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Public Statements

Hearing of the Senate Judiciary Committee - Continued

Location: Washington, DC

SEN. DEWINE: Senator Specter.

SEN. SPECTER: Thank you, Mr. Chairman.

Mr. Pate, at the outset, I thank you for your timely intervention with the department on a matter of significance in Pennsylvania, where we had a bankruptcy sale involving a company called Carbide Graphite, and you had the matter under study and intervened in a very timely way to forestall an antitrust potential violation, which resulted in the continuation of the plant and the employment of some 120 people in a small town, St. Mary's, in Pennsylvania. That was, I thought, unusual, very prompt action, and we thank you for that.

MR. PATE: Well, thank you, Senator. That was an important situation, one in which the division had to act quickly. The division's principal deputy, Debbie Majoras, was in charge of that and did a good job. We also had tremendous help from the U.S. attorney's office in Pennsylvania in that case as well, so I appreciate your comments on that.

SEN. SPECTER: Mr. Pate, back on October 11th, I wrote to President Clinton, and similarly -- in 2000 -- and on April 25th, 2001, wrote to President Bush concerning the energy crisis and the high prices of OPEC oil. And Mr. Chairman, I'd like both of these letters to be made a part of the record.

SEN. DEWINE: Without objection, they'll -- without objection, they'll be made part of the record.

SEN. SPECTER: And these letters outlined a basis for pursuing OPEC, essentially pointing out that the governmental activity exemption did not apply, and citing the case law on commercial transactions, and even an alternative suit, for the International Court of Justice at The Hague, but the principal idea was to move under the antitrust laws. And we have seen the energy issue become even more complicated, difficulties in finding sufficient fuel, costs of using fossils, coal. I hope that you will take a very, very serious look at this issue because we now know with certainty that the Saudis are not our friends. And while there may have been some political factors to ease off in the past, I think that has all changed with 9/11 and the revelations of Saudi involvement.

This is too complicated a subject to discuss at any length in the course of the seven minutes allotted, so perhaps it might just as well be left with your commitment to study it and act if you think you have a case and can get permission from the White House.

MR. PATE: Well, Senator, I understand that this is a very difficult legal area. I know that FTC Chairman Pitofsky testified on this a few years ago and noted some of the legal hurdles that might be in the way of such a case. I know that it's been a subject of interest to you personally, Senator.

Let me say this. Bringing an enforcement action against OPEC would certainly involve more than just the legal and policy considerations normally involved in an anti-trust case that the division might bring. As the content of your question indicates, there are inherent diplomatic and international relations issues involved in such a case, and the issue would be one that would involve interests broader -- not only broader than the anti-trust division, but broader than the Department of Justice.

And I believe that in the past, administrations have pursued this issue through diplomatic and other means. But, as with any topic, I would pledge to take a look at the anti-trust law on this subject and to provide your staff with information on that if you believe our review would be appropriate.

SEN. SPECTER: Well, let's leave it this way. Will you make a commitment to within 90 days give a conclusion as to whether you think there's an anti-trust violation? And if you do, then I think others in the Congress would weigh in.

I certainly would, as a matter of policy and international relations, take it up to the secretary of State and really up to the president. I think the threshold question is whether the assistant attorney general in charge of the anti-trust division thinks there's a case.

MR. PATE: Well, Senator, as with any issue in which senators seek our views, if you were to request those, I commit to you that the division will get a response back to you promptly. And I certainly think 90 days is a reasonable amount of time to do that.

SEN. SPECTER: Okay, I'm requesting it. (Scattered laughter.)

Let me turn now to a matter of interest to Pennsylvania. There is a travel agency called Travelocity which I visited recently because they had brought to my attention a very serious situation which appears to me to be an anti-trust violation.

I have written about this just a week ago, on May 13th, but the essential facts for the record in our hearing are these, that there is a competitor of Travelocity's -- and we're putting all the cards up on the table; it's a question of fair competition, legal competition -- a company called Orbitz, which is jointly owned by five major airlines: United, American, Delta, Continental and Northwest. And those five airlines together account for four of five tickets sold in the United States. And almost all U.S. major airlines, which account for more than 90 percent of domestic bookings, are represented to participate in Orbitz on similar terms with the five identified airlines.

