FEDERAL TRADE COMMISSION (1995)

FEDERAL TRADE COMMISSION

ANNUAL REPORT TO CONGRESS

FOR FISCAL YEAR 1995

PURSUANT TO SECTION 201 OF THE

HART-SCOTT-RODINO ANTITRUST

IMPROVEMENTS ACT OF 1976

(EIGHTEENTH REPORT)

INTRODUCTION

Section 201 of the Hart-Scott-Rodino Antitrust Improvements

Act of 1976, Pub. L. 94-435, amended the Clayton Act by adding a

new Section 7A, 15 U.S.C. Section 18a ("the Act"). Subsection

(j) of Section 7A provides as follows:

Beginning not later than January 1, 1978,

the Federal Trade Commission, with the

concurrence of the Assistant Attorney

General, shall annually report to the

Congress on the operation of this

section. Such report shall include an

assessment of the effects of this

section, of the effects, purpose, and the

need for any rules promulgated pursuant

thereto, and any recommendations for

revisions of this section.

This is the eighteenth annual report to Congress pursuant to

this provision. It covers fiscal year 1995.

In general, the Act requires that certain proposed

acquisitions of stock or assets must be reported to the Federal

Trade Commission and the Antitrust Division of the Department of

Justice prior to consummation. The parties must then wait a

specified period, usually thirty days (fifteen days in the case

of a cash tender offer and ten or fifteen days in the case of a

bankruptcy sale’), before they may complete the transaction.

Whether a particular acquisition is subject to these requirements

depends upon the value of the acquisition and the size of the

parties, as measured by their sales and assets. Small

acquisitions, acquisitions involving small parties and other

classes of acquisitions that are less likely to raise antitrust

concerns are excluded from the Act's coverage.

1 The Bankruptcy Reform Act of 1994 amended § 363 of the

Bankruptcy Code providing in part that the waiting period

required for certain transactions involving an acquired person in

bankruptcy be fifteen days. The provision applies to entities

that filed for bankruptcy on or after October 22, 1994.

Bankruptcy Reform Act, Pub. L. No. 103-394 [H.R. 5116], § 109,

108 Stat. 4106 (1994).

The primary purpose of the statutory scheme, as the

legislative history makes clear, is to provide the antitrust

enforcement agencies with the opportunity to review mergers and

acquisitions before they occur. The premerger notification

program, with its filing and waiting period requirements, ~

provides the agencies with both the time and the information

necessary to conduct this antitrust review. Much of the

information needed for a preliminary antitrust evaluation is

included in the notification filed with the agencies by the

parties to proposed. transactions and thus is immediately

available for review during the waiting period.

If either agency determines during the waiting period that

further inquiry is necessary, it is authorized by Section 7A(e)

of the Act to request additional information or documentary

materials from either or both of the parties to a reported

transaction (a "second request"). A second request extends the

waiting period for a specified period, usually twenty days (ten

days in the case of a cash tender offer), after the parties have

complied with the request (or in the case of a tender offer,

after the acquiring person complies). This additional time

provides the reviewing agency with the opportunity to analyze the

information and to take appropriate action before the transaction

is consummated. If the reviewing agency believes that a proposed

transaction may violate the antitrust laws, it may seek an

injunction in federal district court to prohibit consummation of

the transaction.

Final rules implementing the premerger notification program

were promulgated by the Commission, with the concurrence of the

Assistant Attorney General, on July 31, 1978.2, At that time, a

comprehensive Statement of Basis and Purpose was also published

containing a section-by-section analysis of the rules and an

item-by-item analysis of the Premerger Notification and Report

Form. The program became effective on September 5, 1978. In

2 43 Fed. Reg. 33,450 (1978). The rules also appear in

16 C.F.R. Parts 801 through 803. For more information concerning

the development of the rules and operating procedures of the

premerger notification program, see the second, third and seventh

annual reports covering the years 1978, 1979 and 1983,

respectively.

1983, the Commission, with the concurrence of the Assistant

Attorney General, made several changes in the premerger

notification rules. Those amendments became effective on

August 29, 1983.3 Additional amendments were published in the

Federal Register on March 6, 1987,4 and May 29, 1987.5

TATI AL PROFILE OF THE EMERGE TIL ATI P

The appendices to this report provide a statistical summary

of the operation of the premerger notification program. Appendix

A shows, for a ten-year period, the number of transactions

reported,® the number of filings received, the number of merger

investigations in which second requests were issued, and the

number of transactions in which requests for early termination of

the waiting period were received, granted, and not granted.

Appendix A also shows for fiscal years 1986 through 1995 the

number of transactions in which second requests could have been

issued. (This information appears in Appendix C and is explained

in footnote 1 of that appendix.) Appendix B provides a month-bymonth comparison of the number of transactions reported (Table 1)

and the number of filings received (Table 2) for fiscal years

1986 through 1995. Appendix C shows, for fiscal years 1986

through 1995, the number of transactions in which the agencies

3 48 Fed. Reg. 34,427 (1983) (codified at 16 C.F.R. Parts

801 through 803).

4 52 Fed. Reg. 7,066 (1987) (codified at 16 C.F.R. Parts

801 through 803).

5 52 Fed. Reg. 20,058 (1987) (codified at 16 C.F.R. Parts

801 through 803).

6 The term "transactions", as used in Appendices A, B,

and C, and Exhibit A to this report, does not refer to separate

mergers or deals; rather, it refers to types of structures such

as cash tender offers, options to acquire voting securities from

the issuer, options to acquire voting securities from someone

other than the issuer, and multiple acquiring or acquired persons

that necessitate separate HSR identification numbers to track the

filing parties and waiting periods. A particular merger, joint

venture or deal may involve more than one transaction. Indeed,

some have involved as many as four or five transactions.

3

could have issued second requests, the number of merger

investigations in which second requests were issued, and the

percentage of transactions in which second requests were issued.

Appendix C may provide a more meaningful measure of the second

request rate than Appendix A because Appendix C eliminates from

the total number of transactions certain transactions in which

the agencies could not, or as a practical matter would not, issue

second requests.’

The statistics. set out-.in- these appendices show that the

number of transactions reported in 1995 increased approximately

22.2 percent from the number of transactions reported in 1994

(2,816 transactions were reported in 1995 while 2,305 were

reported in 1994). The statistics in Appendix A also show that

the number of merger investigations in which second requests were

issued in 1995 increased approximately 38.4 percent from the

number of merger investigations in which second requests were

issued in 1994 (second requests were issued in 101 merger

investigations in 1995 while second requests were issued in 73

merger investigations in 1994). However, these numbers indicate

only a slight increase in the number of second requests issued as

a percentage of reported transactions from 1994 to 1995 (from 3.2

percent in 1994 to 3.6 percent in 1995 based on Appendix A, and

from 3.4 percent in 1994 to 3.9 percent in 1995, based on

Appendix C).

