On April 2, 2007, the Antitrust Modernization Commission[1] issued its Report and Recommendation to the President and to Congress ("Report").  In its three years of existence, AMC held 17 public hearings and 16 meetings.  First, in its summary to the President and the Congress, AMC states "the report is fundamentally an endorsement of free-market principles.  These principles have driven the success of the U.S. economy and will continue to fuel the investment and innovation that are essential to ensuring our continued welfare."  Second, AMC reports that the state of the US antitrust laws is "sound".  Third, AMC reported that it did not believe that new or different rules are needed to address the so-called "new economy" issues.  Rather, consistent application of the principles in focus of free market principles, in conjunction with current antitrust law and policy, will ensure that the antitrust laws remain relevant in today’s environment as well as the environment of the future.  The AMC also noted that differentiated rules for different industries would be unnecessary and unwise.  This is particularly the case  as to antitrust immunities, exemptions, or special industry-specific standards.

[1] The Antitrust Modernization Commission ("AMC") was created by the Antitrust Modernization Commission Act of 2002, Public Law No. 107-273 Section 11054(h), 116 Stat. 1856, 1857 (2002).

Having stated the above, the introduction to the Report then summarized a series of "significant changes" recommended by the Commission.  These may be summarized as follows;

Mergers and Monopoly.  The Commission did not recommend legislative change to either the Sherman Act or Section 7 of the Clayton Act.  Its general consensus was that while there may be disagreement about specific enforcement decisions, the basic legal standards governing the conduct of firms in the merger and monopoly area are "sound".  It nevertheless made several recommendations in the area of merger enforcement.  The purpose of these recommendations is to ensure that policy is appropriately sensitive to the needs of companies to innovate and compete while continuing to protect the interest of consumers.  In particular, AMC urges that "substantial weight" be given to evidence demonstrating that a merger will achieve efficiencies, including innovation-related efficiencies.  It also recommends that the federal enforcement agencies continue to examine the basis for, and efficacy of, merger enforcement policy, including further study of the economic foundations for merger policy, including the relationship between market performance and concentration.

As to monopoly conduct, AMC noted that there is a need for greater clarity and improvement to enforcement standards relating to the offering of bundled discounts or rebates, and unilateral refusals to deal with rivals in the same market.  It believes that "clarity" will be best achieved in the courts, rather than through legislation.  It recommended a specific standard for the courts to apply in determining whether bundled discounts or rebates would violate current antitrust law.

Robinson-Patman Act Repeal.

The Commission recommends that Congress repeal the Robinson-Patman Act (RPA).  Enacted in 1936 as an amendment to the Clayton Act, RPA is "antithetical" to core antitrust principles.  It notes that its repeal, or substantial overhaul, has been recommended in three prior reports, including 1955, 1969 and 1977.  This is because RPA protects competitors against competition and punishes the very price discounting and innovation and distribution methods that the antitrust otherwise encourage.  It also noted that it is not clear that RPA actually protects the small business constituents that it was enacted to benefit.  It concluded that small businesses are adequately protected from "truly anticompetitive behavior" by the Sherman Act.[1]

Patents and Antitrust.

AMC noted that patent protection and the antitrust laws are generally complimentary, with both being designed to promote innovation that benefits consumer welfare.  It urged Congress to give serious consideration to recommendations by the Federal Trade Commission and National Academy of Sciences designed to improve the quality of the patent process, and patents.  It also recommended joint negotiation of license terms with standard-setting bodies to be treated under a rule of reason standard.

Enforcement Process Improvement Recommendations.

(a)        Inefficiencies Resulting From Dual Federal Enforcement.  AMC does not believe that it would be feasible or wise to eliminate the dual antitrust enforcement role of the Department of Justice Antitrust Division, and the Federal Trade Commission.  However, it recommended a number of steps to eliminate "inconsistencies" that may result from dual enforcement.  These included (1) merger clearance procedures, (2) Hart Scott Redino Act ("HSR") premerger review process improvements, (3) improved coordination between state and federal antitrust law enforcement, and the "delinking" of agency funding and HSR Act filing fees.

(b)        Private Litigation Recommendations.  The Report noted that while defendants in private antitrust litigation matters are jointly and severally liable for alleged conspiracies, there is no right to contribution.  There is also only a limited right of claim reduction, when one or more defendants settle.  The combined effect may be substantially greater than the treble damages provided for under Section 4 of the Clayton Act.  The Report recognized that while the rules can maximize deterrents and encourage the resolution of claims through quick settlements, they can also over-deter conduct that may not be anticompetitive.  The Commission recommends that Congress enact legislation that would permit non-settling defendants to obtain a more equitable reduction of the judgment against them, and allow for contribution.  The Commission provided a suggested statute in its Annex A, originally proposed as a substitute/alternative to S.995, originally proposed by Assistant Attorney General William F. Baxter, in 1981.

