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It has been quite a ride for Robert Pitofsky, the 71-year-old chairman of the Federal Trade Commission, who stepped down early this month after six years at the agency’s helm. Against the backdrop of a massive wave of mergers and the rise of the Internet, Pitofsky left his mark on the FTC in a way that few chairmen in recent memory can match. When he turns over the reigns to Bush nominee Timothy Muris, a professor at George Mason University School of Law, Pitofsky will go back to his old life: teaching antitrust and constitutional law at the Georgetown University Law Center, and working part time at Arnold & Porter in Washington, D.C., as of counsel. But he leaves behind a legacy of sometimes risky but almost always successful antitrust enforcement, combined with a major expansion of the agency’s consumer protection jurisdiction into cyberspace. In an hour-long interview in his airy corner office overlooking the domed roof of the National Gallery of Art, Pitofsky held forth on the highlights of his time at the FTC. “I loved it. I’ll miss everything about it,” he said earnestly. “It was better than I bargained for because it was such an interesting time, both on the consumer side and the antitrust side.” On his watch, the 1,075-person agency was at its busiest ever, approving some 26,000 mergers and, more notably, going to court to block a handful of others. Criticized under previous administrations for shying away from the courtroom and making law administratively, the agency last year set an internal record by litigating two merger cases simultaneously: one against chewing tobacco makers Swedish Match North America Inc. and National Tobacco Co., and another against baby-food makers H.J. Heinz Co. and Milnot Holding Co. FTC lawyers also won two important antitrust enforcement cases, against Toys R Us Inc. and Mylan Laboratories Inc., and suffered a rare defeat when the U.S. Supreme Court ruled 5-4 against the agency in the California Dental Association case. MOTIVATING FORCE Lawyers both inside the agency and out see the scholarly chairman (dubbed by one a “walking Westlaw of antitrust cases”) as the motivating force behind the agency’s heightened aggression. “He forced the staff to litigate cases they didn’t want to litigate: Staples, baby food, BP Amoco-Arco,” said David Balto, partner in the Washington, D.C., office of White & Case, who recently stepped down as policy director of the Bureau of Competition. “Because he had a clear vision of what the law was, we were able to succeed in ways we never thought we could.” Adds O’Melveny & Myers partner Richard Parker, who headed the Bureau of Competition from 2000 to 2001: “He’d spend hours considering and weighing the facts and evidence. … When he came up with something, he sweated the details.” By contrast, Pitofsky’s predecessor, Janet Steiger, though well-regarded, was not a lawyer, much less an antitrust expert. Pitofsky himself is not eager to wear the mantle of activist. “There were some cases the staff wanted to bring that the commissioners wouldn’t support,” he pointed out. “I don’t think you could identify an overall trend that there was a more activist commission than staff.” Sworn in as chairman in April 1995, Pitofsky said hiring Arnold & Porter colleague William Baer was one of the most important moves of his entire career. Baer, who headed the Bureau of Competition from 1995 to 2000, said Pitofsky “led constructively. He inspired people to do their best.” The chairman also won widespread praise from the bar for holding a series of hearings and workshops, beginning with a four-month-long inquiry into global competition and high-tech innovation. That hearing, he said, “was really a direction finder, a compass, which influenced everything we did for the next six years.” To Pitofsky, the biggest change in consumer protection and antitrust during his time was that the agency became “tougher in the area of remedies — not what the law is, but what the remedy ought to be.” He continues, “That’s particularly obvious on the consumer side. We quite often now don’t stop with cease-and-desist. We ask for restitution, redress, consumer education, affirmative disclosures.” Overseen since 1995 by Director Jodie Bernstein, whom Pitofsky calls “a gift from heaven,” the agency’s consumer protection side has taken on new life during Pitofsky’s tenure. “In many ways, it’s the most unmitigated success we’ve had here,” he said. INTERNET BROUGHT CHANGE The biggest change in the consumer protection landscape, of course, was the rise of the Internet. “We had been doing virtually nothing about electronic commerce when I got here six years ago,” he said. “Now, we spend well in excess of a quarter of our budget on [combating] fraud on the Internet, privacy issues, profiling, leaving cookies on your Web site, and so forth.” To Pitofsky, the agency’s move into cyberspace is a logical outgrowth of its bricks-and-mortar mandate. “We do have a statute that says, ‘Challenge unfair and deceptive acts and practices in commerce,’ so it’s natural that when the deceptive practices migrate to electronic commerce, we migrate to electronic commerce,” he said. Privacy issues, though, are not so clear-cut. “When I arrived, the majority of the commission was rather unenthusiastic about our playing a role on privacy because it doesn’t squarely fall within our statute,” Pitofsky admits. “[Commissioner] Christine Varney took the lead on that and brought the rest of the commission around.” In recent years, Pitofsky has urged Congress to pass legislation giving the agency explicit authority to oversee Internet privacy, but Bush nominee Muris does not appear as eager to expand the agency’s role. According to wire reports, at his May 16 confirmation hearing, Muris told Sen. John McCain, R-Ariz., “The specific issue of legislation is a new one to me. It is very complex and at this point, I have no specific recommendation.” When Sen. Ernest “Fritz” Hollings, D-S.C., pressed him, Muris added, “I am not ready to say what type of legislation, if any, is appropriate.” PAYING