The Antitrust Procedures and Penalties Act

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THE ANTITRUST PROCEDURES AND
PENALTIES ACT
HEARINGS
BEFORE THE
SUBCOMMITTEE ON ANTITRUST AND MONOPOLY
OF THE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
NINETY-THIRD CONGRESS
FIRST SESSION
ON
S. 782
THE ANTITRUST PROCEDURES AND PENALTIES ACT
AND
S. 1088
THE ANTITRUST SETTLEMENT ACT OF 1973
PURSUANT TO S. RES. 56, SECTION 4
MARCH 15, 16 AND APRIL 5, 1973
Printed for the use of the Committee on the Judiciary
Figure
U.S. GOVERNMENT PRINTING OFFICE
93-940 WASHINGTON : 1973
COMMITTEE ON THE JUDICIARY
JAMES O. EASTLAND, Mississippi, Chairman
JOHN L. McCLELLAN, Arkansas ROMAN L. HRUSKA, Nebraska
SAM J. ERVIN, JR., North Carolina HIRAM L. FONG, Hawaii
PHILIP A. HART, Michigan HUGH SCOTT, Pennsylvania
EDWARD M. KENNEDY, Massachusetts STROM THURMOND, South Carolina
BIRCH BAYH, Indiana MARLOW W. COOK, Kentucky
QUENTIN N. BURDICK, North Dakota CHARLES McC. MATHIAS, JR., Maryland
ROBERT C. BYRD, West Virginia EDWARD J. GURNEY, Florida
JOHN TUNNEY, California
SUBCOMMITTEE ON ANTITRUST AND MONOPOLY
PHILIP A. HART, Michigan, Chairman
JOHN L. McCLELLAN, Arkansas ROMAN L. HRUSKA, Nebraska
SAM J. ERVIN, JR., North Carolina HIRAM L. FONG, Hawaii
EDWARD M. KENNEDY, Massachusetts STROM THURMOND, South Carolina
JOHN TUNNEY, California EDWARD J. GURNEY, Florida
HOWARD E. O'LEARY, Staff Director and Chief Counsel
(II)
CONTENTS
WITNESSES
Page.
Blecher, Maxwell M., attorney 56 .
Campbell, James S., attorney 73 .
Goldschmid, Prof. Harvey J., Columbia University School of Law, accom­
panied by Gregor F. Gregorich, Committee on Trade Regulation of Asso­
ciation of the Bar, City of New York 9 .
Hammond, Robert, A., 3, attorney 64.
Kauper, Thomas E., assistant attorney general in charge of antitrust 89 .
Kohn, Harold E., attorney 127 .
Kramer, Victor H., director, Institute for Public Interest Representation 134 .
Loevinger, Lee, attorney 119 .
Nader, Ralph, accompanied by Mark Green 163 .
Rowley, Worth, attorney 137 .
Thompson, Bradley M., publisher, Detroit Legal News, accompanied by
Theodore A. Serrill, executive vice president, National Newspaper Asso­
ciation 186 .
Turner, Donald F., Law School of Harvard University 191 .
Wright, J. Skelly, judge, U.S. Court of Appeals, District of Columbia
Circuit 145 .
EXHIBITS AND APPENDIX
Table: Percentage of antitrust judgments represented by consent decrees,
1955 through 72. 7
Report of Senate on Amending the Expediting Act, 91st Congress 29.
Report of House on Amending the Expediting Act, 91st Congress 36.
Excerpt: Attorney General's report on antitrust 52.
Letter: From A. Sherman Christensen, senior U.S. district judge, comment­
ing on bill 86.
Letter: From Richard M. Buxbaum, University of California, commenting
on bill 202.
Article: Public Participation in the Enforcement of the Antitrust Laws,
by Richard M. Buxbaum 205.
Article: Private Participation in Department of Justice Antitrust Pro­
ceedings by Robert P. Schuwerk 237.
Article: Public Participation in Federal Administrative Proceedings, Uni­
versity of Pennsylvania Law Review 271.
Letter: From Donald F. Turner, Harvard university, commenting on bill 416.
Statement: From Computer Industry Association commenting on bill 418 .
Statement: American Bar Association commenting on bill 422.
Remarks of Senators Tunney and Gurney on introducing S. 782 . 4 44.
Remarks of Donald F. Turner at National Institute of the Antitrust Sec­
tion of the American Bar Association, Nov. 10, 1972 . 4 64.
Report by Richard W. McLaren to the House of Delegates of the American
Bar Association 466.
Article: Antitrust Penalties and Attitudes Toward Risk: An Economic
Analysis, by William Briet and Kenneth G. Elzinga 487.
