Coverspaper i

Prof. Barry Hawk
Jeffrey Beyer
Skadden, Arps, Slater, Meagher & Flom, LLP – Belgium Competition Authorities in the U.S.: European University InstituteRobert Schuman Centre for Advanced Studies2002 EU Competition Law and Policy Workshop/Proceedings To be published in Claus-Dieter Ehlermann and Isabela Atanasiu (eds.),European Competition Law Annual 2002:Constructing the EU Network of Competition Authorities, Oxford/Portland Oregon, Hart Publishing, in preparation.
Please do not quote or circulate without permission
Barry Hawk and Jeffrey Beyer. All rights reserved.
EUI-RSCAS/EU Competition 2002/Proceedings/ Lessons to Be Drawn from the Infra-National Network
of Competition Authorities in the U.S.:
The National Association of Attorneys General (NAAG)
As a Case Study
by Barry Hawk and Jeffrey Beyer* The National Association of Attorneys General (NAAG) is a trade association of attorneysgeneral. It was established in 1907, with the primary mission “to promote communicationamong the attorneys general, the chief law enforcement officials in their state, and to assist inthe delivery of high quality legal services to the states.” The NAAG membership consists ofthe Attorneys General and chief legal officers of the 50 states, the U.S. territories, the Districtof Columbia and the Commonwealth of Puerto Rico.
It must be emphasized that NAAG is an association of law enforcement bodies, and not anassociation of national competition authorities, as are the NCAs in the EC. In other words, thestate advocates general prosecute actions before courts - they do not decide cases, unlikemost NCAs in Europe. This difference cautions against an overly enthusiastic drawing oflessons from NAAG to the ECA or to the proposed network of competition authorities to beestablished in Europe.
Notwithstanding the importance of collective action fostered by the NAAG, each attorneygeneral retains his/her sovereignty regarding enforcement decisions; the NAAG itself has noenforcement authority. Enforcement activities are actually ad hoc actions taken by particularattorneys general, either individually or collectively.
The NAAG has several permanent committees, including the Antitrust Committee, CivilRights Committee, Consumer Protection Committee and Criminal Law Committee.
* Skadden, Arps, Slater, Meagher & Flom LLP, Brussels, Belgium.
EUI-RSCAS/EU Competition 2002/Proceedings/ State involvement in antitrust enforcement, generally The office of the Attorney General of each of the 50 states has the power to enforce bothfederal and state antitrust laws. All states are free to participate in the NAAG. In that sense,NAAG is open and lacks “closure”, to use the political science jargon.
The end of the 19th century saw the adoption of aggressive state antitrust enforcementstatutes in the US. At the time when the Sherman Act was enacted, 13 states had antitrustlaws on the books and another 14 state constitutions included antitrust provisions. The stateantitrust measures took many forms and often established extremely detailed prohibitions.
Several state laws variously targeted monopolies, restraint of trade, restraint of competition,pooling, price fixing, output limitations, territorial divisions, resale restraints, refusals to dealand predatory pricing, among others.
By 1915, statutes in as many as 35 states authorized fines, imprisonment, or both and oftenprovided penalties much more severe than the one year, $5000 limits established in theSherman Act as passed in 1890. Statutes in North Carolina, South Carolina, Oklahoma,Tennessee and Texas authorized maximum prison terms of up to ten years for antitrust viola-tions.
Nor were the state enforcement activities confined to purely local concerns – combinations ofmultistate scope were often targeted. For example, between 1890 and 1906, ten states and theOklahoma Territory brought 24 cases against members of the Standard Oil Trust. Other statesuits challenged the activities of the sugar, beef and tobacco combinations.
The aggressive enforcement efforts undertaken by states in the late 19th and early 20thcenturies can be shown through a couple of examples. In the years between 1912 through1918 and 1922 through 1924, Texas courts imposed $1.5 million in total fines in stateantitrust cases. In Missouri, by the end of 1915, courts had levied unsuspended fines of$678,000 against defendants in five actions charging violations of state antitrust standards.
With the passage of the Sherman Act (1890), Clayton Act (1914) and Federal TradeCommission Act (1914), federal regulators began active antitrust enforcement at the federallevel, and state antitrust enforcement declined significantly. One study found no state mergeractions during the 1930s, 1940s and 1950s; two during the 1960s; and two during the 1970s.
