Washington Lawyer

Legends in the Law

From Washington Lawyer, June 2002

Photography by Patrice Gilbert

legendsLast June Robert F. Pitofsky stepped down as chairman of the Federal Trade Commission (FTC), after guiding the agency through the largest merger wave in U.S. history. This was his third term of service with the FTC, where he served also as a commissioner from 1978 to 1981 and as the first director of the Consumer Protection Bureau in the early 1970s. Upon leaving the FTC, he returned to his roles as professor at Georgetown University Law Center and of counsel at Arnold & Porter.

Where did you grow up and attend school?
I grew up in northern New Jersey, went to college at New York University where I studied English literature, and then studied law at Columbia.

How did you go from literature to deciding to pursue a law degree?
It was a close call whether I’d go on to a Ph.D. in literature or go to law school. I agonized over it for a while and just decided that law was a little more suitable for me than teaching literature, and I thought I might be happier going that way. Once I got to law school, I realized I’d made the right decision. I graduated from Columbia in 1954.

When you were in law school, did you have a focus that determined what you were going to do when you got out?
I really didn’t, and most students don’t. I just took all the courses and had no idea in which direction I would go. I will say I took Milton Handler’s course in antitrust and enjoyed it, so when the antitrust opportunity came along, I certainly didn’t resist going in that direction.

What was your first job out of law school?
After serving two years in the army, mostly in Europe, I spent one year down in Washington in the civil division appellate section at the Department of Justice. Then I returned to New York and a Wall Street law firm. It turned out that the day I arrived at Dewey Ballantine they attracted Eli Lilly as a client with an antitrust problem. They were accused of criminal price fixing on polio vaccine and for two years I worked fairly steadily on that one case. Thomas Dewey was the principal counsel for Lilly, and it was a very glamorous case with lots of super lawyers on both sides.

Working on that case was a tremendous stroke of good fortune. It was the opportunity to watch good lawyers and a very good judge. As we were preparing for the trial, it looked like the court would have to make a real tough decision, but in the end it wasn’t a close call. The judge threw the case out after the government finished its presentation.

Did you have to augment your legal background with economic work?
I had taken some economics in college, but it was by no means my first love. After we finished the Eli Lilly trial, the firm recognized that it had no one with a formal economics background. Consequently, they gave me two months or so to spend in the New York Public Library and do nothing but read economics. They didn’t want me to learn algebra; they just wanted me to get a sense of the basic microeconomic issues that had begun to influence the law, so that if there were negotiations between lawyers and economists, I could be a part of that on behalf of the firm. It was a pleasant several months.

How long did you stay with Dewey Ballantine after the conclusion of the Eli Lilly case?
I stayed for four or five more years, although toward the end of that period I had taken up part-time teaching at NYU as an adjunct law professor. You can see I was tempted by the academic world fairly early.

I was an adjunct professor teaching antitrust at night for several years, and then I decided rather than continuing as a full-time lawyer and a part-time teacher, I’d be better off being a full-time teacher and a part-time lawyer. So I switched it around and continued working with Dewey Ballantine’s clients but started teaching at NYU.

What was the lure to teach law at a university?
To a remarkable extent you are your own master in the academic world in the sense that you work on problems of your choice. You choose to work on the problems that you find important and interesting, and you have all the time you want to commit to it. Academia doesn’t have the kind of deadlines you encounter when filing briefs or writing memos. Both of those aspects were very attractive to me. I also just like teaching; I like the classroom. I think a really good class is one of the great pleasures of life.

Were your expectations met when you switched to full-time teaching?
I spent a year or so pondering whether I really wanted to stay in law and part-time teach or vice versa. Within a week or two of arriving full-time at NYU Law School, I was utterly convinced I had done the right thing and was in the right place. I wondered why I had spent so much time painfully reviewing the options.

Why did you keep your hand in the private practice?
Well, part of it was compensation. Teaching, in those days especially, didn’t pay very much. But I like practicing law, and the projects that Dewey Ballantine got me into or that now Arnold & Porter gets me into tend to be very interesting.

