PREPARED STATEMENT OF SHEILA F. ANTHONY, COMMISSIONER, FEDERAL TRADE COMMISSION I support the Commission's testimony before this Subcommittee, except that part which discusses the clearance procedures for merger investigations. While "streamlining the merger review process" is a laudable goal that deserves our attention, I am not convinced that the approach agreed to by Chairman Muris and Assistant Attorney General Charles James fully maximizes the unique makeup, experience, and institutional assets of the Commission.1 ADDITIONAL COMMITTEE QUESTIONS Senator HOLLINGS. Senator Domenici has some questions that will be submitted for your response. [The following questions were not asked at the hearing, but were submitted to the Commission for response subsequent to the hearing:] QUESTIONS SUBMITTED BY SENATOR PETE V. DOMENICI Question. Why do you think it would be good government to repeal the common carrier exemption and allow the FTC to review the practices of such firms? Answer. The FTC does not have jurisdiction over "common carriers subject to the Acts to regulate commerce" (15 U.S.C. § 45(a)(2)), including common carriers subject to the Communications Act of 1934 (15 U.S.C. §44). When Congress originally exempted common carriers from FTC oversight, the telecommunications industry was controlled by a single, large telecommunications company subject to tight government regulation. The industry has undergone dramatic changes, however, since it was deregulated. Numerous telecommunication companies now offer an ever widening array of services and engage in fierce competition, sometimes resulting in deceptive advertising and marketing schemes. Because of the common carrier exemption, consumers in a very important segment of the economy telecommunications do not benefit from ordinary FTC action against deceptive and unfair marketing, advertising, and billing. Because the FTC, the primary agency responsible for consumer protection matters, does not have jurisdiction over telecommunications common carriers, consumers are not receiving the full benefit of the FTC's expertise and the agency is not being used to its fullest potential. Repealing the exemption would have a secondary benefit. The FTC has jurisdiction over charges on the phone bill that are not related to the transmission of telecommunications. We have been effective in attacking telephone bill "cramming" the placement of unauthorized charges for non-telecommunications services on consumer's phone bills. Acting as a common carrier with respect to some activities should not shield an entity from the FTC Act with respect to non-common carrier activities. Some "cramming" defendants try to cloak themselves with common carrier status, or claim immunity from the FTC Act based on common carrier activities unrelated to the practices at issue. While this defense has not been successful to date, countering the defense has proven expensive and time-consuming. Furthermore, there is the risk that a court could find that the FTC does not have jurisdiction over such defendants, thereby laying a foundation for fraudulent telemarketers and others to register as common carriers to shield themselves from FTC enforcement. In addition, repealing the exemption would permit the FTC to investigate and challenge the activities of all of the participants involved in a deceptive telecommunications-related scheme. Question. What authorities and what resources would you need to do the job of evaluating media competition issues? Answer. Prior to the execution of the new clearance agreement, the Department of Justice's Antitrust Division (DOJ) had handled the vast majority of media mergers based on its greater experience in the area. Much of this experience was accumulated because the DOJ has exclusive jurisdiction over anticompetitive practices by telecommunications common carriers, and those companies are becoming increasingly prominent in the media area. Without full jurisdiction over telecommunications common carriers, it remains inherently difficult for the FTC to garner the necessary level of experience within the broader media context to be able to prevail 1 See Statement of Commissioner Sheila F. Anthony on the Memorandum of Agreement Concerning Clearance Procedures for Investigations (Jan. 18, 2002), available at http://www.ftc.gov/ opa/2002/01/ftcdojsa.htm for further discussion. in a clearance dispute over a media merger with the DOJ. If Congress believes that the FTC should have full authority to investigate telecommunications matters, including media mergers, then a first step could be to repeal the common carrier exemption that prohibits the FTC from pursuing anticompetitive practices of telecommunications common carriers. Question. How much time has been spent fighting with the Department of Justice over who would review each merger or case involving issues of competition? Answer. Under the U.S. antitrust laws, both the FTC and the DOJ have jurisdiction to review proposed mergers as well as other competition matters. For mergers, 15 U.S.C. § 18a provides that only one of the two agencies can conduct a detailed antitrust investigation. Therefore, it is necessary for the agencies to determine which one will review a specific matter to avoid duplication. Šince 1948, the agencies have agreed that neither would proceed with an investigation until one agency "cleared" the matter to the other agency. This decision has been based primarily on one agency's greater expertise in a certain industry. Until recently, this process worked fairly well. From 1982 through 1989, for example, there were only about 10 clearance disputes each year. However, as traditional industry boundaries have become blurred in the current high tech economy, this system has resulted in significant clearance delays as each agency argues for the ability to handle a specific matter. Subsequently, from 1990 through 2001, there has been an average of 83 clearance disputes per year. Delays averaging three weeks occurred in 24 percent of the matters on which clearance was sought from the beginning of fiscal year 2000 through January 28, 2002. Cumulatively, these investigations were delayed by 4,521 business days more than 17 years. As an example of the system at its worst, when I arrived at the FTC last summer, one investigation had been delayed over a year because neither agency would "clear" it to the other. Question. How does the new "clearance" procedure meet the needs of the private sector and of consumers? Answer. The new clearance agreement will eliminate almost all of the delays of the previous system and will provide the public with a transparent understanding of how industries will be allocated. Instead of wasting time and resources on clearance disputes, the agencies will be able to devote that time to reviewing proposed transactions for possible anticompetitive consequences. In