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The American Antitrust Institute
THE FEDERAL ANTITRUST COMMITMENT: PROVIDING RESOURCES TO MEET THE CHALLENGE Albert A. Foer American Antitrust Institute
2919 ELLICOTT ST, NW WASHINGTON, DC 20008 PHONE: 202-362-8704 FAX: 202-966-8711 E-MAIL:
[email protected] www.antitrustinstitute.org
THE FEDERAL ANTITRUST COMMITMENT: PROVIDING RESOURCES TO MEET THE CHALLENGE CONTENTS Executive Summary Overview Section 1: A Brief History A. The Legal Framework B. The Institutions of Antitrust and Competition Policy C. Some Historical Context D. The Changing Environment of U.S. Competition Policy
1-3 4-6 6-18 6-8 8-10 10-15 15-18
Section 2: Dollars and People: The Resources for Antitrust A. Introduction B. Budgetary and Staffing Data 1. Budgets 1970-1998 2. The President’s FY 2000 Budget C. Sources of Funding: The Antitrust Bargain D. Comparing Federal Antitrust Resources to the Workload
18-23 18 19-21 19-20 20-21 21 22-23
Section 3: Priorities: What Money Can Buy A. Merger Enforcement B. Other Enforcement C. Specific Areas Deserving More Federal Antitrust Attention 1. Deregulated and Deregulating Industries 2. International Competition 3. Technological Change 4. Research and Evaluation 5. Miscellaneous Areas
23-31 24-25 25 25-28 25 26 26 27 27
Section 4: Additional Legislative Considerations
28-30
Conclusion
31
Tables 1. Staffing the Federal Antitrust Mission, 1978-2000 2. Funding the Federal Antitrust Mission, 1960-1999 3. Premerger Notifications, 1978-1998 (NOT YET AVAILABLE ON-LINE) 4. Where the Deals Are (NOT YET AVAILABLE ON-LINE) (a) Who Has Been Making Deals? 1994-1999 (b) Acquiring Persons, FY 1997 (c) Percentage of Transactions By Industry Group of Acquired Entity, FY 1997 5. Biggest Deals in 1998 (NOT YET AVAILABLE ON-LINE) 6. Federal Antitrust Budgets, 1970-1997 (NOT YET AVAILABLE ON-LINE) 7. DOJ Antitrust Investigations and Cases, 1970-1997 (NOT YET AVAILABLE ON-LINE) 8. DOJ Total Civil Antitrust Cases and Merger Cases Filed, 1970-1997 9. FTC Antitrust Cases, 1983-1998
THE FEDERAL ANTITRUST COMMITMENT: PROVIDING RESOURCES TO MEET THE CHALLENGE Albert A. Foer1 EXECUTIVE SUMMARY The modern American political economy is based on the idea of competition. But competition does not automatically occur and it cannot be maintained without a national competition policy and appropriate institutions for sustaining competition. The primary tools for maintaining competition are the antitrust laws, primarily enforced by the Antitrust Division of the Department of Justice and the Federal Trade Commission. The federal antitrust laws were first established in 1890, with the Sherman Acts enactment. By 1914, with passage of the Clayton Act and the Federal Trade Commission Act, the institutional structure was in place and it has remained relatively stable, despite amendments, variations and fluctuations with the coming and going of national security crises, depressions, and periodic deviations over the years. In general, the antitrust laws have proven to be economically effective and politically resilient, a broadly accepted bipartisan alternative to forms of direct government regulation. Antitrust institutions generally grew stronger from the arrival of Thurman Arnold at the Antitrust Division in 1937 through the late 1970s. The election of President Reagan was accompanied by a decisive reorientation of antitrust under the influence of the Chicago School of economics and law. The federal antitrust resources and the mission of antitrust were dramatically reduced during the Reagan years, only to 1
Albert A. Foer is President of the American Antitrust Institute, an independent non-profit public interest organization located in Washington, D.C., described at www.antitrustinstitute.org . The author thanks those members of the AAI Advisory Board and the many others who contributed their thoughts to the formulation of this document.
be restored in a slow but steady way under the administrations of President Bush and President Clinton. Circumstances have changed since the Reagan era in at least six important ways, requiring a significant expansion of the antitrust budget. First, we are in the midst of a merger wave of unprecedented size and scope, which is rapidly restructuring the American and the world economy. The federal antitrust agencies are understaffed to deal with this fundamentally important development. Second, we have advanced a long way in the deregulation movement that began in the mid-1970s. Today we see that the promise of more competition in place of government regulation is not being fulfilled, because the role of antitrust has been too small. Third, the economy has become more of a global marketplace, changing the modes and challenges of antitrust, and adding to the enforcement workload. Even as some markets become freer and more competitive, others are ruled by international cartels. Fourth, new technologies have created new antitrust issues, such as the potential of network effects creating persistent monopolies. Fifth, a post-Chicago evolution in antitrust thinking has questioned parts of the Chicago School philosophy and popularized a broader view of antitrust that encompasses not only the Chicago objective of efficiency, but also traditional objectives such as innovation, competitive prices for consumers, and an array of consumer options. And sixth, the political support for antitrust has been expanding. The large and long-lasting merger wave and the landmark Microsoft case have helped focus public attention on antitrust to a greater extent than at any time in a generation or more. A range of interests (consumer and public interest organizations, unions, and businesses that have to live with monopolists) now recognize the relevance of antitrust and want the government to increase its commitment to competition. In recognition of these changes, it has become a matter of urgency to expand the resources available to the federal antitrust mission. The Presidents Budget for F.Y. 2000 would increase the Antitrust Division from $98 million to $114 million (16.3%) and increase the FTC from $119 million to $134 million (12.6%). Among the reasons to support this increase are the following: +In 1998 there were 4,728 reportable U.S. merger transactions—compared to 3,087 in 1996 and 1,529 in 1991. The total value of U.S. mergers completed in 1998 exceeded $1.2 trillion – in an economy with a gross domestic product of $8.4 trillion!
+Mergers, which must be dealt with under a statutory time frame, have taken over the workload of the antitrust agencies. Merger investigations increased from 36% of the Antitrust Division’s caseload in 1970 to 76% in 1998, driving out much of the nonmerger law enforcement. +Resources have not kept pace with the growing economy. Between 1977 and 1997, the total budgets of the FTC and the Antitrust Division decreased by 7% in constant dollars while the GNP grew by 112%. Mergers have increased by 550% since 1992. +Even with the White House budget, authorized workyears will trail the 1980 levels. The Antitrust Division would get an increase in FTE’s from 819 to 943, still below the 1980 level of 982. FTC workyears would increase from 900 to 1,042 (compared to 1,719 in 1980!). +Many antitrust challenges remain. Health care is not sufficiently competitive. Airlines monopolize hub terminals and other deregulated and deregulating industries are becoming more concentrated rather than more competitive. International cartels cost consumers dearly. Price fixing and bid rigging are a continual abuse of the system. New technologies are creating persistent monopolies that can control the global flow of information. Agricultural and meatpacking industries are unduly concentrated. And mergers are restructuring the economy without sufficient oversight. +A single antitrust case can save consumers millions of dollars. E.g., when the FTC stopped the Staples/Office Depot merger, economists calculated the savings at $200 million per year (approximately the combined federal antitrust budget last year). +Antitrust is a great public bargain. Because funding of the agencies will be 100% paid for by premerger filing fees paid by merging companies, money for antitrust does not displace expenditures for other public programs. The agencies also generate millions of dollars for the treasury in the form of criminal and civil penalties. Antitrust has served the American public well for over a hundred years. The need for antitrust has not declined. We still need to work at maintaining competitive markets, perhaps more than ever as the economy continues to change. Yet todays federal antitrust mission is substantially underfunded and understaffed. The President has proposed a budgetary increase, which should be taken as the starting point for a longerterm commitment to rebuilding the FTCs and the Antitrust Divisions capability for dealing with todays challenges, and tomorrows.
THE FEDERAL ANTITRUST COMMITMENT: PROVIDING RESOURCES TO MEET THE CHALLENGE Albert A. Foer OVERVIEW The modern American political economy is based on the idea of competition. Competition rather than public ownership and rather than bureaucracys economic regulation of prices and conditions of trade is deemed the pre-eminent force for structuring the provision of our goods and services. Expectations for the benefits of competition are high. Competition is expected to set prices at or near marginal costs, thereby benefiting consumers directly and furnishing the signals for societys efficient allocation and use of resources. Competition is expected to generate a variety of options for consumers, so that the consumer has a reasonable ability to make choices in the marketplace. Competition is expected to motivate entrepreneurs and investors to start and grow businesses and to undertake the risk of innovation. And finally, competition is expected to contribute to a democratic polity, by reflecting a diversity of economic power bases.
Whether these high expectations, so fundamental to our national well-being, are adequately met depends heavily on the tools and institutions of antitrust and competition policy. These tools include: ➧The federal antitrust laws (including the Sherman Act, the Clayton Act, and the Federal Trade Commission Act2), ➧State antitrust laws, and ➧A variety of non-antitrust laws which directly or indirectly affect competition (including direct economic regulation, consumer protection, international trade, taxation, intellectual property, government procurement, securities laws, etc.). We distinguish between antitrust, which relates only to the antitrust laws, and competition policy, which relates more broadly to governmental policies toward antitrust and the panoply of other laws and regulations which affect competition. The institutions of competition policy include: ➧The Federal antitrust agencies (i.e., the Antitrust Division of the Department of Justice and the Federal Trade Commission), ➧State antitrust agencies, ➧Other federal and state agencies that execute laws and regulations affecting competition, ➧Collateral institutions such as the private antitrust bar (whose work supplements public enforcement, accounting for 90% of antitrust cases) and its economic consulting wing, which advise and represent client firms on antitrust and competition policy matters, ➧ Competition policy academics and their publications, and ➧Courts of law, which interpret the laws relating to competition. At the hub of this mixture of laws and institutions is the U.S. Congress, which establishes and modifies the competition laws and which provides the resources that determine how the laws will be executed. As we approach the millenium, it is necessary to ask how well we are being served by competition and the antitrust laws. Are the tools and institutions doing a satisfactory job? What changes are going to be needed to assure that competition can meet our expectations? 2
Respectively, 15 U.S.C. 1 et seq;. 26 Stat. 209 et seq.; 15 U.S.C. 12 et seq., 38 Stat. 730 et seq.; and 15 U.S.C. 41 et seq., 38 Stat. 717 et seq.
