Pursuant to Subsection (j) of Section 7A of the Clayton Act
Hart-Scott-Rodino Antitrust Improvements Act of 1976
Federal Trade Commission
Bureau of Competition
Department of Justice
Federal Trade Commission
Assistant Attorney General
Through the implementation and enforcement of the Hart-Scott-Rodino Act (the "HSR Act" or "the Act"), the premerger notification program helps protect consumers from those mergers that are anticompetitive. Prior to passage of the Act, mergers often were consummated and operations combined before the antitrust agencies learned of the transactions. It was then difficult, if not impossible, to "unscramble the eggs" and restore the benefits of a competitive market. The Act provides the antitrust agencies a meaningful opportunity to conduct an investigation and take action, if necessary, before an acquisition takes place.
There has been tremendous growth in merger activity since enactment of the statute in 1976. During fiscal year 1997, the number of premerger transactions reported increased for the sixth year in a row to a total of 3702. (See Figure 1.) This represents a 20 percent increase over the 3087 transactions reported during fiscal year 1996, and a 142 percent increase over the 1529 filings recorded in fiscal year 1991.(1)
The HSR Act, together with Section 13(b) of the FTC Act and Section 15 of the Clayton Act, gives the Commission and the Antitrust Division the opportunity to obtain effective preliminary relief against anticompetitive mergers and to prevent interim harm to competition and consumers. The premerger program was instrumental in facilitating numerous enforcement actions in fiscal 1997 to protect consumers and businesses against anticompetitive mergers. The Commission challenged 28 transactions, leading to 17 consent orders, two administrative complaints, seven abandoned transactions and two preliminary injunction proceedings authorized, including the Commission's successful litigation in Staples/Office Depot.(2) The Antitrust Division challenged 31 transactions, leading to 13 consent decrees, one case that was litigated and decided in favor of the defendants, and an additional 17 transactions that were restructured or abandoned after the Antitrust Division informed the parties that it intended to sue.(3)
Swift and efficient review of proposed mergers is possible only if the parties comply with the Act's requirements and provide complete information. When parties fail to file the notification, or file a materially deficient notification form, the HSR Act provides that the courts may impose civil penalties. During fiscal year 1997, Commission investigations resulted in $5.752 million in civil penalties collected pursuant to consent decrees in actions alleging violations of the HSR Act. This includes payment for failure to file by two firms (Mahle GmbH, a German automotive parts manufacturer, and Metal Leve, S.A., a competing Brazilian automotive parts manufacturer) of $5.602 million, the highest amount ever obtained under the Act in connection with a single transaction.
In addition to the Commission's and the Antitrust Division's reviewing a record level of filings in FY97, the Commission's Premerger Notification Office responded to an estimated 44,000 telephone calls seeking information concerning reportability of transactions under the HSR Act and the details involved in completing and filing premerger forms. To improve the notification process, the Commission added a premerger section to its website in 1997 to make the existing guidance on HSR filing requirements more readily available.
Section 201 of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, Pub. L. No. 94-435, amended the Clayton Act by adding a new Section 7A, 15 U.S.C. § 18a ("the Act"). Subsection (j) of Section 7A provides:
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 the need for any rules promulgated pursuant thereto, and any recommendations for revisions of this section.
This is the twentieth annual report to Congress pursuant to this provision. It covers October 1996 to September 1997.
In general, the Act requires that certain proposed acquisitions of stock or assets must be reported to the Federal Trade Commission and the Antitrust Division of 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 and ten or fifteen days in the case of a bankruptcy sale(4)), before they may complete the transaction. Whether a 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 likely 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 necessary to conduct this antitrust review. Much of the information needed for a preliminary antitrust evaluation is included in the notification filed with the agencies by the parties to proposed transactions 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) of the Clayton Act to request additional information or documentary materials from either or both of the parties to a reported transaction (a "second request"). A second request extends the waiting period for a specified period, usually twenty days (ten days in the case of a cash tender offer), after all parties have complied with the request (or, in the case of a tender offer, after the acquiring person complies). This additional time provides the reviewing agency with the opportunity to analyze the information and to take appropriate action before the transaction is consummated. If the reviewing agency believes that a proposed transaction may violate the antitrust laws, it 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.(5) At that time, a comprehensive Statement of Basis and Purpose was also published containing a 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.(6) Additional amendments were published in the Federal Register on March 6, 1987,(7) May 29, 1987,(8) and March 28, 1996.(9)
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 A shows, for a ten-year period, the number of transactions reported,(10) the number of filings received, the number of merger investigations in which second requests 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 fiscal years 1988 through 1997 the number of transactions in which second requests could have been issued. (This information also appears in Appendix C and is explained in footnote 1 of that appendix.) Appendix B provides a month-by-month comparison of the number of transactions reported (Table 1) and the number of filings received (Table 2) for fiscal years 1988 through 1997. Appendix C shows, for fiscal years 1988 through 1997, 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. Appendix C may provide 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.(11)
The statistics set out in these appendices show that the number of transactions reported in 1997 increased approximately 19.9 percent from the number of transactions reported in 1996 (3702 transactions were reported in 1997, while 3087 were reported in 1996). See Figure 1, supra. The statistics in Appendix A also show that the number of merger investigations in which second requests were issued in 1997 increased approximately 23.0 percent from the number of merger investigations in which second requests were issued in 1996 (second requests were issued in 122 merger investigations in 1997, while second requests were issued in 99 merger investigations in 1996). These numbers indicate virtually no increase in the number of second requests issued as a percentage of reported transactions from 1996 to 1997 (from 3.2 percent in 1996 to 3.3 percent in 1997 based on Appendix A, and 3.5 percent in both 1996 and 1997 based on Appendix C).
The statistics in Appendix A also show that in recent years, early termination was requested for most transactions. In 1997, early termination was requested in 90.8 percent (3363) of the transactions reported while in 1996 it was requested in 92.7 percent (2861) of the transactions reported. The number of requests granted increased in 1997 compared to 1996 (from 2044 in 1996 to 2513 in 1997). The percentage of requests granted out of the total requested also increased (from 71.4 percent in 1996 to 74.7 percent in 1997).
Statistical tables (Tables I - XI) in Exhibit A contain information about the agencies' enforcement interest in transactions reported in fiscal year 1997. The tables provide, for various statistical breakdowns, 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 tables in Exhibit A show that, in 1997, clearance was granted to one or the other of the agencies for the purpose of conducting an initial investigation in 15 percent of the total number of transactions in which a second request could have been issued. The tables also indicate, for example, that 50 percent of all clearances granted involved transactions valued at $100 million or less.
Tables I - XI also provide the number of transactions based on the dollar value of transactions reported and the reporting threshold indicated in the notification report. The total dollar value of reported transactions has risen 250 percent during the last five fiscal years from less than $200 billion to over $700 billion. (See Figure 2 below.)
Tables X-XI provide the number of transactions based on the industry group 2-digit SIC code in which the acquiring person or the acquired entity derived revenue. Figures 3 and 4 provide a comparison of reportable transactions among industry groups for selective years based on the acquired entity's operations.
DEVELOPMENTS IN FISCAL YEAR 1997
RELATING TO COMPLIANCE WITH THE PREMERGER NOTIFICATION RULES AND PROCEDURES
The Commission and the Department of Justice continue to monitor compliance with the premerger notification program's filing requirements and initiated a number of investigations of compliance in fiscal year 1997. The agencies monitor compliance through a variety of methods, including the review of 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 information about transactions and possible violations of the filing requirements.
Under Section 7A(g)(1) of the Act, any person that fails to comply with the Act's notification and waiting period requirements is liable for a civil penalty of up to $11,000 for each day the violation continues.(12) As a result of the agencies' efforts to assure compliance, two cases alleging a violation of the Act were filed by the Department of Justice at the Commission's request in fiscal year 1997.
In United States v. Figgie International Inc., and Harry E. Figgie, Jr.,(13) the complaint alleged that Harry E. Figgie ("Figgie") violated the Act when he acquired voting securities of Figgie International Inc. ("FII") on August 3, 1992. At the time of the transaction, Figgie was Chairman and Chief Executive Officer of FII, and its single largest shareholder. As a result of the acquisition, Figgie's holdings in FII exceeded the 15 percent filing threshold. According to the complaint, based on his prior experience with the reporting requirements, Figgie knew or should have known that the purchase was subject to the Act. Under the terms of the final judgment, Figgie and FII agreed to pay civil penalties totalling $150,000 to settle the charges.
