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For much of his tenure as assistant attorney general for the Antitrust Division of the Department of Justice, Charles James was derided as a do-nothing enforcer more interested in internal reforms than fighting monopolies or defending competition. But as James settles into his new job as an oil industry executive, the conventional wisdom regarding his efficacy — and thus his legacy — is beginning to change. From the moment he assumed the office in June 2001, James was at the center of a storm of criticism. There was the battle with Europe over the aborted merger of General Electric Co. and Honeywell International Inc., the controversial settlement of the Microsoft Corp. litigation and the ill-fated merger clearance accord. Sen. Herb Kohl, chairman of the Judiciary antitrust subcommittee, minced few words in September in attacking James’ record. “We have heard a growing sense of unease about the direction of the antitrust division in the last year,” the Wisconsin Democrat said at a hearing. “Observers have noted a sharp decline in the [antitrust] division’s enforcement activity. While we recognize that the numbers of mergers and acquisitions reported to the antitrust division has also diminished in the last couple of years, this decline includes a significant drop in the division’s civil, nonmerger and criminal enforcement.” Kohl was expressing what many antitrust lawyers have been saying privately for months in the hallways outside of competition policy conferences, including the American Bar Association annual meeting in August and the ABA antitrust section’s spring conference. But as James assumes his new office as general counsel for ChevronTexaco Corp., some are beginning to rethink their assessment of his tenure. This new view holds that James was the victim of matters beyond his control, that he was deprived of the political support required to keep critics at bay and that he did not serve long enough to properly assess his commitment to antitrust enforcement. The evidence for this school of thought is hard to ignore, and it begins with the months it took the Senate last year to confirm the former Jones, Day, Reavis & Pogue partner. During this period, the antitrust division was run by John Nannes, a deputy under former Assistant Attorney General Joel Klein. But Nannes, an antitrust veteran, was recused from the biggest case of the time — the investigation of the GE-Honeywell deal. So when European Commission antitrust czar Mario Monti visited Washington in 2001 for the antitrust section’s annual spring meeting, there was no senior official for him to meet with to discuss the case. The result was that only days after James was sworn in on June 9, 2001, he was confronted with reports that the EC would block the GE-Honeywell merger, which the antitrust division had cleared in May. Reaction in the United States was swift and harsh because it represented the first time the EC had blocked a merger of two U.S. companies. President Bush criticized the move, and the U.S. Trade Representative was suddenly blasting EC antitrust policy. Faced with an all-consuming controversy, James sent in Deputy Assistant Attorney General William Kolasky as his attack dog. Kolasky gave countless speeches ripping the Commission and the so-called collective dominance theory European regulators invoked to derail the deal. James’ supporters credit him with using the GE-Honeywell flap to jump-start efforts to coordinate international antitrust enforcement. They note that a year later Kolasky was leading the first meeting of the International Competition Network, a global forum for antitrust regulators. Today, after months of feuding in the wake of the trans-Atlantic merger rejection, relations with the EC antitrust team have never been better, and the Europeans are even considering adopting the U.S. definition for when a merger is deemed anticompetitive. With GE-Honeywell cooling down by fall 2001, James entered his most politically damning fight — the Microsoft case. Even critics of James concede that this was a no-win situation. Although a federal appeals court that summer concluded Microsoft was an illegal monopolist, it threw out large chunks of the government’s case and suggested a structural breakup of the company might not be appropriate. Under enormous pressure from Judge Colleen Kollar-Kotelly in Washington, D.C., to settle the case, James first said he would not seek a breakup of Microsoft. He then agreed to a settlement that includes numerous conduct restrictions. Microsoft foes blasted both decisions and accused James of shirking his responsibilities. Yet with a year of hindsight some now conclude that James had little room to maneuver and little legal or political support for a trial of Microsoft. “He had no chance,” one political source says. As the Microsoft case turned into a fight with nine dissenting states and the District of Columbia, James got his nose bloodied anew. Staff from the antitrust division and Federal Trade Commission had met secretly for months to devise the merger clearance accord, which assigned each regulatory agency primary jurisdiction over deals in specific sectors. Within the antitrust bar there was near-unanimous support for the accord because it promised to end the agencies’ expensive and annoying practice of issuing “second requests” for information just as the 30-day clock for conducting the initial