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1	INTERNATIONAL COMPETITION POLICY ADVISORY COMMITTEE
2	HEARINGS
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6	Washington, D.C.
7	May 17, 1999
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13	This document constitutes accurate minutes of the
14	meeting held May 17, 1999 by the International
15	Competition Policy Advisory Committee. It has been
16	edited for transcription errors.
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18	_____________________   _____________________
19	James F. Rill   Co-Chair
20	Paula Stern   Co-Chair
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1	INTERNATIONAL COMPETITION POLICY ADVISORY COMMITTEE
2	HEARING
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4
5
6	Washington, D.C.
7	May 17, 1999
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14	Taken at the American Geophysical Union, 2000 Florida Avenue,
15	N.W., First Floor Conference Center, Washington, D.C., beginning at 9:15 A.M.,
16	before Bryan Wayne, a court reporter and notary public in and for the District of
17	Columbia.
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1	APPEARANCES:
2	Advisory Committee Members:
3	James F. Rill, Co-Chair and Senior Partner, Collier, Shannon, Rill & Scott,
4	PLLC
5	Paula Stern, Co-Chair and President, The Stern Group, Inc.
6	Merit E. Janow, Executive Director and Professor in the Practice of
7	International Trade, School of International and Public Affairs, Columbia
8	University
9	Thomas E. Donilon, Partner, O'Melveny & Myers
10	John T. Dunlop, Lamont University Professor, Emeritus, Harvard
11	University
12	Department of Justice Employees:
13	The Honorable Janet Reno, Attorney General of the United States
14	Joel I. Klein, Assistant Attorney General, Antitrust Division
15	Members of the Public Who Made an Appearance and Presented Written or Oral
16	Statements:
17	Panelists: Members of the ABA Section of Antitrust Law ICPAC Task Force
18	Phillip A. Proger, Jones, Day, Reavis & Pogue; Chair, ABA Section of
19	Antitrust Law
20	Harvey M. Applebaum, Covington & Burling; Co-Chair, ABA Section of
21	Antitrust Law ICPAC Task Force
22	A. Paul Victor, Weil, Gotshal & Manges LLP; Co-Chair, ABA Section of
23	Antitrust Law ICPAC Task Force

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1	Panelists: Members of the ABA Section of Antitrust Law ICPAC Task Force
2	(Continued)
3	Margaret E. Guerin-Calvert, Economists Incorporated
4	Joseph F. Winterscheid, Jones, Day, Reavis & Pogue
5	Janet L. McDavid, Hogan & Hartson LLP
6	Panelists: Economists
7	Simon J. Evenett, The Brookings Institution; Department of Economics,
8	Rutgers University
9	David J. Salant, Law and Economics Consulting Group
10	Leonard Waverman, Law and Economics Consulting Group
11	Andrew R. Wechsler, Analytic Studies International, Inc.
12	Panelists: Representatives of U.S. Businesses
13	Eastman Kodak Company - Christopher A. Padilla, Director, International
14	Trade Relations
15	Guardian Industries Corp. - Stephen P. Farrar, Director, International Business
16	United Parcel Service - Larry Stevenson, Vice President, International
17	Industrial Engineering; Andrew R. Wechsler, Director of International
18	Economic Strategy and Analysis, Analytic Studies International, Inc.; and
19	Raymond Calamaro, Hogan & Hartson LLP
20	Panelists: Institution Building and Competition Law Advocacy
21	Richard Gordon, International Monetary Fund
22	R. Shyam Khemani, The World Bank
23	Emmy Simmons, U.S. Agency for International Development

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1	IN ATTENDANCE:
2	Advisory Committee Staff:
3	Cynthia R. Lewis, Counsel
4	Andrew J. Shapiro, Counsel
5	Stephanie G. Victor, Counsel
6	Eric J. Weiner, Paralegal
7	Estimated Number of Members of the Public in Attendance: 19
8	Reports or Other Documents Received, Issued, or Approved by the Advisory
9	Committee:
10	American Bar Association Section of Antitrust Law: "Report on the Use of
11	Private Litigation to Challenge Private Anticompetitive Conduct Affecting
12	U.S. Foreign Commerce"
13	American Bar Association Section of Antitrust Law: "Report on
14	Multijurisdictional Merger Review Issues"
15	The Brookings Institution: "Strengthening Trans-Atlantic Antitrust
16	Cooperation," A project jointly sponsored by The Brookings Institution and
17	the Royal Institute of International Affairs - Case Studies - Compiled by
18	Simon J. Evenett, The Brookings Institution, Rutgers University and CEPR
19	Law and Economics Consulting Group (LECG): "Standards Wars - News
20	From the Front Lines and International Solutions," presentation by David
21	Salant, Leonard Waverman, and Andrew R. Wechsler Law and Economics
22	Consulting Group (LECG): "Standards WARS: The Use of Standard
23	Setting as a Means of Facilitating Cartels; Third Generation Wireless

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1	Telecommunications Standard Setting" by Peter Grindley, David J. Salant,
2	and Leonard Waverman
3	Guardian Industries Corp.: "Barriers to Entry Into the Japanese Flat Glass
4	Market: Opportunities for Bilateral Cooperation"
5	United Parcel Service: Statement of Larry Stevenson, Vice President of
6	International Industrial Engineering, United Parcel Service attaching "The
7	Entry into Unregulated Markets by State Owned Enterprises and Regulated
8	Monopolies; A Serious Threat to International Competition?" by Andrew
9	R. Wechsler, Analytic Studies International, Inc. and statement by James
10	P. Kelly, Chairman and CEO, UPS (1/29/99), among other attachments
11	U.S. Agency for International Development: "USAID and Competition Law
12	Advocacy and Institution Building," presented by Emmy B. Simmons,
13	Deputy Assistant Administrator, Center for Economic Growth and
14	Agricultural Development, Global Bureau, U.S. Agency for International
15	Development
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23	PROCEEDINGS

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1	(9:15 a.m.)
2	DR. STERN: Good morning. I'd like to call to order our hearings
3	for May 17th. It is a pleasure to welcome you all to, actually, the second day
4	of our International Competition Policy Advisory Committee Spring hearings. We
5	are particularly honored this morning that the Attorney General of the United
6	States, Janet Reno, joins us with the Assistant Attorney General of the United
7	States for Antitrust, Joel Klein, to make some opening remarks.
8	First, let me say very briefly, the International Competition Policy
9	Advisory Committee was established by the Attorney General and the Assistant
10	Attorney General for Antitrust back in the Fall of '97 to provide guidance to the
11	Department of Justice on the topics of multijurisdictional mergers, the interface of
12	trade and antitrust policies, and cooperation between the U.S. and foreign
13	authorities in antitrust enforcement, particularly enforcement prosecutions against
14	international cartels.
15	Jim will certainly speak for himself, but I certainly wish to say that
16	my appointment to co-chair this initiative with Jim is a great personal privilege
17	and a great honor.
18	I wish now to introduce the Attorney General. Bearing in mind that
19	every day you have a schedule packed to accommodate the immediate and the
20	important, your attendance this morning underlines the importance of this
21	Committee's work, and we very much appreciate it. I'd like to invite you now to
22	share any remarks you wish to make, followed by Joel Klein.
23	ATTORNEY GENERAL RENO: I thank you so much, Dr. Stern,

