Chairman RODINO. Mr. Kauper, if I remember correctly, in testimony last spring before the Senate Antitrust Subcommittee, you stated your personal support, and later the administration's support for a mandatory stay of the merger if requested either by the Department of Justice, or the FTC, during a premerger investigation period.

Recently, the administration announced its opposition to the premerger stay provision. Let me ask you a couple of questions relative to that.

First, do you personally feel now, as you did last spring, that a premerger stay would improve antitrust enforcement; second, if you can, could you tell us why there has been a change in the administration's position?

Mr. KAUPER. Well, Mr. Chairman, let me distinguish two things first, if I might. There are really two concepts of "stay" within the provision presently contained in title V of S. 1284.

Within the premerger notification provision, there is in essence a stay by virtue of the requirement that we must be notified, and the parties must hold up for a period of time after that notification. This we view as part of the premerger notification provision of the bill. I testified in support of those provisions. So far as I'm aware, the administration's position on those provisions has not changed; that is, the premerger notification provision as such, that is, that notice. must be given a certain number of days before consummation, is still, as far as I'm aware, supported by the administration.

The second provision, in essence, called for the issuance of an automatic preliminary injunction once a decision had been made to file suit. S. 1284, as originally drafted, in essence contained a totally automatic stay for the duration of litigation. I did testify on S. 1284 to the effect that I thought that was somewhat Draconian, that even though now I found myself leading a Government enforcement agency, I thought that was placing too much authority in the hands of Government enforcers; but I did indicate that we favored-and the administration favored-a provision which would in essence place such a stay, if there was allowance made under appropriate circumstances where the Government's case could be shown without merit, that the stay could be lifted upon petition of the parties. That was the position taken in general by the administration.

As you are aware, Deputy Attorney General Tyler notified Senator Hart several weeks ago that the administration no longer supported that second part of title V. That was the result, very simply, of a continuing debate within the administration. I could not honestly say, Mr. Chairman, that my own personal views have changed any, but I think as time went along a number of problems were raised, and there was a perfectly good faith disagreement over what the impact of that automatic preliminary injunction would be on such matters as the ability of firms to raise capital in the market, and so on; and hence the change in that provision.

Now, there was discussion within the administration of a variety of compromises in the form, primarily legislation which would grant an automatic temporary restraining order, not an automatic preliminary injunction, but a temporary restraining order, pending the

outcome.

Chairman RODINO. In other words, the administration would support such a provision.

Mr. KAUPER. Well, let me summarize where we came out on that. There was considerable disagreement within the administration as to what an appropriate time period would be. The ultimate decision not to accept various compromises offered within the administration, and thus oppose title V, I would have to say was basically mine because I felt the various compromises we were discussing-and indeed, I think everybody finally agreed on that point-really would put us in a worse position than we are now. Hence, for that reason I felt that the better course was not to try to compromise by ending up with some kind of standard which would actually impede our ability to obtain preliminary injunctions.

But I think my own view, and that was your initial question, really remains pretty much what it has always been, personally.

Chairman RODINO. Do you feel that would be an effective way of bringing about the objective that you outlined in your statement?

Mr. KAUPER. Well, I think it is one way. Here again, let me emphasize that I think part of those objectives, a substantial part, can be met through the premerger notification provisions themselves, which the administration continues to support because that gives us the opportunity to learn of the merger and be better prepared to be in the courtroom, seeking a TRO, and ultimately the preliminary injunction. That is a very significant fact in and of itself.

The question of the use of an automatic TRO, I think, clearly could benefit us in some cases, I don't have any question about that. It's a question of how you balance that off, and this is where the argument came from the other side, against the impact of that on a transaction which might ultimately be held to be perfectly lawful.

One of the concerns was a combination of the time periods. There is, as you are aware, in S. 1284 a provision for a set time period in which premerger notice must be given, and then there is a holdup for that purpose; if you then add additional time in a given transaction, it is possible that you will impede the ability, for example, of certain firms to raise capital quickly which may be done, after all, in this way, for a relatively indefinite period of time.

