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As the primary author of the Antitrust Modernization Commission Act of 2002, Representative James Sensenbrenner, R-Wis., the chairman of the House Judiciary Committee, indicated that he believed the time had come for a more searching examination of American antitrust laws. Of particular concern, he said, was whether the laws are continuing to advance their fundamental goals “in a modern economy that bears little resemblance to the economy of a century ago,” when most of today’s antitrust laws were first put in the books. The act established a commission charged with four duties. The commission is to examine the need to modernize current antitrust law and to identify and study related issues. It is also obligated to solicit views of all parties concerned with the operation of the antitrust laws; evaluate the advisability of proposals and current arrangements related to any of the identified issues; and prepare a report to be submitted to Congress and the president no later than April 2007. The commission’s first public meeting was held in July 2004. Following this meeting, the commission established several working groups tasked with concentrating on various, but specific, topics. The initial reports of these working groups were submitted in December, along with recommendations for which issues warranted further study. After considering the working groups’ recommendations, more than 20 issues were selected by the commission for further study. Though all of these issues may merit inquiry and consideration, two are of particular interest: the application of the antitrust laws to regulated industries and how mergers are reviewed. In light of a recent U.S. Supreme Court case, an issue of concern to many is what standard to employ in determining the extent to which the antitrust laws apply to regulated industries where the regulatory structure for those industries does not contain any specific antitrust exemption and/or contains a specific antitrust savings clause. The Supreme Court has previously found that, under some circumstances, when an industry is subject to a detailed regulatory scheme, the regulated entities are shielded from antitrust liability by the doctrine of implied immunity. For instance, in U.S. v. National Association of Securities Dealers Inc., 422 U.S. 694 (1975), the court held that certain restrictions on the transferability of shares in mutual funds authorized by the Investment Company Act were not actionable under the Sherman Act because of the regulatory scheme established by the Investment Company Act. Antitrust savings clauses To avoid the possibility that such regulated entities would be able to elude the reach of the antitrust laws, Congress has sometimes included an antitrust savings clause as part of the regulatory scheme. An antitrust savings clause provides that the antitrust laws apply the same to the regulated industry as to any other. In 2004, the Supreme Court said in Verizon Communications Inc. v. Law Offices of Curtis V. Trinko LLP, 540 U.S. 398 (2004), that, despite an antitrust savings clause, antitrust laws still could not be applied to certain cases brought under the Telecommunications Act of 1996. The act “imposes certain duties upon incumbent local telephone companies in order to facilitate market entry by competitors, and establishes a complex regime for monitoring and enforcement.” Id. at 401. The plaintiff in Trinko, alleging that Verizon had not properly provided access to its network, sought damages and injunctive relief for violation of � 2 of the Sherman Act. As an initial matter, the high court concluded that even though the act provided for “a detailed regulatory scheme,” it did not create implied antitrust immunity because the act contains an antitrust-specific saving clause. The saving clause preserved claims that satisfy established antitrust standards, the court held, but it does not create new claims that go beyond these existing antitrust standards. At issue then, was whether the activity the plaintiff complained about violated pre-existing antitrust standards. The court concluded that Verizon’s alleged insufficient assistance in providing rivals with access to its network is not a claim recognized under the court’s past refusal-to-deal jurisprudence. The court noted that “[a]ntitrust analysis must always be attuned to the particular structure and circumstances of the industry at issue.” In considering a particular industry, “[o]ne factor of particular importance is the existence of a regulatory structure designed to deter and remedy anticompetitive harm. Where such a structure exists, the additional benefit to competition provided by antitrust enforcement will tend to be small, and it will be less plausible that the antitrust laws contemplate such additional scrutiny.” Id. at 411, 412. The court concluded that the Telecommunications Act of 1996 provides “a regulatory structure designed to deter and remedy anticompetitive harm.” When Verizon failed to properly permit access to its network, both federal and state regulatory authorities took action to ensure compliance, including the imposition of substantial fines and reporting requirements. In contrast, the Supreme Court felt that “[a]n antitrust court is unlikely to be an effective day-to-day enforcer of . . . [the] detailed sharing obligations” imposed by the Telecommunications Act. Id. at 412, 415. The Telecommunications Act demonstrates how, in certain circumstances, “regulation significantly diminishes the likelihood of major antitrust harm.” In contrast, when ” ‘[t]here is nothing built into the regulatory scheme which performs the antitrust function,’ the benefits of antitrust are worth its sometimes considerable disadvantages.” Id. at 412. Trinko raises issues regarding which industries, even if not technically exempt from antitrust regulation, might be beyond the scope of traditional antitrust enforcement because of regulation and the extent of regulation necessary to place them beyond such scope. Consequently, in