ELEVENTH ANNUAL REPORT (1988)

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ELEVENTH ANNUAL REPORT

TO CONGRESS

PURSUANT TO SECTION 201

OF THE

HART-SCOTT-RODINO ANTITRUST

IMPROVEMENTS ACT OF 1976

(Fiscal Year 1988)

DUCTION

section 201 of the Hart-Scott-Rodino Antitrust Improvements

act of 1976, Pub. L. 94-435, amended the Clayton Act py adding 4

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

thereto, and any recommendations for

revisions of this section.

This is the eleventh annual report to Congress pursuant to

this provision. It covers fiscal year 1988.

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 4

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 jikely 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 of documentary materials from

either or poth 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.

Final rules implementing the premerger notification program

were promulgated by the Commission, with the concurrence of the

Assistant Attorney General, on July 31, 1978.° At that time, 4

comprehensive Statement of Basis and Purpose was also published

containing 4 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 became effective on

August 29, 1983.7 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

aA 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

B01 through 803).

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

801 through 803).

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

801 through 803).

5 The term "transactions," a5 used in Appendices A, B,

and C and Exhibits A and B to this report, does not refer to

separate mergers or deals; rather, it refers to types of

structures such as cash tender offers, options to acquire voting

securities from the issuer, options to acquire voting securities

from someone other than the issuer, and multiple acquiring or

acquired persons that necessitate separate HSR identification

(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 1988 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 1988. Appendix C shows, for calendar years 1981

through 1984 and fiscal years 1985 through 1988, 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. 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 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 show the number of

merger investigations in which second requests were issued. A

merger investigation may include several transactions, @.g., a

cash tender offer, an option to acquire shares from the acquired

person, and an option to acquire shares from shareholders. 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 under the Act by

the agencies.

The statistics set out in the appendices show that the

number of transactions reported in 1988 increased approximately

8.4 percent over the number of transactions reported in 1987

*(,...continued)

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 l.

(2,746 transactions were reported in 1988 while 2,533 were

reported in 1987). The statistics in Appendix A also show that

the number of merger investigations in which second requests were

issued in 1988 increased approximately 17.2 percent over the

number of merger investigations in which second requests were

issued in 1987 (second requests were issued in 68 merger

investigations in 1988 while second requests were issued in 58 in

1987). These numbers indicate a slight increase in the number of

merger investigations in which second requests were issued as a

percentage of reported transactions from 1987 to 1988 (from 2.3

percent in 1987 to 2.5 percent in 1988, based on Appendix A, and

from 2.7 percent in 1987 to 2.8 percent in 1988, based on

Appendix C).

The statistics also show that in recent years, early

termination is requested for most transactions.’ In 1988, early

-termination was requested in 88.9 percent (2,440) of the

transactions reported, while in 1987 it was requested in 89.3

percent (2,264) of the transactions reported. Although the

number of requests granted has increased (from 1,752 in 1987 and

to 1,885 in 1988), the percentage of requests granted has

remained steady (77.3 percent in 1987 and 77.2 percent in 1988).

We have also included in the report, as Exhibits A and B,

statistical tables containing information about the agencies.’

enforcement interest in transactions reported in fiscal years

1987 and 1988. Both exhibits present 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

7 As noted in the Seventh Annual Report, 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.

4

Statistics have been included in prior annual reports for the

calendar years 1981-1984, and for fiscal year 1985.

DEVELOPMENTS IN FY 1988 RELATING TO PREMERGER NOTIFICATION RULES

AND PROCEDURES , ;

1. Proposed Rule Change

On September 22, 1988, the Commission, with the concurrence

of the Department of Justice, published in the Federal Register a

Notice of Proposed Rulemaking regarding acquisitions of 10

percent or less of an issuer's voting securities.” The Notice

set out one principal proposal and two alternative approaches to

revising the rules. The principal proposal would exempt from the

requirements of the Act acquisitions that resulted in the

acquiror holding 10 percent or less of an issuer's voting

securities which are valued at more than $15 million. Currently,

such acquisitions are exempt from the Act's requirements under

Section 7A(c)(9) of the Act and § 802.9 of the premerger

notification rules if the acquiror intends to hold the voting

securities "solely for the purpose of investment." Voting

securities are held "solely for the purpose of investment" if the

acquiror "has no intention of participating in the formulation,

determination, or direction of the basic business decisions of

the issuer."