You mentioned that as an academic you’re free to pursue the areas that interest you. What were some of your research areas while you were at NYU?
I wrote several law review articles on joint ventures and mergers. The structural side of antitrust has always attracted me: How do industries become concentrated? What is the government’s responsibility in those areas? Then within two years of arriving at NYU a colleague at Columbia invited me to join him on an antitrust casebook. We did one edition and then we merged with Milton Handler’s casebook. I’m now on my sixth edition.

Was the casebook a good intellectual exercise?
It was a great way of learning the field. Writing a casebook, you cover areas where you have not practiced and areas that you may not even deal with in class. I was lucky that my coeditors-it’s been a string of different people-have all been first-rate. I’ve never failed to learn from each of them.

How did you go from teaching at NYU and working on the casebook to the Bureau of Consumer Protection?
Well, you have to understand the history of the Federal Trade Commission. It was a much-maligned agency in the 1930s, ’40s, and ’50s. It was commonly referred to as the "little old lady of Pennsylvania Avenue." Then in 1969 Ralph Nader wrote a devastating criticism of the FTC. Richard Nixon wanted to do something about the agency, but he didn’t want to depend on Nader’s scholarship, so he appointed a blue-ribbon commission led by Miles Kirkpatrick to study the FTC. I became counsel to that commission. We published a scathing criticism of the agency. Frankly, it was similar to Nader’s report except that our language wasn’t as aggressive or harsh. Not long after that, Nixon appointed Kirkpatrick chairman of the FTC. Although he was a Republican and I was clearly a Democrat, he invited me down to run the new Bureau of Consumer Protection. The idea was to come to Washington for one year, but I’ve been here for 30 years since.

What were the issues that you dealt with at the Bureau of Consumer Protection?
The most important was national advertising. In those days the advertising community was a little out of control. They were running ads that had no substantiation whatsoever. We took on some of the biggest national ad campaigns: the analgesic manufacturers, food claims, gasoline mileage claims, and automobile claims about durability. It was almost half the work of the bureau during my two years there. We brought many lawsuits, and we changed the law with respect to national advertising. To do them justice, the advertising community recognized that they didn’t have much of a defense for the way some of those firms were behaving, and they set up a self-regulatory system that works very well.

Were you actively involved in determining which suits to pursue, or were you more involved in reorganization and management issues?
A lot of it was organization and management because previously there hadn’t been a Bureau of Consumer Protection. Since I was the first bureau director, there were many management questions, such as, Should there be a credit division? Should there be a consumer education division? Should there be a separate advertising division? Since it was an agency known for lethargy and the commission had a serious problem with remedy, we wanted to be active. Remedy in those days was "Go and sin no more." No matter what you had done, the answer was "If you stop, we’ll go away." In that environment, why wouldn’t you do it until someone came along and told you to stop? So we introduced restitution, reformation of contracts, corrective advertising-remedies that would deter bad behavior. It was a really interesting environment.

Why did you leave?
Several reasons. One, I had tenure at NYU and the university had a two-year rule limiting leaves of absence. Second, I knew the chairman was going to leave and under the circumstances I thought, "I’d come for one year and I’d stayed for two, I’m an academic and I should get back to academia." But then it turned out my family voted overwhelmingly to remain in Washington and not return to Greenwich Village, so in 1973 I switched to Georgetown University and Arnold & Porter.

Did your research interests change at this point after your stint with the government?
Not basically. I still wrote in the antitrust field with very rare exceptions, but I probably became a little more sensitive to the political winds, a little less theoretical, and a little more practical as a result of having been in the government.

About four years after joining the Georgetown faculty you returned to the FTC as a commissioner. How did that appointment happen?
I actually didn’t seek the opportunity; it just came around. The commission usually is made up of three members of one party and two of the other, and in 1978 the commission needed a Democrat for an open position. Mike Pertschuk was the chair during the Carter administration, and we had been friends. I thought that a couple of years as a commissioner as opposed to a staff person would be a good investment of my time.

