| Slide 1 Merger Enforcement:
A Quest for Efficiency New York State Bar Association
Antitrust Section Annual Meeting Thomas O. Barnett
Assistant Attorney General
Antitrust Division
U.S. Department of Justice January 25, 2007
Slide 2 
Slide 3 Overview - Merger Review Process Efficiency
- HSR process
- Burdens/Trends
- Merger Review Process Initiative (2001 Initiative & 2006 amendments)
- Merger Enforcement Efficiency
- Transparency
- Mergers 2006 Highlights
Slide 4 Merger Review Process Efficiency - HSR premerger review process
- Since 1976, investigate most potentially anticompetitive transactions before merger is consummated
- More effective relief and greater certainty to merging parties
- Enforcement Goals:
- Identify potentially anticompetitive transactions quickly so that remainder can close
- Reach the right enforcement decision quickly and with minimal burdens necessary
Slide 5 Process Efficiency Transactions Cleared Without Additional Agency Review (FY 2002-2006)  [D] - 5,927 of 7,210 transactions proceeded without the Agencies requesting information beyond the initial HSR filing
Slide 6 Process Efficiency Transactions Cleared Without Agency Second Requests (FY 2002-2006)  [D] - Agencies issued 2ndrequests in 214 (3%) of 7,210 transactions
Slide 7 Process Efficiency Antitrust Division Investigations Resulting in 2nd Requests (FY 2002-2006)  [D] - 2ndrequests issued in 99 out of of 398 Division investigations
Slide 8 Process Efficiency - Volume of information produced
- Ten years ago: Few hundred boxes a “large” production
- Now: Terabytes, millions of pages common
- Verizon/MCI and SBC/AT&T: 25 million pages
- Concern for agencies as well as parties
Slide 9 Process Efficiency - Explanatory Trends:
- Technological change – electronic documents/data
- Complex products, specialized services, rapid change
- Merger analysis is increasingly sophisticated and data-intensive
- E.g., merger simulations and critical loss analysis
Slide 10 The Shape of Things to Come 
Slide 11 Process Efficiency - Conclusions:
- The volume of information will continue to increase
- Identify transactions that do not threaten harm to competition before issuing second requests wherever possible
- Improve ability to identify and process relevant information
Slide 12 Merger Review Process Initiative - 2001 Merger Review Process Initiative
- Aggressive & efficient use of initial waiting period
- Tailor 2ndrequest investigations
- Focus investigations on dispositive issues (e.g.exchange mergers)
- Encourage open communication/dialogue
- Scheduling agreements
Slide 13 Merger Review Process Initiative Antitrust Division Investigations Resulting in Second Requests (FY 2000-2006)  [D] - More effective use of the initial waiting period has enabled the Division to conclude more investigations without issuing 2ndrequests.
Slide 14 Merger Review Process Initiative  [D]
Slide 15 Merger Review Process Initiative - 2006 Amendments
- Announced in December ‘06
- Internal review of merger investigations
- “Process & Timing Agreement” merger review option
- Limit number of custodians/provide post-complaint discovery
- Contested litigation rare
- Revised Model 2ndRequest
Slide 16 Better Information Collection 
Slide 17 Merger Enforcement Efficiency Transparency
Slide 18 Merger Enforcement Transparency - Parties: Encourage open dialogue during investigation
- Public: Enforcement actions
- Public: Decisions to close
- Closing statements (e.g., AT&T/Bellsouth and Whirlpool/Maytag)
- 2006 DOJ/FTC Commentary on the Horizontal Merger Guidelines
- NY State Bar Association Annual Meeting Dinner
Slide 19 Mergers 2006 – Highlights - 1860 transactions notified to the agencies (8.9% increase over FY 2005)
- Over 580 transactions filed so far in FY 2007
- Antitrust Division:
- Opened 77 HSR + 20 non-HSR merger investigations
- Issued 17 2ndrequests
- 16 Transactions Modified
- 10 merger challenges filed
- 6 transactions restructured in response to Division investigations
Slide 20 Mittal/Arcelor - $33 billion steel merger, hostile transaction
- Anticompetitive effects in the $2.3 U.S. tin mill products market
