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Signaling what would be a major turnaround in federal antitrust policy, Federal Trade Commission member Thomas B. Leary said Wednesday he expects the agency to reverse its aggressive policy on divestitures. “I’d like to see more flexibility on remedies, and I think it will happen,” he told an antitrust forum. Leary predicted the agency will be more accepting of divestiture agreements that involve a mix of company facilities rather than distinct operating units. He also said the FTC will likely require fewer companies to identify buyers for divested assets prior to signing the decree with the government. Both elements would overturn changes implemented in 1999 by FTC Chairman Robert Pitofsky, a Democrat whose term expires this fall. Pitofsky said in several speeches that a 1999 study of divestiture agreements showed that many such arrangements failed to restore competition. Requiring the sale of distinct operating units and finding upfront buyers were two ways identified to improve the chance that a buyer of divested assets would be a strong competitor. Leary, however, said the agency is reading too much into the report. “Maybe our staff has sometimes overreacted to the study on divestiture,” he said at the forum sponsored by the Directors Roundtable, Hogan & Hartson LLP and Charles River Associates. The study actually found that merger agreements were effective in boosting competition, said Leary, one of two Republicans on the five-member commission. Leary’s comments came at a panel on the Bush administration’s approach to antitrust. It was held just a week after the president said he intends to nominate Jones, Day, Reavis & Pogue partner Charles James as assistant attorney general for antitrust. Sources also have said that George Mason University law school professor Timothy Muris — a senior Bush adviser — will be nominated as FTC chairman once Pitofsky resigns or his term expires. Both men are viewed as political conservatives, but neither is expected to gut antitrust enforcement. “We are not going to see a radical change,” said Janet McDavid, a Hogan & Hartson partner. “Historically, Republicans have been advocates of the antitrust laws.” The antitrust experts disagreed over what constitutes radical change. Steve Salop, a professor at Georgetown University law school, said he expects the agencies to de-emphasize market concentration as an index of industry competition in favor of hard evidence that a merger will actually harm competition. Under this school of thought, measures such as the Herfindahl-Hirschman Index of market concentration would be less relevant in assessing antitrust matters. According to Salop, the FTC and the Department of Justice also will be more accepting of the efficiency defense, which argues that a merger that reduces competition can be acceptable if the cost savings are high enough. He said the agencies will likely start accepting efficiencies that could be reproduced without doing the merger. Such a change would greatly inflate the amount of savings attributed to the deal, making the efficiency defense more valuable. Salop also predicted the agencies are likely to support cross-market benefits. That means a merger that increases competition in one market may be approved even if it hurts competition in another market. Such cross-market effects are not now recognized. Another battle could occur over whether the antitrust agencies focus their enforcement on improving “consumer welfare” or “aggregate welfare,” Salop said. The agencies now look to consumer welfare to see if mergers raise prices. By looking at aggregate welfare, they also would consider whether a given deal would make shareholders wealthier. Under this standard, a deal could be approved if the benefits to investors outweighed the harm to consumers. Copyright (c)2001 TDD, LLC. All rights reserved.

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