The statistics also show that in recent years, early

termination was requested for most transactions. In 1995, early

7 See Appendix C, note 1. As we explained in previous

annual reports, the information regarding second requests in

Appendices A and C differs from that reported in those appendices

in the annual reports for fiscal years 1979-1987. Appendix A and

C in the 1979-1987 reports identified the number of transactions

in which a second request was issued, while Appendices A and C in

the present report show the number of merger investigations in

which second requests were issued. A merger investigation may

include several transactions. We believe that reporting the

number of merger investigations in which second requests were

issued better reflects the agencies' enforcement activities

because it represents the number of mergers or acquisitions that

were investigated to this extent under the Act by the agencies.

4

termination was requested in 87.7 percent (2,471) of the

transactions reported while in 1994 it was requested in 90.3

percent (2,081) of the transactions reported. The number of

requests granted increased in 1995 compared to 1994 (from 1,508

in 1994 to 1,869 in 1995). The percentage of requests granted

also increased (from 72.5 percent in 1994 to 75.6 percent in

1995).

We have also included in the report, as Exhibit A,

statistical tables (Tables I - XI) containing information about

the agencies' enforcement interest in transactions reported in

fiscal year 1995. The tables provide, for various statistical

breakdowns, the number and percentage of transactions in which

clearances to investigate were granted by one antitrust agency to

the other and the number of merger investigations in which second

requests were issued; the number of transactions based on the

dollar value of transactions reported and the reporting threshold

indicated in the notification; the number of transactions based

on the sales or assets of the acquiring person or the sales or

assets of the acquired entity; and the number of transactions

based on the industry group (2-digit SIC code) in which the

acquiring person or the acquired entity derived revenue.

The tables in Exhibit A show that clearance was granted to

one or the other of the agencies for the purpose of conducting an

initial investigation in 14.5 percent of the total number of

transactions reported in 1995. In 1994, clearance was granted in

17.0 percent of the transactions reported (see Exhibit A to the

Seventeenth Annual Report).

DEVELOPMENTS IN FISCAL YEAR 1995 RELATING TO PREMERGER

NOTIFICATION RULES AND PROCEDURES

1. Compliance

The Commission and the Department of Justice continue to

monitor compliance with the premerger notification program's

filing requirements and initiated a number of investigations to

assure compliance in fiscal year 1995. The agencies monitor

compliance through a variety of methods, including the review of

newspapers and industry publications for announcements of

transactions that may not have been reported in accordance with

the requirements of the Act. Industry sources, such as

5

competitors, customers and suppliers, and interested members of

the public often provide the agencies with information about

transactions and possible violations of the filing requirements.

Under Section 7A(g) (1) of the Act, any person or company

that fails to comply with the Act's notification and waiting

period requirements is liable for a civil penalty of up to

$10,000 for each day the violation continues.* In fiscal year

1995, one case was settled in which the Department of Justice had

filed a complaint at the Commission’s request in 1992° alleging a

violation of the Act.

In United States v. William F. Farley,*® the complaint

alleged that Farley had violated the Act when he acquired certain

voting securities of West Point-Pepperell, Inc. ("WPP").

According to the complaint, Farley was in violation from March

24, 1988, when his/holdings of WPP’s stock exceeded the $15

million threshold,|until June 22, 1988. The United States

contended that Farley’s acquisitions of WPP’s stock were not made

"solely for the purpose of investment" as he asserted, and thus

were not exempt from the Act’s reporting and waiting

requirements. The Northern District of Illinois dismissed the

case with prejudice on January 26, 1993, at the government’s

request, after the United States refused to turn over to

defendant assertedly privileged internal Commission documents.

On December 15, 1993, the U.S. Court of Appeals for the Seventh

Circuit, which found the documents to be irrelevant and

8 Effective November 20, 1996, dollar amounts specified

in civil monetary penalty provisions within the Commission’s

jurisdiction were adjusted for inflation in accordance with the

Debt Collection Improvement Act of 1996. The adjustments

included, in part, an increase from $10,000 to $11,000 for each

day during which a person is in violation under Section 7A(g) (1),

15 U.S.C. 18a(g) (1). 61 Fed. Reg. 54548 (October 21, 1996).

9 See the Annual Report to Congress for fiscal year 1992.

10 United States v. William F. Farley, Cv. No. 92-1071

(N.D. Ill. complaint filed February 12, 1992; dismissed with

prejudice January 26, 1993), rev’d and remanded, 1993-2 Trade

Cas. § 70,441 (7th Cir. December 15, 1993).

6

privileged, reversed the dismissal and remanded the case. Under

the terms of the final judgment, which was filed on January 11,

1995, Farley agreed to pay a civil penalty of $425,000 to settle

the charges.

2. Amendment to the Rules

On August 9, 1995, the Commission published in the Federal

Register a Notice of Final Rulemaking to amend the Antitrust

Improvements Act Notification and Report Form for Certain Mergers

and Acquisitions (the "Form").™ The Form requires data for two

time periods: the most recent year for which the requested

information is available, and the “base year” which coincides

with the Bureau of the Census’ most recently available

quinquennial economic census.

The rule amends the Form to convert the "base year" from

1987 to 1992, and requires filing persons to use the

classification codes referenced in the 1992 Bureau of Census of

Manufactures and Census of Mineral Industries. The amendment

enables the agencies to use effectively the most current and

reliable statistical information on industry components and

market universes published by the Bureau of the Census. The

enforcement agencies compare this statistical data with the

information provided by the reporting persons to determine

whether a proposed transaction may raise serious antitrust

concerns.

3. - - i P Pp Vv

The Antitrust Division and the Chairman of the Commission

announced measures in fiscal year 1995 to improve the premerger

review process. Eight major steps were implemented to reduce

any undue burden on parties in complying with the Act and to

assure greater consistency between the two enforcement agencies

in their merger review procedures. The new measures include (1)

expedited "clearance" procedures to determine which agency will

12 60 Fed. Reg. 40,704 (August 9, 1995).

12 See Hart-Scott-Rodino Premerger Program Improvements,

dated March 23, 1995.

investigate a proposed transaction; (2) issuance of a joint

agency model second request; (3) establishment of a procedure

under which parties may provide information to the enforcement

agencies before clearance is resolved; (4) implementation of

uniform procedures to review the burden of second requests and to

examine disputes as to substantial compliance; (5) adoption of

a joint "quick look" policy whereby parties to a transaction may

identify key issues in which the enforcement agencies should

focus their investigations; (6) establishment of a project with

the American Bar Association’s.Antitrust Section to study second

request practice issues; (7) development of proposals to expand

categories of transactions which would be exempt under the Act;

and (8) establishment of joint training programs to harmonize

merger review efforts by the agencies.