This paper reviews both the tools and the instruments of antitrust and competition policy. It focuses on near-term problems, concluding that a high priority must be the significant expansion of federal antitrust resources. It also proposes devoting increased resources to identifiable problems of the future. We urge Congress to contemplate a three-year expansion of federal antitrust personnel on the order of 30-50%. For Fiscal Year 2000, we support the Presidents proposed budget increases of 16.3% for the Department of Justice Antitrust Division and 12.6% for the Federal Trade Commission (including 28% for the Federal Trade Commissions Competition Mission). In the first section, we review the history of antitrust and competition policy, to provide a context for evaluating where we stand. In particular, we ask what factors have changed. Those who are familiar with this material are invited to skim it quickly. The second section relates the magnitude of todays competition challenge to the resources available. A third section suggests how we can better prepare for tomorrows antitrust challenges and a fourth section offers ideas for further action.
SECTION 1. A BRIEF HISTORY OF U.S. COMPETITION POLICY A. The Legal Framework Before there was an antitrust statute in the United States, the common law as it had developed in England and the United States recognized a positive value in competition, which was easy to find among the small businesses and small farms that dominated the scenery. Without putting a fine point on it, restraints of trade were considered unenforceable if they were unreasonable, but not otherwise, and it was up to judges to decide. 3 With the acceleration of industrialization and the coming of the railroad and the large corporation after the Civil War, a disrupted society began to worry about trusts that were rapidly moving to dominate a variety of important industries. The Sherman Act was passed in 1890, named for a Republican Senator, John Sherman, and signed into law by a Republican President, Benjamin Harrison. Highly controversial for about one generation, the Sherman Act was subjected to changing interpretations, reflecting varying visions of the proper role of the corporation in an economy that now included both vigorously competitive markets and markets 3
See Martin J. Sklar, The Corporate Reconstruction of American Capitalism, 1980-1916 (Cambridge: 1988), chapter 3.
dominated by one or two extremely large corporations.4 Did the Sherman Act merely codify the old common law or was it intended to outlaw all restraints of trade? Could it be used to break up the trusts? Two answers eventually became clear. Yes, with the break up of the Standard Oil of New Jersey trust in 1911, it was clear that the government could separate a monopolistic trust into viable smaller parts. And no, the Sherman Act would not reach all restraints of trade, but only those which a court holds to be unreasonable. 5 By 1914, the desire had grown in many different sectors to define more clearly what restraints and what combinations would be predictably illegal. A burst of Progressive legislation gave two responses. The Clayton Act outlawed mergers which may substantially lessen competition or tend to create a monopoly, and also outlawed several specifically defined behavioral abuses such as certain tying arrangements, exclusive contracts, and price discrimination. The Federal Trade Commission Act, taking the opposite approach, made illegal the very unspecific unfair methods of competition. It created an administrative system capped by a panel of expert commissioners in place of the trial level judiciary. The structure of antitrust was now established. At different times the laws have been amended, generally to clarify certain terms and to perfect the existing laws. Thus, merger law was made more enforcement-friendly6; price discrimination was given more specific meaning7; and companies desiring to merge were required to provide prior notice to the enforcement agencies and then wait for a period of time, before consummating.8 Along with the antitrust laws, we developed a marbled cake of other laws that directly or indirectly affect competition. Most directly, laws established regulatory agencies like the Interstate Commerce Commission, the Civil Aeronautics Board, and the Federal Communications Commission. These had in common the authority to establish prices, terms of trade, and conditions of entry and exit for industries deemed natural monopolies or otherwise too essential and potentially dangerous to be left to the unregulated marketplace. But the theory of regulation was based on the desire to achieve the fruits of competition: if something about the market made laissez faire unworkable, public representatives would be empowered to create industries that performed for the public as if they were competitive. Such, at least, was the theory. More indirectly, a host of laws that were intended to deal with issues other than competition inevitably played a role in the shaping of markets. For example, tax laws often had unequal effects on different industries or on differently positioned competitors 4
See Federal Trade Commission Bureau of Competition, National Competition Policy: Historians’ Perspectives on Antitrust and Government-Business Relationships in the United States (1981). 5 Standard Oil Co. (N.J.) v. United States, 221 U.S. 1 (1911). 6 The Celler-Kefauver amendment to Section 7 of the Clayton Act, in 1950, closed major loopholes and opened a new era in merger enforcement. 7 The Robinson-Patman Act strengthened Section 2 of the Clayton Act in 1936. 8 The Hart-Scott-Rodino Antitrust Improvements Act of 1976 created the premerger notification program. Additional changes in the antitrust laws since 1914 have included the strengthening of criminal penalties and the parens patriae sections of the Hart-Scott-Rodino Act.
within a given industry. Trade laws had a huge impact on the conditions of entry into an industry, protecting some from foreign competition and imposing a traumatic level of competition on others. Procurement and subsidy programs often gave competitive advantages to favored recipients. Licensing laws protected various occupations and professions from competition, usually in the name of consumer protection. In the 1960s and 1970s, a new crop of laws aimed at protecting consumers, the environment, and the workplace began to have their own indirect impact on competition in the markets they did (or did not) affect. Finally, as the burdens of regulation became increasingly obvious, a deregulatory movement developed in the mid-1970s, peaking in the early 1980s. The objective became to replace regulation with free markets or, where that was not feasible, to redirect itthrough greater reliance on market mechanisms. B. The Institutions of Antitrust and Competition Policy The legal structure established by 1914 was accompanied by an institutional structure that has also remained stable. There are still two federal antitrust agencies, the FTC and the Antitrust Division. Each has its own coloration. The Division has criminal enforcement power and thus specializes in dealing with price fixing and cartel behavior, where criminal penalties are often imposed. (In fact, approximately 75% of the Divisions cases are criminal prosecutions.9) Being part of the Executive Branch, the Division plays an active role in shaping an Administrations competition policy. The Commission, which includes a Competition Bureau, a Consumer Protection Bureau, and an Economics Bureau working side-by-side, has at various times focused more on structural issues and their implications for consumers. Formally an independent agency, the Commission often is more closely tied to Congress than the Division. In recent years, the Division and the Commission have had roughly equal budgetary resources, in the neighborhood of $100 million each. However, the Competition Mission of the Commission (the resources allocated to antitrust and competition policy) receives only about half of the total Commission resources. Thus, it is accurate to generalize that for the past five years the Division has handled twice the antitrust load of the Commission, or two thirds of the total federal commitment.10 While they closely coordinate their investigations on the basis of expertise and available resources, a competitive factor exists between the two antitrust agencies, which symbolically reflects the values they share, namely that two heads are often better than one. If we think of the agencies as two competing firms, a merger has not occurred because neither firms stockholders (the Executive Branch and the Congress) or management is likely to benefit sufficiently. In the absence of an antitrust statute that would keep them from conspiring together, they have attained a level of coordination that probably minimizes any efficiency gain from a conceivable merger. 9
See note 25 below. See material at notes 49-51, depicting the changing proportions of funding for the two agencies over time. 10
Both federal agencies regularly use their expertise to influence other governmental agencies. Their importance in this role has increased with the movement toward deregulation as formerly regulated monopolies are transformed into what are intended to be aggressive competitors. Such restructuring has created an expanded need for the kind of expertise developed by antitrust lawyers and economists through their enforcement of the antitrust laws. With roughly twice the resources of the Commission and a closer relationship with the President, the Division generally plays a more active role. To give an example, on matters relating to electricity, which is in the process of being partially deregulated, the Division advises the Federal Energy Regulatory Commission on the handling of public utility mergers. The FTC, on the other hand, has built a niche for advising the states on the competition and consumer protection aspects of electricity deregulation.11 One of the developments affecting antitrust in recent years has been the increased role of the states. 12 As federal antitrust efforts declined in the 1980s, many states expanded their antitrust role, particularly with regard to mergers and distributional restraints that were being ignored by the Reagan Administration. A recent manifestation is the current Microsoft case, which was filed jointly by the Antitrust Division and nineteen states13. Competition policy is strongly influenced not only by the public antitrust agencies but also by private enforcement of the Sherman Act and the Clayton Act. The private bar and its economic consulting wing advise private firms on how to accomplish their business strategies within an environment of antitrust and competition policy. In some cases, a strategy may be enhanced by threatening or bringing an antitrust case against a competitor, or by bringing an anticompetitive situation to the attention of a public antitrust agency.14 Recent examples apparently include Netscape, gaining assistance of the Antitrust Division against Microsoft, and American Express gaining the Divisions assistance against Visa and MasterCharge. The governments selfperceived (and appropriate) role, of course, is to protect the competitive process, not an individual competitor. There is some differentiation between the antitrust defense bar and the antitrust plaintiffs bar, although lines may be crossed. In addition to providing strategic advice, the defense bar represents clients once they have been targeted for investigation or litigation. The plaintiffs antitrust bar is considerably smaller than the defense bar and often is compensated on a contingent fee basis rather than on an hourly retainer. Plaintiffs cases frequently follow-on government cases, sometimes in a class action 11
See Stephen Calkins, “Energy Deregulation: A Special Role for FTC’s Unique Mix of Authority,” FTC:WATCH Dec. 27, 1998, also available at www.antitrustinstitute.org . 12 At least 26 states had adopted constitutional or statutory antimonopoly statutes prior to the Sherman Act. In the 1970’s over 20 states enacted new antitrust statutes and many state antitrust enforcement offices were created or expanded. See Ernest Gellhorn and William E. Kovacic, Antitrust Law and Economics (West Publishing, 1994) at 456. 13 United States of America v. Microsoft Corp., C.A. No. 98-1232, and State of New York v. Microsoft Corp., C.A. No. 98-1233, D.D.C. 14 See, e.g., Michael Porter, Competitive Strategy (The Free Press, 1980), 85-86