The key concern that Travelocity has is the so-called most- favored-nation agreement between Orbitz and air carriers which guarantees Orbitz access to the airlines' lowest fares to the exclusion of Travelocity. Sounds to me on its face like a restraint of trade. What do you think?

MR. PATE: Well, Senator, I appreciate an opportunity to address the Orbitz case, which I know has been one of interest among members. For the reasons you state, the Orbitz matter has been a subject of great concern at the division. A joint venture involving MFN among five horizontal competitors with 70 percent or more of the traffic raises obvious anti-trust issues.

At the time we opened the investigation, however, the division determined right about the time I came to the division -- correctly, I believe -- that we should look at the market operation of Orbitz and make a determination based on that rather than do, as some were suggesting at the time, try to seek an injunction to prevent Orbitz from coming into operation at all, because there were potential consumer benefits from this new venture that were being offered.

At this point, our economists have been involved in trying to review large volumes of market evidence, but one of the problems we face is the post-September 11th environment in which the airline industry has faced a situation unlike any I'm aware of. And frankly, it has been difficult to come to a conclusion that we can be confident about in the case.

But I assure you, we're not sitting on it. We're working hard on it, and we want to bring the case to a conclusion to determine whether we need to try to take some action and whether that would be justified. It's a priority matter at the division.

SEN. SPECTER: You might think 90 days is too short to come to a conclusion, unlike OPEC oil?

MR. PATE: Well, on a non-merger investigation of that importance, I know these things take longer than many would think is necessary. I can assure you, we are working hard on it. But I would hesitate to put a timetable on it of that type, because it's equally important that we get the answer right as that we act quickly in a case like this. But we are working on it.

SEN. SPECTER: Well, Orbitz is important, but not more important than OPEC.

MR. PATE: I wouldn't suggest that it is.

SEN. SPECTER: I'm just jousting a little with you on time; if not 90 days, perhaps 180. But we would appreciate a close look.

Mr. Chairman, I have just a little more, if I might proceed. I'm handed a note, my staff reminding me that the investigation has been ongoing since May of 2000. Now, that's not under your watch, but I hope you'll keep that factor in mind, that we're three years into the matter.

I note that the Department of Transportation is going to be issuing regulations here. And I'm a little perplexed as to why the Department of Transportation has the lead role when this is really an anti-trust issue. Will the Department of Justice and the FTC be giving the Department of Transportation your inputs as to the potential anti-trust issue for the past violation?

MR. PATE: Senator, I believe what you're addressing there is the CRS rule-making that's underway at the Department of Transportation. And, yes, we are looking right now at providing record comments to the Department of Transportation about how the CRS rule-making should go forward. We had a letter from Senator Kohl and from Senator DeWine jointly asking about that same topic, and it's a matter that our attorneys and economists are working on now.

SEN. SPECTER: Why does the Department of Transportation have what is really the lead role on a matter of this sort, which is really an anti-trust issue?

MR. PATE: Well, the rule-making that I believe you're referring to is really a rule-making that occurs under the Federal Aviation Act. And there are different aspects of aviation competition in which the DOT takes the lead and others, such as merger review, where the Justice Department takes the lead. So the reason for that division as it relates to the CRS rules is the content of the statute that they follow.

SEN. SPECTER: Well, I'd just like to be sure that the real anti- trust experts are at work on it. But I thank you for your assurances.

Mr. Pate, I think you're an impressive nominee. You're an impressive witness. I look forward to supporting you and working with you.

MR. PATE: Thank you, Senator.

SEN. SPECTER: Thank you, Mr. Chairman.

SEN. DEWINE: Thank you, Senator Specter. Senator Kohl.

SEN. HERBERT KOHL (D-WI): Thank you very much, Mr. Chairman.

Mr. Pate, we were pleased last year when the Justice Department decided to block the merger between DirecTV and EchoStar. Now the media giant News Corporation, owners of the Fox television and cable networks, wants to acquire a controlling interest in DirecTV.

While not a direct horizontal merger among competitors like the EchoStar/DirecTV deal, this merger does raise important vertical issues. One of the world's most powerful producers of news and entertainment would be acquiring one of the most important distribution vehicles.

