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A REGULATORY BLOOD-FEUD A peace effort is expected shortly to get under way to end the bitter feud between Senate Commerce Committee Chairman Ernest Hollings, D-S.C., and antitrust regulators over the merger clearance accord. The Senate Judiciary antitrust subcommittee hopes to devise a compromise acceptable both to Hollings and to Assistant Attorney General Charles James and Federal Trade Commission Chairman Timothy J. Muris. “We want to play the role of mediator,” a Capitol Hill source said. The goal is to find a solution by June, when a Senate appropriations subcommittee is expected to vote on the 2003 budgets for the FTC and antitrust division. Hollings, who also is chairman of the appropriations subcommittee, has threatened to cut funding for the antitrust agencies if they do not amend the merger clearance accord. The agreement calls for the antitrust division to review all media, telecommunication and entertainment industry mergers while the FTC will handle energy and biotechnology deals. Hollings wants the FTC to maintain at least partial jurisdiction over media deals. Involvement of the antitrust subcommittee in the spat could mean the dispute is nearing conclusion. The subcommittee is one of the most bipartisan entities on Capitol Hill. Joint statements on antitrust matters are the rule rather than the exception for chairman Sen. Herb Kohl, D-Wis., and ranking member Sen. Mike DeWine, R-Ohio. Though both have supported the accord, they also have questioned recent media mergers. That is likely to raise their credibility with both sides. But can even this duo end a dispute in which there appears to be no middle ground? Albert Foer, president of the American Antitrust Institute, said success is possible. “Fortunately there is no immediate deadline, so there is time for everyone to calm down and have second thoughts,” Foer said. “The Senate Judiciary staff is in a good position to work with the parties and get a peaceful solution.” ‘DISGORGEMENT’ The antitrust bar is urging the FTC to seek disgorgement only in extraordinary circumstances, arguing that the remedy is inappropriate if other types of relief are workable. “We believe that disgorgement should be reserved for use only in cases in which there has been a serious violation of the antitrust laws that was clearly established by prior precedent,” wrote Stephen Stack Jr., George Gordon and Thomas Kenyon of Dechert in Philadelphia. The comments were in response to an FTC solicitation asking when it should seek disgorgement, which is its ability to demand forfeiture of profits earned from anticompetitive behavior. The FTC has exercised this power in only a few antitrust cases in recent years, though it has been a regular part of its arsenal in consumer protection matters. Roxane Busey, chairwoman of the American Bar Association antitrust section, said the FTC should not seek disgorgement for procedural errors, such as failing to notify the agency of a merger or violating a commission order. Rather, there should be a substantive violation of antitrust law. If the agency concludes that disgorgement is required, the amount sought should not exceed the illegitimate profits earned by the defendant, she said. Tax savings, stock market profits and gains it would have earned absent the illegal conduct should be excluded, she wrote. “While such gains may be causally linked to the violation, they do not reflect gains attributable to antitrust injury,” Busey wrote. John Spears, a partner at Ropes & Gray in Washington, wrote that the FTC should not use disgorgement unless other remedies such as a lawsuit by victims of the anticompetitive behavior are inadequate to strip the violators of ill-gained profits. “If a violator’s unlawful profits are $50 million, then a disgorgement remedy would be moot if the victim’s trebled damages are $75 million,” Spears wrote. Disgorgement should be used only if the FTC is unable to identify the victims of anticompetitive behavior, he added. “Disgorgement is viable when consumers or other victims who have a cause of action cannot be personally compensated, or when even after that compensation there remain unlawful profits in the wrongdoer’s hands,” he wrote. While the private bar argued for limiting disgorgement, American Antitrust Institute senior research scholar Robert Lande said forfeiture of profits is an important agency tool. “It will help deter future violations of antitrust laws,” he wrote. Civil suits by victims of anticompetitive behavior rarely result in the collection of treble damages, which means they are not fully effective in discouraging violations antitrust law, he said. “The main benefit of the disgorgement remedy is to increase the overall level of deterrence by increasing the total amount of funds paid by law violators,” Lande wrote. A MODEST PROPOSAL Speaking of the American Antitrust Institute, the advocacy group called last week for the breakup of the antitrust division and the FTC, charging that they illegally agreed to divvy up the market for reviewing mergers by signing the merger clearance accord. The AAI, which believes “the more the merrier” when it comes to antitrust enforcement, said each agency should be split up so there are about 10 new entities vying to review Hart Scott Rodino Act filings. The group said Senate Commerce Committee Chairman Ernest Hollings would award each of the 10 entities a limited number of HSR points each year. The mini-antitrust agencies would then use these points to bid for the right to review specific mergers. “If you live by the free market, you should die by the free market,” an AAI spokesman said. The institute unveiled its proposal April 1. Copyright (c)2002 TDD, LLC. All rights reserved.

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