4. Proposal to Replace and Expand Exemptions

Consistent with the eight initiatives outlined above, the

Commission proposed five rules, drafted in cooperation with the

Antitrust Division, that would define or create exemptions to the

requirements imposed by the Act.** The proposed rules would

exempt: (1) certain acquisitions of goods transferred in the

ordinary course of business; (2) certain acquisitions of real

property assets; (3) acquisitions of carbon-based mineral reserve

valued at $200 million or less; (4) acquisitions of voting

securities of issuers holding only exempt real property and

carbon-based mineral reserves; and (5) acquisitions of investment

rental property assets by certain investors.

These proposed amendments were designed to reduce the

compliance burden on the business community by eliminating the

application of the notification and waiting requirements to a

significant number of transactions that are unlikely to violate

13 On August 2, 1995, the Commission and the Antitrust

Division, jointly, issued a press release clarifying second

request internal appeal procedures.

“4 60 Fed. Reg. 38930 (July 28, 1995). The final rules,

with slight modifications, were adopted on March 25, 1996 (61 Fed

Reg. 13666), and will be discussed in the Annual Report for

fiscal year 1996.

the antitrust laws. They were also intended to allow the

enforcement agencies to focus their resources more effectively on

those transactions that present the potential for competitive

harm.

5. Federal-State Cooperation Program

In June 1995, the Commission also announced a modification

to the Federal-State merger cooperation program under which state

attorneys general will be able to obtain information pursuant to

both a policy instituted in 1992, and the Commission’s general

rule governing access requests from state law enforcement

agencies.** Under the Commission’s new policy, states may

receive information previously unavailable in Commission merger

investigations, including (1) information obtained from third

parties; (2) non-HSR protected information obtained from merging

parties who have nét consented to disclosure; and (3) staff

analytic memoranda The Antitrust Division previously instituted

a similar policy. In order to invoke the Commission’s new

policy, states may request information concerning merger

investigations under Commission Rule 4.11(c), 16 CFR § 4.11(c).

The Commission’s General Counsel will consider such requests on a

case-by-case basis. The new policy is intended to improve

coordination where both federal and state agencies investigate

the same transaction.

15 60 Fed. Reg. 54376 (October 23, 1995); see Fifteenth

Annual Report to Congress for a discussion of Federal-State

merger cooperation initiated in 1992.

9

ER E RCEME AcT D F 16

The Antitrust Division challenged eighteen merger

transactions that it concluded could lessen competition if

allowed to proceed as proposed during fiscal year 1995. In nine

of these instances the Antitrust Division filed a complaint in

U.S. District Court.?”7 Six of these cases have been settled by

consent decree. One.was.abandoned after the complaint was filed,

one was litigated and won (defendants’ appeal is pending) and in

one other, the trial court denied a request for a permanent

injunction, and the government is considering whether to appeal.

16 The cases in this report were not necessarily

reportable under the premerger notification program. Because of

the Hart-Scott-Rodino Act’s provisions regarding the

confidentiality of the information obtained pursuant to this

program, it would be inappropriate to identify which cases were

initiated under the premerger notification program.

a United States v. Motorola, Inc. and Nextel

Communications, Inc., Cv. No. 1:94CV02331 (D.D.C. filed October

27, 1994); United States and the States of Florida and Maryland

v. Browning-Ferris Industries, Inc., Cv. No. 1:94CV02588 (D.D.C.

filed December 1, 1994); United States. v. Sabreliner Corporation,

Cv. No. 95CV00421- (D.D.Cc. filed February 6, 1995); United States

v. NAT, L.C., and D.R. Partners d/b/a Donrey Media Group, Cv. No.

95-5048 (W.D. Ark. filed March 28, 1995); United States v.

Microsoft Corporation and Intuit Inc., Cv. No. C95-1393 WHO (N.D.

Cal. filed April 27, 1995); United States v. Engelhard

Corporation, Floridin Company, U.S. Borax, Inc. and U.S. Silica,

Inc. Cv. No. 6:95-CV-45 (WLS) (M.D. Ga. filed June 12, 1995);

United States v. Sprint Corporation and Joint Venture Company,

Cv. No. 1:95CV-1304 (D.D.C. filed July 13, 1995); United States

v. Interstate Bakeries Corporation and Continental Baking

Company, Cv. No. 95C4194 (N.D. Ill. filed July 20, 1995); and

United States v. Computer Associates International, Inc. and

Legent Corporation, Cv. No. 1:95CV01398 (D.D.C. filed July 28,

1995).

10

In the other nine challenges during fiscal year 1995, the

Antitrust Division informed the parties to a proposed transaction

that it would file suit challenging the transaction unless the

parties restructured the proposal to avoid competitive problems

or abandoned the proposal altogether.?® In eight instances, the

parties restructured the proposed transactions. In one instance,

the parties abandoned the proposed transaction. -

18 In six instances, the Department of Justice issued

press releases. Department of Justice press release issued

December 16, 1994, involving the acquisition of Casco Northern ~

Bank by Key Corporation (Key Bank of Maine) involving the banking

service business in Maine; Department of Justice press release

issued January 26, 1995, involving the proposed merger between

McDermott International, Inc. and Offshore Pipelines, Inc., the

two largest marine construction companies in the Gulf of Mexico

providing barge services; Department of Justice press release

issued March 7, 1995, involving the merger between BJ Services

and The Western Company of North America, providers of pressure

pumping service to both oil and gas wells; Department of Justice

press release issued May 25, 1995, involving Ingersoll Rand

Company’s acquisition of Clark Equipment Company in the asphalt

paver business; Department of Justice press release issued

September 27, 1995, involving Land-O-Sun Dairies Inc. acquisition

of Flav-O-Rich Inc. from Mid-America Dairymen Inc. concerning

milk distribution routes; and Department of Justice press release

issued September 29, 1995, involving United Healthcare's

acquisition of MetraHealth Companies, concerning health ~-

maintenance organizations. In addition to the six instances in

which the Department issued press releases, the Department

informed the parties that the proposed merger between Hibernia

National Bank and Pioneer Bank and Trust Company was likely to

have anticompetitive effects in the banking services business in

the Shreveport/Bossier City area of Louisiana; the Department

also informed the parties that the acquisition by First Commerce

Corporation (First National Bank of Lake Charles) of Lakeside

National Bank was likely to have anticompetitive effects in the

banking services business in Louisiana; the Department also

informed the parties that the proposed Joint Venture between

Calmat Company and Tucson Rock & Sand, Inc. was likely to have

anticompetitive effects in the aggregate, ready-mix concrete and

asphalt concrete industry in the Tucson, Arizona area.