In Mahle Gmbh, Mahle, Inc., Mabeg, E.V., Metal Leve, S.A. and Metal Leve, Inc.,(14) the complaint alleged that the parties violated the Act when Mahle acquired more than 50 percent of the voting securities of Metal Leve. Prior to the transaction, both parties manufactured and sold heavy duty pistons to diesel engine producers. Although Mahle and Metal Leve were aware of the need to make preacquisition HSR filings, they regarded antitrust concerns as a major obstacle to completing the acquisition.(15) The complaint alleged that the parties evaluated their reporting obligation as a choice between the costs of compliance and the potential risks of noncompliance with the Act. To settle the charges, the parties agreed to pay civil penalties totalling $5.6 million, the largest total penalty ever collected for an HSR violation.
MERGER ENFORCEMENT ACTIVITY
DURING FISCAL YEAR 1997(16)
Department of Justice
The Antitrust Division challenged 31 merger transactions that it concluded could lessen competition if allowed to proceed as proposed during fiscal year 1997. In 14 of these instances the Antitrust Division filed a complaint in U.S. District Court.(17) Thirteen of these cases have been settled by consent decree and one was litigated and decided in favor of the defendants.
In the other 17 challenges during fiscal year 1997, 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.(18) In eight instances, the parties restructured the proposed transactions, and, in nine instances the parties abandoned the proposed transactions.
In United States and the State of New York v. American Radio Systems Corporation, The Lincoln Group L.P. and Great Lakes Wireless Talking Machine LLC, the Division challenged the proposed acquisition of three Rochester, New York, radio stations by American Radio Systems (ARS) from The Lincoln Group L.P. and a joint sales agreement between ARS and Great Lakes Wireless Talking Machine LLC under § 7 of the Clayton Act and § 1 of the Sherman Act, as threatening to raise radio advertising time prices. A proposed consent decree was filed simultaneously settling the suit. The decree allowed ARS to acquire two Rochester radio stations from The Lincoln Group provided it divested the WHAM-AM, WVOR-FM and WCMF-AM stations. The consent decree also required dissolution of the joint sales agreement, under which ARS had the sole right to sell all the advertising time of another station. This was the Department's first challenge ever to a radio joint sales agreement (JSA). The decree was entered by the court on January 31, 1997.
In United States v. US West, Inc. and Continental Cablevision, Inc., the Division challenged the $11.8 billion merger between US West and Continental Cablevision, the third largest cable system operator in the United States, and simultaneously filed a proposed consent decree requiring Continental Cablevision to divest its interest in Teleport Communications Group, Inc., in order for the deal to go forward. The complaint alleged that the acquisition would have lessened competition in certain markets for dedicated telephone services, which include special access services--dedicated lines linking high-volume business users with their chosen long distance carriers--and local private line services--dedicated lines connecting multiple locations of an end-user within a given metropolitan area. The affected cities were Denver, Colorado, Phoenix, Arizona, Seattle, Washington, and Omaha, Nebraska, where US West was the dominant provider of dedicated services and Teleport was one of only a small number of firms challenging US West's dominance. The consent decree was entered by the court on February 28, 1997.
In United States v. Westinghouse Electric Corporation and Infinity Broadcasting Corporation, the Division challenged the approximately $4.9 billion acquisition of Infinity Broadcasting Corporation by Westinghouse Electric Corporation, a subsidiary of CBS, Inc. The complaint alleged that the acquisition would have lessened competition substantially for radio advertising time in the Philadelphia, Pennsylvania, and Boston, Massachusetts, markets. Westinghouse's acquisition of the Infinity stations in Philadelphia and Boston would have given it over 40 percent of the radio advertising revenues in each city, and would have eliminated competition between them for radio advertisers trying to reach particular demographic groups. A proposed consent decree was filed simultaneously, settling the suit. The decree required the divestiture of two radio stations -- WMMR-FM in Philadelphia, and WBOS-FM in Boston. The decree was entered by the court on March 10, 1997.
In United States and State of Colorado v. Vail Resorts, Inc., Ralston Resorts, Inc. and Ralston Foods, Inc., the Division challenged Vail Resort's $310 million acquisition of Ralston Resorts and simultaneously filed a proposed consent decree requiring that Ralston's Arapahoe Basin Ski Resort be sold to a third party in order for the deal to go forward. The complaint alleged that the merger, without the proposed divestiture, would have lessened competition substantially in the Front Range skier market, likely resulting in higher prices to skiers who live in Colorado's Front Range and ski at the resorts on day and overnight trips. The Front Range is the area east of the Rocky Mountains including the Colorado cities of Denver, Fort Collins, Boulder and Colorado Springs. Vail Resorts owned the Vail, Beaver Creek and Arrowhead Mountain ski resorts, and during the 1995-96 ski season, had revenues of more than $140 million. Ralston Resorts owned the Breckenridge, Keystone and Arapahoe Basin ski resorts. Revenues for the 1995-96 ski season for all Ralston Resorts totaled more than $135 million. Combining both resorts without any divestiture would have resulted in the merged firm having more that 38% of the Front Range market. The decree was entered by the court on July 25, 1997.
In United States v. Signature Flight Support Corporation, the Division challenged Signature Flight Support's acquisition of International Aviation Palm Beach Inc., alleging that the transaction, as proposed, would have reduced competition in the market for the provision of fixed base operation services at Palm Beach International Airport. Fixed base operations are facilities located at airports that provide flight support services such as fueling and ramp and hanger space rental to charter, private and corporate aircraft operators. The complaint alleged that the acquisition, as originally structured, would likely have led to higher prices by creating a duopoly in the sale of jet fuel to aviation customers using the Palm Beach Airport. In 1996, aircraft operators purchased around $1 billion of jet fuel from fixed base operations nationwide. A proposed consent decree was filed simultaneously, settling the suit. The decree required Signature to divest certain assets and leaseholds of its fixed base operations business at Palm Beach International Airport. The decree was entered by the court on May 22, 1997.
In United States v. American Radio Systems Corporation and EZ Communications, Inc., the Division challenged the $655 million acquisition by American Radio Systems ("ARS") of EZ Communications. The complaint alleged that the acquisition would lessen competition substantially in the Sacramento, California, radio advertising market and would give ARS control over six of the 12 class B FM radio signals operating in the Sacramento, California, area (the strongest and most competitively significant radio broadcasting signals in that area). The merger would have given ARS 36% of Sacramento's radio advertising revenues. A proposed consent decree was filed simultaneously, settling the suit. The decree required ARS to divest KSSJ-FM, a new age contemporary station in the process of being upgraded to class B status. The consent decree was entered by the court on July 25, 1997.
In a related case, United States v. EZ Communications, Inc. and Evergreen Media Corporation, the Division challenged EZ's acquisition of six radio stations in Charlotte, North Carolina, from Evergreen Media Corporation on the ground that the acquisition would lessen competition substantially in the Charlotte, North Carolina, radio advertising market. This was one of a series of transactions involving ARS and EZ that, without restructuring, would have resulted in ARS having 55% of Charlotte's radio advertising revenues. A proposed consent decree was filed simultaneously, settling the suit. The proposed decree required divestiture of the largest rock station in Charlotte, WRFX-FM. (Following consummation of the merger between ARS and EZ, ARS, as EZ's successor, would become a party to the EZ/Evergreen action, and would be required to fulfill EZ's divestiture obligation.) The consent decree was entered by the court on June 17, 1997.
In United States and Commonwealth of Pennsylvania, State of New York, and State of Ohio, v. Cargill, Inc., Akzo Nobel, N.V., Akzo Nobel, Inc., and Akzo Nobel Salt, Inc., the Division challenged the $160 million merger between two of the nation's largest salt producers. Cargill, Inc., intended to purchase the United States salt subsidiary of Akzo Nobel N.V., Akzo Nobel Salt Inc. The complaint alleged that the merger, as originally structured, would have lessened competition substantially in the bulk deicing salt market in the northeast interior of the country and in the food-grade evaporated salt market east of the Rocky Mountains. Deicing salt is medium or coarse grade rock salt bought in bulk by state and municipal governments for use in melting snow and ice on public roads. Cargill and Akzo were two of only four producers of bulk deicing salt in the $100 million northeast interior market--an area which includes Rochester, Syracuse and Buffalo, New York; Erie, Pennsylvania; and Burlington, Vermont. Food grade evaporated salt is a highly refined, extremely pure salt meeting Food and Drug Administration standards for human consumption that is added during food processing as a preservative and flavor-enhancing ingredient for a variety of baked, frozen and canned foods. Cargill and Akzo were the second and third leading producers of food grade evaporated salt in the $200 million market east of the Rocky Mountains. A proposed consent decree was filed simultaneously, settling the suit. The decree required Cargill to sell to American Salt Company, a prospective new entrant, a stockpile of bulk deicing salt in Retsof, New York, a four-year salt supply contract from the Cargill and Akzo mines, and numerous salt depots for storage and transshipment of salt to customers. Cargill also was required to divest Akzo's Watkins Glen, New York, plant to alleviate competitive effects in the food-grade salt market. The consent decree was entered by the court on July 22, 1997.