light of the Trinko decision, the Antitrust Modernization Commission will be looking at “the appropriate standard for determining the extent to which the antitrust laws apply to regulated industries where the regulatory structure contains no specific antitrust exemption and/or contains a specific antitrust savings clause.” Merger review The second important issue that the commission has selected to review is whether mergers should continue to be scrutinized at the federal level by two separate agencies. At present, both the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) have a hand in reviewing and approving mergers. In an effort to coordinate their activities, the DOJ and FTC now follow the same Horizontal Merger Guidelines. However, in making its recommendation for further study, the commission’s Mergers, Acquisitions and Joint Ventures Working Group expressed concern that there may be significant and unnecessary regulatory delay in cases in which these two agencies battle for clearance to review the same transaction. There is an additional concern that, with both the DOJ and the FTC involved, different procedures are being applied to merger reviews and enforcement depending on which agency is involved. Three such issues were of particular concern to the members of the working group: that the standards governing judicial review of agency preliminary injunction challenges to mergers are different between each agency; that the FTC has the ability to pursue administrative adjudication even after it has failed to obtain a preliminary injunction; and that the more deferential standard of appellate review applies to FTC administrative decisions. The commission will consider whether merger enforcement at the federal level should continue to be administered by two separate agencies. If the present system is maintained, the commission will still consider the possibility of reforms. For instance, should merger-review responsibility be divided between the two agencies based on industry? Also, if the two agencies both retain some interest in enforcing mergers, should steps be taken to eliminate the differences in treatment arising out of which agency is charged with the review? Unaddressed issues While many are anticipating the commission’s final recommendation, there may be as much interest in some of the issues that the commission elected not to add to its agenda. The commission has decided not to undertake further study of whether the United States should support the creation of an international antitrust regime or body, such as one within the World Trade Organization. The working group that considered this issue recommended against further study of this issue because such a proposal would likely require sovereign nations-including the United States-to cede some ability to influence the direction of antitrust analysis. Regardless of the merits of an international antitrust body, the working group found that the issue would be too amorphous for the commission as a whole to address meaningfully in the time allotted to it. Another issue that received group consideration, but ultimately was not recommended for full study, is whether steps should be taken to attempt to further harmonize the procedural aspects of review of mergers by the United States and non-U.S. competition authorities. Further harmonization might ensure more timely, less burdensome multijurisdictional reviews of international mergers. However, the Mergers, Acquisitions and Joint Ventures Working Group said it did not recommend further study of this issue at this time because of a belief that the U.S. government is already taking steps to pursue appropriate transnational harmonization. However, rather than reject the study of this issue completely, the commission deferred it for additional fact findings. Notwithstanding the rejection of these two international issues, the commission did adopt a recommendation by the International Working Group that it consider whether there are technical or procedural changes that the United States could implement to facilitate further coordination with foreign antitrust enforcement authorities. In particular, the group recommended that the commission consider whether there should be any technical amendments to the International Antitrust Enforcement Assistance Act of 1994 that could enhance coordination between the United States and foreign antitrust enforcement authorities. Additionally, it has asked for an examination of the mechanisms by which the United States funds technical assistance to foreign antitrust agencies. The issues raised in Trinko underscore the need to address the public policy issues raised by the rapid change in the structure of certain industries, particularly technology-based industries such as telecommunications. In the past, industry regulation rarely disrupted the application of established antitrust principles. As Trinko makes clear, even in light of an antitrust savings clause, courts may now find that a regulatory scheme is so encompassing that application of the antitrust laws is not warranted. Consequently, it is an appropriate time to consider whether the courts should be free to apply, on an ad hoc basis, broadly written antitrust laws to changing and unanticipated circumstances in a regulated industry, or whether detailed, industry-specific regulations should supplant the antitrust laws. While the commission’s consideration of issues such as dual enforcement and Trinko is useful and important, it could be viewed as unfortunate that the commission has shown reluctance to explore issues raised by multinational antitrust enforcement. As globalization proceeds apace, this is likely to be an issue of increasing significance. The commission’s reluctance to address it will deprive Congress and the administration of a considered analysis of the issue. Taylor M. Hicks is a partner and commercial litigation attorney at Houston’s Hicks Thomas & Lilienstern. Jay N. Gross is an associate at the firm.

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