Antitrust at the turn of the twenty-first century: The matter of remedies

Georgetown Law Journal, Nov 2002 by Pitofsky, Robert

INTRODUCTION

It was a great honor for me to deliver the inaugural Miles Kirkpatrick Lecture on Antitrust. Miles was a great gentleman, a distinguished lawyer and a friend. Among his many achievements, he was the Chairman of the Federal Trade Commission (FTC or Commission) who did the most to convert that agency to an effective agent of enforcement in the consumer protection and antitrust areas.

In this Essay, I will discuss, as I did in the lecture, the direction of U.S. antitrust enforcement in recent years, and especially enforcement in the Clinton Administration. In my view, the organizing principle of the 1990s-both during the Bush I and Clinton Administrations-was to administer a moderately aggressive antitrust program, but combine it with a sensitivity to the values of preserving efficiencies and encouraging incentives to innovate and a recognition of economic changes resulting from globalization of competition.

In pursuing these issues, I have a thesis to advance. Put simply, it is that the rules of behavior did not change significantly during the Clinton years. I do not mean to say that Clinton enforcement was not a departure. The Department of Justice and the FTC during the Clinton years did bring cases that would not have been considered during the Reagan years and probably would not have been brought during the first Bush administration. But heightened enforcement compared to Bush I was a consequence of aggressiveness in investigation and interpretation of fact. Few, if any, new substantive rules were adopted. On the other hand, the remedies pursued and imposed during the Clinton years were strikingly different, and it is my goal to demonstrate this point.1

I. SOME HISTORY

To put the discussion in context, it is worthwhile to review briefly the radically different levels of enforcement in the United States-indeed radically different attitudes toward antitrust-since 1960. In the 1960s, the enforcement agencies, backed by a sympathetic Congress and a supportive Warren Court, were very aggressive. To choose just one example among many, horizontal mergers involving relatively small companies were regularly challenged-with combined market shares under ten percent-even though barriers to new entry were low and there was no trend toward concentration among the leading firms in the market.2 Challenges that the enforcement agencies regularly won in the Supreme Court not only would not be initiated today, but the transactions themselves would not even be investigated.

These levels of enforcement and the questionable theories that supported them led to an extreme backlash in the academic world and the private sector, with the result that antitrust enforcement during the 1980s was remarkably mild, limited almost entirely to challenges to hardcore cartel behavior like price fixing and a few large horizontal mergers.3 During the eight years of the Reagan Administration, there was an absence of enforcement against vertical and conglomerate mergers, monopolization and attempts to monopolize (at least after the Department of Justice settled the earlier challenge to AT&T by supervising a breakup of the telephone monopoly), all vertical distribution arrangements including minimum resale price fixing, all exclusive dealing arrangements and tie-in sales, boycotts, and all forms of discriminatory pricing.

During the first Bush Administration, the Department of Justice under Assistant Attorney General James Rill and the Federal Trade Commission led by Chair Janet Steiger restored much of the agenda of antitrust. Clinton enforcement similarly attempted to carve out a middle ground-between over-enforcement in the 1960s and what many viewed as under-enforcement in the 1980s. In addition, the Clinton enforcers took a fresh and substantially different view on the issue of remedy.

II. REMEDIAL GOALS

Broadly speaking, the principal goals of antitrust should be: first, to deter anticompetitive conduct, adjusting for the fact that much illegal conduct is not detected; and second, to take illegal gains away from the law violators and restore those monies to the victims. If both those goals are achieved, enforcement will restore the competitive market to the state it was in before the illegal conduct occurred and will create penalties sufficient to deter wrongdoers. Assuming those are the proper goals of antitrust, remedies prior to 1990 were less than effective.

On the criminal side, Congress in 1974 abandoned the notion that antitrust violations were nothing more than misdemeanors and provided that they could be felonies with violators serving up to three years in jail and with maximum fines of $10 million for corporations and $350,000 for individuals.4 But prior to the 1990s, few convicted antitrust violators served much time in prison. For example, the average sentence for an antitrust felony during the period 1984-1988 was five months; in the five-year period ending in 1993, it was ten months for offenses under the Sentencing Guidelines.5 A $10 million fine for a corporation that has engaged in a successful cartel is little more than a parking ticket.