11

In United States v. Motorola, Inc. and Nextel .

Communications, Inc., the Division challenged Nextel

Communications, Inc.’s, acquisition of Motorola Inc.’s

specialized mobile radio ("SMR") service, a dispatch service used

by cab and delivery companies. The complaint alleged that the

acquisition would have eliminated competition in fifteen major

metropolitan cities and caused higher prices and poorer services

for consumers. A proposed consent decree was filed

simultaneously settling the.suit and requiring that the two

companies relinquish control of certain SMR channels that they

own or manage. Nextel, of Rutherford, New Jersey, and Motorola,

of Schaumburg, Illinois, are the nation’s leading providers, and

each other’s principal competitors, of SMR service, a type of

radio service used by contractors, service companies, delivery

services and other businesses that need to communicate with

fleets of vehicles either on a one-to-one or one-to-many basis.

The consent decree was entered on July 25, 1995.

In United States and the State of Florida and the State of

Maryland v. Browning-Ferris Industries, Inc., the Division

challenged Browning-Ferris Industries, Inc.’s ("BFI") acquisition

of one of its major competitors, Attwoods plc, headquartered in

the United Kingdom. BFI is located in Houston, Texas. The

complaint alleged that the merger would have lessened competition

in the market for small containerized waste hauling services in

Florida and the Mid-Atlantic Region. BFI is the nation’s second

largest trash hauling company and had annual revenues of more

than $30 billion in 1993. Attwoods’ U.S. revenues were more than

$300 million in 1993. A proposed consent decree was filed

simultaneously settling the suit. The decree required

divestiture of Attwoods’ small containerized hauling service

assets in several markets and required BFI to offer contracts

with less restrictive terms to small containerized hauling

service customers in the Baltimore area and in Polk and Broward

Counties, Florida. The consent decree was entered on March 30,

1995 and all divestitures have occurred.

In United States v. Sabreliner Corporation, the Division

challenged the acquisition of Midcoast Aviation Inc. from Trans

World Airlines by Sabreliner Corporation of St. Louis, Missouri.

Sabreliner and Midcoast are the only two providers of aircraft

fueling, cleaning, deicing, and certain other terminal services

12

at Lambert International Airport in St. Louis, Missouri. These

providers are also known as fixed base operators (FBOs) and

supply terminal services typically included in the price of jet

fuel sold to general aviation customers. In 1994, general

aviation aircraft purchased about $1 billion of jet fuel from

FBOs nationwide. Sabreliner’s merger of its Lambert Field

facilities with Midcoast would have created a monopoly in the

sale of jet fuel to transient general aviation customers using

the airport. A proposed consent decree was filed simultaneously

settling the suit. The decree required Sabreliner to divest

either its transient general aviation fueling facilities at

Lambert, or, if necessary to attract a purchaser, its entire FBO

operation at Lambert. The consent decree was entered on May 5,

1995.

In United States v. NAT, L.C., and D.R. Partners d/b/a

Donrey Media Group, the Division challenged the combination of

the two local daily newspapers serving the

Fayetteville/Springdale metropolitan area in Arkansas. NAT L.C.,

of Little Rock, Arkansas, and D.R. Partners of Fort Smith,

Arkansas, are owned by substantially the same Stephens Family

trusts. The suit alleged that the common ownership and control

would cause serious anticompetitive concerns and lead to higher

newspaper prices and advertising rates as well as lower quality.

The suit named defendant D.R. Partners, which does business as

Donrey Media Group, and NAT L.C., which operate, respectively,

the Morning News of Northwest Arkansas and the Northwest Arkansas

Times. These two daily newspapers are each other’s primary

competitor in the sale of local daily newspapers and in the sale

of local newspaper advertising. On February 8, 1995, pursuant to

a private suit, the U.S. District Court in Fayetteville,

Arkansas, granted a hold separate order requiring the owners to

maintain the papers separately until the full trial on the

merits. Thereafter, the Department requested that its suit be

consolidated with the private suit. Trial on the merits began

May 1, 1995 and concluded May 10, 1995. On June 30, 1995, a

permanent injunction was issued against the acquisition. On

August 8, 1995, the defendants filed their appellant brief and

the government filed December 21, 1995. Oral argument before the

Eighth Circuit Court of Appeals occurred April 1, 1996 and the

Division awaits a ruling by the Court of Appeals.

13

In United States v. Microsoft Corporation and Intuit Inc.,

the Division challenged the $2 billion acquisition by Microsoft

of Intuit Inc. The complaint alleged that the proposed

acquisition would likely lead to higher prices and lessen

innovation in the personal finance software Market. Intuit’s

"Quicken" is the leading personal finance software and the number

one selling home personal computer software product with a 1994

market share of almost 70 percent and more than seven million

users. Microsoft’s "Money" is the number two personal finance

competitor with a 1994 market share of about 22 percent and about

one million users. Intuit and Microsoft accounted for more than

90 percent of the personal finance software sales in the U.S. in

1994. Personal finance software is used by consumers at home on

personal computers to control their financial records and

transactions. In 1994, sales in that market reached nearly $90

million. Microsoft is headquartered in Redmond, Washington, and

Intuit is headquartered in Menlo Park, California. The proposed

combination would have enabled the defendants to eliminate the

substantial competition between them in the personal

finance/checkbook software market and the emerging home banking

market. Trial on the merits was scheduled to commence on June

26, 1995; however, the parties abandoned the transaction on May

19, 1995.

In United States v. Engelhard Corporation, Floridin Company,

U.S. Borax, Inc. and U.S. Silica, Inc., the Division challenged

the proposed acquisition by Engelhard of Iselin, New Jersey, of

Floridin’s attapulgite clay reserves and processing plant.

Engelhard and Floridin are the two largest attapulgite clay

companies in the United States and are each other’s most

significant competitor. Floridin, with offices in Berkeley

Springs, West Virginia, is a wholly-owned subsidiary of U.S.

Borax, which has offices in Valencia, California. This

transaction would combine under single ownership over 80 percent

of the attapulgite clay mining and processing business in this

country. Attapulgite clay is a mineral mined in the United

States only in the southwestern part of Georgia and the

northwestern part of Florida. There are two basic types of

attapulgite clay--gellant quality attapulgite clay and sorbet

quality attapulgite clay. Trial on the merits commenced on July

24, 1995 and concluded on August 9, 1995. On March 7, 1997, the

district court issued an order denying the government’s request

for a permanent injunction on the grounds of faiure to prove a

14

relevant market, and the government is considering whether to

appeal.

