Submitted by the OAS Trade Unit to the FTAA Working Group on Competition Policies

United States: Report on Developments and Enforcement of Competition Policy and Laws (October 1, 1995 Through September 30, 1996)

Introduction

1. This report describes federal antitrust developments in the United States for Fiscal Year 1996 ("FY96" -- October 1, 1995 through September 30, 1996). It summarizes the activities of the Antitrust Division ("Division") of the U.S. Department of Justice ("Department" or "DOJ") and of the Bureau of Competition of the Federal Trade Commission ("FTC" or "Commission").

2. Joel I. Klein became Acting Assistant Attorney General when Anne K. Bingaman departed on October 18, 1996. A. Douglas Melamed became Principal Deputy Assistant Attorney General, overseeing the Division's civil enforcement program, appellate activities, and international efforts, on October 15, 1996. Andrew S. Joskow became the Deputy in charge of Economic Analysis in October 1996, having been acting deputy since May.

I. Recent Developments and Changes in Law or Policies

A. Changes in Antitrust Rules, Policies or Guidelines

3. The "Telecommunications Act of 1996," Public Law 104-104, was signed into law by President Clinton on February 8, 1996. It is designed to open up the entire telecommunications industry to the influence of competitive market forces. By bringing down long-established barriers to competition in the local telephone and cable markets, and requiring incumbent telecommunications monopolies to open their network facilities to competing firms, the new law should enable consumers to benefit from lower prices, improved service, increased choices, and improved technology. For additional details on the law, see United States Annual Report for FY95, paragraphs 17-22 (DAFFE/CLP(96)17/07).

4. As was reported in last year's annual report, the FTC proposed on July 21, 1995, new rules, drafted in cooperation with the Department, to exempt from HSR reporting requirements certain classes of transactions that, based on enforcement experience, are not likely to raise antitrust concerns. The exemptions are intended to reduce an unnecessary regulatory burden on business and to allow both the FTC and DOJ to focus resources on transactions more likely to pose competitive harm. The proposals were subject to public comment until September 25, 1995. On March 25, 1996, the Commission adopted new rules amending the HSR reporting requirements that would exempt the following classes of transactions: (1) certain purchases of goods or realty in the ordinary course of business, including certain purchases of used durable goods where the purchase is designed to replace or expand production capacity; (2) certain real estate acquisitions, such as acquisitions of shopping centers and hotels and motels, not likely to violate the antitrust laws; (3) acquisitions of oil and natural gas reserves and certain associated production and exploration assets valued at $500 million or less; (4) acquisitions of coal reserves and certain associated productions and exploration assets valued at $200 million or less; (5) acquisitions of voting securities of companies that hold real property or carbon-based mineral reserves the direct acquisition of which would be exempt, and other assets valued at $15 million or less; and (6) acquisitions of realty acquired solely for rental or investment purposes.

5. On March 26, 1996, the Division issued a Protocol for Increased State Prosecution of Criminal Antitrust Offense. The protocol, which sets forth the circumstances where the Division may transfer prosecutorial responsibility for certain antitrust offenses to the States, is designed to enhance cooperation and antitrust enforcement efforts between the federal government and the State Attorneys General.

6. In May, 1996, the Commission issued a staff report on the findings of its 1995 hearings on Global and Innovation-Based Competition which examined whether marketplace changes in competition require any adjustments in U.S. antitrust law and policy. Entitled "Anticipating the 21st Century: Competition Policy in the New High-Tech, Global Marketplace," the report makes certain proposals concerning, for example, the treatment of efficiencies and the approach to "innovation market" analysis in examining mergers.

7. In August, 1996, the FTC and DOJ announced revisions that expand upon statements on health care provider networks contained in their joint Statements of Enforcement Policy in Health Care and Antitrust, last revised in 1994. The most important changes clarify that the more flexible rule of reason analysis will be applied to all provider-controlled networks that are likely to produce significant efficiencies that benefit consumers. The new guidelines are an effort to promote innovation in the industry but do not lessen antitrust scrutiny of anticompetitive health care arrangements.

8. In September, 1996, the Commission adopted amendments to Part III of the FTC Rules of Practice and related rules governing litigation in administrative cases. These procedural amendments will apply to all Part III proceedings begun on or after January, 1997 and are intended to minimize delay and streamline procedures for Part III matters.