However, in the 1980s federal enforcement under the Reagan Administration was greatlyreduced, and was limited to prohibiting cartels and large horizontal mergers. In response,state antitrust enforcement was revitalized, and its focus expanded to cover multistate andnational matters as well as local ones. Twenty-nine cases and 16 amicus briefs or commentswere filed during the 1980s. During 1988, the number of merger cases filed by the statesoutnumbered those filed by the DOJ Antitrust Division. The late 1980s and 1990s saw againa stepped up enforcement on the federal level, but rather than recede, states have remainedactive as a general rule, with many states increasing their antitrust enforcement in recentyears.
EUI-RSCAS/EU Competition 2002/Proceedings/ The NAAG Antitrust Committee is composed of nine attorneys general, who studysubstantive antitrust matters and recommend policy positions to the attorneys general. Oftenthese positions are the basis for testimony by attorneys general at congressional hearings or inletters to Congress. Currently, the Antitrust Committee is chaired by Oregon AttorneyGeneral Hardy Myers.
During the “renaissance” of state antitrust enforcement in the 1980s, the NAAG created theMultistate Antitrust Task Force. Formed in 1983, the Task Force was intended to coordinatethe exercise of powers of the individual state attorneys general in antitrust matters. It is apermanent subcommittee of the NAAG’s Antitrust Committee.
The Task Force is composed of the chief antitrust attorneys for each of the 50 state attorneysgeneral. The Multistate Antitrust Task Force and the Antitrust Committee attempt not only toenforce state antitrust laws, but also promote state enforcement of federal antitrust laws. Theconcept underlying the Multistate Task Force had surfaced in the mid-1970s, when theNAAG assigned an assistant attorney general to report semi-annually to the attorneys generalon the progress of multistate cases in which the states were parties or had some other interest.
Originally, the Task Force was staffed by six assistant state attorneys general; but as the TaskForce became more active, more and more states wished to participate, until the Task Forcebecame a de facto “committee of the whole.” All 50 states are now members of the TaskForce, and formal Task Force meetings are held several times a year; representatives of morethan 30 states regularly attend the meetings.
The activities of the Task Force include conducting multistate investigations and filingmultistate actions, writing amicus curiae briefs, drafting and lobbying for proposed legis-lation, and preparing antitrust policy guidelines.
The task force is led by a Chair, selected by the chair of the NAAG Antitrust Committee.
There are also seven national vice-chairs – two for investigations, three for amicus matters,one for policy and legislation and one for education and training. The regional vice-chairscoordinate regional matters not appropriate for Task Force activity, and also facilitatecommunication with the chiefs of the regional offices of the FTC and Antitrust Division.
The relationship between and among members of the NAAG The members of the NAAG cooperate with one another with respect to legal and lawenforcement issues, policy research, and analysis. They jointly conduct investigations andlitigation; they have promulgated enforcement guidelines as well as a voluntary pre-mergerdisclosure compact; and they also work together to draft amicus briefs in important antitrustcases, and propose new legislation.
EUI-RSCAS/EU Competition 2002/Proceedings/ Coordinated investigations and litigation The NAAG Multistate Antitrust Task Force coordinates multistate investigations andlitigation. Virtually all multistate investigations and litigation are conducted through the TaskForce – and in these cases, the Task Force functions like an ad hoc antitrust enforcement unit.
When the Task Force decides to pursue an investigation, typically a small group of statestakes the lead. One state will issue subpoenas or civil investigative demands authorized bysome state statutes and inform the respondents that their responses will be shared with otherinterested states. This approach serves several purposes: it relieves respondents of having torespond to multiple subpoenas; it facilitates coordination among the states; and it allows thestates to use their resources more effectively. The lead states report to the Task Force, andeventually recommend whether a suit should be filed.
States often arrange to share costs, and regularly deputize staff attorneys from one state to actas assistant attorneys general in other states for investigation and litigation purposes. Thestates coordinate their enforcement efforts in several distinct areas, as discussed below.
Recent coordinated enforcement actions and activities in this area included: CDs (coordinatedaction by 33 states challenging alleged price fixing in the sale of audio compact discs);sanitary paper litigation (allegation that several paper manufacturers conspired to fix prices inthe commercial sanitary paper market); oil (Arizona, California, Oregon and Washingtonchallenged alleged horizontal price fixing by major oil companies, resulting in 17 years oflitigation culminating in settlement worth over $134.5 million in cash and $11 million in fuelvouchers); and shoes (50 states and the District of Columbia reached a $7.2 millionsettlement with Keds Corporation in a case involving allegations that Keds conspired to fixthe resale price of women’s athletic shoes).
