TWELFTH ANNUAL REPORT (1989)

ne gy

TWELFTH ANNUAL REPORT

TO CONGRESS

PURSUANT TO SECTION 201

| OF THE

HART-SCOTT-RODINO ANTITRUST

IMPROVEMENTS ACT OF 1976

_, (Fiscal Year 1989)

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 twelfth annual report to Congress pursuant to

this provision. It covers fiscal year 1989.

In general, Section 7A requires that certain proposed

acquisitions of stock or assets must be reported to the Federal

Trade Commission and 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), 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.

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 to

conduct this antitrust review. Much of the information needed

for a preliminary antitrust evaluation is included in the

notification filed with the agencies 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)

to request additional information or documentary materials from

either or both of the parties to a reported transaction. Such a

request extends the waiting period for a specified period,

usually twenty days (ten days in the case of a cash tender

offer), until after the parties have complied with the request

(or in the case of a tender offer, after the acquiring party

complies). This additional time provides the agencies with the

opportunity to review the information and to take appropriate

action before the transaction is consummated. If either agency

believes that a proposed transaction may violate the antitrust

laws, the agency may seek an injunction in federal district court

to prohibit consummation of the transaction.

Final rules implementing the premerger notification program

(hereinafter referred to as "the rules") were promulgated by the

Commission, with the concurrence of the Assistant Attorney

General, on July 31, 1978.' 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 1983, the

Commission, with the concurrence of the Assistant Attorney

General, made several changes in the rules. Those amendments

became effective on August 29, 1983.” Additional amendments were

published in the Federal Register on March 6, 1987,° and May 29,

1987.

STATISTICAL PROFILE OF THE PREMERGER NOTIFICATION PROGRAM

The appendices to this report provide a statistical summary

of the operation of the premerger notification program. Appendix

A shows for each fiscal year in which the program has been in

operation the number of transactions reported,’ the number of

! 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.

2 48 Fed. Reg. 34,427 (1983) (codified at 16 C.F.R. Parts

801 through 803).

3 52 Fed. Reg. 7,066 (1987) (codified at 16 C.F.R. Parts

801 through 803).

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

801 through 803).

3 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

(continued...)

filings received, the number of merger investigations in which

requests for additional information or documentary material

(hereinafter referred to as "second request{s]") 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 calendar years 1981 through

1984 and fiscal years 1985 through 1989 the number of

transactions in which second requests could have been issued.

(This information appears on Appendix C and is explained in

footnote 1 of that appendix.) Appendix B provides a month-bymonth comparison of the number of filings received (Table 1) and

the number of transactions reported (Table 2) for fiscal years

1979 through 1989. Appendix C shows, for calendar years 1981

through 1984 and fiscal years 1985 through 1989, the number of

transactions in which the agencies 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. We believe that Appendix C provides

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 the appendices show that the

number of transactions reported in 1989 increased approximately

5.0 percent over the number of transactions reported in 1988

5(.. continued)

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 identification numbers to track the

filing parties and waiting periods. As described below, a

particular merger or deal may involve more than one

"transaction." Indeed, some have involved as many as four or

five "transactions.*®

6 See Appendix C, note 1. As explained in the Eleventh

Annual Report, the information regarding second requests in

Appendices A and C differs from that reported in those appendices

in prior annual reports. Appendices A and C in prior reports

identified the number of transactions in which a second request

was issued while Appendices A and C in the present report

indicate the number of merger investigations in which second

requests were jssued. 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.

(2,883 transactions were reported in 1989 while 2,746 were

reported in 1988). The statistics in Appendix A also show that

the number of merger investigations in which second requests were

issued in 1989 decreased approximately 5.8 percent over the

number of merger investigations in which second requests were

issued in 1988 (64 second requests were issued in 1989 while 68

were issued in 1988). These numbers indicate a Slight decrease

in the number of second requests issued as a percentage of

reported transactions from 1988 to 1989 (from 2.5 percent in 1988

to 2.2 percent in 1989, based on Appendix A, and from 2.8 percent

in 1988 to 2.5 percent in 1989, based on Appendix C).

The statistics also show that in recent years, early

termination is requested for most transactions.’ In 1989, early

termination was requested in 89.6 percent (2,582) of the

transactions reported, while in 1988 it was requested in 88.9

percent (2,440) of the transactions reported. Although the

number of requests granted has increased (from 1,885 in 1988 to

1,937 in 1989), the percentage of requests granted has declined

Slightly (77.2 percent in 1988 and 75.0 percent in 1989).

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

statistical tables containing information about the agencies’

enforcement interest in transactions reported in fiscal year

i989. The exhibit presents eleven tables that provide, for

various statistical break downs, 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 most of their revenues. These

statistics have been included in prior annual reports for

calendar years 1981-1984, and for fiscal years 1985, 1987~1988.°

7 The increase in the number of requests for early

termination and the high proportion of those requests that have

been granted are probably attributable to the change in the

agencies’ standard for granting early termination, adopted in the

formal interpretation issued by the Commission on August 20,

1982.