format, attempting to recover for civil damages once the government has established a firms antitrust liability. Since the early 1980s, a variety of procedural and substantive changes in the practice of antitrust have made it more difficult for a private plaintiff to succeed. Consequently, the plaintiffs antitrust bar and with it the role of private enforcement has generally been reduced from the salad days of the 1970s. 15 Finally, competition policy is influenced by judges, usually federal judges and most importantly Supreme Court justices, as they sit in judgment of specific cases. Since the early 1980s, the federal judiciary has become noticeably more conservative on antitrust matters. This reflects (a) the large number of judicial appointments by conservative Presidents, (b) a general intellectual trend led by Chicago School economists and lawyers, (c) an extraordinarily effective public relations effort to expose judges to Chicago School thinking, under the direction of conservative think tanks and institutes, and (d) the absence of an organized coalition dedicated to consumer-oriented antitrust objectives. As indicated, the direction and execution of antitrust is also affected by a community of scholars, think tanks, and legal and economic publications that constantly interacts with the antitrust process. C. Some Historical Context Despite the stability of the laws and institutions of antitrust for 85 years, ideas about the value and meaning of competition have been varied, with different ideas in ascendancy at different times. The large firm suddenly appeared on the American scene in the 1880s, a result of the basic communication and transportation infrastructure that was completed in the years after the Civil War and various other technological and managerial breakthroughs. The big firms almost immediately began to implement their potential for controlling markets. The first step away from deconcentrated, competitive markets was the development of cartels (trade associations) in the 1880s. Next came the movement toward legal consolidation, first in the form of the trust. In the 1890s, the holding company became a popular way to transform old cartels into more effective horizontal combinations. Then, at the turn of the century came our first great merger wave, one of the most important structural developments in our economic history.16 Meanwhile, 15
According to Gellhorn and Kovacic, op. cit.at 462, from 1941 to the mid ‘60’s, the ratio of private to government cases tended to be 6 to 1 or less. From the mid-‘60’s to the late ‘70’s, private cases exceeded government filings by 20 to 1. During the 1980’s, private filings fell substantially, and the ratio of private to public cases stabilized at roughly 10 to 1. 16 We are currently in the fifth great merger wave. The first, from 1887-1904, involved merging to monopoly status. The second, from 1916-1929, was characterized by merging to oligopoly. The third, was the 1960’s conglomerate merger wave. The fourth wave came in the 1980’s; it reflected low stock prices, many foreign acquisitions, and an explosion of hostile tender offers. See F.M. Scherer and David Ross, Industrial Market Structure and Economic Performance (3rd Ed.)(Boston: Houghton Mifflin Co., 1990) 153 et. seq.; Kenneth M. Davidson, Megamergers (Cambridge:Ballinger Pub. Co., 1985) 129. The fifth wave began around 1994 and is not susceptible to easy generalization. Elements include strategic positioning
companies were becoming administratively centralized (something that was not happening concurrently in Europe) and increasingly they began to integrate vertically, forward and backward. From the big firms perspective, this was a time of shifting from a highly competitive framework to one in which coordination and cooperation should prevail. The changes spawned by the advent of the big firm naturally generated opposition, forcing the question of market structure into the political arena. The earliest national reaction was the Sherman Act. 17As a compromise which nearly everyone seemed to favor, it necessarily contained a vagueness which covered over many important questions. The ambiguous objectives had to be sorted out, first, by the Supreme Court. Two Supreme Court decisions in 1911, the Standard Oil case and the American Tobacco trust case, were landmarks: They held in favor of major divestiture remedies under the Sherman Act, while at the same time establishing that the rule of reason would predominate henceforth.18 This result, which was essentially satisfactory to the three leading presidential contenders, Roosevelt, Taft, and Wilson, upheld the ability of big firms to restrain trade (i.e., develop cooperative activities) in reasonable ways, but not in ways that involved unfair methods of competition or that unreasonably excluded competitors from the market. Judges would fill in the blanks.19 The election of 1912 nevertheless became the forum for a sophisticated debate over the role of the big corporation. Competition policy has never again achieved a comparable level of political salience. Ultimately, it was Wilsons vision that came closest to prevailing, with passage of the FTC Act in 1914. Wars and depressions repeatedly threatened the survival of the antitrust idea. During World War I, the antitrust laws were largely suspended . After the War, there were movements advocating amendments and reinterpretation of antitrust to help rationalize the economy. A leader in this movement was Herbert Hoover. As for expanded international trade, restructuring around deregulation, and the shifting of strategy and structure in the face of rapid technological change. 17 Many states had passed antitrust laws beginning in the late 1880’s, even prior to the Sherman Act. For overviews of the legislative history, see Andrew I. Gavil (ed.), An Antitrust Anthology (Anderson Publishing Co., 1996, part III; Herbert Hovenkamp, Federal Antitrust Policy (West Publishing Co., 1994), chapter 2; Sklar, op. cit., chapter 3. 18 The Supreme Court’s first antitrust decision, E. C. Knight in 1895, limited the scope of the Sherman Act by narrowly interpreting the reach of the federal commerce clause power. The Northern Securities case in 1904 broadened the definition of commerce and revitalized the Sherman Act. The other issue that dominated early antitrust decisions was whether all combinations in restraint of interstate commerce were illegal, or merely unreasonable ones. Justice Peckham in the 1897 Trans-Missouri Freight Association case had held that the Sherman Act superseded the common law and rendered all restraints illegal. Sklar, op cit.; Alfred H. Kelly and Winfred A. Harbison, The American Constitution (N.Y.: W.W. Norton & Co., 1963) 599-606. 19 “After 1911, it proved virtually impossible to prosecute any great trust successfully, for almost any monopoly could put up a plausible argument for its social respectability and thus claim to be a ‘reasonable’ combination.” Kelly & Harbison, op. cit. At 605.
President, he espoused an associationalist perspective within the framework of an antitrust structure that he was constantly trying to stretch. 20 Indeed, the FTC at this time was busy adopting competition-restraining codes for each industry, until they were largely scrapped in 1930-31. A renewed drive to end antitrust in the face of the Depression led to the National Industrial Recovery Act of 1933 under Franklin Roosevelt. In effect, antitrust was suspended and industrial associations functioned as industrial governments. This experiment failed.21 The eventual response was the arrival of Thurman Arnold as head of the Antitrust Division in 1937 and the revival of antitrust.22 The institutions of antitrust grew stronger, though hardly in a linear manner, from the Arnold revival through the late 1970s. Meanwhile, a conservative reformation movement was growing in the economics departments and law schools of several campuses, with the University of Chicago at the lead.23 By the time of the Carter Administration, conservative economists were playing a larger role in both the FTC and the Antitrust Division, the more aggressive manifestations of antitrust were under not only academic but political attack, and the country was gradually becoming comfortable with the idea of deregulating such industries as air transportation, trucking, oil, and railroads. A new consensus was forming in favor of competition, which would play an enlarged role even in industries where regulation would not be fully displaced. The election of President Reagan was the high water mark of the Chicago School in antitrust and competition policy. A conservative attorney and law professor, William Baxter, was appointed to head the Antitrust Division and a conservative economist, James Miller, led the FTC. Economists played a far more important role within each bureaucracy, and the most influential economic ideas were of the Chicago variety rather than the more traditional institutionalist school that had previously dominated industrial organization economics.24 The Reagan antitrust regime was characterized by an emphasis on the prosecution of horizontal price fixing schemes.25 Structural cases more or less 20
See Ellis W. Hawley, The New Deal and the Problem of Monopoly (Princeton University Press, 1966), introduction. 21 Under the N.I.R.A., “codes of fair competition” covering prices, wages, trade practices, and more, were drafted by trade or industrial groups and submitted to the President for approval. A promulgated code had the force of law and represented a form of cartelization that was incompatible with antitrust policy. The Supreme Court, in the 1935 Schechter “Sick Chicken” case, unanimously held the N.I.R.A. to be unconstitutional. Kelly and Harbison commented, “[T]he attempt to cartelize American business completely at one stroke…encountered much opposition” prior to the Court’s action. Op. cit. ,739-744. 22 Id. 23 For a brief overview, see Herbert Hovenkamp, op. cit. 61-71; Gavil (ed.), op. cit., part X. 24 On the transition to Chicago School domination, see Marc Allen Eisner, Antitrust and the Triumph of Economics (University of North Carolina Press, 1991). Concerning the possibilities for an antitrust renaissance, see Robert H. Lande, “Beyond Chicago: Will Activist Antitrust Rise Again?” 39 The Antitrust Bulletin 1 (1994). 25
“Since the mid-1970’s, criminal prosecution has become a significant part of the DOJ’s antitrust enforcement effort. Each year, more than half of the cases prosecuted by the DOJ for antitrust violations are prosecuted criminally. Since 1980, that percentage has been over 75 percent. The vast majority (95%) of the criminal cases have been for horizontal per se violations. This focus on criminal prosecution of
disappeared, once the AT&T divestiture settlement was approved26 and the IBM case was dropped. Vertical relationships became virtually unrestrained by antitrust. Predatory pricing was dismissed as something that rarely happened and shouldnt be prosecuted. Mergers became subject to a formal mode of economic analysis. The number of civil cases brought by the Antitrust Division dropped dramatically.27 Private antitrust enforcement declined. The States, stepping into what they perceived as a vacuum, became more involved in antitrust. At the same time, free trade was promoted. The pace of deregulation picked up. Government itself was under attack and many parts of the regulatory structure, including antitrust, suffered substantial resource cuts. Privatization and contracting-out occurred in a variety of areas. Judicial appointments had to pass a litmus test of conservatism. All in all, laissez faire predominated. The Reagan Administration represented one end of the spectrum of state-market relations, and the pendulum began gradually to swing back with the election of President Bush. Resources for antitrust slowly increased from their low points in the 1980s and the antitrust agencies became somewhat more aggressive with respect to anticompetitive behavior outside of price fixing. Nevertheless, Chicago economists continued to occupy positions of influence and neo-classical economics was now more or less entrenched in the thinking of all but the small populist wing of the antitrust community. The Clinton Administration under Chairman Robert Pitofsky at the Federal Trade Commission and Assistant Attorney General Anne Bingaman and her successor Joel Klein at the Antitrust Division took a moderate but more expansive and activist view of antitrust.28 Neo-classical economics remained an influential mode of thought, but was increasingly conjoined with what was becoming known as a post-Chicago outlook.29 The post-Chicago perspective added an overlay of strategic thinking, nurtured in part in the nations business schools and management consulting firms, in an effort to enrich such violations has increased in the most recent years…The DOJ wins the vast majority of these cases with a conviction rate of better than 90 percent.” Joseph C. Gallo et al, “Criminal Penalties Under the Sherman Act,” 16 Research in Law and Economics 25, 58 (1994).Criminal cases as a percentage of total DOJ cases jumped from 32% in 1970-74 to 61% in 1975-79, to 83% in 1980-84, to 87% in 1985-89. The percentages in the years 1990-1993 were 80%,84%,85%, and 95%. Id. Working from data in the Antitrust Division’s Workload Statistics, the percentages for 1994 through 1997 were 77%,71%,59%, and 66%. 26 The AT&T consent was sui generis in the Reagan period. See William E. Kovacic, “Failed Expectations: The Troubled Past and Uncertain Future of the Sherman Act as a Tool for Deconcentration,”74 Iowa Law Review 1105 (1989). 27 Table 8. The average number of civil antitrust cases filed by the DOJ from 1977-1981 was 29. For the next 8 years the average was 11. However, one should note that from 1990-1997, the average has only been 18. The numbers have been climbing. From 1994-1997, the average has been 24. 28 Note 27 above. The FTC data that the author obtained begins in 1983. The average number of new cases, as shown in Table 9, was 21 for 1983-1989 and 32 for 1990-1998. The average for 1994-1998(to compare with the DOJ figures through 1997) was 38. The author was not able to utilize data provided by the FTC regarding types of cases brought. 29 See “The Economics of Antitrust: The Trustbusters’ New Tools,” The Economist, May 2, 1998; Lauren E. Zuckerman, “How the Antitrust Wars Wax and Wane,” New York Times, April 11, 1998; Joel Brinkley and Laura M. Holson, “Aiding Consumers Is Now the Thrust of Antitrust Push,” New York Times, March 22, 1998.