- The alternative proposals involved an escrow arrangement and

a modified optional notification form. The escrow proposal would

permit an acquiror to purchase, but not take possession of, 10

percent or less of an issuer's voting securities valued at more

than $15 million without first filing notification provided the

securities were held in escrow and the acquiror did not exercise

the power to vote the shares. The acquiror would be required to

file notification prior to taking the shares out of escrow and

prior to acquiring more than 10 percent of the issuer's shares.

8 See the Tenth Annual Report, Exhibit A, for fiscal year

1985, the Ninth Annual Report, Exhibit A, for calendar year 1984

transactions, the 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.

? 53 Fed. Reg. 36,831 (1988).

10 16 C.F.R. § 801.1(i)(1).

5

The optional modified notification proposal would permit an

acquiror to file notification for acquisitions resulting in an

acquiror holding 10 percent or less of an issuer's voting

securities valued at more than $15 million without notifying the

acquired person prior to filing. Currently, § 803.5(a) of the

premerger notification rules requires an acquiring person, inter

alia, to notify the acquired person of its intention to make an

acquisition and its intention to file notification before it

makes its filing. Under this optional system, an acquiror would

have to submit specified public documents describing the entity

to be acquired, but would not have to give the acquired person

notice under rule 803.5(a). This optional modified notification

would be available only for acquisitions of the voting securities

of companies that file Schedule 10-K's with the Securities and

Exchange Commission and have publicly available annual reports.

Eighteen public comments regarding these proposed changes

were received. The Commission has no action pending or planned

at this time regarding this rulemaking.

2. Reinstatement of Dairy Merger Reporting Program

On September 6, 1988, the Commission reinstated its dairy

merger reporting program. The Commission had established this

program in 1974, and suspended it in 1981.

Under this program, dairy processors over a certain size

must file reports 60 days before they acquire companies with.

fluid milk processing or distribution facilities within a 250

mile radius of similar facilities of the acquiring firm, and.

before they acquire companies that have a certain sales volume.

Merging dairy firms are exempted from filing a report under this

program if they are required to report the transaction under the

HSR premerger notification program.

3. Premergqer Notificatio ource Boo

On November 13, 1987, the Commission announced that it had

prepared and had available for purchase through the U.S.

Government Printing Office the "Premerger Notification Source

Book." This book has collected into a single volume a large

number of materials concerning the premerger notification

program, all of which had been previously published separately.

The Source Book contains the following materials:

- Section 201 of the Hart-Scott-Rodino Antitrust

Improvements Act (15 U.S.C. § 18a), which established the

program;

~ the Commission's premerger notification rules, including |

the most recent amendments;

- copies of most of the Federal Register notices concerning

the rules and amendments, including the Commission's

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.

4. ompliance

Fiscal year 1988 was a very significant year for HSR noncompliance actions. At the Commission's request, the Department

of Justice filed five complaints” alleging that a total of six

corporations and three individuals had violated the premerger

notification requirements of the Act by failing to comply with

reporting and waiting period requirements before consummating

certain stock acquisitions. Under Section 7A(g)(1) of the Act,

any person or company that fails to comply with the Act's

notification and waiting period requirements is liable for a

civil penalty of up to $10,000 for each day the violation

continues. In each case, the Division filed a proposed consent

decree simultaneously with the complaint. Only two other

enforcement actions have been brought under Section 7A(g) (1)

since the program's inception.

ut United States v. Wickes Companies, Inc., 1988-1 Trade

Cases ¢ 67,966 (D.D.C. 1988); United States v. First City

Financial Corporation Ltd. and Roxboro Investments (1976) Ltd.,

1988-1 Trade Cases q 67,967 (D.D.C. 1988); United States v.

Donald J. Trump, 1988-1 Trade Cases ¢ 67,968 (D.D.C. 1988);

United States v. Roscoe Moss Corporation and Roscoe Moss Jr.,

1988-1 Trade Cases q 68,040 (D.D.C. 1988); and United States v.

Lonrho, PLC, Lonrho, Inc., Robert 0. Anderson, and Diamond A.

Cattle Company, 1988-2 Trade Cases ¢ 68,232 (D.D.C. 1988).