States have also jointly undertaken enforcement action in the area of tying arrangements. Forexample, in the mid-1980s, Maryland, Delaware, West Virginia, Pennsylvania, Virginia andthe District of Columbia jointly challenged an agreement between a Toyota distributor and itsdealers to offer Toyotas only with a $500 rust-proof packaging, which resulted in refunds for33,000 consumers. In September 1993, 34 attorneys general settled a suit charging SandozPharmaceuticals Corp. with unlawfully tying the sale of its schizophrenia drug, Clozapine, toa blood monitoring and lab testing system operated by Caremark, Inc. The attorneys generalrecovered $20 million for patients and state mental health programs whom had been forced tobuy the lab tests.
EUI-RSCAS/EU Competition 2002/Proceedings/ Although mergers are commonly thought of as being usually challenged by the JusticeDepartment and/or the FTC, the states have also brought merger cases. For example, in 1988,Massachusetts, Maine and New Hampshire challenged the acquisition of FederatedDepartment Stores by the Campeau Corp., a department store chain. The states’ challengeresulted in a consent decree, whereby Campeau agreed to divest its Filene’s Basement divi-sion if the takeover were to succeed.
Joint ventures have been the subject of coordinated state enforcement efforts as well. Forexample, in 1989, Visa and Mastercard formed a joint venture to develop and market a pointof sale debit card called “Entree.” Twelve states alleged the joint venture stifled competitionbecause Visa’s and Mastercard’s members included almost every major bank in the U.S., andthe joint venture in the emerging debit card market therefore constituted an attempt to createa monopoly in a new payment system industry. Ultimately, a consent decree was enteredrequiring Mastercard and Visa to terminate the Entree card.
In one prominent recent monopolization case, the generic drug manufacturer MylanLaboratories reached in early 2001 a settlement with 33 states for $100 million in a casewhere Mylan was charged with unlawfully attempting to corner the market in twocommonly-used prescription drugs used to treat Alzheimer’s disease. And, in the mostlywidely known monopolization case of recent years, 19 states and the District of Columbiajoined the Justice Department in suing Microsoft for alleged monopolization of the softwaremarket. Although nine states and the Justice Department recently settled with Microsoft, nineother states and the District of Columbia have elected not to settle. The Microsoft case will beexplored more fully below, in the context of the discussion on the relationship between thestates and federal antitrust authorities.
The states have also actively enforced antitrust law in other areas, including health care andboycotts. Furthermore, the states were intimately involved in the tobacco litigation, whichresulted in 46 states entering into a $206 billion settlement with the tobacco industry in 1998to resolve a variety of claims, including antitrust and consumer claims.
The above are just a few examples of the successful joint litigation and investigationsundertaken by the states in the spirit of cooperation. Clearly, coordinated state enforcementhas proven to be extremely effective. Between 1995 and 1997, attorneys general reachedsettlements in multistate cases with America Online, American Cyanamid, Bausch & Lomb,General Motors, Louisiana Pacific, Mazda, Packard Bell and Sears, Roebuck.
EUI-RSCAS/EU Competition 2002/Proceedings/ In addition to conducting joint investigations and litigation, the states have also used theNAAG and the Multistate Antitrust Task Force as a vehicle to develop and adopt policypositions. Work by the Task Force led to the adoption of the NAAG Vertical RestraintsGuidelines and the NAAG Horizontal Merger Guidelines. Both of these guidelines reflect theantitrust philosophy of the states and “embody the general enforcement policy of the NAAGand its members.” The Guidelines were unanimously adopted by NAAG in December 1985, and as such,represent the first collective venture by the states into the field of policy formulation. TheGuidelines were amended in December 1988 and again in 1995.
The Vertical Guidelines purport to state the general enforcement policy of the 50 states,under both federal and state antitrust law, with respect to resale price maintenance and non-price vertical restraints. The Guidelines acknowledge, however, that differences in stateantitrust laws and in prosecutorial decisions made by attorneys general may result in somedeviations from the stated enforcement policy.