In United States v. Sprint Corporation and Joint Venture

Company, the Division challenged the proposed joint venture

involving a plan by France Telecom and Deutsche Telekom A.G. to

purchase $4 billion of stock in Sprint Corporation and form a

joint venture with Sprint to provide global telecommunications

services. The transaction, as initially proposed--a combination

of foreign monopoly firms with a U.S. long distance firm--would

have reduced competition in international telecommunications by

placing other U.S. telecommunications firms at a competitive

disadvantage. France Telecom is the monopoly provider in France

and the fourth largest provider of telecommunications in the

world, with $28 billion in 1994 revenues; Deutsche Telekom is the

monopoly provider in Germany and the second largest provider of

telecommunications in the world, with 1994 revenues of $44

billion; and Sprint, of Westwood, Kansas, is a major provider of

long distance telecommunications services, with $12.6 billion in

annual revenues. A proposed consent decree was filed

simultaneously settling the suit. Under the decree, Sprint and

the joint venture are subject to various restrictions that will

operate in two phases, changing over time as competition develops

in France and Germany. The consent decree was entered on

February 16, 1996.

In United States v. Interstate Bakeries Corporation and

Continental Baking Company, the Division challenged the proposed

merger of two of the country’s largest manufacturers of white

bread. The complaint alleged that the proposed acquisition of

Continental Baking Company, of St. Louis, Missouri, the nation’s

largest wholesale baker and the maker of Wonder Bread, by

Interstate Bakeries Corporation, of Kansas City, Missouri, the

third largest wholesale baker and the maker of such popular

brands as Weber’s, Sunbeam and Butternut, violated Section 7 of

the Clayton Act and threatened to drive up white bread prices in

at least five markets--Los Angeles, San Diego, Chicago, Milwaukee

and Central Illinois. Simultaneously, a consent decree was filed

settling the suit. The decree required Interstate to sell, in

each of the different areas, either the Wonder brand or one of

Interstate’s brands of premium white pan bread--Weber’s in

Southern California, Butternut in Chicago, Mrs. Karl’s in

Milwaukee and Butternut and Sunbeam in Central Illinois.

15

Continental is a wholly-owned subsidiary of Ralston Purina. It

had revenues of $1.9 billion in 1994. Interstate had revenues of

$1.1 billion in 1994. The consent decree was entered on January

9, 1996.

In United States v. Computer Associates International, Inc.

and Legent Corporation, the Division challenged the $1.7 billion

proposed acquisition of Legent Corporation of Herndon, Virginia

by Computer Associates International, Inc. ("CA") of Islandia,

New York. The complaint alleged that the proposed acquisition

would eliminate significant competition between CA and Legent in

the markets for five relevant software products for use with a

type of operating system known as Virtual Storage Extended. CA

is the world’s largest independent vendor of computer software

for mainframe computers and a leading producer of mainframe

computer systems management software. In 1994, CA had over $2

billion in total revenues. Legent is also a major producer of

mainframe computer software. In 1994, Legent had total revenues

of approximately $500 million, a major portion of which derived

from the development and production of systems management

software for mainframe computers. A proposed consent decree was

filed simultaneously settling the suit. The decree required CA

to grant licenses for Legent products in each of the five markets

and forbids CA from taking any action to restrict competitors’

access to an important technology in a sixth relevant market--the

emerging market for cross-platform distributed systems management

that had been previously licensed by Legent from Peer Logic, Inc.

Cross-platform products permit centralized management of various

computer systems linked together through networks. The consent

decree was entered on March 14, 1996.

Additionally, the consent decree in United States v. Outdoor

Systems, Inc., (N.D. Ga filed September 8, 1994) was entered by

the court.

During fiscal year 1995, there were three bank merger

transactions for which divestiture was required prior to or

concurrently with the acquisition. A "not significantly adverse"

letter conditioned on divestiture prior to or concurrently with

19 See the FY 1994 Annual Report for a description of that

case.

16

consummation of the transaction was sent by the Division to the

appropriate bank regulatory agency in all instances. ?°

2. Federal Trade Commission

The Commission authorized its staff to seek injunctive

relief in five merger cases during fiscal year 1995, three of

which were filed in district court. Three of the five cases were

settled by consent decree; one was dismissed; and one transaction

was abandoned by the parties.

In B.A.T Industries, p.l.c./Brown & Williamson Tobacco

Corporation/American Brands, Inc./American Tobacco Company,?? the

20 On November 14, 1994, a "not significantly adverse"

letter was sent to the Board of Governors and on November 16,

1994 a letter was sent to the Comptroller of the Currency

regarding the application by Hibernia Corporation, New Orleans,

Louisiana, to acquire Pioneer Bancshares, Shreveport, Louisiana;

on December 21, 1994, a "not significantly adverse" letter was

sent to the Board of Governors regarding the application by Key

Corp, Cleveland, Ohio, to acquire Casco Northern Bank, National

Association, Portland, Maine; and on May 10, 1995, a "not

significantly adverse" letter was sent to the Board of Governors

and the Comptroller of the Currency regarding the application by

First Commerce Corporation, New Orleans, Louisiana, to acquire

Lakeside Bancshares Inc., Lake Charles, Louisiana and merge the

First National Bank of Lake Charles into Lakeside National Bank

of Lake Charles.

22 FTC news release issued July 19, 1994, concerning the

proposed acquisition by Ferro Corporation of Chi-Vit Corporation.

The press release reported that the Commission had reason to

believe the transaction would lessen competition substantially

for the manufacture and sale of frit in the United States. Frit

is a specialty glass used to make porcelain enameled steel for

home appliances, barbecue grills and hot water heaters. The

parties abandoned the transaction before papers were filed in

court.

22 Federal Trade Commission v. B.A.T. Industries p.l.c.,

(continued...)

17

Commission filed for a preliminary injunction in October 1994

alleging that B.A.T.’s proposed acquisition of American Tobacco

Company ("ATC") from American Brands would lessen competition

substantially for the manufacture and sale of cigarettes in the

United States. Brown & Williamson Tobacco Corporation, which is

controlled by B.A.T., and ATC are, respectively, the third and

fifth largest of the six major United States cigarette

manufacturers. On December 22, 1994, the Commission accepted a

consent agreement for public comment and on April 19, 1995,

issued its decision and order. - Under the order, B.A.T. was

required to divest, within 12 months, six ATC discount cigarette

brands and three of its full-revenue brands, as well as the

Reidsville, North Carolina, manufacturing facility, toa

Commission-approved acquirer.?3

Corp./Mercy Health|Services,?4 the Commission authorized seeking

a preliminary injunction alleging that Local Health System,

Inc.’s ("LHS") proposed acquisitions of Mercy Hospital-Port Huron

("Mercy") and Port Huron Hospital would lessen competition

substantially in the provision of acute care inpatient hospital

services in Greater Port Huron, Michigan. Mercy and Port Huron

Hospital are the only general acute care hospitals in Port Huron.