economic theory and to provide a sense of empiric realism that many critics found absent in the purist Chicago vision. The emerging vision recognized the importance of free markets, but saw that markets are neither automatic nor natural; rather, they are always embedded in social, political, economic, and legal institutions whose proximate reality must be taken into account. 30 To summarize, American history has a strong tradition of cooperative undertakings that run alongside our commitment to competition: the mercantilism of Alexander Hamilton, the War Industries Board, the N.I.R.A., even the FTC itself promoting associationalism. Particularly during times of crisis depression or certain warscooperation, order, and national interest have been more important guiding symbols than competition. What is perhaps extraordinary is the resiliency of antitrust. Antitrust is part of the larger picture of business-government relations and its role has repeatedly expanded or declined in accord with other features of the political landscape. As much as it has been criticized over the years and as often as it has been suspended, undermined, and reinterpreted, it has always bounced back to a healthy norm. If it did not fulfill some substantial underlying needs of the American polity, the alternatives would surely have prevailed for longer periods. Another extraordinary aspect of antitrusts history is its bipartisan nature. In recent years, it has seemed that antitrust was more of a Democratic than Republican interest.31 That view belies both the full history and the more recent history. The Republicans Sherman and Harrison started the federal antitrust mission. Republicans Roosevelt and Taft became the first important trustbusters. Wilson, the Democrat, added the Clayton and FTC Acts. Harding carried on the tradition. Hoover, for all of his associationalism, opposed pricefixing and monopoly and opposed efforts to suspend the antitrust laws. The Democrat Roosevelt virtually suspended antitrust, only to revive it later in the New Deal. The Republican Eisenhower initiated numerous important antitrust cases and expanded the mandate to include bank mergers. It was the Republican Nixon who reinvigorated the FTC and initiated suits to stop the trend toward concentration. 30
This is a primary point in a recent (non-antitrust) book by a University of Chicago Law School professor, Cass R. Sunstein, Free Markets and Social Justice (NY: Oxford Univ. Press, 1997). 31 John E. Kwoka, Jr., has found , in reviewing the period from 1970 to 1997, that federal antitrust expenditures have been significantly greater under Democratic administrations, and that the antitrust enforcement budget as a percent of expenditures on industry regulation is significantly larger under Democratic administrations. Kwoka also found that a stronger Democratic House appears to increase the enforcement budget, while the effect of a more Democratic Senate is significantly negative. He also found that the Antitrust Division fares better under a Democratic president and the FTC fares better when the House is heavily Democratic. “Commitment to Competition: An Assessment of Antitrust Agency Budgets Since 1970,” 1999 Industrial Organization Society Presidential Address, forthcoming, Review of Industrial Organization. These findings probably reflect the unusual hostility of the Reagan Administration to federal governmental institutions and its narrow view of antitrust rather than of Republican administrations generally over time.
The Reagan Administration represents a major but temporary deviation from the course of antitrust history, but even though it shifted priorities and dramatically slashed many aspects of antitrust, the Reagan Administration remained faithful to narrowly defined core values of antitrust, particularly bolstering its price-fixing agenda, and, indeed, brokered the landmark AT&T consent decree. The Bush Administration returned to a more traditional antitrust effort, which the Clinton Administration is currently carrying forward. Over the past century and in recent years, the federal antitrust mission has generally had a remarkable degree of bipartisan support.
D.
The Changing Environment of U.S. Competition Policy
The environment of competition policy has markedly changed since the coming of the Reagan efficiency regime.32 Six factors seem most important. First, we are in the midst of a merger wave of unprecedented size and scope, which is rapidly restructuring the American and the world economy. 33 Detailed information about merger trends is available in the annual report to Congress on the Hart-Scott-Rodino Act,34 which documents the growth in number of transactions reported. There were 2,883 reportable transactions in 1989, declining to 1,529 in 1991, then a period of rapid growth, hitting 2,305 in 1994, 2,816 in 1995, 3,087 in 1996, and 3,702 in 1997. The number of transactions leaped to 4,728 in 1998.35 The New York Times reported on February 14, 1999, that “The frenzy over deals is likely to continue, particularly if American stock markets remain buoyant and European merger activity explodes, as Wall Street experts expect.”36 The current merger wave is extraordinary not only for the number of transactions, but for the size. Assistant Attorney General Joel Klein advised Congress in mid-1998, “[I]f you combined the value of all U.S. merger activity that took place in 1990, 1991, 1992, 1993, 1994, 1995, and early part of 1996, it would approximately equal the value of merger activity that can be expected 32
In Regulatory Politics in Transition (Baltimore:Johns Hopkins University Press, 1993), political scientist Marc Allen Eisner defines various regulatory regimes—the market regime which emerged as the benchmark of the Progressive era; the associational regime that emerged during the New Deal; the societal regime which developed in the 1960’s and 1970’s; and the efficiency regime of the late 1970’s and 1980’s, whose features are deregulation, market-oriented regulation, and the application of free-market economics to a wide variety of policy issues. 33 See Tables 3,4, and 5. 34 The most recent is Federal Trade Commission and Department of Justice, Annual Report to Congress, Fiscal Year 1997 (20th Report), available at www.FTC.Gov . Bear in mind that only relatively large transactions are reported In general, a Hart-Scott-Rodino filing is required when one of the parties to the transaction has annual net sales over $100 million annual net sales or total assets exceeding $100 million and the other party has annual net sales or total assets exceeding $10 million, and the acquisition price or value exceeds $15 million. 35 FTC, Mission Accomplishments (undated document provided by the Bureau of Competition, Jan. 26, 1999). 36 Laura M. Holson, “The Deal Still Rules,” New York Times, Feb. 14, 1999, Section 3.
in 1998 alone.”37It appears that the total value of U.S. mergers completed in 1998 exceeded $1.2 trillion38 – in an economy with a gross domestic product of $8.4 trillion! To quote the New York Times, Since January, 1994, roughly the starting point of the decade’s boom in deal making, $7.1 trillion in deals have been announced worldwide. Of the 50 biggest American companies, measured by market value at the start of that year, six have disappeared through mergers –including Chrysler, Amoco and Nynex—and three more will vanish if announced deals are completed. Those 50 companies have been involved in 4,190 mergers or acquisitions in the last five years, with a total value estimated at $1.4 trillion…”39 Second, we have advanced a long way in the deregulation movement. Where the focus had been on defining what is to be deregulated and how to deregulate, we now must focus on making deregulated markets function competitively and on applying the learning we have gained to industries, such as electricity, which are still in the process of deregulating. Whether one believes that deregulation has been an unmitigated success, a mixed picture, or a disaster, there is an emerging consensus that antitrust must play a larger role than it has to date in assuring that deregulated markets are competitive. This consensus is driven by recognition that formerly regulated companies do not suddenly gain a competitive mentality; that bureaucracies which formerly regulated do not suddenly shift to an antitrust mindset; that merger waves can all too quickly concentrate deregulated industries, depriving the public of the competitiveness that was supposed to take the place of regulation; and that antitrust enforcement has not played a sufficient role either in preparing for deregulation or in keeping deregulated industries competitive.