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1	and to you and Jim, I say a very special thank you, and to Merit Janow, for all
2	that you have done.
3	When one comes to Washington for the first time and you don't
4	know too many people and you're suddenly Attorney General of the United States,
5	you remember those people that you rely on in those early days. And Jim Rill was
6	one of those people who made a point of being there in a bipartisan way, and I
7	think it was in a great tradition of public service.
8	Your, Paula, willingness to do this is a further example, and I'm
9	just deeply deeply grateful.
10	MR. RILL: Thank you, General.
11	ATTORNEY GENERAL RENO: To the members of the Committee,
12	thank you so much. I know the time that something like this takes and I am deeply
13	grateful for your willingness to do it because I think it is profoundly important. I
14	think sometimes we get blinders on and for ICPAC to spend the time to hear from
15	people is so very important.
16	To all of those who are willing to come and give of their time, their
17	wisdom, their advice, their thoughts, I say thank you. I think it is again
18	very important that government be informed.
19	I think one of the first points that Anne Bingaman and Jim made to
20	me, and then Joel has made it again and again and again, is that international
21	competition policy is playing an increasingly important role in the global
22	economy. I'm called to the White House to talk about things that relate to
23	this issue more often in the last six years as each year goes by. And so I think it's

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1	vital.
2	I look at the perspective of the Justice Department and, Tom, you
3	will appreciate this. I think all crime is becoming global. Antitrust issues are
4	becoming global. And as Strobe Talbott told me, he said: We're going to have to
5	start developing a working relationship such as the State Department and the
6	Defense Department have long had, out of necessity. We're going to have to do
7	the same thing with the Justice Department.
8	You realize, whether it be criminal prosecution, cyber crime,
9	antitrust issues, it is going to be so important that we inform ourselves in a global
10	way about the antitrust implications of all that we do. So I'm particularly glad
11	that we have a former State Department perspective.
12	We're committed to meeting the challenges posed by the new global
13	economy, and Joel, I think, has done just a wonderful job. He has advised me on
14	so many different issues and you haven't been wrong once yet. And I just want to
15	personally thank you for your willingness to lead this Division, and I think you've
16	done a wonderful job.
17	Through its sustained enforcement efforts, the Antitrust Division
18	has succeeded in exposing international cartels. The result has been numerous
19	guilty pleas and in the last two fiscal years record fines. Just two weeks ago, SGL
20	AG, the world's largest producer of graphite and carbon products, agreed to pay a
21	record fine of $135 million and pled guilty to participating in an international
22	conspiracy to fix prices and to allocate the volume of graphite electrodes in the
23	U.S. and elsewhere.

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1	With numerous grand juries currently investigating suspected
2	international cartel activity, the unmasking and prosecution of international
3	cartels is likely to increase dramatically.
4	Another area where the Justice Department has met challenges
5	posed by globalization is in its review of multinational mergers. The global
6	economy is currently undergoing an unprecedented merger wave. Many of these
7	transactions require review by several different national antitrust enforcement
8	agencies. The Antitrust Division I think has managed this flood of multinational
9	merger notifications with great skill and it has assured that the interests of U.S.
10	consumers are protected.
11	While the Department has enjoyed important successes in its
12	international antitrust enforcement efforts, the increasing globalization of markets
13	presents unique challenges to the development of sound competition policy. That's
14	the reason that Joel and I agreed that the Department could benefit greatly from
15	bringing together a diverse group of experts for two years to make
16	recommendations concerning the really critical issues that we face in international
17	competition policy. Again, I am just so deeply grateful that we were able to
18	attract such great people and those that can provide such a variety of perspectives.
19	Paula has described the issues that we're confronting: first,
20	building on U.S. antitrust cooperation agreements, how do we build a consensus
21	among governments for cooperation in effective enforcement efforts aimed at
22	eliminating international cartels? This is vital to me because I have seen so much
23	progress made on a number of fronts in terms of international law enforcement

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1	policy generally.
2	We're trying to develop a system of working relationships with other
3	nations so that there will be no safe place to hide, so that we can ensure the
4	extradition of nationals, so we can focus on domestic prosecutions if extradition
5	does not succeed. But again I see in that situation an occasion where we take
6	three steps forward and four steps back sometimes as governments change and as
7	policies change. So your thoughts on this effort will be very important.
8	Second, given the proliferation of national antitrust laws and
9	premerger notification requirements, how can the various antitrust agencies
10	achieve sound results for both merging firms and consumers?
11	And third, how should the U.S. address anticompetitive schemes by
12	private firms in other countries that impede access to markets?
13	From what I've heard, the Advisory Committee has made impressive
14	progress toward its goal of delivering a report to the Justice Department by the
15	end of this year. Just a few weeks ago, the Advisory Committee, as I understand
16	it, held the first day of its Spring hearings with testimony from members of
17	prominent trade associations, bar associations and other experts. This testimony I
18	think is going to be very vital in developing recommendations and reports for the
19	Department.
20	I have long felt that public service is one of the great callings that
21	anyone can undertake. When you've done public service and then you go out into
22	the private sector and are still willing to come back and lend the wisdom of your
23	vantage point of both public and private experience, I think it is so important and

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1	am deeply grateful.
2	So people have been thanking me for being here this morning. I just
3	thank you so many times over for your willingness to do this.
4	DR. STERN: Thank you so much.
5	MR. RILL: Thank you, General.
6	DR. STERN: Joel.
7	MR. KLEIN: First let me say to you, Madam Attorney General,
8	without your leadership and support this Advisory Committee would not have been
9	possible, and without your continuing strong support for effective antitrust
10	enforcement the Division could not be doing the important work that it is doing
11	today in the global economy. So we all owe you a great debt of gratitude and most
12	particularly, frankly, America's consumers, who I think benefit from the work that
13	the Division does.
14	I join with you in saluting Paula and Jim, two stalwarts in the field
15	who have been enormous support and help to me, and Merit, who has led the work
16	of this Committee with great sensitivity and effectiveness.
17	I would just be very brief in saying a couple of points. This world-
18	wide web, this State Department-like view of the Justice Department's role in the
19	global economy, is actually continuing to develop with remarkable,
20	remarkable success, even as the Committee does its work.
21	We have no choice in doing that because our outreach in
22	international cartel cooperation, our necessity to review on a daily basis
23	multinational mergers that are being reviewed by other countries, and our issues at

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1	the interface of trade and competition policy, whether it's the kind of positive
2	comity referral we had with DG-IV, is forcing us to work on an increasing basis in
3	a global way with our counterparts.
4	I am pleased to say that we have some of the best possible working
5	relationships with our colleagues in Europe at DG-IV, with our colleagues in
6	Canada, with our colleagues in Australia. And we are looking to expand and
7	recently the President and the Japanese Prime Minister announced what will soon
8	become a formal agreement with the Japanese, hoping to bring them into the
9	family of effective cooperation in international antitrust enforcement.
10	So in an ironic kind of way, we are developing a bilateral lattice of
11	interrelationships which I think will effectively develop into really a multilateral
12	system of multinational antitrust enforcement.
13	The issues before this Committee could not be more timely or more
14	important. We are heading into a round at the end of this year with respect to the
15	World Trade Organization where the issues of trade and competition policy will be
16	before us.
17	Every day that I wake up, I read in the newspaper about a new
18	merger that I know we and somebody else somewhere in the world or many other
19	places in the world is going to review. And just last week the Senate Antitrust
20	Subcommittee held hearings on trade and competition policy issues, and you'll
21	hear from some of the same people with some of the same concerns later today.
22	Last week at the OECD, the Antitrust Division put on a key
23	presentation with respect to international cartel enforcement which I think was

