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but if you look at the whole pattern of joint venturing throughout an entire industry, maybe the pattern is bad.
What I'm trying to find out is whether section 7 is an effective remedy when you find yourself confronted with the whole pattern of joint ventures, even though individually they don't have any substantial effect.
Mr. Dixon I hope you'll forgive me. If I open my mouth one more time, I'm out. [Laughter.]
Mr. SEIBERLING. Well, OK, I can understand that. Let me ask just one further question, then. In testimony before the Senate, Professor Brodley examined the current FTC merger notification program. Currently, of course, only firms with $250 million in assets or sales have to report their acquisitions. And, under those standards the FTC would have detected only 38 percent of the mergers the FTC actually challenged.
Have you examined your merger notification program to see whether it would be wise to expand its coverage? For example, how do you learn about mergers of firms with assets of less than $250 million ?
Mr. Dixon. I think the evaluation was probably about right. But, that experiment has worked very well, and we had pretty good success with it. It isn't nearly as effective as the premerger notification bill you are talking about here today. But, it has been helpful, sir.
Mr. SEIBERLING. Well, for mergers that are picked up by your merger notification program, which you spot, but decide not to prosecute, do you inform the Justice Department of these, so they can review them?
Mr. Dixon. When they ask us, or we ask for clearance to go investigate, we do inform them. As a practical matter, they have substantial access to what we have.
Mr. SEIBERLING. But the question is whether you automatically inform them.
Mr. Dixon. Now, we have to go back, if it's smaller than that size, as Mr. Kauper said, we may have more economists reading the trade papers, and all, and we'll come across it. It's pretty hard to keep a thing like that of any size quiet because of SĒC demands. They've got problems when they tinker around like that. So, we'll find out about it, and then we have to go out and start an investigation, and then we'll get the information.
Mr. SEIBERLING. But when you initiate an investigation, do you still in form Justice! Mr. Dixon. We still tell them we propose to do it.
Mr. SEIBERLING. And if you don't propose to do it, do you tell them that you are not proposing to do it?
Mr. Dixon. Oh, no. If we don't propose to do it, we don't propose to do it, and we have no assumption that they propose to do it.
Mr. SEIBERLING. In other words, it's up to them to go through the same procedure.
Mr. Dixon. The same process. You know, since 1961, now nearly 15 years, I think that Justice and the Federal Trade Commission can look with pride upon what we have accomplished through our respective premerger efforts. I think we've done very well. Now, I think we could do better if we were assured that there was going to be a stay of some description, or a tool of some kind that we would have.
Mr. SEIBERLING. Well, I would agree, you have done an outstanding job.
Mr. Dixon. We've lost some good ones, and I'm sure we missed some, nobody can be perfect, here. But I'm sure if you would call the antitrust section of the American Bar Association up here and put them on the line and ask them, I think they'd pretty well think our job has been fairly well done.
Mr. SEIBERLING. And, as your testimony indicates, the tool that you have been given is the Celler-Kefauver Act, without which you wouldn't have been able to do the job.
Mr. Dixon. We would have just been on dead center if all you'd have to do was buy the assets of the company to avoid being sued. They were trying to plug that loophole for 15 years. And then they did it in 1950 after a lot of hearings, and the great question in the merger field now is, what in the world can we do about conglomerate mergers, true conglomerate mergers. A steel producer buys a ribbon company-now, that is as far removed as you could get activities—but if the largest steel producer had the cash flow and bought the largest ribbon manufacturers, what are you going to do about that?
Mr. SEIBERLING. Well, having read some opinions that have been issued over the years, I would say that you would probably say, “Well, if they make steel ribbons, that's a horizontal merger, and therefore it's illegal."
Mr. Dixon. If we would find in the investigation that they had a survey made as to going into that area because they wanted to make a ribbon and put a little strength in it, putting a little steel in it; and they were thinking about going into it themselves, but took a shortcut and went over and bought that ribbon guy instead, we would call that a product extension merger that eliminated potential competition.