Now, that was the concern on the other side. I guess I drew the line a little differently than the other people, but I think it is a perfectly legitimate concern, nevertheless because the automatic stay provision does operate, after all, when there has been no court judgment as to whether the transaction is lawful or not.

Chairman RODINO. Of course, with your experience, the experience you cite is such that it would seem that the automatic stay probably would work most effectively, despite the fact that you say there are counter-balancing factors.

Mr. KAUPER. Well, I think if you put it in terms of, parochially, what would help in terms of getting relief, it would: I don't think anybody really has denied that. I think the argument has been more on the other side, what are other kinds of countervailing concerns in the economy as a whole, recognizing, as I think we all must, that a certain number of mergers-indeed, I suspect a rather large number of mergers-are not only not unlawful, but maybe quite beneficial, and hence

the question how do you balance off what impact that may have on certain mergers that you might want to in essence encourage in some way. That's, I think, where the major disagreement has been.

But in terms of, would it be of assistance to prevent a given merger which we think is unlawful, I don't think anybody could deny that. Chairman RODINO. Mr. Kauper, in 1969, then Attorney General Mitchell stated that "The Antitrust Division would probably challenge any merger between the top 200 U.S. firms, or between a top-200 firm and a leading firm in another industry."

Does this still represent the policy of the Department toward conglomerate mergers?

Mr. KAUPER. Well, I think as a general proposition it certainly indicates where we are going to put our resources, and what kind of response is probably most likely. Now, you have to keep in mind, that's an awfully generalized statement. I would add a couple of caveats to it. First of all, at the time that statement was made we were prior to some decisions of the Supreme Court in terms of the potential competition doctrine, which have not helped us very much in the last 2 or 3 years. But, I suppose the major caveat that has to be added under the law is that you have to be assuming financially healthy companies. That is, if you have companies that are failing, or divisions perhaps that are failing, then under the law you may have really quite a different problem under the kind of defenses the Court recognized. But, I think generally is remains a pretty accurate statement. Chairman RODINO. Let's put it this way, do you believe there is a social purpose to section 7, which would support a challenge between the merger of two large unrelated firms?

Mr. KAUPER. I don't think one can say that the purpose in and of itself is enough to carry the day in a courtroom. But I have very little question that there is a major social purpose behind section 7.

Chairman RODINO. You mean there is weight given to that factor? Mr. KAUPER. I think that's quite right. The statute, after all, does talk in terms of a lessening of competition in relevant markets, and it is rather difficult to take a purely social, noneconomic, nonmarket concern and translate that into a court decision under that statutory criteria.

But, I think there is very little doubt that a court does in fact give some weight to that sort of concern, and certainly the judgments made with respect to enforcement have to take that kind of a concern into account. But I don't think one really could say that one could, for example, bring an action to challenge a large conglomerate merger by asserting, just hypothetically, for example, to take a social policy, that this would have certain employment consequences that we might view as undesirable. The statute does, after all, talk in terms of competition, which I think has been given a pretty well-defined meaning, at least insofar as it refers to an economic, market-type concept.

Chairman RODINO. Mr. Kauper, one final question, and then I will turn it over to Mr. Hutchinson. Why wouldn't the Federal Trade Commission's premerger notification program be adequate for your purposes?

Mr. KAUPER. Well, in the first place, as I understand the Commission's premerger notification concept, it may be that the ceiling ranges are somewhat high.

Second of all, there really is no concept, as I understand their provisions, which provides a premerger waiting period. To me that really is the crucial element of a concept of premerger notification. It does not, in terms of our concern, which is the availability of preliminary relief and our ability to get it, it is not of great assistance to us to know that a merger is about to occur in 3 days, or 4 days, or 5 days. Thus, the statutory requirement of a waiting period is really, I think, at the heart of the concept of premerger notification.

Chairman RODINO. You think the period of premerger waiting time is really the most important element, outside of the fact that there is notice?

Mr. KAUPER. My feeling, Mr. Chairman, is that with most significant mergers, we will probably learn of them in any event sometime Chairman RODINO. Well, "sometime" is too late.