In United States v. Martin Marietta Materials, Inc., CSR Limited, CSR America, Inc. and American Aggregates, Inc., the Division challenged the $234.5 million acquisition of American Aggregates Corporation by Martin Marietta Materials, Inc. American Aggregates was a subsidiary of CSR America Inc., a Georgia-based company owned by CSR Limited of Australia. The complaint alleged that the acquisition, as originally structured, would have allowed Martin Marietta to become the dominant supplier of aggregate in Marion County, Indiana, and would have given it the power to increase prices. Aggregate is used to manufacture asphalt concrete and ready mix concrete, which are used to build roads and highways. The Indiana Department of Transportation, through its highway contracts, is the largest purchaser of aggregate in Marion County. A proposed consent decree was filed simultaneously, settling the suit. The decree required Martin Marietta to divest American Aggregates' Harding Street Quarry in Indianapolis. The decree was entered by the court on August 29, 1997.
In United States v. Long Island Jewish Medical Center and North Shore Health System, Inc., the Division sued to block the combination of two flagship hospitals on Long Island--North Shore Health Systems and Long Island Jewish Medical Center ("LIJMC"). The complaint alleged that North Shore's flagship hospital, North Shore Manhasset, and LIJMC were each other's principal competitor by virtue of their premier reputations, comparable full range of services and strategic location. They competed head-to-head to be the "flagship" or "anchor" hospital in the networks of hospitals that managed care plans assemble on Long Island so that the plans can offer a choice of health care options to area employers, families and individuals throughout both Nassau and Queens Counties. The Division contended that if the proposed transaction were permitted to go through, North Shore and LIJMC would cease to compete for the business of managed care plans, and managed care plans would have only a single entity to negotiate with, eliminating the bargaining that has benefitted consumers of health care services. North Shore was one of the largest health care delivery systems in the northeast, consisting of nine hospitals with more than 3,400 beds and revenues of about $1.8 billion. North Shore Manhasset is a prestigious, 729 bed teaching hospital that competed vigorously with LIJMC--a well known and highly regarded 591-bed academic hospital located only two miles away. Trial began in August 1997, and on October 23, 1997, the district court denied the government's request for a permanent injunction and entered judgment in favor of the defendants.(19)
In United States v. Raytheon Company and Texas Instruments, the Division challenged the proposed $2.9 billion acquisition of Texas Instruments' Defense System and Electronics Unit by Raytheon Company and simultaneously filed a proposed consent decree requiring Raytheon to sell Texas Instruments' MMIC business, which produced a key component for radar systems, in order for the deal to go forward. The complaint alleged that Raytheon and Texas Instruments competed aggressively to develop leading edge high power amplifier monolithic microwave integrated chips ("MMICs"), and that their research and development efforts had positioned them as the only firms able to supply competitive MMICs for future Defense Department radar programs. MMICs extend the power and range of radars, enabling them to scan airspace quickly and efficiently, with a lower probability of detection by enemies. The acquisition, as originally structured, would have resulted in higher prices paid by the Department of Defense--and ultimately by the taxpayers--for advanced military radars used in major weapon systems. The required divestiture, the largest since the post cold-war effort to consolidate the defense industry began, ensured that there will be a viable competitor to Raytheon in position to provide the MMICs necessary for the next generation of Defense Department radar systems. The decree was entered by the court on November 5, 1997.
In United States and State of Texas v. Allied Waste Industries, Inc., the Division challenged a proposed Texas landfill acquisition involving two of the largest waste hauling and disposal companies in North America--Allied Waste of Phoenix, Arizona, and USA Waste Services, Inc., of Houston, Texas. The complaint alleged that the acquisition would have lessened competition substantially in the Tarrant County area of Texas (where Fort Worth is located) by concentrating the landfill capacity in that area into the hands of only three companies, resulting in higher prices for waste disposal and hauling. A proposed consent decree was filed simultaneously, settling the suit. The decree requires the divestiture of more than 1.4 million cubic yards of landfill space over a 5-10 year period at the two landfills Allied will own after the acquisition in the Tarrant County area. Additional divestiture of landfill space would be required if Allied expands its capacity at USA Waste's Crow Landfill or develops a new landfill nearby. In addition, the decree requires the acceptance of waste at Allied's two Tarrant County area landfills from haulers not affiliated with Allied on non-price terms and conditions identical to those provided Allied. The decree was entered by the court on March 9, 1998.
In United States and Commonwealth of Pennsylvania v. USA Waste Services Inc., United Waste Systems, Inc. and Riviera Acquisition Corporation, the Division challenged the acquisition of United Waste Systems, Inc., of Greenwich, Connecticut, by USA Waste Services of Houston, Texas, two of the nation's largest waste hauling companies. The complaint alleged that the acquisition would lessen competition substantially for municipal solid waste disposal and hauling services in Allegheny County, Pennsylvania, by giving USA Waste control over about 60% of the disposal services offered to haulers of municipal solid waste generated there. This would have resulted in higher prices for municipal solid waste disposal and hauling services in that area. Municipal solid waste includes residential and commercial trash and garbage. A proposed consent decree was filed simultaneously, settling the suit. The decree requires the divestiture of a Pittsburgh-area landfill owned by a subsidiary of United Waste and was entered by the court on November 18, 1997.
In United States v. Mid-America Dairymen Inc., Southern Foods Group LP and Milk Products, LLC, the Division challenged the acquisition of Borden/Meadows Gold Dairies Holdings Inc. by Mid-America Dairymen, Inc., the largest dairy cooperative in the United States. The complaint alleged that the acquisition would have lessened competition substantialy for the sale of milk to public schools throughout eastern Texas and virtually all of Louisiana. Throughout much of Texas and Louisiana, Southern Foods Group LP, in which Mid-America has a partial ownership interest, and Borden are the only two bidders for school milk contracts. A proposed consent decree was filed simultaneously which, if approved by the court, would settle the suit. The decree requires divestiture of nine plants--five in Texas, three in Louisiana and one in New Mexico. A newly-formed firm, Milk Products LLC, will be allowed to buy the divested dairies under certain conditions set out in the decree. The transaction as originally proposed would have had Mid-America finance most of the purchase price to be paid by Milk Products, but the complaint alleged that this would have left Mid-America with the ability to influence the operations of Milk Products. The decree places limits on the terms and duration of Mid-America loans to Milk Products and places strict limits on Mid-America's access to information about Milk Products. The consent decree was entered by the court on February 27, 1998.
On August 1, 1997, oral arguments were heard before the Eleventh Circuit in U.S. v. Engelhard Corporation, et al.,(20) and on October 23, 1997, the court affirmed the district court's denial of a permanent injunction.(21)
During fiscal year 1997, the Division investigated 10 bank merger transactions for which divestiture was required prior to or concurrently with the acquisition. A "not significantly adverse" letter conditioned upon a letter agreement between the parties and the Division was sent to the appropriate bank regulatory agency in all instances.(22)
Federal Trade Commission
The Commission challenged 28 transactions that it concluded would lessen competition if allowed to proceed as proposed during fiscal year 1997, leading to 17 consent orders, two administrative complaints and seven abandoned transactions. In two of the 28 matters, the Commission authorized its staff to seek injunctive relief. In both of these cases, the parties abandoned the transactions, one prior to a court decision.(23)
In Staples, Inc., and Office Depot, Inc.,(24) the Commission filed for a preliminary injunction in April 1997 alleging that the acquisition by Staples of Office Depot would lessen competition substantially in the retail sale of office supplies through office supply superstores in 17 areas of the United States.(25) The parties were the only two "consumable" office supply superstore vendors in 15 of the relevant geographic markets and were dominant in the remaining two markets. The court granted the Commission's motion blocking the proposed acquisition on June 30, 1997. Subsequently, the parties abandoned the transaction.