B. Proposals to Change Antitrust Laws, Related Legislation or Policies

9. In February, l996, Chairman Pitofsky testified before a Congressional panel recommending against enactment of H.R. 2925, which would specify that certain kinds of health care provider networks must be judged under the rule of reason. While preventing restrictive treatment of provider networks is laudable, the Commission believes that health care markets are changing too quickly to allow potential efficiencies of provider collaboration to be based on any single set of criteria. Also, retaining the per se prohibition of certain forms of highly anticompetitive conduct, such as price fixing or market allocation, avoids complex and costly inquiries where the potential harm to competition is clear.

10. In 1996 legislators continued work on deregulatory proposals affecting the U.S. postal monopoly, the electric power industry and ocean shipping, all of which are likely to be taken up again by the 105th Congress. Lawmakers are also expected to take up proposals affecting the application of the antitrust laws to professional sports, the health care industry, and intellectual property.

II. Enforcement of Antitrust Laws and Policies: Action Against Anticompetitve Practices

A. Department of Justice and FTC Statistics

1) DOJ Staffing and Enforcement Statistics

11. At the end of FY96, the Division had 767 employees: 325 attorneys, 50 economists, 163 paralegals and 229 support staff.

12. During FY96, the Antitrust Division opened 347 investigations and filed 71 antitrust cases, both civil and criminal, in federal court. The Division was a party to 13 U.S. antitrust cases decided by the federal Courts of Appeals and filed amicus curiae briefs in six Court of Appeals cases and three Supreme Court cases.

13. During FY96, the Division filed 42 criminal cases against 41 corporations and 22 individuals. Thirty-one corporate defendants and 16 individuals were assessed fines totaling $26.8 million and 5 defendants were sentenced to a total of 2,431 days of incarceration. Another 8 individual defendants were sentenced to spend a total of 1,148 days in some form of alternative confinement. The Division obtained the highest criminal antitrust fines ever in its investigation of the lysine and citric acid markets. The $100 million fine paid by Archer Daniels Midland Co. (see below, paragraph 33) was the biggest fine ever imposed in a criminal antitrust matter.

14. The Division investigated 186 mergers and challenged nine; 21 transactions were restructured or abandoned prior to the filing of a complaint as a result of an announced challenge. The Division opened 331 civil investigations, both merger and non-merger, and issued 1,878 civil investigative demands (a form of compulsory process). The Division filed 20 non-merger civil complaints. Also during FY96, the Division responded to 24 requests for review of written business proposals.

2) FTC Staffing and Enforcement Statistics

15. At the end of FY96, the FTC's Bureau of Competition had 212 employees: 146 attorneys, 35 other professionals and 31 clerical staff. The FTC also employs about 40 economists who participate in its antitrust enforcement activities.

16. Based on its review of premerger notification filings, the FTC investigated 36 transactions with second requests for information. The Commission authorized the staff to seek preliminary injunctions in federal district court to block three proposed mergers (two of which were abandoned after such authorization), and accepted 21 consent agreements for public comment to settle anticompetitive concerns raised by proposed transactions. In addition, acting on two cases begun in previous years, the Commission dismissed two administrative complaints. Another four mergers or acquisitions were abandoned before the Commission could act and after FTC staff raised concerns that the transactions might reduce competition.

17. In the non-merger area, six consent agreements were accepted during FY96 involving a variety of legal theories, including horizontal restraints, exclusive dealing and resale price maintenance, in such sectors as pharmacy network services, fire engine fire pumps, athletic footwear and specialty wood products. The Commission issued one administrative complaint and one final order. An initial decision was issued by an Administrative Law Judge upholding a l995 Commission complaint.

18. The Commission secured a record $7.8 million in civil penalties in HSR enforcement actions against firms that failed to observe the premerger notification requirements and waiting periods under the HSR Act before consummating a notifiable acquisition. An additional $250,000 was obtained for a company's violation of a final cease and desist order.

19. Staff of the Bureau of Competition provided guidance to industry through five advisory opinion letters on whether specific health care arrangements might violate antitrust laws.