12 One action, United States v. Coastal Corporation, 1985-

Under

1 Trade Cases q 66,425 (D.D.C. 1984), was filed in 1984.

the terms of the consent decree, Coastal agreed to pay a civil

penalty of $230,000, the maximum civil penalty authorized.

Coastal also divested the stock that it was alleged to have

acquired illegally. The other action, United States v. Bell

(continued...)

In United States v. Wickes Companies, Inc., the complaint

alleged that Wickes violated the Act from July 18 through

September 2, 1986, when it acquired stock of Owens-Corning

Fiberglas Corporation of Toledo, Ohio, through its agent, the

investment banking firm of Bear, Stearns & Company. This was the

first case brought concerning the use of an investment banking

firm to avoid filing notification required by the Act. Wickes

sells lumber and other building material. Under the terms of the

consent decree, Wickes agreed to pay a civil penalty of $300,000

to settle the case.

In ited States v. First City Financia orporation Ltd.

and Roxboro Investments (1976) Ltd., the complaint alleged that

First City Financial and Roxboro Investments violated the Act

from February 19 through April 2, 1986, when they acquired stock

of Ashland Oil, Inc., of Russell, Kentucky, through their agent,

the investment banking firm of Bear, Stearns & Company. First

City provides diversified financial services, as well as general

leasing services. Roxboro is a holding company affiliated with

First City. Under the terms of the consent decree, First City

Pinancial and Roxboro Investments agreed to pay a civil penalty

of $400,000 to settle the case.

In United States v. Donald J. Trump, a two-count complaint

was filed alleging that Donald J. Trump of New York City violated

the Act from August 22 through November 9, 1986, when he acquired

stock of Holiday Corporation of Memphis, Tennessee, and from:

November 13, 1986, through January 22, 1987, when he acquired

stock of Bally Manufacturing Corporation of Chicago. Both

acquisitions were made through Trump's agent, the investment:

banking firm of Bear, Stearns & Company. Trump is a real estate

developer who also owns and operates casinos. Under the terms of

the consent decree, Trump agreed to pay a civil penalty of

$750,000 to settle the case.

In United States v. Roscoe Moss Corporation and Roscoe Moss

Jr., the complaint alleged that Roscoe Moss Corporation of Los

Angeles and its Chairman and CEO, Roscoe Moss, Jr., violated the

Act from December 1, 1984 through March 26, 1986, when they

acquired stock of San Jose Water Company. Roscoe Moss

Corporation is engaged in the manufacture of steel tubular

products for use in water wells and transmission lines. Under

2 .,.continued)

Resources LTD., Weeks Petroleum LTD., and M.R.H. Holmes a Court,

1986-2 Trade Cases { 67,321 (S.D.N.Y. 1985), was filed in 1985.

Under the terms of the consent decree, Weeks agreed to pay a

Civil penalty of $450,000.

the terms of the consent decree, the defendants agreed to pay a.

civil penalty of $500,000 to settle the case. ;

In United States v. Lonrho, Inc., Robert O. Anderson, and

Diamond A Cattle Company, the complaint alleged that the

defendants violated the Act from October 21 through December 27,

1986, in connection with the acquisition by Lonrho, Inc., of more

than $15 million worth of voting securities of Diamond A Cattle

Company. Lonrho, Inc., is a U.S. holding company that is whollyowned by Lonrho, PLC, a British firm that has mining,

agricultural and other business interests. Diamond A Cattle is a

privately-held firm engaged primarily in ranching. Under the

terms of the consent decree, the defendants agreed to pay a total

of $244,000 as civil penalties to settle the case. ;

In addition to these civil penalty actions, on April 26,

1988, the Commission filed an action in federal district court,

under Section 7A(g)(2) of the Act, against McCormick & Co., Inc.,

for failure to comply with a request for additional information

and documentary material.” The court issued an order

prohibiting McCormick and Specialty Brands from consummating

their proposed transaction until 20 days after McCormick complied

with the Commission's request for additional information. This

is the first case litigated under Section 7A(g)(2) of the Act.

In addition to the enforcement actions brought this year,

the agencies monitored compliance by reviewing newspapers and

industry publications for announcements of transactions that may

not have been reported in accordance with the requirements of the

Act. Industry sources, such as 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 filings are not 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.