Mr. Pate, we recognize that you cannot comment on the specifics of the News Corporation/DirecTV deal, as it will be reviewed by your agency when you're confirmed. But can you tell us generally how you will analyze vertical mergers in the media industry? Do combinations of content producers and distribution channels pose special dangers, especially for competitors who do not own a means of distribution?

MR. PATE: Well, thank you for that question, Senator. I appreciate your remarks on the DirecTV/EchoStar merger. We were very pleased with the outcome we got there. It was actually an instance where I was able to appear in court myself on that case and was especially pleased at the way it turned out.

As to the transaction you mentioned, the upcoming News Corp transaction, as you say, it would not be appropriate for me to comment on that. It involves obviously different circumstances from the purchase or the merger of two direct horizontal competitors, as we had in DirecTV/EchoStar. But we'll be looking at it closely.

On the overall question about vertical mergers, as a general approach, vertical mergers, as you know, generally provide lesser concern under the anti-trust laws than a merger of horizontal competitors. Nonetheless, there are instances where the vertical consequences of a merger can present a sufficient impediment to competition by one of the horizontal competitors, that they do raise significant concerns.

I would mention cases since I've been at the division -- Northrop-Grumman-TRW. We had a case called Premdor in the door manufacturing area. So we have in recent times looked at vertical aspects of mergers, and we'll do that in any case that it's called for. But beyond that, I think it would be inappropriate to address specifically an upcoming transaction such as the one you mentioned.

SEN. KOHL: All right. In the 1996 Telecommunications Act, Congress essentially deregulated radio station ownership, ending national ownership caps and allowing one company to own up to eight radio stations in large markets. As you know, an enormous wave of consolidation followed, resulting in large corporations such as Clear Channel now owning more than a thousand stations across the country.

Many people have decried this gigantic wave of radio consolidation and contend that it has homogenized radio across the country with the same formats and programming offered in every major city by the same owners. Most stations, critics contend, care little about their local markets and are often programmed at one central and oftentimes one very distant location.

Local news coverage has suffered perhaps the most. Radio stations once competed with different city hall or courthouse reporters, for example. And those same groups of eight stations now share one reporter and only one perspective. Many stations have eliminated news coverage altogether. Last Sunday's Washington Post reported, for example, that on 9/11 several of Washington's leading FM radio stations had nowhere to turn but to television, and they merely fed the sound from these television broadcasts.

Does the experience of radio consolidation sound a warning bell for media consolidation in general? Doesn't this experience support examining a media merger's effect on the marketplace of ideas, to which I referred before, rather than just on the economic cost of advertising?

MR. PATE: Well, as we discussed with your earlier question about media consolidation, Senator, when we intervene to stop an anti- competitive merger, it can have the effect of preserving diversity. The specific treatment of issues such as local content generation, local ownership and looking directly at the content of broadcasting is something that comes within the Federal Communications Commission's mandate.

When we act, as I mentioned earlier, we act under the Sherman Act. In terms of doing that, with respect to your concern about local communities, I will stress that we look at that on a local geographic market-by-market basis. We don't simply look at a radio merger in a nationwide context. Rather, we look from market to market at what the effects will be on a particular locality.

As to my experience in this field, with respect to radio mergers, the one recent transaction we've had was the Univision-HBC transaction. And in that case, radio overlaps between HBC and a company called EntreVision were the specific issue in which we intervened and required a divestiture. So these are issues that we're going to look at closely.

SEN. KOHL: Would you say that you would tend to be, can we predict, more in the mold of a Charles James or a Joel Klein in terms of your activity? I'm not talking about your philosophy. But he was perhaps, in my judgment, more energetic just in terms of his activity, not necessarily, you know, his political philosophy, but --

MR. PATE: Well, Joel Klein has been, Senator, a friend of mine for a long time. Charles James is a friend and my former boss. So I may be too close to the situation to comment. I guess if I were going to try to affiliate myself with two predecessors, I would take my friend, John Shenfield, who's here, and then James Rill, who was in charge of the division and is also a good friend who served in the previous Bush administration.

SEN. KOHL: Thank you.

MR. PATE: Thank you.