B. Antitrust Cases in the Courts

1) United States Supreme Court

a. DOJ or FTC Cases

20. There were no DOJ or FTC cases decided in the Supreme Court in FY96.

b. Private Cases

21. The United States filed an amicus brief in Anthony Brown v. Pro Football, Inc., 116 S.Ct. 2116 (1996). The issue in the case was whether federal labor laws preclude an antitrust challenge to an agreement among owners of professional sports teams to implement the terms of their last offer to a labor union after negotiations reached an impasse. Among other things, the Court rejected the government's argument that the nonstatutory exemption from the antitrust laws should end when the labor negotiations reach an impasse. The Court concluded that the exemption applied to the employer conduct at issue in this case because that conduct occurred during and immediately after negotiations with the union, concerned issues that the parties were required to negotiate collectively, grew out of and was directly related to the lawful operation of the bargaining process, and concerned only parties to the collective bargaining agreement.

2) Court of Appeals Cases

a. Significant DOJ Cases Decided in FY96

22. There were nine decisions in Antitrust Division cases by appellate courts in FY96 but only two published decisions. The two reported decisions were both in criminal cases and did not involve any issues of antitrust policy.

23. United States v. Nippon Paper Indus. Co., Ltd (available in Westlaw at 1996 WL 528426 (D. Mass. Sept. 3, 1996) is a district court decision which has been appealed to the First Circuit. The United States obtained indictments against a Japanese Corporation and its successor entity charging that it violated Sherman Act Section 1 by conspiring with other manufacturers of thermal facsimile ("fax") paper to raise the price of fax paper sold for importation into the United States. Defendant moved to dismiss the Indictment for failure to state an offense on grounds that (1) the Indictment alleged conspiratorial conduct undertaken entirely outside the United States; and (2) such wholly foreign conduct did not state a criminal Sherman Act violation. The Court agreed with both arguments. First, although the Indictment identified certain trading houses that purchased fax paper from the manufacturers at inflated prices and resold it within the United States as co-conspirators, that averment, the Court believed, did not suffice to show in-U.S. conspiratorial conduct. Second, the court held that the Sherman Act, when enforced criminally, did not embrace a conspiracy in which all the overt acts are undertaken abroad, even if the scheme produces substantial intended effects within the United States. Although the Supreme Court in Hartford Fire construed the Sherman Act to reach such conduct in a civil setting, civil precedents, the Court held, did not control in a criminal case. And the criminal prosecution of wholly foreign conduct, the Court believed, would raise substantial notice concerns.

b. FTC Cases Decided in FY96

24. FTC v. Coca Cola Bottling Co. of the Southwest is an appeal from a Commission decision that ordered Coca Cola Bottling Co. of the Southwest to divest the franchise to bottle Dr Pepper acquired in 1984. In June, 1996, the U.S. Court of Appeals for the Fifth Circuit reversed and remanded the Commission's divestiture order, holding that the Commission should have evaluated the acquisition under standards of the Soft Drink Interbrand Competition Act. 85 F.3d 1139 (5th Cir. 1996). The Commission subsequently dismissed its complaint.

25. FTC v. Crestwood Dodge, Inc. is an appeal from a Commission decision that ordered certain Detroit automobile dealers to remain open for certain hours during the week in order to remedy an agreement by those dealers to close on weekends and week nights. In May, 1996, the U.S. Court of Appeals for the Sixth Circuit reversed and remanded the Commission's order, directing that the Commission consider whether the order was justified in light of changed circumstances since issuance of the Commission's complaint. 84 F.3d 786 (6th Cir. 1996).

26. FTC v. Freeman Hospital is a suit to enjoin a proposed consolidation of two hospitals pending an administrative proceeding to determine the legality of the transaction under Section 7 of the Clayton Act. The Eighth Circuit Court of Appeals held that the district court did not abuse its discretion in concluding that the Commission had failed to make the requisite showing of a geographic market in support of its complaint. 69 F.3d 260 (8th Cir. 1995). The Commission subsequently dismissed its complaint.

