10/4. The Department of Justice's (DOJ) Antitrust Division and several states filed a complaint [35 pages in PDF] in the U.S. District Court (EDNY) against American Express, MasterCard and Visa alleging violation of Section 1 of the Sherman Act, which is codified at 15 U.S.C. § 1, in connection with their alleged restraints on competition at the point of sale.

The plaintiffs simultaneously entered into a proposed consent judgment [15 pages in PDF] with MasterCard and Visa. It provides that neither MasterCard nor Visa can maintain any rule that prohibits merchants from offering customers discounts, free or discounted products or services, or other incentives, for using a particular card. It provides for no fine, or admission of wrongdoing.

Litigation against American Express continues. Kenneth Chenault, its Ch/CEO, stated in a release that "We have no intention of settling the case". He added that "We are confident that the courts will recognize the perverse anti-competitive nature of the government's case and that we will continue providing a competitive, superior service to cardmembers and merchants."

He added that "the government's new approach would hand an unfair advantage back to Visa and MasterCard".

The complaint alleges that the defendants, American Express Company, American Express Travel Related Services Company, Inc., Mastercard International Inc., and Visa Inc., "operate the three largest credit and charge card transaction networks in the United States".

It states that the "Plaintiffs bring this action to prevent Defendants from imposing on merchants certain rules, policies, and practices ... that insulate Defendants from competition."

The complaint alleges that the restraints "impede merchants from promoting or encouraging the use of a competing credit or charge card with lower card acceptance fees." It further states that these vertical restraints "are directly aimed at restraining horizontal interbrand competition", and result in consumers paying higher retail prices.

It alleges that "Each Defendant has suppressed competition with rival networks a the ``point of sale,´´ where merchants interact directly with customers, by disrupting the ordinary give and take of the marketplace. Most consumers who use credit or charge cards carry more than one."

However, defendants' restraints "prevent merchants from offering their customers a discount or benefit for using a network credit card that is less costly to the merchant. Merchants cannot reward their customers based on the customer's card choice. Merchants cannot even suggest that their customers use a less costly alternative card by posting a sign stating ``we prefer´´ another card or by disclosing a card's acceptance fee."

That is, the defendants "prohibit merchants from fostering competition among credit card networks at the point of sale."

Christine Varney (at right), Assistant Attorney General in charge of the DOJ's Antitrust Division, stated in a release that "These restrictive rules restrain competition among credit card networks for merchant acceptance and distort the competitive process ... The proposed settlement with MasterCard and Visa is an important step in bringing more credit card competition to the point of sale. The department's lawsuit against American Express will continue that effort and, if successful, allow merchants more freedom to benefit their customers."

The proposed consent judgment provides, for example, that "neither MasterCard nor Visa shall adopt, maintain, or enforce any Rule, or enter into or enforce any agreement that directly or indirectly prohibits, prevents, or restrains any Merchant in the United States from offering the Customer a discount or rebate, including an immediate discount or rebate at the point of sale, if the Customer uses a particular Brand or Type of General Purpose Card, a particular Form of Payment, or a Brand or Type of General Purpose Card or a Form of Payment other than the General Purpose Card the Customer initially presents".

The proposed judgment further provides that neither MasterCard nor Visa can maintain any rule that prevents merchants from expressing a preference for any particular card, or communicating cost information to customers.

The proposed judgment imposes no fine or other transfer. Neither MasterCard nor Visa admit to any wrongdoing. The proposed judgment contains no conclusion of wrongdoing.

American Express is not a party to the settlement. The DOJ added in its release that "The ongoing litigation against American Express seeks to allow merchants that accept American Express to engage in the same kind of discounting and encouragement that the proposed settlement with MasterCard and Visa allows. Until American Express's restraints on merchants are lifted, the many merchants that accept American Express, as well as Visa and MasterCard, will not be able to take full advantage of their new options under the proposed settlement".

The proposed judgment has yet to be approved by the District Court.

