. Chairman, the enforcement of the antitrust laws are very important and essential for the protection of competition in our free market economy, and I've known Mr. Pate for many years, and I can confidently say without any reservation whatsoever that he is very well qualified, and I am confident that he will be effective, he will handle the job and leadership positions and decisions with dignity and impartiality, and enforcing the law.
I, when I was governor of Virginia, appointed Mr. Pate to the Virginia Commission on Higher Education, and to the Governor's Commission on Self-Determination and Federalism. You may see from his record that he did get his undergraduate degree from the University of North Carolina. I got to know Hew -- that's what we call him -- Hew Pate when he was at law school at the University of Virginia in Charlottesville, and I was a member of the House of Delegates at that time representing the Charlottesville area. And Mr. Pate, at the University of Virginia, at the law school, graduated first in his class in 1987, and then went on to clerk for Fourth Circuit Judge J. Harvey Wilkinson. In addition, Hew, Mr. Pate, clerked for Justice Lewis Powell and Justice Anthony Kennedy on the Supreme Court of the United States.
After these impressive clerkships, Mr. Pate went on to practice antitrust law for 10 years at Hunton & Williams, which is a highly respected and one of the largest law firms in the Commonwealth of Virginia. It's an international firm, actually. He also taught competition law at the University of Virginia Law School. And since 2001, Mr. Pate has worked in the Justice Department's Antitrust Division, and has been the acting assistant attorney general for antitrust since November of 2002. In fact, there was one case that Senator Warner and I had one position and the Justice Department and Antitrust had another position, and Mr. Pate came and briefed us on it, applying the law and the facts of that situation. He said, Here's why we come down this way, contrary to the way that Senator Warner and I were advocating. After that meeting we felt that that issue had been given fair consideration. He applied the law logically and understandably, and there was no more grousing appeals for reconsideration and all the rest.
So when you have a friend who has to tell two other friends that applying the law and the question of a judgement call contrary to what you'd desire is not an easy task to do, and that's why I am confident that he will impartially adhere to the laws, provide for proper competition in our economy, and I ask you, Mr. Chairman and members of the committee, to move as swiftly as possible for the confirmation of R. Hewitt Pate, because I know he's a man of integrity, of capability, and the qualifications we would want to be heading up this important division. And I thank you, Mr. Chairman, and members of the committee, for having this committee.
SEN. HATCH: Well, thank you, Senator Allen. I worry about a nominee though that doesn't hew the line for two powerful senators from Virginia like -- (laughter) --
SEN. ALLEN: Well, I'm still for him, and with respect to it, he argued the case very well and in a logical way in applying the law.
SEN. HATCH: Well, I appreciate that, and that's what we want. We want people who are going to do what's right.
SEN. ALLEN: And I will present to you, to the clerk, Senator Warner's testimony, or his introduction, unless you -- do you already have it, Mr. Chairman? You do? Good.
SEN. HATCH: We do, and thank you very much. You can leave it there --
SEN. ALLEN: I'll leave it here.
SEN. HATCH: -- and we'll make sure it's in the record. Thanks, Senator Allen. We know you're busy, and we'll excuse you. We know how busy you really are.
SEN. ALLEN: We know how busy you are as well, Mr. Chairman. Thanks you.
SEN. HATCH: Thank you so much. Appreciate it.
Well, I'll finish my opening remarks and then I'll turn to the ranking member on the Antitrust Subcommittee, Senator Kohl.
SEN. HERB KOHL (D-WI): Thank you, Mr. Chairman. We meet today to consider the nomination of Hewitt Pate to be assistant attorney general for antitrust. The mission of the Justice Department's Antitrust Division has never been more important. In our challenging economic times, we depend on the dynamism of competition in providing economic growth and the jobs necessary to propel our economy forward. Only the aggressive enforcement of our nation's antitrust laws will ensure competition flourishes, and consumers obtain the highest quality products and services at the lowest possible prices.
If confirmed, Mr. Pate will assume the leadership of the Antitrust Division at a very crucial time. One example is the ferment in the media sector. In the next few weeks, the Federal Communications Commission is expected to adopt new rules that will fundamentally relax the limits on media ownership that have existed for decades. This ruling is likely to unleash a wave of media consolidation and media acquisitions that have the potential to reshape the way Americans receive their news, information and entertainment programming.