Once you were there did you think it was a good investment of your time?
I did. The irony is, this agency that was called the little old lady of Pennsylvania Avenue had become a target of criticism because it was too active. Therefore, the first time around my role had been "Don’t just stand there, do something," and now it was "Be more cautious and moderate." I thought the case that the commission was out of control was exaggerated. Some of the rhetoric by some of the staff people was fierce, but I think the agency enforced sensible law most of the time.

What were the primary issues during the late 1970s and early 1980s?
On the consumer side, it was the legitimacy of rule making. The commission had decided that rather than a case-by-case enforcement model, it would issue rules governing different industries. There must have been 8 or 10 different rules in play at the same time, each one of them controversial and each one of them resisted fiercely by the industry that we were regulating. For example, one of the rules I thought was the most sound had to do with abusive funeral practices, and the funeral industry protested that the federal government was regulating them across the board rather than case by case. Even legitimate funeral directors were going to have to change their ways because of this rule. I came to the view that rule making sounds good but doesn’t work well in practice. We were better off bringing cases against bad practices. Later, when I was chairman, we did not initiate rules except the one or two that Congress directed us to initiate, and we vacated quite a few that were on the books.

Did you view your position as a commissioner as an advocate for any particular issue that you felt strongly about as a result of your research?
I’ve always been a very strong advocate for corrective advertising. It’s still controversial, but I believe if you publish a fraudulent ad for a long time, it’s not enough just to stop the ad; you have to go back in the same media in which you published the fraud and tell people what the truth is. I initiated that as a bureau director and I pushed that as a commissioner.

One of the best examples was the campaign for Listerine. It was close to a monopolist in the mouthwash market because it claimed that it gave you not just fresh breath, but also prevented colds and flu. When we went to court, it turned out the company didn’t have support for the cold and flu claim. They’d been making this claim for 40 years, and mothers would make their children gargle with Listerine. So rather than just telling the company to stop, we thought it was necessary for them to go back and say there’s no substantial evidence the product has any effect on colds and flu.

How did they go about doing that? Was it in the context of an ad promoting the product?
We didn’t require them to run separate ads. We said if they advertise Listerine, which of course they had to do, then down at the bottom they must say, "Now you should understand . . ." When I was chairman we required similar action by Doan’s Backache Pills. It’s a fine analgesic, but the evidence doesn’t show it does anything special for your back, so we required corrective advertising.

How does the process occur?
The commission brings the case and rules on it, but quite often the company will be so stressed about the impact of that remedy that it will appeal and take the commission to court. It becomes a fairly heavy burden on the commission to prove that a remedy is required. Corrective advertising requires a finding that people still remember the fraud so that there is something to remedy. Since advertising is so ephemeral sometimes, it’s hard for the commission to prove that anybody still remembers the original fraudulent ad.

After your stint as commissioner, you returned to Georgetown and served as the dean for six years. How is that different from being a professor?
I actually did try to teach while I was dean, but only one course a year. Ultimately it’s a management job. It’s hiring, tenure, salaries, and dealing with students. Building the Edward B. Williams Law Library was the biggest challenge of my six years. When I became dean, the law school was housed in a smaller version of this one building. When I took the job, I asked the faculty, "What do think is the first priority?" and almost every member said more space. So my six years consisted to a great extent in being a real estate client and raising money to build a library.

Mostly raising the money?
Georgetown was not endowed like Columbia and Yale, so for a project like this you really have to raise the money as you go. I was a little concerned about fundraising when I took the job, but actually I enjoyed it very much. I believe that we are the preeminent school in Washington, but a preeminent school should have adequate space. Ever since I’ve been here it’s been the largest law school in the United States, but it had one of the smallest physical plants. When the library was squeezed into the second floor of this building, students didn’t have any place to read and write. Now, with the library, the expansion of this building, and a new dorm (the last two built as a result of work by my successor, Judith Areen), the school is much changed.