¢

8 See the Eleventh Annual Report, Exhibits A and B, for

fiscal years 1987-1988 transactions, the Tenth Annual Report,

Exhibit A, for fiscal year 1985 transactions, the Ninth Annual

Report, Exhibit A, for calendar year 1984 transactions, the

(continued...)

DEVELOPMENTS IN FY 1989 RELATING TO PREMERGER NOTIFICATION RULES

AND PROCEDURES

1. Formal Interpretation

On November 14, 1988, the Commission issued Formal

Interpretation Number 14 which discussed the effect of the CAB

Sunset Act? on § 802.6(b) of the rules.’ Its primary purpose

was to state that any airline merger or acquisition to be

consummated on or after January 1, 1989, would require review

under the Hart-Scott-Rodino premerger notification program,

regardless of whether the parties to it had sought or obtained

approval from the Department of Transportation before that time.

Mergers between airlines required federal regulatory

approval prior to consummation for decades. Until 1985, that

authority was granted to the Civil Aeronautics Board and,

subsequently, to the Department of Transportation ("DOT"). A

provision in the rules attempted to eliminate duplicative

notification and review by providing in § 802.6(b)(1) that:

[A]ny transaction which requires approval by [DOT]

prior to consummation, pursuant to section 408 of the

Federal Aviation Act, 49 U.S.C. 1378, shall be exempt

from the requirements of the act if copies of all

information and documentary material filed with [DOT]

are contemporaneously filed with the Federal Trade

Commission and the Assistant Attorney General.

Under the provisions of the CAB Sunset Act, DOT no longer

has authority over airline mergers beginning, January 1, 1989.

The Commission issued the formal interpretation in anticipation

of transactions for which DOT approval had been sought or

obtained, but that had not been consummated prior to January 1,

1989. The interpretation limited the exemption provided by

§ 802.6 to transactions that were both approved by DOT and

consummated by the parties prior to that date. Without these

§(...continued)

Eighth Annual Report, Exhibit A, for calendar year 1983

transactions, the Seventh Annual Report, Exhibit B, for calendar

year 1982 transactions, and the Sixth Annual Report, Exhibit A,

for calendar year 1981 transactions. Due to resource

constraints, statistics for fiscal year 1986 have not been

prepared. ;

9 49 U.S.C. § 1551(a) (7) (1988).

10 16 C.F.R. § 802.6(b) (1989). The formal interpretation

was published in the Federal Register on November 23, 1988. 53

Fed. Reg. 47,524 (1988).

limitations, approval of a transaction by DOT might have enabled

the parties to complete a transaction at a much later date when

the likely competitive effects of the transaction could be

significantly different. In addition, the interpretation

eliminated the possibility that a transaction would avoid all

premerger review if the parties had sought, but did not receive,

final approval by DOT.

2. Advance Notice of Proposed Rulemaking

On February 24, 1989, the Commission published an Advance

Notice of Proposed Rulemaking in the Federal Register (the

"Notice") requesting public comment on several questions and

options relating to whether the Commission should amend the rules

to prevent the nonreporting of certain types of acquisitions by

partnerships and other newly formed entities." In 1987, when

the Commission amended the definition of "control" in § 801.1(b)

to include partnerships, it noted that further examination of

more inclusive definitions might be required if it appeared that

significant underreporting remained after implementation of the

change.” The Notice was designed, in part, to elicit comments

on this issue.

The Notice described the development of the rules in this

area, provided some background concerning the issues addressed in

the Notice, and discussed five possible approaches. The Notice

also posed general questions covering (1) the definition of

"control;" (2) the use of partnerships as acquisition vehicles;

(3) the possible use of partnerships to avoid reporting; and (4)

the effect on partnerships of any change in the definition of

"control."

Four public comments were submitted in response to the

Notice.

ul 54 Fed. Reg. 7,960 (1989).

2 52 Fed. Reg 20,058, 20,061 (1987). Prior to the

amendment of 801.1(b), certain acquisitions by partnerships and

other entities that had no outstanding voting securities were not

subject to premerger review. The revised rule provided for the

consistent treatment of partnerships and corporations by

modifying the definition of "control" to include the following

language applicable to the control of partnerships:

(ii) In the case of an entity that has no outstanding

voting securities, having the right to 50 percent or

more of the profits of the entity, or having the right

in the event of dissolution to 50 percent or more of

the assets of the entity[.]

6

3. Interim Rule

On May 18, 1989, the Commission published an Interim Rule in

the Federal Register that formalized the Commission’s procedures

for publicly disclosing grants of early termination of the

waiting period through means in addition to publication in the

Federal Register.”

Section 7A(b)(2) of the Act and § 803.11(c) of the rules

authorize the Commission and the Assistant Attorney General to

terminate the waiting period provided by section 7A(b) (1) of the

Act in certain transactions before it would otherwise expire."

