# . FEDERAL TRADE COMMISSION

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- **Collection:** Agency decision
- **Document type:** Agency decision

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. FEDERAL TRADE COMMISSION
WASHINGTON. 0. C. 20S80

.·
Honorable Warren G. Magnuson
President Pro Tempore
United States Senate
127 Russell Senate Off ice Building
Washington, D.C. 20510
Honorable Thomas P. O'Neill, Jr.
Speaker of the House of Representatives
2231 Rayburn House Off ice Building
Washington, D.C. 20515
SUBJECT: ~ird Annuel ..Bepotl> to Congress pursuant
to Section 201 of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
Gentlemen:
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. S lBa (hereinafter referred to as •the
ActM). Subsection (j) of the Act provides as follows:
Beginning not later than January l, 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 need for
any rules promulgated pursuant thereto, and
any recommendations for revisions of this
section.
This is th~ third annual report to the Congress mandated by
subsection .(j) of the Act.
In general, the Act creates a mechanism under which persons
with sales and assets greater than a specified amount who intend
to make a stock or assets acquisition of a specified size or
larger must report their intentions to the Antitrust Division of
the Department of Justice and to the Federal Trade Commission.
Thereafter the parties must wait a prescribed period of time,
usually 30 days, before consummating the transaction.
The waiting period is designed to permit the antitrust
enf orcernent agencies to determine whether action against a
reported acquisition is warranted prior to its consummation. The
Act authorizes the enforcement agencies during the waiting period

..

to issue requests for additional information or documentary
material. Such a request in most cases extends the waiting
period while the requested information or documentary material is
compiled for submission to the requesting agency and for an
addjtional time, usually 20 days, after that agency receives
those materials. In the event that during this waiting period
either enforcement agency seeks a preliminary injunction to
prevent consummation of the reported acquisition, the Act
provides for expedited consideration by a Federal district court.
The legislative history suggests several complementary
purposes underlying the Act. First, Congress clearly intended to
eliminate the large •midnight merger,• which is negotiated in
secret and announced just before, or sometimes only after, the
closing takes place. Second, Congress wanted to assure that
large acquisitions were subjected to meaningful scrutiny under
the antitrust laws. Third, Congress provided an opportunity for
the enforcement agencies to seek a court order enjoining the
completion of those transactions which the agencies deemed to
present significant antitrust problems. Finally, Congress sought
to facilitate an effective remedy where a challenge by one of the
enforcement agencies proved ·successful. Thus the Act requires
that the agencies receive prior notification of significant
acquisitions between sizeable parties, provides certain tools to
facilitate a prompt but thorough investigation, assures an
opportunity to seek a preliminary injunction before the parties
are legally free to complete the transaction, and eliminates the
problem of unscrambling. the assets when one of the agencies
obtains an order enjoining consummation of the acquisition.
Operation of the premerger notification program
The Act authorizes the Com.mission, with the concurrence of
the Assistant Attorney General in charge of the Antitrust
Division of the Justice Department, to promulgate implementing
rules. Prior reports to the Congress have described the steps
taken to implement the program, which became effective on
September 5, 1978. The second annual report to Congress covered
only the first few months of the program's operation (to December
l, 1978) a~d thus did not present any comprehensive overview of
the operation or impact of the program. While a definitive
overview and assessment of the program would still be premature
after only fifteen months experience, it is possible at this time
to provide Congress with considerably more information about the
operation of the program and its impact to date.
The rules implementing the Act 1 define the terms in the
statute, specify the means for determining whether a transaction
is reportable under the Act, detail certain procedures for
compliance with the requirements of the Act, and create certain

l

16 C.F.R. Parts 801-803 (1979).
-2-

exemptions from those requirements. In addition, the rules state (in
an appendix to Part 803) the information to be submitted on the
Notification and Report Form~ which must be completed by both parties
to a reportable acquisition.
·