SEN. KOHL: Thank you, Mr. Chairman.

SEN. DEWINE: Senator Leahy.

SEN. PATRICK LEAHY (D-VT): Thank you, Mr. Chairman. I would hope you'd look very carefully at the issues that Senator Kohl and others have raised on this. And as I say, I will give you a copy of the letter that Senator Jeffords and I sent to Chairman Powell on this media concentration.

Just from a -- well, the article that Senator Kohl referred to from the Post over the weekend reflects what many of us who travel around the country see. I mean, the homogenization of radio is terrible. When somebody can sit in a room in Maryland and pretend to give the traffic reports for a West Coast radio station, you realize how much they've lost touch. But you also find when the company, Clear Channel, I believe they will deny this, but I believe they have done this, have actively censored different artists and others, and that's wrong. Let's have clear -- or even those who have talk shows, who actively censor them or make sure they can't compete with each other. I think one of the great things that I found growing up and still find in my own state is having a number of radio stations that are each different. It's bad enough that our newspapers around the country have become very homogenized. Now radio and television does the same thing. We have a real problem. Plus the public safety aspects. In my state we have only got a couple radio -- two or three radio stations that can do the things when there's a flood, massive snow storm -- and in Vermont, massive, you have got to go above 15 or 20 inches. Fifteen inches, the schools open an hour late; 20 inches, it is possible having some closings, but those are newcomers to the state. (Laughter.) And 25 inches, I'm willing to open the office three hours late. But you need these kinds of things. And it -- the best thing about this country is to have diversity of views, diversity of opinions. And it's not real competition if somebody is able to say in one place but it's going to be heard all over the country. It doesn't help any of us. So please look at it carefully.

I also would note that in December I wrote to you about opposing the proposed merger between H.P. Hood and National Dairy Holdings, a dairy processing company largely owned by Dairy Farmers of America. Now, this is somewhat parochial, I'll admit, but it would have allowed them to, as I said in my opening statement, control 90 percent of the fluid milk in New England. And we saw this -- the Department of Justice has now launched an investigation of the proposed merger. H.P. Hood and National Dairy has announced they would restructure their merger. I think because the Department of Justice was looking at it that they were more careful. I hope I have your commitment that your department will continue to look at it. I am not asking you to prejudge it, but will you at least continue to look at it carefully?

MR. PATE: Well, thank you, senator. You do have that commitment, and we don't view agricultural issues as parochial ones or unimportant ones. As you know, at the Division we have a man named Doug Ross who is our special counsel full-time on agriculture. With respect to milk specifically we recently brought a case which was not a reported merger but a transaction that was below the threshold, called Southern Belle, which related to school milk markets, primarily in Kentucky, in which joint control by DFA presented a concern. We were looking very closely at the NDH Hood transaction when it was withdrawn, and to the extent that or a similar transaction in that industry comes back, you can rest assured that we will be looking at it closely.

SEN. LEAHY: Well, I mention this because in 2001 Dean Foods and Suiza Foods merged. I was concerned about that, expressed concern about they control about 30 percent of milk nationally, but 70 percent in New England. Since that merger what has happened is the farmers receive 25 percent less for their milk. The price in the supermarket is virtually the same for a gallon. It may change a cent or two, but most places it is the same. So I hope also that your department will look and find out whether or not that merger brought about the severe drop in prices to the producers. It certainly has not made any change to the consumer. But whether that has any change to do with the severe drop to the producers.

MR. PATE: Well, just as you mention, senator, in the agricultural area this can be somewhat unlike other areas. We are concerned with issues of so-called monopsony power. And in order for farmers to have a fair market in which to sell their milk there needs to be a choice of potential purchasers. So I think these are legitimate issues, and they are ones that we'll continue to look at. With respect to Suiza/Dean, the department did insist on some divestitures there; but, as with any other case, if information comes to light about what's happened since the merger that can help us do a better job in the future, we want to consider that as well.