Only by maintaining diversity in media ownership can we assure the diverse marketplace of ideas so essential to our democracy. The Antitrust Division will stand as our last line of defense against excessive media concentration.
Our work in the last year has also uncovered serious allegations of anti-competitive practices in the ways hospitals, by the medical devices essential to delivering quality health care to millions of Americans. Group purchasing organizations have been accused of adopting exclusionary contract practices which benefit dominant suppliers to the detriment of innovation and patience. While the Federal Trade Commission has taken the lead in investigating this industry, the Antitrust Division's cooperation in revising the joint FTC-DOJ health care guidelines will be essential to restoring competition to this vital sector.
Mr. Pate, the performance of the Antitrust Division over the last two years under your predecessor's leadership does concern me. From the defects in the Microsoft settlement, which many believe was unnecessarily weak and riddled with loopholes, to the general decline in the Division's activities, we are left to wonder if the Division was truly committed to its crucial mission of protecting competition. It is essential that the next head of the Antitrust Division be committed to restoring the proud tradition of vigorous antitrust enforcement to the Justice Department.
Your impressive record of achievement and your fine reputation demonstrate that you are well qualified to restore our confidence and lead the Antitrust Division. I have been impressed with your dedication since you have been the acting head of this division.
Mr. Pate, the position of assistant attorney general for antitrust carries with it a special burden and a special responsibility. The companies over whom the Antitrust Division has jurisdiction have ample resources to hire skilled and talented counsel to represent their best interests. But no one represents the interests of the American consumer other than the Antitrust Division. Millions of consumers will depend on your efforts and your judgment. It is my sincere hope and full expectation that you will meet this challenge when you are confirmed. Thank you very much, Mr. Chairman.
SEN. HATCH: Well, thank you, Senator Kohl.
Mr. Pate, we'll just swear in you at this point, if we can. Do you solemnly swear to tell the truth, the whole truth and nothing but the truth, so help you God?
MR. PATE: I do.
SEN. HATCH: Thank you, sir. We'd be happy to take any statement you'd care to give at this time.
MR. PATE: Thank you, senator, I do have a brief opening statement. It is a great honor to me to be nominated by the president to serve in the Justice Department as assistant attorney general for antitrust, and I thank you, Mr. Chairman, and the committee, for the opportunity to appear today. I'd like to thank Senator Allen and also Senator Warner for their support and for the warm introductions that they've given. Senator Allen mentioned my family. I would like to recognize the support that my wife Lindsey and my daughters Ellen and Lizzie provide me, which is valuable beyond measure, and I thank them for that.
SEN. HATCH: Well, we are happy to have them with you here today.
MR. PATE: I have with me today also my mentor as a young lawyer, Tom Slater, from my former firm, who taught me a great deal about antitrust litigation. And the committee may be interested to know that John Shennefield, whose presence I really appreciate here today, was the head of that firm's antitrust practice when he left in the late '70s to become the AAG for antitrust during the Carter administration. Tom Slater then succeeded him as head of the firm's antitrust practice. I went to work for Slater, and now here some 13 years later, if confirmed, I have the opportunity to succeed Mr. Shennefield to be --
SEN. HATCH: This sounds like nepotism to me. (Laughter.) I mean, we have one law firm controlling all the antitrust rules in this country. (Laughter.)
MR. PATE: Well, in fairness, Mr. Shennefield moved on and has had an illustrious career elsewhere. But I do appreciate being associated with that lineage.
SEN. HATCH: We're happy to have both of you here. And, Mr. Shennefield, we remember your -- I was here when you served, and you did a very good job, and we just appreciate having both of you -- both of you have done good jobs, and we are grateful to have you in this position as well.
I am going to have to turn this over to Senator DeWine -- it looks like we have another vote -- because I am in the middle of the tax conference. I hate to leave, but I am totally in support of your nomination. I think it's one of the best nominations we could possibly have. But, Senator DeWine, whom himself has been an attorney general, and Senator Kohl, do an excellent job on our Antitrust Subcommittee, and I am going to turn it over to Senator DeWine. But it looks like we have a vote. So I'll tell them to hold it for you, okay?
MR. PATE: Well, thank you, senator. I appreciate you being here to open the hearing.
