PURSUANT TO SECTION 201 OF THE (1986)

TENTH ANNUAL REPORT

TO CONGRESS

PURSUANT TO SECTION 201 OF THE

~ »S HART~SCOTT-RODINO ANTITRUST

IMPROVEMENTS ACT OF 1976

FDP T ME GU ee em ree me

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. Subsection (j) of this

section 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 tenth annual report to Congress pursuant to this

provision.

In general, Section 7A establishes a mechanism under which

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 which are unlikely 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 a meaningful 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 initial thirty-day

waiting period.

If either agency determines during that initial 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, after the requested

information and documents are received. 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.

Pinal rules implementing the premerger notification program

vere promulgated by the Commission, with the concurrence of the

Assistant Attorney General, on July 31, 1978.1 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 premerger

notification rules. Those amendments becane effective on

August 29, 1983.2 Additional amendments were published in the

Federal Register on March 6, 1987, and May 29,. 1987, and will be

discussed hereinafter.

GHANGE TO FISCAL YEAR BASIS

Effective October 1, 1985, the Commission converted the

Premerger Notification program to a fiscal year reporting basis

from a calendar year basis. Beginning with this year’s annual

report, information will be furnished for periods covering

October lst through September 30th. The information in this

annual report was compiled for fiscal years 1986 and 1987.

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

filings received, the number of transactions in which requests

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 ana 1983,

respectively.

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

801 through 803). .

for additional information or documentary material (hereinafter

referred to as “second requests”) were issued, and the number of

transactions in which requests for early termination of the

waiting period were received, granted, and denied. Appendix B

provides a month-by-mzonth comparison of the number ef filings

received and the number of transactions reported for fiscal year

1979 through 1987. Appendix C shows, for calendar years 1979

through 1985 and fiscal years 1986 and 1987, the number of

transactions in which the agencies could have issued second

requests, the number of second requests issued, and the

percentage of transactions in which second requests were issued.

As we explained in the Eighth Annual Report, 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 these appendices show that the

number of transactions reported in 1987 increased 30 percent over

the number of transactions reported in 1986 while the number of

transactions reported in 1986 increased 22 percent over the

number reported in 1985 (2,533 transactions were reported in

1987, 1,949 in 1986 and 1,603 in 1985). The statistics also

report the number of second requests issued remained relatively

constant from 1985 to 1986 but decreased in 1987. Appendix A

shows that 91 second requests were issued in 1985 and in 1986 and

that 78 were issued in 1987 while Appendix C shows an increase

from 78 in 1985 to 83 in 1986 and a decrease to 81 in 1987.

These numbers represent a decrease in the number of second

requests issued as a percentage of reported transactions (from

5.7 percent in 1985 to 4.7 percent in 1986 to 3.1 percent in

1987, based on Appendix A, and from 6.0 percent in 1985 to 5.0

percent in 1986 to 3.7 percent in 1987, based on Appendix C).

The statistics also show that the number of transactions

involving requests for early termination has again increased

3 See Appendix C, notes 1 and 2. The second request

statistics in Appendices A and C also differ in two other

respects. Appendix Cc includes only the number of second

requests issued for transactions reported in each specified |

year, while Appendix A includes all second requests issued

during each fiscal year irrespective of when the filing was

actually received. In addition, Appendix A includes secondary

acquisitions while Appendix C does not.

4

a ee ee ee

dramatically.4 In 1987, early termination was requested in 2,251

transactions, while in 1986 it was requested in 1,639

transactions and in only 1,281 in 1984. This represents, as a

percentage of reported transactions, a request rate in 1987 of

88.9 percent, as compared with 84.1 percent in 1986 and 79.9

percent in 1985. The number of requests granted has increased

(from 975 in 1985, to 1,263 in 1986, to 1,739 in 1987) and the

percentage of requests granted has also increased slightly (from

76.1 percent in 1985, to 77.1 percent in 1986, to 77.3 percent in

2987).

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

tables containing other information about transactions reported

in fiscal year 1985. Some tables break down the number of

transactions reported by the dollar value of transactions or by

the reporting threshold and indicate the number and percentage of

transactions in which clearances to investigate were granted by

one antitrust agency to the other and second requests issued for

each category of transaction. other tables provide a breakdown

of transactions based on the sales or the assets of the acquiring

person or the acquired person or the acquired entity or on the

dustry group (2-digit SIC code) in which the acquiring person

or the acquired entity derive most of their revenues. These

statistics have been included in prior annual reports for the

calendar years 1981-1984.

On September 24, 1985, the Commission published in the

Federal Register a Notice of Proposed Rulemaking proposing

thirteen changes to the premerger notification rules and the

Notification and Report Form.® with two exceptions, the proposed

“4 As noted in the Seventh Annual Report, the increases in

the,smumber of requests for early termination and the high

proportion of those requests which 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.