The Commission also issued two administrative complaints in fiscal year 1997. In Automatic Data Processing, Inc.,(26) the Commission charged that the 1995 acquisition by Automatic Data Processing, Inc. ("ADP"), of certain assets of AutoInfo Inc. would lessen competition substantially in five product markets: (1) automotive used parts and assemblies interchange; (2) computerized automotive salvage yard management systems that use an interchange; (3) electronic communication systems using an interchange to buy and sell used automotive parts and assemblies; (4) the integrated network consisting of an interchange, yard management systems and communication systems; and (5) the collection and provision of salvage yard inventory data to customers that provide such data as part of estimating products sold to insurance companies. According to the complaint, automobile salvage yards used the ADP and former-AutoInfo products in connection with buying and selling used parts and parts-assemblies for automobiles.(27) The complaint alleged that the transaction was part of a plan by ADP to acquire the leading information service providers to the salvage industry and thereby acquire market power. The plan included both the 1992 acquisition of Hollander, Inc., the largest provider of salvage yard information services, and the 1995 acquisition of AutoInfo, the second largest provider of such services. According to the complaint, as a result of the acquisitions, ADP dominated the market for auto salvage yard information management systems.(28) The order required ADP to divest the former-AutoInfo yard management and communications systems, interchange, and parts locator (a computerized on-line telephone service offered to the auto casualty insurance industry), and to grant a non-exclusive, paid-up license to all ADP research and development for any new yard management or communication systems. In addition, ADP was required to divest its contractual rights as the data collector for the Automotive Recyclers Association International Database. Further, the order required ADP to grant a paid-up, perpetual, non-exclusive license to the Hollander interchange with updates from ADP for at least a three-year period.(29)
In Butterworth Hospital/Blodgett Memorial Medical Center,(30) the complaint alleged that Butterworth's proposed acquisition of Blodgett Hospital would lessen competition substantially in the provision of acute care inpatient hospital services in the Grand Rapids, Michigan, area. The complaint followed a Commission action to seek a preliminary injunction to block the transaction in January 1996. On September 26, 1996, the district court denied the request for a preliminary injunction, finding that, although the Commission had demonstrated that the merged entity would have substantial market power and established its prima facie case that the transaction would violate Section 7 of the Clayton Act, the parties were unlikely to exercise market power to the detriment of all consumers. As a condition to the merger, the court ruled that the hospitals must sign a proposed consent decree containing certain terms. In November 1996, the Commission announced that it would appeal the district court decision and pursue administrative litigation. The Sixth Circuit affirmed the decision of the district court on July 8, 1997. On September 25, 1997, the Commission dismissed its administrative complaint after concluding that further litigation was not in the public interest.(31)
The Commission also accepted consent agreements for public comment in 17 other merger cases in fiscal year 1997. A complaint and decision and order were issued in 15 of those matters during the fiscal year, and consent agreements in two of these cases became final after September 30, 1997.
In Softsearch Holdings, Inc., and Geoquest International Holdings, Inc.,(32) the complaint alleged that the proposed acquisition by Dwight's Energydata, Inc. ("Dwight's"), a subsidiary of Softsearch, of Petroleum Information Corporation ("PI"), a subsidiary of GeoQuest, would lessen competition substantially in the sale or licensing of oil- and gas-related well and production data in the United States. According to the complaint, Dwight's and PI are the only firms that have extensive, multi-state collections of historical information on oil and gas properties. Customers use this data to evaluate potential production and reserves of geological formations, and to find patterns of oil and gas production for future exploration and development. Under the order, the parties were required to license the Dwight's database to a Commission-approved purchaser.(33)
In J.C. Penney Company, Inc., and Thrift Drug, Inc.,(34) the complaint alleged that the proposed acquisitions by Thrift Drug, a subsidiary of J.C. Penney, of Eckerd Corporation and certain assets of Rite Aid Corporation would lessen competition substantially in the retail sale of pharmacy services to third-party payors in North Carolina and a portion of South Carolina. Thrift Drug operates one of the largest drug store chains in the United States with approximately 1000 locations in 17 northeastern states. According to the complaint, as a result of the transactions, Thrift would hold a dominant position in the state of North Carolina, including its three major metropolitan areas of Charlotte-Gastonia-Rock Hill, Greensboro-Winston Salem-High Point and Raleigh-Durham-Chapel Hill, as well as in the Charleston-North Charleston, South Carolina, metropolitan statistical area. Under the order, J.C. Penney was required to divest a total of 34 Thrift Drug retail drug stores in Raleigh-Durham and Charlotte, North Carolina, 110 Rite Aid drug stores in the state of North Carolina and 17 Rite Aid drug stores in Charleston, South Carolina.(35)
In The Boeing Company,(36) the complaint alleged that Boeing's proposed acquisition of the aerospace and defense business of Rockwell International Corporation ("Rockwell") would lessen competition substantially in the research, development, manufacture and sale of (1) high altitude endurance unmanned air vehicles ("HAE UAVs"); (2) space launch vehicles; and (3) space launch vehicle propulsion systems in the United States. Boeing and Rockwell were members of the two teams competing in the design and development of HAE UAVs.(37) Boeing was responsible for providing the wings, launch station and avionics for its team. As a subcontractor for a team headed by Teledyne Ryan, Rockwell was responsible for providing the aircraft's wings. According to the complaint, the proposed acquisition would position Boeing as a member of both competing HAE UAV teams. Boeing also was a significant competitor in the manufacture of space launch vehicles, and was expected to bid for the upcoming Department of Defense ("DoD") Evolved Expendable Launch Vehicle ("EELV") program, along with McDonnell Douglas and others.(38) Both Boeing and McDonnell Douglas were planning to use Rockwell's space launch vehicle propulsion system as part of their respective EELV proposals.
The complaint alleged that the proposed transaction would have vertically integrated Boeing as both an EELV bidder and a launch vehicle propulsion systems provider. Boeing and McDonnell Douglas had provided a wide range of competitively sensitive proprietary information to Rockwell in connection with the integration of its system into their EELVs. According to the complaint, if the Boeing and McDonnell Douglas teams were the two finalists selected by DoD, Boeing could gain access to the proprietary information provided by McDonnell Douglas to Rockwell. In addition, the complaint alleged that the proposed acquisition would give Boeing, as supplier of space launch propulsion systems to its commercial space launch vehicle rivals, access to certain proprietary information of those competitors. The order, which was supported by DoD, required Boeing to deliver to Teledyne Ryan all of the assets needed to produce wings for its HAE UAV. The order also prohibited Boeing's division that provides space launch vehicle propulsion systems from sharing any competitor's proprietary information with its space launch vehicle division.
In Baxter International Inc.,(39) the complaint alleged that Baxter's proposed acquisition of Immuno International AG would lessen competition substantially in the research, development, manufacture and sale of Factor VIII inhibitor treatments and fibrin sealants. Baxter's "Autoplex" and Immuno's "FEIBA" were the only FDA-approved activated prothrombin complex concentrates for the treatment of patients with hemophilia A who have developed an immune system response, known as "inhibitors," to their therapy. In addition, Baxter and Immuno were two of only a few companies developing fibrin sealants for sale in the United States.(40) The order required Baxter to divest its Autoplex product, and to license Immuno's fibrin sealant product in development to a Commission-approved licensee.(41)
In General Mills, Inc.,(42) the complaint alleged that General Mills' proposed acquisition of certain assets of Ralcorp Holdings, Inc., would lessen competition substantially in the sale of branded and private label ready-to-eat ("RTE") cereals in the United States. According to the complaint, General Mills, which produced Cheerios, Total and Wheaties, and Ralcorp, which produced Corn CHEX, Rice CHEX and Wheat CHEX, were the second and fifth largest producers of RTE cereals, respectively. Ralcorp also was the largest producer of private label RTE cereals. Although Ralcorp would retain the right to manufacture and sell private label CHEX products under the purchase agreement, it was restricted from transferring this right to a third party without the permission of General Mills. The order required the parties to include provisions in their purchase agreement that would permit the transfer of the right to manufacture and sell private label CHEX products in the United States to any third party. The order also prohibited General Mills from taking any action to prevent or delay the sale of private label CHEX products or enforcing any agreement to prevent the transfer to a successor party.