The Vertical Guidelines have two stated primary purposes: · to “mark the boundaries” between per se unlawful agreements and those to be · to identify the factors that the attorneys general deem relevant in a rule of reason Generally speaking, the NAAG Vertical Guidelines reflect a clear intention to challengevertical price-fixing agreements, a skepticism regarding pro-competitive inter-brand effectsas a justification for intra-brand restraints, and a 10 percent market screen to weed out lessimportant non-price cases. In addition, the Guidelines unequivocally condemn resale pricemaintenance. With respect to tying arrangements, the key inquiry is whether the firmimposing the tying arrangement has “economic power” in the market for the tying product.
The Guidelines have prompted coordinated challenges by NAAG members to variousnational distribution schemes in industries including shoes and crop protection chemicals.
The Horizontal Merger Guidelines were approved by the NAAG in 1987 and revised in 1993.
For the most part, these Guidelines are in harmony with their federal counterparts, the DOJ-FTC Horizontal Merger Guidelines of 1992. However, there are some differences betweenthe two.
For example, the NAAG approach to market definition in Section 3 relies on actual marketexperience and data. Merging parties may present an analysis under the federal market EUI-RSCAS/EU Competition 2002/Proceedings/ definition methodology, which is recognized as an alternative method of defining markets toinvestigating states. Also, mergers involving a leading firm in the market or an innovativefirm receive special scrutiny under the NAAG Merger Guidelines. Additionally, the failingdivision defense, permitted under the federal guidelines, is not recognized by the NAAGHorizontal Merger Guidelines.
The NAAG Guidelines were developed largely to promote uniformity among the states. TheGuidelines provide a practical alternative to the federal merger guidelines. The NAAGdrafters concluded that the federal guidelines represented an overly theoretical method ofanalysis and lacked predictability.
However, it should also be noted that NAAG recognized within the Horizontal Guidelinesthat uniform results might not always be achieved. Though the Merger Guidelines wereintended to create predictability in merger enforcement, the Guidelines provide that stateofficials “may vary or supplement this general antitrust enforcement methodology in theexercise of their individual prosecutorial discretion or to account for differences in stateantitrust laws and variations in precedents among the federal circuits.” In 1987 NAAG published a Voluntary Pre-Merger Disclosure Compact, which was signed by45 states. The Compact was subsequently revised in 1994. The Compact allows partiesvoluntarily to file with a designated “liaison state” a copy of their initial Hart-Scott-Rodinofiling, copies of any subsequent requests for information by the federal enforcement agencies,and, upon the request of any state, the additional materials provided in response to theserequests. The initial filing must be simultaneous with those to the DOJ and the FTC.
In return for this voluntary filing, signatories of the NAAG Compact agree not to serve theparties with any additional requests for information or to make any other compulsory pre-complaint investigative demands on the parties during the Hart-Scott-Rodino waiting period,including any extensions of time.
However, the NAAG Compact signatories do not agree to be bound or constrained by thedecisions of the federal enforcement agencies. Under the Compact as amended, the signatorystates agree not to use compulsory process to investigate a merger that is undergoing HSRmerger analysis by one of the federal agencies unless the merging parties have declined toprovide supplementary materials that have been voluntarily requested by a state in a timelyfashion. Additionally, the Compact addresses confidentiality concerns by pledging tomaintain the confidentiality of information contained in the pre-merger notification forms.
The members of NAAG also coordinate the states’ participation as amicus curiae in majorantitrust cases, through the amicus curiae program. States have filed amicus curiae briefsbefore the U.S. Supreme Court, in order to inform the Court of the states’ positions in manyantitrust cases, including Eastman Kodak Co. v. Image Technical Services, 504 U.S. 451 EUI-RSCAS/EU Competition 2002/Proceedings/ (1992) (tying and monopolization case), and Matsushita Electric Industrial Co. v. ZenithRadio Corp. 471 U.S. 1002 (1985) (case concerning alleged conspiracy to fix prices andpredatory pricing scheme).
The states have also submitted amicus briefs to federal courts in the merger context. Forexample, after an independent investigation, several states submitted an amicus brief and anexpert affidavit in support of, but were ultimately denied the right to intervene in, the FTC’schallenge of the proposed Staples/Office Depot merger.
The Multistate Task Force also proposes both federal and state legislation that attempts toharmonize and improve antitrust enforcement at the national and state level. For example, theTask Force drafted both the State Attorneys General Antitrust Improvements Act of 1987 andthe Model State Statute Governing Pre-Merger Notification.