In general, receipt of completed Notifijation· and Report Forms

from both parties begins the waiting period.
At this time, the
staffs of both enforcement agenci~s review these filings and make
separate initial determinations whether the reported transaction may
raise significant antitrust issues which warrant further
investigation. If neither agency believes that further inquiry is
needed, the waiting period is allowed to expire or the agencies may
entertain requests for tarly termination of the waiting period from
either or both parties.
If either or both agency staffs believe that significant
antitrust issues may be raised by a reported transaction, an
established liaison arrangement is used to determine which of the two
agencies will investigate the matter further. Either agency may
investigate a 9iven transaction, but the Act does not permit both
agencies to request additional information from the same parties with
respect to the same transaction. Thus, if only one of the agencies
believes an investigation is necessary, generally that agency will
proceed. If both agencies desire to investigate an acquisition,
unnecessary duplication of effort by the agencies and burden on
reporting persons are avoided by a decision as to which agency will
proceed.
Once an investigation is authorized, the agency conducting the
investigation may use any tools at its disposal to probe further and
to facilitate its determination whether to challenge the proposed
transaction. Frequently the investigating agency issues to either or
both parties requests for additional information or documentary material
("second requests") under S 7A(e) of the Act and S 803.20 of the rules.
With the information from the initial notification forms, the responses
to second requests and any other information available to it, the
investigating agency then determines whether a challenge to the
transaction is appropriate. lf not, then the extended waiting period is
allowed to expire, or requests for early termination may be considered.

2

A comprehensive Statement of Basis and Purpose, which
explains the operation, purpose, and need for each of the
rules, was published along with the final rules. 43 Ped.
Reg. 33450 (July 31, 1978).

3

Certain types of transactions, specified in S 801.30 of the
rules, have waiting periods which begin when only the
acquiring person files notification.

4

Requests for early termination have been received in lll of
the 814 transactions reported ao far this yeari 61 of the
requests were granted and SO were denied.

-3-

If, however, the reported transaction is tho~ght to present
significant antitrust problems, the investigating agency may seek
a preliminary injunction in Federal district court to stay the
consummation of the transaction pendente lite. If the matter is
thought inappropriate for a preliminary in;unction proceeding,
the agency may decide to challenge the transaction without
seeking an injunction. The Antitrust Division of the Justice
Department challenges an acquisition by filing a complaint in
Federal district court1 the Commission challenges an acquisition
by issuing an administrative complaint which is tried before an
administrative law judge, subject to a right of appeal to the
full Commission and thereafter to a United States court of
appeals.
Acquisitions challenged during 1979
Throughout the first eleven months of calendar year 1979,
the agencies ~ave received filings with respect to 814
transactions.
Upon review of these filings, the Commission and
the Antitrust Division initiated 95 investigations in which
second requests were issued to one or both parties.
After
receipt of the requested information, some of these
investigations were closed without further action: others are
continuing as of this date. The remainder resulted in
enforcement action by the agencies as detail~d below.
The Commission has sought to enjoin three acquisitions under
the premerger notification program so far this year. In a
challenge to the acquisition of Applebaums' Food Markets by
National Tea Company, a preliminary injunction was denied by the
District Court in Minnesota on June 25, 1979, and the denial was
affirmed ~Y the Court of Appeals for the Eighth Circuit on July
16, 1979.
Even though the courts held that an injunction should
not be granted, the Commission's administrative complaint
challenging the now-consummated acquisition is scheduled for
trial in early 1980. In July, the proposed acquisition of
Reliance Electric Co. by Exxon Corp. was challenged by the

5

Sixty-three transactions were reported during the month of
December, 1978, after the second annual report to Congress
had been reported, making the total number of 1978
transactions 355.

6

A total of 179 requests were issued in 95 transactions. Thus
in most, but not all, investigations in which second requests
were issued, both parties received them.

7

FTC v. National Tea Co., 603 F.2d 694 (8th Cir. 1979).