The Act and rules further specify that when parties receive early

termination of the waiting period, the enforcement agencies must

publish a notice in the Federal Register that neither agency

intends to take any action with respect to the acquisition during

the waiting period.

In 1982, the Commission eliminated the requirement that

parties provide a business reason to qualify for early

termination, and adopted the practice of sending a Notice to the

Federal Register every two weeks listing early terminations

granted during the preceding period. In addition, the Premerger

Notification Office provided information about early terminations

in response to telephone inquiries from the public, and submitted

a list of early terminations to the Commission’s Public Reference

Section. Subsequently, the Commission discovered that these

informal dissemination methods may have enabled some investors

familiar with the procedure to profit from their knowledge to the

detriment of investors who were unaware that the information was

available. The policy was discontinued in 1988 until a process

could be established to make the public at large aware of the

availability of early termination notices, and the Commission

could consider whether it was appropriate to release the

information by methods other than the Federal Register.

The Commission determined in fiscal year 1989 that sections

7A(b) (2) and 7A(h) do not limit the release of information

concerning early terminations to publication in the Federal

Register. The change in § 803.11(c) recognizes that the

Commission may use additional means to make this information

public.

B 54 Fed. Reg. 21,425 (1989).

M4 15 U.S.C. § 18a(b)(2) (1988); 16 C.F.R. § 803.11(c)

(1989).

15 Id.

. Accordingly, since mid-1989, the Commission has provided in

the Public Reference Section of the Commission a daily list of

transactions for which early termination was granted on the

previous work day. This information is also available for the

prior five business days on a prerecorded message through the

Public Reference Section’s telephone information system which can

be reached by calling (202)326-2222. These procedures give the

public access to this information promptly without imposing an

undue administrative burden on the Commission. Release of the

information in this manner supplements the current two week

schedule of publication in the Federal Register.

The Interim Rule, which became effective on June 19, 1989,

amends § 803.11(c) by appending the following language to the

existing rule:

The Federal Trade Commission and the Assistant Attorney

General aiso may use other means to make the

termination public prior to publication in the Federal

Register in a manner that will make the information

equally accessible to all members of the public.

4. Premerger Notification Sourcebook

In August 1989, the Commission published an update of its

Premerger Notification Sourcebook which contains the following

information:

- Section 201 of the Hart-Scott-Rodino Antitrust

Improvements Act (15 U.S.C. § 18a);

- the Commission’s premerger notification rules and

amendments;

- copies of Federal Register notices concerning

the rules and amendments, including statements of basis and

purpose for the rules and amendments;

- all formal interpretations of the rules;

- Bureau of Competition statements concerning enforcement

of the premerger notification rules; and

~ the Tenth Annual Report to Congress on the premerger

notification program.

5. Compliance

The Federal Trade 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 1989. At the

Commission’s request, the Department of Justice filed one

complaint in fiscal year 1989 alleging that a corporation had

violated the premerger notification requirements by failing to

comply with reporting and waiting period obligations before

consummating a stock acquisition. This action resulted in the

largest civil penalty ever obtained for a violation of the Act.!6

In United States v. Tengelmann Warenhandelsgesellschaft and

The Great Atlantic & Pacific Tea Co., Inc.,'’ the complaint

alleged that The Great Atlantic & Pacific Tea Co. ("A&P")

violated the Act when it acquired stock of Waldbaum, Inc., and

was in violation of the Act from November 26, 1986 through

November 18, 1988. According to the complaint, A&P structured

its acquisition of Waldbaum as an acquisition by a general

partnership for the purpose of avoiding the notification and

waiting period requirements of the Act. Waldbaum operated retail

grocery stores in the States of New York and Connecticut and the

Commonwealth of Massachusetts. Under the terms of the consent

decree, A&P agreed to pay a civil penalty of $3,000,000 to settle

the case.

In addition to investigations, the agencies continue to

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 Act. Industry sources, such as competitors, customers

and suppliers, and interested members of the public also provide

information about transactions and possible violations of the

filing requirements.

16 Under Section (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.

v United States v. Tengelmann Warenhandelsgesellschaft

and The Great Atlantic & Pacific Tea Co., Inc., 1989-1 Trade

Cases § 68,623 (D.D.C. 1989).

MERGER ENFORCEMENT ACTIVITY DURING Fy 1989"

1. Department of Justice

The Antitrust Division ("the Division") filed five

complaints in merger cases during fiscal year 1989." Three of

these cases, United States v. TRW Inc., United States v.

Westinghouse Electric Corporation, ABB Asea Brown Boveri Ltd.,

and Asea Brown Boveri Inc., and United States v. Pacific Dunlop

Holdings Inc., Becton, Dickinson and Company, and Edmont, Inc.,

were settled by the entry of consent decrees. In one of the

remaining cases, United States v. Engelhard Corporation and

Filtrol Corporation, the Division voluntarily dismissed the suit

when the proposed transaction was terminated by the parties. In

the fifth case, United States v. Ivaco, Inc., Canron, Inc. and

Jackson Jordan, Inc., a preliminary injunction against

consummation of the merger was issued after an evidentiary

hearing and the parties subsequently abandoned the transaction.