5 See the Ninth Annual Report, Exhibit A, for 1984

transactions, the Eighth Annual Report, Exhibit A, for 1983

transactions, the Seventh Annual Report, Exhibit B for 1982

transactions, and the Sixth Annual Report, Exhibit A for 1981

transactions.

6 50 Fed. Reg. 38,742 (1985).

. 5

POP MET eT Pee ree

rules were designed primarily to reduce the burden of the

premerger notification program in three ways: by narrowing the

types of acquisitions that are subject to the notification

requirement; by reducing the documents and information that must

accompany notifications; and by clarifying the meaning of several

of the premerger notification rules. The Commission, with the

concurrence of the Department of Justice, adopted eight of the

proposed changes and they became effective on March 6, 1987.7

The following list of amendments briefly characterizes each new

rule.

a. Section 801,i1fe): Total Assets of a Newly-Formed Person.

This rule codifies an informal interpretation by the Commission

staff. The rule states that for determining if a person has the

minimum amount of assets to be subject to the reporting

requirements of the Act, a newly-formed entity need not include

cash that will be used to make an acquisition of assets or voting

securities, or securities of the person the entity is acquiring.

This, the rule does not require notification where the

acquisition merely transfers ownership of one business and does

not combine two previously separate businesses.

b. :

- This rule also codifies an.

informal staff interpretation. The rule states how to calculate

the percentage of a person’s voting securities held by each

shareholder where the person has issued classes of securities

that have Gifferent voting rights. .

ce. Section 801.13: Aggregation of Assets and Voting

Securities. This rule limits an existing rule. It is no longer

necessary to report small acquisitions of assets solely because

the acquiring person has made a previous reportable acquisition

from the same seller. The effect of this rule is to reduce the

coverage of the rules by removing reporting requirements for

small acquisitions that are unlikely to pose competitive

problens.

€@. Section 802.35: Acquisitions by Employee Trusts. This rule

creates a new exemption for acquisitions of an employer’s voting

securities by certain employee trusts. Since the adoption of the

tax incentives for certain acquisitions pursuant to Employee

Stock Option Plans, such trusts have become common. The rule

reduces the coverage of the notification rules but continues the

review of other acquisitions by employee trusts that could pose

competitive problems.

7 582 Fed. Reg. 7066 (1987) (to be codified at 16 C.F.R.

Parts 801-803). Attached as part of Exhibit B is a copy of the

final rules.

e. : .

This rule deletes an exemption for acquisitions subject to prior

approval orders. Although the exemption affected few

transactions, it could have created problems in obtaining consent

agreements or orders from businesses subject to prior approval

orders.

z. : Vv

Pergon. This rule codifies the Commission’s formal

interpretation concerning the notice which must be sent to an

ed person by an acquiring person and describes language for

that notice that will be considered acceptable.

g- 2

Transactions. This rule codifies an informal staff

interpretation by stating that the statutory waiting period for

the formation of a joint venture does not begin until all persons

that are required to report the formation have. filed

notifications.

h. Revision of the Premerger Notification and Report Form.

The Commission adopted eight changes which simplify the

Wotification and Report Form, and thereby reduce the time

required to prepare the Form without impairing the ability to

review transactions.

On March 6, 1987, the Commission published in the Federal

Register a Notice of Proposed” Rulemaking proposing a change in

the premerger notification rules to improve their effectiveness

by amending the term “control” as it applies to partnerships and

other entities that do not have outstanding voting securities.§®

The proposed rule was designed to eliminate a loophole that was

perceived to exist for acquisitions undertaken by newly-formed

partnerships. The new rule treats partnerships essentially the

same as corporations are treated by stating that a partnership is

controlled by any person having the right to 50 percent or more

of the profits or a right to 50 percent or more of the assets of

the partnership in the event of dissolution. The Commission,

with the concurrence of the Department of Justice, adopted the

proposal as a final rule on May 29, 1987. It became effective on

July 3, 1987.9

8 52 Fed. Reg. 7095 (1987). Attached as part of Exhibit B

is a copy of the Notice published in the Federal Register.

9 52 Fed Reg. 20058 (1987) (to be codified at 16 C.F.R.

Part 801). Attached as Exhibit C is a copy of the Notice

published in the Federal Register.

7

2. Compliance

Generally, compliance with the premerger notification

program’s filing requirements continued to be good in fiscal

years 1986 and 1987. As of the end of fiscal year 1987, only two

actions have been brought under Section 7A(g)(1) to recover civil

penalties for non-compliance since the the progran’s inception. 1°

However, the agencies examined an unprecedented number of

transactions for possible violations of the Hart-Scott-Rodino Act

in fiscal years 1986 and 1987. These investigations focused

primarily on two issues: the validity of claims that the

transactions were exempt and the possibility that transactions

were unlawfully structured to evade the reporting requirements of

the Act. These investigations grew out of the agencies’

gwonitoring of current transactions to ensure compliance with the

progran’s filing requirements.