Third, we have moved into a more global marketplace. This does not imply, as some have argued, that antitrust is now irrelevant because increasing free trade makes markets adequately competitive. While sometimes this is true, more often it makes antitrust more complicated and resource-intensive. International factors need to be taken into account in the investigation and analysis of antitrust allegations. With more nations committed to antitrust and competition policies, 40 there is more need to coordinate with other enforcement officials in terms of establishing and
37
Statement of Joel I. Klein before the U.S. Senate Committee on the Judiciary, June 16, 1998. Stephen Labaton, “Merger Wave Spurs a New Scrutiny,” New York Times, Dec. 13, 1998 at 38. 39 Holson, op. cit. 40 As of 1997, thirteen countries in the Western hemisphere had antitrust laws, with the majority of these laws enacted since 1990. Robert H. Lande, “Introduction to Symposium on Creating Competition Policy for Transition Economies, 23 Brooklyn Journal of International Law 339 (1997).“ Since the late 1970’s, nearly forty transition economies have created new competition policy systems or retooled dormant 38
harmonizing policies and in terms of specific enforcement actions. Fourth, we have become increasingly aware of network effects, particularly in high tech industries. Despite the fact that some high tech industries are changing rapidly, many have had persistent monopolies. Microsoft and Intel, both of which are currently defendants in federal and private antitrust actions, are but two examples of companies which have been able to become globally dominant in a relatively short period of time by taking advantage of network effects and aggressively expanding into adjacent market space. Theories of efficient firm behavior have not proven satisfactory to justify the results. Fifth, a “post-Chicago” reformation has questioned parts of the theory underlying the efficiency regime.41 This questioning has several components. One is derived from game theory and strategic behavior, utilized in the business schools and management consulting firms. This learning suggests that the strategic behavior of firms may frequent be different from the simplistic profit-seeking behavior postulated by classical economics. Another component is derived from dissatisfaction with the concept of efficiency, the meaning of which is not always clear (compare short-term efficiencies with long-term efficiencies; static efficiencies with dynamic efficiencies). A third component is derived from a history of antitrust which concludes that antitrust has from its earliest days had a multitude of goals, not just economic efficiency,42 including innovation, competitive pricing for consumers, and an array of consumer options. Chicago School thinking no longer dominates.
And sixth, the political basis for antitrust has been shifting. With rare exceptions (e.g., in 1912-1914), antitrust has not had much political salience. To the extent that it had a constituency, it was primarily to be found in the small business and consumer communities. Antitrust’s opposition came largely from big business and laissez faire economists. Today, the situation is changing. The large and long-lasting merger wave and the landmark Microsoft case have focused public attention on antitrust to a greater extent than any time since at least the ATT divestiture agreement. 43 Consumer groups have intensified their interest, recognizing that consumers are injured when competition is not vigorous. Organized labor has become interested in antitrust as a response
antimonopoly laws.” William E. Kovacic, “Getting Started: Creating New Competition Policy Institutions in Transition Economies,” 23 Brooklyn Journal of International Law 403 (1997). 41 See John E.. Kwoka, Jr. and Lawrence J. White (Eds.), The Antitrust Revolution (3rd Ed.) (N.Y.: Oxford University Press, 1999) at 4: “[Post-Chicago economics] has gained acceptance as an intellectually rigorous alternative approach to antitrust. It represents a signficant counterweight to the views that have dominated the past twenty years, with fundamentally different policy implications and with increasing impact on antitrust enforcement and court decisions.” 42 Robert H. Lande, “Beyond Chicago: Will Activist Antitrust Rise Again?” 39 Antitrust Bulletin 1 (1994); Edwin J. Hughes, “The Left Side of Antitrust: What Fairness Means and Why It Matters,” 77 Marquette Law Review 201 (1994). 43 See United States v. AT&T, 552 F. Supp. 131 (D.D.C. 1982).
to the downsizing and destabilizing effects of the merger wave. Small businesses seek antitrust protection from mergers and vertical restraints which threaten their ability to compete on the merits (an example being the opposition of the independent booksellers to the acquisition of their largest wholesale distributor by their largest competitor). Even relatively large companies have increasingly found it appropriate to support antitrust because of the strategic assistance it can give them in their fight to survive against a dominant rival. (Consider that the opponents of Microsoft have created the ‘Pro-Competition’ coalition44; that American Express and Discover have assisted the Division in its investigation and suit against MasterCard and Visa; that Pepsi Cola has brought a private antitrust action against Coca Cola.) State attorney generals, seeing a gap in enforcement and finding political benefit in pursuing antitrust cases, have responded to the political potential that is latent in antitrust. The time is more than ripe to expand the federal antitrust mission, in recognition of our evolution into a new regulatory regime. In our next section, we trace the recent history of the federal antitrust mission’s resources, showing that the resources being allocated have not been consistent with the need.
SECTION 2. DOLLARS AND PEOPLE: THE RESOURCES FOR ANTITRUST A. Introduction Ideally, to determine whether the federal antitrust mission is adequately supported by Congress, one would chart a history of federal antitrust budgets and run the results against a chart depicting the objective need for antitrust. Unfortunately, the only objective information is that which relates the dollars and human resources that have been allocated in the past. There is no single or unassailable method for depicting the need for antitrust. Nevertheless, we can present some evidence on the demand side, including the general level of economic activity in the economy and the number of mergers filed under the Hart-Scott-Rodino premerger notification law. We can also present measures of antitrust activity by the two federal antitrust agencies and observe patterns of enforcement over time. Where possible, we will present combined information for the federal antitrust mission, meaning the Antitrust Division and the Competition Mission of the FTC. 45 44
Described at the coalition’s home page, www.procompetition.org . Typically, observers have looked at each agency separately or they have combined the two without deducting out the FTCs Consumer Protection Mission, which represents about one half of its activity. This might be justifiable for two reasons. First, it is easier to obtain information, over time, for the whole FTC than for its Competition Mission. Second, consumer protection and competition, viewed correctly, are two sides of the same coin, and in most nations today consumer protection is subsumed within the term competition policy. Nonetheless, where we have separate data for the Competition Mission, we will refer to it because, despite the above, antitrust and consumer protection are not the same. 45
B. Budgetary and Staffing Data46 1. Budgets 1970-1998 Between 1970 and 1997, the total budgets of the FTC Competition Mission and the Division grew from $64.5 million to $125.1 million in constant (1992) dollars. This represents a 94% overall increase and an annual rate of growth of 2.5%. 47But this growth masks the substantial ups and downs that have occurred. The peak budget occurred in 1978. This was followed by more than a decade of decline, including the Reagan era of very dramatic cutbacks. A steady recovery began in 1990, but staffing levels have not yet caught up with where they were in 1980. If we look at only the past twenty years, the combined budget of the [entire] FTC and the Antitrust Division actually declined by 7%, from $194 million in 1979 to $181 million in 1999 (constant 1992 dollars).48 The two agencies have not been treated as appropriation twins. From 1970-1997, the Division budget grew by 151%, while the FTC Competition Missions budget grew by only 34%.49 For the last five years, the Division and the FTC have had roughly equal funding, but only half of the FTCs funding has been allocated to antitrust. Thus, it is accurate to say that approximately 2/3s of the federal antitrust mission is currently carried by the Justice Department. Historically, the funding relationship between the two agencies has gone through phases. The Antitrust Division was generally funded in the range of 47% to 57% of the FTC in the years 1960-1977. Making the assumption, in the absence of better evidence, that the Competition Mission was roughly half of the FTC total, then the two antitrust components were approximately equal in this period. .50Around 1978 the FTC began to feel the wrath of Congress for some of its large structural antitrust cases and consumer protection rulemaking initiatives.51 From 1978-1993, the Division generally received 69-70% of the FTC’s budget. Interestingly, from 1993-1999 the Antitrust Division did even better, compared to the FTC, receiving 77-91% of the FTC budget.52 46
This section benefits from the work and advice of John E. Kwoka, Jr., of the George Washington University economics faculty, including his forthcoming paper , “Commitment to Competition: An Assessment of Antitrust Agency Budgets Since 1970,” 1999 Presidential Address, Industrial Organization Society. The author also appreciates the assistance of Tom King in the Antitrust Division and Pat Foster in the FTC in responding to requests for data about their agencies. 47 Kwoka, Id. 48 Table 2. 49 Kwoka, Id. 50 Table 2. 51 See Michael Pertschuk, Revolt Against Regulation (Berkeley: University of California Press, 1982). For a different perspective, see Kenneth W. Clarkson and Timothy J. Muris, The Federal Trade Commission Since 1970: Economic Regulation & Bureaucratic Behavior (Cambridge: Cambridge University Press, 1981). 52 Table 2.