In United States v. Engelhard Corporation and Filtro]

Corporation, the Division challenged the proposed acquisition of

Filtrol by Engelhard. The complaint alleged that the proposed

acquisition might substantially lessen competition in the

production and sale of fluid catalytic crackers ("FCC"), used to

break down or "crack" heavy hydrocarbon molecules contained in

crude oil (to make light petroleum products such as gasoline).

Filtrol is a wholly owned subsidiary of Kaiser Aluminum &

Chemical Corporation which in turn is ultimately controlled by

KaiserTech. Only five companies in the United States sell FCC

catalysts and the merger would have combined the second and third

largest producers. Engelhard accounted for 32 percent of the

$289 million total 1987 U.S. sales of FCC catalysts while Filtrol

18 The transactions mentioned in this report were not

necessarily reportable under the premerger notification program.

Because of the Act’s provisions regarding the confidentiality of

the information obtained pursuant to this program, it would be

inappropriate to identify which transactions were reported under

the premerger notification progran.

ad United States v. Engelhard Corporation and Filtrol

Corporation, Cv. No. 88-8403 (E.D. Pa. filed November 12, 1988);

United States V. TRW Inc., Cv. No. C-88-4253 (N.D. Ohio filed

November 17, 1988); United States v. Ivaco, Inc., Canron, Inc.,

and Jackson Jordan, Inc., Cv. No. G89-40032CA (W.D. Mich. filed

January 12, 1989); United States v. Westinghouse Electric

Corporation, ABB Asea Brown Boveri Ltd., and Asea Brown Boveri

Inc., Cv. No. 89-CIV-1032 (S.D.N.Y¥. filed February 14, 1989); and

United States v. Pacific Dunlop Holdings Inc., Becton, Dickinson

and Company, and Edmont, Inc., Cv. No. 89-4522 (E.D. Pa. filed

June 16, 1989).

10

accounted for 18 percent. A Temporary Restraining Order was

issued and trial on the merits was scheduled. The parties

abandoned the transaction prior to trial and the Division

dismissed the suit.

In United States v. TRW Inc., the Division challenged TRW’s

proposed acquisition of Chilton Corporation of Dallas, Texas,

from Borg-Warner of Chicago, Illinois. The complaint alleged a

lessening of competition in the sale of consumer credit reports

in all or portions of Arizona, Colorado, Connecticut, Hawaii,

Massachusetts, Michigan, New Hampshire, New Mexico, New York,

Rhode Island and Texas. Both TRW and Chilton sell consumer

credit reports and related services to stores, banks and others

that extend credit. The total United States credit reporting

revenues of TRW, Chilton, and its principal competitors were

approximately $410 million in 1986. The consent decree required

TRW to terminate relationships with a number of independent

credit bureaus that sold credit reports under either TRW or

Chilton trade names. It also required TRW to sell a copy of the

consumer credit files of either TRW or Chilton in certain areas

to a new competitor by July 14, 1989.

In United States v Vv c a c. d cks

Jordan, Inc., the Division filed suit to block the proposed $48

million joint venture between Ivaco, Inc. of Montreal and Jackson

Jordan, Inc. of Schaumburg, Illinois. The suit alleged that the

joint venture would lessen competition in the production and sale

of automatic tampers--large pieces of equipment used to level and

align railroad tracks. Canron, Inc., based in Toronto, Canada,

is a controlled subsidiary through which Ivaco manufactures and

sells automatic tampers in the United States. The joint venture

would have controlled over 70 percent of the automatic tampers

sold in the United States since Ivaco was the largest domestic

producer and Jackson Jordan was the third largest. Sales of

automatic tampers in the United States in 1987 totaled about $15

million. After an evidentiary hearing, a preliminary injunction

was issued. The parties subsequently abandoned the transaction

and the Division dismissed the suit.

In United States v, Westinghouse EFlectric Corporation, ABB

sea ow ov. -, and Asea ° overj , the Division

challenged two proposed joint ventures between Westinghouse

Electric of Pittsburgh, Pennsylvania, and ABB Asea Brown Boveri

Ltd., ("ABB") of Zurich, Switzerland. One joint venture involved

steam turbine generator equipment and service and the other

involved electric power transmission and distribution equipment.