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1	really an eye opener for many of the members of the OECD organization and I
2	suspect will have significant implications for long-term antitrust cooperation.
3	I along with Karel Van Miert and many industry leaders were in
4	Berlin last week to discuss the set of issues involved in international antitrust
5	enforcement and multijurisdictional merger review. We heard from Jürgen
6	Schrempp of DaimlerChrysler, who went through the process in ten different
7	antitrust authorities when the Daimler-Chrysler merger was put forward.
8	Again, what you could see there was a growing consensus, including
9	I think even the Germans, a consensus with respect to a sensible WTO policy, one
10	that would aim toward developing a culture of competition not only within the
11	WTO but worldwide, and one that would move away from dangerous efforts such
12	as premature dispute resolution.
13	Both Alex Schaub of DG-IV and Konrad von Finckenstein of
14	Canada supported notions along those lines which I found personally very
15	encouraging.
16	Just this past Friday I was at the Mentor Group for a four-hour
17	session, which is a group that sponsors key EU-U.S. conferences, a four-hour
18	session on these very issues.
19	So what I want to say is, enough preliminary remarks. There's a lot
20	of work ahead for this Committee. I can see from the talent assembled here at this
21	table, some of the leading thinkers in our field, that you are going to have a
22	robust, exciting, and I suspect, highly informative meeting today.
23	I want to thank all of you for the effort and we are very eager to see

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1	your report later this year.
2	ATTORNEY GENERAL RENO: And if anybody has any questions
3	or suggestions for us at this point, we're certainly receptive to them.
4	DR. STERN: Hearing none, with respect to you and your busy
5	schedule --
6	ATTORNEY GENERAL RENO: Thank you.
7	(Pause.)
8	DR. STERN: Okay, well, let's resume the hearing. I'll have to give
9	Joel my quip separately, because when he talked about this lattice that he was
10	making I kept thinking that good fences make good neighbors. In this case I guess
11	a good lattice may make good trading partners.
12	Our hearings, as I said, are a continuation of the April 22nd
13	hearing, and together these Spring hearings complement those that were conducted
14	by the Advisory Committee last November.
15	Today's format is as follows: It's designed to allow members of the
16	Advisory Committee to hear from associations and individuals who have been
17	developing input for the Advisory Committee for many months. We've heard from
18	individual U.S. businesses, economists, attorneys and others engaged in technical
19	assistance to develop antitrust regulations around the world. These hearings
20	provide us an opportunity to hear from participants who will share with the
21	Committee their views and experience on matters relating, as I said very briefly,
22	to multijurisdictional merger reviews, the interface of trade and competition
23	policy, and thirdly the cooperation between antitrust enforcement authorities.

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1	Last November the Advisory Committee held hearings featuring
2	roundtable discussions with the heads of 10 foreign competition authorities as well
3	as distinguished lawyers, economists, academics and other experts. And the
4	transcripts of those hearings as well as the full meetings of the Advisory
5	Committee are posted now on the Advisory Committee's website, along with a host
6	of other useful materials relating to this Committee's work. I will save you all of
7	the letters of the website address -- it's a mouthful -- but the staff can certainly
8	provide you with that.
9	Let me take a few minutes to discuss the substance of today's
10	hearing. The Advisory Committee will hear presentations by the ABA Section of
11	Antitrust Law's task force that was established to provide input to our Advisory
12	Committee. We shall hear from its members about the ABA Antitrust Section's
13	views on two basic topics: first, multijurisdictional mergers and joint ventures;
14	and secondly, the use of private litigation to challenge private anticompetitive
15	conduct affecting U.S. foreign commerce. Again, I want to thank all of you for
16	your continued dedication, for coming, and for providing us -- as the year
17	stretches to two years -- with your expertise.
18	After a break for lunch, we then have scheduled three more
19	sessions. The first afternoon session is a presentation by economists, again on
20	two distinct topics. First we'll hear a presentation about a Brookings Institution
21	study that's underway on trans-Atlantic antitrust cooperation. And then we'll have
22	an opportunity to hear about the use of standard-setting as a means of facilitating
23	cartels and market blockage, and its potential trade effects, particularly in

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1	high-tech industries.
2	At the next afternoon session, the Advisory Committee will hear
3	presentation from the representatives of three U.S. businesses: Eastman Kodak,
4	Guardian Industries and the United Parcel Service -- UPS -- about the experience
5	of these businesses in their overseas markets.
6	We will conclude with presentations on institution-building and
7	competition law advocacy. And our panelists in that concluding session have
8	broad experience, representing the U.S. Agency for International Development, the
9	World Bank, and the International Monetary Fund. They will share with us their
10	experience with technical assistance programs of their respective organizations in
11	competition law and policy.
12	We welcome everyone's attendance in the audience. We appreciate
13	your interest in our Committee and its work. I'd like just to note that the audience
14	should please refrain from giving us their views at this particular moment during
15	the day -- our format does not accommodate that kind of input -- but we do
16	welcome and indeed invite any reactions that you may have to today's meeting in
17	writing. You may contact one of the staff people who are arrayed here if you wish
18	to submit written comments to the Advisory Committee.
19	I think that we should further bless this Committee by saying that
20	this meeting is being held in accordance with the Federal Register notice.
21	I would now like to say that we are eager to hear from the other
22	participants who have prepared their remarks. But before doing so, I'd like to turn
23	to my esteemed colleague, Co-Chair Jim Rill, for any remarks he might wish to

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1	make.
2	MR. RILL: Thank you, Paula. I think you have with great
3	articulateness described the format of the day and the purpose for which we are
4	here.
5	I simply want to add my thanks to all of the panelists who are going
6	to appear today for the very hard work that they've done. And the value it's going
7	to have to our deliberations is, I'm sure, extraordinarily substantial. Having said
8	that, I don't want to take up any more of your time.
9	DR. STERN: Okay. Well, I think the group has decided to adjust
10	their format so that we'll hear presentations on both issues and then we'll open it
11	up to questions.
12	Phil, are you going to lead off?
13	MR. PROGER: Yes, I am.
14	DR. STERN: I could somehow tell by that eager smile.
15	MR. PROGER: Good morning and thank you for having us. While
16	many of us have appeared before you in our individual capacity, I am pleased that
17	we can appear today representing the Section of Antitrust Law of the American
18	Bar Association. The views expressed today in the two papers that we are
19	transmitting, while not formal views of the American Bar Association, are formal
20	views of the Section of Antitrust Law of the American Bar Association.
21	I'd like to introduce my co-panelists. To my far right is Jan
22	McDavid, the Chair Elect of the Section and who already has testified in an
23	individual capacity. Next to Jan is one of our two Co-Chairs of our Task Force on

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1	ICPAC, Paul Victor. Paul is a past Vice Chair of the Section and extremely
2	active in the area of international antitrust. To my immediate right, Harvey
3	Applebaum, past Chair of the Section and Co-Chair of our ICPAC Task Force.
4	Harvey brings a wealth of experience and expertise to the Section's deliberations
5	in this area.
6	And on behalf of the Section, I want to express our thanks to them
7	in co-chairing our task force and producing these two excellent papers, which have
8	been approved by our council and gone through the blanket authority process of
9	the American Bar Association. As such, these two papers formally represent the
10	views of the Section of Antitrust Law.
11	Across my way also are Meg Guerin-Calvert and Joe Winterscheid,
12	members of the ICPAC Task Force who appear today to help respond to any
13	questions that you might have.
14	The format that we thought we would do was to start with the paper
15	on Multijurisdictional Mergers and Joint Ventures and then go to the Private
16	Litigation paper. The way we were going to do it is that Joe is going to introduce
17	the multijurisdictional mergers and Harvey is going to give a brief overview on
18	private litigation. And then we'll be open for any questions from the members of
19	ICPAC.
20	DR. STERN: Great.
21	MR. PROGER: Joe.
22	MR. WINTERSCHEID: Thank you, Phil.
23	I too am pleased to be here today to be able to present the views of