The agencies review newspapers and industry publications for

announcements of transactions that may not have been reported in

- accordance with the requirements of the Act. In addition,

industry sources, such as competitors, customers and suppliers,

and interested members of the public often provide the agencies

with further information about transactions and possible

violations of the filing requirements. If a proposed transaction

is announced that appears to be covered by the statute and rules, -

but no filing is received within a reasonable time, Commission

staff sends letters to the parties requesting an explanation for

their failure to file. The same procedure is followed when the

staff learns of a consummated transaction for which no prior

filing was received. In most of these cases, the inquiries have

established that the transactions were not covered by the Act or

were exempt from it.

In addition, the agencies have also learned of a number of

violations of the Act from parties who have failed to meet their

notification requirements. In each of these cases, the parties

have belatedly filed Notification and Report Forms when they were

made aware of their filing obligation and submitted detailed

letters explaining how the violations occurred. In all of the

210 one action was brought in 1984. United States v.

Coastal Corporation, Cv. No. 84-2675 (D.D.C. filed Aug. 30,

1984). Coastal paid the maximum civil penalty authorized and

divested the stock that it was alleged to have acquired

illegally. The other action was brought in 1985. United States

v. Bell Resources Ltd., Weeks Petroleum Ltd., and M.R.H. Holmes

a Court, 85 Civ. 6202 (S.D.N.¥. filed Aug. 9, 1985). Under a

consent decree, Weeks was required to pay a civil penalty of

$450,000.

&

investigations closed by the end of fiscal year 1987, the failure

to file was inadvertent rather than deliberate or the result of

gross negligence. None of these investigations has involved a

transaction that presented the serious possibility of a violation

of the antitrust laws.

BEll

The Antitrust Division filed six complaints in merger cases

. @uring fiscal year 1986.42 Five of these cases, United States v.

Sorporation, United States v, $.p.A. Officine Maccaferri, et al,

United States v, Pacific Telesis Group and Communications

industries, Inc., United States v, Genera] Electric Company, and

, have been settled by the

entry of consent decrees. The other case, Vv

, is pending.

- In Vv

x , the Division challenged

Baxter Travenol’s proposed acquisition of American Hospital

Supply Corporation. The suit alleged that Baxter Travenol’s

. acquisition of American Hospital Supply would lessen competition

°

in five health-care product markets: parenteral solutions

(sterile intravenous (IV) fluids); fluid administration sets

(disposable devices attached to parenteral solutions or blood

containers through which parenteral solutions or blood flows to

patients); electronic flow control devices (electro-mechanical

devices that infuse fluids at predetermined rates into patients

during intravenous therapy); therapeutic hemapheresis equipment

(devices that separate blood into components for therapeutic

21 The cases mentioned 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 progran.

12 United states v. Baxter Travenol Laboratories, Inc. and

American Hospital Supply Corporation, Cv. No. 85C09856 (N.D.

Ill. filed Nov. 22, 1985); United States v. S.p.A. Officine

Maccaferri, et al., Cv. No. B-86-612 (D. Md. filed Feb. 24,

1986); United States v. Pacific Telesis Group and Communications

Industries, Inc., Cv. No. 86-1298-RMT (C.D. Cal. filed Feb. 28,

1986); United States v. Syufy Enterprises and Raymond J. Syufy,

Cv. No. C-86-3057 (N.D. Cal. filed June 6, 1986); United States

v. General Electric Company, Cv. No. 86-1578 (D.D.C. filed June

6, 1986); and United States v. Data Card Corporation, Cv. No.

86-2339 (D.D.C. filed Aug. 22, 1986).

9

uses); and surgeons’ gloves and procedure gloves (used inside and

outside the operating room for surgical procedures). The

defendants entered into a series of divestiture and contractual

agreements to resolve the competitive problems that would arise

from the acquisition. The consent decree ensures that the

defendants will perform each of these agreements, and, if they do

not, that the assets involved will be divested by a trustee ina

manner that will preserve effective competition in each of the

five affected markets.

In United States v. S.p.A. Officine Maccaferri, et al., the

Division challenged the 1983 acquisition of Terra Aqua, Inc. of

Reno, Nevada, by S.p.A. Officine Maccaferri of Bologna, Italy,

alleging a lessening of competition in the United States for the

manufacture and sale of gabions. Prior to the acquisition, these

companies were the only two manufacturers of gabions in the

United States. Gabions are rectangular wire mesh containers

which are filled with hand-size stones and wired together to form

large structures that are used in river training, flood control,

landscaping, and erosion control. They are used primarily in

public works projects. The consent decree required Officine

Maccaferri and River and Sea Gabions (London) Limited to sell

their interests in Terra Aqua within six months.

