Global Policy Forum

The mission of an antitrust authority should, therefore, be to protect competition in all of its forms and varieties because competition is the one surefire way of guaranteeing that society's resources will be put to their most efficient use -- keeping costs and the resulting prices low, and encouraging firms to innovate.

Recognize The Central Role Of Efficiencies In Antitrust Analysis

Base Decisions on Sound Economics and Hard Evidence

Third, we must do everything we can to prevent antitrust from becoming politicized. As an economy grows, and the stakes become ever larger, firms are naturally driven to seek protection and help from their governments. They can be expected to try to use antitrust as a weapon to be wielded against their competitors. This is a problem faced by new antitrust agencies and old -- newer agencies can expect to see their legitimacy challenged, and more mature agencies are increasingly confronted by lobbyists and public relations experts seeking to influence decisions, not through arguments on the competitive merits, but through the media and otherwise.

The best thing that both new and old antitrust enforcement regimes can do to prevent antitrust from becoming politicized is to make sure our decisions are soundly grounded in economic theory and fully supported by the empirical and factual evidence. When complaints -- particularly those of competitors -- are brought to us, they must be tested against what Joseph Schumpeter called "the cold metal of economic theory." We must also ensure that our decision-making is transparent and fair. Senior enforcement officials should give merging parties and complainants an opportunity to engage them substantively before reaching a decision, and should bring their own mature judgment to cases and not rely uncritically on the advice of their staffs. And, we must have in place effective mechanisms for judicial review.

Realize That Our Predictive Capabilities Are Limited

Fourth, antitrust officials, like doctors, should take a sort of Hippocratic oath: before intervening, we should be confident that our actions will not cause harm. Antitrust authorities should be law enforcers, not industrial policy makers who try to move industries in a certain direction or dictate particular market results. Dictating industrial policy is not the proper role of an antitrust authority for a very good reason: the long-term (and, in some industries, even the short-term) predictive powers of antitrust enforcers are limited. Over the course of my twenty-five-year career as an antitrust lawyer, I continually have been amazed at how markets evolve -- often in ways that even the most sophisticated of industry participants were unable to anticipate.

In the United States, we have relatively little confidence in our ability to make predictions far out into the future and have much more faith in the self-correcting nature of markets. These beliefs lead us to be skeptical of self-interested claims by rivals that a merger will lead to their ultimate demise and explain why we demand strong factual and empirical proof before we accept such claims. This is also why we intervene only when a merger is likely substantially to lessen competition and when we believe we can prove that to an objective decision-maker by a preponderance of evidence.

Impose No Unnecessary Bureaucratic Roadblocks

Fifth, we must work hard to ensure that the antitrust laws do not themselves become bureaucratic roadblocks to efficient transactions. A vigorous, competitive, free-market economy produces a whole host of agreements and transactions every day. The vast majority are pro-competitive or, at worst, competitively neutral. Mergers are just one subset of the deals produced in a healthy economy, and government interference with, and delay of, the merger process should be kept to a minimum.

We enforcement authorities should therefore continually take stock of our procedures to be sure that only those mergers that raise legitimate competitive concerns are delayed and that we are stopping only those mergers that are truly anticompetitive. In recent years, the United States has been able to clear roughly 97 percent of all mergers in the first thirty days and we inspire to do even better. The Antitrust Division is examining our own internal procedures to find ways to make them work even better, and, last October we launched the Merger Review Process Initiative. The purpose of this initiative is to streamline the merger review process by encouraging and empowering Antitrust Division staff to narrow the focus of the review to critical legal, factual and economic issues as early as possible and to authorize the staff to enter into agreements with the parties under which we will agree to a procedural schedule in exchange for undertakings by the parties regarding submission of information and compliance with investigative requests.

We also just recently announced a new agreement with the U.S. Federal Trade Commission concerning clearance procedures for merger reviews and other antitrust matters. This new agreement for the first time formally allocates primary areas of responsibility, on an industry-wide basis, between the Justice Department and the Federal Trade Commission. We believe both of these initiatives will serve to make our merger review processes more efficient and effective, while at the same time reducing delay and the investigative burden on the merging firms.

Be Flexible and Forward Looking

Finally, antitrust agencies should be as flexible and dynamic as the industries with which they deal. We must make sure that antitrust adapts to changes in technology and in the economy. In particular, we should recognize that in our new, knowledge-based economy, competition in some markets is driven more by innovation than price. New-economy industries frequently require very large and risky upfront investments that will not be made without the promise of a substantial return. They also are often characterized by large network effects and low marginal product costs. All of this means that the most efficient outcome in some markets may be for a single firm to serve the entire market for at least a period of time.

In the new economy, the costs of regulatory missteps are therefore very high. Too much government interference will frustrate innovation and discourage efficient practices to the detriment of consumers worldwide. On the other hand, a totally hands-off approach could lead to high prices and frustrate the emergence of potentially superior technologies -- also to the detriment of consumers. The fact that many of the new economy industries are global in nature, coupled with the reality that numerous enforcement agencies may now be looking at the same transactions, make it that much more important -- and that much more difficult -- to get it right.

International Initiatives

This is an exciting era full of new and unique challenges for antitrust. By adhering to the principles I have enunciated here, I think we can successfully meet those challenges. Speaking from the United States perspective, it is important that we continue to be engaged with our enforcement counterparts around the world. As the economy becomes increasingly global, and as more and more jurisdictions begin betting on competition and antitrust enforcement, it is all the more critical that we continue our technical assistance efforts, continue to cooperate on investigations, and continue to achieve greater convergence.

Thank you.

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