(III)
HEARINGS ON S. 782 AND S. 1088
THURSDAY, MARCH 15, 1973
U.S. SENATE
SUBCOMMITTEE ON ANTITRUST AND MONOPOLY
OF THE COMMITTEE ON THE JUDICIARY,
Washington, D.C.
The subcommittee met at 10 a.m., in room 2228, Dirksen Office
Building, Senator John Tunney presiding.
Present: Senators John Tunney, Strom Thurmond, Hiram Fong,
Edward Gurney, and Roman Hruska.
Also present: Peter N. Chumbris, chief minority counsel; Charles
E. Bangert, general counsel; Meldon Levine, legislative assistant to
Senator Tunney; Thomas Farrar, legislative assistant to Senator Gur­
ney; Charles Kern, assistant counsel; Patricia Bario, editorial direc­
tor, and Janice Williams, clerk.
Senator TUNNEY. The hearings of the subcommittee on Antitrust
and Monopoly will come to order.
Today we are holding hearings on legislation S. 782, introduced
by Senator Gurney and myself, and S. 1088, introduced by Senator
Mansfield for Senator Bayh.
The Nation's antitrust laws no longer sufficiently protect the public
against abuses by giant corporations. The laws were last amended in
1955—almost two decades ago. Since then, the corporations have
grown in power and influence through mergers, and their inner deal­
ings with the Government agencies that supposedly regulate them
remain behind closed doors.
Senator Gurney and I have introduced S. 782—the Antitrust Pro­
cedures and Penalties Act—to throw open those doors and give the
public information about and a voice in the mergers and other actions
that so directly affect the quality and the cost of what we buy.
Specifically, our legislation will bring the consent decree process
into the full light of day and will increase penalties for offenders. It
will make our courts an independent force rather than a rubber stamp
in reviewing consent decrees, and it will assure that the courtroom
rather than the backroom becomes the final arbiter in antitrust
enforcement.
S. 782 has three basic provisions. First, it focuses on the process by
which antitrust suits are settled and consent judgments entered by
providing specific standards and procedures to assure that the deci­
sion to settle and the settlement itself are in fact in the public inter­
est. The Government is required to file and publish any proposed
consent decree and a "public impact statement" at least 60 days prior
to its effective date. The Government must comment upon any writ­
ten comments submitted while the decree is pending, and the court,
(1)
2
before entering the proposed decree must determine that it is in the
public interest. Moreover, each defendant in the still-pending anti­
trust suit is required to file a record of its lobbying activities (other
than by its counsel of record) relative to the proposed consent decree.
A second basic provision increases the criminal penalties for viola­
tions of the antitrust statutes from $50,000 to $500,000 for corpora­
tions and $100,000 for any other persons.
The third basic provision revises the Expediting Act in an effort
to improve the process of appellate review of antitrust cases. It au­
thorizes the United States to appeal from the denial of a preliminary
injunction at the trial court level.
CURRENT PRACTICE
A civil antitrust case is brought by the United States in order to
preserve competition in the marketplace. A very high percentage of
these cases are settled, thus being concluded in the form of a consent
decree. The decree itself usually emerges from a series of private, in­
formal negotiations between lawyers representing the Antitrust Divi­
sion of the Department of Justice and the attorneys representing the
defendant. Pursuant to the Code of Federal Regulations (28 CFR
sec. 50.1) the public has a 30-day period to comment to the Depart­
ment of Justice on a proposed decree. However, the decision to modify
the decree on the basis of public comments received is entirely up to
the Department. As a recent Law Review article stated:
These views are presented to the Antitrust Division, not the court considering
the decree. Consequently, an "affected person's" interests may only be reflected
in the consent decree if the Antitrust Division chooses to do so.
The only other avenue of approach for an "affected person," not a party to th e
suit is by intervention under Rule 24 of the Federal Rules of Civil Procedure .
Federal courts have been more than reluctant to permit intervention in the
framing or modification of consent decrees. (Flynn, "Consent Decrees in Anti­
trust Enforcement; Some Thoughts and Proposals," 53 Ia. L. Rev. 983, 1005
(1968).)
Thus, in Federal antitrust litigation, the general rule is that it is the
United States "which must alone speak for the public interest." Buck­
eye Coal & Railway Co. v. Hocking Railway Co., 269 U.S. 42, 49
(1925).
Most recently, in the ITT-Hartford merger case, the Supreme Court
denied standing to Reuben Robertson and Ralph Nader to intervene
to set aside the consent decree. U.S. v. ITT Corp. and Hartford Fire
Insurance Company, — F. Supp. —, Civ. Action Number 13320, 41 L.W.