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1	our Working Group on Multijurisdictional Merger Review issues. Our working
2	group consisted, in addition to myself, of Michael Byowitz, Barry Hawk, and
3	Spencer Weber Waller, and in their absence I'd like to commend them for the fine
4	work that they did in helping us to prepare and present the paper.
5	At present there are over 50 jurisdictions, I've heard estimates of up
6	to 80 jurisdictions, with antitrust merger control laws on the books, up from only
7	a handful a decade ago. This fact, coupled with the increasing number of
8	transactions which have some significant international dimension, has resulted in a
9	dramatic increase in the incidence of multijurisdictional merger reviews by
10	multiple jurisdictions.
11	The parties to international transactions of any consequence these
12	days are subjected to a multitude of filing requirements and mandatory waiting
13	periods around the world. This process imposes significant costs on transactions,
14	and the Advisory Committee's focus on the issues that this process raises is of
15	great importance to the business community, the antitrust bar, and the
16	international enforcement missions of both agencies.
17	I think it's significant that in prior comments submitted by various
18	trade and industry groups, including the National Association of Manufacturers,
19	the transaction costs and burdens associated with the multijurisdictional merger
20	review process were identified as one of the most significant problems facing
21	American business in the area of international antitrust enforcement and antitrust
22	enforcement generally.
23	The Advisory Committee's earlier working drafts on these issues set

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1	forth a number of possible solutions ranging from substantive convergence of
2	international antitrust laws to procedural harmonization, including a common
3	notification form, common time periods, or alternatively, focusing on problems
4	presented in specific individual jurisdictions.
5	We believe that broad-base initiatives directed at substantive
6	convergence, formalized allocation of enforcement responsibility, and/or
7	supranational mediation efforts offer little prospect of success. We therefore
8	believe that the Advisory Committee's merger review initiative should focus on
9	a more limited agenda directed at reducing unnecessary transaction costs associated
10	with the international merger review process, in particular as to those transactions
11	which do not raise serious competitive issues.
12	In that respect, we believe that there is little prospect for resolving
13	the significant issues arising in the context of Boeing-McDonnell Douglas or
14	Daimler Benz-Chrysler, for that matter, where transactions on their face raise
15	significant substantive issues in various jurisdictions and give various
16	jurisdictions a legitimate basis for examining the effects of those transactions
17	within their local territory.
18	On the other hand, we believe that the focus of the Advisory
19	Committee's efforts and the agency's efforts should be on those transactions which
20	do not raise serious competitive concerns, in an effort to try to streamline the
21	multijurisdictional review process so as to avoid unnecessary transaction costs as
22	to those transactions which do not raise any serious enforcement issues in a
23	growing number of jurisdictions having onerous premerger notification

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1	requirements.
2	The most effective means to reduce unnecessary transaction costs
3	associated with the multijurisdictional process is to promote the adoption of clear
4	objective tests for determining when notification is required, to eliminate
5	notification requirements in those jurisdictions lacking any reasonable basis for
6	asserting jurisdiction over a transaction, and to limit the information required in
7	connection with those transactions which lack antitrust significance.
8	The ultimate goal should be to minimize transaction costs and
9	burdens without reducing the public benefit and without compromising the ability
10	of any jurisdiction to enforce its own competition laws. The main goal in
11	addressing multijurisdictional merger review issues therefore should be directed
12	towards promoting reforms in individual merger control regimes so that they focus
13	on those transactions that raise competitive concerns within their territory and do
14	not unduly burden transactions that lack anticompetitive potential.
15	Secondarily, ICPAC should promote limited procedural reforms in
16	an effort to reduce unnecessary transaction costs associated with the notification
17	process itself.
18	Towards these ends, we would propose the following specific
19	agenda items, which are detailed in our paper. First, the agencies should promote
20	objective jurisdictional tests for premerger notification which incorporate
21	appropriate de minimis local contacts thresholds. Transaction costs associated
22	with the multijurisdictional merger review process could be substantially reduced
23	if filing requirements were based on readily-accessible and objectively based

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1	jurisdictional thresholds.
2	In particular, notification thresholds based on market share-based
3	tests should be eliminated or at a minimum coupled with an appropriate
4	objectively based de minimis local sales or other local contacts threshold.
5	Examples of jurisdictions which are problematic in this respect include Belgium --
6	the present test is combined worldwide turnover of approximately $84 million
7	and a market share in Belgium of more than 25 percent; Brazil, 20 percent market
8	share; Greece, 25 percent, and so forth. There are a growing number of
9	jurisdictions in which premerger notification requirements are predicated on
10	market share-based tests. Parties should not be required to undertake a full-blown
11	substantive review of a proposed transaction in a multitude of jurisdictions simply
12	to determine whether premerger notification is required.
13	The agencies should promote elimination of these market share-
14	based tests in favor of objectively quantifiable and readily accessible information
15	such as sales or turnover in the affected jurisdiction. Appropriate models are
16	provided not just in the United States, but significantly by a number of other
17	jurisdictions in the international community, including Canada, the Netherlands,
18	Switzerland, and the European Union.
19	Notification thresholds should also incorporate an appropriate and
20	objectively-based de minimis standard as to the level of local contacts required to
21	trigger premerger notification, especially as to foreign-to-foreign transactions.
22	That is, transactions involving firms which do not have actual business operations
23	within the territorial confines of the particular jurisdiction involved.

25

1	Requiring premerger notification on the basis of worldwide assets
2	or sales, especially at the exceedingly low levels which characterize many of these
3	regimes, as to transactions that lack any significant local nexus increase
4	transaction costs without any corresponding enforcement benefit. Notification
5	should not be required in any jurisdiction based merely on potential local
6	"effects," broadly defined, or local business activity
7	unless such effects or activity exceed some de minimis standard as measured either by reference to the target's
8	local sales activity and/or an appropriate minimal level of contacts by both parties
9	to the transaction.
10	Once again, suitable models in this regard include Canada, which
11	incorporates a target company business operations in Canada coupled with
12	combined Canadian assets and sales; the Netherlands, combined worldwide
13	turnover plus the parties' individual Dutch turnover; and the Hart-Scott-Rodino
14	Act, in particular the foreign transaction exemptions provided for in the rules.
15	Second, the agencies should promote harmonization of initial
16	premerger review periods and harmonization of rules pertaining to when
17	premerger filings can or must be made. Achieving harmonization of review
18	periods in cases which raise serious competitive issues once again we believe is an
19	unrealistic objective, at least in the short run. With respect to timing issues
20	associated with the merger review process, we therefore believe that the agencies
21	should focus on the disparate initial review periods, and again in particular as to
22	those transactions lacking any significant anticompetitive potential.
23	In most jurisdictions the initial review period is in the one-month