Visa stated in a release that "Visa's rules always have allowed U.S. merchants to steer customers to other forms of payment and offer discounts to customers who choose to pay with cash, check or PIN debit. The new rules will expand U.S. merchants' ability to discount for their preferred form of payment, though they will not be able to pick and choose amongst issuing banks. The settlement agreement does not address Visa's rule prohibiting U.S. merchants from surcharging consumers."

MasterCard's General Counsel, Noah Hanft, stated in a release that "MasterCard's practices are both lawful and pro-competitive and we view this settlement as a great result. We are very pleased that after a comprehensive and lengthy investigation and intensive lobbying efforts by lawyers representing retailers in a pending lawsuit, this matter has been resolved without our having to substantially change our business practices."

American Express stated in its release that "The government's lawsuit claims that terms of American Express merchant contracts, which protect cardmembers against discrimination and disruption at the point of sale, violate U.S. antitrust laws. The Justice Department's proposed remedy would interfere with consumer choice at the check-out counter by steering American Express cardmembers to another payment network."

It further stated that "The government's new legal theory ignores a key point that the Justice Department previously made and that the courts have already decided: American Express does not have the ability to force merchants to accept its products or pricing."

The state plaintiffs are Connecticut, Iowa, Maryland, Michigan, Missouri, Iowa, and Texas. This case is U.S.A., et al. v. American Express Company, et al., U.S. District Court for the Eastern District of New York, D.C. No. 1:10-cv-04496-NGG-CLP, Judge Nicholas Garaufis presiding.

10/1. The Department of Justice's (DOJ) Antitrust Division and the Federal Trade Commission (FTC) released a report [43 pages in PDF] titled "Hart-Scott-Rodino Annual Report: Fiscal Year 2009". See also, FTC release.

The DOJ/FTC fiscal year 2009 covers the time period of October 1, 2008 through September 30, 2009. This report therefore is the first Hart Scott Rodino (HSR) report that reflects, in part, the antitrust activities of the Obama administration. President Obama did not take office until several months into this reporting period.

This report reveals several changes. First, the total number of transactions is down significantly. Although, the total number of transactions is affected by overall economic trends, as well as by changes in the reporting thresholds, including one in 2009.

Second, the percentage of transactions for which the DOJ or FTC made a second request increased significantly. Third, the percentage of transactions which the DOJ or FTC challenged increased significantly. Fourth, the percentage of transactions for which the DOJ or FTC granted early termination requests decreased.

See also, the DOJ/FTC reports for the preceding four years: FY 2005 report [47 pages in PDF], FY 2006 report [51 pages in PDF], FY 2007 report [52 pages in PDF], and FY 2008 report [46 pages in PDF].

The following table summarizes key overall trends.

(Sources: The data in the column titled "Total Transactions" is taken from the FY 2009 report. The data in the column titled "2nd Requests" is taken from the FY 2009 report. The data in the column titled "Challenges" is TLJ calculations based upon data taken from the FY 2005 through 2009 reports. The data in the column titled "Early Termination Requests Granted" is TLJ calculations based on data from the FY 2009 report at PDF page 21.)

This 2009 report also discloses that the information technology sector accounted for 8.2 % of transactions in FY 2009.

The Hart Scott Rodino Antitrust Improvements Act of 1976, which is codified at 15 U.S.C. §18a, established the premerger notification regime, jointly administered by the DOJ and the FTC. The Federal Communications Commission (FCC), which conducts redundant merger reviews involving information technology and communications companies, is not affected by the HSR Act.

The HSR Act, as amended, sets minimum reporting thresholds. Then, the reporting parties may not close their transaction until either the waiting period outlined in the HSR Act has passed, or the DOJ or FTC has granted early termination of the waiting period. The DOJ and FTC do not compete with each other; they have allocated the market for antitrust merger reviews.

10/5. The Phoenix Center for Advanced Legal & Economic Public Policy Studies released a paper [23 pages in PDF] titled "Jobs, Jobs, Jobs: Communications Policy and Employment Effects in the Information Sector". The authors are George Ford (Phoenix Center), Randolph Beard (Auburn University) and Hyeongwoo Kim (Auburn University).