Was your goal primarily to get that building completed and get back to teaching?
I didn’t take the job to build a library. I had ideas about curriculum reform, hiring, and a more active program of conferences and lectureships. But I have to be honest: I spent more time in real estate than in academic pursuits. I wanted to enliven the second and third year, especially the third year. I wanted more seminars, more interesting courses, more joint disciplinary courses, and more joint degrees with the main campus.

Did you miss the teaching during that period?
legends_2I did. Also, I missed the writing and the reading. If you’re the dean, you don’t learn. You’re realizing on existing capital. You don’t write and you don’t stay up with the literature.

The dean here, unlike almost any school I know of, is also a vice president of the university and often serves as a quasi-general counsel. So, in addition to serving as the dean of the largest law school in the United States, the dean also plays a major role in the university.

One project that I was involved in concerned the university and the gay rights community. The issue was whether the university, in this case the law school, was required to subsidize gay rights groups on campus to the same extent that it subsidized other student groups like the chess club or the history society. We were talking about a couple of hundred dollars a year, but because of the university’s Catholic roots, it felt that it was not right to subsidize a form of behavior that their religious principles did not condone. On the other hand, the gay community certainly felt they were being discriminated against. The president of the university sent John DeGioia, the current president of the university, and me to try to settle the case. "Just get the best deal you can, bring it back to the board of directors and see if we can’t settle this case." The two sides had been fighting in the courts for seven or eight years. The university lost, then it won, and then it lost and the case was about to go to the Supreme Court. We spent an enormous amount of time crafting a compromise so that neither side got everything it wanted but neither side was embarrassed or crushed. When we took our settlement back to the board, they approved it. I recently asked DeGioia, "Since we settled that case, has there ever been a complaint that something about that settlement wasn’t fair either to the Catholic community or to the gay rights community?" The answer was no, and I’m very proud of that.

In the late 1980s and early 1990s, in the interim between your term as FTC commissioner and FTC chairman, what changes were going on in the antitrust field?
As I mentioned, when I was a commissioner, the Federal Trade Commission was regarded as unduly activist. When the Reagan administration came in, antitrust went to a lower level of activity than any time since before World War II. There was much criticism of this minimalist period. Congress harassed the agency heads for doing too little. When Bush was elected in 1988, the administration decided to take more of a middle ground. The commission didn’t go back to the overly activist period, but they weren’t going to do a minimalist number. They devised an antitrust program that was somewhere between those two. Many areas of antitrust that had not been enforced during the Reagan years were back on the agenda. Clinton antitrust was just a continuation of the Bush policies. The difference between antitrust in the Reagan and Bush years was much greater than the difference between Bush and Clinton.

When you were appointed chairman, what was your vision for the upcoming term?
There are so many aspects of it. First, I wanted to continue what I thought my predecessor, Janet Steiger, had done, which was find a middle ground where antitrust and consumer protection laws would be enforced at roughly the same level regardless of who won the election. We weren’t going to bounce from extreme activism to practically no action at all; that was fundamental.

Second, the role of the FTC as an investigative arm for Congress by holding hearings had fallen into disuse. Originally the commission was created to be a collaborator with business to try to anticipate problems and report on them to Congress. The commission had a great record of doing things like that. It was commission hearings that led to the creation of the Securities and Exchange Commission in 1934. Somehow that function had gotten lost over time and I wanted to restore it. We initiated my chairmanship with a very ambitious set of hearings on globalization of competition and innovation-examining the way antitrust and consumer protection laws treat innovation-and we kept up a commitment to hearings during my six and a half years.

The Clinton administration raised the bar on remedies in a half dozen or so areas including criminal enforcement, disgorgement, and tougher remedies in the merger area. I don’t think Clinton antitrust on the merits was very different from Bush antitrust, but the remedies were very different. In the last two years of the Clinton administration, total fines per year were $1.1 billion, about 40 times the total a decade earlier.