That's old stuff; we already developed that. I'm talking about one where you just couldn't dream up that kind of thing.
I had the question put to me one time, sir, I had it put to me real strong by a major biscuit company-I don't know, maybe $1 billion in sales proposed to merge with one of the major detergents. And I said, “You've reached my breaking point, though I'm only one Commissioner. If you do it, I'm going to recommend that we challenge you, , and you can get the best lawyers you can hire and say we are crazy because we can't prove a violation, but we'll try." I knew Mr. Celler real well, and I knew Mr. Kefauver, I worked with him; and I used to tell them it would have been much better if they put explicit prohibitions on large conglomerate mergers in a statute instead of talking about them.
Mr. SEIBERLING. Well, I thought the Kennecott-Peabody case came about as close to a conglomerate situation in reality as I've seen.
Mr. Dixox. You read that? Mr. SEIBERLING. It was just unlucky that they also happened to have a little coal mine, or you fellows
Mr. Dixon. They might have been home free without that, you see. But the point is, as we issued that complaint, I wouldn't have voted for that complaint unless we had those facts. That wasn't the one; the case where I thought we were going to get the law clarified was the ITT case, but it was settled.
Mr. SEIBERLING. I think this committee had some familiarity with that.
Mr. Dixon. Well, I think both enforcement agencies would like to know what the outer parameter of section 7 is. The only way we'll ever know is to bring sometime perhaps a foolish case, just on size, or something, and have the court tell us we've got to go back and read the statute, or something. But until this is done—and I think we have been progressing in an orderly way, challenging different types of mergers so that we now have a body of law, so that the practitioner that reads his case book can give his client a pretty danged good understanding. Maybe that's the reason some of our success is standing out, and so we don't see horizontal mergers very often any more.
Mr. SEIBERLING. Well, I think that's true, and as a practicing lawyer in the past, that made a big difference.
Mr. Dixon. No matter how horizontal they are, there is a "failing company" doctrine in here, and you can run right nose-to-nose with it.
Mr. SEIBERLING. I agree, that's one of the really tough areas.
Mr. Dixon. We always like to come and give as much help as we can.
[Whereupon, at 12:25 p.m., the subcommittee adjourned, subject to the call of the Chair.]
MERGER OVERSIGHT AND H.R. 13131
THURSDAY, MAY 6, 1976
HOUSE OF REPRESENTATIVES,
Washington, D.C. The subcommittee met, pursuant to notice, at 9:46 a.m. in room 2141, Rayburn House Office Building, Hon. Walter Flowers presiding.
Present: Representatives Flowers, Seiberling, Mazzoli, Hughes, and
Also present: Earl C. Dudley, Jr., general counsel; Thomas S.