This paper argues that regulatory interventions by the Federal Communications Commission (FCC) affect capital expenditures by communications firms, which in turn affects employment.

It concludes that "policy-induced shocks to capital spending may have sizeable and long-term employment effects. If jobs are viewed as a legitimate public policy concern, then policymakers should seek to encourage the expansion of the sector and avoid interventions that threaten to reduce investment".

The paper states that "Statistical testing indicates a causal relationship between capital expenditures and jobs in the Information sector. A 10% negative shock to expenditures in the Information sector results in an average loss of about 130,000 information-sector jobs per year in the ensuing five years. Including indirect jobs, these job losses could be as high as 327,600 jobs."

This paper estimates how changes in the level of investment affects total employment in the information sector. It does not estimate or predict how any specific policy proposals would affect the level of investment.

Lawrence Spiwak, head of the Phoenix Center, stated in a release that "At a time when unemployment is high and the economy is faltering, anti-investment telecom and broadband policies are ill-advised".

He added that "The data reveal that increasing investment in communications networks increases sector employment, and these jobs are relatively high-paying jobs. The heavy-handed regulatory mindset of the current FCC is not good for investment, so it is not good for jobs. Moreover, there is no evidence that the proposed regulations are good for consumers."

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The House is in recess until November 15.

The Senate is in recess until November 12, except for pro forma sessions.

9:30 - 11:00 AM. The Information Technology and Innovation Foundation (ITIF) will host a panel discussion titled "A Guide to the Internet Political Landscape". The speakers will be Rob Atkinson (ITIF), Adam Thierer, Morgan Reed (Association for Competitive Technology), and Juliana Gruenwald (National Journal). The ITIF will webcast this event. See, registration page. Location: ITIF, Room 610A, 1101 K St., NW.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Ronald A. Katz Technologies v. American Airlines, App. Ct. No. 2009-1450, a patent case regarding interactive call processing. Location: Courtroom 201, 717 Madison Place, NW.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Papyrus Technology Corp. v. New York Stock Exchange, App. Ct. No. 2010-1166, a patent case regarding wireless computer systems. Location: Courtroom 402, 717 Madison Place, NW.

12:15 - 1:45 PM. The Federal Communications Bar Association's (FCBA) Privacy & Data Security Committee will host a brown bag lunch titled "Pay It Forward -- The Smart Tween/Teen's Guide to Online Safety". The speakers will be Stephen Balkam (Family Online Safety Institute), David Pierce (NCTA), and John Heitmann (Kelley Drye & Warren). Location: USTelecom, Suite 400, 607 14th St., NW.

1:00 - 3:00 PM. The Department of Energy's (DOE) Advanced Scientific Computing Advisory Committee (ASCAC) will meet. The purpose of this meeting is to discuss the Exascale Subcommittee Report. Public attendance is by teleconference only. Contact Melea Baker by October 4 at 301-903-7486 to receive a call in number. See, notice in the Federal Register, September 22, 2010, Vol. 75, No. 183, at Pages 57742-57743.

2:00 PM. The U.S. Court of Appeals (FedCir) will hear oral argument in St. Clair Intellectual Property Consultants v. Canon, App. Ct. No. 2009-1052, a patent case regarding digital camera technology. Location: Courtroom 201, 717 Madison Place, NW.

2:00 PM. The U.S. Court of Appeals (FedCir) will hear oral argument in Acacia Media Technologies v. Mediacom Communications, App. Ct. No. 2010-1081. Location: Courtroom 201.

4:00 PM. The New America Foundation (NAF) will webcast an event titled "Public Media in a Digital Age Broadcast, Broadband and Beyond". It will address government subsidies for news entities. The speakers will be Josh Silver (Free Press), Mark Thompson (British Broadcasting Corporation), Nicholas Lemann (Columbia University Graduate School of Journalism), Geneva Overholser (University of Southern California, Annenberg School of Journalism), Paula Kerger (Public Broadcasting Service), and Steve Coll (NAF).

