Antitrust Enforcement Strategies Benefit Consumers and Ease Regulatory Burden on Business, Pitofsky Says

Robert Pitofsky, Chairman of the Federal Trade Commission, today told the House Judiciary Committee that antitrust enforcement strategies at the agency have benefitted consumers and eased regulatory burdens on business. Speaking for the FTC at a hearing on federal antitrust enforcement, Pitofsky said, "The Commission's approach to antitrust enforcement is twofold: to enforce the antitrust laws with vigor and protect consumers from abuses of market power, but also to avoid unnecessary intrusions and burdens on businesses."

Pitofsky said one measure of the antitrust workload is the number of mergers requiring premerger review by either the FTC's Bureau of Competition or the Department of Justice's Antitrust Division. The number has more than doubled, from 1,589 transactions in 1992 to 3,702 transactions in fiscal 1997. "Through productivity gains and old fashioned hard work, the Commission -- more specifically, its dedicated staff -- has handled the increased workload with basically the same staffing level it had in 1991," Pitofsky said.

Pitofsky said consumers benefit directly from rigorous enforcement of antitrust laws. As an example, he said that the Staples/Office Depot merger, which was challenged by the agency in court, likely would have resulted in increased prices for consumers. " . . . [B]y blocking that merger, we may have saved consumers around $1 billion over a five year period, or about $200 million a year." In another example, Pitofsky pointed to the challenged merger of First Data Corporation and First Financial -- firms that operate the only two consumer money wire transfer services in the United States, MoneyGram and Western Union. "These services are used by thousands of people who need emergency cash when they are away from home, such as travelers and students, and by people who do not have a bank account -- estimated at around 25 percent of U. S. households. The Commission's consent order requiring divestiture of one of those businesses saved consumers an estimated $15 million to $30 million each year in money wire transfer fees," he said.

"The Commission's non-merger enforcement, like its merger program, has focused on cases that have an impact on consumers," Pitofsky said. As an example, he detailed a case where the College of Physicians-Surgeons of Puerto Rico and three physicians' groups settled charges that they engaged in an unlawful boycott and other fee-setting actions that harmed indigent patients. In the agreement to settle the charges the physicians agreed not to engage in boycotts and collective fee setting practices and to pay $300,000 to the catastrophic fund administered by the Puerto Rico Department of Health. "The Commission's analysis and the remedy embodied in the consent order reflect the care we take to ensure that consumers are protected from anticompetitive conduct, while also ensuring that legitimate efficiency-enhancing joint venture activities are not discouraged," Pitofsky said.

Pitofsky said that the Commission has renewed its focus on ensuring effective, targeted remedies. He noted that in 1995 the Commission undertook a study of the effectiveness of orders in merger cases to determine whether they were achieving the intended results. "As a result of that study, the Commission's policies regarding consent orders were revised in a number of respects. The Commission prefers that divestitures be accomplished in shorter time so that competition is restored more quickly and assets are less likely to deteriorate in the interim. In addition, in some cases the Commission requires the respondent to identify a purchaser for the assets before the consent agreement is accepted. As a result, the average time for divestiture was reduced from about 15 months in 1995 to slightly less than nine months in 1997," Pitofsky said.

Pitofsky said that other initiatives have been implemented to further reduce burdens that antitrust enforcement places on business. "Some burden is inevitable because rigorous antitrust analysis requires a great deal of information, but unnecessary burdens must be avoided," he explained. He said the Commission has implemented significant changes in three areas: investigations, order termination and administrative litigation. In the area of merger investigations Pitofsky said that streamlining the process used to determine whether DOJ or FTC would review a given filing, developing a joint filing form, and adopting a "quick look" procedure could result in savings of time and effort for both the parties and the Commission staff.

He noted that the agency also has broadened a policy to automatically terminate Commission orders after 20 years, allowing respondents to avoid the expense and inconvenience of petitioning to the Commission to terminate the orders. In addition, he said that since 1994, the Commission has eliminated 42 percent of its trade regulation rules -- no longer necessary because industry or state requirements exist or technology has changed. And he pointed to procedural rule changes to streamline the Commission's administrative trial procedures. "The perception, and sometimes the reality, was that administrative litigation took too long. The amendments establish new and shorter deadlines, streamline pre-trial discovery and speed up the trail itself." Pitofsky noted that the process of procedural reform is continuing.

Pitofsky said the Commission has acted to ensure that antitrust policy ". . . recognizes the needs of the contemporary business environment." He pointed to the FTC's Global Competition Hearings, which resulted in a revision of the efficiencies section of the 1992 Horizontal Merger Guidelines. "The revisions provide merging firms, the agencies and the public a clearer roadmap for determining whether efficiencies will result in lower prices or new products or will otherwise enhance competition." Another outgrowth is an ongoing effort to develop antitrust guidance for the business community regarding joint ventures and other forms of competitor collaborations.

Pitofsky also noted that in 1996 the Commission and the Department of Justice revised their enforcement policy statements regarding physician network joint ventures and multi-provider networks. "The new guidelines make clear that a wider range of physician networks will be reviewed under the more flexible rule of reason standard than was announced in previous policy statements. As a result, the new guidelines give providers greater latitude to develop alternative forms of efficient networks and, together with the agencies' advisory opinion procedures, provide greater assurance that such efforts will not run afoul of the antitrust laws," he said.

"Consumers are well served by antitrust enforcement which produces substantial dollar savings by preventing anticompetitive price increases and preserves the benefits of innovation for the future. The Commission continues to ensure that these benefits are achieved with the minimum possible burden on business," he said.

Copies of the testimony are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov and also from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. P859 910)