_,_

'·

Commission in the District Court for the District of Columbia.
The distrAct court issued a temporary restraining order on July
28, 1979.
After further hearings, however, the court.issued an
order permitting the acquisition but requiring that Exxon hold a
portion of the Reliance assets separate 9or the duration of the
Commission's administrative proceedings.
Finally the Commission
sought a preliminary injunction to prev15t the acquisition of
Barnischfeger Corp. by Mannesmann A.G.
Befo're the district
court could rule on that motion, Mannesmann withdrew its offer to
purchase Harnischfeger. Mannesmann publicly announced that it
had canceli~ its proposed acquisition because of the Com.mission's
challenge.
The Antitrust Division has so f~r sought preliminary
injunctions six times durii~ 1979.
In United States v.
Tracinda Investment Corp.,
the Division sought to enjoin an
acquisition of the stock of Columbia Pictures Industries, Inc. by
Tracinda, which, along with its controlling shareholder, already
held 48% of the stock of Metro-Goldwyn-Mayer, Inc. The

8

FTC v. Exxon Corp., 5 Trade Reg. Rep. (CCH)
July 28, 1979).

9

FTC v. Exxon Corp. , 5 Trade Reg. Rep. (CCH)
October 26, 1979).

10

FTC v. Harnischfeger Coq~. , Civ. No. 79-2601 (D.O.C., f ilec
September 28, 1979).

ll

Wall Street Journal, November 5, 1979, at 2, col. 3.

12

The second annual report to Congress listed two cases in
which the Division had sought preliminary relief during
1978. After that report was completed, Occidental Petroleum
Corp. announced that it was withdrawing its cash tender offer
for the shares of Mead Corp., and the court therefore did
not rule on the motion for a preliminary injunction. United
States·v. Occidental Petroleum Corp., Civ. No. C3-78-22S
(S.O. Ohio, filed October 11, 1978). The District Court for
the Northern District of New York denied the Division's
motioh to enjoin the takeover of Carrier Corp. by United
Technologies, Inc., United States v. United Technologies,
Inc., 1978-2 Trade Cases (CCH) '62,393 (N.O.N.Y., December 6,
1978), aff'd, 1978-2 Trade cases (CCH) '62,405 (2d Cir.,
December lS, 1978). The district court, however, imposed a
hold separate order pending the outcome of further
proceedings on the merits. United States v. United
Technologies, Inc., 1979-1 Trade Cases (CCB) t62,512
(N.O.N.Y., February 9, 1979). The matter is still pending
before that court.

13

464 r. Supp. 660 (C.D. Cal. 1979).

-s-

'
'

62,763 (D. D. C. ,
62,972 (D.D.C.,

injunction was denied and the matter vent to trial. After a twoweek trial the court dismissed the suit,1 4 and the Justice
Department has filed an appeal.
r
On March 22, 1979, the Antitrust Division filed an
application for a temporary restraining order to prevent the
acquisition by Emerson Electric Co. of Skil Corp. ~he district
court denied the application for a temporary restraining order, 15
but on March 23, 1979, the court issued an order which required
Emerson Electric Co. to hold separate the operations of Skil
Corp. pending the resolution of the government's case.

Efforts to enjoin the acquisition of American Investment
Company by Household Finance Corporation were initially
unsuccessful. On a record in which all issues except the
relevant product market had been stipulated by the parties, the
District Court for the Northern District of Illinois declined to
issue an !~junction. On appeal, however, the Seventh Circuit
reversed,
and divestiture was ordered. Defendants have
petitioned the United States Supreme Court for the issuance of a
writ of certiorari.
In three other cases, the Antitrust Division sought
preliminary injunctions to prevent consummation of acquisitions
which had been reported under the premerger notification
program. In each case the defendants entered into consent
agreements with the Division before the courts ruled on the
preliminary injunction motions. United States v. Martin Marietta
Corp. (acquisition of the assets of Wedron Silica Company, a
subsidiary of Twentieth Century-Fox Corp.), Civ. No. 79-C-3626
(N.D. Ill., filed August 31, 1979) (divestiture of certain assets
was required); United States v. Beneficial Corp. (acquisition of
Southwestern Investment Company, a subsidiary of Beatrice Foods
Co.), Civ. No. 79-C-3550 (N.D. Ill., filed September 24, 1979)
(divestiture of 23 Southwestern offices was required); United
States v. Beneficial Corp. (acquisition of Capital Finance
Services, Inc., a subsidiary of the Continental Corp.), Civ. No.
79-C-3551 (N.D. Ill., filed August 29, 1979) (divestiture of 112
Capital of~ices was required).
There .have been two other challenges to reportable
acquisitiQns this year: although a preliminary injunction was not
sought in either, both matters are now in litigation. The