In Ciba-Geigy Limited, Ciba-Geigy Corporation, Chiron Corporation, Sandoz Ltd., Sandoz Corporation and Novartis AG,(43) the complaint alleged that the proposed merger of Ciba-Geigy Limited ("Ciba") and Sandoz Ltd. into a new entity, Novartis, would lessen competition substantially in (1) gene therapy research and development; (2) corn herbicides; and (3) flea control products.(44) According to the complaint, Ciba, through its 46.5 percent interest in Chiron Corporation, and Sandoz were the two leading commercial developers of gene therapy technologies, including herpes simplex virus-thymidine kinase ("HSV-tk") gene therapies for the treatment of cancer and graft versus host disease, and gene therapy for the treatment of hemophilia, as well as chemoresistance gene therapy. Ciba and Sandoz also were leading manufacturers of corn herbicide, with market shares of 35 percent and 10 percent, respectively. In addition, Ciba and Sandoz ranked first and second, respectively, in the United States market for flea control products. Under the order, Chiron and Sandoz were required to grant to other gene therapy researchers non-exclusive licenses to certain gene therapy technologies.(45) The order also required the non-exclusive licensing of the parties' worldwide HSV-tk patent rights to Rhone-Poulenc Rorer ("RPR"). In addition, the order required Sandoz to either convert from exclusive to non-exclusive its license for the use in gene therapy of the partial Factor VIII gene, or grant to RPR a sublicense to those gene therapy Factor VIII rights. The order prohibited Ciba, Chiron, Sandoz and Novartis from acquiring exclusive rights in intellectual property and technology relating to the use of the MDR-1 and/or MRP chemoresistance genes in gene therapy. Finally, the parties also were required to divest Sandoz' corn herbicide business, valued at approximately $780 million, to BASF AG, and Sandoz' animal health business to Central Garden and Pet Company.(46)
In Phillips Petroleum Company,(47) the complaint alleged that Phillips' proposed acquisition of certain assets of ANR Pipeline Company ("ANR") would lessen competition substantially in the provision of natural gas gathering services in the five Oklahoma counties of Beaver, Ellis, Harper, Woods and Woodward. For certain gas and oil producers in these areas, Phillips and ANR were the only, or two of very few, choices available to provide these services. The order required Phillips to divest seven parts of a pipeline system, consisting of approximately 160 miles of pipeline in the Anadarko Basin area.(48)
In Tenet Healthcare Corporation,(49) the complaint alleged that the proposed acquisition by Tenet of OrNda Healthcorp would lessen competition substantially in the provision of acute care inpatient hospital services in San Luis Obispo County, California. According to the complaint, Tenet owned two of the five acute care hospitals in the relevant market, including Sierra Vista, the largest acute care hospital in the county. OrNda owned the second largest hospital in the area, French Hospital. The complaint alleged that Sierra Vista and French each provided a broader range of inpatient hospital services than any of the other area hospitals, and were each other's principal competitor. The order required the divestiture of French Hospital Medical Center, as well as OrNda's one-third interest in Monarch Health Systems, an integrated health delivery system.(50)
In American Home Products Corporation,(51) the complaint alleged that the proposed acquisition by American Home Products ("AHP") of the animal health business of Solvay S.A. would lessen competition substantially in the research, development, manufacture and sale of canine lyme, canine corona virus and feline leukemia vaccines in the United States.(52) According to the complaint, AHP and Solvay were two of only three suppliers of canine lyme and feline leukemia vaccines, and two of only a small number of suppliers of canine corona virus vaccines. The order required the divestiture of certain assets related to Solvay's production of these vaccines to Schering-Plough, Ltd. In addition, AHP was required to assist Schering-Plough in obtaining United States Department of Agriculture certification.
In Cooperative Computing, Inc.,(53) the complaint alleged that the acquisition by Cooperative Computing, Inc. ("CCI"), of Triad Systems Corporation ("Triad") would lessen competition substantially in the United States or North American market for the provision of computer management information systems ("MIS") integrated with an electronic automotive parts catalog ("electronic catalog").(54) According to the complaint, CCI and Triad were the dominant providers of MIS integrated with an electronic catalog for automotive parts distributors, together controlling approximately 70 percent of the market. The order required CCI to divest its electronic parts catalog, through a perpetual, royalty-free, transferable, assignable and exclusive license, the CCI "PartFinder" electronic catalog database and "J-CON" application program interface, as well as certain support software, to MacDonald Computer Systems.
In Mahle GmbH, Mahle, Inc., Metal Leve, S.A. and Metal Leve, Inc.,(55) the complaint alleged that the proposed acquisition by Mahle, a German company, of Metal Leve, a Brazilian corporation, would lessen competition substantially in the manufacture and sale of articulated pistons in the United States and large bore two-piece pistons worldwide.(56) According to the complaint, the combined entity would have a 95 percent market share for articulated pistons used in diesel engine applications. In addition, the complaint alleged that there are only four producers of two-piece large bore pistons in the world. The order required divestiture of Metal Leve's United States piston business, as well as any technology outside the United States that supported that business.(57)
In Autodesk, Inc., and Softdesk, Inc.,(58) the complaint alleged that Autodesk's acquisition of Softdesk would lessen competition substantially in the market for computer aided design ("CAD") engines for Windows-based personal computers in the United States or the world. CAD engines are the software platform that allows architects and engineers to draw lines, shapes and objects with their computer. According to the complaint, Autodesk commanded a dominant market share of the Windows-based CAD engines in North America, controlling nearly 70 percent of the installed base. Softdesk was developing and had tested a CAD engine, known as IntelliCADD, which would compete directly with Autodesk's product. After being advised by Commission staff that the transaction raised competitive concerns, Softdesk negotiated the sale of its rights and title to the IntelliCADD product to Boomerang Technology, a company created and owned by the developer of IntelliCADD.(59) The order prohibited either Autodesk or Softdesk from re-acquiring the IntelliCADD product or enforcing any non-compete agreements against any former employees of Softdesk whose primary responsibility was the development of the IntelliCADD product.
In Cadence Design Systems, Inc.,(60) the complaint alleged that the proposed acquisition by Cadence Design Systems ("Cadence") of Cooper and Chyan Technology, Inc. ("CCT"), would lessen competition substantially in the worldwide markets for the research, development and sale of constraint-driven, shape-based integrated circuit routing tools and integrated circuit layout environments. According to the complaint, Cadence was the dominant supplier of complete software "layout environments" for the physical design of integrated circuits, or "chips." CCT sold a software tool, called a "router," that works within a layout environment and allows users to plot the connections among the millions of components within an integrated circuit. The complaint alleged that CCT was the only firm to have developed a "constraint-driven, shape-based" router, a state-of-the-art technology. According to the complaint, a would-be supplier of routing tools would need an interface to the Cadence integrated circuit layout environment in order to market its routing product effectively to Cadence's customers. The complaint alleged that, as owner of the only commercially viable constraint-driven, shape-based integrated circuit router, Cadence would be less likely to permit potential suppliers of competing routing tools to obtain access to its layout environments. The order required Cadence to allow independent commercial router developers to build interfaces between their design tools and the Cadence layout environment through Cadence's "Connections Program," under terms equal to those available to any other program participant.(61)
In CVS Corporation and Revco D.S., Inc.,(62) the complaint alleged that the proposed acquisition by CVS of Revco would lessen competition substantially in the retail sale of pharmacy services to third-party payors in the Commonwealth of Virginia and in the Binghamton, New York, metropolitan statistical area. Under the order, CVS was required to divest a total of 114 Revco retail drug stores in Virginia to Eckerd Corporation (a subsidiary of J.C. Penney Company) or to a Commission-approved purchaser, and to divest certain pharmacy assets related to six Revco retail drug stores in the Binghamton, New York, area to Medicine Shoppe (a subsidiary of Cardinal Health) or to a Commission-approved buyer.
In Insilco Corporation,(63) the complaint alleged that Insilco's acquisition of certain assets of Helima-Helvetion International ("Helima") from Helmut Lingemann GmbH & Co. ("Lingemann") would lessen competition substantially in the North American markets for welded-seam aluminum tubes with diameters 50 millimeters or greater and welded-seam aluminum tubes with diameters less than 50 millimeters. Welded-seam aluminum tubes with diameters of at least 50 millimeters are used generally in charged air coolers ("CAC") installed on heavy-weight trucks, while smaller diameter tubes are installed in radiators. In both instances, the tubes act as the heat exchange components. As a result of the acquisition, Insilco was the only supplier of large welded aluminum tubes, and one of only two merchant suppliers of small welded aluminum tubes, with a market share over 90 percent. The complaint also alleged that Lingemann transferred to Insilco comprehensive competitively-sensitive information, including customer-specific price information, current and future pricing plans, competition/price strategies and price formulas, prior to consummation of the acquisition. Under the order, Insilco was required to divest two former Helima mills--one capable of producing welded-seam aluminum tubes for CAC applications, and one capable of producing radiator-type tubes. The order also prohibited Insilco, in any future transactions, from obtaining or providing competitively-sensitive information from or to others prior to closing.