I don’t think it’s enough to tell people to stop. You’ve got to make it worth their while to stop before the government comes along. In one case, Mylan Laboratories (a generic drug manufacturer) violated the antitrust laws, and by the time the FTC found out about it and sued them, they had accumulated about $100 million in illegal profits. For the commission to come along at that point and say, "Don’t do that anymore," is less than effective. So we brought a case and asked for disgorgement. The court backed us and, in fact, disgorgement is ongoing.

Finally, we tried to adjust consumer protection enforcement to emphasize fraud and deception problems in high-tech sectors of the economy, particularly the Internet.

Were you able to quantify the effect of tougher remedies?
No, it should be done, and I hope some scholars are out there now doing it. It’s very important to check later and see if remedies work. We did some of that with an influential report on merger remedies looking backward at our previous cases. We should do the same for all sorts of other areas.

During the later half of the 1990s there was an accelerating pace of mergers that the FTC had to review. What caused such a concentration of companies?
It was the greatest merger wave in history. There are many people writing on this subject and they all have a different answer. There were many reasons: globalization, the high-tech revolution, the explosion of the Internet, and telecommunications. But I would add one additional factor: the stock market had gone up so much and so many of these deals were stock for assets-I’ll give you my stock if you’ll sell me your company-and I think the buyers thought to themselves, "I know my stock’s inflated, I know it’s not worth what the market thinks it’s worth, so I’ll buy real assets with my stock." I think one of the reasons for such a remarkable merger trend was this "funny money" aspect of stock-for-stock or stock-for-asset transactions. But the main reason for the merger wave was globalization. For example, some companies felt that they had to have a firm in the European Union or an EU firm had to have a firm in the U.S. in order to compete.

With globalization, was it necessary to create or define new relationships with equivalent agencies in other nations?
Joel Klein and I spent a great deal of time on that. To be effective it is essential that we are able to cooperate with law enforcement in Japan, China, Europe, and other countries around the world. I think the international community deserves credit for improving cooperation over the last 15 years.

Are there any areas that still require better cooperation between the United States and other countries that you were trying to improve as you left?
There is an EU-U.S. task force working right now on remedies. Sometimes the remedy approaches are not consistent and we want to talk that through. The worst thing in the world is if we require a company to do or not do something in the United States and that very thing violates the law in Europe. I think there’s room for improvement there and the task force is working on it.

The other area has to do with merger filings. If you’re a really large company doing business throughout the world and you merge with another really large company, you might have to file your merger in 15 different countries, in 15 languages, 15 forms, 15 filing fees. We’ve got to do something about that. It’s excessive.

While you were chairman the commission reviewed several high-profile mergers. Did the commissioners share similar thoughts on these combinations, and was it easy to arrive at approval?
No. The oil industry mergers were pretty much unanimous, but we struggled very much to come up with a commission position on AOL Time Warner. In the end, we arrived at the same point on what we would require before we let the merger go through, but the process was as tough as any I’ve seen.

Between 1995 and 2001 the use of the Internet and the expansion of e-commerce was just phenomenal. Do these new technologies change antitrust law or require changes?
I think they do, although I’m not sure I’m in the majority on this. My view is that intellectual property is not just another form of property. New technologies can displace old technologies very easily, the upfront investment is often great, but then producing the product really doesn’t cost very much at all. There are basic differences between physical property and intellectual property, and I think antitrust must adjust to these differences. Now at the other extreme there are people who think that intellectual property trumps antitrust. They argue that you didn’t have to license your intellectual property in the first place and therefore you can license it anyway you want. I would argue that you want to adjust antitrust but you don’t want to displace antitrust.

Did the FTC play a role in the Microsoft case, or was that primarily through the Justice Department?
The FTC started the case long before I arrived. The staff worked on it for years, but one commissioner was recused and the other four were split two to two. Then Senator Metzenbaum, head of the antitrust subcommittee, urged that the case to be transferred out of the FTC to Justice. That kind of transfer is very rare.