Antitrust is labor intensive and the primary use of funds is to employ staff. Much can be learned from a review of staffing since 1980.53 The combined Full-Time Equivalent staffing of the Antitrust Division and the [entire] FTC was 2,701 in 1980. It is estimated to be 1,985 in F.Y. 2000. The combined Full-Time Equivalent staffing of the Antitrust Division and the FTCs Competition Mission was 982 in F.Y. 1990 and 1308 in F.Y. 1998, an increase of one-third. The Antitrust Division in 1980 had a staff of 982. This declined to as low as 509 in 1989. Since then, it has gradually climbed back to 846. The number of attorneys in the Division was 456 in 1980. It dipped to 229 in 1989 and was 363 in 1998. One might have expected that the drop in attorneys would be offset by a growth in the number of economists, in that the influence of economists and economic analysis was increasing during this period. The number of economists was 47 in 1980; it had only grown to 54 in 1998. The occupational category that has grown is that of paralegal, which increased (as a matter of choice by the Division) from 53 in 1989 to 185 in 1998. The FTCs staff included 1719 Full-Time Equivalents in FY 1980. This was cut precipitously to a low of 894 in F.Y. 1989. It grew slowly upward to 979 in F.Y. 1997.54 Information on the Maintaining Competition Mission was obtained for the years 1990 through 1998 (estimate).55 The actual obligations budget grew from $34.4 million in F.Y. 1990 to $55.6 million (56%, unadjusted for inflation) and the number of Full-Time Equivalents grew from 441 in 1990 to 458 in 1998 (4%). For Fiscal Year 1999, Congress increased the Antitrust Divisions budget by 5.1%, to $98,275,000 (an increase of 8 workyears) and increased the FTCs overall budget by almost 10%, to $116,700,000. Much of the FTCs increase was directed, however, to internet fraud and a consumer response center, rather than to antitrust. 2. The Presidents FY 2000 Budget The Presidents Budget, introduced in early 1999, would increase the Antitrust Division from $98 million to $114 million (16.3%)56This would permit an increase in full-time equivalents from 819 to 943 (15%),57 still below the 1980 level. For the FTC as a whole, the Presidents Budget would increase from $119 million to $134 million (12.6%) 58 and total workyears would increase from 900 to 1042 53
Table 1. Competition Mission staffing data before 1990 was not deemed reliable. FTC, Anticipating the 21st Century, Spring, 1997. 55 FTC, Actual Obligations and Full-Time Equivalents, updated May 12, 1998, at www.FTC.Gov . 56 Appendix of the Budget of the U.S. Government, Fiscal Year 2000, Department of Justice, Antitrust Division, Line 70.00, total new budget authority (gross). 57 Id., Line 2001, total compensable workyears: full-time equivalent employment. The actual in 1998 was 751, so the two-year increase would be 25.5%. 58 Appendix of the Budget of the U.S. Government, Fiscal Year 2000, Federal Trade Commission, Line 70.00, total new budget authority (gross). 54
(15.8%).59 This compares to the actual Full-Time Equivalent staffing in 1980 of 1719. The Competition Mission would go from $50 million to $64 million (28%). C. Sources of Funding: The Antitrust Bargain The federal antitrust mission is a government function that more than pays for itself. The premerger notification program includes filing fees of $45,000 paid by each of the merging parties. These fees now supply almost 100% of the two agencies 1999 budgets (including the FTCs consumer protection budget). The FY 2000 Presidents Budget takes no money from the General Fund, relying entirely on premerger filing fees. By law, fees collected by the agencies in conjunction with the receipt of premerger notifications filed under the Hart-Scott-Rodino Act are for the exclusive use of the two Thus, no program or priority other than antitrust antitrust enforcement agencies. 60 enforcement has any expectation of receiving these funds, and—to the extent that filing fees are sufficient— Congress need not take anything away from anyone else to fund antitrust. In addition to the filing fees, the Justice Department obtains criminal fines in antitrust cases, against both individuals and corporations. The average annual total for 1997, 1998, and 1999 (est.) is $118 million, i.e., $10 million more than the Divisions budget. These fines go into a special fund for compensating victims of crime. Finally, any consideration of the costs revenue sources of antitrust ought also to mention the savings to the American public which accrue from successful antitrust actions. There is, in general, relatively little data on this, although there is much theory as to the reasons we think there are large benefits. Based on detailed econometric work done by the FTC after it stopped the merger of Office Depot and Staples in 1997, a single case has saved consumers $200 million per year as much as the combined cost of the FTC and Antitrust Division!61 59
Id., Line 2001, total compensable workyears: Full-time equivalent employment. The actual in 1998 was 794, so the two-year increase would be 31%. The President’s Budget does not break out workyears for the Competition Mission. 60 See Pub. L. No. 101-162, sec. 605, 103 Stat. 1031 (1989), as amended by Pub. L. No. 101-302, Title II, 104 Stat. 217 (1990) (“Fees collected for [Hart-Scott-Rodino filings] shall be divided evenly between and credited to the appropriations, Federal Trade Commission, ‘Salaries and Expenses’ and Department of Justice, ‘Salaries and Expenses, Antitrust Division’…Provided further, That fees made available to the Federal Trade Commission and the Antitrust Division herein shall remain available until expended.”). Filing fees were initially proposed by Senator Howard Metzenbaum as a method of supplementing antitrust revenues, beginning in fiscal year 1990. The funds are split evenly between the Antitrust Division and the Federal Trade Commission, although the FTC uses some of the funding for consumer protection. 61 Robert Pitofsky, “An Overview of FTC Antitrust Enforcement,” Prepared Statement Before the Committee on the Judiciary, U.S. House of Representatives, Nov. 5, 1997.
D. Comparing Federal Antitrust Resources to the Workload While there are precise numbers for the budget and the staffing of the agencies, it is impossible to be precise about the appropriate level of staffing. How much antitrust is enough? Too much? One approach is to compare what is available today with what was available in the past. On this basis, we have already seen that the current and proposed levels do not match where we were in 1980, not to mention the peak year of 1977. This does not permit us to say that any particular level of staffing was correct in the past; only that the current level is below levels that had previously existed. Another approach is to ask whether the growth of antitrust resources has kept pace with the general growth of the economy. During the 1970-1997 period, real gross domestic product grew by 112 percent, and both corporate profits and the S&P stock market index rose by over 280 percent. The total antitrust budget only grew by 94 percent.62 Again, we cant imply from this that the correct staffing level occurred in 1970, and we cant say that the workload for the correct level of antitrust grew at the same rate as the GDP. But there is an intuitive sense that as the economy grows, the number of transactions that raise antitrust concerns would probably grow at about the same pace.63 So, we can say that over a period of 27 years, antitrust resources did not grow nearly as fast as the economy itself. 64And, as noted above, if we focus on the period 1979-1999, the budget for the combined Antitrust Division and the [entire] FTC grew by a negative 7% in constant dollars. We have precise numbers for one measure of the antitrust workload: mergers. Under the Hart-Scott-Rodino law, companies must give notice before they merge. In the first full year of reporting, 1979, a total of 859 mergers were recorded. In 1998, this number exploded to 4,728, more than at any time and three times as many as in 1992. 65 This increase of 550% dwarfed the rise in antitrust resources. In reporting on the agencies reaction to the merger wave, the New York Times noted, The two agencies continue to suffer from staff shortages, having never recovered from the cutbacks in the 80s. Because of the large number of mergers, they have been forced to undertake a kind of regulatory triage, delaying and thinly staffing civil enforcement inquiries in order to complete merger reviews under the deadlines set by Congress.66 62
Kwoka, op. cit. Richard Posner in his 1970 study, “A Statistical Study of Antitrust Enforcement,” 13 Journal of Law and Economics 365-419, had hypothesized that antitrust enforcement, as measured by the number of cases initiated by the Department of Justice, would increase when there was an expansion in economic activity and he reported some evidence to support his hypothesis. However, the subsequent literature has provided mixed results. 64 From 1970-1997, non-defense federal government expenditures rose by 79%, slightly less than the antitrust budgets. Kwoka, op. cit. 65 Table 3. See, NewYork Times, Dec. 13, 1998 at p. 38, Merger Wave Spurs a New Scrutiny, by Stephen Labaton. 63
66
Id.
Merger reviews and investigations have taken over the work of the agencies. In 1970 the Justice Department launched 473 investigations. In 1988, it began only 178 investigations. By 1997, the number had climbed upward to 362, still 23% less than in 1970. In 1970, 173 investigations involved mergers; in 1988, 74 involved mergers; and in 1997, 276 involved mergersmergers increased from 36% of the Divisions caseload in 1970 to 42% in 1988 to 76% in 1997. 67 The increased emphasis on mergers does not necessarily imply that the Division has stopped more mergers. In fact, the number of actions cases actually filed in court plus mergers abandoned or restructured by companies in the face of announced agency opposition declined between 1970 and 1997, from 37 to 31. 68 Another angle is to focus on deregulation. During the arguments made in favor of deregulation, it was promised that the free market, under the auspices of antitrust, was would replace the direct control of bureaucrats. Because [t]he progressive deregulation of the economy over the past thirty years has subjected more industries to general antitrust scrutiny rather than to the specific oversight of a regulatory body,69one might have predicted that expenditures on regulation would decline, that expenditures on antitrust would rise with time, and that the antitrust budget would gradually come to stand in higher proportion to regulatory expenditures. A regression analysis for the period from 1970 through 1997 shows the opposite: namely, that antitrust expenditures have been positively and significantly related to expenditures on industry regulation.70 The implication, that Congress has treated antitrust as another form of regulation, rather than as an alternative to regulation, suggests the presence of an error that merits correction. The picture that emerges is of an enterprise that has been starved of resources for a long generation. In the following section, we ask, if more money were available for the federal antitrust mission, how should it be spent?