In e

, the Division challenged Pacific Telesis’ (a San

Francisco corporation) proposed acquisition of Communications

Industries (a Dallas, Texas corporation) alleging a violation of

Section 7 of the Clayton Act and Section 1 of the Sherman Act in

the market for the provision of cellular radio service in Los

Angeles. (The only two firms licensed to provide cellular radio

service in Los Angeles would become partners in Dallas-Ft. Worth

and the transfer of information between the two firms could

impede competition in the Los Angeles cellular radio service

market.) Cellular radio service is a high-capacity, two-way

mobile telephone service. Under the consent decree, Pacific

Telesis’ participation in the Dallas-Ft. Worth partnership is

Limited to an essentially passive investment interest. The

decree prohibits Pacific Telesis from playing an active role in

the Metroplex Telephone Company in Dallas-Ft. Worth and from

obtaining information about that system to which it would

otherwise be entitled.

In United States v. General Electric Company, the Division

challenged the acquisition by General Electric of RCA

Corporation’s assets used in the manufacture and sale of vidicon

tubes. Vidicon tubes are image tubes that convert an optical

image into an electrical signal. They are used in camera systems

for television broadcasting, closed-circuit monitor services,

medical applications, industrial processes, and military

applications, such as tracking surveillance. The consent decree

10

required General Electric to sell its vidicon tube business by

Movember 3, 1986.

In United States v, Data Card Corporation, the Division

alleged that Data Card’s proposed acquisition of DBS,

Incorporated would prove anticompetitive in the market for

automatically fed, low-volume embossers. Embossers are machines

used to make the raised lettering on plastic or metal cards, such

as credit or identification cards. Such embossers (which are

eapable of producing 100-200 cards per hour) are used primarily

by hospitals to produce embossed plastic patient identification

cards. The consent decree required Data Card to sell one of the

enbosser product lines it acquired from DBS.

In ,

the Division challenged Syufy’s October, 1984, acquisition of the

Red Rock Theatre in Las Vegas on the grounds that the acquisition

unduly decreased competition in the marke: for first-run motion

picture exhibition in Las Vegas, Nevada. in addition, the suit

alleged that since at least 1982, Syufy Enterprises attempted to

monopolize, and since at least October, 1984, has monopolized the

business of first-run motion picture exhibition in Las Vegas,

Nevada, in violation of Section 2 of the Sherman Act. The suit

is pending.

On several occasions during fiscal year 1986 the Division

investigated bank merger transactions for which divestitures were

_~ wvrequired to cure competitive problems. In the following

- transactions, a “not significantly adverse” letter was sent to

the Federal Reserve Board or FDIC, conditioned on divestiture

prior to or concurrent with consummation of the transaction:

1. First Alabama Bank, Montgomery, AL- First State Bank of

Alabama, Decatur, AL.

2. Wells Fargo Co., San Francisco, CA- Crocker National

Corp., San Francisco, CA.

33. . First of America Corp., Kalamazoo, MI- New Century Bank

- ~~ Corp., Bay City, MI.

4. Marshall & Ilsley Bancorp., Milwaukee, WI- Affiliated

Bancorp., Stevens Point, WI.

Finally, the Division entered into a consent decree in one

merger case in which the complaint had been filed prior to

October 1, 1985.13

13 United States v. Allied Corporation, Civ. No. 85-2475

(D.D.C. filed August 2, 1985, consent decree entered November 4,

1985). ;

121

bk me ol de ee ee

The Commission authorized its staff to seek a preliminary

injunction in five merger cases during fiscal year 1986.

In one of those cases, the parties abandoned the transaction

before, the motion for a preliminary injunction was filed in

court.

In Federal Trade Commission v, Occidental Petroleum Corp.,*°

the Commission charged that Occidental’s proposed acquisition of

certain plastic-production assets of Tenneco Inc. would

substantially reduce competition in the production of three

polyvinyl chloride resin products. The court granted the

Commission’s request for a temporary restraining order on

April 3, 1986. The Comnission’s motion for a preliminary

injunction was denied on April 30, 1986. The parties consummated

the transaction and the case against Occidental is currently in

litigation before an Administrative Law Judge. In the case

against Tenneco, the Commission has issued a decision and order

which requires Tenneco to consent to the assignment of assets by

Occidental if the Commission issues an order requiring Occidental

to divest certain assets.+©

In Federal Trade Commission v. The Coca-Cola Co,,+” the

Commission charged that Coca-Cola’s proposed acquisition of the

Dr Pepper Co. would reduce competition in the production,

distribution, and sale of carbonated soft drinks and soft drink

concentrates. A preliminary injunction action was filed on

June 24, 1986, and the court granted the preliminary injunction

on July 31, 1986. Subsequently, the parties abandoned the

proposed acquisition. The administrative complaint is currently

in litigation.

