U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON MONOPOLIES AND COMMERCIAL LAW OF THE COMMITTEE ON THE JUDICIARY, Washington, D.C. The subcommittee met at 10 a.m. in room 2141, Rayburn House Office Building, Hon. Peter W. Rodino, Jr. [chairman] presiding. Present: Representatives Rodino, Seiberling, Jordan, Mazzoli, Hughes, and McClory. Staff present: Alan A. Parker, general counsel; Alan A. Ransom, William L. Sippel, and Tom S. Runge, counsel; and Franklin G. Polk, associate counsel. Chairman RODINO. The subcommittee will come to order. Our purpose this morning is to conduct a hearing on antitrust exemp- I'm asking the Assistant Attorney General for Antitrust, Mr. Donald immunities. As all of us know, there has been increasing concern expressed by both past and present Administrations, by the courts, and by the Congress, on whether or not, and to what extent, present exemptions and regulations serve the broad public interest as opposed to narrower private interests. I think that the Nation's basic philosophy regarding antitrust policy has been aptly summed up by the Supreme Court in the Topco case, in which this Court stated that: Antitrust laws in general, and the Sherman Act in particular, are the Magna And the freedom guaranteed each and every business, no matter how small, is (1) The courts have eliminated the so-called learned professions exemp tion, and recently narrowed the State action exemption. The Federal Trade Commission has been vigorously pursuing its attack on State regulatory policies that serve to eliminate competition to the detriment of the consumer. Finally, the Department of Justice has recently completed detailed studies on regulated ocean shipping, the McCarran-Ferguson insurance exemption, and the Capper-Volstead cooperative exemption. It has also compiled a summary of all our antitrust exemptions, and we are happy to be able to use these as a starting point for this endeavor. We know that this morning's presentation by the Department of Justice and the Federal Trade Commission will provide constructive information. We hope that they will see this also as an opportunity to recommend to the Congress what changes might be made in Government regulation and exemptions, so as to enable them to better serve the public. We wish particularly to urge both the Committee and the Antitrust Division to supplement their presentation with any studies or other materials they feel would serve as a useful foundation for this project. With that I'd like to ask the ranking minority Member, Mr. McClory, if he wishes to make any opening remarks. Mr. McCLORY. Yes, I do. Thank you very much, Mr. Chairman. I'm pleased that you have scheduled our Federal antitrust enforcement agencies to discuss with us the various antitrust exemptions and whether they can continue to be justified. I might say that the last Congress was certainly a banner term so far as our antitrust efforts were concerned. You, Mr. Chairman, with my support, had the opportunity to recommend and secure passage of the Hart-Scott Rodino bill which, of course, included the parens patriae title which you individually sponsored, as well as the civil investigative demand title and the premerger modification title. It is, a monumental piece of legislation promoting private enterprise and discouraging actions which are violative of the antitrust laws. And also, I had the privilege to sponsor on this side the measure which was sponsored on the other side by Barbara Jordan which repealed the authority of the States to enact "fair trade" laws. This repeal was another boon to our private, free, competitive society. and This is the kind of a meeting today, it seems to me, which in the days before the sunshine had blinded us, we would have informally had in a closed session. I hope that the formality of an open transcribed meeting does not limit the number or the candor of our questions. And I hope, too, that this formality itself does not give misleading promise that great changes definitely lie ahead. The subcommittee is, indeed, studying only what to study. In reviewing these exemptions I must confess some frustration. Although the rules of the House grant this committee jurisdiction over antitrust matters, and although at every turn we see practices that should be covered by antitrust laws, this committee is, or at least has been, powerless to act in many instances. And why? Because these practices are exempt from the antitrust laws. Under the complexity of the House rules it appears that we do not have jurisdiction over many exceptions to our own antitrust rules. Unless the future is to differ from the past, two of the three major recommendations of the task group would be referred to other committees. Because of antitrust exemptions, laborers collect wages for work not performed, truckers cannot haul shipments both ways, and consumers pay too much for goods and services from milk to air travel. Yet none of these particular problems, unfortunately, is one that we presently have jurisdiction to correct. However, there are areas where we can act. For example, recently we asserted the jurisdiction of this committee with regard to professional baseball. Mr. Chairman, I hope that if we decide to study a particular exemption in depth, we can play an important role. This can only be done if we give active consideration to the possible elimination of some of these exemptions. In this way we can continue to strengthen our antitrust laws which are the bulwark of our system of free enterprise. Thank you, Mr. Chairman. Chairman RODINO. Thank you. We will now hear from the Honorable Donald I. Baker, Assistant Attorney General for the Antitrust Division of the Department of Justice. Mr. Baker, you may proceed as you wish. Mr. BAKER. I will not burden you with the whole of my statement. If it's all right with the committee, I will submit the statement for the record and just summarize it. Chairman RODINO. Without objection it will be inserted in the record in its entirety. [See p. 8.] TESTIMONY OF HON. DONALD I. BAKER, ASSISTANT ATTORNEY GENERAL FOR ANTITRUST, ANTITRUST DIVISION, DEPARTMENT OF JUSTICE Mr. BAKER. Well, I very much want to thank the committee for setting up these hearings and asking us to come. As, Mr. Chairman, both you and Mr. McClory have said, this is an extremely important subject, and I think that it's terribly important that we do, today, have a new look at a lot of these antitrust immunities. Too often they have been the product of history, of circumstances ong gone, of economic conditions that are entirely different from the world in which we live. Many of the exemptions, particularly in the regulated sector-some of which Mr. McClory spoke of-date from the depression era where, sentially, the spirit of the times was survival and solvency, not ciency and competition. Antitrust, of course, is