SEN. LEAHY: Well, thank you, Mr. Pate. I will put my other questions in the record. I would like you to look at it. But I do have one if I would just might, Mr. Chairman. You gave a speech in February offering praise for a European Union initiative whereby the EU or a member country could investigate in an antitrust matter but not both. And you suggested, as I read it, the U.S. system where many states and federal agencies launch investigations is too cumbersome. But I look at things like Microsoft -- that case came about because there had been cooperative state and federal law enforcement officials working. Some of the things that come eventually to the federal level began because of aggressive action at the state level. So would you like to speak a little bit to your speech?

MR. PATE: I would. I appreciate the opportunity to talk about that.

SEN. LEAHY: I thought you might.

MR. PATE: The context in which I was mentioning that is one in which, as you know, we from time to time have been critical of our colleagues at the European Commission. On the other hand, the point I wanted to make there is that we need to be open to ideas in terms of what they are doing there. And Mario Monti I think very ambitiously is looking at how in a federal system they can work together.

With respect to what we have here, I guess I would refer you to my remarks at the ABA antitrust meeting more recently, in which I pointed out that one of the strengths of our antitrust system is the decentralization of that system. The Antitrust Division has a voice in making antitrust law; so do the courts; so do states attorneys general. And we work cooperatively very well with states attorneys general. We are doing that now in terms of enforcing the Microsoft settlement, even working with the so-called non-settling states who took a different view of the case than we did. And so as long as I am at the division, if I am confirmed you will find that we are going to continue to cooperate with the states.

There are situations in which having a very large number of enforcers looking at the same case can make it difficult to enforce in a non-duplicative way, and we want to work together with the states on that problem when it comes up as well.

SEN. LEAHY: I'll take a look. In fact, if you could have somebody send me over the ABA speech, I will actually read it.

MR. PATE: I will make sure you have it.

SEN. LEAHY: Not everybody will make -- not everybody will make that offer, but I will read it. Thank you. Thank you, Mr. Chairman.

SEN. DEWINE: Senator Kohl.

SEN. KOHL: Thank you, Mr. Chairman. I have just one more question. Mr. Pate, the government's landmark antitrust case against Microsoft was settled before you assumed your current responsibilities. As you may know, I expressed serious concerns regarding the loopholes and limitations in the settlement when it was announced, and I still hold some of these concerns today.

A couple of questions. First, have you been satisfied in the manner in which Microsoft has implemented the settlement thus far? And can you point to any specific ways in which the settlement has improved competition in the computer software market today?

MR. PATE: Well, senator, I appreciate your comments. On Microsoft I know there was a wide range of opinions about that case. We at the division were very pleased about what Judge Kollar-Kotelly had to say about the ways in which the settlement did track very faithfully the findings of the D.C. Circuit Court of Appeals and did provide effective relief for consumers. Since that time we have worked together with the state attorneys general offices who have been involved in the case to try to make sure that settlement is effective. I would say that it's an area in which we understand the need to be vigilant in making sure that the settlement is carried out. One recent example in which -- that I would point out where our lawyers who are in charge of enforcing that settlement obtained some improvements was in the area of the licensing agreements that Microsoft uses. Through our efforts, together with our state colleagues, we obtained an agreement that Microsoft change those licensing terms, and also remove a non-disclosure agreement so that the terms of the agreement could be available to the public so that we could get comment from interested parties. We are going to continue to do things like that, and Judge Kollar-Kotelly has set up her procedure that is going to try to make sure that the settlement is effective. And we are committed to doing that.

SEN. KOHL: All right. And with respect to Microsoft, last week the International Herald Tribune reported on allegations that Microsoft had engaged in a number of questionable business practices during the last year in order to dissuade governments and large institutions from choosing cheaper alternatives to its dominant Windows operating systems. The alleged practices include offering steep discounts for Windows, or even offering it for free if necessary. In addition, the newspaper claimed that Microsoft representatives were attending trade fairs under false identities, and purporting to be independent computer consultants in order to persuade customers to avoid buying competitive products.

Do these allegations concern you, Mr. Pate? And, if true, do they raise questions regarding Microsoft's pledges to have undertaken reforms and obey the spirit as well as the letter of the settlement? Do you plan when you are confirmed to investigate these allegations?

MR. PATE: Senator, with respect to the report you mention, our level our concern would depend on the actual facts that we were able to verify.