8 Federal Trade Commission v. McCormick & Co., Inc.,

1988-1 Trade Cases ( 67,976 (D.D.C. 1988).

9

MERGER ENFORCEMENT ACTIVITY DURING Fy 1988"

1. Department of Justice

The Antitrust Division filed six complaints in merger cases

during fiscal year 1988. ‘Three of these cases, U.S. v.

Westi ouse ectric Corp. en ectrica ipment

a erican Properties Corp., United States v. BNS Inc.

ford-Hi ompa n¢c., and United States v. Waste

Management, Inc., Industrial Disposal Service, Richard R. Clark

and Andrew A. Clark, were settled by the entry of consent

decrees. In United States v. Lewis M. Manderson, Jr., and

Patrick Media Group of Atlanta, Inc., the Division voluntarily

dismissed the lawsuit when the proposed transaction was abandoned

by the parties.

In United States v. Lewis M. Manderson, Jr., and Patrick

Media Group of Atlanta, Inc., the Division challenged the

proposed acquisition of Patrick Media Group of Atlanta, Inc., by

Lewis M. Manderson, Jr., controlling owner of Turner Outdoor

Advertising, Ltd. The complaint alleged that the proposed

acquisition might substantially lessen competition in the market

for outdoor advertising in the Atlanta area. Sales of outdoor

advertising in Atlanta in 1986 totalled more than $28 million.

Turner Outdoor Advertising was the largest provider of billboards

for outdoor advertising in metropolitan Atlanta and Patrick Media

Group was the second largest. The acquisition would have raised

Turner's share of outdoor advertising in the Atlanta area from 48

“ 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 transactions

were reported under the premerger notification program.

b United States v. Lewis M. Manderson, Jr., and Patrick

Media Group of Atlanta, Inc., Cv. No. C87-2239A (N.D. Ga. filed

October 9, 1987); United States v. Westinghouse Electric Corp.,

Challenger Electrical Equipment Corp. and American Properties

Corp., Cv. No. 87-3528 (W.D. Pa. filed December 30, 1987); United

States v. BNS Inc. and Gifford-Hill & Company, Inc., Cv. No. 88

01452MRP(BX) (C.D. Cal. filed March 18, 1988); United States v.

Carilion Health System and Community Hospital of Roanoke Valley,

Cv. No. 88-0249-R (W.D. Va. filed May 27, 1988); United States v.

Rockford Memorial Corporation and SwedishAmerican Corporation,

‘Cv. No. 88-C-20186 (N.D. Ill. filed June 1, 1988); and United

States v. Waste Management, Inc., Industrial Disposal Service,

Richard R. Clark, and Andrew A. Clark, Cv. No. SA88CA0911 (W.D.

Tex. filed September 1, 1988).

10

percent to approximately 68 percent. The Division dismissed the

suit after being advised that Manderson had terminated the

contract to acquire Patrick Media Group and that Mr. Manderson

did not intend to acquire Patrick Media Group's assets in the

future.

In United States v. Westinghouse Electric Corp., Challenger

Electrical Equipment Corp. and American Properties Co -, the

Division challenged the acquisition by Westinghouse Electric

Corp. of Challenger Electrical Equipment Corp., alleging that the

proposed combination of the residential circuit breaker

businesses of the two companies would violate Section 7 of the

Clayton Act. A circuit breaker is an electrical device that acts

as a safety switch by interrupting the flow of power in the event

of a power overload. In 1986, approximately $360 million in

residential circuit breakers were sold in the United States.

Challenger and Westinghouse were the third and fifth largest

suppliers of residential circuit breakers in the United States.

The final. judgment required Challenger to divest itself of its

circuit breaker plant in Albemarle, North Carolina.

In Unite tates v. BNS Inc. and Gifford-Hill ompan

inc., the Division alleged that the proposed acquisition by BNS

of Koppers Company would lessen competition in the market for the

extraction, processing and sale of aggregate rock, sand and

gravel used mainly in making concrete and as-a road base in

highway construction in portions of Los Angeles County and Orange

County, California. Total annual sales of aggregate in the Los

Angeles and Orange Counties area in 1987 were approximately $100

million. Gifford-Hill (an affiliate of BNS), through a wholly

owned subsidiary, Livingston-Graham, Inc., of Irwindale,

California, and Koppers, through a wholly-owned subsidiary, Blue

Diamond Materials of Irwindale, California, both operated

aggregate extraction and processing facilities in Irwindale,

California. Livingston-Graham and Blue Diamond were two of the

four largest producers of aggregate in this area. The consent

decree required BNS and Gifford-Hill & Company to divest Kopper's

Irwindale, California, Blue Diamond Materials aggregate facility.