SEN. HATCH: Thank you so much. We are honored to have you accept this position, and we appreciate your wife and family, because we know the long hours that you have to put in, and it's very, very difficult for you. So we appreciate the service you give as well.
MR. PATE: Thank you.
SEN. HATCH: Go ahead. I'm sorry to interrupt you.
SEN. MIKE DEWINE (R-OH): I think what we are going to do, since we just started a vote, I think that we will stop at this point, so we don't break the questioning.
MR. PATE: Okay. And should I complete my brief statement at that time when you resume, or --
SEN. DEWINE: We're going to do that.
MR. PATE: Okay.
SEN. DEWINE: We are going to have to just break it right now. We are going to go vote. Senator Kohl and I will vote, and we will be back. Thank you very much.
MR. PATE: Thank you, senator.
SEN. DEWINE: The hearing will come to order. We apologize for the interruption. We didn't count on the -- at least I didn't count on the second vote.
Mr. Pate, will you please continue your opening statement?
MR. PATE: I will. Thank you, Senator. Having introduced my family and Mr. Slater and Mr. Shenfield earlier, let me just continue by saying this, Mr. Chairman.
The antitrust laws are truly a cornerstone of our market economy. We in the United States rely to a great extent on competition to ensure that citizens get the benefit of higher quality and lower prices in the goods and services that they need, and sound enforcement of our antitrust laws protects this competition. The antitrust division's criminal enforcement program detects, punishes and deters price-fixing and other illegal conduct by those who conspire to cheat consumers rather than compete to win their business. Our merger review program prevents anti-competitive combinations that can lead to higher prices or can lead to greater opportunities for collusive behavior. And our civil non-merger program prevents the unlawful creation or abuse of monopoly power.
This year marks the 100th anniversary of the appointment under President Roosevelt of the first assistant to the attorney general responsible for antitrust. This organizational step laid the foundation for the current antitrust division, and the division has a great history of vigorous enforcement of our antitrust laws. My work at the division for just about two years now has made me appreciate that it is the extraordinary public service of our dedicated career attorneys and career economists who make the division's enforcement record possible, and I am very humbled to think that if confirmed by the Senate I will have the opportunity to do all that I can to help the division carry forward its important work.
I'd like to thank you again, Mr. Chairman, for the opportunity to appear before the committee, and I would be happy to answer any questions that senators may have.
SEN. DEWINE: I turn to my colleague Senator Leahy for any opening statement he would like to make.
SEN. PATRICK LEAHY (D-VT): I thank you, Mr. Chairman. And I'm glad to be here with you and with Senator Kohl, who you -- both of you, as I've said before, did such a superb job of handling this subcommittee and I will put most of our -- my statement in the record, but I do worry about the geographic boundaries of our marketplace being pushed further and further out, and many of the competitive issues that were once only local have become regional, national, even global, in their -- in their nature, and when the economy is suffering and in down times, then you have a temptation to act anti- competitively. We're in a world dominated by high-tech information industries, technological change coming at a dizzying speed. And so we have to have fair and efficient enforcement of our antitrust laws.
We think of mergers of competitors, but more and more vertical arrangements are entered into and we have to look at those. It doesn't mean they're all bad by any means, but in some cases they can give consumers a greater range of choice, others, they can very much limit it.
And we have to make sure in the digital age consumers that they are covered. I've raised concern about the recent proposal by H.P. Hood and National Dairy Holdings to join, which would have had one entity, Dairy Farmers of America, in control of 90 percent of the milk in my part of the country at a time when milk prices are at an all- time low.
And I might conclude with this, Mr. Chairman. On the question of media concentration, I've talked before this hearing with Mr. Pate. I sent a letter, along with Senator Jeffords, to Chairman Powell at the FCC, expressing our concerns about media concentration, and I will arrange to give to Mr. Pate a copy of that letter because, as he has pointed out to me, there are different rules that involve the Department of Justice and the FCC on that, and they have different concerns expressing it and should do so.
And the last thing I would say is it's so nice to see your family here. And you are -- as I told you earlier, you are blessed with a wonderful family, and I hope these two lovely eight-year-olds gain something from this. This is not what they'd normally be doing in school, so we're delighted to have them here.
MR. PATE: Thank you, Senator.
SEN. LEAHY: Thank you, Mr. Chairman.
SEN. DEWINE: Senator Specter.