With respect to discounting and other practices in Europe, I would suggest a caution in that the laws in Europe with respect to what sort of discounting is appropriate may differ from ours, and there may be instances in which things that are actually on the merits competition from our point of view may run afoul of different local rules there.

On the other hand, as to your general question, we have met in the past repeatedly with firms who have concerns about Microsoft. If I am confirmed, we will continue to welcome input from those who think there are matters that need to be addressed. And I can assure you if we find anti-competitive conduct, we will take appropriate action to stop it.

SEN. KOHL: Thank you, Mr. Pate.

MR. PATE: Thank you, senator.

SEN. KOHL: And thank you, Mr. Chairman. I return the floor to you.

SEN. DEWINE: Senator Kohl, thank you very much. Mr. Pate, the good news or the bad news is you are down to me I think now. Let me welcome you again to the committee.

MR. PATE: Thank you, senator.

SEN. DEWINE: I appreciate you being here, and your wife Lindsey, and Ellen and Lizzie are doing pretty well I think there. I am not sure this is an improvement over school though. (Laughter.) School has got to be better than this, but I won't ask them to comment. They can tell you later, but school has got to be more exciting than this. But we do appreciate your leadership at the department you provided as acting assistant attorney general for antitrust, really during a period of great transition. The transition period has not only included the departure of your predecessor, Charles James, but also that of two different deputy attorney generals, deputy assistant attorney generals, one for international enforcement and one for economics. Really I think you are to be commended for the way in which the Antitrust Division has functioned during this transition period, and we thank you for that. In today's challenging economic climate, vigorous antitrust enforcement we believe remains vitally important to ensuring that our markets function properly, and ultimately that American consumers get the benefit of better goods and services at better prices.

The Antitrust Division is of course an integral part of our nation's antitrust enforcement efforts. In fact, it is likely that the role of the Antitrust Division will grow in importance in the near future. I am thinking in particular of the issue of media consolidation. Of course we have already talked about that a little bit today. It's been widely reported that the FCC is likely to weaken its media ownership rules early next months. Accordingly, consumers will look increasingly to the Antitrust Division to carefully scrutinize potential mergers and acquisitions in the television, the radio, the cable, news and entertainment markets. We must take care to not allow consolidation in theses markets to harm consumer interests.

The pending News Corp Direct TV deal is an example of the type of media deal that creates the need for a thorough review. Although the FCC rule-making may not directly implicate the deal, I think the proposed acquisition is really typical of the type of consolidation that we are seeing throughout the media sector. Because of this, Senator Kohl and I plan to hold an Antitrust Subcommittee hearing next month on the News Corp-Direct TV deal, and we will closely examine the proposal at that time. And we have already begun to line up witnesses for that hearing. I think it's going to be a lively, and I think a very positive, hearing.

For today, however, there are a number of other key areas that I think we need to examine. Now, when your predecessor appeared before the Antitrust Subcommittee last September, I stressed the importance of antitrust scrutiny for joint ventures. While joint ventures differ from full-fledged mergers, they often have significant competitive impacts and require similar vigorous scrutiny from the antitrust agencies. Joint ventures also differ from mergers because the Hart- Scott-Rodino Act does not cover them. As a result, the Antitrust Division is not required to examine joint ventures under the statutory merger timelines.

Despite the lack of statutory timelines, however, it is important that the Antitrust Division review these arrangements within reasonable time periods, without of course sacrificing careful, thorough, economically sound analysis.

We also must recognize that the Antitrust Division and other American antitrust authorities are not the only important antitrust authorities in the world. As business becomes more global, and commerce flows more freely around the world, companies that do business worldwide face nearly 100 different antitrust enforcement agencies. Ongoing efforts to facilitate cooperation between various antitrust agencies around the world, and efforts to coordinate procedural and substantive antitrust standards, represent important advances in antitrust enforcement. I know you've worked a great deal on international coordination and hope that those efforts continue.

I look forward to discussing with you these and other issues today, and in just a moment we are going to do that with just a few questions, although some of these areas have been really I think thoroughly examined by my colleagues.

I also want to discuss this -- along with the successes of the Antitrust Division during your tenure as the acting assistant attorney general -- the challenges that still remain. So we do also look forward to working with you in the future. And really, again, I want to just say I appreciate your work, look forward to your confirmation. I think you've done a very good job thus far, and I know you are going to continue that work after your confirmation.

