Hearing of the House Judiciary Committee Antitrust Task Force Subcommittee - Department of Justice Antitrust Division

Interview

Oversight Hearing of the Antitrust Agencies: Department of Justice Antitrust Division and Federal Trade Commission Bureau of Competition

REP. MIKE PENCE (R-IN): Thank you, Chairman. Thanks for calling this hearing and bringing these two distinguished public servants before this task force.

I appreciate your service to the country.

And I'm curious about a couple kind of headline issues and what either one of you might be doing with them. Number one would be when I'm back in Muncie, Indiana, people are -- I don't know much worried about some of the issues we fight about out here, but they're pretty worried about gasoline prices.

And to the chair of the FTC I'd ask: There's calls for regulation of the oil and gas industry here in Congress. Price- gouging statutes have been advanced. I haven't supported them, but -- I mean as federal solutions. I know the FTC has looked at this, and I'd love to know what has the FTC actually found at this point with regard to collusion in the pricing of gasoline?

And secondly -- also ripped from the headlines, Mr. Barnett -- is this whole issue of real estate mortgages and the concern that we all have about when all these ARMs come due at the end of this year. And I know that the Antitrust Division under your leadership has undertaken a civil action regarding real estate broker activities, and I'm just wondering if you might comment as appropriate on that and how you think that kind of enforcement will benefit homeowners in the future.

MS. MAJORAS: We are well aware at the FTC that there's virtually no product in the United States that's sold that affects consumers as much as gasoline and certainly the price of gasoline, which has gone up in recent years. So we spend an enormous amount of time studying gasoline markets, investigating gasoline markets, and making sure that companies are adhering to the antitrust laws.

We have done several studies in recent years, including a major study after hurricanes Katrina and Rita. We have not found collusion among the oil companies. Obviously, we have OPEC at the upstream end, which is another story. But we've not found it.

What we have found -- which is hard for people to hear -- is a market that behaves pretty competitively according to laws of supply and demand. Now in recent years, demand has been going up. Our supply has not kept pace. People ask well, how could that happen? How could they be competitive markets but our refining capacity's not keeping pace?

Well, the problem has been -- and we sort of have short memories, I'm afraid -- that it was just a few years ago that refineries were not making so much money. Their profits were not going up, and so that inhibited investment. What we're seeing now and we just saw a major announcement by Royal Dutch/Shell that in fact they are increasing their capacity in Port Arthur, Texas, by 325,000 barrels a day, which is enormous -- that's a third of all of our imports that we get.

So we're seeing what we thought we would see with these higher prices -- increased investment -- and we think that's going to be a good thing for consumers.

REP. PENCE: And British Petroleum was trying to increase its capacity in Indiana until very recently.

MS. MAJORAS: Yes, indeed.

REP. PENCE: Be very aware.

MS. MAJORAS: (Laughs.) So it's a big area obviously of discussion.

I'd be happy to talk more about it, but I don't want to use up all your time.

REP. PENCE: Very good. Thank you.

MR. BARNETT: Well, if there is any one market that's as important as the gasoline market it might well be the real estate market, given that that is by far and away the largest transaction that most people engage in in their lives.

I don't think it's appropriate for me to comment on pending litigation.

REP. PENCE: Understood.

MR. BARNETT: But more generally, the Department of Justice -- very much in cooperation with the Federal Trade Commission -- has been quite active in the real estate area.

It's not only through investigations and enforcement actions -- such as a couple of years ago when we took an action against the Kentucky Real Estate Commission, which banned rebates by brokers, essentially banning price discounts to brokers. We've been engaged through advocacy efforts with a variety of states who either have regulations or laws that ban such price discounting or that are considered to do so, as well as something they call minimum service requirements. That means they force you as a purchaser of brokerage services to buy a package of services even if you don't want all of them.

And we have found that by freeing up the market to let consumers and suppliers make these choices, there's indications that consumers can save thousands of dollars on a transaction, which is a very significant benefit to Americans.

REP. PENCE: Thank you, Chair.

Thank you, General.

Yield back.

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