In Jitney-Jungle Stores of America, Inc., Bruckmann, Rosier, Sherrill & Co., L.P., Delta Acquisition Corporation, and Delchamps, Inc.,(64) the complaint alleged that Jitney-Jungle's acquisition of Delchamps, Inc., would lessen competition substantially for the retail sale of food and grocery items in supermarkets in certain areas of Florida and Mississippi. Jitney-Jungle is one of the leading supermarket chains in the southeast, and the largest supermarket operator in Mississippi. The order requires the divestiture of five stores owned by Jitney-Jungle, and five Delchamps-owned stores in the Gulfport-Biloxi, Hattiesburg and Vicksburg areas of Mississippi, and in Pensacola, Florida, to Supervalu Holdings, Inc., or another buyer approved by the Commission.(65)
ONGOING REASSESSMENT OF THE EFFECTS
OF THE PREMERGER NOTIFICATION PROGRAM
Although a complete assessment of the impact of the premerger notification program on the business community and on antitrust enforcement is not possible in this limited report, a few observations can be made.
As indicated in past annual reports, the HSR program 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. Thus, HSR is doing what Congress intended -- giving the government the opportunity to investigate and challenge mergers that are likely to harm consumers before injury can occur. 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 consider adequately their competitive effects. The enforcement agencies were forced to pursue lengthy post-acquisition litigation, during the course of which harm from the consummated transaction continued in place (and afterwards as well, where achievement of effective post-acquisition relief was not practicable). Because the premerger notification program requires reporting before consummation, this problem has been significantly reduced.
Although highly effective, the HSR program has periodically prompted criticism from the business and legal communities that the program is overreaching, that the reporting thresholds may be too low, or that the process may cause delay. Cognizant of these concerns, the enforcement agencies continue to seek ways to speed up the review process and reduce burdens for companies. Following on the adoption of five new exemptions in 1996 that eliminated approximately ten percent of filings, the agencies are examining additional means to exempt from the filing requirements transactions that are not likely to be problematic. The agencies will continue ongoing review of the HSR program in order to make it as minimally burdensome as possible without compromising the prompt and effective relief intended to result from the HSR program.
The Assistant Attorney General in charge of the Antitrust Division concurs with this annual report.
List of Appendices
Appendix A Summary of Transactions, Fiscal Years 1988-1997 Appendix B Number of Transactions Reported and Filings Received by Month for Fiscal Years 1988-1997. Appendix C Transactions in Which Additional Information Was Requested for Fiscal Years 1988-1997.
List of Exhibits
Exhibit A - Statistical Tables for Fiscal Year 1997, Presenting Data Profiling Hart-Scott-Rodino Premerger Notification Filings and Enforcement Interest. Table I - Acquisitions By Size of Transaction (by size range) Table II - Acquisitions By Size of Transaction (cumulative) Table III - Transactions Involving the Granting of Clearance by Agency Table IV - Investigations in which Second Requests Were Issued Table V - Acquisitions by Reporting Threshold Table VI - Transactions by Assets or Acquiring Persons Table VII - Transactions by Sales of Acquiring Persons Table VIII - Transactions by Assets of Acquired Entities Table IX - Transactions by Sales of Acquired Entities Table X - Industry Group of Acquiring Persons Table XI - Industry Group of Acquired Entity
Summary of Transactions;
Fiscal Years 1988-1997
|Filings Received 1/||5,172||5,530||4,272||2,914||3,030||3,559||4,403||5,410||6,001||7,199|
|Transactions in which a Second Request Could Have Been Issued 2/||2,391||2,535||1,955||1,376||1,451||1,745||2,128||2,612||2,864||3,438|
|Investigations in which Second Requests were issed||68||64||89||64||44||71||73||101||99||122|
|Number of Transactions Involving a Request for Early Termination 4/ 5/||2,440||2,582||1,975||1,321||1,403||1,689||2,081||2,471||2,861||3,363|
|Not Granted 4/||555||645||676||414||383||488||573||602||817||850|
1 Usually, two filings are received, one from the acquiring person and one from the acquired person when a transaction is reported. Only one application is received when an acquiring party files for an exemption under sections 7A(c)(6) or (c)(8) of the Clayton Act.
2 These figures are from Appendix C and are explained in footnote 1 of that Appendix.
3 These statistics are based on the date the request was issued and not the date the investigation was opened.
4 These statistics are based on the date of the H-S-R filing and not the date action was taken on the request.
5 Includes the following number of non-reportable transactions: twenty-four in 1988; fifty-four in 1989; fifty-seven in 1990; twenty-six in 1991; thirty-five in 1992; thirty-eight in 1993; forty in 1994; forty-eight in 1995; fifty-eight in 1996; and eighty in 1997.
Number of Transactions Reported
Fiscal Years 1988-1997
Filings Received by Month;
Fiscal Years 1988-1997.
Transactions in Which Additional Information Was Requested;
Investigations In Which Second Requests Were Issued 2/
1 These figures omit from the total number of transactions reported all transactions for which the agencies were not authorized to request additional information. These include (1) incomplete transactions (only one party filed a compliant notification); (2) transactions reported pursuant to the exemption provisions of sections 7A(c)(6) and 7A(c)(8) of the Act; and (3) transactions which were found to be non-reportable. In addition, where a party filed more than one notification in the same year to acquire voting securities of the same corporation, e.g., filing for the 15% threshold and later filing for the 25% threshold, only a single consolidated transaction has been counted because, as a practical matter, the agencies do not issue more than one second request in such a case. These statistics also omit from the total number of transactions reported secondary acquisitions filed pursuant to Section 801.4 of the premerger notification rules. Secondary acquisitions have been deducted in order to be consistent with the statistics presented in most of the prior annual reports.
2 Based on the date the second request was issued, not the date the investigation was opened.
3 Second request investigations as a percentage of the total number of transactions listed in this table.
1. See Appendix A.
2. See pp. 23-38 infra.
3. See pp. 12-22 infra.
4. The Bankruptcy Reform Act of 1994 amended Section 363 of the Bankruptcy Code, providing in part that the waiting period required for certain transactions involving an acquired person in bankruptcy be fifteen days. The amendment applies to entities that filed for bankruptcy on or after October 22, 1994. Bankruptcy Reform Act, Pub. L. No. 103-394 [H.R. 5116], § 109, 108 Stat. 4106 (1994).
5. 43 Fed. Reg. 33450 (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.
6. 48 Fed. Reg. 34427 (1983) (codified at 16 C.F.R. Parts 801 through 803).
7. 52 Fed. Reg. 7066 (1987) (codified at 16 C.F.R. Parts 801 through 803).
8. 52 Fed. Reg. 20058 (1987) (codified at 16 C.F.R. Parts 801 through 803).
9. 61 Fed. Reg. 13666 (1996) (codified at 16 C.F.R. Parts 801 through 803).
10. The term "transactions", as used in Appendices A, B, and C, and Exhibit A 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 numbers to track the filing parties and waiting periods. A particular merger, joint venture or deal may involve more than one transaction. Indeed, some have involved as many as four or five separate transactions.
11. See Appendix C, note 2.
12. Effective November 20, 1996, dollar amounts specified in civil monetary penalty provisions within the Commission's jurisdiction were adjusted for inflation in accordance with the Debt Collection Improvement Act of 1996, Pub. L. No. 104-134 (April 26, 1996). The adjustments included, in part, an increase from $10,000 to $11,000 for each day during which a person is in violation under Section 7A(g)(1), 15 U.S.C. 18a(g)(1). 61 Fed. Reg. 54548 (October 21, 1996), corrected at 61 Fed. Reg. 55840 (October 29, 1996).
13. United States v. Figgie International Inc., and Harry E. Figgie, Jr., Cv. No. 1:97CV00302 (D.D.C. complaint filed February 13, 1997); 1997-1 Trade Cas. (CCH) ¶ 71,766.
14. United States v. Mahle Gmbh, Mahle, Inc., Mabeg, E.V., Metal Leve, S.A. and Metal Leve, Inc., Cv. No. 97-1404 (D.D.C. complaint filed June 19, 1997); 1997-2 Trade Cas. (CCH) ¶ 71,868.