Let me just start -- I just have a couple questions. First, I have expressed concern in the past about supplier-owned joint ventures. Now, I understand the Antitrust Division has several ongoing investigations of these joint ventures. And, as I said before, however, I have some concerns about the length of time that some of these investigations going on. It is certainly important to thoroughly examine these issues, but the Orbitz investigation for example does seem to be taking quite a long time. I am particularly worried that the very existence of the investigation is starting to have an impact on the marketplace. And I know of course that you can't get into the details of an ongoing investigation, so I am not going to ask you to do that. But perhaps we could discuss the more general question of what if any impact does the existence of ongoing investigations into these joint ventures have in the market. In other words, does the existence of these investigations deter supplier-owned joint ventures from behaving in an anti-competitive manner, or does the existence of these investigations discourage legitimate pre- competitive activities? How should the balance be struck? And, more importantly, how can the Antitrust Division investigate these issues thoroughly enough to protect consumers but quickly enough to give businesses and the marketplace the certainty and the finality that they really need?

MR. PATE: Thank you, senator, let me address your joint ventures comment directly. But, first, thank you for your comments about the division's operation during the interim period since Charles James left in November. I really do appreciate that, and would like to recognize that that has been the result of a lot of hard work from Debbie Majoras, the principal deputy, Connie Robinson, our director of operations, who stepped in, Ken Hire (ph), who served the function of economics deputy essentially prior to our filling that slot recently. But I appreciate your comments on that point.

With respect to joint ventures, there were really two aspects of the importance that Charles placed on that that he talked about with you in an earlier hearing. One is the so-called sham joint venture, where two companies may characterize as a joint venture something that is really nothing more than an agreement to eliminate competition. We have been very active in that area, and have moved very fast. Our alternative newspapers case and the case involving the math works both were situations where the division acted quickly to bring assets back into competition.

As to the investigations that have taken a longer time, I am not sure that despite the long pendency of those investigations that they are really average examples. Orbitz, our foreign currency joint venture transaction, the music distribution investigations -- all were situations involving the inceptions of brand-new industries and the need on our part to collect and evaluate huge amounts of economic data. As I said earlier, they take a long time, but it's just as important to get the right result as it is to move quickly in a case like that.

As to your very specific question, there are two sides to that coin. Some think -- and this has been an opinion that has been expressed in the context of Orbitz -- that the pendency of the investigation may have prevented anti-competitive conduct. Others equally, with respect to that very same case, say that the pendency of the investigation is an unfair burden on Orbitz. So we at the division try not to look at either side of that coin. For an investigation to be open, we don't see ourselves as sitting as regulators with no end in sight. Rather if an investigation is open, it needs to be driving towards some potential Sherman Act claim. Now, these things can take some time, but we try to do them as expeditiously as possible.

So, I hope that's responsive.

SEN. DEWINE: Good. Good. Thank you. Thank you very much.

Mr. Pate, in passing the Telecommunications Act of 1996, Congress granted a role to the antitrust division in examining the applications of the Bell operating companies to provide long distance services in their local service areas -- the so-called Section 271 applications.

The antitrust division has adopted the standard that a regional Bell operating company should be permitted to provide long distance service in its local service area only when those local markets in a state had been fully and irreversibly opened to competition. In addition to providing a role to the antitrust division in examining the Section 271 applications, Congress also expressly included an antitrust savings clause in the 1996 act to ensure that the antitrust laws continue to apply.

Has the antitrust division undertaken any -- undertaken any investigations of alleged anti-competitive conduct by the Bell operating companies in their local markets once 271 applications have been granted? Under what circumstances do you foresee the antitrust division undertaking such investigations to ensure that competition in local markets remain fully and irreversible open to competition?

MR. PATE: Well, Senator DeWine, as you mentioned, the Congress gave the division a specific responsibility, a statutory responsibility under Section 271 of the Telecommunications Act in this field. We have been very active in the 271 process, and as you know the statute requires the Federal Communications Commission to give weight to the comments expressed in our evaluations. We have in some cases recommended that -- or concluded that markets are fully and irreversibly opened and recommended that the FCC grant those applications. In others, we've been unable to support the applications. And we think our work in that field has been -- has been very important.