a fundamental commitment to competition as most efficient economic regulator; it is a commitment to competition because competition allows businessmen to make choices based on guesses as to the market, and allows the consumer to pay what they're willing to pay and to make their own choices. their It is, indeed, closely related to broader notions of freedom. The Task Group on Antitrust Immunities, which was set up by the Ford administration in 1974, was organized for the very purpose of having a new look, a systematic look, at the antitrust immunities and exemptions which we had in this country. What we found, of course, was that this is truly a ragbag collection covering all kinds of different things from all kinds of different periods, with all kinds of justifications, and with great diversity in economic effect. The task group itself was presided over initially by my predecessor, Assistant Attorney General Thomas Kauper, and included representatives of the Office of Management and Budget, the Council of Economic Advisers, the Council on Wage and Price Stability, the Council on International Economic Policy, and the Domestic Council. Most of the staff work of the task force was done by members of the Antitrust Division. Basically, what I've done in my testimony is divide the exemptions that we looked at into three general categories: First, the exemption the task force looked at only very briefly; second, those which we found had substantial effects on competition on markets-but on which, for a variety of reasons which I will explain, we did not make recommendations; and third, those exemptions where we did conduct very substantial studies and did make recommendations, namely in the fields of milk marketing, of ocean shipping conferences, of insurance, and postal express statutes. Beginning at page 6 of the testimony, we summarize very briefly the various provisions of exemptions which we did not review in any great detail. The Newspaper Preservation Act was a recent statute, and we decided that we would let it stand. We looked at the Energy Policy and Conservation Act of 1975. Again, it was a recent statute, and was part of an international program to which the United States is a signatory. We looked at the Defense Production Act's antitrust exemption for certain voluntary agreements, and found the safeguards there were generally adequate, and that there had to be participation by representatives of the public. With respect to the Webb-Pomerene Act, which deals with the export trade associations, allowing American firms to get together to sell products abroad, we found that-in general-this is not of great economic importance. It is not widely used by businesses desir ing to operate overseas-with a few exceptions for primary products-and so we did not go further on that. Similar considerations influenced our judgment on the Small Business Act, which did not seem to have particularly harmful effects. The very specialized marine insurance area, again, we passed by on grounds that it wasn't particularly important. The Sports P.... which, again, b.. exemption, whic is another example of an exemption effect. We did focus on the baseball e of ancient judicial decisionmaking. and we recommended that be eliminated. It's completely inconsist ent with what is done with all of the professional sports, and we could see no basis for treating it differently. That subject was discussed at some length in the testimony of my colleague, Joe Sims, before the Committee on Professional Sports last year, and we stand behind that testimony. The second general category of exemptions, which I begin to discuss on page 10 in my testimony, were exemptions which we thought were of substantial economic importance but in which we did not recommend specific changes. We began with one of the most important, the labor exemption, which really represents an attempt to accommodate two rather inconsistent policies, and has been a difficult area to administer. The first policy is that we shall not allow competition to govern in the primary market for labor; that we will not have competition among employees, among unions-in that field. The other policy is that we shall have competition in the secondary markets for products that are produced by labor. The whole history of the labor exemption is an exercise in trying to draw a workable line between a no-competition policy in the primary market, and a competition policy in the secondary market. Very often I have found, and what the Task Group's report reflects, is that the conflict in this field is not between management and labor, but between unionized labor and unionized management on one hand, and nonunionized management organizations on the other. Most of the casesthe antitrust cases-involve attempts by labor and management and unionized people to make sure they're not undercut by products produced by nonunionized labor. The cases cover the full gamut. The reason we decided not to recommend any legislation was that the line itself, this complicated line between primary and secondary markets, did not seem to be neatly subject to a statutory treatment. And the Supreme Court, in it's Connell Construction decision in 1975, has indicated its willingness to have a hard look at labor-generated restrictions which fall fairly heavily in the secondary market activities. The second exemption that I discuss in this part of the testimony concern the exemptions for government-owned enterprises, and for Sovereign acts of governments. Essentially, one of the continuing problems we have is that more and more activities that are traditionally regarded as commercial in Our society have been taken over by government bodies. Airports were private-airports are now generally public-old-fashioned railroad terminals were private, sports facilities are generally public now; and there's a whole range of antitrust cases dealing with these State-owned, or municipal-owned, enterprises. And, essentially, what we said in the report was that we thought it was possible to draw some sensible lines-and the courts are working toward this to drawing sensible lines between what is essentially political activity on one hand, and what is essentially commercial activity on the other hand. Therefore, if the State runs a bank-as it does in Delaware-if the State runs a stadium, it's fairly likely that they would be subject to antitrust liability. And this, indeed, was somewhat the standard that was applied in the more difficult foreign area, where we have a lot of activity by Sovereigns, in the Sovereign Immunities Act of 1976. The other related exemption is the Parker v. Brown exemption for State mandated restrictions on competition. That was an enormously broad and open-ended exemption. When the Supreme Court first spoke it was ambiguous in a variety of ways and the lower courts give |