14

S Trade Reg. Rep. (CCH) •62,889 (C.D. Cal., September 14,
1979).

lS

Onited States v. Emerson Electric Co., Civ. No. 79-C-1144
(N.O. Ill., March 22, 1979).

16

United States v. Bousehold Finance Corp., 602 F.2d 1255 (7th
Cir. 1979).
-6-

Antitrust Oivision filed a complaint challeni.;ng 'the merger of
Cross Company with Jearney and Trecker Corp.
The Commission
filed a complaint challenging the acquisition by BASF A.G. of the
Pigments Division ~Q Chemetron Corp., a subsidiary of Allegheny
Ludlum Industries.
.
A number of additional acquisitions investigated by the
Commission under the premerger notification program resulted in
agreements under which complaints challenging the transactions
were issued simultaneously with divestiture orders, under the
Commission's consent docket. This procedure was followed with
respect to the acquisition by Crane Co. of Medusa Corp. (Docket
No. C-2959, issued April S, 1979): the acquisition of Gardner
Denver Co. by Cooper Industries, Inc. (Docket No. C-2970, issued
June 18, 1979); Schering Plough Corp.'s acquisition of
Scholl, Inc. (Docket No. C-2986, issued August 10, 1979); the
acquisition by Liquid Air Corp. of the industrial gases assets of
Chemetron Corp., a subsidiary of Allegheny Ludlum Industries
(Docket No. C-2990, issued September S, 1979); and the
acquisition of oaylin, Inc., by W.R. Grace' Co. (File No.
791-0073, consent agreement placed on the public record for
co~~ents on October 30, 1979).
A consent order was also entered in a case challenging the
acquisition of certain assets of Keystone Portland Cement Co. by
Lone Star Industries, Inc. (Docket No. 9122). On January 25,
1979, the Commission issued a complaint and authorized its staff
to seek a preliminary in.junction in Federal district court, but
the acquisition was abandoned when Lone Star learned of the
Commission's action. The order prevents the contemplated
acquisition from being accomplished without prior notice to the
Commission.
The success of the premerger notification program cannot be
judged on formal challenges and consent orders alone, although
these are the most obvious and visible measures of merger law
enforcement efforts by both agencies. Other indicators of the
program's effectiveness are described below.
In the· first eleven months of 1979, a number of transactions
reportable u~eer the program were abandoned after second requests
were issued.
Frequently there is no announcement of the

17

o.s. v. Cross and Trecker Cor~., Civ. No. 973-737 (E.D.

18

In re BASF Wyandotte Corp., Docket No. 9125 (filed April 4,
1979).

19

Fourteen transactions were abandoned during Commission
investigations. The Antitrust Division does not keep
specific data on this aspect of the program.

Mich., filed September 25, 19 9).

