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URL: https://www.frixlaw.com/law-library/documents/agency%3Aftc%3A80118468da58954c

## Record

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

## Text

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FEDERAL TRADE COMMlSSION
WASHINGTON. D. C. 20510

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· : !.i.S P. O'Neill, Jr.
Ln~ House of Representatives

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Wosidngt· .i. D.C. 20515

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Gent".'~en:

Se~tion 201 of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, Pub.L. ~4-435, aa~~~ d new S 7A to the Clayton
Act, 15 u.s.c. S 18A (hereinaf:er referred to as •t~e
Act"). Subsection (j) of the Act provides as follows:

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Beginning not later than January 1, 1978, the
Federal Trade Commission, with the concurrence
of the Assistant Attorney Gen~ral, shall annually
report ~o the Congress on the operation of this
section. Su~h report shall include an assessment
of the effects ~f this section, of the effects,
purpose, and need for any rules prorr.ulgated
pursuant thereto, and any recommendations for
rev~siC~$ of thls section.
Tilic. .s · · .~nual

repo~to the Congress mand~ i:ed by

subs ;:cti .·n - ~<! Act.

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,. ~ -: :. ·;.. i::t~··.,-ie_-: a mechanism unde'~ which persons of
spe:: '{ ,,; ~ ize or 14rger, who intend ;; ~. ma~~e stock or asset
ac ;,' ·',ii: .. e:.-.·. .:-f sp~cified size or larger, must report their
i,~ te); ~."'.""ls t.o the }.i'l t.i ~""U~t Di vision of the Department of
Justice ar; to t~·.a- Faderal T.rade Commission and must thereafter
t.Jai t a pr. 'Scribed period of time before consummating the
tran~a~tjoo
That waiting period may be extended by either
enZ~:·1. ;:!t!TT.f~.rlt agency by means of a request for additional
inforlt\.;) ;:.«.on. The Act contains eleven specific types of
exemptions, along with a grant of rulemaking authority to
the Federal Trade Commission to dcf ine any terms used in tha
Aet, to ~~eate additional ~~emptions, and generally to carry
out the purposes of the Act.

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'l'he Act provides for expedited consideration by a
federal district court in the event that either agency seeks
a preliminary injunction to prevent consummation of a proposed
acquisition. It also contains penalty and enforcement
provisions, a requirement that information filed by reporting
persons be kept c~nfidential, provisions clarifying the
relationship between the Act-and other substantive and
procedural aspects of traditional antitrust law, and the
requirement of an annual report.
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'l'he Act was signed by the President on September 30,
1976. On December 15, 1976, the Federal 'l'rade Commission,
with the informal concurrence of the Assistant Attorney
General in charge of the Antitrust Division, issued proposed
rules and a proposed Notification and Report Form for public
comment; the proposed rulemaking was published in the Federal
Register of December 20, 1976 (see attachment I). 'l'he
thirty-day comment period was extended by the Commission on
January 12, 1977, and expired on February 18, 1977.
Approximately 130 comments were received in 1 response to
those proposed rules and form.
Because of the extensiveness of public comment, it
became clear to the Commission that some substantial revisions
would have to be made in the proposed rules. On July 25,
1977, the Commission approved revised propos~d rules and a
revised proposed Notification and Report Form and determined
that additional public comment thereon would be desirable.
'l'he revised proposed rules and form were published in the
Federal Register of August 1, 1977 (see attachment II), and
a thirty-day co,nment period began on that date. *I In
response to numerous requests for additional time for comment,
the Commission on August 23, 1977, extended the comment
period by thirty days, through September 30, 1977. A to~al
of 116 comments were received during the second comment
period.
'l'he process of preparing rules to implement the Act has
been time consuming for several reasons. First, the Act
covers all types of acquisitions of assets or of voting
securities -- acquisitions by corporations, partnerships and
natural persons, acquisitions directly from the owner or
issuer, acquisitions of voting securities from third parties
or in the open market, acquisitions by means of tender offer
or negotiated sale, acquisitions by or from foreign parties,

*I At the time of publication, the Commission staff also
made available a side-by-side comparison of the revised
proposed rules with those originally proposed (see attachment
III).