14 Fre news release issued June 20, 1986, involving the

proposed acquisition by PepsiCo Inc. of the Seven-Up Co. The

news release reported that the Commission believed that the

proposed acquisition could reduce competition in the

distribution and sale of carbonated soft drinks in the United

States.

15 Federal Trade Commission v. Occidental Petroleum Corp.,

1986-1 Trade Cas. (CCH) q67,071 at 62,508 (D.D.C. 1986), vacated

as moot, No. 86-5254 (D.C. Cir. Oct. 23, 1986).

16 enneco Inc. (issued July 19, 1988).

17 yederal Trade Commission v. Coca-Cola Co., 641 F. Supp.

1128 (D.D.C. 1986). The Court of Appeals vacated the preliminary

injunction on the ground of mootness and remanded with

instructions to dismiss the court action. Federal Trade

Commission v. Coca-Cola Co., 829 F.2d 191 (D.C. Cir. 1987).

12

In Federa} Trade Commission v. PPG Industries, Inc, and

the Commission charged that a proposed merger

°

between two leading manufacturers of aircraft windshields,

canopies, and cockpit and cabin windows would create a single

firm possessing a near monopoly on the technology for the

fabrication of glass and acrylic aircraft transparencies. A

prelizinary injunction action was filed on January 6, 1986. On

February 21, 1986, the court granted the preliminary injunction

pending the submission of an acceptable hold separate order.

Subsequently, the court modified its decree by entering a hold

separate order. The Commission appealed that decision and, on

August 22, 1986, the appellate court reversed the lower court’s

ruling and directed the issuance of a preliminary injunction. In

Pebruary, 1987, the parties abandoned the merger.

The fifth case in which the Commission authorized staff to

seeX a preliminary injunction involved Occidental Petroleum

Corporation’s proposed acquisition of Midcon Corporation. The

Commission charged that Occidental’s merger with Midcon would

substantially lessen competition in pipeline transportation and

the sale of natural gas in the St. Louis area. The preliminary

injunction action was not filed since Occidental agreed to divest

Midcon’s Mississippi River Transmission Corp. subsidiary which

operates a natural gas pipeline from the east Texas and northern

Louisiana producing areas to St. Louis. The Commission issued a

complaint and decision and order on June 25, 1986.2 “

_. The Commission issued a decision and complaint and order in

six other merger cases in fiscal year 1986 in which it had

previously accepted consent agreements for public comment.

In E , Columbian, the third largest

U.S. producer of carbon black, sought to acquire the Continental

Carbon Company, the nation’s sixth largest producer. In 1984,

the Commission sought and was granted a preliminary injunction

against Columbian, based upon the anticompetitive effects of the

proposed acquisition. In November, 1985, the Commission issued

48 Federal Trade Commission v. PPG Industries, Inc. and

Swedléw, Inc.,.628 F. Supp. 881 (D.D.C. 1986), aff’d in part and

rev’d in part, 798 F.2d 1500 (D.C. Cir. 1986).

19 Occidental Petroleum Corporation, 109 F.T.C. 167 (1986).

20 columbian Enterprises, Inc., 106 F.T.C. 551 (1985);

MidCon Corporation, 107 F.1T.C. 48 (1986); Ashland Oil inc.,

107 F.T.C. 303 (1986); Bass Brothers Enterprises, Inc., 108

F.T.C. 51 (1986); Warner Communications, Inc., 108 F.T.C. 105

(1986): and Polygram Records, Inc., 108 F.T.C. 112 (1986).

13

an order under which Columbian agreed not to acquire, for a

period of five years, any part of the U.S. rubber carbon black

business of any other person if, as a result of the acquisition,

Columbian would increase its U.S. rubber carbon black production

capacity by more than 130 million pounds. Columbian further

agreed, for a period of five years, to obtain the prior approval

of the Commission before completing any acquisition not

prohibited by the order.

In Occidental Petroleum Corporation, the Commission charged

that Occidental’s merger with MidCon Corporation would

substantially lessen competition in pipeline transportation and

the sale of natural gas in the St. Louis area. Occidental agreed

to divest MidCon’s Mississippi River Transmission Corp.

subsidiary which operates a natural gas pipeline from the east

Texas and northern Louisiana producing areas to St. Louis.

In MidCGon Corporation, the Commission charged that MidCon’s

acquisition of the stock of United Energy Resources, Inc. would

lessen competition in the transportation of natural gas in

various- parts of the United States. MidCon agreed to divest

various gas gathering and transmission facilities.

In Ashland Oi) Inc., the Commission charged that a proposed

merger between Bass Brothers Enterprises, Inc. and Ashland’s

Carbon Black Division would be anticompetitive. Ashland Oil Inc.

agreed to obtain Commission approval before selling any of its

domestic carbon black plants to a major competitor. In Bass

Brothers Enterprises. Inc., Bass Brothers agreed to terminate any

agreement that provided for the acquisition of Ashland’s carbon

black business.