The State Attorneys General Antitrust Improvements Act consisted of a package of federallegislative reforms, including, among other items, ending the antitrust immunity enjoyed bythe insurance industry under the McCarran-Ferguson Act. The bill did not pass.
The NAAG Model State Statute provides for mandatory pre-merger notification to stateantitrust authorities under certain circumstances. A bill based on the NAAG Model Statutewas introduced in the Connecticut Legislature but was later defeated.
The relationship between members of the NAAG and the federal antitrustauthorities (FTC and DOJ) How the states and the federal agencies cooperate In addition to serving as a vehicle to encourage the states to work together in antitrustenforcement, the NAAG has also played an important role in improving cooperation andcoordination between federal and state antitrust enforcers.
Recently, the enforcement policies of the states generally and the federal antitrust agencieshave been going through a process of close coordination. The relationship between the statesand federal antitrust regulators has been described as evolving “from outright hostility in theearly 1980s to grudging recognition in the late 1980s and joint prosecutions in the early1990s.” In any event, it is clear that the relationship between the states on one hand and theFTC and DOJ on the other, has undergone a huge transformation, largely due to thecooperative work of the NAAG Multistate Task Force and the federal agencies over the pastseveral years.
The federal-state coordination is aimed at promoting efficient use of the antitrust lawresources and at improving consistency of the federal and various state antitrust laws.
EUI-RSCAS/EU Competition 2002/Proceedings/ The cooperation between the NAAG members and the federal agencies has taken manyforms, including: joint federal-state investigations and litigation; information-sharingbetween state and federal agencies; formation of new institutional structures to promotefederal-state coordination, such as the Executive Working Group for Anti-trust; and directcommunication between the states and the federal government on antitrust matters.
Examples of joint federal-state investigations and litigation Just as the states have coordinated multistate litigation among themselves, there have beenmany recent examples of major cases that have been jointly brought by both federal and stateauthorities.
In 1994 the FTC and all 50 states jointly settled one case involving price fixing in the athleticfootwear market in violation of federal and state law against Reebok, and a second caseconcerning a resale price maintenance scheme involving Keds in the women’s casualfootwear market.
In the course of the same year (1994) the Antitrust Division of the Justice Department and thestate of Utah coordinated their investigations regarding price fixing by hospitals of theircompensation levels for nurses. Eventually, the District Court of Utah entered three consentdecrees under which each of the defendants – eight Utah hospitals, the Utah HospitalAssociation and the Society for Healthcare Human Resources Administration – wereprohibited from, among other things, “conducting or facilitating” any exchange ofinformation concerning “the current or prospective compensation paid to nurses.” In the matter of Northwest Crab Fishermen, a joint action was undertaken by the DOJ,California, Oregon and Washington to prohibit price coordination among crab fishermen.
The most significant litigation of recent years in which the federal antitrust regulators and thestates cooperated was the lawsuit brought jointly against Microsoft by the Justice Departmentand several state attorneys general. Nineteen states joined the Justice Department in suingMicrosoft in 1998, accusing the company of using its dominance in computer software todrive competitors out of business. After a trial before a federal court, Microsoft was found in2000 to have engaged in various anti-competitive practices, and the court ruled that thecompany was to be broken up as a remedy. However, in 2001 an appeals court overturned theorder that Microsoft be broken up, though it agreed that the company had violated theantitrust law by illegally maintaining a monopoly.
In late 2001, nine states and the Justice Department reached a settlement agreement withMicrosoft. But another nine states and the District of Columbia rejected the proposed EUI-RSCAS/EU Competition 2002/Proceedings/ settlement, concluding that the deal did not go far enough to prevent, in the words of Con-necticut Attorney General Richard Blumenthal, a “recurrence of violations” of the law.
Because the nine “litigating” states and D.C. refused to join the settlement, the Microsoft caseis currently on two “tracks” – the presiding judge must decide whether to give final approvalto the settlement while at the same time preparing for a set of remedy hearings. At the remedyhearings, scheduled to begin in March 2002, the litigating states will attempt to show whytougher sanctions than the ones in the settlement are appropriate.
During the progress of the case, the NAAG established the Microsoft Working Group ofNineteen States and the District of Columbia, which coordinated the efforts of the states.
Thus, when the states commented on the case, or made submissions to the court (for example,submitting a set of proposed remedies in May 2000), the states spoke with one voice.