5:30 - 7:30 PM. The The Institute for Policy Innovation (IPI) will host a reception that precedes its October 6 event titled "IPI Communications Summit". Location: Room HVC-201, Capitol Visitor Center.

Day three of a three day event hosted by the Future of Music Coalition (FOMC) titled "Future of Music Coalition Policy Summit". See, notice. Location: Georgetown University, 37th and O Streets, NW.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its Notice of Inquiry (NOI) [23 pages in PDF] regarding writing its next Section 706 report to the Congress. See, FCC Public Notice. The FCC adopted and released this NOI on August 6, 2010. It is FCC 10-148 in GN Docket No. 10-159.

Deadline to submit comments to the Federal Election Commission (FEC) regarding its draft Advisory Opinion 2010-19. This draft states that "Google, Inc. asks whether disclaimers are required on text ads generated when Internet users use Google's search engine to perform searches. The Commission concludes that disclaimers are not required to be appended to text ads on behalf of candidates or political committees generated through Google's AdWords program." See, FEC release.

9:00 AM - 1:00 PM. The Institute for Policy Innovation (IPI) will host an event titled "IPI Communications Summit". Lunch will be served. For more information, or to register, contact Erin Humiston at 972-874-5139 or erin at ipi dot org. Location: Reserve Officers Association Building, 5th floor, 1 Constitution Ave., NE.

10:00 AM. The Center for Democracy and Technology (CDT) will host an event, on site and by teleconference, to release a paper titled "Campaign Takedown Troubles: How Meritless Copyright Claims Threaten Online Political Speech", and to brief reporters. The call in number is 1-800-377-8846; the Participant Code is 92713123#. For more information, call Brock Meeks at brock at cdt dot org or 202-407-8814. Location: CDT, 11th floor, 1634 I St., NW.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Micron Technology v. Rambus, App. Ct. No. 2009-1263, and Hynix Semiconductor v. Rambus, App. Ct. No. 2009-1299. Location: Courtroom 201, 717 Madison Place, NW.

6 10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in ESN v. Cisco Systems, App. Ct. No. 2010-1185, a patent case regarding VOIP technology. Location: Courtroom 402, 717 Madison Place, NW.

12:15 - 1:45 PM. The Federal Communications Bar Association's (FCBA) Engineering and Technical Practice and Young Lawyers Committees will host a brown bag lunch titled "Engineering for Lawyers: How Understanding Basic RF Issues Can Help You Advocate Better for Your Clients". The speaker will be Mitchell Lazarus (Fletcher Heald & Hildreth). For more information, contact Mark Brennan at mark dot brennan at hoganlovells dot com or Laura Stefani at lstefani at g2w2 dot com. Location: Hogan Lovells, 555 13th St., NW.

TIME? The Office of the U.S. Trade Representative (OUSTR) will hold a hearing to assist it in preparing its annual report to the Congress on the People's Republic of China's compliance with the commitments made in connection with its accession to the World Trade Organization (WTO). See, notice in the Federal Register, August 3, 2010, Vol. 75, No. 148, at Pages 45693-45694. Location?

Extended deadline to submit to the Department of Commerce's (DOC) Bureau of Industry and Security proposals for members of the President's Export Council Subcommittee on Export Administration (PECSEA). The BIS seeks "private-sector members with senior export control expertise and direct experience in one or more of the following industries: ... semiconductors, commercial communication satellites, high performance computers, telecommunications ..." See, notice in the Federal Register, September 9, 2010, Vol. 75, No. 174, at Page 54857.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Honeywell v. Nokia, App. Ct. No. 2010-1121. Location: Courtroom 201, 717 Madison Place, NW.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Hitachi Koki Co. v. Kappos, App. Ct. No. 2009-1548. Location: Courtroom 402, 717 Madison Place, NW.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Juniper Networks v. Graphon, App. Ct. No. 2010-1143. Location: Courtroom 402, 717 Madison Place, NW.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Cheetah Omni v. Samsung Electronics, App. Ct. No. 2010-1169. Location: Courtroom 201, 717 Madison Place, NW.