- Consent decree requires sale of Dofasco (Arcelor subsidiary) or alternative tin mill product assets (Sparrows Point, MD or Weirton, WVa) if Dofasco sale not possible
Slide 21 Mittal/Arcelor “Pocket” decrees - Used by Division for some time, but rare
- Insurance policy on a fix-it-first remedy
- Insurance policy on regulatory fixes (e.g., FCC/radio station mergers)
- May be used in rare cases where antitrust review interferes with market by operation of law (e.g., foreign tender offer regulations)
Slide 22 
Slide 23 Maytag/Whirlpool - Residential washers and dryers
- High market shares creates initial presumption
- Initial Presumption Rebutted
- Well-established rival brands (GE/Frigidaire/Kenmore)
- Recent entrants with growing share (LG/Samsung)
- Large retailers (2/3rds of sales) can shift shares
- Excess capacity (U.S./Mexico/Korea)
- Customers/Internal Documents
Slide 24 Mergers 2006 – Year in Review  [D]
Slide 25 Exelon/PSEG - $16 billion electricity generation merger
- Focus on mid-Atlantic region (NJ and PA)
- Complex merger analysis:
- Electricity generating plants not the same (hydro/nuclear/coal/gas turbine)
- “Fuel curve”
- Auction process
Slide 26 Exemplar Cost Curve  [D] Note: For illustrative purposes only – not an actual representation of market conditions.
Slide 27 Exemplar Cost Curve  [D] Note: For illustrative purposes only – not an actual representation of market conditions.
Slide 28 Exemplar Cost Curve  [D] Note: For illustrative purposes only – not an actual representation of market conditions.
Slide 29 Exelon/PSEG - Likelihood of substantial anticompetitive effects in the $19.8b mid-Atlantic wholesale electricity market
- Consent decree: Divest 6 electricity plants (5,600 megawatts of generating capacity) in PA and NJ
- Transaction ultimately abandoned
Slide 30 Telecommunications Mergers - Verizon/MCI
- SBC/AT&T
- AT&T/BellSouth
- Sprint/Nextel
- Cingular/AT&T Wireless
Slide 31 Wireless Telecommunications | | DynaTAX 8000X | RAZR
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| Introduced | 1983 | 2004
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| Weight | 2 pounds | 3 ounces
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| Cost | $4,000 | $200-400
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| Talk time | 30 minutes | 7 hours |
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Slide 32 Wireless Telecommunications | | 1985 | 2006
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| subscribers | 203,000 | 219 million
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| revenues | $354 million | $118 billion
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| Avg. monthly bill | $95 (1988) | $49.30
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| Avg. minutes of use | 140 (1993) | 740 (2005)
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| Effective price | 44 cents/minute (1993) | 7 cents/minute (2005)
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| Penetration | 1% in 1985 | over 71% (2005)
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| Cell sites | 599 | over 197,000
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| Direct employees | 1,697 | 238,236 |
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(from CTIA & FCC reports)
Slide 33 Tunney Act Proceeding Metro Area in Verizon Territory: CLEC Fiber  [D]
Slide 34 Tunney Act Proceeding Other Competitive Fiber  [D]
Slide 35 DFA/Southern Belle - Dairy processing: anticompetitive effects in school milk contracts in 100 school districts in Kentucky & Tennessee
- Case history
- Pre-trial settlement
Slide 36 Benefits of Greater Transparency - Predicting Enforcement Actions
- More efficient planning by business
- More efficient review and resolution
- Fewer contested challenges
- Faster resolution through consent decrees
Slide 37 Greater Process Efficiency and Enforcement Transparency WIN-WIN-WIN Division-Business-Consumer Welfare
Slide 38 Merger Review:
A Quest for Efficiency New York State Bar Association
Antitrust Section Annual Meeting Thomas O. Barnett
Assistant Attorney General
Antitrust Division
U.S. Department of Justice January 25, 2007 | UNITED STATES DEPARTMENT OF JUSTICE
ANTITRUST DIVISION |
| 
U.S. Department
of Justice