The suit allegéd that the joint ventures would lessen competition

in the U.S. markets for power transformers, converter

transformers, steam turbine generator equipment and steam turbine

generator service. Both Westinghouse and ABB are major U.S.

producers and suppliers of electrical power equipment and

services. In 1987, Westinghouse’s sales of electric power

11

equipment and services were in excess of $3 billion. ABB’s

United States sales of electric power equipment and services in

1987 were approximately $1.6 billion. In the period 1983 through

1987, total sales of steam turbine generator equipment in the

United States were approximately $442 million -- Westinghouse’s

sales of such equipment constituted about 43 percent, or $190

million, and ABB’s United States sales constituted about 19

percent, or $84 million. The consent decree enjoined

consummation of the steam turbine generator equipment and service

joint venture. With respect to the transmission and distribution

joint venture, the decree required ABB to divest its Waukesha,

Wisconsin, power transformer plant and related assets to a

purchaser who would operate the plant and assets as a viable and

ongoing business that would compete in the U.S. power transformer

market. Regarding converter transformers, the consent decree

required Westinghouse to sell, to an eligible purchaser, the

technology and intellectual property used in the design or

manufacture of converter transformers or smoothing reactors.

In United States v acific Dunlop Holdings -, Becto

Dickinson and Company, and Edmont, Inc., the Division challenged

Pacific Dunlop’s proposed acquisition of Edmont, Inc., a

subsidiary of Becton, Dickinson and Company. The complaint

alleged that the proposed acquisition would be anticompetitive in

the U.S. markets for the following five types of industrial

gloves: (1) unsupported nitrile gloves; (2) liquid proof dipped

supported latex gloves; (3) liquid proof dipped supported nitrile

gloves; (4) liquid proof dipped supported neoprene gloves; and

(5) liquid proof dipped supported PVC gloves. Industrial gloves

are used to protect hands from cuts and abrasions and

environmental, chemical, and biological agents, and/or protect

products from hand contamination. Both Edmont and Pacific Dunlop

are major producers of various types of industrial gloves.

Edmont’s total 1988 U.S. sales of all types of industrial gloves

were approximately $65 million. Pacific Dunlop’s total 1988 U.S.

sales of all types of industrial gloves were approximately $26

million. The consent decree provides that Pacific Dunlop will

sell Edmont’s unsupported nitrile glove production facility in

Canton, Ohio, and its own dipped supported glove production

facility in Snow Hill, North Carolina.

During fiscal year 1989, the Division investigated one bank

merger transaction for which divestiture was required prior to or

concurrently with the acquisition. The transaction involved the

acquisition of Howard Bancorp, Burlington, Vermont, by Banknorth

Group, Inc., Burlington, Vermont. A "not significantly adverse".

letter conditioned on divestiture prior to or concurrent with

consummation of the transaction was sent to the Board of

Governors of the Federal Reserve System on August 15, 1989.

Finally, on four occasions during fiscal year 1989 the

Division informed the parties to a proposed transaction that it

12

would file suit challenging the transaction unless the parties

restructured the proposal to avoid competitive problems or

abandoned the proposal altogether.”

2. Federal Trade Commission

The Commission authorized its staff to seek preliminary

injunctions in seven merger cases in fiscal year 1989. In four

of these cases, the parties abandoned the proposed transaction

before the motion for preliminary injunction was filed in

court.”

20 Department of Justice Press Release issued December 8,

1988, involving the proposed acquisition of Chase Brass & Copper

Co. of Solon, Ohio, by TBG, Inc., of New York City; Department of

Justice Press Release issued April 28, 1989, involving the

proposed acquisition of AmeriGas Inc., a subsidiary of UGI

Corporation, by The BOC Group PLC, of Windlesham, Surrey,

England; Department of Justice Press Release issued June 7, 1989,

involving a proposed sale by Eastern airlines, Inc., to USAir,

Inc., of gates at Philadelphia National Airport and route

authority between Toronto, Canada, and Philadelphia; and

Department of Justice Press Release issued June 22, 1989,

involving a proposed joint venture of computer reservation

systems between AMR Corporation, parent of American Airline Inc.,

and Delta Airline Inc.

21 FTC news release issued November 2, 1988, concerning

the proposed joint venture between General Electric Company and

Union Carbide Corporation. The press release reported that the

Commission had reason to believe that the joint venture would

substantially lessen competition in the production and sale of

Silicone products. General Electric was the second largest

seller of silicone products worldwide, and owned silicone

producing plants in New York and in the Netherlands. Union

Carbide ranked third in domestic silicone production and sixth

worldwide.

FTC news release issued February 23, 1989, involving

the proposed acquisition by The BOC Group ple of the Vacuum

Products Division of Varian Associates Inc. The press release

reported that the Commission had reason to believe that the

acquisition would substantially lessen competition in the

production and,sale of helium mass spectrometer leak detectors.

Helium mass spectrometer leak detectors use helium to discover

leaks in products ranging from electronic valves to nuclear fuel

systems to refrigeration systems. A subsidiary of BOC, Edwards

High Vacuum International, based in West Sussex, England, was a

direct competitor of the Varian Vacuum Products Division.

(continued...)