3) Private Cases Having International Implications

27. In Optimum, S.A. v. Legent Corp., 926 F.Supp. 530 (W.D. Penn. 1996), an Argentine software distributor sued a U.S. software company, its wholly-owned Argentine distributor, and an Argentine company which had marketed the software through an exclusive contract with the plaintiff until the U.S. defendant acquired a controlling interest in it, alleging Sherman Act violations. Plaintiff argued that its contractual rights to act as exclusive representative and distributor of the software were terminated in an effort by defendants to monopolize the Argentine market. The Court granted the defendants' motion to dismiss for lack of subject matter jurisdiction. The Court held that the alleged anticompetitive conduct involved commerce with a foreign nation and U.S. export commerce, and therefore Section 6(a) of the Sherman Act required the plaintiff to show that the alleged conduct "had a direct, substantial, and reasonably foreseeable effect either upon United States domestic commerce, United States import commerce, or export commerce which injures export business in the United States." Plaintiff's only attempts to meet this burden were allegations concerning income flows between corporations in the U.S. and in Argentina. The Court held these allegations to be insufficient to establish the requisite domestic effect. The plaintiff further alleged that defendant's large market share created a barrier to entry for other U.S. companies, but the Court ruled that "plaintiff, a foreign corporation, cannot maintain an action under the Sherman Act based merely upon injury to United States exporters attempting to enter the Argentine computer software market."

28. In Metro Industries, Inc. v. Sammi Corp., 82 F.3d 839 (9th Cir.), cert. denied 117 S.Ct. 181 (1996), Metro, an importer and wholesaler of kitchenware, sued Sammi, a South Korean exporting company, and two of its U.S. subsidiaries, alleging, inter alia, that a Korean design registration system, which gave Korean holloware producers the exclusive right to export a particular holloware design for three years, constituted a market division that is a per se violation of Section 1 of the Sherman Act. Metro alleged that Sammi used this registration system to prevent Metro and other kitchenware importers from acquiring Korean-made stainless steel steamers from any of Sammi's competitors in Korea. In affirming summary judgment for the defendants, the Court of Appeals held that the design registration system was not an illegal market division arrangement subject to per se treatment under the Sherman Act. The Court went on to say that even if the per se rule would have been applicable to the defendants' conduct had it occurred in a domestic context, per se rules are not applicable to conduct occurring outside the United States. The Court held further that facts supporting jurisdiction had been properly pleaded, and that comity and fairness would not bar an assertion of jurisdiction. Summary judgment was appropriate, however, because Metro failed to produce any evidence of the injury to competition required in rule of reason cases.

29. In Hammons v. Alcan Aluminum Corp., No. SACV 96-0319-LHM(EEx) (C.D. Cal. July 1, 1996), the Court entered summary judgment for defendants in a state antitrust law action brought on behalf of a class of aluminum consumers alleging an illegal international conspiracy to restrict aluminum output and raise prices. The complaint was filed under California's Cartwright Act, but its relevant provisions appear to have been interpreted under federal Sherman Act precedents by the Court. Plaintiff alleged that U.S. and other aluminum producers had agreed to curtail output around the beginning of 1994 in conjunction with an inter-governmental "Memorandum of Understanding" designed to alleviate international aluminum oversupply problems by requiring the Russian government to reduce Russian output. In a brief opinion, the District Court applied three separate federal antitrust defenses: the non-justiciability of a "political question," the "act of state doctrine" and the Noerr-Pennington protection for petitioning government action. The court found no genuine issues of fact supporting claims that a private -- as opposed to intergovernmental -- production agreement had occurred.

30. In Caribbean Broadcast System Ltd. v. Cable and Wireless PLC, 1996-1 Trade Cas. (CCH) ¶71,263 (D.D.C. 1995), the plaintiffs, a radio broadcasting company organized under the laws of the British Virgin Islands and its U.S. citizen sole shareholder, sued various British companies alleging violations of the Sherman Act and of the Lanham Trademark Act. Plaintiffs alleged that the defendants misrepresented the coverage and strength of their radio station, thereby creating a barrier to plaintiffs' entry into the television and radio market in the British Virgin Islands by preventing plaintiffs from gaining access to advertising revenues. In granting defendants' motion to dismiss, the Court found that plaintiffs had demonstrated no adverse effect on U.S. commerce, or on prices and supplies in the relevant market, as the only harm alleged was to the plaintiff broadcaster itself, which at most would form the basis for a commercial tort action. In addition, the Court found that jurisdiction was lacking because the plaintiffs were neither importers nor exporters of U.S. goods and services, but rather were foreign sellers of a foreign product, namely broadcast airtime on stations in Tortola. "Because there are no allegations that Defendants' alleged misconduct has had any kind of anticompetitive effect on U.S. advertisers or consumers, and there are no facts showing how U.S. commerce has been adversely affected, the antitrust claims must be dismissed for lack of subject matter jurisdiction ... ."