The NAAG continues to coordinate the efforts of the nine litigating states that are pushing fortougher penalties against Microsoft. It has prominently posted on its website the statement ofIowa Attorney General Tom Miller, one of the attorneys general who elected not to settle.
Miller stated in December 2001, “Let’s get on to the conclusion of this case so we canprevent further harm to competition and consumers.” (Ironically, Miller was the chair of theMicrosoft Working Group and is also a former chair of the NAAG Antitrust Committee.) Microsoft is an interesting example of how the states and federal authorities work together toenforce the antitrust laws, while still retaining independent authority to seek solutions thatthey deem most appropriate. The Justice Department and the states worked jointly for manyyears, yet half of the states elected to join the DOJ and settle the case, while the other half ofthe states felt the better course of action was to seek tougher penalties.
The states and federal agencies have also joined forces to conduct merger investigations, andwhen necessary, to challenge transactions as anti-competitive.
In the Exxon/Mobil merger, the FTC, 13 states and the District of Columbia entered intosettlement agreements with the merging companies following lengthy negotiations. Thesettlement included a substantial divestiture of more than 2,400 Exxon and Mobil gas stationsnationwide. In addition to the consent agreement accepted by the FTC, the merging partiesentered into separate settlement agreements with four states that addressed the local impact ofthe merger on consumers.
In 2001, 12 states, including Iowa and Pennsylvania, joined the Justice Department indeciding to sue to block United Airlines from acquiring US Airways in a proposed deal thatwas valued at $4.3 billion.
In USA Waste Services, 19 states and the Justice Department investigated the merger ofwaste disposal companies and obtained divestitures in 20 local markets. In the Sony Corp.
matter, New York and Illinois joined the DOJ in investigating and obtaining a consentjudgment divesting 14 movie theaters in Manhattan and Chicago.
EUI-RSCAS/EU Competition 2002/Proceedings/ In Shell/Texaco, California, Hawaii, Oregon and Washington joined the FTC to investigateand settle competitive concerns arising from the transaction.
In U.S. v. Morton Plant Health System, the DOJ Antitrust Division and the Florida AttorneyGeneral filed a joint lawsuit against the merger of two hospitals in the Tampa Bay, Floridaarea.
Information-sharing between the states and the federal agencies Significant efforts have been made to increase information sharing between the federalagencies and state antitrust authorities. In the area of pre-merger disclosure, discussed above,45 states executed the Voluntary Pre-Merger Disclosure Compact, which is designed toprovide an incentive for merging parties to voluntarily provide the states with copies of theirHSR filings and other materials which they provide to the federal agencies. Shortlythereafter, the states formulated an Information Sharing Protocol under which they couldobtain access to HSR filings with the consent of the merging parties. The Protocol wasadopted by the federal agencies, and the FTC later ruled that the Protocol would provide theexclusive means by which states could obtain HSR material from the FTC.
In 1995 the FTC and DOJ announced a new policy to increase the sharing of informationregarding mergers. The policy provides that states may receive information obtained fromthird parties, without revealing their identity and staff analytic memoranda after the FTC hasdecided whether it will challenge the merger.
Federal-state information sharing as embodied by the Compact and the Protocol are intendedto reduce the risk of inconsistent enforcement by allowing coordination and communicationbetween state and federal antitrust enforcers starting at the earliest stages of the investigation.
Institutional structures to promote federal-state coordination The Executive Working Group for Antitrust comprises the heads of the two federalenforcement agencies and the chairman of the Antitrust Committee of NAAG. The group’spurpose is to discuss enforcement policy issues of common concern to the three agencies, andto coordinate overlapping federal and state enforcement activities, thus preventing theduplication of efforts.
The Working Group has made significant contributions to cooperation among the threeenforcement entities, with senior NAAG officials stating that the Executive Working Grouphas been an important vehicle for increased state-federal cooperation on issues of mutualinterest.
In order to ensure regular communication between the federal and state authorities, theJustice Department in the mid-1990s appointed a Senior Counsel to the Assistant AttorneyGeneral for Antitrust. The primary responsibility of this individual is to serve as the AntitrustDivision’s liaison to the state attorneys general.