26

1	time frame, as, for example, the Hart-Scott-Rodino-Act, EU merger control
2	regulation, Germany, and Canada, which is being extended to 14 days on the short
3	form and 42 days on the long form filing. Marginal differences in the review
4	period are inconsequential since they can be managed from a transaction planning
5	standpoint. There are, however, a number of "outlier" jurisdictions as to which
6	the timing requirements do impose significant transaction costs and these should
7	be the focus of continued discussions and efforts. These would include the Czech
8	Republic, with an indefinite review period; Greece, a three-month initial period;
9	Hungary, 90 days; Brazil, up to 72 days. Jurisdictions such as these, which have
10	either open-ended or very extended initial review periods, are where the greatest
11	efforts should be directed.
12	The agencies should also promote harmonization of rules pertaining
13	to when parties are permitted to file. Under the Hart-Scott-Rodino process, of
14	course, parties are permitted to file as soon as a letter of intent, agreement in
15	principle or contract has been executed. Many other jurisdictions also follow this
16	example, most notably Germany and Canada.
17	In many jurisdictions, however, including the European Union and
18	most jurisdictions following the basic EU-format on premerger notification,
19	including Belgium, many other European Union jurisdictions, as well as Eastern
20	European jurisdictions, premerger notification is not permitted until the parties
21	have actually executed a definitive agreement.
22	This definitive agreement requirement is unnecessary and impedes
23	the parties from orchestrating the multijurisdictional filing process in the most

27

1	efficient manner. The difficulties associated with the definitive agreement
2	requirement are exacerbated by the fact that, although the parties cannot file prior
3	to the execution of the definitive agreement, they must file in many of these
4	jurisdictions within a short time frame following the execution. This is the case,
5	for example, under the EU Merger Regulation, one week; Belgium, likewise one
6	week; Finland, one week; Greece, 10 days; and Brazil, 15 days.
7	It is virtually impossible to prepare the required detailed
8	submissions within these specified timeframes and, to the extent that the parties
9	are required to observe mandatory waiting periods after filing, these filing
10	deadlines are entirely superfluous. As a consequence, we believe that the agencies
11	should advocate the elimination of the definitive agreement requirement and these
12	compressed post- execution filing deadlines. This would permit the parties to
13	proceed more efficiently in orchestrating their multijurisdictional filing
14	requirements and it would also, we believe, promote de facto harmonization of the
15	initial review periods themselves, as well as perhaps promoting voluntary
16	confidentiality waivers, since the review of transactions in various jurisdictions
17	would be undertaken within the same basic time parameters.
18	Third, the agencies should promote the elimination of unnecessary
19	burdens imposed by premerger notification systems, in particular as to the initial
20	filing requirements. Filing requirements and the information required should be
21	tailored so as to avoid imposing unnecessary transaction costs that do not have a
22	direct correlation to effective competition law enforcement in the affected
23	jurisdiction. The minimum amount of information needed to make that

28

1	determination should be all that is required and to the extent possible that
2	information should be limited to information maintained by the parties in the
3	ordinary course of business.
4	In this connection, it is often observed that in jurisdictions imposing
5	a burdensome initial filing requirement, the European Union being one example,
6	the system seems to work well because the agencies are willing to cut back on
7	those requirements in the context of premerger notification meetings. While this is
8	workable in connection with a single or limited number of jurisdictions, in our
9	experience it is very difficult and sometimes unworkable when you're dealing with
10	12, 15 or 20 individual jurisdictions. Also, success in achieving these more
11	reasonable requirements is somewhat limited in connection with those jurisdictions
12	lacking significant substantive expertise in the merger review process in
13	determining what information they actually need.
14	Finally, I would like to offer a few comments in connection with
15	observations relating to transparency. It has been observed, for example, that the
16	overall merger review process could be improved by greater transparency within
17	particular jurisdictions, including the U.S. For example, it has been proposed that
18	the reviewing agencies should be required to provide greater detail in their
19	explanations as to why action has not been taken in addition to articulating the
20	reasons why a particular transaction has been challenged.
21	While this suggestion has merit in the abstract, it should be
22	recognized that it may also have a negative correlation with the burdens imposed
23	on the parties in the notification process itself. In our experience, those agencies

29

1	which have been less inclined to acquiesce in more limited disclosure and
2	information requirements are those jurisdictions which have a "reasoned decision"
3	requirement at the back end. In other words, they need the information very often
4	not necessarily to assess the merits of the transaction, but rather simply to assist
5	them in drafting and publishing their reasoned decision. So while "transparency"
6	is an objective in the abstract to be promoted, it should be recognized that there
7	are countervailing considerations which need to be taken into account.
8	Nevertheless, we believe that the agencies should promote greater
9	clarity and transparency in the multijurisdictional merger review process itself,
10	particularly as it relates to international cooperative enforcement initiatives.
11	Antitrust enforcers here and abroad have frequently touted the benefits of
12	information sharing and cooperation with their foreign counterparts, and in that
13	context they have promoted the notion that it is almost invariably in the parties'
14	best interest to waive the confidentiality restrictions which characterize many of
15	the national regimes to facilitate that process.
16	We believe that the agencies need to do more to help the business
17	community and their legal advisors to better understand the cooperative process,
18	with particular emphasis on how voluntary confidentiality waivers can be
19	beneficial to the merging parties. The lack of transparency which exists at present
20	makes it difficult to assess the benefits of voluntary waivers to the merging parties
21	notwithstanding the agencies' assurances that it is in the client's best interest to do
22	so.
23	In closing, we would offer the following recommendations

30

1	respecting interagency coordination. In working towards these changes, we
2	believe that the United States government and the agencies playing a lead role
3	must present a consistent message to the rest of the world if serious progress is to
4	be made. This requires both substantial coordination between the various United
5	States government agencies and private groups involved in the formulation of
6	competition and trade policy.
7	We believe that the Division and the Federal Trade Commission
8	have done a good job in presenting a uniform and coordinated message to the
9	international community. We believe that it's very important that they redouble
10	those efforts, in particular in connection with their technical missions and the
11	interagency consultation process. As the agencies consult with countries which
12	are considering enacting an antitrust statute or modifying their existing statutes,
13	these themes should invariably be part of that mission. Finally in this connection
14	-- and this afternoon's session I think is a case in point -- we need to make sure
15	that the other government groups -- for example, the U.S. Trade Representative,
16	Departments of State, Defense, Transportation, Commerce, and Treasury, all of
17	which have some role in developing trade and competition policy in their
18	intergovernmental advisory capacities -- likewise need to be delivering a
19	consistent message as to the need for avoiding unnecessary transaction costs in the
20	multijurisdictional merger review process as they pursue their individual missions
21	as well.
22	That concludes my overview of our paper. Details are set forth in
23	the paper itself, and once again I appreciate having the opportunity to make this

31

1	presentation this morning. Thank you.
2	DR. STERN: Thank you very much.
3	We're not going to open it to questions until we've heard from the
4	whole panel.
5	MR. PROGER: Harvey is now going to present our paper on
6	Private Litigation and then Paul has some follow-up comments on both papers,
7	and then we would be happy to take your questions.
8	DR. STERN: Excellent. Thank you.
9	MR. APPLEBAUM: It's a pleasure to be here again. As you know,
10	I testified in my personal capacity in November, so I may have to exercise more
11	restraint today since I am testifying on behalf of the ABA Antitrust Section and,
12	as Phil indicated, as one of the ICPAC co-chairs along with Paul Victor.
13	Let me mention at the outset that, while we have prepared these
14	papers, we'll continue to provide input. Paul and I both look forward to
15	evaluating this Committee's report and undertaking our own analysis once there is
16	an ICPAC report. That is another objective of the ABA Antitrust Section task
17	force.
18	I am, as Phil indicated, going to provide a very brief overview of the
19	Section's paper on the use of private litigation to challenge anticompetitive
20	conduct affecting U.S. foreign commerce. As you can see from the original
21	calendar, Tad Lipsky of The Coca-Cola Company was scheduled to present this
22	overview and Tad was the principal author of the paper, or at least responsible for
23	pulling it together at the end. I only learned of Tad's absence on Saturday