Microsoft wasn’t the only computer industry giant to face these problems. What was the background on the FTC suit against Intel?
Intel got into intellectual property quarrels with three other companies, and when they couldn’t settle the suit, Intel cut the other companies off from information and product samples in retaliation for being sued. A small company can do that, but we thought a monopolist shouldn’t be allowed to, because if you allow self-help in an area like that, the strong will prevail over the weak every time. In that industry if you don’t have information or any samples, you’re out of luck. All we wanted to say was if a company sues you, don’t cut them off; resolve it in court. We settled in a way that Intel described as a win-win result. After long negotiations the two sides agreed to a rather elaborate order that set some guidelines. Intel agreed not to retaliate against people who tried to enforce their intellectual property rights with Intel. They were pleased our order did not amount to compulsory licensing where they would have no discretion over whom they could license.

It seems to be a microcosm for the struggle you describe between intellectual property and antitrust.
Absolutely. I say it’s the quintessential case, and it’s what I use in my classes. Are you limiting companies like Intel on their incentives to innovate, or are you protecting the incentives to innovate of the smaller companies who find themselves in a quarrel with Intel? And I see that scholars are still writing pro and con about the case. It will be commented upon for a long time.

Do you see the role of the FTC changing in the future?
That’s hard to say. Because of the merger wave, two-thirds of our antitrust budget was used just for merger review. There were roughly 4,700 mergers in 1999; that was up from about 1,500 just five years earlier. I do expect, however, that there will be more resources spent on nonmerger enforcement. Second, I think if anything the trend will continue toward the commission being an investigative arm of the Congress and doing investigations at the request of the White House, such as our investigation of violent entertainment material inconsistent with the industry’s own ratings. I think there is a need in this country for an independent agency to be available to conduct investigations, and I think if anything the commission will do more, not less.

On the consumer side, it’s so hard to predict future issues. Congress is extremely generous in supporting the commission’s consumer protection work. I suspect, given all the opportunities for fraud and abuse in a high-tech society, the commission will expand its operations in this area.

Did that expand significantly while you were there?
Yes. The things that we were spending much of our budget on near the end of my chairmanship, privacy issues and identity fraud issues, didn’t even exist when I arrived. Those were all problems that emerged during the six or seven years that I was there.

It must be exciting to deal with an entirely new problem.
Much better than I had expected. I also had super staff. We may not have been ahead of the curve, but we were rapid in our response to problems.

What are you doing now? What’s keeping you busy?
Well, I’m back teaching. I had a sabbatical just before I went into the government, so I was away for eight years, and just getting back up to speed as a teacher is taking most of my time. I taught constitutional law this past fall and many of the cases were new; they weren’t in the books the last time I taught the subject. This summer and fall we are going to redo the casebook. It’s been nine years since we’ve put out a new edition.

Were you glad to be back in the classroom?
Yes, I always am. That’s my base. You have a photo on the wall of Babe Ruth in a Yankees uniform.

Any chance you’ll return to New York?
No, but we often visit. Two of my three children live in Brooklyn. All three of my children went to law school, but only my son who’s an assistant U.S. attorney in Brooklyn is a committed lawyer. My older son had the same problem I once had: torn between English literature and law. He was a lawyer for a while and he wasn’t happy, so he took his Ph.D. and now he’s teaching literature. My daughter has left the SEC and is working for an educational think tank.

Do you have any desire or wish to do another stint of public service?
You know, if it came around, I probably would. I love academia. I love teaching. But I also have found some of the most exciting periods of my life were the four times that I was in government, especially the most recent one.

How about retirement? Is that on the horizon anywhere?
Not for me. It has no appeal. If health doesn’t become a factor, I haven’t the slightest interest in retiring. I might take a sabbatical or research leave a little more often, but that is it.