-7-

reasons for abandoning a reportable merger. Obviously, one
cannot conclude that the likelihood of an antitrust challenge was
the basis for every decision to cancel: on the other hand, one
cannot totally discount this phenomenon and the implications it
raises concerning the program's effect on merger law enforcement.
It is also possible that the inception of the premerger
notification program itself has deterred companies from entering
into merger agreements which might violate the antitrust laws
because of the parties' awareness that their transactions will be
subjected to more careful scrutiny than in the past. There is,
of course, no way of measuring this impact, but Congress, by
passing the Act, has clearly made it more difficult for large
companies to make an acquisition which violates established
precedent and guidelines without the agencies knowing about it.
It is therefore likely that the Act has resulted in the
alteration of acquisition strategies of some large companies.
Rules changes
During the past year, the Commission staff undertook a
review of the filings received during the first six months that
the premerger notification piogram had been in operation. The
staff compared the size of each reported transaction with the
level of enforcement interest by either agency and discovered
that a significant number of the smaller reportable transactions
did not result in any investigation or challenge. As a result,
the Commission proposed a revision of the so-called •minimum
dollar value exemption,• S 802.20 of the rules. This revision
increased the dollar value reporting thresholds for certain
transactions, thus providing exemption from the requirements of
the Act for many of these smaller transactions.
The Commission's Notice of Proposed Rulemaking was published
for comment in the Federal Register of August 10, 1979 (volume 44
at page 47099). Nine comments were received in response to this
proposal, and a revision of S 802.20 was formally promulgated on
November 13, with the concurrence of the Assistant Attorney
General, and published in the Federal Register of November 21,
1979 (volume 44 at page 66781). The new rule became effective on
November 21, 1979.
Based on the experience of both enforcement agencies, the
Commission estimated that approximately 20\ of the transactions
reportable prior to the change would be exempt under the revised
rule. The revision was designed both to reduce the burden of
f ilin9 requirements for relatively small firms and to aake
additional agency resources available for review of other
transactions. It represented a judgment by the enforcement
agencies that this change could be implemented without impairing
the effectiveness of the premerger notification program, while
substantially reducing paperwork burdens for smaller companies.

-a-

Further information concerning this rule re~ision is
attached to this annual report, including the Federal Register
notices announcing the proposed change and the final rule, copies
of the nine comments received in response to the proposal; and a
copy of the press release issued by the Commission after the
revision had been issued (Exhibits •A" through •L•).
Litigation
The Commission and the Antitrust Division were named as
defendants in a suit related to the premerger ~otification
program and filed in the Federal District Court in Delaware by
Borg-Warner Corporation on June 21, 1979. Borg-Warner had
submitted a Notification and Report Form and later responded to a
second request issued by Commission staff in connection with a
proposed merger with the Firestone Tire ' Rubber Company. The
merger was subsequently abandoned, and Borg-Warner requested the
return of all documents it had submitted. The Commission
declined to return any documents on grounds that the Act does not
require it, and that the documents may be necessary for
subsequent use in an administrative or judicial action or
proceeding. Borg-Warner sought a temporary restraining order,
which was denied on June 22, 1979. The parties submitted briefs
on cross motions for summary judgment, and oral argument was
heard on November 29, 1979. No decision has been issued by the
court to date.
Other effects of the prernerger notification program
The impact of the prernerger notification program on the
antitrust enforcement agencies can be seen in part from the cases
they have brought. Some additional observations may be useful,
however, with respect to the way in which the agencies conduct
their merger enforcement activities.
First, it is clear that one of the goals of the Act has been
met, merely by the creation of the premerger notification
program. Implementation of the Act largely ended the phenomenon
of the •midnight merger,• because only under the most unusual
circumstan=es can a significant acquisition occur in the United
States without prior notification to the enforcement agencies and
compliance ·with a waiting period.
Second, the procedural tools which the Act provides to the
enforcement agencies have had a significant impact on the ability
of the agencies to investigate reportable mergers and
acquisitions efficiently and effectively. The information
provided by the parties on completed Notification and Report
Forms is sufficiently comprehensive to permit a determination, in

-9-

.
.