SEN. ARLEN SPECTER (R-PA): Well, just a word to welcome Mr. Pate to this committee for taking on a very, very major assignment here. The modern trends on mergers and acquisitions and concentrations, really, pose a very, very different economic picture for America today than when Jefferson raised a question about whether big was bad and Brandeis raised about the same issue. So, it's a very, very important matter.
One of the subjects that has been of continuing concern to me has been the monopoly practices of OPEC oil. And when we have a chance to talk about it, I'd like to get your views on what might be done on an aggressive policy, because I think that OPEC does not qualify for any of the exclusions from the antitrust laws under sovereign immunity, et cetera. But I'll save most of my comments for the Q&A.
Thank you, Mr. Chairman.
SEN. DEWINE: Senator Craig.
SEN. LARRY CRAIG (R-ID): Welcome before the committee.
MR. PATE: Thank you, Senator.
SEN. CRAIG: Your reputation tells me that you're going to be confirmed, and we'll look forward to working with you.
I do say that I reflect some of the concerns expressed by my colleagues here. Dominant in them is the consolidation of the segments of the agricultural economy that have offered great frustration to the producers in the last decade or two. And while that frustration doesn't go away, there's ongoing study as to whether in fact it affects market price and whether all of this activity fits within the antitrust laws of our country or does not. My guess is that during your tenure, some of those issues will be visited, and we'll look forward to working with you on them.
MR. PATE: Thank you, Senator.
SEN. DEWINE: Since I am presiding today on behalf of Chairman Hatch, and since I'm going to be here throughout the hearing -- I know some of my colleagues do have to leave because they have other hearings going on, I'm going to hold my opening statement, and I'm going to hold my questions until the end. So, we'll start with Senator Leahy for the first round of questions.
SEN. LEAHY: I just as soon go to --
SEN. DEWINE: Or Senator Kohl --
SEN. LEAHY: -- Senator Kohl, who is the ranking member.
SEN. DEWINE: That's fine. Senator Kohl. Senator Kohl is the ranking member, as you know, of the Antitrust Subcommittee, and Senator Kohl and I have exchanged gavels back and forth a number of times, and I suspect we may at some time in the future do that again, although I hope that doesn't occur too soon. (Laughter.)
SEN. LEAHY: I hope it does. (Laughter.)
SEN. DEWINE: Well, I -- well, we understand. Senator Kohl.
SEN. KOHL: Thank you very much, Senator DeWine.
Mr. Pate, as you know, over the last year, our subcommittee has investigated disturbing allegations of anti-competitive practices among the large buying organizations that purchase medical equipment and devices for hospitals -- what are known as group purchasing organizations, or GPOs. We held a hearing last year and received evidence of GPO contracting practices and conflicts of interest that can effectively prevent competitive medical device manufacturers from gaining access to hospitals for their devices -- innovative products like retractable needles, for example, or advanced pacemakers. As a result, it appeared that in my cases hospitals were not getting the best products at the best prices for their patients. The situation is quite disturbing. We cannot tolerate, as you know, a situation in which patients and physicians would be well denied the best medical devices because of anti-competitive practices by these GPOs.
We are pleased that in response to our concerns, several of the largest GPOs, including the industry leader, Premiere, have now committed to voluntarily change many of their contracting practices and end conflicts of interest. We commend Premiere and the other GPOs that have worked with us over the last year to inform -- to reform their practices. However, we also believe that vigorous antitrust enforcement is required of this industry, and that the joint FTC-DOJ healthcare guidelines covered -- covering the activities of GPOs need to be reviewed and updated in light of the industry practices we uncovered and a consolidation that has taken place in this industry.
I have a question for you regarding this issue, and then a follow-up.
First, do you share our concern, Mr. Pate, regarding the possibility of anti-competitive practices by GPOs, which could well result in device manufacturers being denied access to the hospital marketplace?
MR. PATE: Senator, the issue you raise is one of great importance. The ways in which hospitals can purchase medical supplies affects not just the price of medical care but also access to new and innovative products, as you mentioned. This is an issue of concern and attention at the division.
As you know, the Federal Trade Commission has an open investigation in this area. It would be inappropriate for me to make comments directly about that, but I will say that the division works cooperatively with the Federal Trade Commission in this area. We have joint health care hearings open with the Federal Trade Commission in which this is a subject on which we're going to be seeking evidence. And if as a result of that we find that there is a need for changes to the healthcare guidelines as they relate to GPOs particularly, then we have pledged to work with the Federal Trade Commission on that. So, this is an area in which you can expect us to be active.