SECTION 3. PRIORITIES: WHAT MONEY CAN BUY We believe that the federal antitrust mission is currently underfunded in the range of 30-50%. While some funding would be needed for such material purchases as space, furniture, travel, and computers, most of the shortfall relates to the acquisition of additional human talent. We are not criticizing the current level of talent or commitment and we are not criticizing the current leadership of either agency. We believe that both have been stretched beyond what any civil servants should be required to endure. 71 67
Table Seven and DOJ Antitrust Division Workload Statistics. DOJ Antitrust Division Workload Statistics. Table 8 reports on merger cases actually filed, which since implementation of the premerger notification procedures has generally been a single-digit figure. 69 Kwoka, op. cit. 70 Kwoka notes, “This implies that policymakers view antitrust as a complementary activity, perhaps even another form of regulation. This runs counter to the proposition that antitrust and regulation might (or should) be seen as substitute policies.” Id. 71 See David Segal, “Scaling a Mountain of Antitrust Cases: Workload Poses Challenge at Justice Dept., FTC,” Washington Post, May 29, 1998. 68
In speaking of human talent, we recognize that a substantial increase of personnel cannot be accomplished over night. Time is needed to recruit and train newcomers and to develop the expanded middle management necessary to properly supervise litigation teams. For this reason, we recommend that expansion of the agencies be staged over a three year period in such a manner that the agencies can carefully plan ahead. The most immediate objectives are to (a) expand the agencies ability to handle mergers and (b) expand their non-merger litigation activities. Longer-term planning should include legislative initiatives to improve procedures and strengthen substantive law. A. Merger Enforcement We have already depicted the magnitude of the current merger wave and how it has distorted enforcement priorities. 72 Because merger waves tend to be cyclical, it is appropriate to transfer some resources away from other types of investigations, which is what has already occurred. But mergers carry with them the time-pressure of statutory deadlines, and therefore detract from managements ability to plan the best use of personnel. There is no indication that the current wave has peaked73, and resources have already been pulled away from other areas, so it makes sense now to bring in additional resources to focus on mergers. Within the antitrust community, there are rumors that the merger workload is sometimes dealt with by agency staff issuing unjustified second requests, simply to buy time in the premerger notification process and that investigations are not always as thorough as they should be, because of the time crunch. We do not have the information necessary to project the appropriate magnitude of new resources needed. The agencies should be able to create a formula that associates the number of workyears (composed of a mix of attorneys, economists, support staff, and supervisors) that is ideal for each prenotified merger on average, taking into account the varying needs for screening, handling second requests, developing complaints, negotiating, and litigating. The formula can then be applied to the estimated number of filings for the coming year. 72
At some point, it will be appropriate to consider whether the funding of antitrust solely by premerger filing fees is wise public policy. Several problems are theoretically possible. (1) The agencies will be driven by funding concerns to overemphasize merger enforcement, to the detriment of other types of enforcement. (2) When the merger wave eventually ebbs, funding for antitrust will decrease, but Congress may not be willing to fund important programs from the General Funds. (3) Uncertainty about the revenue flow generated by filing fees may make it difficult for the agencies to spend their funds in an optimal manner throughout the year. 73 See Laura M. Holson, “The Deal Still Rules, Mania for Mergers Defines the Market,” New York Times, Feb. 14, 1999.
The objective of increasing the merger enforcement resources is to assure a more thorough review of premerger filings, to facilitate challenge to a higher proportion of mergers, and to reduce the temptation to take shortcuts and make compromises on the basis of inadequate resources. B. Other Enforcement The first objective is to assure that merger enforcement, under the impetus of the merger wave and the time imperatives of H-S-R compliance, does not undermine the agencies ability to investigate a sufficiently large universe of non-merger activities. Historically, in periods not characterized by merger waves, merger enforcement accounted for (very approximately) one-third of overall federal antitrust resources. If we take the merger enforcement budget as an independent variable (based on projected filings and the resources driven by that number), then the other areas of enforcement could well be targeted at twice that budget, in order to return to a two-thirds/one-third relationship. So many antitrust challenges remain that it is difficult to say where to start. Health care is not sufficiently competitive. 74 Airlines monopolize hub terminals and other deregulated and deregulating industries are becoming more concentrated rather than more competitive. International cartels cost consumers dearly. Price fixing and bid rigging are a continual abuse of the system. New technologies are creating persistent monopolies that can control the global flow of information. Agricultural and meatpacking industries are unduly concentrated. There is reason to believe that non-merger investigations are not only fewer in number, but that they are taking longer because of the shift to merger enforcement. There is also reason to believe that the declining availability of per se rules of illegality has resulted in making some cases more complicated both in terms of investigating and in litigation itself. Finally, the increasing role of foreign antitrust regimes and of state attorneys general may create coordination requirements that increase the federal antitrust workload. All of these factors suggest the need for more antitrust staff. The following section discusses several specific areas deserving more attention. C. Specific Areas Deserving More Federal Antitrust Attention 1. Deregulated and Deregulating Industries In general, the antitrust agencies have been underutilized in the industries which have been deregulated or are in the process of deregulating (transportation, telecommunications, energy, finance). These are critical industries that play a keystone For example, the important health industry could be viewed with regard to consolidation in health-related markets, various abuse problems involving pharmaceuticals, physician boycotts, price fixing, and HMO market power issues. 74
role in the economy. By virtue of their histories under regulation, both the companies and their regulatory overseers have a tradition and culture that is not well attuned to competitive markets. Transition comes slowly and competitive institutions need to be developed.75 The expertise in building competitive institutions often resides in the antitrust agencies, and it is needed at both the federal and the state levels, on both an enforcement and (more importantly) a consultative/advocacy basis. It is worth stressing that the initial years of deregulation are particularly crucial to the long-run structure of the industry, since many mergers and practices occur during this period that warrant close scrutiny. 2. International Competition. As trade becomes freer, as more industries become international, and as more countries apply antitrust laws (usually referred to as competition policy), the enforcement role of the American antitrust agencies becomes more complicated, time consuming, and costly. Their work increasingly involves finding parties, evidence, and competitive effects in other countries. Extensive intergovernmental negotiations, coordination, and collaboration take time. Travel budgets need to grow and translators, interpreters and communications become more expensive. The companies being dealt with have a size and scope that means there are more documents to review, more markets to analyze, more employees to interview, more competitors to survey. Cartels that operated in many nations with their blessing are increasingly under scrutiny as international competition policy turns against cartels. It can be expected that international cartels will provide an increasing workload for the US agencies. In addition, the evolution of international antitrust and the development of antitrust institutions in transitional countries (moving from socialism to capitalism), developing nations, regional economic alliances (such as the European Union), and international forums requires a larger investment in antitrust expertise which can help inform the development of international competition policy, including the harmonization of varying laws and priorities. 3. Technological Change Major restructurings of our economy have generally responded to changes in technology, e.g. the growth of the large firm following invention of the railroad and telegraph. Today we are seeing technology change at an unprecedented rate, as computers operate with ever-faster capabilities and declining costs and as new modes of communication (including data transmission) present new possibilities for corporate organization and interaction. One fundamental task for antitrust is simply to understand the new technologies and their impact on business organization and behavior. New industries emerge; old industries try to maintain their status; businesses in network industries fight for dominance over the network. Electronic commerce, the 75
See Albert A. Foer, “Institutional Contexts of Market Power in the Electricity Industry,” forthcoming, Electricity Journal.
stock markets are telling us rather loudly, will revolutionize the ways in which we do business, within a brief time frame. These developments require antitrust vigilance and possible intervention. The new technologies themselves change the nature of antitrust enforcement by, for example, making the methods of price fixing, bid rigging, and market allocation more subtle and complex. Antitrust enforcement must now deal not only with hard-copy evidence, but also with magnetic tapes and computer disks of e-mail. Transactions may be captured in great detail from the point-of-sale, which can be subjected to innovative methods of economic analysis. While the new technologies offer new opportunities for detecting antitrust violations, they also present challenges that add to the workload. In addition to the need for more resources devoted to the challenges and opportunities presented to law enforcement by technological change, history suggests that we should devote substantial brainpower simply to understanding the implications of these changes for competition policy. During the Depression, the Temporary National Economic Committee produced an incomparable study of the structure of the economy, which had a long-term impact on public policy. We recommend a study in the spirit of the TNEC that focuses on technology and competition policy, which would be independent but heavily staffed with personnel from the antitrust agencies. 4. Research and Evaluation Research and evaluation are two important functions of the antitrust agencies that have suffered under financial stress. Research is needed not only with respect to technological change, but with regard to a wide range of antitrust issues. The American Antitrust Institute has identified an agenda for research. 76While some research is best undertaken within the agencies, much more could be accomplished if the agencies had research funding available for contracting out. The same can be said for evaluation of the work that has been done by the agencies. Which types of cases have worked out well or poorly, from a consumer welfare perspective? What happened in situations after the agencies did not take action? Improvement comes from careful evaluation of what has been and has not been done. Prudent development of antitrust priorities and directions requires more of this. 5. Miscellaneous Areas a. More workyears would allow the agencies to pursue a policy of greater transparency, i.e. justifying more consistently to the public their actions in investigation closings. This takes time and may subject the agencies to criticism, but would clearly be in the interest of better public policy. b. Standards and certification processes quietly shape a great deal of economic 76
See www.antitrustinstitute.org .
activity, yet are rarely monitored by the antitrust agencies or by the public. Typically, they are dominated by the largest companies in an industry, which have the resources and the motivation to be deeply involved, and they involve close interactions over a sustained period of time between horizontal competitors and vertical affiliates. A small portion of increased antitrust resources could be utilized in assuring that these meetings of competitors are not misused. Possibly, there should be legislation or an FTC rulemaking mandating pre-standardization notification to the agencies. c. More attention could be given to patent settlements, which sometimes result in deals that satisfy the companies involved, at the publics ultimate expense. Patent pools and misuse of intellectual property rights may also deserve more attention. SECTION 4. ADDITIONAL LEGISLATIVE CONSIDERATIONS The highest and most immediate concern should be the funding of the federal antitrust agencies. First, the need for funding is obvious, if the agencies are to have the human expertise and time availability to carry out an aggressive antitrust agenda that has the potential for keeping up with the workload. Second, the agencies need Congress to send a message to the corporate world that antitrust is important and that Congress expects the agencies to do their work aggressively. Third, whatever substantive or procedural changes one might want for the antitrust mission, none is likely to have much impact without dealing with the problem of understaffing. Beyond the staffing issue, however, Congress should be looking toward a variety of antitrust reforms. We offer the following suggestions. 1. Amend the Hart-Scott-Rodino Premerger Filing law in order to facilitate a higher level of scrutiny for the largest mergers. (For example, the FTC/ DOJ could annually determine a threshold transactional size for the largest 5% of reportable mergers.77) These largest mergers frequently have the most dramatic impact on the public in terms of plant closings, layoffs, community desertions, etc., and they often (though not in all cases) require more governmental time and attention because of the diversity of markets and issues that must be analyzed. a. For this limited number of mergers, the merging companies would have to file information with the public as to the nature of the merger, the markets that are involved, and explanations for any claimed efficiency gains (including anticipated layoffs and plant closings). 77
In F.Y. 1997, out of 3,438 merger transactions, 144 (4.2%) were over $1 billion. 34.7% of these largest transactions were cleared for a second request, and 15.3% (22) were handled as second request investigations. FTC and DOJ, Table 1 of F.Y. 1997 Annual Report to Congress. Compare this to the overall percentage of transactions subjected to second requests in F.Y. 1997, 3.5%. Table 3.