The Commission filed the preliminary injunction action in the

Eastern District of Michigan on November 29, 1994. Thereafter,

the parties stated their intention to abandon the transaction.

In June 1995, the Commission accepted a consent agreement for

public comment and on October 3, 1995, issued its decision and

In Local sith System, Inc./Blue Water Health Services,

(...continued)

et al., Civ. No. 94 Civ. 7849(MP) (S.D.N.Y. filed October 31,

1994); FTC Docket No. 9271 complaint issued November 28, 1994;

consent and decision and order issued April 19, 1995.

23 In October 1996, the Commission approved B.A.T.’s

application to divest the Montclair, Riviera, Malibu, Bull

Durham, Crowns and Special Tens brands to Commonwealth Tobacco,

LLC, a subsidiary of Commonwealth Brands, Inc.

24 Local Health System, Inc./Blue Water Health Services,

Corp./Mercy Health Services, Docket No. C-3618 (issued October 3,

1995).

18

order. The order required the parties to terminate, within seven

days, all agreements that provided for the acquisition of Port

Huron Hospital and Mercy by LHS; and, for a period of three

years, the parties are prohibited from acquiring, without prior

Commission approval, any acute care hospital facility operated by

either of the other companies.

In Boston Scientific Corporation,?® the Commission

authorized seeking a preliminary injunction alleging that Boston

Scientific’s acquisitions of Cardiovascular Imaging Systems, Inc.

(“CVIS”), and SCIMED Life Systems, Inc. ("SCIMED"), would lessen

competition substantially in the research and development,

manufacture and sale of intravascular ultrasound (“IVUS”)

catheters in the United States. IVUS catheters are used as an

adjunct to angiography in conjunction with therapeutic

procedures, such as balloon angioplasty, atherectomy and stent

implantation, to diagnose and treat cardiovascular disease.

According to the complaint, Boston Scientific and CVIS were the

two leading competitors in the IVUS catheter market. In

addition, Boston Scientific’s acquisition of SCIMED would

eliminate a viable potential entrant. On February 24, 1995, the

Commission accepted a consent agreement for public comment and

on April 28, 1995, issued its decision and order. Under the

order, the parties were permitted to proceed with the

transactions, but Boston Scientific was required to grant a

perpetual, non-exclusive license of patents, trade secrets,

technology and know-how related to CVIS’ and SCIMED’s IVUS

catheters to the Hewlett-Packard Company or another Commissionapproved licensee within six months.

In Freeman Hospital,?* the Commission filed for a

preliminary injunction in February 1995 alleging that the merger

of Freeman and the Tri-State Osteopathic Hospital Association

25 Boston Scientific Corporation, Docket No. C-3573

(issued April 28, 1995).

26 FTC v. Freeman Hospital, Civ. No. 95-5015-CV-SW-1 (W.D.

Mo. filed February 21, 1995); Nos. 95-1448, 95-2882 (8th Cir.);

1995-2 Trade Cas. § 71,167; FTC Docket No. 9273 (complaint issued

March 21, 1995; complaint dismissed by the Commission November

30, 1995).

19

(d/b/a Oak Hill Hospital) would lessen competition substantially

for the production and sale of acute care inpatient hospital

services in Joplin, Missouri, and nearby areas of Missouri and

Kansas. Freeman and Oak Hill are, respectively, the second and

third largest hospitals in Joplin. The district court deriied the

motion; the U.S. Court of Appeals for the Eighth Circuit entered

an injunction pending appeal and remanded the case to the

district court for an evidentiary hearing. Subsequently, the

district court again declined to issue the preliminary

injunction, and the Circuit. Court affirmed that decision.

Thereafter, the matter was withdrawn from administrative

adjudication. On November 30, 1995, the Commission dismissed its

administrative complaint after concluding that further litigation

was not in the public interest.?’

The Commission accepted consent agreements for public

comment in 28 other merger cases in fiscal year 1995. A

complaint and decision and order were issued in 20 of those cases

during the fiscal year, and consent agreements in seven of these

cases became final after September 30, 1995. In one of the 28

matters, the Commission rejected the consent agreement and closed

the investigation.”

- See Statement of Federal Trade Commission Policy

Regarding Administrative Merger Litigation Following the Denial

of a Preliminary Injunction, 60 Fed. Reg. 39741 (August 3, 1995).

28 In December 1994, the Commission accepted a consent

agreement for public comment concerning Nestle S.A.’s proposed

acquisition of Alpo PetFoods from Grand Metropolitan. According

to the draft complaint, the transaction would lessen competition

substantially for the manufacture and sale of canned cat food in

the United States. Under the proposed order, Nestle would have

been required to divest its Fort Dodge, Iowa, manufacturing

plant. However, based on evidence presented during the public

comment period, the Commission rejected the consent agreement and

closed its investigation on June 7, 1995.

20

In Oerlikon-Buhrle Holding AG,?9 the complaint alleged that

Oerlikon-Buhrle’s acquisition of Leybold AG from Degussa

Aktiengesellschaft would lessen competition substantially in the

United States market for the manufacture, distribution and sale

of turbomolecular pumps, and the world market for the :

manufacture, distribution and sale of compact disc metallizers.

Turbomolecular pumps are small, jet engine-like devices that

produce very high vacuum atmospheres for use in semiconductor

manufacturing, and various other scientific applications.

Compact disc metallizers are used in the compact disc replication

process to apply a reflective coating to clear plastic discs.

Under the order, Oerlikon-Buhrle was permitted to acquire Leybold

provided that it divest both the turbomolecular pump business of

its subsidiary, Balzer-Pfeiffer GmbH, and the Leybold compact

disc metallizer business within 12 months.?

In Eli Lilly dnd Company, Inc.,*1 the complaint alleged that

Eli Lilly and Company’s (“Lilly”) acquisition of PCS Health

Systems, Inc. (“PCS”), from McKesson Corporation would lessen

competition substantially in the provision of pharmacy benefit

management (“PBM”) services in the United States. In addition,

the Commission alleged that the acquisition would harm

competition in pharmaceutical markets because products of

manufacturers other than Lilly would likely be foreclosed from

the PCS formulary; PCS would be eliminated as an independent

negotiator of pharmaceutical prices with manufacturers; and

incentives of other manufacturers to develop pharmaceuticals

would be diminished. Lilly is a major producer of branded

pharmaceuticals. PCS provides PBM services to insurance

29 Oerlikon-Buhrle Holding AG, Docket No. C-3555 (issued

February 1, 1995).

30 The Commission approved the divestiture of the compact

disc metallizer business to Diana Beteiligungs und Verwaltungs

Gesellschaft GmbH in December 1995. In June 1996, the Commission

approved Oerlikon-Buhrle’s plan to divest its Balzers-Pfeiffer

turbomolecular pump business by means of an initial public

offering of stock in Pfeiffer Vacuum Technology AG.