Mr. FLOWERS. We will call the subcommittee meeting to order. This morning we open hearings on H.R. 13131. The bill would establish premerger notification and stay agreements for large mergers, thereby strengthening enforcement of the antimerger law. The problem this bill seeks to cure is not a new one. The Congress has been considering bills very much like this one for 20 years and in fact the House passed a bill similar to this one in 1957 by å unanimous vote. President Eisenhower urged the bill's passage for 5 successive years as did Attorney General Herbert Brownell. Former Chairman Celler of this committee sponsored bills like this one many times. (A copy of H.R. 13131 follows:]
(H.R. 13131, 94th Cong., 2d sess.) A BILL To amend the Act commonly called the Clayton Act to provide for premerger
notification and stay agreements Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Act entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes”, approved October 15, 1914 (38 Stat. 730; 15 U.S.C. 12), is amended by inserting immediately after section 6 a new section 7A to read as follows:
"SEC. 7A. (a) Notwithstanding any other provision of law, except as exempted pursuant to subsection (b)(4) of this section, until expiration of the notification and waiting period specified in subsection (b) (1) of this section, no person or persons shall acquire, directly or indirectly, the whole or any part of the stock or other share capital or of the assets of another person or persons, if the acquiring person or persons, or the person or persons the stock or assets of which are being acquired, or both, are engaged in commerce or in any activity affecting commerce, and
“(1) stock or assets of a manufacturing company with annual net sales or total assets of $10,000,000 or more is or are being acquired by a person or persons with total assets or annual net sales of $100,000,000 or more;
“(2) stock or assets of a nonmanufacturing company with total assets of $10,000,000 or more is or are being acquired by a person or persons with total assets or annual net sales of $100,000,000 or more; or
“(3) stock or assets of a person or persons with annual net sales or total assets of $100,000,000 or more is or are being acquired by a person or persons
with total assets or annual net sales of $10,000,000 or more. "(b) (1) The notification and waiting period required by this section shalt expire thirty days after the persons subject to subsection (a) of this section each file with the Federal Trade Commission and the Assistant Attorney General in charge of the Antitrust Division of the Department of Justice (hereafter referred to in this section as the 'Assistant Attorney General) duplicate originals of the notification specified in paragraph (3) of this subsection, or until expiration of any extension of such period pursuant to subsection (c)(2) of this section, whichever is later, except as the Federal Trade Commission and the Assistant Attorney General may otherwise authorize pursuant to subsection (c)(4) of this section.
"(2) Notwithstanding any other provision of law or the applicability of subsection (a) of this section, except as exempted pursuant to subsection (b) (4) of this section, no person or persons shall, within thirty days following the filing of a notification (specified pursuant to paragraph (3) of this subsection), or until the Federal Trade Commission and the Assistant Attorney General may otherwise authorize pursuant to subsection (c)(4) of this section, whichever occurs first, acquire, directly or indirectly, the whole or any part of the stock or other share capital or of the assets of another person or persons, if
“(A) the acquiring person or persons, or the person or persons the stock or assets of which are being acquired, or both, are engaged in commerce or in any activity affecting commerce; and
"(B) with the concurrence of the Assistant Attorney General, the Federal Trade Commission by general regulation requires, after notice and submission of views, pursuant to section 553 of title 5, United States Code, that such person or persons, or any class or category thereof, shall not do so
until the expiration of the period specified by this paragraph. “(3) The notification required by this section shall be in such form and contain such information and documentary material as the Federal Trade Commission, with the concurrence of the Assistant Attorney General, shall by general regula. tion prescribe, after notice and submission of views, pursuant to section 553 of title 5, United States Code.
“(4) (A) The Federal Trade Commission, with the concurrence of the Assistant Attorney General, is authorized and directed to define the terms used in this section, to prescribe the content and form of reports, by general regulations to except classes of persons and transactions from the notification requirements thereu der, and to promulgate rules of general or special applicabi as may be necessary or proper to the administration of this section, insofar as such action is not inconsistent with the purposes of this section, after notice and submission of views, pursuant to section 553 of title 5, United States Code.
"(B) The following classes of transactions are exempt from the notification requirements of this section
“(i) goods or realty transferred in the ordinary course of business ;
"(ii) bonds, mortgages, deeds of trust, or other obligations which are not voting securities;
"(iii) interests in a corporation at least 50 per centum of the stock of which is already owned by the acquiring person or a wholly owned subsidiary thereof;
"(iv) transfers to or from a Federal agency or a State or political subdivision thereof;
"(v) transactions exempted from collateral attack under section 7 of this Act if approved by a Federal administrative or regulatory agency: Provided, That duplicate originals of the information and documentary material filed with such agency shall be contemporaneously filled with the Federal Trade Commission and the Assistant Attorney General;
"(vi) transactions which require agency approval under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. 1828(c)), as amended, or section 3 of the Bank Holding Company Act of 1956 (12 U.S.C. 1842), as amended;
“(vii) transactions which require agency approval under section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843), as amended, section