EUI-RSCAS/EU Competition 2002/Proceedings/ Direct communication from the states to federal authorities Aside from coordinating efforts directly with federal enforcers, states have taken the initiativeto express their views directly to Congress and the agencies regarding federal antitrustlegislation initiatives. For example, in 1995, 24 attorneys general submitted a letter toCongress regarding legislation seeking to deregulate the telecommunications industry. In1985, when the DOJ released its vertical restraint guidelines, the NAAG was critical of theguidelines as too lenient on vertical restraints. The NAAG publicized its opposition to thefederal guidelines, and later in 1985, released its own set of guidelines in an attempt to statethe law, as the NAAG understood it at the time. The NAAG also lobbied – successfully – theDOJ to have the federal guidelines withdrawn. The NAAG also submitted commentsregarding the DOJ/FTC Joint Horizontal Merger Guidelines, some of which were acceptedregarding merger analysis.
Advantages and disadvantages of federal-state cooperation Because all antitrust enforcement is conducted under a common body of statutory anddecisional law, enforcers at the state and federal levels have a common interest in promotinga competitive business environment. The differing perspectives and incentives between thestates and the federal agencies, rather than being a hindrance, can actually promote betterenforcement. Another level of independent antitrust enforcement means that overallenforcement will be less affected by policy shifts at the national level. Given the variety ofincentives and concerns on both the state and federal level, antitrust enforcement does notdepend on the policy agenda of one primary enforcer. This was illustrated in the 1980s, whenthe states increased their enforcement of federal antitrust law as a result of the less aggressiveenforcement approach of the federal agencies.
Differences in substantive law governing inter-state transactions can increase legaluncertainty, although this does not appear to be a significant problem or issue in the U.S.
When transactions have disproportionate effects on certain areas, states may try and succeedin blocking these deals even if they have efficiencies on a wider scale. In addition, thepresence of another layer of antitrust enforcers necessarily means additional bureaucracy, andthis naturally can lead to increased transaction costs. Furthermore, the presence of moreenforcers can lead to rivalries among agencies to block or otherwise affect efforts of others.
On a theoretical level, many of these problems could be reduced or eliminated by givingexclusive enforcement authority to a central antitrust enforcer, which would not be affectedby local interests when enforcing the law. A central enforcement agency would also eliminateextra layers of bureaucracy, as well as the potential for different enforcement guidelines andpolicies among the multiple enforcers. However, a central enforcement agency lacks thesensitivity of state enforcers to local concerns. Many effects that appear to be minimal to a EUI-RSCAS/EU Competition 2002/Proceedings/ central enforcer might be more significant to the local ones, because the markets affectedmay be primarily local ones. Furthermore, the entire business community can be affectedwhen the central enforcers undergo a policy shift, the effects of which could not be temperedwithout a coordinated group of local enforcers, working with each other as well as the centralenforcement authority.
Does the NAAG offer any lessons for the European system? There are several significant differences between the NAAG (and the U.S. antitrust regime)and the EC network (and the European antitrust system). These differences make it difficultto draw lessons from the NAAG, and certainly caution against a non-nuanced application ofthe NAAG experience in Europe. These differences include: · The state Attorneys General are not competition authorities and do not decide cases, unlike the competition authorities of the EC Member States.
· There are no courts or judicial bodies in the U.S. “network”.
· Private actions are available and play an important role in U.S. antitrust enforcement, unlike in the EC; thus issues involving case allocation are absent or unimportant in theU.S.
· There is nothing similar to the Walt Wilhelm doctrine in the U.S., and federal antitrust law does not preempt state antitrust law; again, this radically changes the relationshipsbetween the state and federal authorities.
· There has been little, if any, use of the NAAG for the purposes of harmonizing antitrust Given these differences, the lessons for the EC are modest. First, the importance of thehuman factor cannot be sufficiently emphasized. Respect, trust and openness among antitrustenforcers and authorities are probably the most important factors in a successful cohabitationof state and federal powers. Second, the successes of the NAAG, notably in the cartel area,result from the pragmatic self-interest of each independent enforcer. This suggests thatincreased cooperation among NCAs and the EC Commission in the network might beexpected to lead to increased enforcement activity.
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Lynch, J. (2001) “Federalism, Separation of Powers, and the Role of State Attorneys Generalin Multistate Litigation,” 101 Columbia Law Review 1998.
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Rill, J.F. (2001) “Recent Trends and Developments in the Role of Federal and StateAuthorities in US Antitrust Enforcement: Is Cooperation Working?” in Ehlermann C.-D. andAtanasiu, I. eds., European Competition Law Annual 2000: The Modernisation of ECAntitrust Policy, pp. 429-441.
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