32 Eli Lilly and Company, Inc., Docket No. C-3594 (issued

July 28, 1995).

21

companies and third-party payors that include the maintenance of

a drug formulary,?? as well as claims processing, drug

utilization review and pharmacy network administration.

According to the complaint, PCS negotiates with pharmaceutical

manufacturers, including Lilly, concerning placement on the

formulary, as well as rebates, discounts and product prices.

Under the order, Lilly, through PCS, is required to maintain an

open formulary, and appoint an independent committee of

healthcare professionals to determine the inclusion of drugs on

the formulary. In addition, Lilly is required to ensure that PCS

accepts all discounts, rebates or other concessions offered by

any pharmaceutical manufacturer. The order also prohibits Lilly

and PCS from exchanging non-public information.

In Charter Medical Corporation,*® the complaint alleged that

Charter’s acquisition of 17 psychiatric facilities from National

Medical Enterprise (“NME”) would lessen competition substantially

for in-patient services by psychiatric hospitals and psychiatric

units of general acute care hospitals in several geographic

markets in the United States. Charter and NME owned,

respectively, the nation’s largest and second largest chain of

psychiatric hospitals. Under the order, Charter and NME agreed

to modify the original purchase agreement to eliminate from the

transaction the purchase of certain NME psychiatric facilities,

including Brawner North Medical Health System, Smyrna, Georgia;

Crescent Pines Hospital, Stockbridge, Georgia; MidSouth Hospital,

Memphis, Tennessee; Laurel Oaks Hospital and Residential

32 A formulary is a listing, by therapeutic category, of

FDA-approved ambulatory drug products used to assist pharmacies,

physicians and third-party payors in prescribing and dispensing

pharmaceuticals. An “open formulary” is a formulary that allows

the inclusion of any FDA-approved ambulatory prescription drug

product which a group of healthcare professionals determines is

appropriate for inclusion in the formulary.

33 Charter Medical Corporation, Docket No. C-3558 (issued

February 14, 1995).

22

Treatment Center, Orlando, Florida; and Psychiatric Institute of

Richmond, Richmond, Virginia.**

In American Home Products Corporation,*® the complaint

alleged that the acquisition by American Home Products

Corporation (“AHP”) of American Cyanamid Company (“Cyanamid”)

would lessen competition substantially in the U.S. markets for

the manufacture and sale of three existing tetanus and diphtheria

vaccines, and the research and development of a new rotavirus

vaccine. In addition, the complaint alleged a lessening of

competition in the research, development, production and sale of

cytokines for white blood cell and platelet restoration.

According to the complaint, AHP and Cyanamid were direct

competitors in the manufacture and sale of tetanus and diphtheria

vaccines, and two of only three producers of rotavirus vaccines

with research projects either in or near the clinical

development .2° Under the order, AHP must divest its tetanus and

diphtheria vaccines business to a Commission-approved purchaser

within four months and license Cyanamid’s rotavirus research to

an approved licensee within one year. The order also prohibits

AHP from receiving information relating to the market for

cytokines under a previously-established licensing agreement

unless the information is aggregated on a worldwide basis.3’

34 Pursuant to a June 1994 consent decree with the

Department of Justice, NME was in the process of completing a

divestiture of its psychiatric hospital operations. The

facilities excluded from the Commission order are still subject

to the Department of Justice settlement.

35 American Home Products Corporation, Docket No. C-3557

(issued February 14, 1995).

36 Rotavirus is an organism that causes severe dehydration

in children under the age of 2 years.

37 In July 1995, AHP requested Commission approval to

divest its tetanus and diphtheria vaccines assets to Medev PLC.

23

In Alliant Techsystems Inc.,** the complaint alleged that

Alliant’s acquisition of Hercules Aerospace Company (“HAC”) would

lessen competition substantially in the research, development,

manufacture and sale of weapons in the United States. Alliant is

one of the largest producers of ammunition, munitions and weapons

systems. HAC manufactures propellant or explosives used to

activate weapons. As a result of the transaction, Alliant would

be both an ammunition and munitions producer, as well as the only

U.S. supplier of propellant for large-caliber ammunition. The

order permits the transaction, but prohibits Alliant’s newlyacquired propellant division from sharing with its ammunition and

munitions divisions any non-public information that the

propellant division receives from other ammunition and munitions

manufacturers.

In Wright Medical Technology, Inc., et. al.,*® the complaint

alleged that Wright Medical Technology, Inc.’s acquisition of

Orthomet, Inc., would lessen competition substantially in the

United States market for the research, development, manufacture

and sale of FDA-approved orthopaedic implants used in the human

hand. Under the order, Wright is required to transfer to the

Mayo Foundation for Medical Education and Research (“Mayo”), the

licensor of Orthomet’s implant technology, a complete copy of all

assets relating to Orthomet’s business of researching and

developing orthopaedic implants for use in the human hand and,

where applicable, grant to Mayo a license in perpetuity to such

assets with full rights of sublicense.

In Reckitt & Colman plc,*® the complaint alleged that

Reckitt and Colman’s proposed acquisition of L&F Products Inc.

("L&F”) from Eastman Kodak company would lessen competition

substantially in the development, manufacture, marketing and sale

38 Alliant Techsystems Inc., Docket No. C-3567 (issued

April 7, 1995).

39 Wright Medical Technology , Inc./Kidd, Kamm Equity

Partners, L.P./Kidd, Kamm Investments, L.P./Kidd, Kamm

Investments, Inc., Docket No. C-3564 (issued March 23, 1995).

40 Reckitt & Colman plc, Docket No. C-3571 (issued April

4, 1995).

24

of carpet deodorizer products in the United States. (At the

time, Reckitt and Colman also was subject to a Commission order

requiring prior approval of the Commission concerning the

acquisition of any rug cleaning products business.*!) The order

permitted the transaction but required Reckitt & Colman to

divest, within six months, both its carpet-deodorizer and rugcleaning businesses, including the trademarks for "Carpet Fresh"

and "Rug Fresh" carpet deodorizer products, and "Woolite" rug

cleaning products to a Commission-approved purchaser. In

addition, Reckitt & Colman was required to divest, at the option

of the acquirer of the carpet deodorizer business, the rights to

use the "Airwick" brand name in connection with the manufacture

and sale of carpet deodorizer products.

In IVAX Corporation,*? the complaint alleged that the

acquisition by IVAX of Zenith Laboratories, Inc. (“Zenith”),

would lessen competition substantially for the sale of generic

verapamil in the United States. IVAX and Zenith are the only two

companies that supply this drug, which is used to treat patients

with chronic cardiac conditions. The order required that the

parties exclude from the transaction Zenith’s rights to market or

sell the sustained-release form of verapamil hydrochloride

pursuant to an exclusive distribution agreement with G.D. Searle

& Co.