2129 (D.C. Conn., Sept. 6, 1972), aff'd sub. nom. Nader v. U.S.—U.S.
— (Feb. 20, 1973), 41 L.W. 3447. While our legislation would not pro­
vide such intervention as a matter of right, it would help insure that
meaningful comment would be provided.
I believe that interested persons should not be denied a meaningful
voice in the content of consent decree solutions. The participation of
public representatives, many of whom are affected by such settlements,
is absolutely essential.
PROPOSED REVISIONS TO CONSENT DECREE PROCESS
The decree provisions in S. 782 can be broken down into four major
parts. First, the bill would require that any consent decree be filed with
3
the court at least 60 days prior to entry of judgment, published and
furnished upon request to any person who wishes a copy of its terms.
The 60-day time period can be shortened for extraordinary circum­
stances. Current practice, as I mentioned earlier, provides the public
with a 30-day comment period and it would appear that, given the
complexities of some antitrust litigation, 60 days would facilitate
public study and comment and would hardly be a burdensome
requirement.
Second, S. 782 requires that the Government file, also 60 days in
advance, a public impact statement setting forth six items of informa­
tion with regard to the proposed decree. The items are spelled out in
section 2 (b) of S. 782 and are relatively self-explanatory. I am certain
that we shall explore these in the hearings. In sum, they do not require
considerably more information than the complaint, answer and consent
decree themselves would provide and, therefore, would not be burden­
some requirements. They should help rationalize the consent decree
procedure, making it more predictable and understandable—and help­
ing the public to understand better the actual effect and impact of the
decree. We have also required that the United States receive and
respond to written comments with regard to the public impact state­
ment. If criticisms are offered, the Government should have the oppor­
tunity to respond. If a response is difficult the comment might well
have pointed up an area in which the decree could be improved.
In providing this mechanism which permits meaningful public com­
ment, we have fashioned our proposed public impact statement upon
the already existing environmental impact statement. There have been
a number of judicial decisions under the National Environmental
Policy Act which have discussed the importance of such environmental
impact statements in apprising the public of environmental considera­
tions in proposed actions. At least one of these judicial pronounce­
ments suggests benefits that have been reaped by those impact state­
ments which would also be realized by that which we suggest in S. 782.
In Calvert Cliffs' Coordinating Committee, Inc. v United States
Atomic Energy Commission, 449 F. 2d 1109, 1114 (D.C. Cir. 1971),
the court stated that:
The apparent purpose of the "detailed statement" is to aid in the agencies'
own decisionmaking process and to advise other interested agencies and the public
of the environmental consequences of planned federal action * * *. Moreover,
by compelling a formal "detailed statement" and a description of alternatives,
NEPA provides evidence that the mandated decisionmaking process has in fact
taken place and, most importantly, allows those removed from the initial process
to evaluate and balance the factors on their own.
The third major requirement is set forth in section 2 (d), in which
the bill would require the court to make two determinations with
regard to the legislation—determinations that taken together would
warrant the clear conclusion that the decree is in the public interest.
Alternatives to the specific language of this section have been proposed
by a number of sources and I hope the hearings on the legislation will
explore them carefully. However, the concept that the trial court
judge ought to be independently involved in making the determination
that the proposed decree is in the public interest must be preserved.
The purpose of section 2 (d) is to insure that the court shall exercise its
independent judgment in antitrust consent decrees—and not merely
act as a rubberstamp upon out-of-court settlements.
4
The need for this type of a mechanism has been suggested by sev­
eral commentators. In a recent comment in the Catholic University
Law Review, the point was made as follows:
As a general rule, consent decrees are accepted and signed by the court as
a matter of purely formal routine. If the court, after a brief presentation by
defendant's counsel and the Antitrust division attorneys, is satisfied that the
parties are in agreement, the requested order is entered with only cursory ex­
amination. Ordinarily, no record is made of the proceedings. Findings of facts or
conclusions of law are not made, nor are they required. The Justice Department
need not prepare a written statement of facts upon which the government bases
its case, nor declare what it expects to accomplish through the decree. Similarly,
the court is not required to render a written opinion. This is so notwithstanding
the fact: (1) the final order is treated as a final judgment; (2) the terms of
the consent decree may become the standard for an entire industry; and (3)
traditional competitors of the defendant are denied the right to intervene and
object to the entry of the decree and, therefore, may be adversely affected in
their business operations. (Comment, "Consent Decrees and the Judicial Func­
tion," 20 Cath. U. L. Rev. 312, 316 (1970).)
