DEPARTMENT OF JUSTICE, Washington, D.C., July 7, 1975.

Hon. PHILIP A. HART,

U.S. Senate,

Washington, D.C.

DEAR SENATOR HART: This is in response to your letter of May 15, 1975, asking for responses to several questions dealing with my testimony before your subcommittee on the Antitrust Improvements Act of 1975 (S. 1284).

For sake of clarity, I will respond to each of your questions seriatim.

1. I am authorized to state that the views expressed in this letter, as well as the views contained in my testimony of May 7 as clarified and expanded by this letter, represent the views of the Administration.

2. In order to obtain a preliminary injunction barring consummation of a merger or acquisition transaction pending the outcome of a suit instituted by the Government challenging the transaction under the antitrust laws, the Government must demonstrate only a "reasonable probability" that it will prevail on the merits. See United States v. Atlantic Richfield Co., 297 F. Supp. 1061 (S.D. N.Y. 1969); United States v. Ingersoll-Rand Co., 218 F. Supp. 530 (W.D. Pa. 1962), aff'd, 320 F.2d 509 (C.A. 3. 1963); United States v. Crocker-Anglo National Bank, 223 F. Supp. 849 (N.D. Calif. 1963); United States v. Chrysler Corp., 232 F. Supp. 651 (D.N.J. 1964). No separate showing of "irreparable injury" is required, as such is embodied in the policy of the antitrust laws, see, e.g., United v. Ingersoll-Rand Co., supra, 218 F. Supp. at 544. In Ingersoll-Rand, the District Court pointed out that it was not "necessary [for the Government] to demonstrate the precise manner in which violation of the law will result in injury to the public interest. It is sufficient to show only that an act or threatened act is within the declared prohibition of Congress," 218 F. Supp. at 545. However, despite this generally accepted rule, preliminary relief has been denied where a company involved in the transaction was in a severely weakened financial condition, see United States v. G. Heileman Brewing Co., 345 F. Supp. 117 (E.D. Mich. 1972), and where economic factors might make consummation at a later date impossible, see United States v. Brown Shoe Co., 1956 Trade Cas. ¶ 68244 (E.D. Mo. 1956).

Nonetheless, the essential burden of the Government to obtain preliminary relief is to demonstrate the probability of success on the merits. In a sense, the "probability" standard for preliminary relief is compounded, since the Government's ultimate burden in a Clayton Act § 7 case is to show a reasonable "probability" of a substantial lessening of competition, see United States v. Marine Bancorporation, 94 S. Ct. 2856, 2870 (1974). Thus, as a logical matter, preliminary relief should not be difficult to obtain. In practice, it has frequently been necessary to convince the trial court of the ultimate merits of the case. The material requested is attached as Appendix A.1

3. There may well be situations in which a study of a proposed transaction would appear appropriate or desirable at the time of suit, but where changed conditions make reevaluation of that conclusion necessary at some time prior to the completion of the litigation process. It is obviously difficult to delineate all possible factual circumstances which might compel this conclusion, but the most obvious would be where emergency financial circumstances made continued separate operation difficult or perhaps impassable. Assuming that the stay would be automatically imposed, either upon the initiation of a legal challenge or a request from the Department, and assuming further that circumstances could arise in which the Department and the defendants might differ on the appropriateness of a continued injunction, some discretion in the court seems desirable, although this discretion must be limited in order to assure the effectiveness of the procedure.

There are, obviously, a number of ways to deal with this issue. One alternative is language similar to that contained in the Bank Merger Act (12 U.S.C. § 18), which on its face leaves the district court with broad discretion to lift the stay automatically imposed when a proposed bank merger is challenged by the government. Judicial interpretation has sharply circumscribed this apparent discretion, however, and controlling decisions appear to require a court to find that the challenge is "frivolous" before a stay may be lifted.

1 Printed under title III.

Another alternative, which we prefer, would be to include within the statute language which would leave limited discretion in the district court, in words which are broad enough to cover any possible circumstances which could appropriately call for lifting of the stay and yet narrow enough so that the stay could not be lifted without an appropriate showing. The following language, added at the end of new Section 23(d) of Title V of S. 1284, would seem to meet this description:

Such order staying the consummation of the acquisition shall remain in force during the pendency of litigation and any appeals which might be taken, unless the court shall otherwise specifically order. Such an order shall be modified only upon a showing either of irreparable harm resulting from the continuation of the order, in which case the order shall be modified only to the extent necessary to deal with the harm resulting from the total prohibition against consummation, or that the government challenge to the acquisition is wholly without merit and frivolous. A showing of loss of anticipated benefits arising from the challenged acquisition itself shall not be sufficient to meet the standards set forth in this section.

There may well be alternative language formulations which would accomplish the desired result, and my staff stands ready to work with the subcommittee staff on this and other issues.

Sincerely,

THOMAS E. KAUPER, Assistant Attorney General, Antitrust Division.

FEDERAL TRADE COMMISSION,
Washington, D.C., July 10, 1975.

Hon. PHILIP A. HART,

Chairman, Subcommittee on Antitrust and Monopoly,
Committee on the Judiciary, U.S. Senate, Washington, D.C.

DEAR MR. CHAIRMAN: Enclosed are the following supplementary materials concerning S. 1284. These materials were requested by your Subcommittee at the hearings held earlier this year and in subsequent communications:

A statement of reasons for the proposed Amendment to Section 10 of the Fed

eral Trade Commission Act (Title III of S. 2184);1

A breakdown by asset size (of the acquiring company) of merger in 1968 and 1972;

A synopsis of the deposition of all FTC merger cases by document number and name since 1950.

Sincerely,

LEWIS A. ENGMAN, Chairman.

NUMBER OF LARGE MERGERS,11968 AND 1972, WITH AN ACQUIRING COMPANY OF $100,000,000 OR MORE IN ASSETS

Asset size of acquiring company

$100,000,000 to $199,000,000. $200,000,000 to $299,900,000. $300,000,000 to $399,900,000. $400,000,000 to $499,900,000. $500,000,000 and above..

Total 2.

All large mergers (including acquiring companies with assets less than $100,000,000)....

1 Acquisitions of manufacturing and mining companies with $10,000,000 or more in assets. 2 This figure includes acquisitions in which both partners publish financial reports and also acquisitions in which 1 or both of the companies was privately held and hence did not publish financial reports. The principal sources of data for acquisitions involving non-public companies were the FTC's premerger notification reports and quarterly financial report files. Since individual company data in those files are confidential, company names and asset values for such acquisitions are suppressed in the more detailed tables.

Source: Federal Trade Commission, Bureau of Economics.

NAMES OF COMPANIES INVOLVED IN ACQUISITIONS, BY HUNDRED MILLION DOLLAR SIZE CLASSES, 1968-Con.

NAMES OF COMPANIES INVOLVED IN ACQUISITIONS, BY HUNDRED MILLION DOLLAR SIZE CLASSES, 1968-Con.