In Warner Communications, Ine, and PolyGram Records, Ince.

the Commission issued complaints and decisions and orders

settling charges that the proposed merger of Warner

Communications and PolyGram Records would lessen competition in

the prerecorded music industry. Under the orders, Warner and

Polygram are prohibited from acquisitions involving three major

competitors without the prior approval of the Commission and both

must provide the Commission with notice before entering into

relationships with those competitors.

14

In fiscal year 1986, the Commission also accepted a consent

order for public comment in ion?i

settling antitrust charges stemming from Champion’s acquisition

of St. Regis Corporation. The consent order was withdrawn after

Champion voluntarily divested a St. Regis linerboard mill in

Tacoma, Washington.

The Antitrust Division filed six complaints in merger cases

during fiscal year 1987.¢2 Four of these cases,

Rohm_and Haas Company, United States v, Pomtar Inc,, et al.,

GSorporation, and Uni tw

» have been settled by the entry of consent

decrees. In the two remaining cases, w

and

, the Division voluntarily dismissed

the lawsuits when the proposed transactions were abandoned by the

parties.

In Vv , the Division

challenged the acquisition by Rohm and Haas Company of the ion

exchange resins business and assets of Duolite International,

inc., a subsidiary of Diamond Shamrock Corporation. Ion exchange

resins are synthetic resinous beads principally used to remove

objectionable ions from aqueous solutions, thereby purifying the

solution. In 1983, total sales of such resins in the United

States amounted to approximately $112 million. Rohm and Haas

accounted for approximately 35 percent of those sales and Duclite

accounted for approximately 16 percent. The consent decree

required Rohm and Haas to seek a buyer for the Duolite ion

exchange resin plant located in Redwood City, California, and to

21 Champion International Corporation (accepted for public

comment on February 20, 1986; withdrawn July 10, 1986).

22 united States v. Rohm and Haas Company, Cv. No. 86-3091

(D.D.C. filed November 10, 1986); United States v. MacAndrews and

Forbes Group, Inc., et al., Cv. No. 86-8055JMI(KX) (C.D. Cal.

filed December 10, 1986); United States v. Rheem Manufacturing

Company, et al., Cv. No. G87=-40CAl (W.D. Mich. filed January 16,

1987); United States v. Dontar Inc., é€t al., Cv. No. C87-0689RFP

(N.D. Cal. filed February 25, 1987); United States v. Hughes Tool

Company and Baker International Corporation, Cv. No. 87-0932

(D.D.C. filed April 3, 1987); and United States v. The Dow

Chemical Company and Ethyl Corporation, Cv. No. 87-C=-4280 (N.D.

Tll. filed May 11, 1987).

15

AO Ee LN ee

license relevant technology for the manufacture and sale of

Duclite ion exchange resins.

In United States v. Domtar Inc.. et ali, the Division

challenged Domtar’s proposed acquisition of the Genstar Gypsum

Products Company. The complaint alleged that the acquisition

would prove anticompetitive in the market for gypsum board in the

Pacific Southwest, an area consisting of southern California,

southern Nevada and Arizona. Gypsum board is a principal

component in new building construction. In 1985, total sales of

gypsum board in the Pacific Southwest market were over $250

million--Donmtar was the third largest producer and Genstar was

the fourth largest producer. The consent decree required Domtar

to sell Genstar’s Pacific Southwest operations within six months.

In United States v. Hughes Tool Company and Baker

the Division challenged the

’ proposed

merger of the two companies alleging a lessening of competition

in the U.S. markets for tricon rock bits and electric submersible

oil well pumps. Tricon rock bits are drill bits, with steel

teeth or tungsten carbide inserts, that are used in oil and gas

@rilling. Electric submersible oil well pumps are driven by

electric motors and placed at the bottom of an oil well to lift

oil to the surface. Both Hughes Tool and Baker International are

major manufacturers of tricon rock bits and electric submersible

oil well pumps. In 1986, total sales of tricon rock pits in the

United States totaled approximately $200 million. Hughes Tool

accounted for approximately 28 percent and Baker International

accounted for approximately 17 percent of those sales. Total

sales of electric submersible oil well pumps in the United States

were approximately $110 million in 1986. Hughes Tool accounted

for approximately 28 percent and Baker Lift Systems accounted for

approximately six percent. The consent decree required Baker

International to sell the tricon rock bit operations’ of its Reed

Tool Company subsidiary ana the electric submersible oil well

pump operations of its Baker Lift Systems division.