13

In Societe Nationale Elf Acquitaine,” on July 20, 1989, the

Commission authorized its staff to seek a preliminary injunction

alleging that Societe Nationale Elf Acquitaine’s ("Elf") proposed

acquisition of Pennwalt Corporation would substantially lessen

competition in the production and sale of two chemical products:

polyvinylidene fluoride ("PVDF"), a chemical resin used in the

production of architectural coatings, electrical and electronic

cable, and chemical processing equipment; and vinylidene fluoride

("VF 2"), a chemical intermediate used to make PVDF and

fluoroelastomers, rubberlike compounds used in high temperature

and corrosive environments. Before filing the motion for a

preliminary injunction, the Commission accepted a consent

agreement for public comment from Elf. Under the proposed

consent, Elf could acquire Pennwalt, subject to Elf’s agreement

to divest Pennwalt’s chemical manufacturing plant in Thorofare,

New Jersey, to a Commission approved purchaser. The Thorofare

plant produced both PVDF and VF 2. Elf produced both PVDF and VF

2 in France. In addition, the proposed consent required Elf to

"hold separate" from other entities it owned the entire

fluorochemicals division of Pennwalt until divestiture of the

Thorofare plant had been effected. The consent agreement became

final on December 28, 1989, when the Commission issued a

complaint, decision and order.

21(,. continued)

FTC news release issued June 5, 1989, involving the

proposed acquisition by U.S. Can Company, a wholly owned

subsidiary of Inter-American Packaging, Inc., of Armstrong

Industries, Inc. The press release reported that the Commission

had reason to believe that the acquisition would substantially

lessen competition in the production and sale of one-gallon metal

paint cans. U.S. Can and Armstrong were the nation’s two largest

manufacturers of paint cans.

FTC news release issued July 10, 1989, involving

Autoclave Engineers Inc.’s tender offer for Tylan Corp. The

press release reported that the Commission had reason to believe

that consummation of the tender offer would substantially lessen

competition in the manufacture and sale of mass flow controllers.

Mass flow controllers are precision electronic instruments which

measure, monitor and control the flow of process gases used in

the manufacture of semiconductors and other products.

2 Societe Nationale Elf Acquitaine, Docket No. C3270

(issued December 28, 1989).

14

In Federal Trade Commission v. Textron Inc. ,” the

Commission authorized its staff to seek a preliminary injunction

preventing Textron from acquiring either the assets or operations

of Avdel PLC. The Commission alleged that the acquisition of

Avdel by Textron would result in a substantial lessening of

competition in the design, production and sale of two kinds of

rivets used in aerospace applications and in ground

transportation, including aerospace structural blind rivets and

non-aerospace structural blind rivets. Textron had already

acquired a majority of Avdel’s stock at the time the Commission

authorized its staff to seek a preliminary injunction. The court

granted the Commission’s request for an injunction, and ordered

Textron to "hold separate" the business of Avdel under

supervision of a court appointed trustee until completion of

administrative proceedings. The Commission issued an

administrative complaint and the matter is in litigation before

an administrative law judge.

n Federa ade Commission v. Promodes : fe)

Stores, Inc.; The Kroger Co.,“ the Commission authorized its

staff to seek a preliminary injunction preventing Red Food

Stores, Inc., from acquiring all seven of Kroger Co.’s grocery

stores in Chattanooga, Tennessee. The Commission alleged that

the proposed acquisition would substantially lessen competition

among grocery stores in that area. Red Food operated 27 grocery

stores in the Chattanooga area, and the acquisition of the Kroger

stores would result in Red Food having nearly 75% of the

Chattanooga metropolitan grocery store market. The court denied

the Commission’s application for injunctive relief. The

Commission issued an administrative complaint and the matter was

later settled when the Commission issued a decision and order

requiring Red Food to divest stores in the Chattanooga area.

The Commission issued a complaint and decision and order in

four merger cases during fiscal year 1989 in which it had

previously accepted consent agreements for public comment.

In Sun Company, Inc.,* the complaint alleged that Sun’s

acquisition of Atlantic would substantially lessen competition in

the distribution and marketing of gasoline and other light

petroleum products in the Williamsport, Pennsylvania, and

3 Federal Trade Commission v. Textron Inc., Cv. No. 89-

0484 (D.D.C. filed February 22, 1989; preliminary injunction

order entered March 9, 1989).

a Federal Trade Commission v. Promodes, S.A., Red Food

Stores, Inc.; The Kroger Co., Docket No. D.9228 (issued May 17,

1990).

3 Sun Company, Inc., 111 F.T.C. 570 (1989).

15

Binghamton, New York, areas. Under the order, Sun was required

to divest all of Atlantic’s light products terminals in Lycoming

County, Pennsylvania, and Broome County, New York, as well as all

retail gasoline properties owned by Atlantic and supplied

predominately from those terminals.

In KKR Associates,” the complaint alleged that KKR’s

acquisition of RJR Nabisco, Inc. ("RJR") would substantially

lessen competition in the production and distribution of branded

catsup/ketchup, shelf-stable oriental entrees, shelf-stable

oriental noodles, shelf-stable oriental vegetables, soy sauce and

packaged nuts. Under the order, KKR was permitted to acquire RJR

subject to its divestiture of either Beatrice/Hunt-Wesson Inc. or

RJR assets used in the production and sale of packaged nuts,

ketchup and oriental food.