•.substantial majority of eases, that no significant antitrust
issues are raised by the transaction. That inf otmation also
provides a useful focus and starting point with respect to those
transactions which may raise such issues. In short, the Form has
worked quite well during the first full year of the program's
operation, and major revisions bn the substance of .those
requirements seem unnecessary. 2
The other key procedural tool which has strengthened the
agencies' ability to investigate acquisitions which may violate
the antitrust laws is the second request. Even though only one
second request can be issued to each party the importance of this
device is that the parties receiving such requests generally have
a strong incentive to provide full responses as quickly as
possible. Coupled with the Act's provision for extending the
waiting period while responses to second requests are being
prepared by recipients and for a short time thereafter, the
second request permits the agencies to gather from the parties
most or all of the information needed by the agencies to make
their final determination whether to challenge certain
transactions. The delays frequently encountered at the discovery
stage of other types of litigation cannot benefit the parties to
a reportable acquisition, who must defer consummation of the
transaction until responses to second requests have been
submitted and the waiting period has expired. At the same time,
the government's ability to delay a transaction for a long perioo
is limited by the fact that the waiting period can be extended
only once.
The agencies have generally received a high degree of
cooperation from the recipients of second requests, and areas of
disagreement have been frequently narrowed and to date always
resolvea through negotiation. The second request and eY.tended
waiting period mechanism appear to have strengthened the
investigative powers of the enforcement agencies, while
permitting them to complete their investigations of significant
acquisitions more efficiently and more quickly.
Another important aspect of the Act is that it gives the
agencies an opportunity to seek a preliminary injunction to
prevent consummation of a transaction which the agencies believe
may violate the antitrust laws. It is too early for the agencies
to make definitive judgments concerning the effectiveness of the
Act in this respect. There simply have not been enough cases to
aupport eonf ident generalizations concerning the impact of the
Act on the ability of the agencies to obtain preliminary
injunctions in merger eases. It appears, however, that the

20

It is anticipated that the Notification and Report Porm will
be updated shortly to provide for the submission of 1977
Economic Census data instead of the 1972 data currently
required.
-10-

opportunity to seek an injunction has already be.en useful.
It would be misleading, however, to imply that all, or even
sost, future challenges to mergers and acquisitions by the
ag~ncies will necessarily be by preliminary injunction.
While
the Aet significantly strengthens the agencies' investigative
powers, it does not mean that injunctions will,be sought in all
situations in which the agencies believe that a transaction would
violate the antitrust laws, and it certainly does not guarantee
that the agencies will be more su21essful in obtaining
injunctions when they are sought.
Implicit in the Act is an assumption that at least some
government antitrust challenges to mergers and acquisitions can
be thoroughly investigated in a short time, that the governrnent's
case can be assembled quickly, and that a Federal district judge
can feasibly and responsibly hear and decide such challenges in a
preliminary injunction proceeding. The complexity of the legal
and factual issues, the necessity of obtaining information from
third parties who cannot be served with second requests under the
Act and competing public interest considerations make some cases
inappropriate for resolution in an injunction context. It would
be incorrect, therefore, to assume that the Act will prevent the
consummation of all large mergers or acquisitions which may
violate the antitrust laws. The Act provides significant
benefits to competition by improving the ability of the agencies
to discover, investigate and challenge anticompetitive
transactions, but it is' not a panacea. Its utility should not be
judged solely by reference to the number of injunctions
successfully obtained by the enforcement agencies under its
provisions. Instead, its full impact on the antitrust law
enforcement process should be assessed. After the first full
year of operation, that impact appears to be positive.
It is possible also to offer 1ome observations at this
juncture concerning the impact of the program on persons whose
transactions are reportable under it. First, compliance with the
program has exceeded even the most optimistic expectations of the
agencies. Both agencies have informally monitored announcements
of consumrriat.ed acquisitions to ensure that the parties to
transactions covered by the Act are in compliance. When the
program was first implemented, the agencies assumed that it might
be necessary to bring some actions under S7A(g) (1) of the Act,
which provides for penalties of up to $10,000 per day for

21

That is why the provisions of S 7A(i) are so important.
Congress there provided, first, that neither action nor
inaction by either agency under the Act can bar any other
proceeding or action with respect to the same transaction
under any other provision of law; an~, 1econd, that the Act
does not limit the agencies' authority to obtain information
fro~ any person under any other provision of law.
-11-

violations of the premerger notification requirements.
actions have been filed to date.