C. Statistics on Private and Government Cases Filed During FY 1996

31. According to the annual report of the Director of the Administrative Office of the U.S. Courts, 720 new civil and criminal antitrust actions, both governmental and private, were filed in the federal district courts in the FY96.

D. Significant DOJ and FTC Enforcement Actions

1) DOJ Criminal Enforcement

32. On August 27, 1996, the Division filed six one-count felony informations in the U.S. District Court in Chicago, charging two Japanese firms and one U.S.-based Korean subsidiary with conspiring to fix prices to eliminate competition and allocate sales in the lysine market worldwide. The Division alleged that Ajinomoto Co. Inc. of Tokyo, Japan and its executive Kanji Mimoto, Kyowa Hakko Kogyo Co. Ltd. of Tokyo, Japan and its executive, Masaru Yamamoto, and Sewon America Inc. of Paramus, New Jersey and its President, Jhom Su Kim, agreed to increase the price of lysine and allocate the volume of lysine to be sold among the corporate conspirators, and participated in meetings and conversations for the purpose of monitoring and enforcing adherence to the agreed-upon prices during the period of June 1992 through June 27, 1995. On October 15, 1996, following a guilty plea, the defendants were fined more than $20 million.

33. On October 15, 1996, in the same investigation, the Division filed a two-count felony information in the U.S. District Court in Chicago charging Archer Daniels Midland Co. with conspiring to suppress and eliminate competition in the lysine market and in the citric acid market. Following a guilty plea, ADM agreed to pay a $100 million criminal fine -- the largest criminal antitrust fine ever -- for its role in the conspiracy. Lysine, a $600 million a year industry, is an amino acid used by farmers as a feed additive to ensure the proper growth of poultry and swine. Citric acid, a $1.2 billion a year industry, is a flavor additive and preservative found in soft drinks, processed food, detergents, pharmaceutical and cosmetic products. Three ADM executives have also been indicted in this investigation.

34. On December 13, 1995, a grand jury in the District of Massachusetts returned a two-count felony indictment presented by the Antitrust Division charging various companies and individuals with fixing prices of jumbo rolls of thermal facsimile paper. Count I of the indictment alleged that Jujo Paper Co., Ltd. of Tokyo, Japan, and Nippon Paper Industries Co., Ltd. of Tokyo, Japan participated in a conspiracy to fix fax paper prices charged in North America in 1990. Count II of the indictment charged that Appleton Papers, Inc. of Appleton, Wisconsin, Jerry Wallace, an executive of Appleton Papers Inc., and Hirinori Ichida, an executive of Mitsubishi Paper Mills, Ltd. participated in a conspiracy to fix prices for fax paper charged in North America in 1991 and 1992. The charges against Appleton Papers and Wallace were subsequently severed and transferred to the Eastern District of Wisconsin. On January 13, 1997, a jury sitting in the U.S. District Court for the Eastern District of Wisconsin found Appleton Papers and Wallace not guilty of the charges of price fixing. Upon motion by Jujo Paper and Nippon Paper, on September 3, 1996, the Court in the District of Massachusetts dismissed the indictment against them for failure to adequately allege subject matter jurisdiction. The Antitrust Division appealed the Court's decision to the Court of Appeals for the First Circuit. That appeal has been briefed and argued, and the parties are waiting for a decision (see para 23 above).

35. On April 24, 1996, the grand jury in the District of Massachusetts returned two additional indictments against three fax paper industry executives, all of whom are Japanese nationals. The first indictment alleged that Yoshihiro Kurachi, an executive with Kanzaki Paper Manufacturing Co., Ltd. and Noburu Kurushima, an executive with Mitsubishi Paper Mills, Ltd., met in Japan in 1991 and agreed to increase the prices of fax paper to a particular U.S. customer. The second indictment alleged that Koichi Tano, an executive with Kanzaki Paper Manufacturing Co, Ltd., participated in a price fixing conspiracy in 1991 and 1992 to increase fax paper prices in North America.

36. On April 26, 1996, again as a result of its investigation into the thermal fax paper industry, the Division filed a one-count felony information in the U.S. District Court in Massachusetts charging Honshu Paper Co. of Tokyo, Japan, with conspiring with others to increase the prices of thermal fax paper sold in the United States in 1991. Following a guilty plea, Honshu was ordered by the Court to pay a criminal fine of $225,000.