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acquisitions by affiliates, and others. Each of these, and
many others, have their own peculiar factual settings, of
which the rules must take account.
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Second, there are a large variety of .other situations
where the extent and type of notification appropriate under
the Act is affected by the existence of other statutes and
~ther regulatory systems.
Some of these underlie particular
exemptions appearing in subsection (c) of the Act. Others
may suggest the advisability of creating additional exemptions
by rule.
Third, the infinite variety of existing business practices
and forms of organization may in some cases permit or require
variat'ions in reporting obligations, depending upon the
likelihood that certain types of acquisitions may raise
anticompetitive problems, the extent to which certain types
of acquisitions occur in the ordinary course of business of
one or more of the parties, and the relationship between the
parties to the transaction.
Finally, the drafting of regulations implementing the
Act involves the attempt to strike ·what is often a difficult
balance between the need of the enforcement agencies for
•such documentary material and information relevant to a
proposed acquisition as is necessary and appropriate to
enable [them] to determine whether such acquisitions may, if
consummated, violate the antitrust laws,• •/ and the cost
to the persons who must provide such information. The
process of gathering sufficient information to determine
where this balance may be ·struck has been a sizeable task.

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At the present time, the staffs of the Commission and
of the Antitrust Division are working on.revisions of the
rules and form. Following conditional approval of the rules
and form by the Commission and conditional concurrence by
the Assistant Attorney General in charge of the Antitrust
Divisiop, the form will be submitted to the General Accounting
Office for consideration under the Federal Reports Act, 44
u.s.c. S 3502. While that.review, which must be completed
within 45 days, is pending, the staff will complete preparation

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S 7A (d) (1).

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of a final statement of basis and purpose. Thereafter, the
Commission will formally promulgate the rules and form and
submit them to the Assistant Attorney General for concurrence.
After concurrence .has been obtained, the final rules and
form will be published in the Federal Register, along with a
•tatement of basis and purpose. Under Section 4 of the
Administrative Procedure Aet, 5 u.s.c. S 553, the rules may
become effective no sooner than thirty days after publication. !/
Throughout preparation of both sets of proposed rules
and during preparation of final rules, the staffs of the
Commission and of the Antitrust Division have worked closely
together. Staff-level procedures are being developed for
coordinating the administration of the premerger notification
program by the two agencies, including clearance mechanisms,
continual exchange of information concerning the status of
pendins notifications, interpretations of the rules and
proposals for modification of any reporting requirements,
and any enforcement 'ctions which may need to be instituted •

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Section 202 of the Antitrust Improvements Act of 1976
specified that Section 201, containing new S 7A of the
Clayton Act, would become effective 150 days after enactment,
i.e., February 27, 1977. (The rulemaking provisions contained
in subsection (d) of S 7A became effective upon enactment.)
Because final rules could not be promulgated prior to the
effective date of the Act, the Commission on January 27,
1977, with the concurrence of the Assistant Attorney General,
promulgated a Transitional Rule, which was published in the
Federal Register of February 2, 1977 (see attachment IV).
The Transitional Rule created an exemption for all transactions
consummated prior to the effective date of the final rules
and specified the manner in which the final rules would be
implemented during the first thirty days following the
effective date of the rule$.

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Because the final rules have not become effective as of
this date, the Commission cannot now provide a full assessment
of the Act, or of the related rules, as contemplated by
subsection (j). The Commission expects to be able, on the
basis of experience administering the premer9er notification
program, to provide a more·c~mprehensive and detailed assessment
of these matters in its second annual report.
The Assistant Attorney General in charge of the Antitrust
Division bas indicated his concurrence with this annual
report •
By direction of the Commission.

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Carol M. Thomas
Secretary

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Aftc%3A80118468da58954c. Public record. Not legal advice.