15. Indeed, the Commission examined the competitive implications of the transaction and issued a complaint. See infra.
16. The cases in this report were not necessarily reportable under the premerger notification program. Because of provisions regarding the confidentiality of the information obtained pursuant to the Act, it would be inappropriate to identify which cases were initiated under the program.
17. United States and the State of New York v. American Radio Systems Corporation, The Lincoln Group L.P. and Great Lakes Wireless Talking Machine LLC, Cv. No. 1:96CV02459 (D.D.C. filed 10/24/96); United States v. US West, Inc. and Continental Cablevision, Inc., Cv. No. 96-2529 (D.D.C. filed 11/5/96); United States v. Westinghouse Electric Corporation and Infinity Broadcasting Corporation, Cv. No. 1:96CV02363 (D.D.C. filed 11/13/96); United States and State of Colorado v. Vail Resorts, Inc., Ralston Resorts, Inc. and Ralston Foods, Inc., Cv. No. 97-B-10 (D. Col. filed 1/3/97); United States v. Signature Flight Support Corporation, Cv. No. 97-0248 (D.D.C. filed 2/5/97); United States v. American Radio Systems Corporation and EZ Communications, Inc., Cv. No. 1:97CV00405 (D.D.C. filed 2/27/97); United States v. EZ Communications, Inc. and Evergreen Media Corporation, Cv. No. 1:97CV00406 (D.D.C. filed 2/27/97); United States and Commonwealth of Pennsylvania, State of New York, and State of Ohio, v. Cargill, Inc., Akzo Nobel, N.V., Akzo Nobel, Inc., and Akzo Nobel Salt, Inc., Cv. No. 97-CV616L (W.D.N.Y. filed 4/21/97); United States v. Martin Marietta Materials, Inc., CSR Limited, CSR America, Inc. and American Aggregates, Inc., Cv. No. IP97-854C-T/G (S.D. Ind. filed 5/27/97); United States v. Long Island Jewish Medical Center and North Shore Health System, Inc., Cv. No. 97-CV-3412 (E.D.N.Y. filed 6/11/97); United States v. Raytheon Company and Texas Instruments, Cv. No. 1:97CV01515(D.D.C. filed 7/2/97); United States and State of Texas v. Allied Waste Industries, Inc., Cv. No. 497-CV564E (N.D. Tx. filed 7/14/97); United States and Commonwealth of Pennsylvania v. USA Waste Services Inc., United Waste Systems, Inc. and Riviera Acquisition Corporation, Cv. No. 97-1524,(W.D. Penn. filed 8/22/97); and United States v. Mid-America Dairymen Inc., Southern Foods Group LP and Milk Products, LLC, Cv. No. 3:97CV2162-T (N.D. Tx. filed 9/3/97).
18. In nine instances noted below, the Department of Justice issued press releases: March 6, 1997 -- acquisition of three Arkansas radio stations from Demaree Media Inc. by Gulfstar Communications, Inc.; March 18, 1997 -- First Virginia Banks Inc.'s merger with Premier Bankshares Corporation (banking service business in southwestern Virginia); March 28, 1997 -- Pike Industries' acquisition of a quarry and two asphalt plants from Frank W. Whitcomb Construction Company (New Hampshire asphalt); April 29, 1997 -- Southern National Corporation and United Carolina Bancshares merger (banking service business in North Carolina); June 2, 1997 -- Lamar Advertising Co.'s acquisition of Headrick Outdoor Inc. (billboards in Mississippi, Louisiana and Florida); July 7, 1997 -- acquisition of MCI by British Telecommunications (modification and extension of previous BT/MCI settlement); July 11, 1997 -- Jacor's acquisition of radio assets from Village Communications (Kentucky radio station); August 15, 1997 -- Outdoor System Inc.'s acquisition of Minnesota Mining and Manufacturing (3M) subsidiary, National Advertising Company (outdoor advertising); and August 22, 1997 -- Tyco International Ltd's acquisition of Keystone International Inc. (waterworks butterfly valves).
In addition to the nine instances in which it issued press releases, the Department in eight instances informed the respective parties that their proposed acquisition was likely to have anticompetitive effects: proposed consolidation among Andersen Area Medical Center, Greenville Hospital System and Spartanburg Hospital System (South Carolina hospitals); proposed acquisition of assets among Starkist Food, Inc., H.J. Heinz, Co., Bumble Bee Seafood, Unicord Public Co. and Questor Partners (tuna); United Security Bank merger with First Bank and Trust (business banking services in Grove Hill, Alabama); Northern States Power Company merger with Wisconsin Energy Company (utilities); First Bank of Grants and Grants State Bank Merger (business banking services in Cibola County and parts of McKinley County, New Mexico); Waste Management of Ohio acquisition of USA Waste Services, Inc. (waste hauling in Eastern Pennsylvania); Allied Signal Truck Brake Systems Co., subsidiary of Allied Signal, Inc. acquisition of Midland Brake, Inc., Prattville MFG. Inc. and United Brake Systems, Inc., subsidiaries of Echlin, Inc. (brakes); and GKN plc acquisition of Weasler Holdings, Inc. (driveline systems).
19. 983 F. Supp. 121 (E.D.N.Y. 1997).
20. M.D. Ga. filed June 12, 1995.
21. 126 F.3d 1302 (M.D. Ga. 1997). See 1995 Annual Report for a description of this case.
22. November 22, 1996 letter to the Board of Governors regarding the application by Community First Bankshares, Inc., Fargo, North Dakota, to acquire Mountain Parks Financial Corporation, Denver, Colorado; December 2, 1996 letter to the Board of Governors regarding the application by NationsBank Corporation, Charlotte, North Carolina, to acquire Boatmen's Bancshares, St. Louis, Missouri; December 12, 1996 letter to the Chairman of the Federal Deposit Insurance Corporation regarding the application by United Security Bank, Thomasville, Alabama, to merge with First Bank and Trust, Grove Hill, Alabama; March 18, 1997 letter to the Board of Governors regarding the application by First Virginia Banks Inc., Falls Church, Virginia, to acquire Premier Bancshares Inc., Bluefield, Virginia; May 1, 1997 letter to the Board of Governors regarding the application by Southern National Corporation, Winston-Salem, North Carolina, to acquire United Carolina Bancshares, Whiteville, North Carolina; May 20, 1997 letter to the Board of Governors regarding the application by Allied Irish Banks, p.l.c., Dublin, Ireland, and its subsidiary First Maryland Bancorp, Baltimore, Maryland, to acquire Dauphin Deposit Corporation, Harrisburg, Pennsylvania; June 25, 1997 letter to the Comptroller of the Currency regarding the application by Community Banks, N.A., Canton, New York, to acquire twelve branches from Fleet Bank, Albany, New York; July 1, 1997 letter to the Comptroller of the Currency regarding the application by Zions First National Bank, Salt Lake City, Utah, to acquire the Coalville and Price, Utah, branches of Wells Fargo Bank, N.A., San Francisco, California; August 19, 1997 letter to the Comptroller of the Currency regarding the application by Zions First National Bank, Salt Lake City, Utah, to acquire the Cedar City, St. George, Logan, and North Logan, Utah branches of Wells Fargo Bank, N.A., San Francisco, California; and September 5, 1997 letter to the Board of Governors regarding the application by Union Planters Corporation, Memphis, Tennessee, to acquire Magna Bancorp, Inc. Hattiesburg, Mississippi.
23. On August 22, 1997, the Commission filed for a preliminary injunction alleging that the proposed acquisition by Mediq Inc. of UHS, Inc. would lessen competition substantially in the rental of durable, movable medical equipment, such as respiratory, infusion and monitoring devices, to hospitals on an "as-needed," short-term basis. According to the complaint, the parties are the two largest firms in the country in the relevant market. Subsequently, the parties abandoned the transaction and the investigation was closed. Federal Trade Commission v. Mediq Inc. and UHS, Inc., Civ. No. 97-1916 (D.D.C. filed August 22, 1997).
24. 970 F. Supp. 1066 (D.D.C. 1997).
25. The 17 markets were Los Angeles-Riverside-Orange County, California CMSA; the San Diego, California MSA; the Salinas, California MSA; the Visalia-Tulare-Porterville, California MSA; Lakeland, Florida; the Ocala, Florida MSA; the Tampa-St. Petersburg-Clearwater, Florida MSA; the Champaign-Urbana, Illinois MSA; the Louisville, Kentucky-Indiana MSA; the Greenville, North Carolina MSA; the Florence, South Carolina MSA; the Charlottesville, Virginia MSA; the Baltimore, Maryland PMSA; the Washington, D.C.-Maryland-Virginia-West Virginia PMSA; Anne Arundel County, Maryland; the Spokane, Washington MSA; and Napa, California.