32

1	morning.
2	Just for your information, Tad is in London today, which probably
3	reconfirms the globalization of the antitrust process in that one can cross the
4	Atlantic on very short notice.
5	Members of the private litigation task force subgroup besides Tad
6	were Margaret Guerin-Calvert, who is here with us today, Thomas Green, and
7	Doug Rosenthal. Others contributed to the paper, particularly the development of
8	the studies of the six cases.
9	There have been hundreds of private antitrust cases over the years
10	that have involved foreign commerce and obviously there was neither time nor
11	practicality to try and analyze even a significant number of them. What the
12	subgroup did initially was to discuss which cases might be landmarks which would
13	best identify and present the major issues that occur in cases that involve, one,
14	foreign commerce and, two, almost invariably, the roles, the positions, and the
15	policies of foreign governments.
16	The themes of these cases, as the paper indicates, present the issues
17	which we believe that the ICPAC should consider. They were purposely also
18	selected to reflect a mix of import and export trade, sometimes referred to as
19	inbound and outbound.
20	These cases reflect the kind of well-known complexity of any kind
21	of international suit, and I might note, not unique to private suits. When the
22	Department of Justice undertakes in a suit involving foreign commerce, it also
23	encounters problems of jurisdiction, discovery of relevant evidence, difficulty of

33

1	enforcing judgments and the like. The procedural complexity of these suits is thus
2	not unique to private litigation, and affects government suits as well.
3	More importantly, these cases typically involve issues which are by
4	and large unresolved and complex, such as when to apply principles of
5	international comity, when to sustain the foreign sovereign immunity defense,
6	when to apply the foreign sovereign compulsion defense, when does the act of
7	state apply, etc.
8	The Section in particular refers the ICPAC to its 1995 Section
9	monograph entitled "Special Defenses in International Antitrust Litigation," which
10	deals with the particular defenses that occur in these cases. All of them in one
11	way or another, as already indicated, reflect the potential interest or the potential
12	role of a foreign government in a case involving U.S. foreign commerce, and that
13	can be true whether it's export or import trade.
14	There was some consideration of whether to consider private
15	litigation elsewhere. We decided to concentrate on U.S. litigation for several
16	reasons: First, the Section believes that any consideration of the United States'
17	role in international antitrust enforcement has to take into account our relatively
18	unique private treble damage remedy. It is very popular, it is widely used, and
19	while other governments are receptive to private complaints, they are usually
20	prosecuted in the form of government suits, not private suits.
21	Putting it another way, it is virtually impossible to consider
22	international antitrust enforcement from the United States perspective without
23	taking into account strongly encouraged use of private actions.

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1	I have identified six issues and themes from the cases. They appear
2	in both our executive summary and our conclusions. The executive summary
3	which was inserted at the end is not totally overlapping with the conclusions, so
4	one should read both of them to recognize the six themes.
5	The first theme is what mechanisms should courts employ, the U.S.
6	federal courts, to obtain the views of foreign governments? Foreign governments
7	often have a legitimate interest in these cases, but what procedures should be
8	developed for their participation, and as the paper notes, if they so desire,
9	governments sometimes as a matter of choice may decide they would prefer to be
10	silent in these cases.
11	The second theme is whether there is a need for consistent principles
12	in determining when United States antitrust rules and standards should be
13	modified or adjusted to accommodate foreign laws and policies? The most recent
14	interpretation in this area is the Supreme Court decision in Hartford Fire
15	Insurance, which many have read to say that only a literal
16	conflict, a clear literal inconsistency or conflict between the foreign law and the U.S. law, will cause or
17	provoke a consideration of an adjustment.
18	The paper suggests that that standard may be too narrow for
19	purposes of determining when U.S. law should accommodate foreign government
20	interests and policies.
21	The third theme is really a corollary of that. We are all familiar
22	with the principle of international comity in these cases, the Timberlane doctrine
23	and the like, but there is a question of consistency as to when and how the courts

35

1	undertake their balancing, and it is a very complex and unsettled area. The
2	Supreme Court decision in Hartford Fire does not necessarily contribute a great
3	deal of enlightenment on the subject.
4	The fourth theme is an interesting one. Could one approach this
5	subject somewhat similar to the well-developed United States state action
6	doctrine? Mid-Cal Aluminum is cited in the paper. When a foreign government
7	asserts it has an interest that it authorizes the challenged conduct or its law should
8	be taken into account, should the U.S. courts inquire into whether the alleged
9	anticompetitive conduct or restraint of trade was in fact authorized by and
10	actively supervised by the foreign government? That is a doctrine that is fairly
11	well developed in the United States.
12	The fifth theme is very familiar to Jim Rill. Some would call it the
13	DOJ International Guidelines Footnote 159 controversy. That is, should the
14	United States continue to take the position that export trade or export
15	opportunities alone can potentially constitute a Sherman Act violation? This is
16	the old issue of whether United States consumer welfare is being protected when
17	only export trade is involved.
18	Perhaps more importantly, the paper suggests that it should be made
19	clear in any event that the fact that export trade can be potentially covered or
20	challenged under the Sherman Act is not substantive; it is simply jurisdiction. If
21	there is a challenge involving export trade, it still has to be shown there was
22	substantive antitrust law violation.
23	This issue begins to dovetail with the broader issue that you were

36

1	considering in November and continue to consider of whether if it is export trade
2	or U.S. market access that is involved, whether the Sherman Act or the trade laws
3	and trade policy are the better vehicle or approach.
4	The sixth theme is the more broader one, should there be any special
5	procedural rules or limitations in a foreign commerce case. This is not necessarily
6	a question of comity, but for example, should there be at least discretion on the
7	part of the court to limit any damages to single damages? Should the court have
8	the authority in foreign commerce cases when the defendant prevails to do
9	anything with attorneys fees and in any event should attorneys fees or treble
10	damages be awarded automatically in these foreign commerce suits?
11	Those six themes, which are found in the executive summary and the
12	conclusions, are what the Antitrust Section suggests that the ICPAC Committee
13	should consider. Thank you.
14	DR. STERN: Thank you.
15	MR. VICTOR: Thank you. Good morning. I have a little frog in
16	my throat. I'll try not to -- what do frogs do? Croak?
17	MR. RILL: I don't know. You sound like you always sound.
18	MR. VICTOR: I was just listening to Harvey and one thought that
19	comes to me is actually a broader thought, which I don't know that I thought of
20	before in the same way. But that is this committee might want to give some
21	thought to what should the role of private litigation be today in the context of an
22	effort to develop greater coordination, enforcement coordination and cooperation
23	with other nations and other regimes.