In HEALTHSOUTH Rehabilitation Corporation,* the complaint

alleged that the merger of HEALTHSOUTH Rehabilitation Corporation

and ReLife, Inc., would lessen competition substantially for

inpatient rehabilitation hospital services in the metropolitan

areas of Birmingham, Alabama; Charleston, South Carolina; and

Nashville, Tennessee. ReLife operated four rehabilitation

hospitals or rehabilitation hospital units in or near Birmingham,

aa Reckitt & Colman plc, Docket No. C-3306 (issued

September 26, 1990); see Thirteenth Annual Report to Congress for

Fiscal Year 1990.

42 IVAX Corporation, Docket No. C-3565 (issued March 27,

1995).

43 HEALTHSOUTH Rehabilitation Corporation, Docket No. C-

3570 (issued April 12, 1995).

25

one in Charleston and two in or near Nashville. HEALTHSOUTH, the

largest rehabilitation hospital system in the United States,

operated a rehabilitation facility in each of those cities.

Under the order, HEALTHSOUTH was required to divest ReLife’s

Nashville Rehabilitation Hospital to a Commission-approved

purchaser within 12 months. In addition, the settlement required

HEALTHSOUTH to terminate management contracts pertaining to the

operation of rehabilitation units by HEALTHSOUTH at Medical

Center East in Birmingham, and by ReLife at Roper Hospital in

Charleston.**

In Sensormatic Electronics Corporation,** the complaint

alleged that Sensormatic Electronics Corporation's

(“Sensormatic”) acquisition of Knogo Corporation would lessen

competition substantially in research and development of

disposable labels for source labelling, and the processes for

manufacturing them in the United States and Canada. Sensormatic

and Knogo manufacture electronic article surveillance systems

used by hard goods retailers to prevent theft. The parties also

were developing disposable labels that could be installed at the

manufacturing or distribution level rather than manually by

retailers, a process known as “source labelling.” Under the

order, Sensormatic is prohibited from acquiring Knogo’s

“SuperStrip” patents and intellectual property rights for source

labelling in the United States and Canada. However, it is

permitted to acquire a non-exclusive license to use the

technology for products manufactured in North America, as well as

exclusive rights to the technology outside the United States and

Canada.

In Del Monte Foods Company/Del Monte Corporation/Pacific

Coast Producers,*® the complaint alleged that Del Monte’s and

44 In June 1996, the Commission approved HEALTHSOUTH’s

application to divest Nashville Rehabilitation Hospital to

Edgefield Rehabilitation L.L.C.

45 Sensormatic Electronics Corporation, Docket No. C-3572

(issued April 18, 1995).

a Del Monte Foods Company/Del Monte Corporation/Pacific

(continued...)

26

Pacific Coast Producers’s (“PCP”) long-term supply agreement

would lessen competition substantially in the manufacture and

sale of canned fruit in the United States. The parties are

leading producers of canned peaches, pears, fruit cocktail and

fruit mix. According to the complaint, the parties’ 1992 supply

agreement gave Del Monte the right to virtually all of PCP’s

output of canned fruit, as well as an option to purchase PCP

outright. The final order required that Del Monte and PCP

terminate the option agreement and certain provisions of the

supply agreement for the 1995 canning season within three days,

and to terminate the remaining provisions of the supply agreement

by the end of June 1995.

In Lockheed Corporation/Martin Marietta Corporation/Lockheed

Martin Corporation,‘*’? the complaint alleged that the merger

between Lockheed and Martin Marietta would lessen competition

substantially in the United States markets for research,

development, manufacture and sale of satellites for use in space

based early warning systems; military aircraft; and expendable

launch vehicles (“ELV”). The parties were direct competitors in

the manufacture of space-based early warning satellite systems,

and each was involved in an exclusive teaming arrangement with

one of the only two suppliers of electro-optical sensors used in

those systems. According to the complaint, the transaction would

have vertically integrated Lockheed Martin in the manufacture of

both tactical fighter aircraft and “LANTIRN,” a navigation and

targeting infrared system for military aircraft. In addition,

the complaint alleged that both companies manufactured satellites

and ELVs, which are used to launch satellites into orbit. Under

the order, the combined company, Lockheed Martin, would be

prohibited from enforcing exclusivity provisions contained in

teaming agreements with sensor manufacturers. The order also

prohibits the parties’ military aircraft division from gaining

access to any non-public information that the parties’

electronics division receives from competing military aircraft

46(.. .continued)

Coast Producers, Inc., Docket No. C-3569 (issued April 11, 1995).

47 Lockheed Corporation/Martin Marietta

Corporation/Lockheed Martin Corporation, Docket No. C-3576

(issued May 9, 1995).

27

manufacturers when providing LANTIRN to competing aircraft

producers. In addition, the order prohibits the parties from

making any modifications to LANTIRN that discriminate against

other military aircraft manufacturers. Finally, the order

prohibits the parties’ ELV divisions from gaining access to any

non-public information that their satellite divisions receive

from competing ELV suppliers when those competing suppliers

launch the parties’ satellites.‘

In Montedison S.p.A./HIMONT Incorporated/Royal Dutch

Petroleum Company/The “Shell” Transport and Trading Company,

p.1.c./Shell Oil Company,*? the complaint alleged that the

proposed six billion dollar joint venture between Montedison and

Shell would lessen competition substantially in the worldwide

markets of polypropylene technology, polypropylene licensing and

polypropylene catalysts; and in the United States/Canada markets

of polypropylene resin and polypropylene impact copolymer resin.

The complaint also alleged that the proposed joint venture would

have an adverse effect on United States export trade. According

to the complaint, Shell, through its United States licensing and

production joint venture with Union Carbide Corporation, and

Montedison are the two largest polypropylene producers and the

two dominant licensors of current polypropylene technology

worldwide. Polypropylene, which is the lowest cost thermoplastic

resin, has distinct performance characteristics and superior

physical properties, including high temperature resistance and

stiffness. The order, among other things, required Shell to

divest all of its polypropylene assets to Union Carbide

Corporation within six months. ®

48 In order to launch a satellite successfully, ELV

manufacturers provide extensive competitively sensitive

proprietary information to satellite manufacturers.

49 Montedison S.p.A./HIMONT Incorporated/Royal Dutch

Petroleum Company/The “Shell” Transport and Trading Company,

p.l.c./Shell Oil Company, Docket No. C-3580 (issued May 25,

1995).

50 In December 1995, the Commission approved Shell’s plan

to divest its polypropylene business to Union Carbide

(continued...)

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