In Pepsico, Inc.,” the complaint alleged that PepsiCo,

Inc.’s acquisition of bottling operations from General Cinema

Corporation ("GCC") in Broward County, Florida, and a six-county

area in and around Staunton, Virginia, would substantially lessen

competition in all or branded carbonated soft drinks in these two

areas. The order requires PepsiCo to provide bottling services

to GCC at cost, and to permit GCC to continue to distribute such

non-Pepsi brands as Dr. Pepper, Barq’s and Mountain Dew in the

Staunton area, and Dr. Pepper, Seven-Up, Barq’s and Sunkist in

Broward County.

In Panhandle Eastern Corporation,” the complaint alleged

that Panhandle Eastern Corporation’s ("Panhandle") acquisition of

Texas Eastern Transmission Corporation ("Texas Eastern"), would

substantially lessen competition in the pipeline transportation

of natural gas out of portions of the Gulf of Mexico, south of

eastern Texas and western Louisiana. Under the order, Panhandle

was permitted to acquire Texas Eastern subject to its divestiture

of Truckline Offshore Company.

In fiscal year 1989, the Commission also accepted for public

comment two consent agreements which became final after September

30, 1989.

26 KKR Associates, 111 F.T.C. 670 (1989).

7 Pepsico, Inc., 111 F.T.C. 704 (1989).

ad Panhandle Eastern Corporation, Docket No. C3260 (issued

July 17, 1989).

16

In Arkla, Inc.,” the Commission accepted for public comment

a consent agreement to settle its complaint that Arkla, Inc.’s

1986 acquisition of TransArk Transmission Company ("TransArk")

substantially lessened competition in the transportation of

natural gas in both the Arkoma Basin area and the Russellville-

Morrilton-Conway corridor of Arkansas. The consent agreement

became final on October 10, 1989, when the Commission issued a

complaint and decision and order. Arkla was involved in all

sectors of the natural gas industry, including the gathering,

storage and transmission of natural gas. TransArk was a natural

gas transmission company which owned natural gas pipeline assets

in the Arkoma Basin and in the Russellville-Morrilton-Conway

corridor. Under the order, Arkla agreed to divest either the

TransArk pipeline or an undivided interest in the Arkla pipeline

systen.

In MTH Holdings, Inc.,*” the Commission accepted for public

comment a consent agreement which allowed MTH Holdings, Inc.

("MTH") to acquire a majority of the voting securities of GU

Acquisition Corporation ("GU"). The consent agreement became

final on October 6, 1989, when the Commission issued a complaint

and decision and order. GU owned and operated The Grand Union

Company which operated a chain of 304 retail grocery stores in

the United States. Both MTH and Salomon Inc, which was to

acquire the minority stake in GU, were investment banking firms.

MTH in turn controlled P & C Food Markets, Inc., a retail grocery

store chain. The complaint alleged that MTH’s acquisition of

Grand Union would substantially lessen competition in twelve

towns and cities in New York and Vermont. The order required MTH

to divest one retail grocery store owned or operated by either P

& C or Grand Union in three towns in New York and in seven towns

or areas in Vermont. MTH also was required to divest two retail

grocery stores owned or operated by either P & C or Grand Union

in the Rutland, Vermont, area, and four retail grocery stores

owned or operated by either P & C or Grand Union in the

Burlington, Vermont, Metropolitan Statistical Area.

The Commission also issued one administrative complaint in

fiscal year 1989 concerning an acquisition that occurred in 1987.

oechs elanese Corporatio oechst C

Aktiengesellschaft,*! the Commission charged that Hoechst

29 Arkla, Inc., Docket No. C3265 (issued October 10,

1989).

30 MTH Holdings, Inc., Docket No. C3266 (issued October 6,

1989).

31 Hoechst Celanese Corporation, Hoechst Corporation,

Hoechst Aktiengesellschaft, Docket No. D.9216 (complaint issued

November 17, 1988).

17

Aktiengesellschaft’s ("Hoechst A.G.") 1987 merger of Celanese

Corporation (resulting in a new corporation called Hoechst

Celanese Corporation) would substantially lessen international

competition in the manufacture and sale of acetal. Acetal is a

plastic used in items ranging from car parts to disposable

lighters. At the time of its acquisition of Celanese, Hoechst

A.G. owned 59% of the capital stock of Ticona Polymerwerke GMBH

("Ticona") and Celanese owned the remaining 41% of Ticona’s

capital stock. Ticona was the leading producer of acetal in

Europe, and Celanese was the leading producer of acetal in the

United States. The Commission’s complaint alleged that the

acquisition by Hoechst A.G. of Celanese eliminated substantial

actual competition between Celanese and Ticona, and between

Celanese and Hoechst A.G. The complaint further alleged that

this acquisition significantly enhanced the likelihood of

collusion or interdependent coordination among the remaining

firms that sell or produce acetal.

