ANTITRUST DIVISION UNITED STATES DEPARTMENT OF JUSTICE ANNUAL REPORT FY 1999 Contents Foreword 1 The Criminal Enforcement Program 5 The Merger Enforcement Program 9 The Civil Non-Merger Enforcement Program 13 The Telecommunications Competition Program 17 Contents International Antitrust Policies and Procedures 21 Appendix A: Selected Criminal Cases 25 iii Appendix B: Merger Challenges 41 Appendix C: Civil Non-Merger Cases 87 Appendix D: Antitrust Division Organization Directory 99 Antitrust Division Annual Report Foreword March 20, 2000 By Assistant Attorney General Joel I. Klein am pleased to present this Report This is the kind of antitrust enforcement I summarizing the recent major activi- policy to which this Administration is ties of the Antitrust Division of the committed. It is both principled and Department of Justice. As the Report pragmatic. There is no presumption that documents, this has been an active “big” is “bad,” but neither is there an period for the Antitrust Division across assumption that the market will always the full-range of its enforcement respon- “correct” anticompetitive problems. sibilities: criminal prosecutions, merger Instead, the Antitrust Division pays careful attention to facts, informed by review, and civil non-merger activities. economic analysis, in making its Our accomplishments range from enforcement decisions. Foreword prosecutions of international cartels that have resulted in greater fines than ever before to successful challenges to “magna carta” of the free enterprise multibillion dollar mergers, not to system. The antitrust laws are thus used mention challenges to exclusionary to deter and punish anticompetitive behavior in technologically critical conduct and to obtain prospective relief 1 industries. to prevent such conduct in the future. Antitrust plays an important role in At the same time, caution must be our economy. Competition is the corner- taken to assure that the antitrust laws stone of this country’s economic founda- are not misused to protect competitors tion. We have long extolled the virtues from the vigor of the competitive of the free market, which provides process. In a free market system, innova- business with the opportunity to inno- tion and creativity should be rewarded, vate, produce, and distribute goods and not penalized. There will inevitably be services without direct intervention by winners and losers in this battle, but the government. Competition, rather while the antitrust laws are intended to than government directives, determines prevent conduct that impairs the com- which businesses will succeed, and petitive process, the antitrust agencies consumers are the ultimate—and appro- are not in the business of picking who priate—beneficiaries of the competitive should win and who should lose. That process. responsibility falls to consumers, who make that determination through their The antitrust laws ensure that the purchasing decisions. benefits of the competitive process are not interdicted by private anticompeti- This is the kind of antitrust enforce- tive conduct. The Supreme Court has ment policy to which this Administra- described the Sherman Act as the tion is committed. It is both principled Antitrust Division Annual Report The increasing globalization of economic behavior presents important challenges to antitrust regimes that have traditionally been administered by individual sovereign nations. Globalization of Trade International trade is of increasing importance to the economic well-being of United States producers and consum- ers. U.S. firms frequently export to foreign countries, and American con- sumers purchase goods manufactured abroad. Nearly 25 percent of our GDP is now related to export and import trade. The increasing globalization of economic behavior presents important challenges to antitrust regimes that have traditionally been administered by individual sovereign nations. The Anti- trust Division has taken account of the globalization of trade in important ways. First, the Antitrust Division is Foreword and pragmatic. There is no presumption devoting more of its resources to uncov- 2 that “big” is “bad,” but neither is there ering international cartel behavior that an assumption that the market will has significant economic consequences always “correct” anticompetitive prob- for American consumers. Perhaps the lems. Instead, the Antitrust Division most widely publicized example during pays careful attention to facts, informed the past year was the successful prosecu- by economic analysis, in making its tion of companies and individuals enforcement decisions. involved in vitamin production, which culminated in fines of over $875 million Despite the diversity of our enforce- for companies and in significant jail ment targets—ranging from hard-core time for individuals. More of our crimi- criminal violations to exclusionary nal investigations involve foreign com- practices by dominant producers and panies than ever before. To detect and service providers—we have observed prosecute international cartels, the certain important trends that cut cross Antitrust Division has developed pro- the full range of competitive activity: grams that encourage cooperation by globalization of trade, rapid technologi- foreign companies and their employees, cal change, and deregulation. Each of including various forms of cooperation these trends has important implications agreements with other governments. for the future of antitrust enforcement. Antitrust Division Annual Report Another important focus of the Department’s antitrust enforcement efforts over the past few years has been our continuing effort to eliminate both private and public restrictions on competition in industries traditionally regulated as franchise monopolies. So, too, the Antitrust Division has recognized the international dimension of merger activity. An increasing number of transactions have competitive implica- tions in more than one country, and today it is not uncommon for a transac- tion to be subject to multicountry review. The Antitrust Division has endeavored to develop good working relationships with other countries and the European Union. We are working closely with governments around the world to cooperate in merger review, both to minimize burdens on private parties and to advance the cause of Foreword proper antitrust analysis. To advance this process, the Attorney General estab- lished the International Competition Policy Advisory Committee, which work externalities and first-mover recently issued its report reviewing advantages, which pose risks that mar- kets will “tip” very quickly toward a international antitrust issues and making 3 recommendations for consideration. dominant supplier and thereby make entry extremely difficult. The more important that innovation becomes to Technological Change society, the more important it is to A number of our most important preserve economic incentives to inno- industries have been characterized vate. In such circumstances, timely and recently by unprecedented levels of effective antitrust enforcement may be technological change. Such change has the key to preserving an environment in important implications for antitrust which companies—whether new or old, enforcement. On the one hand, such large or small—believe that there will be change creates opportunities for compa- no artificial barriers to bringing new nies to develop new products and products and services to market. services and find rapid customer accep- tance. It has been argued that the pros- It is undoubtedly true that rapid pect for such change reduces the need technological change requires careful for antitrust enforcement because a attention to facts. Our challenges to the company that dominates an industry Lockheed Martin-Northrop Grumman today may be replaced tomorrow by a transaction and Microsoft’s monopoly of company that suddenly offers a superior computer operating systems are not product or service. However, rapid garden-variety antitrust actions. They technological change may actually and other challenges filed by the Anti- increase barriers to entry through net- trust Division were undertaken only Antitrust Division Annual Report The past decade has witnessed remarkable progress in moving these industries from a regime based largely on regulated monopoly to one that encourages competition wherever possible, a trend portending an increasingly important role for antitrust. after careful consideration of both The United States has again become historical conduct and likely future the dominant economy of the world. effects. The fact that antitrust analysis of The fact that this reemergence has issues arising in high-technology indus- coincided with a substitution of compe- tries may be difficult is no basis for tition for regulation and a reinvigorated abandoning the effort altogether. En- antitrust enforcement policy is not a forcement decisions that are made today, coincidence. Michael Porter noted in his especially in industries characterized by landmark work The Competitive Advan- rapid technological change, will have tage of Nations (at pp. 662-63) that important ramifications for the nature of domestic firms spared from competing the American economy for many years at home are unlikely to succeed abroad. to come. He also found that the importance of domestic rivalry has “strong implications Deregulation for antitrust policy…. A strong antitrust policy, especially in the area of horizon- In recent decades, legislative and tal mergers, alliances,