37

1	Is there some benefits to gain by moderating or modifying our own
2	private litigation rights in an international context when we are trying to bring
3	along the rest of the world to see antitrust enforcement in a roughly similar
4	context that we see it, although not trying to convert everybody to the exact same
5	substantive or procedural standards? I don't know the answer, but it's just
6	occurred to me that that's a more global question.
7	The only other thing I have to add as a preliminary matter is that we
8	do have one additional working group on the task force, and that's a group that's
9	working on the issue of enforcement policy and cooperation. I am told we are
10	pretty close to having a paper for the task force and then the Section council and
11	officers to consider and, assuming that that does follow a normal course,
12	hopefully we'll have one additional paper to submit to this Committee for
13	consideration.
14	Thank you.
15	MR. PROGER: I should mention that Jan had a scheduling conflict
16	which she moved back to be here this morning, but unfortunately we are shortly
17	going to lose her. Therefore, before she has to leave, we wanted to give her the
18	opportunity to comment.
19	MS. McDAVID: Very briefly, I think the two papers that have been
20	presented to you and the views of the members of the task force that will be
21	presented today bring a unique perspective in that they really focus on the
22	practical realities of how you approach these issues from an unbiased perspective,
23	without the views of any particular client in mind, such as for example, Joe's

38

1	paper on international merger review or the comments that Harvey and Paul have
2	made with respect to private antitrust litigation involving multinationals.
3	I think that is almost a unique perspective because many other
4	groups that will be presenting to you today have a particular interest or client's
5	interest in mind. I think that is one of the unique benefits of an organization like
6	the Antitrust Section, one of the reasons that all of us have been so proud for
7	many years to have worked on it.
8	This is the finest tradition of the Section to make views known with
9	respect to both policy questions and the practical realities, for example, of trying
10	to figure out whether you've got 25 percent of the Belgium market when the law
11	doesn't define how you figure out what the market is. You can usually identify the
12	numerator, but figuring out the denominator is virtually impossible, and it's
13	extraordinarily difficult, as Joe's paper really does explain.
14	This is an area in which the ICPAC can take a leadership role and
15	accomplish some genuine benefits for multinational corporations.
16	DR. STERN: That completes your formal presentation. And we
17	were planning to take a break before we started the Q's and A's. I'm aware now
18	that you're going to be leaving, which is too bad.
19	MS. McDAVID: Don't work around me.
20	DR. STERN: Well, I think I should at least give the opportunity to
21	anyone, if they want to ask you questions before we break, to Janet, and then go
22	ahead and break and then come back for Q's and A's for the rest of the panel.
23	MR. RILL: I'd just like to thank you, Jan, for adjusting your

39

1	schedule to be with us today, and personally, and I think at least I can speak for
2	my law firm, I'd like to wish you the best of good fortune for a superb year that I
3	know you're going to have, following the superb year that Phil is still having.
4	MS. McDAVID: Thank you.
5	MR. RILL: Notice I said "is still having."
6	MS. McDAVID: One of the things we will do -- we will be very
7	anxious to follow the work Phil has done in communication with the committee as
8	you move forward with your actual recommendations.
9	MR. RILL: We very much appreciate that and we'll certainly make
10	use of it.
11	DR. STERN: Indeed, this paper and your presentation today are
12	extremely helpful. They're very much aligned with our requirements to come up
13	with a set of recommendations which are practical and hopefully constructive.
14	And your perspective that you've just added that you have tried to distill the
15	thoughts and experience of the various practitioners in practical suggestions, is
16	extremely helpful.
17	My only statement that I'd like to make for you to think about as
18	you leave and maybe as everyone has coffee right now is the statement that comes
19	at the very conclusion of your first paper, which dwells on the importance of the
20	European Union, that finding common ground with the EU perhaps holds the
21	greatest promise. I had the cursory impression because I need to really study
22	these papers which reflect a great deal of work, that some of the concerns, at least
23	in the first paper, are looking at potential recommendations out of this committee

40

1	applied to the whole world and how we relate with the whole world, whereas in
2	fact you recognize that there is a daily convergence, if you will, on a very
3	practical level, particularly with the EU, bearing in mind of course the importance
4	of Canada in that statement as well.
5	And so I would be interested in hearing what your optimal level of
6	convergence and harmonization would be with the EU. And then what your level
7	of comfort would be with countries other than the EU, perhaps in Canada and
8	Australia. In other words, your take on all of this might be different if we were
9	only asking you about a bilateral as opposed to a whole international set of
10	recommendations.
11	MS. JANOW: I'd like to just also extend my appreciation for all the
12	work that's been done over many months, and of course I have some specific
13	questions we can come back to, but I did want to share that, and also wanted to
14	extend my appreciation for the clarity of these papers and their definitiveness. As
15	a professor, I am very mindful that this be a business and policy relevant
16	document that we produce ultimately and not one that is read mandatorily by my
17	students alone.
18	MR. RILL: Notice she said alone.
19	MS. JANOW: So the definitiveness of the views, that is to say this
20	is not a wishy washy set of papers. This is very clear as to what your participants
21	thought would be useful. I think there are some dimensions that I'm hoping our
22	discussion can amplify. If a perfect world does not close all of these gaps that
23	you point to, what the consequences are of incompletion, whether that's regional

41

1	or more specific, and I think we need to talk about that a little bit more and hear
2	your views.
3	But I just want to thank you for all the hard work and also for the
4	business and policy-relevant focus.
5	DR. STERN: Okay. Let's take a break for 15 minutes for coffee
6	and side conversations.
7	(Recess.)
8	DR. STERN: Well, let's resume the hearings where we left off,
9	which was to have questions and answers of this panel of the American Bar
10	Association Section of Antitrust Law Task Force for the International Competition
11	Policy Advisory Committee.
12	Phil, would you like to perhaps -- you had some comments that you
13	wanted to make. I think it wouldn't hurt to put that right on the record and then
14	we'll just turn to questions.
15	MR. PROGER: Thank you. The only thing I was commenting to
16	Paula when we recessed was that there is a noticeable dichotomy between these
17	two issues. There is a general consensus worldwide that the concept of merger
18	review is a good concept, and we are trying to avoid undue burden on the parties.
19	But the concept of private litigation is very different. Private
20	antitrust litigation is not accepted worldwide and there is a fairly extraordinary
21	cultural clash between the United States and the rest of the world on the value of
22	private litigation. I think that because of that dichotomy these issues pose a whole
23	different set of issues for ICPAC to consider.

42

1	DR. STERN: Absolutely. Let's open it up to questions. Jim?
2	MR. RILL: Thank you. Again, let me express appreciation for the
3	hard work that's been done.
4	I would like to pose a couple of questions, if I may, to Joe, and
5	obviously anyone else on the panel. You suggest that initial filings should contain
6	the minimum amount of information needed to determine whether or not there's a
7	competitive issue. I'd like to ask you whether you think the U.S. current HSR
8	form provides that information, based as it is on industrial codes that are
9	developed for different purposes, and if you think it doesn't contain adequate
10	information, what further information do you, speaking either in your personal or
11	institutional capacity, think might be added?
12	MR. WINTERSCHEID: Well, first as to the Hart-Scott-Rodino
13	form itself. Again, certainly it meets the minimal information requirement. In
14	terms of whether it's the right information, obviously there are various schools of
15	thought on whether the SIC code format is the right format. It does at least
16	provide an objective way to present business information by product line,
17	recognizing that it does not necessarily represent a properly defined product
18	market.
19	So I think that the SIC codes, while imperfect, certainly at least
20	provide a baseline for providing the information. An alternative might be, in lieu
21	of the SIC codes, reporting as to lines of business or product lines in the manner
22	that the businesses themselves normally describe their businesses.
23	But I think what should be avoided, again coming back to the