37. On March 6, 1996, the Division filed a one-count felony information in the U.S. District Court in Dallas, against ETI Explosives Technologies International Inc. of Wilmington, Delaware, charging a conspiracy to restrain competition in the commercial explosives industry. Following a guilty plea, ETI Inc. was fined $950,000 for rigging bids on explosives contracts sold to customers in Alaska. On September 16, 1996, similar charges were brought against six distributors of commercial explosives. Amos L. Dolby Co. of Corsica, Pennsylvania, Douglas Explosives Inc. of Philipsburg, Pennsylvania, D.C. Guelich Explosives Co. of Clearfield, Pennsylvania, Hilltop Energy Inc. of Lisbon, Ohio, Kesco Inc. of Butler, Pennsylvania, and Ren-Loi Inc. of Cuddy, Pennsylvania, all pleaded guilty to the charges and agreed to pay a total of $900,000 in criminal fines.

38. On September 26, 1996, the Division filed a one-count felony information in the U.S. District Court in Dallas, charging Austin Powder Co. and its Evansville regional manger, Thomas F. Mechtenburg, with conspiring with others between 1987 and 1992 to fix prices of commercial explosives and to rig bids submitted to certain customers. Following a guilty plea, Austin Powder Co. was fined $7 million and Mechtenburg was fined $20,000. Commercial explosives, a $1 billion per year industry in the United States, are used primarily in the mining, construction, and oil and gas exploration industries. Since September 1995, the Division's investigation into this industry has resulted in 12 guilty pleas by 11 corporations and two individuals, and $36 million in criminal fines.

39. On May 30, 1996, the Division filed a one-count felony information in the U.S. District Court in Philadelphia, charging A&L Mayer Associates, Inc. with conspiring with others to suppress and eliminate competition in the sale of tampico fiber from January 1990 to April 1995. Tampico fiber, a $4-5 million a year industry in the U.S., is a vegetable fiber imported from Mexico used to make household scrub brushes and brooms, and consumer and industrial brushes. Following a guilty plea, A & L Mayer Associates agreed to pay a $700,000 criminal fine. The Division also filed a civil complaint and proposed consent decree alleging that A & L Mayer Associates, A & L Mayer Inc., and Fibros Saltillo (their Mexican processor) engaged in anticompetitive activity, including retail price maintenance agreements which artificially inflated prices. On September 26, 1996, similar criminal and civil charges were filed in the U.S. District Court in Philadelphia against Ixtlera de Santa Catarina, S.A. de C.V., the other primary Mexican processor, and MFC Corporation of Laredo, Texas, its U.S. distributor. Following guilty pleas, these defendants agreed to pay a total of $1.5 million in fines.

2) DOJ Non-Merger Civil Enforcement

40. In February 1996, the Division brought its fourth challenge of a most favored nation clause provision in U.S. v. Delta Dental of Rhode Island. The Division's complaint alleged that Delta Dental, Rhode Island's largest dental care insurer, reduced competition in the dental services and dental insurance markets through agreements with its participating dentists that had the effect of preventing dentists from cutting fees below those offered in the Delta Plan. See 1996-2 Trade Cases (CCH) ¶ 71,609 for the text of the complaint.

41. The Division filed a complaint and proposed consent decree in U.S. v. American National Can (D.D.C. filed June 25, 1996) to break up an exclusive deal between two of the leading producers of equipment used to make laminated tubes for toothpaste, both of whom also manufactured and sold these tubes in the U.S. and owned and licensed rights to laminated tube-making technology worldwide. According to the Division's complaint, KMK Maschinen AG, a Swiss corporation whose U.S. laminated tube-making operations were conducted through Swisspack, a New Jersey corporation, exited the U.S. tube market by selling Swisspack to American National Can, agreed to sell its tube-making equipment exclusively to American National Can, and gave American National Can exclusive rights to license KMK's technology in North America. In return, American National Can agreed to buy all tube-making equipment and to license any related technology for use in North America only from KMK; at about the same time, American National Can exited the tube-making equipment business. The proposed settlement would increase the source of tube-making equipment and technology by terminating the exclusive licensing agreement between the two companies and would enable KMK to re-enter the laminated tubes market in North America. The text of the final consent decree appears at 7 Trade Reg. Rep. (CCH) ¶ 50,805.