In United states v. The Dow Chemical Company_and Ethyi

, the Division challenged Ethyl’s proposed acquisition

of Dow’s Bromine and Brominated Chemicals Division. The

complaint alleged that the proposed acquisition would .

substantially lessen competition in the United States for the

panufacture and sale of bromides used in brominated clear brine

fluids (used in the oil and gas industry to counterbalance the

downhole pressure of oil and gas wells during completion and

workover procedures to prevent blowouts or geysers). In 1986,

gales to the U.S. oil and gas industry of bromides used in ;

brominated clear brine fluids totalled over $30 million. Dow is

the second largest producer of these bromides and Ethyl is the

third largest, with 1986 gales in the U.S. of about §9 pillion

and §5 million, respectively. The consent decree required

divestiture of Dow’s brominated clear brine fluid business.

16

In

al,, the Division challenged the proposed acquisition by

MacAndrews & Forbes Group, Inc. of Metrocolor Laboratories fron

Lorimar-Telepictures alleging a lessening of competition in two

markets: the production of 35 millimeter release prints for

motion pictures receiving national distribution and the

production of 70 millimeter release prints. Total sales in 1985

of 35 millimeter release prints for exhibition in the U.S.

exceeded $100 million; 70 millimeter release prints exceeded $10

million. The acquisition would have combined two of the three

primary film laboratories used by motion picture studios in the

U.S. for processing 35 millimeter and 70 millimeter release

prints for major motion pictures. After the Division filed suit,

MacAndrews announced it would abandon its attempt to acquire

Metrocolor. To settle other concerns of the Division, MacAndrews

" and Lorimar entered into an agreement whereby Lorimar would

operate Metrocolor as a vigorous competitor in the film

laboratory business. The complaint was then moot and was

voluntarily dismissed by the Division.

in , the

Division challenged the proposed acquisition by Rheem

Manufacturing Co. of Bradford-White Corporation. The complaint

alleged that the proposed acquisition would lessen competition in

the manufacture and sale of residential water heaters in the

United States. In 1985, sales of residential water heaters in

the U.S. totalled approximately $915 million; Rheem and Bradford-

White had total sales of approximately $262 million. The parties

abandoned the transaction and the Division dismissed the lawsuit.

On several occasions during fiscal year 1987 the Division

investigated bank merger transactions for which divestitures were

required to cure competitive problems. In the following four

transactions, a “not significantly adverse” letter was sent to

the Federal Reserve Board, conditioned on divestiture prior to or

concurrent with consummation of the transaction:

. d+ _ Bank of New England Corporation, Boston, Massachusetts,

we acquisition of Conifer Group, Inc., Worcester,

Massachusetts;

2. Republicbank Corporation, Dallas, Texas, acquisition of

Iinterfirst Corporation, Dallas, Texas;

3. Amoskeag Bank Shares, Inc., Manchester, New Hampshire,

acquisition of NTC Corporation, Nashua, New Hampshire;

and

4. Marshall & Isley Corporation, Milwaukee, Wisconsin,

acquisition of Central Wisconsin Bankshares, Inc.,

Wausau, Wisconsin.

17

In addition, during fiscal year 1987, the Division advised

parties in two merger transactions that it would file suit if the

mergers were consummated. In one instance, the parties abandoned

the proposed transaction (Surgical Associates of Western

Connecticut, P.c., and Danbury Surgical Associates, P.C.); in the

other instance, the merger was approved after certain

restructuring conditions were net (American Brands proposed

. perger with Acco World Corporation).

Finally, the Division entered into consent decrees in two

merger cases in which the complaints had been filed prior to

October 1, 1986.4

The Commission authorized its staff to seek a preliminary

injunction in seven merger cases in fiscal year 1987.

In four of those cases, the parties abandoned the

transaction before the motion for preliminary injunction was

filed in court.

23 united States v. National Medical Enterprises, Inc. and

February 21, 1984; consent decree entered April 16, 1987); and

United States v. Industrial Asphalt, et al., Cv. No. 85-4631(RG)

(c.D. Cal. filed July 15, 1985; consent decree entered June 25, 1987).

24 prc news release issued September 16, 1987, involving

the proposed acquisition by Sunds AB, a Swedish company, of the

Impco division of Ingersoll-Rand Co. The Impco division makes

and sells pulp machinery and equipment. The news release

reported that the Commission believed that the acquisition would

substantially reduce competition in the production and sale of

equipment used to bleach wood pulp to be made into paper. FTC

news release issued August 7, 1987, involving the proposed merger

of Buntco Health Care Inc. into Invacare Corp. The news release

reported that the Commission had reason to believe that the

proposed merger would substantially lessen competition in the

production and sale of homecare beds, which are portable healthcare beds rented by consumers for home use. FTC news release

issued December 30, 1986, involving the proposed acquisition by

Conoco, Inc., a subsidiary of E.I. Dupont DeNemours & Co., of

Asamera Inc. The news release reported that the Commission

believed that the acquisition of Asamera’s Denver area refinery

would substantially lessen competition and increase prices for

gasoline, diesel fuel, and other refined products in Denver and

in eastern Colorado, and that the acquisition would lessen

competition in the purchase and transportation of crude oil in

the Denver area. FTC news release issued December 2, 1986,

involving the proposed acquisition by Kidde Inc. of the crane

. (continued...)