You are very correct in what you said with respect to the savings clause. And since I've been at the division, we have filed several briefs reiterating the department's position that the antitrust laws continue to apply.

I don't think it would be appropriate to discuss any particular case, but I would just say generally that we hope that once we conclude that a market is fully and irreversibly open to competition, that means that the operating systems and other necessary attributes are present there that the market will function, and that as a commercial matter there will be access for local competitive firms. But, if as you say there is an allegation of anti-competitive conduct, we certainly believe that under the savings clause that it's our job to be there to evaluate it, and we'll do that.

SEN. DEWINE: Thank you very much.

Let me turn to the issue that you've already discussed a little bit, and that is the international antitrust arena, which is so fundamentally changed, really, in the last -- in the last decade. International antitrust enforcement has really increased in importance over the past few years, as businesses become more global, and as, really, the number of antitrust enforcement regimes around the world have increased. In fact, there are nearly -- I believe it's nearly a hundred antitrust enforcement regimes in the world today. This means that businesses face an array of different antitrust standards and procedural requirements. In specific cases, this can lead to different jurisdictions reaching different conclusions on the same transactions. This happened, of course, with the GE-Honeywell merger case. And in general, it can create a great deal of uncertainty for business as they operate internationally.

I'm pleased to hear about the strides that you've made in facilitating cooperation among the different antitrust authorities, and let me also just congratulate you -- we talked about this the other day in the office -- but congratulate you on the successes that you've had in this area.

You've stated that the U.S.-EU bilateral relationship is a good model for how bilateral relationships should work. And recently Senator Kohl and I met with Mario Monti, the European commissioner for competition, and he mentioned the positive working relationship as well.

Let me just ask you, how are we progressing with other bilateral relationships? What's the future there, do you think?

MR. PATE: I think, Senator DeWine, that the future is positive. We do have a particularly good relationship with the EU. That's borne fruit in all aspects of our work, particularly on the criminal side, where we just this year for the first time have had joint investigations in terms of drop-in interviews, dawn raids, as they call those in the EC, coordinated with the EC, Japan, Canada, some of the other countries with whom we have a particularly strong bilateral relationship.

On the broader front, I would mention the International Competition Network to you, and that is an organization -- not an organization composed of a number of private interests, not a bar organization, but an organization of enforcement authorities around the world. As you mentioned, there are about a hundred countries now that do have antitrust statutes. The ICN, as it's called, we think is a good forum for us to try to share the view that antitrust enforcement ought to be based on objective economics and objective law enforcement rather than any other considerations. And the best thing we can do is to have forum to try to discuss that. There's a meeting coming up next month in Mexico that's going to involve the jurisdiction -- many of the jurisdictions with antitrust laws, and we think that is a good forum that can make improvements in the area that you mentioned.

SEN. DEWINE: Mr. Pate, again, thank you very much. Let me just again say that, as I did announce, that Senator Kohl and I do plan on holding an Antitrust Subcommittee hearing next month on the News Corp- Direct TV deal. We think that is a very important hearing. We intend to spend significant time on that hearing to thoroughly examine that issue.

Another issue that Senator Leahy raised with you is the whole media consolidation issue. We also plan on holding a hearing on that issue in June, and we will examine that issue as well. I must say that I share many of the concerns that were expressed by Senator Leahy. I understand, Mr. Pate, that your jurisdiction under our law is of a limited jurisdiction. You do have jurisdiction in these areas, but it is somewhat limited, as you and I talked about the other day in my office. But we have an obligation, I think, in this subcommittee to have an overview of this issue. I think. from a public policy point of view, that these consolidations present some very big -- big public policy issues, that frankly go beyond the economic issues that you are limited to looking, and some of the antitrust issues that you are limited to looking at, and so we intend to look at the broad issues as well.

So, again, Mr. Pate, thank you very much. I think you're off to a great start in your job, and we look forward to moving forward on your confirmation.

MR. PATE: Thank you very much, Senator DeWine.

SEN. DEWINE: Thanks for being with us.

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