In United States v. Carilion Health stem_and Communit

Hospital of Roanoke Valley, the Division filed suit under Section

7 of the Clayton Act and Section 1 of the Sherman Act to block a

proposed merger of Carilion Health Services, Inc. (which operates

Roanoke Memorial Hospital) and Community Hospital of Roanoke

Valley. Both hospitals were nonprofit. Roanoke Memorial

Hospital and Community Hospital of Roanoke Valley were the first

and third largest general acute-care hospitals serving the

Roanoke Valley area of Virginia. There was only one other acutecare hospital in Roanoke, the Lewis-Gale Hospital. In 1987, the

three Roanoke hospitals had in-patient revenues of about $212

million. On September 30, 1988, the Section 7 count was

11

dismissed by. the judge on jurisdiction grounds. The government

lost the trial and subsequent appeal of the Section 1 count.

In United States v. Rockford Memorial Corporation and

SwedishAmerican Corporation, the Division challenged the merger

of Rockford Memorial Corporation (operator of the Rockford

Memorial Hospital) and the SwedishAmerican Corporation (operator

of the SwedishAmerican Hospital), the largest hospitals in

Rockford. Both corporations were nonprofit. There was only one

other general acute-care hospital in Rockford, St. Anthony

Medical Center. Total in-patient revenues of the three Rockford

hospitals were about $163 million in 1987. The Division's motion

for preliminary injunction was combined with the trial on the

merits, which was held from June 20 through July 14, 1988, and

the government won. The defendants appealed and lost.

nite tates v. Waste agement, Inc. dus

Disposal Service, Richard R. Cla and Andrew A. Clark, the

Division challenged the proposed acquisition of Industrial

Disposal Service (IDS) by Waste Management, Inc., (WMI) alleging

a lessening of competition in the market for commercial

containerized solid waste hauling services in Bexar County,

Texas. Commercial containerized waste hauling service is a

dumpster service used by most commercial customers, such as .

restaurants, office buildings and stores. In 1986, WMI had total

revenues of over $2 billion from solid waste hauling and disposal

and approximately $5 million in revenues from the San Antonio

area in 1987. IDS, which operated only in the San Antonio area,

had 1987 revenues of over $17.5 million. In 1987, WMI accounted

for approximately 16 percent and IDS for 48 percent of commercial

containerized hauling revenues in Bexar County. The consent

decree required WMI to divest its solid waste hauling business in

San Antonio, Texas, and its interest in an all-purpose landfill

permit and site (Buffalo Valley).

During fiscal year 1988, the Division investigated bank

merger transactions for which divestitures were required to cure

competitive problems. In the following three 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:

1. Fleet Financial Group, Inc., Providence, Rhode Island,

merger with Norstar Bancorp, Inc., Albany, New York;

2. Integra Financial Corporation, Mt. Lebanon,

Pennsylvania, acquisition of Pennbancorp, Titusville,

Pennsylvania, and Union National Corporation, Mt.

Lebanon, Pennsylvania; and

12

3. Boatmen's Bancshares, Inc., St. Louis, Missouri,

acquisition of Centerre Bancorporation, St. Louis,

Missouri.

Finally, on five occasions the Antitrust Division informed

the parties to a proposed transaction that it would file suit

challenging the transaction unless the parties restructured the

proposal to avoid competitive problems or abandoned the proposal

altogether.” The parties abandoned the proposed transactions.