addition to the allocation of industries, the clearance agreement also improves the overall transparency of the process and institutes specific procedures for possible disputes. The agreement sets forth expedited time frames for review, provides for the development of a Clearance Manual that will be posted on each agency's Web site, and establishes a dispute process involving a Neutral Evaluator for clearance resolution all of which make the process more effective and efficient for the agencies, consumers and businesses. Question. What benefits accrue to the operation of the government under the new "clearance" procedures? Answer. The new clearance agreement represents good government. Because both agencies have jurisdiction to review proposed mergers while only one agency can actually conduct an antitrust investigation of the merger, the clearance agreement eliminates much of the conflict and inefficiencies in the previous system. In recent years, the clearance process had become more contentious as the convergence of industries blurred bright lines between industry boundaries. As each agency vied for clearance over particular matters in these converging industries, both the level of tension that developed between the agencies' staff and the delays associated with the prolonged process increased. The new agreement will significantly reduce the occurrence of clearance disputes through a clear delineation of industries and the establishment of a formal process for resolving any clearance issues. These policies will enhance the previous system by reducing the inefficiencies associated with the ensuing delays and virtually eliminating the possibility of protracted disputes between staff on clearance issues. The new agreement will remedy another inefficiency of the old process: division of matters even within a given industry between agencies based on historical experience with particular industry segments. Prior to the new agreement, one agency could not study the full array of related matters in some industries, and thereby maximize the breadth and depth of its expertise. It is not sound public policy for one agency to investigate cars, for example, while the other agency investigates trucks, or for one agency to investigate electricity mergers, while the other handles all other energy matters. The new clearance agreement allows for expertise in one industry to be developed as fully as possible by avoiding historical allocations to the agencies that divided different segments of the same industry. For example, the old allocations that divided cars from trucks, and divided electricity from other energy matters, will no longer be followed under the new agreement. Question. I understand that a request for an advisory opinion has been filed with the FTC seeking its guidance on advertising by a smokeless tobacco manufacturer that its products are a reduced risk alternative to smoking cigarettes. What steps will the Commission follow in reaching a determination on the advisory opinion request? Answer. The Federal Trade Commission received a request for an advisory opinion from the U.S. Smokeless Tobacco Company ("USSTC") regarding the acceptability of communicating in advertising that smokeless tobacco products generally are considered to be a significantly reduced risk alternative as compared to cigarette smoking. The Commission has placed USSTC's request on the public record, along with letters received from the Campaign for Tobacco-Free Kids, the American Academy of Otolaryngology Head and Neck Surgery, Inc., and the California Department of Health Services, urging the Commission to deny the request. Commission staff is reviewing the request and supporting materials submitted by USSTC and is consulting with the federal government's science-based public health agencies. Following this review, the Commission will make a determination as to an appropriate response to USSTC's request. CONCLUSION OF HEARINGS Senator HOLLINGS. The subcommittee will be in recess, subject to the call of the Chair. [Whereupon, at 10:58 a.m., Tuesday, March 19, the hearings were concluded, and the subcommittee was recessed, to reconvene subject to the call of the Chair.] DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED APPROPRIATIONS AGENCIES YEAR 2003 FOR FISCAL U.S. SENATE, SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, DC. NONDEPARTMENTAL WITNESSES [The following testimonies were received by the Subcommittee on Commerce, Justice, and State, the Judiciary, and Related Agencies for inclusion in the record. The submitted materials relate to the fiscal year 2003 budget request for programs within the subcommittee's jurisdiction.] DEPARTMENT OF COMMERCE PREPARED STATEMENT OF THE OCEAN CONSERVANCY The Ocean Conservancy is pleased to share its views regarding the marine conservation programs in the National Oceanic and Atmospheric Administration's (NOAA) budget and the Department of State, and requests that this statement be included in the official record for the fiscal year 2003 Commerce, Justice, State, and the Judiciary Appropriations bill. The Ocean Conservancy (TOC) strives to be the world's foremost advocate for the oceans. Through science-based advocacy, research, and public education, we inform, inspire, and empower people to speak and act for the oceans. TOC is the largest and oldest nonprofit conservation organization dedicated solely to protecting the marine environment. Headquartered in Washington D.C., TOC has regional offices in Alaska, California, Florida, and Maine. TOČ can not overstate the importance of this subcommittee to advance marine conservation and greatly appreciates the funding provided in fiscal year 2002. While TOC recognizes the subcommittee has many difficult choices to make this year, we urge you to continue to make ocean conservation a top priority. DEPARTMENT OF STATE Implementation of the Inter-American Convention for the Protection of Sea Turtles (IAC).—The IAC, the first international treaty dedicated to sea turtle protection and conservation, was ratified by the United States in 2000. To date, eight nations, including Brazil, Costa Rica, Ecuador, Honduras, Mexico, the Netherlands, and Peru have ratified the IAC, and Costa Rica will host the first meeting of the Parties in August 2002. TOC requests $100,000 (within the International Fisheries Commission program_account) in fiscal year 2003 for the State Department to assist the independent Secretariat and maintain the leadership of the United States on this treaty. NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION Conservation Spending Category In October of 2000, Congress established the Land Conservation, Preservation, and Infrastructure Improvement Fund (LCPIIF) to provide increased support for conservation activities. The fund dedicates an additional $480 million in the fiscal 78-462 D-15 |