Deadline to submit comments to the Department of Commerce's (DOC) Bureau of Industry and Security (BIS) in response to its notice in the Federal Register requesting public comments regarding its foreign policy based export controls, including its regulation of "encryption items", "communication intercepting devices, software and technology", and "certain general purpose microprocessors". See, Federal Register, September 8, 2010, Vol. 75, No. 173, at Pages 54540-54541.

Deadline to submit comments to the Department of Homeland Security's (DHS) Homeland Security Advisory Council (HSAC) in advance of its October 14, 2010, closed meeting. The agenda for the meeting includes "Lessons Learned from the cyber exercise". See, notice in the Federal Register, September 27, 2010, Vol. 75, No. 186, at Page 59278.

Columbus Day. This is a federal holiday. See, Office of Personnel Management's (OPM) web page titled "2010 Federal Holidays".

5:00 PM. Deadline to submit comments to the National Science Foundation (NSF) National Coordination Office (NCO) for Networking and Information Technology Research and Development (NITRD) regarding the draft NITRD Strategic Plan. See, notice in the Federal Register, September 21, 2010, Vol. 75, No. 182, at Page 57521.

Deadline to submit comments to the Commodity Futures Trading Commission's (CFTC) Technology Advisory Committee in advance of its October 12, 2010, meeting. See, notice in the Federal Register, September 24, 2010, Vol. 75, No. 185, at Pages 58367-58368.

8:00 -10:00 AM. Broadband Census News LLC will host a panel discussion titled "China and Intellectual Property". Breakfast will be served. This event is free and open to the public. See, notice and registration page. This event is also sponsored by the National Cable & Telecommunications Association (NCTA) and the Public Knowledge (PK). Location: Clyde's of Gallery Place, 707 7th St., NW.

9:30 AM - 12:15 PM. The Office of the U.S. Trade Representative's (OUSTR) Committee of Chairs of the Industry Trade Advisory Committees (ITACs) will meet. The meeting will be closed to the public from 9:30 to 11:15 AM. See, notice in the Federal Register, September 22, 2010, Vol. 75, No. 183, at Page 57827. Location: Department of Commerce, Room 4830, 14th St. and Constitution Ave., NW.

10:00 AM - 4:00 PM. Day one of a three day meeting of the U.S.-China Economic and Security Review Commission to consider drafts of material for its 2010 Annual Report to the Congress. See, notice in the Federal Register, August 10, 2010, Vol. 75, No. 153, at Page 48412. Location: Room 231, Hall of States, 444 North Capitol St., NW.

12:00 NOON - 2:00 PM. The Free State Foundation (FSF) will host a panel discussion titled "Looking Forward: Will Congress Establish Broadband Policy?". The speakers will be Neil Fried (House Commerce Committee staff), David Quinalty (Senate Commerce Committee staff), Daniel Sepulveda (Sen. John Kerry's (D-MA) staff), and Bruce Wolpe (HCC staff). Lunch will be served. Location: Congressional Meeting Room North, Capitol Visitor Center.

1:00 - 5:00 PM. The Commodity Futures Trading Commission's (CFTC) Technology Advisory Committee will hold a public meeting. See, notice in the Federal Register, September 24, 2010, Vol. 75, No. 185, at Pages 58367-58368. Location: CFTC, 1st floor hearing room, Three Lafayette Centre, 1155 21st St., NW.

3:00 - 5:00 PM. The Department of Commerce's (DOC) National Advisory Committee on Innovation and Entrepreneurship will meet by teleconference. The call in number is 888-942-9574; the passcode is 6315042. See, notice in the Federal Register, September 28, 2010, Vol. 75, No. 187, at Pages 59685-59686.