26. Automatic Data Processing, Inc., Docket No. 9282 (complaint issued November 13, 1996).
27. The salvage yards purchase unusable vehicles, and sell the parts to auto repair shops, consumers and other salvage yards. Computerized information systems, i.e., yard management systems, automate the process of managing parts inventories, and are linked to electronic communications networks that enable salvage yards to search electronically for parts in the inventories of other yards. An interchange, a cross-indexed numbering system for parts that identifies which are interchangeable, is a critical component of this computerized inventory-management and communications system.
28. The transaction also involved a violation of the Act's notification and waiting period requirements. In a complaint filed by the Department of Justice at the Commission's request in 1996, the United States alleged that ADP's failure to provide required documents when it filed notification hindered the ability of the antitrust enforcement agencies to analyze the competitive effects of the acquisition. ADP agreed to pay a civil penalty of $2.97 million to settle the charges. United States v. Automatic Data Processing, Inc., Cv. No. 95-0606 (D.D.C. April 10, 1996); 1996-1 Trade Cas. (CCH) ¶ 71,361; see 1996 Annual Report.
29. In February 1998, the Commission approved the application of ADP to divest the AutoInfo assets to Cooperative Computing, Inc., an affiliate of Hicks, Muse, Tate & Furst, Inc.
30. FTC Docket No. 9283, complaint issued November 18, 1996; dismissed September 25, 1997; see also Federal Trade Commission v. Butterworth Health Corporation, Civ. No. 1:96CV49 (W.D. Mich. filed January 23, 1996); preliminary injunction denied, 946 F. Supp. 1285 (W.D. Mich. 1996); aff'd, 1997-2 Trade Cas.(CCH) ¶ 71,863 (6th Cir. July 8, 1997) (per curiam); 1996 Annual Report.
31. See Statement of Federal Trade Commission Policy Regarding Administrative Merger Litigation Following the Denial of a Preliminary Injunction, 60 Fed. Reg. 39741 (August 3, 1995).
32. Softsearch Holdings, Inc., and Geoquest International Holdings, Inc., Docket No. C-3759 (issued July 28, 1997).
33. Pursuant to the order, the Commission appointed Ben C. Burkett, II, as trustee, to find a licensee and complete the required divestiture.
34. J.C. Penney Company, Inc., and Thrift Drug, Inc., Docket Nos. C-3721/C-3722 (issued February 28, 1997).
35. In May 1997, the Commission approved the divestiture of these assets to New Kerr Drug, Inc.
36. The Boeing Company, Docket No. C-3723 (issued March 5, 1997).
37. HAE UAVs will allow the U.S. military to obtain responsive and continuous reconnaissance data from anywhere within enemy territory.
38. The EELV competition is expected to produce the next generation of launch vehicles to replace all current medium to heavy launchers with a single family of vehicles capable of launching medium and heavy payloads into orbit at a significantly lower cost. The EELV, which would handle the bulk of the U.S. government's launch requirements after the year 2000, also will be used for commercial applications.
39. Baxter International Inc., Docket No. C-3726 (issued March 24, 1997).
40. Currently, no fibrin sealant products are marketed in the United States. In Europe and Japan, fibrin sealants are used to control bleeding and promote wound healing in a wide variety of surgical procedures, and to treat burn and trauma victims.
41. In May 1997, the Commission approved the application of Baxter to divest its Autoplex assets to NABI. The Commission approved Baxter's application to license Immuno's fibrin sealant product to Haemacure Corporation in August 1997.
42. General Mills, Inc., Docket No. C-3742 (issued May 16, 1997).
43. Ciba-Geigy Limited, Ciba-Geigy Corporation, Chiron Corporation, Sandoz Ltd., Sandoz Corporation and Novartis AG, Docket No. C-3725 (issued March 24, 1997).
44. Gene therapy is a therapeutic intervention in humans based on modification of the genetic material of living cells. Cells may be modified ex vivo for subsequent administration or altered in vivo by gene therapy products given directly to the patient.
Corn herbicides are chemical products designed to kill or control weeds that interfere with corn production. Flea control products contain chemicals for the treatment and prevention of flea infestation in domestic animals.
45. Specifically, these products include cytokine Interleukin 2, the Anderson ex vivo patent and cytokines Interleukin 3 and Interleukin 6.
46. Divestiture of the corn herbicide business to BASF was required within 10 days of final issuance of the order. In May 1997, the Commission approved the application of Novartis AG to divest the Sandoz flea control business to Central Garden and Pet Company and Centic Acquisition Corporation. The Commission approved the application of Novartis to license gene therapy technology and patent rights in "B-domain deleted Factor VIII" gene therapy products to RPR in September 1997.
47. Phillips Petroleum Company, Docket No. C-3728 (issued March 28, 1997).
48. In September 1997, the Commission granted the application of Phillips to divest the pipeline segments to KN Gas Gathering, Inc., a subsidiary of KN Energy, Inc.
49. Tenet Healthcare Corporation, Docket No. C-3743 (issued May 20, 1997).
50. On July 29, 1997, the Commission approved the application of Tenet to divest French Hospital Medical Center to Vista Hospital Systems, Inc., a subsidiary of Permian Health Care Inc.
51. American Home Products Corporation, Docket No. C-3740 (issued May 16, 1997).
52. Canine lyme, canine corona virus and feline leukemia vaccines are the only effective method to prevent certain companion animal diseases. These vaccines work by exposing the host animal's own immune system to specific antigens for the disease. The antigens, in turn, stimulate the immune system's production of antibodies, which protect the host animal against future exposure to the disease.
53. Cooperative Computing, Inc., Docket No. C-3757 (issued June 20, 1997). According to the complaint, CCI was to be purchased by Hicks, Muse, Tate & Furst, a private investment firm, prior to its acquisition of Triad.
54. MIS are computer systems used by warehouse distributors to organize information including the indexing of millions of aftermarket automotive parts manufactured for domestic and foreign-built automobiles. An electronic catalog is an extensive database of aftermarket automotive part numbers that is searchable by make, model and year of car.
55. Mahle GmbH, Mahle, Inc., Metal Leve, S.A. and Metal Leve, Inc., Docket No. C-3746 (issued June 4, 1997); see supra for a discussion of compliance with the Act.
56. Articulated pistons are two-piece pistons with a crown made of steel and a skirt made of aluminum in which the crown and skirt are able to move independently of each other. These pistons are used in engine applications, such as Class 8 diesel truck engines. Large bore two-piece pistons are pistons in bore sizes of more than 150 millimeters in diameter and are used in high output diesel and natural gas engines, such as new generation locomotive engines and stationary power generators.
57. In June 1997, the Commission approved Mahle's application to divest Metal Leve's United States piston business to T&N Industries.
58. Autodesk, Inc., and Softdesk, Inc., Docket No. C-3756 (issued June 18, 1997).
59. Boomerang now has full rights and title to the IntelliCADD product and has assigned its rights to Visio Corporation.
60. Cadence Design Systems, Inc., Docket No. C-3761 (issued August 7, 1997).
61. At the time of the transaction, there were approximately 100 participants in Cadence's Connections Program, which enables software developers to create and sell interfaces to Cadence layout tools and environments.
62. CVS Corporation and Revco D.S., Inc., Docket No. C-3762 (issued August 13, 1997).
63. Insilco Corporation, Docket No. C-3783 (issued January 27, 1998).
64. Jitney-Jungle Stores of America, Inc., Bruckmann, Rosier, Sherrill & Co., L.P., Delta Acquisition Corporation, and Delchamps, Inc., Docket No. C-3784 (issued January 28, 1998).
65. Under the order, Supervalu was permitted to sell any of the divested supermarkets to either R&M Foods, Inc., or Southeast Foods, Inc., within three months of their purchase if it acquired the supermarkets within three months of the final order. In February 1998, the Commission approved the application of Supervalu to sell three supermarkets to R&M Foods, Inc.
66. Usually, two filings are received, one from the acquiring person and one from the acquired person when a transaction is reported. Only one filing is received when an acquiring person files for a transaction that is exempt under Sections 7A(c)(6) and (c)(8) of the Clayton Act.