FEDERA.L TRADE COMMISSION

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FEDERA.L TRADE COMMISSION

W"SHINGTON. D. C. 20580

January 2, 1979

Honorable James O. Eastland

President Fro Tempore

United States Senate

2241 Dirksen Office Building

Washington, D.C. 20510

Honorable Thomas P. O'Neill, Jr.

Speaker of the House of

Representatives

2231 Rayburn House Office Building

Washington, D.C. 20515

Subject:

Second Annual Report) to Congress

pursuant to ec ion 201 of the

Hart-Scott-Rodino Antitrust

Improvements Act of 1976

Gentlemen:

Section 201 of the Hart-Scott-Rodino Improvements Act of

1976, Pub. L. 94-435, added a ne~ S 7A to the Clayton Act,

15 U.S.C. § 18a (hereinafter referred to as (~the Act"}. Subsection (j) of the Act 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 need for any rules

promulgated pursuant thereto, and any

recommendations for revisions of this

section.

This is the, second annual report to the Congress mandated by

subsection (j) of the Act.

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In general, the Act creates a mechanism under which

persons of specified size or larger, who intend to make stock

or asset acquisitions of specified size or larger, must report

their intentions to the Antitrust Division of the-Department

of Justice and to the Federal Trade Commission and must thereafter wait a prescribed period of time before consummating

the transaction.

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The waiting period is designed to permit tne a9encies

to determine whether actiorr egainst a reported acquisition

is warranted prior to its consummation. Section 7A(f} of

the Act provides for expedited consideration by a Federal

district court in the event that either agency seeks a

preliminary injunction to prevent consummation of an

acquisition.

The Act was signed by the President on September 30, 1976.

December 15, 1976, the Federal Trade 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 notice of

proposed rulemakin9 was published in the Federal Register of

December 20, 1976. Approximately 130 comments were received

in response to those proposed rules and form. In response to

the comments, the staff prepared substantial revisions to the

proposed rules. On July 25, 1977, the Commission approved

revised proposed rules and a revised proposed Notification and

Report Form and determined that additional public comment

thereon would be desirable.. The revised proposed rules and

form were published in the Federal Register of August l, 1977,

42 FR 39040. A total of 116 comments were received in response

to the revised proposed rules and form.

On

Additional changes in the revised proposed rules and form

were made after the close of the comment period, and on

February 14, 1978, the.Commission gave its interim approval

to final versions of the rules and form. The Notification and

Report Form was then transmitted to the General Accounting

Office ("GAO") for review under the Federal Reports Act,

44 U.S.C. S 3502. On February 27, 1978, GAO published in the

Federal Register a notice soliciting comments regarding the

final version of the form, 43 FR 8038. Seven comments were

received. Those comments and a letter requesting the staff's

responses to the issues raised in the comments were forwarded

to Corranission staff on March 22, 1978. The staff responded

on April 5, 1978. The staff and GAO then held additional

discussio~s concerning the form at which several modifications

were agreeq to and incorporated into the final form. GAO

submitted· its final report to the Commission on May 12, 1978.

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The Commission formally promulgated the final rules and

form and issued a Statement of Basis and Purpose on July 10,

1978. The Assistant Attorney General gave his formal concurrence on July 18, 1978. The Statement of Basis and Purpose

was published in the Federal Register of July 31, 1978,

43 FR 33451 (attached) and the final forrn was published in the

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Federal Register of August 4, 1978, 43 FR 34443. !/

and form went into effect on September 5, 1978.

~he rules

As of December l, 1978, the agencies had received filings

covering two hundred ninety-two transactions. The staffs of

the two agencies independently review all filings to determine

w~ether an investigation should be opened and, if warranted,

a request for additional information or documentary material

issued pursuant to S 7A(e) of the Act and S 803.20 of the rules.

Prior to opening an investigation and issuing such a request,

Commission and Antitrust Division staff determine th.rough normal

liaison procedures which agency will conduct an investigation.

These procedures are designed to avoid unnecessary duplication

of effort by the agencies and unnecessary burdens on persons

whose transactions might otherwise be investigated by both

agencies.

As of December l, 1978, the agencies had issued forty-six

requests for additional information in twenty-six transactions.

Because of the short period of time in which the premerger

notification program has been in operation, few investigations

of reported acquisitions ·have been completed.

In a number of cases,· initial notification reports provided

information that enabled the staffs of the aoencies to determine

~hether to open an investigation. Such information had not

previously been available to the staff and has provided valuable

assistance in the expeditious preliminary review of acquisitions

involving large persons. Information submitted in response to

requests for additional information has made possible a more

detailed reviey; and analysis of transactions which the agency

staffs believe may pose antitrust questions. To date, information

provided by the premerger notification program has been employed

in two motions for preliminary injunctions; United States v.

Occidental Petroleurr. Corp., Civ. No. C-3-78-288 (S.D. Ohio, filed

October 11, 1978), and United States v. United Technologies, Inc.,

Civ. No. 78-CV-580 (N.D.N.Y., filed Noveriiber 13, 1978). The

staffs believe that additional motions for preliminary injunctions

will be filed in the near future.

Of the two hundred ninety-two transactions reported through

December·l, 1978, early termination of the waiting period was

requested pursuant to S 7A(b) (2) of the Act in twenty-five cases.

Early termination was granted and appropriate notice in the

Federal' Register published in twelve of these cases. The balance

were deniec.

l/ A version of the fonn was published with the Statement of

Basis and Purpose on July 31, 1978, but, because of extensive

Federal Register omissions, had to be republished on August 4,

1978. The attached reprint embodies the August 4 corrections.

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On the effective date of the rules, Commis.sion staff

instituted a compliance monitoring prograrn to insure that

acquisitions covered by the Act and rules are being reported

under the premerger notification program. ~he staffs have

also made a concerted effort to inform and educate the public

concerning the operation of the program. In addition to

writing a detailed Statement of Basis and Purpose, staff

members have discussed the program at numerous bar association

seminars, discussion groups and meetings. Most recently,

Commission staff held a series of premerger notification

seminars in New York City, Chicago, Dallas, -and San Francisco,

which were jointly sponsored by the Commission and the

Federal Bar Association.

Since September S, 1978, one formal interpretation

(attached) pursuant to S 803.30(c} of the rules has been

issued by Commission staff with the concurrence of the

Assistant Attorney General. At the present time, a number

of additional formal and infonnal interpretations by

Commission staff are under consideration.

Because of the Commission's limited experience under

the premerger notification program, it is unable fully to

assess the effects of the program on the law enforcement

activities of the agencies, reporting persons, and merger

and acquisition activity in the economy as a whole. The

Comrnission does not believe th.at revisions of the Act by

Congress are necessary at the present time.

The Assistant Attorney General has indicated his

concurrence with this annual report.

By direction of the Commission.

~nmeO. an

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0. na.-na- e

Carol "'· Thomas

Secretary

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