43

1	market share and market definition point, and one of the key objections that we
2	have voiced with respect to the OECD common notification form, is to try and
3	capture market definition and market share information in that initial
4	filing. Market definition is usually contestable, and it is therefore not always necessarily
5	clear in any given situation, and it really goes to the heart of the competitive
6	analysis that the agencies need to undertake in their assessment.
7	MR. RILL: Thank you.
8	MR. PROGER: If you look at the form one has to make certain
9	assumptions as to what particular questions were designed to do and, while I think
10	that SIC code information does not necessarily properly define a relevant market,
11	the parties are free to supplement that initial submission if they want to draw
12	attention to what they think is the correct relevant market.
13	But sales by SIC codes is information usually maintained by the
14	parties which allows the agencies to easily identify overlaps. And I really do not
15	think it's intended to go much further than that. I would be concerned about any
16	other type of requirement that required a more subjective information basis.
17	MR. WINTERSCHEID: Coming back to one of the points made in
18	our paper, you'll recall the legislative history of the Hart-Scott-Act itself, one of
19	the key points was that the information called for should be limited to information
20	maintained by businesses in the ordinary course of their business, that they should
21	not be required to undertake significant information gathering simply for purposes
22	of making their initial submissions.
23	MS. JANOW: I'd like to ask two merger questions if we're talking

44

1	about mergers initially. One is given the differences in timetables, say between
2	the United States and the EU, if some of these improvements were made you could
3	still have a situation where, given the fixed timetable in Europe, that they would
4	be, in effect, completing their process ahead of the U.S. process.
5	The more global question is, this Committee's been thinking about
6	some of the issues that you've highlighted here in terms of problematic practices in
7	foreign jurisdictions and how to encourage jurisdictions to address those
8	deficiencies, move them away from market share and so on. And in the course of
9	this Committee's deliberation a recurring theme has been leading by example as a
10	stimulant for corrective action in those jurisdictions.
11	So my question to you is how does one stimulate change in your
12	view in foreign jurisdictions with respect to these practices? What are the
13	incentives? Certainly addressing our own imperfections is one way. But since we
14	know that for some jurisdictions introduction of merger control and filing fees is
15	the basis for legitimacy and worldwide turnover is a way to give jurisdictions a
16	bigger role in the world than maybe they should, based on the nexus to the
17	jurisdiction, how does one get over that mind set? Have you deliberated on that
18	point?
19	MR. WINTERSCHEID: I'll deal with the second question first, if I
20	may, because that also I think in part responds to Dr. Stern's earlier question on
21	the importance of the EU. In terms of leading by example, the EU is particularly
22	important, I think, in this process, because there are two basic world views as to
23	merger notification process and procedure: the U.S. example and, generally

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1	stated, the EU example.
2	In the scheme of things, the U.S. example is really the minority
3	view, in fact, the distinct minority view. Those jurisdictions which are in the
4	process of enacting merger control laws by and large are tending towards the EU
5	format. Certainly, this is the case as to the EU member states and an increasing
6	number of jurisdiction which are positioning themselves for ultimate accession to
7	the EU.
8	So recognizing the European Commission as an important
9	constituency at least in part merely recognizes the very important fact that, in
10	terms of counseling these jurisdictions, frankly, what the European Commission
11	has to say in many instances will be as important, if not more important, than
12	what the U.S. agencies are saying.
13	The European Commission, in our discussions with them, seems
14	generally sympathetic with many of these points. They recognize, for example,
15	that their procedures, while perhaps suitable for a transaction with Community
16	dimension, which by definition is a significant transaction with potential
17	significant effects within their jurisdiction, may not be suitable as a model for
18	national legislation absent an adequate local effects impact. Absent such an
19	impact, I believe that the European Commission is sympathetic to the view that the
20	Form CO format may impose unreasonable burdens or has the potential to impose
21	unreasonable burdens on parties.
22	You also see aspects of the EU procedures that have been
23	incorporated in national jurisdictions in ways that they were not really intended to

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1	be used. For example, the market share-based jurisdictional test seems to have
2	been derived from the EU's "affected market" test, which defines your reporting
3	obligations -- that is, how much information you have to give -- not whether
4	notification should be required.
5	So the EU is an extremely important constituency in terms of
6	leading by example. Certainly the U.S. agencies need to lead by example and to
7	help to educate jurisdictions as to the burdens that are involved and the sometimes
8	unintended burdens imposed on their own agencies that might not be necessary to
9	accomplish their enforcement mission. But the agencies must also enlist the
10	assistance of the European Commission in leading by example as well. In
11	educating jurisdictions as to issues and problems presented by the EU format, a
12	format which may or may not be the appropriate model to be adopted in particular
13	situations, the European Commission will undoubtedly be even more influential
14	than the U.S. agencies.
15	In terms of incentives, I think that there are clear incentives to
16	streamline the process, both in terms of interagency coordination and in terms of
17	promoting compliance with local law. I think, unfortunately, that one consequence
18	of the overexpansive jurisdictional tests is that companies are really becoming
19	somewhat selective in complying with international premerger notification
20	requirements, because the tests are subjective, because compliance is
21	unreasonably burdensome, and because risk of actual enforcement is oftentimes
22	non-existent.
23	So in terms of promoting compliance and corporate good citizenship

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1	in a global environment, I think that streamlining the process would promote those
2	objectives and, correspondingly, should incentivize the local jurisdictions to think
3	seriously about these issues.
4	As to the timing in the EU, the dyssymmetry in the EU timeline as to
5	transactions that are investigated is generally not a serious issue because once
6	again you can manage the timing process. In the U.S., again, you can initiate the
7	HSR process at the letter of intent stage. The EU process can't be initiated,
8	formally at least, until you have a definitive agreement. So there's a built-in
9	cushion, if you will, that in most instances tends to equalize the review periods as
10	a practical matter.
11	On a going forward basis, assuming that the EU would permit filing
12	contemporaneously based on a letter of intent, then, yes, there could be a greater
13	potential for serious issues arising just from the timing of the review. I'm not
14	sure, again given the very strict deadlines that the European Commission operates
15	under, that there's any easy solution to those problems.
16	But still the fact remains, again focusing on those transactions that
17	don't raise serious issues on the merits, I think the business community is better
18	off in having a common time frame, recognizing that in those transactions where
19	there are serious substantive issues that there are going to be some necessary
20	dyssymmetries in the actual review processes.
21	MS. JANOW: Thank you.
22	DR. STERN: Paul.
23	MR. VICTOR: I was going to make a couple of different comments

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1	on timing. Of course, if you get clearance from one of the jurisdictions in
2	advance, that's wonderful from the standpoint of the client. If you don't get
3	clearance, if there's a problem that surfaces, you're going to know about that
4	anyway, and you're going to be well aware of whether or not that problem is going
5	to have an overlap in the other jurisdiction and be able to deal with the
6	implications of that.
7	As to how to stimulate change in foreign jurisdictions, I don't think
8	we should lose sight of the fact that what's happening today informally is probably
9	stimulating more change than might happen formally in the sense that, Merit, you
10	were in Berlin, Jim, you were in Berlin, and we all heard Joel talk about how the
11	European Community and the United States antitrust authorities are working these
12	days almost as a seamless web. I think those were his words.
13	And, of course, they're learning from shared experiences. They
14	apparently speak to each other with great regularity and, even though the written
15	rules and regulations may be different, and they have to of course be mindful of
16	that and apply them as they are required under each jurisdiction, nevertheless the
17	pragmatic aspects of coordination tend to be taking place in many situations today
18	even on an informal basis and you can have influence that way.
19	MR. WINTERSCHEID: Merit, could I come back to one additional
20	point that Paul's comments raised. Again, on timing generally and also on our
21	overall initiative in consulting on a bilateral basis and what can realistically be
22	achieved and