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Corporations that expect Federal Trade Commission competition bureau director Joseph J. Simons to be a pushover could be in for a rude shock. Though likely to be less aggressive than his Clinton administration predecessors, Simons said in a recent interview that he is not afraid to challenge anticompetitive mergers in court. “We have an interest in making sure that transactions of any size that are harmful to consumers are blocked,” Simons said in his corner office on the third floor of the agency’s Pennsylvania Avenue building. Simons, 43, appears a perfect candidate to take on powerful foes. While a law student at Georgetown University, he played basketball Saturday mornings against two of his antitrust law professors — Robert Pitofsky and Steve Salop. “He was probably the best player in the game,” said Pitofsky who, besides his Georgetown roots served until June as FTC chairman. “The professors were the ones afraid of him.” Simons’ boss, FTC Chairman Timothy J. Muris, said Simons, whom he has known for 12 years, will excel in the post. “He is a very knowledgeable practitioner and a practitioner with a sense of policy,” Muris said. Simons said he is still trying to get a handle on the job, which he assumed less than a month ago. His office walls are largely devoid of personal mementos, though he said he expects to get around to hanging up some pictures. Still, he outlined an enforcement philosophy that differs only marginally from the agenda espoused by his predecessors, including Molly Boast and Richard Parker. “You should not expect a lot of change,” he said. “The prior administration left this agency in good shape.” LITTLE CHANGE That is a view of the new FTC shared by many in the antitrust bar. “Those who think he is coming in to cut back on antitrust enforcement may be disappointed,” said William Baer, who spent four years as competition bureau director under Pitofsky before joining Arnold & Porter. Phil Proger, a partner at Jones, Day, Reavis & Pogue in Washington, D.C., cautioned against reading much into past opposition to FTC enforcement efforts by Simons or his boss, FTC Chairman Timothy Muris. “It would be a mistake to assume that because they are in a Republican administration and well versed in fundamentals of economics and have been critical of some Pitofsky enforcement efforts that they will be ushering in a new era of laissez faire antitrust enforcement,” Proger said. “They both believe in the antitrust laws and will be quite vigorous in bringing cases.” That does not mean no changes will occur. The Pitofsky regime stirred up significant controversy with its view on divestiture agreements. The agency began demanding the sale of entire operating units rather than scattered assets. It also wanted to know who the buyer would be before approving the transaction. Simons said he views divestitures as very fact-specific. He said he does not anticipate requiring an up-front buyer in every case. “If you are talking about a stand-alone business, then there is no need for an up front buyer,” he said. VALUE OF EFFICIENCIES Behavioral remedies work best in vertical mergers, Simons said. For instance, in a defense industry deal, firewalls around certain critical units may be the best way to ensure competition remains after the deal is completed. Simons said he plans to build upon the 1999 divestiture study, which found that some FTC consent decrees failed to restore lost competition. He wants to examine whether other remedies imposed by the FTC worked and look at what happened in cases where the agency allowed a deal to proceed unchallenged. “It is helpful to go back and see the results of what you did,” he said. The new FTC is expected to be much more receptive to arguments regarding efficiencies, which is the notion that some deals result in such large cost savings that they should be approved even if they result in less competition. This is a theory espoused by Muris. “Simons certainly believes in the value of efficiencies,” said Steve Newborn, his former partner at Clifford Chance Rogers & Wells. “He is very close to Tim on that.” TRANS-ATLANTIC COOPERATION While the president, some U.S. lawmakers and even the Justice Department’s top antitrust enforcer, Charles James, have criticized the European Commission’s decision to block General Electric Co.’s acquisition of Honeywell International Inc., Simons said he expects trans-Atlantic cooperation among antitrust authorities to continue. “Cooperation is extensive and it occurs daily,” he said. “It benefits both sides.” Differences in interpreting economic and legal theories are inevitable among competition authorities, he said. “In the ideal world we would do everything the same,” he said. “But we are both sovereigns.” Simons questioned whether even small steps toward international harmonization of antitrust regimes, such as a single pre-merger notification form, could occur in the near-term. “Each country has a different approach so that creates issues as to how practical this really is,” he said. While cross-border mergers are grabbing headlines, Simons said mergers involving companies with less than $50 million in assets will not escape FTC review, even though changes to the Hart-Scott-Rodino Act that took effect in February exempt these smaller transactions from the per-merger notification requirement. GETTING COMPLAINTS Simons said the agency will continue to scrutinize the trade and business press to uncover smaller deals. They also are receptive to getting complaints from competitors, he said. “They won’t hesitate to call,” he predicted. That also holds for larger deals, he