Thus, "* * * the court is presented with a negotiated 'contract' with
little or no understanding of its background, content, or consequences,
and mechanically performs the rite of stamping the contract with the
approval of the judiciary." Flynn, op. cit. at 990. Further, there is
"* * * a strong danger * * * that continued rubberstamp approval of
consent decrees by the courts will result in the complete abdication of
the contemplated judicial function in favor of an administrative pro­
cedure in which there are no rules to safeguard the interests of the
public." Comment, Cath. U. L. Rev., op. cit. at 326.
Our proposed change in S. 782 would help assure the public and the
antitrust participants that the court will, in fact, serve as another
factor to safeguard the public interest.
The next section, 2 (e), supplements 2 (d). It offers certain proce­
dures which might help the court to make that determination—the de­
termination that the decree is, in fact, in the public interest. S. 782
does not spell out any area of new judicial authority, however, and it is
conceivable that this subcommittee might conclude that section 2 (e)
or some aspects thereof should be revised. I will be interested in the
views of the witnesses on this subject.
The fourth major provision in the consent decree legislation requires
each defendant in the still-pending antitrust suit to file with the court
a description of all communications its representatives have had with
representatives of the Federal Government, other than discussions
between counsel of record and Government representatives. I believe
that this concept is a sound one. By requiring a listing of discussions
between Government representatives and the defendant, corporate
defendants will at least think twice before deciding to request inter­
cession by members of either the executive or legislative branch. Here,
too, the basic theory is simple: public disclosure is the best guarantee
of a sound decision on the merits.
We have, as I believe is clear, attempted to improve and maintain
the current consent decree procedures. We do not wish to weaken or
eliminate them. We believe—we are convinced—that the disclosure
that we seek will benefit the Government, the economy, and the public
at large.
5
INCREASE IN CRIMINAL PENALTIES
An increase in the maximum criminal penalties in the Sherman
Antitrust Act (15 U.S.C. secs. 1 through 3) from $50,000 to $500,000 for cor­
porations and $100,000 for other persons is long overdue. The criminal
sanctions of the Sherman Act are designed to deter illegal conduct
and practices which prevent effective competition. Because of the
small amount of the present fine for criminal violations of that act,
it no longer represents a real deterrent to antitrust violations. Increas­
ing the fine would help to insure that it will not be in the violator's
financial interest to pay the penalty and continue the forbidden
practice.
The maximum penalties prescribed in the bill are but a realistic
reflection of the modern-day marketplace, and, in my opinion, would
impose a penalty to fit the gravity of the offense. As to the murmur­
ing that this increase would be a death knell to small business, two
points must be remembered. First, the penalty is a ceiling and not a
floor. Second, discretion is provided to the Department of Justice in
recommending the amount of the fine, and to the courts in imposing it.
They will consider, as they do now, such factors as the means and
circumstances of the defendant, the practice involved, the duration
of the violation, the degree of culpability, and the effect on the econ­
omy. Therefore, a statutory increase of the maximum fines would not
place an undue hardship upon small business enterprises.
It has been argued that the maximum fine need not be increased
when even now it is seldom imposed. Yet, corporations have grown
dramatically in size and in power, and, for those corporate giants
who must at times be deterred from and punished for illegal conduct,
the current maximum fine is wholly inadequate.
As recently as 1 month ago, Chairman of the Federal Reserve
Board Arthur Burns stated that we need to take the inflation fight
more seriously. He then cited the need for heavier antitrust fines and
penalties as a top priority.
In a letter of September 1969, Attorney General John Mitchell
urged prompt enactment of this important measure. In the hearings
of March 1970, there was near unanimity in the support of the same
penalty increases as provided in the bill before us today.
Only a combination of heavier fines and their effective use will deter
antitrust violators in the future.
REVISIONS TO THE EXPEDITING ACT
Provisions of S. 782 to revise the Expediting Act must be debated
thoroughly. I have supported these provisions because I believe the
debate must be held now.
At present, appeals from district court decisions must be made di­
rectly to the Supreme Court. Many feel that direct appeals provide
inadequate fact review, and they are unnecessary and inappropriate in
the great majority of cases. Civil antitrust appeals also place a great
burden on the Supreme Court. Under section 4 of S. 782, direct appeal
is eliminated in most cases. The intermediate court, the courts of ap­
6
peals, which had been in existence only 12 years when the Expediting
Act was enacted are now fully established as the normal channel of
appeals.
While I see considerable merits to this position, two of its assump­
tions must be examined: (1) Is the Supreme Court, in fact, overbur­
dened to such an extent that such legislation is necessary? (2) Will
the change in forums actually facilitate anti-trust enforcement? I
shall address those questions to the witnesses.