Mr. KAUPER. That's my point. My point is to assure that we learn in sufficient time that it is possible for us to take some kind of court action. And hence the time period, I think, is really in my own judgment the major reason for that kind of legislation because without that, it's true, we would get notice, and in a few cases that might in effect advance how much time we have; but as a practical matter, in many cases we would only learn a few days earlier what we would know anyway, and it would still be too late.

Chairman RODINO. Thank you very much, Mr. Kauper. Mr. Hutchinson?

Mr. HUTCHINSON. Thank you, Mr. Chairman.

Mr. Kauper, how do you define a merger? Is the definition broad enough to include the sale by one corporation of part of its operations to another for cash?

Mr. KAUPER. There are really two different parts to that. I normally would define a merger as an acquisition of virtually all of the assets of a company; or, alternatively of acquisition of control, when you may be talking about a stock acquisition, after all.

The statute, however, does not really speak in terms of "merger,” as that word is used. It talks in terms of "acquisitions of assets or stock." And thus, within the meaning of the statute, virtually any acquisition of assets, whatever they may be, I suppose, is technically covered within the jurisdictional reach of the statute. You obviously would have to go on and prove the anticompetitive effect. But, within the jurisdictional reach of the statute, acquisition of any part of the assets of one company by another is covered.

So, I think the answer to your question, in terms of the statutory language, is that the transaction would be covered by the statute, very clearly.

Mr. HUTCHINSON. That's what we are talking about in the type of legislation we are considering here the broad concept, everything within the statute.

Mr. KAUPER. Yes, if you talk about the provisions as they now appear within S. 1284, that premerger notification concept. That was one of the questions. Congressman, you may recall, I raised in the testimony on S. 1284, whether or not it shouldn't more clearly define the

classes of acquisitions covered by the requirement. I think the latest version of S. 1284 does that.

Mr. HUTCHINSON. Now, if we are talking about a merger in the broad context of premerger notification, would that mean that every time that any corporation decided it wanted to sell, and another to acquire one of its divisions for example, it would have to notify the Government, even though it wasn't an absorption of one company by another. Of course, it might have that effect in some market because I suppose a single division might be a dominant force in the market, and so on; but that's what is contemplated, that any time one corporation wanted to sell some of its assets to another, it would have to notify the Government.

Mr. KAUPER. Well, first of all, it would have to meet the jurisdictional requirements, we are talking about S. 1284 as drafted, and those are, the first company would have to have sales or assets of $100 million, and the other assets of $10 million. So, number one, you would have to meet those requirements.

Second, there is in the bill a rather long list of types of transactions that are not covered, that is certain kinds of assets the sales of which are not covered. For example, sales between firms in certain kinds of regulated industries are not covered. There is a list pursuant to a number of questions I raised on precisely that issue, in testifying on S. 1284. But, if it is not within one of those exceptions, if the corporations are within that jurisdictional reach, then they must notify us. Mr. HUTCHINSON. At what point must the notification be made? Certainly, the notification is not required until after an agreement has been made in its final form.

Mr. KAUPER. That's correct.

Mr. HUTCHINSON. And up until that time the Government wouldn't be brought into it.

Mr. KAUPER. That's right. The provision in S. 1284 would require them to notify us 30 days prior to consummation. Now, in the normal merger, the agreement, in principle, is usually in fact before that time period; in other kinds of transactions it might not be. The statute as now drafted says 30 days prior to the date on which they plan consummation. Or, to put it another way, they cannot consummate until 30 days have passed after notification.

Mr. HUTCHINSON. And "consummation" simply means sitting down and signing the papers.

Mr. KAUPER. That's correct. The final transfer of title, if you like. Mr. HUTCHINSON. And so this then would accord your Division 30 days in which to look the thing over. That is plenty of time, isn't it? Mr. KAUPER. Well, the bill also provides that if certain information which we have requested has not been furnished; or if we feel there is a need for additional information, we can request an additional-the bill, as I now understand it, says 45 days-but the understanding, I think, in terms of the committee in the Senate is that that will come down to an additional 20 days following receipt of that information. But, that would require us to say, "There is certain information you have not yet given us", and there is a rather tight limit

on that.

Again, this was an issue I discussed in my S. 1284 testimony because I originally felt that the bill was too open-ended in terms of our ability to extend that time period.