b. Data that is filed with DOJ/FTC would also be filed with states in which the merging companies do substantial business. This would streamline a process that often occurs in a roundabout way. c. Establish a tier structure for filing fees. Today, all firms pay $45,000. This could be reduced somewhat for a category of small transactions, and increased quite significantly for the largest mergers. d. Allow the antitrust agencies more time to analyze second request information. Under the statute, they have 30 days to analyze data; if they make a second request, they have 20 days to go to court after all requested information is received. Although the agencies do have leverage in negotiating for additional time, it seems appropriate that they should have a statutory right to 60 or 90 days for the largest mergers. e. Increase the transparency of decisions regarding the largest mergers. When the Justice Department enters a consent decree, it files a Competitive Impact Statement with the court. The FTC prepares a plain English explanation for its consent agreements. We are suggesting that the agencies also provide a written report on the largest mergers when they close the investigation after a second request has been answered. This will add to the workload and it will require some careful thinking about what information may be released without causing undue harm to the merging companies, but the greater transparency will facilitate Congress ability to evaluate situations where no action is taken and consider substantive revisions to the law, if needed. 2.
Consider whether the current federal merger guidelines are sufficient. Hearings, by Congress or perhaps by the agencies, could focus on several questions that keep arising: a. Why are the guidelines so rarely enforced when the HHI figures78 for concentration levels are under 2000 and for changes in concentration are between 50 and 100? Does this unduly crimp the incipiency nature of the Clayton Act, keeping the agencies from acting soon enough in contexts of clear trends of concentration?
78
For an introduction to the federal merger guidelines, see Herbert Hovenkamp, Federal Antitrust Policy (West Publishing Co., 1994), 442. HHI refers to the Herfindahl-Hirschman Index, a measure of industry concentration. According to the guidelines, an industry with an HHI above 1800 is considered highly concentrated. If a post-merger HHI falls between 1000 and 1800, the market will be deemed “moderately” concentrated.
b. Do the guidelines give sufficient weight to dynamic (as opposed to static) efficiencies? 79 To power buyers? To the concept of raising rivals costs? c. Is the potential competition doctrine being construed broadly enough to protect competition?80 d. Are the standards for proving coordinated interaction so unrealistically high that they have become unworkable for antitrust enforcers? If it unduly hampers the application of the doctrine in a way that is likely to permit mergers that might well lead to coordinated interaction, how could it best be changed? 3. Address the absence of recourse for indirect purchasers, caused by the Illinois Brick case.81 A beginning point would be hearings on the experience of those states which have passed Illinois Brick Repealer laws. 4. Increase the penalty that may be imposed in criminal antitrust cases. 82 5. With regard to deregulated or deregulating industries, assure that an antitrust agency has the primary jurisdiction over mergers. 83 79
The classic reference for dynamic efficiencies is Burton H. Klein, Dynamic Economics (Cambridge: Harvard University Press, 1977). Static efficiency –getting the most out of available resources—may be less valuable in the long-run than the dynamic efficiency of a system that introduces automobiles to replace buggy whips. Klein emphasizes that competition, by propagating a greater diversity of approaches, often evokes winning solutions at lower cost despite seemingly inefficient duplication. 80 Few potential competition cases have been brought in recent years, although the theory is still alive and relevant, particularly in several current telecommunications mergers. For a review of the law in this area, see Hovenkamp, op. cit., 508-515. 81 A consumer who buys something from a retailer who obtained the good from a monopolistic manufacturer is an indirect purchaser. In Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), the Supreme Court held that in order to avoid multiple recoveries for the same activity, an indirect purchaser does not have standing to seek damages for overpricing caused by an antitrust violation. See Herbert Hovenkamp, ”Indirect-Purchaser Rule and Cost-Plus Sales,” 103 Harvard Law Review 1717 (1990). It has proven difficult to develop a good solution, but the problem remains. The Supreme Court recently denied certiorari in Alex Campos v. Ticketmaster Corp. (Oct. Term, 1998, No. 98-127), where the 8th Circuit upheld a holding that consumers who purchased concert tickets from a monopolist ticket distributor could not sue for damages, in that they were considered indirect purchasers. Ticketmaster Corp. was considered an agent for the concert venue or promoter. See Albert A. Foer, “On the Appeal of Ticketmaster,” FTC:WATCH, Feb. 15, 1999, also at www.antitrustinstitute.org . 82 The Antitrust Division supports a proposal that Congress amend the Sherman Act to raise the maximum fine from $10 million to $100 million. Fines larger than $10 million can sometimes be obtained under the “twice the gain or twice the loss” alternative sentencing provision, 18 U.S.C. 3571(d), but establishing the precise gain or loss in antitrust offenses has been difficult. 83 In doing this, it would be important not to remove the “public interest” authority that a regulatory agency may have as part of its jurisdiction
CONCLUSION Antitrust has served the American public well for over a hundred years. The need for antitrust has not declined. We still need to work at maintaining competitive markets, perhaps more than ever as the economy continues to change. Yet todays federal antitrust mission is substantially underfunded and understaffed. The President has proposed a budgetary increase, which should be taken as the starting point for a longer-term commitment to rebuilding the FTCs and the Antitrust Divisions capability for dealing with todays challenges, and tomorrows.
Table One STAFFING THE FEDERAL ANTITRUST MISSION 1978-2000
Year
DOJ Antitrust
FTC Maintaining Competition
Total AT + MC
1978 1979
FTC Agency
Total AT + FTC
FTC % of MC % of AT + FTC AT + MC
1719 1667 1491 1310 1238 1201 1107 1007 986 894
2701 2601 2294 2007 1905 1839 1718 1541 1526 1403
64% 65 65 65 65 65 64 65 65 64
903 926 939 953 933 944 939 928 964 979
1444 1528 1546 1547 1619 1736 1707 1731 1814 1825
63 61 61 62 58 54 55 54 53 54
1042
1985
52
1690 1746
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
982 934 803 697 667 638 611 534 540 509
1990 1991 1992 1993 1994 1995 1996 1997 1998 est. 1999
541 602 607 594 686 792 768 803 850 846
est. 2000
943
441 464 447 450 439 447 437 430 est.
458
982 1066 1054 1044 1125 1239 1205 1233 1308
82% 77 74 76 64 56 57 54 54
Abbreviations: AT= Antitrust Divisioln; MC=FTC’s Competition Mission Notes: DOJ information provided by DOJ, 2/99. FTC information available at www.FTC.GOV. Staffing expressed in actual Full-Time Equivalent workyears. Estimates for 2000 are from Appendix of the Budget of the U.S. Government, F.Y.2000. FTC Competition Mission is composed of Bureau of Competition and part of the Bureau of Economics.
Table Two FUNDING THE FEDERAL ANTITRUST MISSION 1960-1999
Fiscal Year Antitrust Division
Federal Trade Commission
AT as % of FTC
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970
17 21 24 26 27 28 27 28 28 29 33
30 34 42 45 49 52 54 53 54 59 69
57% 62 57 58 55 54 50 53 52 49 48
1971 1972 1973 1974 1975 1976 1977 1978 1979 1980
34 36 37 36 43 49 59 83 76 81
69 75 79 83 92 105 116 120 118 109
49 48 47 43 47 47 51 69 64 76
Fiscal Year Antitrust Division
Federal Trade Commission
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990
67 60 60 58 55 53 52 52 50 51
106 97 92 84 84 83 79 78 75 75
63% 62 65 69 65 64 66 67 67 68
1991 1992 1993 1994 est 1996 1997 est est est
55 59 60 69 1995 84 82 83 1998 80 1999 84 2000
79 83 86 90 95 92 91 92 97
70 71 70 77 88 89 91 87 87
Note: In millions of constant 1992 dollars. Source: “1999 Annual Regulatory Budget Report,” Center for the Study of American Business, Washington University, Nov. 1998.
AT as % of FTC
TABLE 3 NOT YET AVAILABLE ON-LINE
TABLE 4 NOT YET AVAILABLE ON-LINE
TABLE 5 NOT YET AVAILABLE ON-LINE
TABLE 6 NOT YET AVAILABLE ON-LINE
TABLE 7 NOT YET AVAILABLE ON-LINE
Table Eight DOJ TOTAL CASES AND MERGER CASES FIELD 1970-1997
Year
Total Cases Merger Cases Merger % Filed Filed of Total
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979
54 52 72 42 33 37 45 34 27 31
15 24 19 16 13 3 7 4 7 11
44% 46 26 38 39 8 16 12 26 35
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
28 26 18 10 14 11 6 15 11 6
10 4 8 4 5 7 6 6 6 5
36 15 44 40 36 64 100 40 55 83
Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Note: Total is for civil antitrust cases filed in District Court by the Antitrust Division. Source: Antitrust Division Workload Statistics
Total Cases Filed
Merger Cases Merger % Filed of Total
14 17 12 9 21 24 29 20
11 4 4 5 9 9 9 14
79% 24 33 56 43 38 31 70
Table Nine FTC Antitrust Cases 1983-1998 Year
Total New Cases
1983 1984 1985 1986 1987 1988 1989
8 24 25 17 13 33 27
1990 1991 1992 1993 1994 1995 1996 1997 1998
31 27 15 25 33 48 35 28 44
Note: New antitrust cases brought by FTC. New cases includes: administrative complaints, part II (investigative phase) consents, civil penalty actions, and preliminary injunctions. Source: Bureau of Competition “Mission Accomplishments”.