THE PRICE On the antitrust side, the agency’s newfound enthusiasm for tougher remedies was most apparent in the case against Mylan Laboratories, which Pitofsky singles out as the precedent he most hopes will endure. The Mylan case was the first time in agency history that a court approved an actual monetary penalty for an antitrust violation. The FTC charged Pittsburgh-based Mylan with monopolizing the market for two popular anti-anxiety medications, causing prices to skyrocket as much as 3,200 percent. The standard recourse for antitrust violations had been injunctive relief. But in this case, Mylan allegedly made $120 million by jacking up prices. “For us just to say, ‘Stop doing that,’ seemed to me a complete failure in enforcement,” Pitofsky said. “Without restitution, there are situations in which antitrust borders on being irrelevant.” Over the bitter objections of amicus curiae U.S. Chamber of Commerce, Judge Thomas Hogan of the U.S. District Court for the District of Columbia affirmed the FTC’s authority to go after the money. Moreover, the case involved a rule of reason violation, meaning that unlike price fixing, for example, the conduct at issue was not necessarily illegal. Judge Hogan formally approved the $100 million settlement in April 2001. Muris, who served as director of the Consumer Protection and Competition bureaus during the Reagan Administration, has spoken in support of the Mylan case at antitrust conferences. Muris declines to comment. In May, the Senate Commerce Committee approved his nomination 17-0, but the full Senate has yet to act on it. OFFICE SUPERSTORES The FTC had another significant win before Judge Hogan when the agency challenged the merger between Staples Inc. and Office Depot Inc. in 1997. Although many in the antitrust bar had been skeptical that the FTC could prove office supply superstores were a separate market, FTC lawyers carried the day, thanks in large part to painstaking economic research. “Usually, it’s the defendant who comes in with vast econometric evidence, data and economics,” said Pitofsky. “We were the ones who took the lead on econometrics in that case, to prove a very simple point, but it took an enormous amount of data to do it. In cities where there was one [office] supply superstore, prices were 13 percent higher than where there were two or three. It’s easy to say but hard to prove. The staff did a fabulous job.” The FTC’s victory sent a signal to the investment banking and mergers and acquisitions community that after 12 years of Republican presidents, antitrust was back. For example, Bruce Wasserstein in his book “Big Deal” calls the case “a particularly dramatic showstopper, a sign of the [government's] new assertive posture and of the courts’ willingness to block a deal.” (Wasserstein is chairman of American Lawyer Media, the parent company of Legal Times, an affiliate of law.com.) OTHER MAJOR CASES Other major merger cases followed, including Exxon-Mobil, in which the FTC required the largest retail divestiture in history, and BP Amoco-Arco, which settled only after the FTC filed suit to block the transaction. “BP-Arco was a classic example where we wanted to know who was going to buy Arco’s Alaska assets, and whether they were capable of being an effective competitor,” said Pitofsky. Overall, the agency fared well against the Department of Justice in getting its fair share of sexy deals, in part because there were so many to go around, and in part because Pitofsky and DOJ antitrust chief Joel Klein are friendly. (The pair are known for teaming up on the tennis court in doubles matches.) In FY 2000 alone, the FTC had two gigantic mergers, the $182 billion combination of Glaxo Wellcome and SmithKline and the $100 billion-plus union of America Online Inc. and Time Warner Inc. The protracted battle for approval of the AOL deal, where there was little horizontal overlap, led some antitrust lawyers to question whether the chairman holds deals with First Amendment implications to a higher standard. “It’s not a different standard. We have no right to do that,” Pitofsky responds. “But in con[stitutional] law, there’s that concept of heightened scrutiny for certain kinds of free speech. I think of antitrust, when it applies to an area that has First Amendment implications, as properly applying heightened scrutiny, and we did it in Time Warner-Turner [Broadcasting] and AOL-Time Warner.” BABY FOOD MAKERS The FTC’s merger activity culminated in the 2000 court challenge to the union of baby-food makers H.J. Heinz and Milnot Holding Co. Although the merger would have reduced a three-competitor industry with high barriers to entry to just two players, the companies argued the efficiencies created by their union would offset the competitive harm. Persuaded, many FTC staff members opposed bringing the case, and had Muris been in charge, it seems unlikely it would have been filed. Indeed, Muris was actually a member of Heinz’s legal team. In a 1999 Legal Times article, he criticized the FTC’s “continuing hostility” to the efficiency defense, asserting that “evidence of significant efficiencies should trump the weak anticompetitive presumption derived from market concentration data.” In what would have been a landmark decision, U.S. District Judge James Robertson ruled last October that the merger could proceed. “I respect Judge Robertson, and I was certainly troubled by his opinion,” said Pitofsky. “But the decision to appeal was never in doubt.” Last month, the D.C. Circuit reversed Judge Robertson, handing Pitofsky a major victory, almost like a parting gift. “The careful way that the court took apart the efficiency claims doesn’t make new law but sets some standards for what parties are going to have to prove in the future,” Pitofsky said. “You can’t just make a claim. You’re going to have to have substantiation, calculation, documentation.” He added, “Our role is mostly to play defense and preserve the status quo.” Whether Muris will do the same remains to be seen. Pitofsky’s only comment on his successor? “Tim will do fine.”

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