review was expiring. With reporters and staff gathered at the FTC to witness the signing ceremony for the pact, James was at the last moment forced to withhold his John Hancock when an aide to Attorney General John Ashcroft called on a cell phone to tell him to abort. Senate Commerce Committee Chairman Ernest Hollings was irate and threatening reprisals if the accord was implemented. Hollings was upset that the agreement appointed the antitrust division primary responsibility to review media mergers. Historically, the Justice Department has handled most media deals, but Hollings insisted that the FTC retain a role. Political sources have since said that the South Carolina Democrat needed to preserve the possibility that media deals would go to the FTC, which he oversaw, rather than to the antitrust division, which is not under the Commerce Committee. The antitrust division and FTC spent the next few months trying to work out a deal with Hollings. When that failed, the agencies implemented the accord over the senator’s objections. But Hollings thwarted the effort by using his position on the appropriations subcommittee to threaten the entire Justice Department budget. That forced James to retreat and void the accord. Several antitrust sources said James got little political support for this fight with Hollings. The American Bar Association’s antitrust section did write a letter, but it failed to address the division of industries. And by not endorsing the crux of the plan, the letter deprived James of ammunition to do battle with Hollings. The publicity surrounding these three events may have sullied James’ reputation by obscuring the actual work under way at the antitrust division. Despite plummeting premerger notification filings, during his tenure the division went to court four times to challenge deals. Of these cases, one is pending, one merger was dropped, one was settled after a hearing before a judge and the antitrust division lost the final matter after a trial. “Since my arrival here last June, my singular goal has been to continue the excellent work that has always been done by the division, while positioning the agency to meet the challenges of the future,” James said in the September hearing. “Given the important role we assign to competition in our nation’s economy, the antitrust division must be a vigorous, formidable and effective enforcer of our laws.” But James’ critics, including Kohl and the Washington-based American Antitrust Institute, say his record compares unfavorably to that of his predecessor, Klein. The AAI notes the division brought 21 merger challenges, including those resolved by consent decree, in fiscal years 1999 and 2000. Yet since Bush was elected, the number dropped to nine in 2001 and to four this year. The drop is especially relevant because the FTC has experienced a much smaller decline, the AAI said. FTC filed 23 cases in both 2001 and 2002, down from 32 cases in 2000 and 30 in 1999. Kohl and his supporters concentrate their analysis on the differences between the first two years of the Bush administration compared to the last four years of the Clinton administration. Under this scenario, the James regime appears to be doing a lot less. Besides merger case filings, the senator charges that the division is issuing far fewer second requests. The antitrust division made 80 second requests in 1998, 67 in 1999 and 55 in 2000. That number fell to 43 in fiscal year 2001, which includes four months under James. For the first 11 months of the 2002 fiscal year, the James antitrust division has issued 19 second requests. That is about two-thirds fewer than in the last full fiscal year of the Klein administration. Such data, however, may be misleading. Congress revised the Hart-Scott-Rodino Act last year, raising to $50 million, from $15 million, the threshold that triggers a filing. Also, the merger wave of the 1990s has essentially dried up. The result is that merger filings are at less than half of their highs in the 1990s. The antitrust division prefers to cite the data as the ratio of second requests to HSR filings. In his testimony to the Senate subcommittee, James said the division is beginning an investigation into 5.3 percent of HSR filings, compared with 3.7 percent and 2.8 percent of HSR filings during the last full fiscal years of the Clinton administration. “As a percentage of filings, we are commencing more investigations,” James testified. The comparison also is difficult because the numbers contrast the start of a new presidential administration with the end of an administration that was in power for eight years. The antitrust division in the first full year under Clinton initiated 25 HSR investigations, compared with 59 during the first full year under Bush. The Clinton team issued 25 second requests, which is six more than the Bush team issued through the first 11 months of James’ tenure, according to data provided to the Senate Judiciary antitrust subcommittee. James appeared to acknowledge the inherent difficult in assessing his record and the need to overcome the problems that plagued his tenure. “While I am quite pleased with all that we have accomplished thus far,” he told the Senate Judiciary antitrust subcommittee, “I recognize that the hallmark of any successful organization is the continuing desire to improve.” Copyright �2002 TDD, LLC. All rights reserved.

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