42. In U.S. v. Alex. Brown & Sons, Inc., et al., the Division filed a civil antitrust suit and proposed settlement charging 24 major Nasdaq market-makers who buy and sell stocks to the investing public with inflating the quoted "inside spread" -- the difference between the best buying price and the best selling price of a stock -- in a substantial number of Nasdaq stocks, resulting in investors having to pay more to buy or sell stocks than they would have in a competitive market. The Division's complaint alleged that the firms and others adhered to and enforced a "quoting convention" that was designed to deter price competition among the firms and other market-makers in the trading of Nasdaq stocks. The proposed settlement requires the settling firms to stop the practice that inflated transaction costs and to monitor and record up to 3.5% of the telephone conversations of their Nasdaq traders. In addition, under the proposed settlement, Division representatives can listen in on traders' conversations, to monitor compliance with the decree. A text of the proposed settlement appears at 7 Trade Reg. Rep. (CCH) ¶ 50,806.

43. In U.S. v. Universal Shippers Association, Inc., the Division filed a civil antitrust suit on August 26,1996, challenging an agreement between Universal, one of the country's largest wine and spirits importers' association based in Bedford, Virginia, and the Lykes Bros. Steamship Company Inc., a major carrier of wine and spirits headquartered in Tampa, Florida. The Division's complaint alleged that the agreement required Lykes to charge other importers at least five percent more in shipping costs than it charged Universal, giving Universal an unreasonable advantage over its competitors. The consent decree prohibits Universal from agreeing to or enforcing an automatic rate differential clause in any contract and also nullifies any automatic rate differential clause in any existing contract. The text of the final consent decree appears at 7 Trade Reg. Rep. (CCH) ¶ 50,808.

3) Modification or Termination of DOJ Consent Decrees

44. On October 11, 1995, the Division filed a motion to modify the Modification of Final Judgment of the 1982 AT&T consent decree and to allow US West Inc. to provide long distance telephone services outside of its 14 state region to customers outside of its region who sign up for its planned local telephone services. The Division stated that the ability to offer long distance services to customers who choose US West's competitive local telephone services is likely to make those services more attractive to customers, and encourage the development of local telephone service in the markets that US West will enter.

45. Following passage of the Telecommunications Act of 1996, the United States moved for an order formally terminating the 1982 AT&T consent decree. On April 11, 1996, the district court (Judge Harold Greene) granted the motion, and terminated the decree, nunc pro tunc, as of February 8, 1996, the date the Act had become law. United States V. Western Electric Co., 1996 Trade Cas. ¶71,364, 1996 WL 2559904 (D.D.C.). As the Court, the Department, and all parties agreed, termination was appropriate because the 1996 Act, which builds upon the success of the decree in promoting competition, expressly provides (in ¶601) that the Communications Act of 1934 as amended by the 1996 Act -- and not the decree -- prospectively governs the BOCs' activities. The court further ruled that the Department of Justice and the FCC may use, in connection with their duties under the 1996 Act, certain documents that the Department obtained from the BOCs pursuant to the decree. Finally, the court dismissed as moot all other pending motions under the decree.

46. On July 2, 1996, the Division filed documents in the U.S. District Court in New York, agreeing to terminate the remaining provisions of the 1956 antitrust consent decree with IBM. The decree's main provisions were entered to create a market in used equipment that competed with IBM's new machines and to limit its monopoly power in the computer market. The proposed settlement would terminate by July 2001 the decree's provisions as they currently apply to IBM's midframe and mainframe computers.

4) FTC Non-Merger Enforcement Actions

a. Commission Administrative Decisions

47. In March, 1996, the Commission issued an order prohibiting the California Dental Association (CDA), a professional association with 19,000 members, from imposing a variety of restrictions on truthful and nondeceptive advertising and solicitation practices of its members. The Commission determined that the CDA had illegally restrained advertising of the price, quality, and availability of dental services and coerced compliance through expulsion and other means. In a key section of its opinion, the Commission found that broad, categorical bans on advertising of low prices and discounts are as anticompetitive as outright price fixing. California Dental Ass'n, Docket No. 9259, 5 Trade Reg. Rep. (CCH) ¶24,007.