The Commission issued one decision and order during fiscal

year 1989 involving an acquisition in which the administrative

complaint was issued prior to October 1, 1988. In PPG

Industries, Inc.,* PPG Industries agreed to settle charges

stemming from its attempted acquisition of Swedlow, Inc., in

1985. The Commission had charged in a 1986 complaint that PPG’s

acquisition of Swedlow could substantially lessen competition in

the manufacture and sales of windows, windshields and canopies

used in airplanes and helicopters. The Commission authorized its

staff to seek a preliminary injunction to block the transaction,

which was ultimately granted by the United States Court of

Appeals for the District of Columbia Circuit. PPG and Swedlow

subsequently abandoned their proposed merger. Under the order,

PPG is required to obtain Commission approval before acquiring

any interest in a company making aircraft transparencies, if that

company does more than $750,000 in sales in the United States.”

Finally, the Commission brought two civil penalty actions in

fiscal year 1989 for violations of previous consent orders.

In MidCon Corporation,’ MidCon Corporation agreed to a

stipulated judgement providing for a civil penalty of $100,000

for failing to divest by the date set forth in a Commission

order. Under the terms of a 1986 order, MidCon was required to

divest its interests in the Acadian Gas Pipeline System

32 Federal Trade Commission v. PPG Industries, Inc., 798

F.2d 1500 (D.C. Cir. 1986).

3 PPG Industries, Inc., 111 F.T.C. 597 (1989).

a Federal Trade Commission v. MidCon Corporation, Cv.

No. 88-3102 (D.D.C. filed October 27, 1988).

18

("Acadian") in order to settle charges that MidCon’s acquisition

of United Energy Resources, Inc., would substantially lessen

competition in the transportation and sale of natural gas in the

New Orleans/Baton Rouge area. MidCon failed to divest its

interest in Acadian as the order required by February 26, 1987.

In Cooper Industries, Inc.,* Cooper Industries agreed to a

stipulated final judgement providing for a civil penalty of

$100,000 for failure to obtain Commission approval prior to

making an acquisition of nearly 200,000 shares of McGraw-Edison

stock in 1984. The 1979 order had settled charges that Cooper’s

planned acquisition of the Gardner-Denver Company would lessen

competition in the manufacture and sale of certain reciprocating

gas compressors and hand-held pneumatic tools.

ASSESSMENT OF THE EFFECTS OF THE PREMERGER NOTIFICATION PROGRAM

Although a complete assessment of the effect of the

premerger notification program on the business community and on

antitrust enforcement is not possible in this limited report, the

following observations can be made.

First, as indicated in past annual reports, one of the

premerger notification program’s primary objectives, eliminating

the so-called "midnight merger," has been achieved. The

requirement that parties file and wait ensures that virtually all

significant mergers or acquisitions occurring in the United

States will be reviewed by the antitrust agencies prior to

consummation. The agencies generally have the opportunity to

challenge unlawful transactions before they occur, thus avoiding

the problem of constructing effective post-acquisition relief.

Second, in most cases the parties provide sufficient

information to allow the enforcement agencies to determine

promptly whether a transaction raises any antitrust problems. In

addition, over the years, parties have increasingly supplied

information voluntarily to the Commission and the Antitrust

Division. This cooperation has resulted in fewer second requests

than would otherwise have been necessary.

Finally, the existence of the premerger notification program

alerts businesses to the antitrust concerns raised by proposed

transactions. In addition, the greatly increased probability

that antitrust violations will be detected prior to consummation

may deter some competitively questionable transactions. Prior to

the premerger hotification program, businesses could, and

frequently did, consummate transactions that raised significant

35 Federal Trade Commission v. Cooper Industries, Inc.,

Cv. No. 89-0175 (D.D.C. filed March 17, 1989).

19

antitrust concerns, before the antitrust agencies had the

opportunity to adequately consider their competitive effects.

The enforcement agencies were forced to pursue lengthy postacquisition litigation during the course of which the consummated

transaction continued in place (and afterwards as well, where

effective post-acquisition relief was not possible or available).

Because the premerger notification program requires reporting

before consummation, this problem has been significantly reduced.

The Assistant Attorney General of the Antitrust Division

concurs with this annual report.

Insert date “wy? 7 1998

20

Appendix A

Appendix B

Appendix C

Exhibit A

List of Appendices

Summary of Transactions, Fiscal Years 1979-

1989.

Number of Filings Received and Transactions

Reported by Month for Fiscal Years 1979-1989.

Investigations in Which Additional

Information Was Requested. Calendar Years

1981-1984 and Fiscal Years 1985-1989.

sto ttachme

Statistical tables for fiscal year 1989,

presenting data profiling Hart-Scott-Rodino

premerger notification filings and

enforcement interest.

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