SEN. KOHL: So then what you are saying is that if and when you are confirmed, we can expect your very prompt reexamination of the healthcare guidelines to begin, and would expect it to be finished in a fairly quick and effective way?
MR. PATE: You can expect we'll be very active in this area. I think that it would be most likely that we would try to conclude the joint healthcare hearings and the collection of evidence on healthcare issues before, frankly, there would be a revision of the guidelines. But what I'm talking about there is a period of several weeks, during which those hearings are going to continue, and after that, if there is a need to move forward, we'll be doing that together with our colleagues at the Federal Trade Commission.
SEN. KOHL: Okay. One more question on this. Mr. Pate, the Federal Communications Commission is about to conclude perhaps the most fundamental revision to its media ownership rules that we've ever seen, and expects to issue its new rules in the next few weeks. It's been reported in the press that the new rules will be a major relaxation of current media ownership limits, even though we've recently seen a great amount of consolidation in the media. And these reports trouble many of us.
Mr. Pate, if these ownership limits are lifted, then we can imagine a greater wave of merger -- media mergers and acquisitions. Indeed, the investment firm of Merrill Lynch has just released a report predicting just such a merger and acquisition binge. The antitrust enforcement agencies will then be our last line of defense against excessive media concentration.
Some believe that there is nothing special about mergers and acquisitions in the media marketplace, and that they should be treated just like any other merger. For example, when I discussed this issue with your predecessor, Charles James, last year, he said that the only thing that matter in reviewing such a media merger was the economic consequences of the transaction.
I respectfully disagree. First, mergers in the media are different because they affect competition in the marketplace of ideas which are so central to our democracy, and diversity in ownership is essential to ensuring that such competing views are heard. Therefore, I believe that we must give media mergers special and more exacting scrutiny than one would review mergers in other industries which do not affect the free flow of information. Former FTC Chairman Robert Pitofsky agrees with this view.
What is your view, Mr. Pate? Is the conventional view of antitrust review of media mergers focused solely on, for example, ad rates, correct, or do you agree with me that the Justice Department should consider a media merger's impact on diversity of views and information, and not limit your analysis to merger's likely effect on economic interests, such as advertising rates?
MR. PATE: Well, Senator, this is an important issue, one on which I know members of the committee have been very active. There are different predictions as to what may follow from the FCC's rulemaking. I recall the report you mentioned. I know that an analysts group, I believe called the Precursor Group, issued a report a couple of days ago suggesting that there would not be consolidation following the rulemaking.
We don't -- we're not in the business of predicting what will happen but dealing with transactions that do come before us. What I would say on that front is that -- I know you characterized us as the last line of defense, but I can certainly assure you that we will be in place, and if there are transactions that present anti-competitive consequences, we will stop them. We have been active in the media area in whatever size case, including big cases, such as Direct TV/Echo Star.
As to the specific diversity issue that you mentioned, it is the case that we have a different statutory mandate than the Federal Communications Commission, which, for example, right now is looking at a diversity index that would look directly at diversity of voices, to some extent at local production.
Our statute, the Sherman Act, is different and is directed specifically at competition, but I would say that when we step in to stop an anti-competitive transaction, that may, as a by-product, also preserve diversity of voices, and that's all to the good.
SEN. KOHL: And I appreciate that. And finally, I'd like you to offer me some response that is somewhat specific, to my suggestion that media activities, because they relate to something so central to democracy, deserve more than just an economic review, that there's another level of review that is proper and necessary when it comes to media diversity.
MR. PATE: Well, certainly as a statutory mandate, the FCC directly looks at those things. And in terms just of the general interest in citizens, no one can deny that there is a great interest in diversity of access to views in the media. When we go to court, which is what we need to do to challenge an anti-competitive transaction, we have to proceed under the standards of the Sherman Act. And those are specifically directed toward competition. But as I say, the work that we try to do in protecting competition may also from time-to-time help preserve diversity in the marketplace in terms of the output of views that are accessible to consumers.
SEN. KOHL: Thank you, Mr. Pate. Thank you, Mr. Chairman.