said. Credible complaints will include evidence that the deal would cause prices to rise, which would demonstrate that the merged company would wield undue market power, he said. Companies that argue they will be unable to compete with the newly merged firm are unlikely to make much headway with the agency, he said. That’s because competitor complaints often indicate the merged firm will be more efficient, which means consumers will get lower prices. The FTC also wants to hear from customers, Simons said, because they are the most sensitive to price changes. “Generally the most constructive information we will get will be from the consumers,” he said. Consumers — from large corporations to individuals — frequently write letters to the agency to complain about mergers, and those are sometimes followed by interviews. RETURN ENGAGEMENT This is Simons’ second tour at the agency. He served from 1987 to 1989 working as associate director of mergers, assistant director for evaluation, and assistant to the bureau director. “That was the most stimulating time in my professional career,” Simons said. “You get to see more interesting issues and more matters than in almost any other job.” One of the deals he worked on was Kohlberg, Kravis & Roberts’ $25 billion purchase in 1988 of RJR Nabisco, at the time the largest takeover in Wall Street history. His economic expertise comes courtesy of Cornell University, where he received his undergraduate degree in economics and history in 1980. He authored or co-wrote papers on market definitions, horizontal mergers, merger guidelines, price-cost margins in antitrust analysis and price fixing. Newborn, his former law partner, said Simons’ strength is his ability to translate economic theory into practice. “He is very much a believer in the marriage of law and economics,” Newborn said. “He is very fair and open-minded.” FAIR-MINDED It is Simons’ economics background that has caused some lawyers to believe he will be less willing to recommend that the FTC authorize a challenge than his predecessors were. The feeling holds particularly strongly for vertical mergers. This is because some economic literature finds that acquisitions of suppliers or customers typically do not harm competition. “I am told he is fair-minded and will be about the same on horizontal, but not as concerned about vertical mergers,” said one antitrust lawyer who appears frequently before the FTC. Before being selected by Muris, Simons was a partner at the D.C. office of Clifford Chance Rogers & Wells. He worked on a joint venture by DaimlerChrysler that resulted in creation of EADS NV. He also did a deal for DaimlerChrysler with Caterpillar for a joint engine production facility. And he handled transactions for Northrop Grumman Corp. and Lockheed Martin Corp. Simons may be best known for his participation in the 1998 Mylan Laboratories Inc. case. He opposed the FTC’s ultimately successful effort to seek disgorgement of profits earned from anticompetitive behavior. ENFORCEMENT ARSENAL Use of disgorgement in antitrust cases is controversial within the agencies and among academics. Simons said he has no personal view on whether disgorgement should be a tool in the agency enforcement arsenal, saying that positions taken as an advocate for his client should not be used to predict how he will do his job now. He also said all the same members of the FTC who supported the Mylan case — except for Pitofsky — are still on board. Simons has significant experience with the divestiture process. He has served for the last two years as trustee for wireless telephone businesses that had to be divested as part of the GTE Corp.-Bell Atlantic Corp.-Vodafone AirTouch merger. “It was like being the CEO,” said Simons, who retained the existing management as he sold off the properties. He still has the license for Air Touch’s properties in the San Diego market left to sell, a task he will continue while at the FTC. The position gave him an insight into the FTC’s compliance department which, like a trustee, is responsible for ensuring that divestiture orders work, he said. Simons said the trustee process works well for some consent decrees where separate business units are being sold. “It is better than having a ‘hold-separate’ order with the company still responsible for running the properties,” he said. “There is more autonomy and less connection to the seller, who is ultimately going to compete against the sold properties.” Another tool the FTC has used is monitoring trustees, responsible for ensuring the consent decree is properly complied with. Those will remain within the agency’s tool box, he said. “That is something I have no intention of changing.” TIME WILL TELL In the Internet realm, he represented Travelocity.com’s 1999 acquisition of Preview Travel. He also worked on more traditional deals, including American Radio Systems Corp. acquisition of local stations in the 1990s, QVC Network’s attempted acquisition in 1993 of Paramount Studios, and Genentech Inc.’s 1999 sale of 60 percent of its stock to Roche Holding. Outside of the merger front, he helped defend MasterCard International last year on charges that it violated the antitrust laws by preventing member banks from offering American Express Co. cards and represented a Microsoft Corp. competitor before the Department of Justice and Congress. Pitofsky, Simons’ former basketball foe, urged the antitrust bar to withhold judgment on the competition bureau chief’s antitrust stance. “It is too soon to tell,” Pitofsky said. “We have to wait and see.” Copyright (c)2001 TDD, LLC. All rights reserved.

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