It is an honor to be part of the Antitrust Division, to lead its talented and dedicated staff in protecting competition and consumers, and to share with you the Division’s annual spring newsletter.
The Division has had an eventful year. We continue to use all the tools available to us to achieve good outcomes for U.S. consumers, including merger and civil nonmerger investigations and litigations, criminal enforcement, international and domestic cooperation, and competition advocacy.
We focus on protecting competition in industries that affect the everyday lives of American consumers, whether involving e-books, real estate, health care, auto parts, or beer. Our competition advocacy efforts similarly focus on issues that matter, such as health care and intellectual property.
Our litigation efforts and successes this past year stand out. Until just recently, we had an unprecedented seven civil matters in active litigation, including both merger and civil nonmerger cases. We also have had several successful criminal trials since our last update.
With budgets tight, both for American families and for the Federal government, it is more important than ever that we make every taxpayer dollar count. Our results suggest we are doing just that.
In fiscal year 2012, the Division continued to crack down on domestic and international price-fixing cartels, obtaining $1.14 billion in criminal fines. Compare that total with the Division’s FY 2012 direct appropriation of $72 million and you can see that the Division gives taxpayers a healthy return on their investment. These fines are contributed to the Crime Victim’s Fund, helping Americans harmed by crimes throughout our country.
Fines against price fixers tell only part of the story. The Division protects consumers by stopping anticompetitive mergers and by attacking conduct that harms competition, raises prices, lowers the quality of goods, and hampers innovation. In short, effective antitrust enforcement saves consumers money.
Looking Out for the American Consumer
Our priority at the Division is to target anticompetitive behavior that puts consumers at risk. The Division’s ongoing criminal auto parts investigation is a good example. To date the Division has charged 9 companies and 12 individuals for conspiring to fix prices and rig bids on a range of auto parts, including seatbelts, steering wheels, and instrument panel clusters. The investigation has resulted in $809 million in criminal fines and jail sentences for several executives. And the investigation continues.
Effective civil enforcement also produces impressive outcomes for American consumers. Last year we worked together with state attorneys general to challenge a conspiracy involving Apple and five major book publishers to raise prices for e-books. The results tell the story. Our state AG partners have already obtained customer refunds of over $80 million from the defendant publishers. And, our settlements with those publishers have restored meaningful retail price competition for e-books. According to published reports, in just the last few months, the average price of the top 25 bestselling e-books has dropped $3, from over $11 to closer to $8.
Our recent challenge to the Anheuser-Busch InBev acquisition of Grupo Modelo is another good example. That merger proposed to combine the number one and number three brewers of beer sold in the United States. American consumers last year spent at least $80 billion on beer purchases. We sued to block the merger because we believe that the deal put the American public at risk of higher prices.
Health care is critical to American consumers. Over the past year, the Division prosecuted its case challenging Blue Cross Blue Shield of Michigan’s use of most-favored-nation (MFN) clauses in its contracts with hospitals. Our concern was that these provisions raise the price of health care and health insurance for Michigan consumers. Recently, Michigan enacted legislation prohibiting the use of MFNs in contracts between insurers and hospitals. This new law is a victory for Michigan residents and has allowed the Division to dismiss its lawsuit.
Focus on Litigation
Successful antitrust enforcement requires the ability to litigate when necessary. In the last year the Division’s litigators have been active and successful. In March 2012, the Division prevailed in an eight-week trial resulting in guilty verdicts against AU Optronics (AUO), a liquid crystal display (LCD) manufacturer, its American subsidiary, and two former executives for their role in a conspiracy to fix the prices of thin-film-transistor LCD panels. In December 2012, another individual was retried and found guilty. And in January 2013, a Division team secured a guilty verdict against a shipping executive for conspiring to fix rates on coastal freight between Puerto Rico and the mainland United States.
As I noted, during the last year the Division pursued a record number of civil antitrust challenges. In January 2013, the Division filed a lawsuit challenging Bazaarvoice Inc.’s consummated June 2012 acquisition of PowerReviews. Before the merger, the two companies had competed in the market for product ratings and reviews platforms in the United States. Retailers and manufacturers use these services to collect, organize, and display consumer-generated product feedback on company websites. Bazaarvoice is the dominant commercial supplier of ratings and reviews products and PowerReviews was its closest rival. This case is ongoing.
Other continuing civil litigation matters include the Division’s e-books case against Apple Inc.; the case challenging American Express’ credit card network rules; the lawsuit against the New York City tour bus joint venture, Twin America; the Anheuser-Busch InBev/Grupo Modelo merger challenge; and a lawsuit against eBay for unlawfully agreeing not to solicit or hire employees from Intuit.
The Division places a high value on cooperation, both with our international counterparts and with our partners in Federal and state government. This past year, the Division enhanced its relationships with important new enforcement partners in China and India, including by joining with the FTC to sign a groundbreaking memorandum of understanding with the Indian competition authorities. And we have continued to cultivate our strong relationship with the European Commission (EC). We worked closely with the EC in resolving competitive issues raised by United Technologies’ proposed acquisition of Goodrich Corporation, the largest merger in the history of the aircraft industry. The Division recently cooperated on specific matters with a number of other non-U.S. competition agencies as well, including those in Australia, Brazil, Canada, Colombia, Germany, Japan, Mexico, South Africa, and the United Kingdom. We continue also to participate in important multilateral organizations, like the Organisation for Economic Co-operation Development (OECD) and the International Competition Network (ICN).
Domestic cooperation is important to the Division as well. In the past year, we have cooperated on a number of projects with our sister agency, the Federal Trade Commission (FTC), including issuing joint comments to the U.S. Patent and Trademark Office urging the agency to adopt proposed rules that would increase the transparency of patent ownership. We also continue to work closely with the states attorneys general. We joined with a number of states in the Division’s lawsuit against American Express and with the state of New York in our Twin America case.
The Division continued this past year to focus on competition advocacy and on shaping competition policy. In December 2012, the Division and the FTC hosted a workshop on patent assertion entities (PAEs), bringing together outside lawyers, academics, and businesspeople to discuss the impact of PAEs on intellectual property-intensive businesses. The Division and the FTC hosted a similar workshop on MFNs in September 2012.
The Division also advances competition through its work with other Federal agencies. In the past year, the Division worked with the FTC and the Department of Health and Human Services to ensure that competitive principles are taken into account as health care reform is implemented. And in January of 2013, the Division joined with the Patent and Trademark Office in issuing a Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments, which focused on the use of exclusion orders at the U.S. International Trade Commission. The Division also has worked closely with the Federal Communications Commission on both policy matters and proposed transactions over the past year.
The other articles in this newsletter provide more detail about the excellent work the Division has done in the past year to protect competition and consumers. We remain steadfast in our efforts to ensure that markets remain free of anticompetitive restraints and consumers benefit from robust competition. All of us at the Division look forward to another productive and exciting year.