18

n Federal Trade Commission vy. Pacific Resources, Inc., et

aL.2! the Commission filed for a preliminary injunction charging

that the acquisition by Pacific Resources, Inc. of Shell Oil

any’s Hawaiian petroleum and marketing assets would

substantially reduce competition in the distribution of gasoline

and other petroleum fuels in Hawaii. The court granted the

preliminary injunction on November 6, 1987. Subsequently, the

parties abandoned the transaction. On August 29, 1988, the

Commission accepted a consent agreement for public comment to

settle the charges in this matter.

In two of the cases in which a preliminary injunction action

was authorized in fiscal year 1987 and in which the Commission

had accepted a consent agreement for public comment, the

Commission has issued a complaint and decision and order. In

,2© the Commission charged that

American Hoechst Corporation’s acquisition of Celanese '

Corporation would substantially lessen competition in the

production of polyester textile fiber in the United States by

greatly increasing concentration and significantly enhancing the

likelihood ef collusion among the remaining firms in the

industry. American Hoechst agreed to divest certain polyester

fiber assets and to hold the Celanese polyester textile fiber

assets separate until the divestiture is made.

In v ,27 Supermarket

Development Corporation ("SDC") sought to acquire Safeway’s Fl

Paso Division which operates supermarkets in south and west Texas

and New Mexico. The order calls for SDC to hold separate

Safeway’s El Paso Division until it divests certain of the

Division’s assets. .

The Commission issued a complaint and decision and order in

two other merger cases in fiscal year 1987 in which it had

previously accepted consent agreements for public comment. In

24(.. continued)

business of Harnischfeger Corporation. The news release reported

that,#he Commission believed that the proposed acquisition would

reduce competition in the sale of mobile hydraulic cranes in the

United States. .

25 Federal Trade Commission v. Pacific Resources, Inc., et

al., Cv. No. C87=-1390C (W.D. Wash. filed October 15, 1987;

preliminary injunction order entered November 6, 1987).

26 American Hoechst Corporation (issued July 2, 1987).

27 Supermarket Development Corporation (issued Mar. 17,

1988).

19

,*8 the Commission charged that Alleghany’s

proposed acquisition of Safeco Title Insurance Company would

reduce competition in the production and sale of title

information in Cook County, Illinois, and Los Angeles County,

California. Alleghany agreed to divest either Safeco’s or

Alleghany’s title information plants.

In L’Air Liguide,*9 the Commission charged that L’Air

Liquide S.A.’s proposed acquisition of Big Three Industries Inc.

would reduce competition in the production and sale of liquid

gas. Under the order, L’Air Liquide agreed to divest certain

assets, including several air separation gases plants, to resolve

the Commission’s antitrust concerns.

In one merger case in which the administrative complaint was

issued before October 1, 1985, the Commission’s final order

became effective after the Supreme Court denied respondent’s

petition for certiorari.3° In Hospital Corporation of America,

the Commission charged that HCA’s acquisition. of two hospitals

may substantially lessen competition in the acute care hospital

services market in the Chattanooga, Tennessee, area. HCA was

ordered to divest two hospitals it had acquired in Hamilton

County, Tennessee, and to terminate a management contract it had

with another hospital in Hamilton County. HCA was further

ordered to obtain Commission approval for a period of ten years

prior to consummating certain future hospital acquisitions. ~

Although a complete assessment of the impact 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

28 Allegheny Corporation (issued September 9, 1987).

29 Lair Liquide (issued July 15, 1987).

30 Hospital Corporation of America, 106 F.T.C. 361 (1985),

aff’d and enforced, Hospital Corporation of America v. Federal

Trade Commission, 807 F.2d 1381 (7th Cir. 1986), cert. denied,

107 &.Ct. 1975 (1987).

20

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 notification program, businesses could, and

frequently did, consummate transactions which raised significant

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.

November 10, 1988

21

Appendix A

list of Appendices

Summary of Transactions, Fiscal Years 1979-

"1987.

Number of Filings Received and Transactions

Reported by Month for Fiscal Years 1979-1987.

fransactions in Which Additional Information

Was Requested for Calendar Years 1981-1985 and

Fiscal Years 1986-1987.

List of Attachments

Statistical tables for fiscal year 1985,

presenting data profiling Hart-Scott-Rodino

premerger notification filings and enforcement

interest.

Notices of Final Rulemaking, 52 Fed. Reg. 7066

(1987) and Notice of Proposed Rulemaking, 52

Fed. Reg. 7095 (1987).

Notice of Final Rulemaking, 52 Fed. Reg. 20058

(1987)...

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[Read from a scan; the first 30 pages.]