2. The Federal Trade Commission

The Commission authorized its staff to seek preliminary

injunctions in eleven merger cases in fiscal year 1988. In nine

of these cases, the parties abandoned the transaction before the

motion for preliminary injunction was filed in court. In

6 Department of Justice press release issued November

10, 1987, involving the proposed joint venture of Engelhard

Corporation with Floridin Company (a subsidiary of Rio Tinto-

Zinc); Department of Justice press release issued November 23,

1987, involving the proposed acquisition of Autotote. Systems,

Inc., by General Instrument Corporation; Department of Justice

press release issued May 20, 1988, involving the proposed

acquisition of Thermco Systems, Inc., by BTU Engineering

Corporation; Department of Justice press release issued May 26,

1988, involving the proposed acquisition of Bumble Bee Seafoods,

Inc:, by J. Heinz Company; and Department of Justice press

release issued September 16, 1988, involving the proposed joint

venture of Ivaco, Inc., with Jackson. Jordan, Inc.

ad FTC news release issued November 16, 1987, involving

the proposed acquisition by Dun & Bradstreet Corp. of Information

Resources, Inc. The press release reported that the Commission

had reason to believe that the proposed acquisition would

substantially reduce competition in syndicated national tracking

services, which are methods of tracking products that consumers

buy. Dun & Bradstreet and Information Resources were two of the

three companies providing this service.

FTC news release issued January 27, 1988, involving the

proposed acquisition by American Maize-Products Co. of U.S.

Tobacco Company's dry snuff assets. The press release reported

that the Commission had reason to believe that the acquisition

would substantially reduce competition in the production and sale

of dry snuff. American Maize-Products, through its subsidiary,

was the second largest dry snuff producer in an industry

dominated by four firms. U.S. Tobacco was the third largest

producer.

(continued...)

13

“7. ,,continued)

FTC news release issued February 17, 1988, involving the

proposed acquisition by James River Corporation of Princeton

Packaging, Inc. The press release reported that the Commission

had reason to believe that the proposed acquisition would

substantially reduce competition in the manufacture and sale of

frozen food, film and bakery bags. James River and Princeton

were the two largest U.S. producers of printed frozen food film.

This food film is formed into plastic bags used for frozen food

packaging. The two companies were also two of the top three

producers of printed bread bags.

FTC news release issued March 21, 1988, involving the

proposed acquisition by Browning-Ferris Industries, Inc., of

Inland Refuse Transfer Co., Inc., Inland Reclamation, Inc., and

Solon Sanitary Landfill, Inc., from their co-owners James and Jon

Pallidino. The press release reported that the Commission had

reason to believe that the acquisition would substantially lessen

competition in the solid waste disposal market in northeastern

Ohio by giving Browning-Ferris control of four of the nine solid

waste disposal sites (landfills) in the Cleveland area that were

available to commercial customers. pa

FTC news release issued April 29, 1988, involving the

proposed acquisition by Schering-Plough Corp. of The Cooper -

Companies Inc.'s contact lens assets. The press release stated

that the Commission had reason to believe that the proposed

acquisition would substantially reduce competition in the

manufacture and sale of soft contact lenses. The two firms were

among the top five producers and sellers of soft contact lenses.

FTC news release issued May 23, 1988, involving the proposed

acquisition by McCormick & Co., Inc., of the Spice Island assets

of Specialty Brands, Inc. The press release reported that the

Commission had reason to believe that the acquisition would

substantially reduce competition in the production and sale of

spices.

FTC news release issued July 27, 1988, involving the

proposed acquisition by SPX Corp. of Stanadyne Holding Corp.'s

valve lifter assets. The press release reported that the

Commission had reason to believe that this acquisition would

substantially reduce competition in the manufacture and sale of

hydraulic valve lifters. Valve lifters, also called "tappets" or

"lifters", are part of the valve train in the engines of cars and

light trucks. SPX and Stanadyne were two of only four companies

in the U.S. that produced hydraulic valve lifters for these types

of engines.

(continued...)

14

Federal Trade Commission v. Owens-Illinois, Inc., °° the

Commission filed for a preliminary injunction alleging that the

proposed acquisition by Owens-Illinois of Brockway, Inc., would

substantially lessen competition in the manufacture and sale of

glass containers. Owens-Illinois and Brockway were the second

and third largest manufacturers of glass containers for food,

beverages and other products in the United States. The

Commission's motion for preliminary injunction was denied.

parties consummated the transaction on April 12, 1988. The

Commission also issued an administrative complaint. On September

11, 1989, the Administrative Law Judge issued an initial decision

finding that the transaction violated Section 7 of the Clayton

Act.” “The matter is on appeal to the Commission.