48. In May, 1996, the Commission issued an administrative complaint charging that Toys "R" Us, the nation's largest toy retailer, used its market power to keep toy prices higher and to reduce toy outlet choices for consumers. The Commission seeks an order prohibiting Toys "R" Us from engaging in the anticompetitive activities alleged in the complaint. The matter is presently in litigation before an Administrative Trial Judge. Toys "R" Us, Inc., Docket No. 9278, 5 Trade Reg. Rep. (CCH) ¶24,034.

49. The Commission, in September, 1996, dismissed on public interest grounds its administrative complaints against six of the largest publishers in the U.S. charging that they had favored large bookstore chains with price and promotional discounts not available to independent book stores. The grounds for the dismissal were (1) changes in the industry that have replaced the principal forms of alleged price discrimination and (2) private litigation that had resulted in settlements with four of the publishers. Harper & Row, Docket No. 9217, Macmillan, Docket No. 9218, Hearst/Morrow, Docket No. 9219, Putnam Berkley, Docket No. 9220, Simon & Schuster, Docket No. 9222, Bantam, File No. 801-0059, 5 Trade Reg. Rep.(CCH) ¶23,288.

50. In July, 1996, an Administrative Law Judge issued an initial decision finding that the International Association of Conference Interpreters (AIIC), a voluntary professional association of interpreters based in Geneva, Switzerland, and the U.S. Region of AIIC (its U.S. affiliate members), conspired to fix or stabilize the fees for interpretation services performed in the U.S., and imposed a variety of restrictions that illegally restrained competition among them. The initial order prohibits the organizations from, among other things, fixing, or otherwise interfering with price, fee or certain other forms of competition among members working in the U.S. The case is currently on appeal before the Commission. International Ass'n of Conference Interpreters, Docket No. 9270, 5 Trade Reg. Rep. (CCH) ¶24,080.

51. The Commission, in May, 1996, issued a final consent order settling charges that Dell Computer Corporation restricted competition in the personal computer industry and undermined the standard-setting process by threatening to exercise its patent rights, which Dell failed to disclose during such process, against computer manufacturers adopting the VL-bus standard. Under the final order, Dell cannot enforce its patent rights against computer manufacturers using the VL-bus, the technology of choice in computers that use "486" chips. Dell Computer Corp., Docket No. C-3658, 5 Trade Reg. Rep. (CCH) ¶24,054.

52. In June, 1996, the Commission gave final approval to a consent order settling charges against RxCare of Tennessee, Inc., a leading provider of pharmacy network services in that state, that its use of a "most favored nation" clause in its pharmacy participation agreements discourages pharmacies from discounting and thereby limits price competition among such pharmacies in their dealings with pharmacy benefits managers and third-party payers. The order bars the respondent from having such clause in its pharmacy participation agreements. RxCare of Tennessee, Docket No. C-3664, 5 Trade Reg. Rep. (CCH) ¶23,957.

53. Two leading manufacturers of truck-mounted fire pumps agreed to settle FTC charges that each imposed restraints requiring their customers to deal exclusively in that manufacturer's pumps, thereby reducing competition between the two firms and impeding entry into this market by other firms. The consent order prohibits the companies from engaging in the challenged practices or similar ones. Hale Products, Inc., Docket No. C-3693, C-3694, 5 Trade Reg. Rep. (CCH) ¶ 24,076.

54. Other consent orders, final or proposed subject to public comment, are:

Precision Moulding Co.,Inc. (attempt to fix prices of stretcher bars for artist's canvases), Docket No. C-3682, 5 Trade Reg. Rep. (CCH) ¶ 24,049 (Final).

New Balance Athletic Shoe Inc. (resale price maintenance), File No. 921-0050, 5 Trade Reg. Rep.(CCH) ¶ 24,098 (Proposed).

b. Federal District Court Decisions

55. Federated Department Stores agreed to pay a $250,000 civil penalty for allegedly violating a 1979 FTC order prohibiting it from interfering with entry of another tenant in any shopping mall in which it operates a store. The complaint and proposed consent judgment were filed in October, 1996 in federal district court. Federated Department Stores Inc., Docket No. C-2958, 5 Trade Reg. Rep. (CCH) ¶23,912.

Continue on to Section E: Business Reviews Conducted by the Department of Justice