No such

One possible explanation for the absence of s 7A(9) (1)
actions is the efforts of both agencies to disseminate
information about the program. Personnel from both agen22es have
given a number of speeches about the program this year,
and
the Commission prepared a •compliance Guide,• that was
distributed in substantial numbers early this year. The
Commission staff receives hundreds of telephone inquiries a
month, and a significant portion of staff time is spent
explaining the operation of the program and assisting persons
with questions and problems that arise under the Act and the
rules. Four formal interpretations of the Act and rules have
been issued by Commission staff with the concurrence of the
Antitrust Division, under S 803.30(c) of the rules, and
~istributed both to the public and to the media which cover
antitrust and corporate matters (Exhibits •N" through •o">. 23
Based on experience to date, it also does not appear that
compliance with the initial notification requirement is
inordinately difficult or ~nreasonably expensive. Filing persons
have not had significant problems providing the information and
documentary materials required by the Notification and Report
Form.
The agencies have received complaints from certain
recipients of second requests who objected to the breadth of
those requests or to specific items contained in the requests.
To a large extent, the breadth of second requests stems from the
dual role of the request under the Act. First, the agencies have
to jnclude in a second request whatever they believe they have to
learn from the recipient in order to make a determination whether
to challenge the transaction. Second, if a decision is made to
challenge the transaction, the second request is one of the

22

For example, on August 14, 1979, Malcolm R. Pfunder,
Assistant Director for Evaluation in the Commission's Bureau
of Compet1tion, delivered a speech on the subject of
premerger notification to the annual meeting of the Antitrust
Section of the American Bar Association in Dallas, Texas.
The speech was entitled •premerger Notification After One
Year -- A Staff Perspective from the Federal Trade
Commisson.• Mr. Pfunder has been responsible for the
administration of the premerger notification program at the
Commission aince April, 1977, and the speech represented his
personal views. A copy of the apeech is attached aa Exhibit

•M.•

23

One formal interpretation was issued in late December of last
year after the second annual report to Congress had been
prepared, and is attached as Exhibit •a.•
-12-

primary means by which evidence is gathered to support the
agency's case in Federal district court. Moreover, because the
agencies must prepare their second requests within a very ahort
time -- ·relying solely on information contained in the initial
notifications, information which is publicly available, and
information previously.in their possession -- second requests are
sometimes inadvertently broader than would be necessary if more
information had been available at the time they were prepared.
The agencies have attempted to mitigate these problems by
adopting an approach toward second request recipients that is
both practical and flexible. The staffs of both agencies have
been highly receptive to negotiations with recipients, both as to
the content of the request and as to the manner of compliance.
It seems particularly significant that neither agency has sought
a court order under S 7A(g) (2) of the Act, which authorizes each
agency to seek from a Federal district court an order requiring
compliance, a further extension of the waiting period, or other
equitable relief. The fact that S 7A(g) (2) actions have not
proved necessary suggests that the agencies have so far
successfully found a reasonable balance between the use of the
Act's investigative tools and reasonable and responsible
accommodation of the interests of the parties to those
transactions.
Another impact on the parties to a reportable transaction
results from the ext2gsion of the waiting period when second
requests are issued.
Extension of the waiting period may or
may not create inconvenience or hardship to the parties,
depending upon whether consummation of the transaction is
delayed, and if so, the consequences resulting from that delay.
The purpose of the delay is to permit the enforcement agencies to
conduct a more thorough investigation and to decide whether to
challenge the transaction prior to consummation. Thus some delay
is necessary to carry out the purposes of the Act.
This delay, however, may be mitigated.