In Federal Trade Commission v. Illinois Cereal Mills,

-Inc.,”° the Commission filed for a preliminary injunction

alleging that Illinois Cereal Mills' acquisition of Lincoln Grain

Co. from Elders Grain, Inc., would substantially reduce

competition in the production and sale of dry corn mill products.

The Commission requested preliminary relief seeking either

rescission or the appointment of a receiver to manage the

acquired assets until the matter was resolved in an

administrative proceeding. This case is the first time the

Commission has sought rescission of a merger transaction under

Section 13(b) of the Federal Trade Commission Act. Prior to

closing, the parties had been asked to postpone consummation

because of the Commission's "serious reservations" about the

merger's legality. The parties elected to consummate their

transaction, closing on a Sunday afternoon, and the Commission

The

» 7, . continued)

FTC news release issued October 3, 1988, involving the

proposed acquisitions by McKesson Corp. of Alco Health Services

Corp. and Northwestern Drug Co. The press release reported that

the Commission had reason to believe that each acquisition would

substantially reduce competition in wholesale drug distribution

and the related services provided by wholesalers. The Commission

authorized staff to seek preliminary injunctions to enjoin both

transactions on September 30. The parties abandoned the

transactions the following week (in fiscal year 1989).

18 Federal Trade Commission v. Owens-Illinois, Inc., 681

F. Supp. 27 (D.D.C. 1988).

19 Owens-Illinois, Inc. (issued September 11, 1989).

20 Federal Trade Commission v. Illinois Cereal Mills,

Inc., 691 F.Supp. 1131 (N.D. Ill. 1988), aff'd sub nom., Federal

Trade Commission v. Elders Grain, Inc., 868 F.2d 901 (1989).

15

filed its complaint the next day. The court ordered the parties

to rescind the acquisition. The court's decision was affirmed on

appeal. The Commission also issued an administrative complaint

in this matter. On March 12, 1990, the Commission issued a

decision and order settling the charges against Illinois Cereal

Mills that requires Illinois Cereal Mills to obtain Commission

approval before acquiring any assets of or an interest in any

company in the industrial dry corn milling industry. The

complaint against Elders Grain was dismissed by the Commission on

May 3, 1990.

In addition,. a case in which the Commission authorized staff

‘to seek a preliminary injunction in fiscal year 1987 was resolved

in fiscal year 1988. In Federal Trade Commission v. Pacific

Resources, Inc.,~” the Commission filed for a preliminary

injunction, in the U.S. District Court for the Western District

of Washington, alleging that the proposed acquisition by Pacific

Resources, Inc., of Shell Oil Company's Hawaiian petroleum

products and gasoline 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. The Commission also issued an administrative

complaint in this matter. On August 29, 1988, the Commission

accepted a consent agreement for public, comment and issued a.

decision and order on November 4, 1988.” the order requires.

Pacific Resources to obtain Commission approval before acquiring

certain terminal, refining, or gasoline retailing assets in the

state of Hawaii.

In fiscal year 1988, the Commission also issued an

administrative complaint against Coca-Cola Company of the

Southwest alleging that its 1984 acquisition of the Dr Pepper and

Canada Dry franchises and related assets from San Antonio Dr

Pepper Bottling Company substantially lessened competition in the

production, distribution, and sale of soft drinks in the San

Antonio area. The matter is in litigation before an

Administrative Law Judge.

21 Illinois Cereal Mills, Inc., Docket No. D. 9213 (issued

March 12, 1990).

22 Federal Trade Commission v. Pacific Resources, Inc.,

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

injunction order entered November 6, 1987).

23 Pacific Resources, Inc., 111 F.T.C. 322 (1988).

24 Coca-Cola Bottling Company of the Southwest, Docket No.

D 9215 (complaint issued July 29, 1988).

