http://www.nytimes.com/2006/05/05/business/worldbusiness/05iht-antitrust.html

May 5, 2006

When it comes to antitrust, Washington is antibust

By Stephen Labaton

WASHINGTON -- President George W. Bush's government increasingly is handling U.S. antitrust cases with the most relaxed and least aggressive approach since the final years of the Reagan presidency.

When the Justice Department cleared Whirlpool's $1.7 billion acquisition of the rival appliance maker Maytag a few weeks ago, the decision demoralized the career ranks of the department's antitrust division, officials there have said. And it left private antitrust practitioners in Washington wondering whether, in light of the decision and the flurry of corporate deals, this administration would challenge any mergers.

The Whirlpool deal would create an entity with a dominating share of the marketplace, controlling about three-quarters of the American market for some home appliances.

The department justified its approval with a combination of evidence and law. That included confidential commercial details that the department says it cannot make public, a very broad definition of the marketplace to include foreign companies, some of which have yet to make a bigger push in the United States, and an expansive reading of the economic efficiency defense for permitting such deals.

In the coming months, everyone expects that the government will approve AT&T's proposal to buy BellSouth with very few conditions, just as the government has approved almost every other big telecommunications deal in the past few years.

U.S. antitrust officials have become gun-shy in recent years, in part because of two setbacks in the courts in 2004 - a defeat of the Federal Trade Commission's effort to block Arch Coal's acquisition of Triton Coal, and a loss by the Justice Department in its effort to stop Oracle from buying PeopleSoft.

And while the Bush administration, following its Democratic and Republican predecessors, continues its unsurprising policy of aggressively combating cartels and price-fixing,there are other signs of the U.S. government's lack of interest in antitrust enforcement. Despite the wholesale deregulation of some industries and the widespread consolidation of others, no one can remember a major case under the Sherman Act against a company for acting as a monopolist since the Clinton administration's pursuit of Microsoft.

The Bush administration is also threatening to undermine an effort by an independent agency, the Federal Trade Commission, as it pursues what it says are abusive efforts by major pharmaceutical companies to keep generic drugs off the market.

The commission, an independent agency led by Democrats and Republicans appointed by the president, has asked the Supreme Court to reverse a decision in a case the agency brought against Schering-Plough for paying a generic-drug maker, Upsher-Smith Laboratories, to delay the generics company from bringing a rival drug to the market. The commission has complained that such agreements violate both Section 1 of the Sherman Antitrust Act and the Hatch-Waxman Act, which Congress passed in 1984 to accelerate the development of lower-cost generic drugs.

Two weeks ago, the Federal Trade Commission released a study showing a sharp increase in deals between brand and generic pharmaceutical makers, which some officials say are having the effect of reducing competition for high-cost drugs. The study found that in the fiscal year 2005, of the 16 settlements between brand and generic makers over patent issues, 3 involved payments to the generics along with a commitment to delay the entry to market. And in the current fiscal year, 7 of 10 deals between brand drug companies and generic makers included a payment and a delay.

Jon Leibowitz, one of the five commission members, has criticized the trend toward settlements that keep generic drugs off the market.

"These settlements do deny consumers potential access to potentially major savings," he said in a speech two weeks ago to drug company lawyers in Philadelphia. He cited as an example a potential $2 billion savings that was lost to consumers when Cephalon, the brand manufacturer of Provigil, a sleep-disorder medicine, settled claims in recent months with four generic makers.

"By settling with all generic applicants, a brand firm ensures that consumers never have a chance to see those savings," Leibowitz said.

On the other side of the debate is the industry, which has been led by Billy Tauzin, a former Republican congressman from Louisiana. Tauzin, who helped regulate the drug industry as head of the House Energy and Commerce Committee, is the president of the Pharmaceutical Research and Manufacturers of America, a lobbying organization for brand- name drug companies.

His main argument is that the settlements do not violate antitrust law because they resolve costly and vexatious litigation. It is an argument that was adopted by the appeals court that ruled for Schering-Plough and seems to be prevailing at the Justice Department

The counterargument is that the costs of the lawsuits often pale in comparison to the potential savings of consumers, and courts have ruled that some settlements are contrary to public policy.

But the Justice Department notably did not sign the Supreme Court brief filed by the Federal Trade Commission last year. Since then, the justices have asked the administration to provide its opinion in the case, and officials predict that the Justice Department soon will come out against the commission.

Leibowitz says a court filing by the Justice Department could kill the case, although he suggested that the agency would continue to find other cases to challenge agreements between generic and branded drug companies that limit competition.

Still, pursuit of such cases has become rare in Washington these days, a prospect that has disheartened die-hard supporters of antitrust law.

"They don't even seem to think that monopolies are bad," said Albert Foer, president of the American Antitrust Institute, a research organization. "Big is efficient and efficient is good. This is a story about how ideology has taken over the law enforcement process."