24

The parties can

When a seeond request is issued to the acquiring person in a
cash tender offer, the 15-day waiting period is extended
until 10 days after the response to the second request has
been received. When a aecond request is issued to the
acquiring person in a non-cash tender offer, the 30-day
waiting period is extended until 20 days following receipt of
the response. A aecond request issued to the acquired person
in either type of tender offer has no effect on the waiting
period, regardless of how long it takes for the recipient to
compile its response, although the rules require that the
response be provided within a reasonable time. A second
request issued to either or both parties in a non-tender
of fer transaction extends the 30-day waiting period until 20
days after all recipients have responded.
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request early termination, which would normally·be granted if a
good business reason is provided to support the request and if,
after receiving the second request responses, the investigating
agency aetermines not to challenge the transaction. In many
ca$es the parties, by filing their initial notifications earlier
or by scheduling the consummation of the transaction for a date
later than immediately following the originally anticipated
expiration of the waiting period, can minimize the possibility
that delay may adversely affect them.
There have been a number of situations during the past year
in which recipients of second requests, for whatever reason, have
simply not responded promptly. In a few cases, the parties have
provided no response for a number of months. On the other hand,
a review of all cases in which second requests have been issued
reveals that the time necessary for receipt of all responses
which affected the length of the waiting period was less than
20 days about as often as it was longer than 20 days. Thus
experience to date does not appear to suggest that second
requests are inappropriately lengthy or complex, or that waiting
period extensions have been unduly long or damaging to the
parties to transactions under investigation.
While conclusions based on only one year's experience must
of necessity be somewhat tentative, the agencies have attempted
to exercise the powers conferred on them by the Act in a
responsible manner, while at the same time seeking to carry out
the Congressional mandate to subject all significant acquisitions
to careful antitrust scrutiny. Interference with mergers and
acquisitions that do not raise significant antitrust issues
appears to have been minimized, while transactions questionable
under the antitrust laws have been investigated and prosecuted
more effectively under the Act.
Recommendation for a possible revision of the Act
The agencies do not believe that any major revisions of the
Act are needed at this time. There is one area, however, in
which a relatively minor change might be appropriate. Section
7A(h) pro~ides that any information filed with the agencies under
the Act is eonf idential and may not be made public •except as may
be relevant to any administrative or judicial action or
proceeding.• The agencies have taken the position, in response
both to informal requests and to requests under the Freedom of
·Information Act, that the fact of filing is itself part of the
information protected from disclosure under 5,7A(h). The
agencies do not disclose the fact that parties to a transaction
have filed notification under the Act because this aay reveal
information filed with the agencies under the Act, such as the
sizes of the parties, the size of the transaction, the likely
consummation date, and other information the Act intended to keep
confidential. Bowever, aection 7A(b) (2), vhich authorizes the
agencies to grant early termination of the waiting period,
requires that notice be published in the Federal Register when
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early termination is granted. Section 7A(b) (2), therefore,
appears to be in conflict with 5 7A(h).
This problem vas pointed out in the comments received when
the implementing rules were under consideration. !.!!_ •3 Ped.
Reg. 33514 (July 31, 1978). The Commission at that time
interprete~ the mandatory publication requirement in S 7A(b) (2)
to be •a necessary exception to section 7A(h)• even though it had
the effect of revealing the fact of filing.
The agencies believe, however, that parties to a reportable
transaction should not have to choose between keeping
confidential the fact that their transaction has been reported
under the prernerger notification program and requesting early
termination of the waiting period. In no other respect is
confidential information received under the program required to
be made available to the public. The Commission and the
Assistant Attorney General thus recommend that S 7A(b) (2} be
amended by deleting that portion of the subsection which follows
the word •section,• as indicated below:
The Federal Trade Commission and the
Assistant Attorney General may, in individual
eases, terminate the waiting period specified
in paragraph (1) and allow any person to
proceed with any acquisition subject to this
sectionT e~e eheii ee~ee te ee p~eiiehee ~~
t~e Feeefei Re!i&tef ~etiee that fte,the~
•~te~ee te te*e. •~Y eetie~ wit~i~ •~eh periee
wit~ respeet te •~e~ ee~~ieitie~.

The Assistant Attorney General has indicated his concurrence
with this annual report.
By direction of the Commission.

Carol M. ~homas
Secretary

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Aftc%3A240c02cb30dba26f. Public record. Not legal advice.