Section 5 (a) of S. 782 would amend the Expediting Act to provide
interlocutory appeal to the appellate courts. It has been held, most re­
cently in the Supreme Court in Tide-Water Oil Co. v. United States,
____ U.S._ ___ (1972), that there can be no interlocutory review
under the Sherman Act of orders in actions brought by the Govern­
ment for relief. Such review is also barred in Government antitrust
cases by section 2 of the Expediting Act. Because orders of a pre­
liminary or interlocutory nature may not be revised until completion
of the case, enforcement efforts are often delayed. The proposed revi­
sion of the Expediting Act in the bill would solve this antitrust en­
forcement problem and remove any confusion and uncertainty of such
a situation.
Finally, I would like to raise one additional point with regard to the
bill as a whole.
I do believe that its contents will vastly improve antitrust enforce­
ment, especially in the consent decree area. But it is true that the
provisions in the bill are most necessary in so-called "important" cases.
Further, of the arguments raised in opposition to the consent decree
provisions of the legislation, that argument which causes one the most
concern is the suggestion that these provisions could burden the Anti­
trust Division and divert resources from other enforcement tasks.
I believe that argument has been exaggerated and that, especially
with a careful markup of this bill, such concerns will be minimized.
Nevertheless, to alleviate some of those concerns, I wonder if it
might be advisable to introduce a trigger in the bill so that its pro­
visions—or at least its consent decree provisions—would be applicable
only in important cases. I do not know how we would define an im­
wpoorutladn tf accaisliet,a tbeu et ffpeecrtihvaep sa pspolmicea tidoenf inoift iothni s cloauwld. I bwe idlle vaisske dth ew hwiicth­
nesses for their views on this matter as well.
I will also be interested in the views of the witnesses on S. 1088,
introduced by Senator Birch Bayh, which also would revise consent
decree procedures.
A Section-by-section analysis of S. 782 and a copy of the statement
I made when Senator Gurney and I introduced this legislation in the
92nd Congress, as S. 4014, are submitted for the record.
I am looking forward to hearing the views of the witnesses on this
legislation, which I believe will improve greatly our Nation's anti­
trust enforcement effort.
Senator Gurney?
Senator GURNEY. It is a pleasure to welcome these distinguished
witnesses to these hearings today on S. 782, the bill introduced by
Senator Tunney and myself, on the Antitrust Procedures and Penal­
ties Act.
7
I am sure their testimony will be of great assistance to the subcom­
mittee as we consider this legislation.
The consent decree is an important and useful tool in the enforce­
ment of our antitrust laws. The Antitrust Procedures and Penalties
Act, by amending the existing antitrust laws to make more informa­
tion available to the courts and to the public about proposed consent
decree settlements of antitrust cases, promises to shape the consent
decree into a more important and more effective device.
This, in turn, should enhance the very free enterprise business sys­
tem which the antitrust laws themselves are designed to protect.
The importance of consent decrees is difficult to understate. The
vast bulk of antitrust judgments entered annually are implemented by
these decrees.
Consider, for example, the following statistics regarding the use of
consent judgments. During the years from 1955 to 1967, 81 percent of
all antitrust judgments were represented by consent decrees.
The annual percentage of antitrust judgments represented by con­
sent decrees during the period 1955 to 1972 are represented by the fol­
lowing table. I won't bother to go through these.
[The document follows:]
Percent Percent
1955 91 1964 88
1956 91 1965 75
1957 88 1966 80
1958 88 1967 53
1959 82 1968 66
1960 100 1969 57
1961 70 1970 84
1962 100 1971 93
1963 82 1972 76
Senator GURNEY. It shows again the numbers of antitrust consent
decrees and these figures certainly indicate the importance of the con­
sent decree in antitrust enforcement.
In none of the 18 years listed did the percentage of consent decrees
constitute less than half the total number of judgments in antitrust
litigation.
In only 2 years, 1963 and 1969, did the percentage even approach the
50 percent mark, and in 2 years, 1960 and 1962, 100 percent of all the
judgments entered were pursuant to the consent decree.
The antitrust laws of the United States are the bulwark of our free
enterprise system. Without effective operation of the laws against trust
and monopoly power, competition is eroded and the quality of our
commerce is correspondingly reduced.
Competition in the marketplace is virtually indispensable to the
production of high quality goods at the lowest possible price. Without
it, the advantages of a free enterprise system are lost, with consequent
loss of efficiency and economy.
Now, the Antitrust Procedures and Penalties Act is designed to en­
hance the value and effectiveness of the consent decree as a tool of
public policy.
Specifically, the bill establishes a specific but reasonable set of
standards and guidelines to govern the settlement of antitrust cases
and, in particular, the procedures by which consent judgments are
entered into.