16

The Commission issued a complaint and decision and order in

three other merger cases in fiscal year 1988 in which it had

previously accepted consent agreements for public comment. In

supermarket Development Corporation, the complaint alleged that

Supermarket Development's acquisition of Safeway's Ei Paso

Division in south and west Texas and New Mexico would

substantially lessen competition in the retail sale and

distribution of food and grocery items in retail grocery stores

in west Texas and New Mexico. The order requires Supermarket

Development to hold separate the El Paso Division until certain

of its assets are divested. In The Vons Companies, Inc., the

complaint alleged that the acquisition by Vons of three Safeway

Divisions in southern California and Nevada would substantially

lessen competition in the retail sale and distribution of food

and grocery items in retail grocery stores in southern

California. Under the order, Vons was permitted to acquire the

‘Safeway divisions after Vons and Safeway divested 12 grocery

stores in southern California. In American Stores Company, the

complaint alleged that American Stores’ acquisition of Lucky

Stores, Inc., would substantially lessen competition in the

retail sale and distribution of food and grocery items in retail

stores in sections of California and parts of Illinois, Iowa, and

Indiana. Under the consent, American was allowed to acquire

Lucky Stores subject to its divestiture of between 31 and 37

grocery stores in California and Lucky's interest in a

partnership that operated grocery stores in the Midwest.

In fiscal year 1988, the Commission also accepted for public

comment a consent agreement with West Point-Pepperell, Inc.,

concerning its acquisition of J.P. Stevens & Co., Inc. The

consent became final on December 14, 1988, when the Commission

issued a complaint and decision and order. The complaint alleged

that West Point-Pepperell's acquisition of J.P.Stevens would

substantially lessen competition in the manufacture,

distribution, and sale of sheets and towels in the United States.

Under the order, West Point was required to operate most of the

J.P. Stevens assets as an independent business until it made

certain divestitures of sheet and towel assets.’

In two merger cases in which the administrative complaint

was issued before October 1, 1987, the Commission issued a

decision and order. In B.F. Goodrich Company ,”’ the Commission

found that B.F. Goodrich's acquisition of certain assets of

2 Supermarket Development Corporation, 110 F.T.C. 369

(1988); The Vons Companies, Inc., 111 F.T.C. 64 (1988); and

American Stores Company, 111 F.T.C. 80 (1988).

26 West Point-Pepperell, Inc., 111 F.T.C. 349 (1988).

2 B.F. Goodrich Company, 110 F.T.C. 207 (1988).

17

‘ z i é a

Diamond Shamrock would substantially lessen competition in the

production of vinyl chloride monomer (VCM). The Commission

dismissed that part of the complaint which alleged that the

acquisition would substantially reduce competition in the

production of polyvinyl chloride (PVC). VCM is used to make PVC,

which in turn is used to produce a broad spectrum of plastic

products, ranging from irrigation pipes to phonograph records.

The Commission ordered B.F. Goodrich to divest a vinyl chloride

monomer (VCM) plant in La Porte, Texas, and, for a period of ten

years, to receive FTC approval before acquiring any interest in

any producer of VCM located in the United States.

In Occidental Petroleum Co oration,” the Commission issued

a decision and order involving the acquisition by Occidental

Petroleum Corp. of Tenneco Polymers, Inc., from Tenneco, Inc. In

1986, the Commission had issued an administrative complaint

against Occidental Petroleum and Tenneco, Inc., charging that the

acquisition would substantially reduce competition in the

production of three polyvinyl chloride (PVC) resin product

markets. The order requires Tenneco to abide by any divestiture

order issued by the Commission against Occidental and to

reacquire a PVC plant in Burlington, New Jersey, from Occidental

if divestiture is ordered. The matter remains in adjudication

with respect to Occidental, the acquiring person. ~

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

28 Occidental Petroleum Corporation, 111 F.T.C. 27 (1988).

18

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 that 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 Acting Assistant Attorney General of the Antitrust

Division concurs with this annual report.

Insert date JW27 108

19

Appendix A

Appendix B

Appendix C

Exhibit A

Exhibit B

List of Appendices

Summary of Transactions, Fiscal Years 1979-.

1988. .

Number of Filings Received and Transactions

Reported by Month for Fiscal Years 1979-1988.

Investigations in Which Additional

Information Was Requested. Calendar Years

1981-1984 and Fiscal Years 1985-1988.

List of Attachments

Statistical tables for fiscal year 1987,

presenting data profiling Hart-Scott-Rodino

premerger notification filings and

enforcement interest.

Statistical tables for fiscal year 1988,

presenting data profiling Hart-Scott-Rodino

premerger notification filings and

enforcement interest.

20

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