(c)        Indirect and Direct Purchaser Litigation.  After a thorough discussion of the different rules at the federal and state level as to whether both direct and indirect purchasers of price-fixed goods may sue to recover damages, the Ccommission recommended the over-ruling of Illinois Brick, which had precluded suits by indirect purchasers, as well as Hanover Shoe, which prevented defendants from arguing that an antitrust overcharge had been passed on to a subsequent purchaser in the chain of distribution.

Recommendations Re Criminal Penalties.  Noting the strong worldwide consensus favoring vigorous enforcement against cartels, the Commission recommended that the U.S. Sentencing Commission evaluate whether it remains reasonable to assume an overcharge of ten percent, or a higher or lower percentage, in lieu of the ability to prove actual damages.  It also recommended amending the Sentencing Guidelines to make it clear that the current twenty percent proxy test may be rebutted by proof of by a preponderance of the evidence that the actual amount of overcharge was higher or lower.

Recommendations Relating to International Antitrust Enforcement.  Noting that today more than one hundred countries have adopted competition laws, and further recognizing that this development has assisted the United States in its fight against international cartel activity, the proliferation of competition authorities has increased the risk of burden, inconsistency, and even conflict among sovereign states.  In particular, there is concern about the potential effect on U.S. based companies on differences in the way that other countries treat so-called "dominant firm behavior".

Accordingly, the Commission recommended a number of steps, including, as a first priority, enforcement agency study and report to Congress on the possibility of developing a centralized international pre-merger notification system.  Second, the enforcement agency should seek procedural and substantive convergence throughout the world.  Third, the United States should pursue bilateral and multilateral cooperation agreements with the aid of its trading partners.  Finally, the Commission recommends that purchases made outside the United States from sellers outside of the United States should not give rise to a cause of action in United States courts.

Recommendations Relating to Immunities and Exemptions.

While recognizing that free-market competition is the foundation of the United States economy, and that the antitrust laws are an integral part of preserving such competition, the Commission identified thirty separate statutory immunities from the antitrust laws.  It stated that it is skeptical about the value of these immunities, and that many were vestiges of earlier antitrust enforcement policies that were deemed to be insufficiently sensitive to the benefits of certain types of conduct.  Others are fairly characterized, the Report stated, as special interest legislation, that sacrifices general consumer welfare.

The Report states that the Commission believes that statutory immunity from the antitrust laws should be disfavored.  It recommends a framework for a review of statutory immunity and recommends further that Congress consult with the enforcement agencies about likely competitive effects of existing and proposed immunities.  It recommends that immunities should be limited in scope, and contain "sunset" provisions that will provide for termination of the granted immunity at the end of the specified period, absent renewal.  Finally it recommends that the enforcement agencies report to Congress on the effects of the immunity before any vote on renewal is taken.

In discussing the judicial state action doctrine, immunizing private action undertaken pursuant to a clearly articulated state policy deliberately intended to displace competition, the Commission noted a recent report by the Federal Trade Commission staff raising concerns that courts have been applying the doctrine without sufficient care to ensure that private anticompetitive conduct has actually been authorized by a state pursuant to a clearly articulated policy to displace competition, as well as that it be "actively supervised".  Finally, it recommends that a state action doctrine should not apply where the effects of conduct are not predominantly intrastate.  In addition, the doctrine should equally apply to governmental entities when they are acting as participants in the market place.

Recommendations Relating to Regulated Industries.

The Report noted that technological advancement and changing economic perspectives have led to substantial deregulation in industries once thought to be either natural monopolies, or at risk of "excessive competition", or both.  The Report recognizes that antitrust enforcement is an important counterpart to deregulation.  Where government regulation still exists, the antitrust law should continue to apply to the maximum extent consistent with the regulatory regime.  Statutes should clearly state whether and to what extent, Congress intended to displace the antitrust laws with regulation.  The Commission specifically noted that the filed-rate doctrine, which prohibits private treble damage actions where industry rates are approved by a regulatory regime, is out of sync.  It notes that today, few filed rates are actually reviewed by regulators as to their competition implications.  While this has been recognized by the United States Supreme Court, the Court has continued to conclude that it was for Congress to make such determination.  The Commission recommends that Congress should re-evaluate the filed-rate doctrine and consider overruling it where the regulator no longer specifically reviews and approves proposed rates agreed to among industry members.

Finally, the Commission recommends that the antitrust enforcement agencies, pursuant to the HSR Act, share merger review authority with a regulatory agency that reviews the merger under a "public interest" standard.

With the Report now on file with the President and with the Congress, let’s see if a second shoe now drops.

[1] At the recent Chair’s Showcase program, at the Annual Spring Meeting of the American Bar Association, Section of Antitrust Law, on April 19, 2007, Professor Steve Calkins expressed the concern that a repeal of the RPA might encourage state "repealer legislation", that could result in new legislation anethetical to core antitrust principles, and encourage the enforcement of a variety of existing "unfair practices act" approaches to "small trader" protection.