By Assistant Attorney General Joel I. Klein
March 20, 2000
I am pleased to present this Report summarizing the recent major activities
of the Antitrust Division of the Department of Justice. As the Report documents,
this has been an active period for the Antitrust Division across the full-range
of its enforcement responsibilities: criminal prosecutions, merger review, and
civil non-merger activities. Our accomplishments range from prosecutions of
international cartels that have resulted in greater fines than ever before to
successful challenges to multibillion dollar mergers, not to mention challenges
to exclusionary behavior in technologically critical industries.
Antitrust plays an important role in our economy. Competition is the
cornerstone of this country's economic foundation. We have long extolled the
virtues of the free market, which provides business with the opportunity to
innovate, produce, and distribute goods and services without direct intervention
by the government. Competition, rather than government directives,
determines which businesses will succeed, and consumers are the ultimateand
appropriatebeneficiaries of the competitive process.
The antitrust laws ensure that the benefits of the competitive process
are not interdicted by private anticompetitive conduct. The Supreme Court
has described the Sherman Act as the "magna carta" of the free
enterprise system. The antitrust laws are thus
used to deter and punish anticompetitive conduct and to obtain prospective
relief to prevent such conduct in the future.
At the same time, caution must be taken to assure that the antitrust
laws are not misused to protect competitors from the vigor of the
competitive process. In a free market system,
innovation and creativity should be rewarded, not penalized. There will inevitably
be winners and losers in this battle, but while the antitrust laws are intended
to prevent conduct that impairs the competitive process, the antitrust
agencies are not in the business of picking who should win and who should lose.
That responsibility falls to consumers, who make that determination through
their purchasing decisions.
This is the kind of antitrust enforcement policy to which this
Administration is committed. It is both principled and pragmatic. There is no
presumption that "big" is "bad," but neither is
there an assumption that the market will always "correct" anticompetitive
problems. Instead, the Antitrust Division pays careful attention to facts,
informed by economic analysis, in making its enforcement decisions.
Despite the diversity of our enforcement targetsranging from hard-core
criminal violations to exclusionary practices by dominant producers and service
providerswe have observed certain important trends that cut cross the
full range of competitive activity: globalization of trade, rapid technological
change, and deregulation. Each of these trends has important implications for
the future of antitrust enforcement.
(Description of photograph: Assistant Attorney General Joel Klein sitting at
Globalization of Trade
International trade is of increasing importance to the economic
well-being of United States producers and consumers. U.S. firms frequently export
to foreign countries, and American consumers purchase goods
manufactured abroad. Nearly 25 percent of our GDP is now related to export and
import trade. The increasing globalization of economic behavior presents
important challenges to antitrust regimes that
have traditionally been administered by individual sovereign nations. The
Antitrust Division has taken account of the globalization of trade in important ways.
First, the Antitrust Division is devoting more of its resources to
uncovering international cartel behavior that has significant economic
consequences for American consumers. Perhaps the most widely publicized example
during the past year was the successful prosecution of companies and
individuals involved in vitamin production, which culminated in fines of over $875
million for companies and in significant jail time for individuals. More of our
criminal investigations involve foreign companies than ever before. To detect
and prosecute international cartels, the Antitrust Division has developed
programs that encourage cooperation by foreign companies and their
employees, including various forms of cooperation agreements with other governments.
So, too, the Antitrust Division has recognized the international dimension
of merger activity. An increasing number of transactions have competitive implications
in more than one country, and today it is not uncommon for a transaction to
be subject to multicountry review. The Antitrust Division has endeavored to
develop good working relationships with other countries and the European Union.
We are working closely with governments around the world to cooperate in merger
review, both to minimize burdens on private parties and to advance the cause
of proper antitrust analysis. To advance this process, the Attorney General
established the International Competition Policy Advisory Committee, which recently
issued its report reviewing international antitrust issues and making recommendations
(Description of photograph: Assistant Attorney General Joel Klein speaking
in front of a microphone. In the background, to his right, is Attorney General
A number of our most important industries have been
characterized recently by unprecedented levels of technological change. Such change
has important implications for antitrust enforcement. On the one hand,
such change creates opportunities for companies to develop new products
and services and find rapid customer acceptance. It has been argued that the
prospect for such change reduces the need for antitrust enforcement because
a company that dominates an industry today may be replaced tomorrow by
a company that suddenly offers a superior product or service. However,
rapid technological change may actually increase barriers to entry through
network externalities and first-mover advantages, which pose risks that
markets will "tip" very quickly toward a dominant supplier and thereby
make entry extremely difficult. The more important that innovation becomes
to society, the more important it is to preserve economic incentives to
innovate. In such circumstances, timely and effective antitrust enforcement may
be the key to preserving an environment in which companieswhether new or
old, large or smallbelieve that there will
be no artificial barriers to bringing new products and services to market.
It is undoubtedly true that rapid technological change requires
careful attention to facts. Our challenges to the Lockheed Martin-Northrop
Grumman transaction and Microsoft's monopoly of computer operating systems are
not garden-variety antitrust actions. They and other challenges filed by the
Antitrust Division were undertaken only after careful consideration of
both historical conduct and likely future effects. The fact that antitrust analysis
of issues arising in high-technology industries may be difficult is no basis
for abandoning the effort altogether. Enforcement decisions that are made
today, especially in industries characterized by rapid technological change, will
have important ramifications for the nature of the American economy for many
years to come.
In recent decades, legislative and regulatory changes in the United
States have reversed a generation of pervasive government regulation and
deregulated such basic industries as telecommunications, energy, financial services,
and transportation. Competition, with appropriate reliance upon antitrust
laws, has again become the norm.
The Antitrust Division continues to work with various agencies to find
ways to replace regulatory constraints with competitive incentives. We have
been very active in promoting competition pursuant to the Telecommunications
Act of 1996, both to the Federal Communications Commission and in the courts.
The Antitrust Division is the primary advocate of competition within
the executive branch and works regularly with Congress, urging that the
marketplacethrough purchase decisions made by consumersrather than
government agencies determine the products and services that businesses will provide.
The United States has again become the dominant economy of the world. The fact
that this reemergence has coincided with a substitution of competition for regulation
and a reinvigorated antitrust enforcement policy is not a coincidence. Michael
Porter noted in his landmark work The Competitive Advantage of Nations
(at pp. 662-63) that domestic firms spared from competing at home are unlikely
to succeed abroad. He also found that the importance of domestic rivalry has
"strong implications for antitrust policy
. A strong antitrust policy,
especially in the area of horizontal mergers, alliances, and collusive behavior,
is essential to the rate of upgrading in an economy." We could not agree
I hope you will find the attached report informative. This is the
first Annual Report published by the Antitrust Division in over three years. As
a result, the discussion of our enforcement programs includes references to
certain matters begun before fiscal 1999 that carried over into that year, and
the appendices contain information about cases filed subsequent to publication
of our last annual report.
Our recent accomplishments are testimony to the hard-working men
and women of the Antitrust Division and the bipartisan support that
antitrust enforcement has enjoyed. Both are critical to the health and future of
the American economy.