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OBJECTIONS AND RECOMMENDATIONS TO PREMERGER NOTIFICATION Bills INTRO

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OBJECTION OR RECOMMENDATION

PROVISIONS OF H. R. 2143 (0) “Intracorporate transactions, including those of subsidiaries and affiliates with each other and with their parent, should require no advane notification" (New York State Bar Association comment, House hearings, p. 206; see also Commerce & Industry Association of New York comment, Senate hearings, p. 446; B. L. Gilpatric comment; Cravath, Swaine & Moore, Senate hearings, p. 409).

(C) Exempt; “[A]cquisition of the stock or assets of a corporation more than 50 percent of the voting stock of which is directly or indirectly owned by the acquiring corporation” (American Paper & Pulp Association comment, Senate hearinas, p. 315).

15. (a) Exemptions for regulated industries have been urged mainly on the

15. “(10) Any acquisition of stock or basis that regulatory agencies already assets which, under any specific provihave all of the information they need sion of law, requires the approval in adconcerning a merger or acquisitions by vance of a commission or board or other regulated companies before they go into agency of the United States, and when effect. H. R. 9424's requirements would, cific provision of law from the provi

so approved is exempt under any spetherefore, be duplicative and unneces- sions of this section: Provided, howsary. Statements to this effect for the different agencies are as follows:

ever, That any commission, board, or

agency of the United States which is (1) Civil Aeronautics Board : (a) Air Transport Association of quisition by one corporation of the stock

authorized by law to approve the acAmerica (Senate hearings,

or assets of another corporation where p. 204) (0) Civil Aeronautics Board (Sen- tion is exempt from the provisions of

by virtue of such approval such acquisiate hearings, p. 473)

this section shall promptly notify the (2) Department of Agriculture:

Attorney General of any application or (a) Department of Agriculture (Senate hearings, p. 480)

request for such approval. (3) Federal Power Commission : (a) Federal Power Commission

(Senate hearings, p. 478) (1) Federal Maritime Board : (a) American Merchant Marine

Institute (Senate hearings,

p. 501)
(6) Federal Maritime Board (Sen-

ate hearings, p. 527)
(5) Interstate Commerce Commission:
(a) National Association of Motor

Bus Operators (Senate hear

ings, p. 484) (b) Association of American Rail

roads (Senate hearings, p.

191) (c) American Trucking Associa

tion (Senate hearings, p. 502)

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OBJECTIONS AND RECOMMENDATIONS TO PREMERGER NOTIFICATION BILLS INTRO

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re

OBJECTION OR RECOMMENDATION

PROVISIONS OF H. R. 2143 (6) Securities and Exchange Commission: (a) American Research & Develop

ment Corp. (Senate hear

ings, p. 427)
(6) Investment Bankers Associa-

tion of America (Senate

hearings, p. 509)
(0) Securities and Exchange Com-

mission (Senate hearings, p.

477) (b) "Any acquisition of stock or of assets, the lawfulness of which requires the prior approval of a regulatory agency of the United States, wherever such approval, when granted, carries with it an exemption from the prohibition of section 7 of the Clayton Act” (S. Rept. 2817, 84th Cong., 2d sess., July 27, 1956, p. 11). 16. (a) “[Justice Department]

16. SEC. 2. The second and third parasuggests 90 days after enact- graphs of section 1 of this Act shall take ment so as a practical matter I am effect one hundred and twenty days only suggesting an approximately addi- after their enactment. tional 90 days beyond [that] *** mentioned" (American Paper & Pulp Association comment, Senate hearings, p. 314; see also B. L. Gilpatric comment; Cravath, Swaine & Moore, Senate hearings, p. 418).

print ***

17. (a) "To confine the bill to its 17. The procedures for the waiver by real purpose, it is suggested that the the appropriate commission or board appropriate Government boards or com- and the Attorney General of all or part missions be not merely permitted (as of the notification and waiting requirein H. R. 9424), but actually directed ments in appropriate cases and cateto provide for the waiver of the entire gories of cases required by the second waiting period in types of cases which paragraph of section 1 of this Act shall can have no effect in competition" be established within one hundred and (American Mining Congress comment, twenty days after enactment of this Act. Senate hearings, pp. 281-282).

18. (a) H. R. 9424 would include 18. Suggested amendment to H. R. “Steps in the consummation of a judi- 2143 to provide exemption from notice cially the [sic] supervised reorganiza- and waiting requirements for "sales of tion (under the Bankruptcy Act * * * assets or stock pursuant to court or or other State law utilizing the device government supervised dissolution" of merger, sale of assets or dissolu. (statement of Attorney General tion;" (R. L. Gilpatric comment, Brownell before House Antitrust SubCravath, Swaine & Moore, Senate hear- committee, March 6, 1957). ings, p. 407).

19. (a) "Likewise, an acquisition of 19. Suggested amendment to H. R. a foreign corporation only incidentally 2143 to provide exemption from notice engaged in importing to or exporting and waiting requirements for "acquisifrom this country need not be covered" tion of stocks or assets by or from (New York State Bar Association any foreign corporation unless such comment, House hearings, p. 207; see foreign corporation is engaged in comalso National Association of Manu- merce in the United States" (statement facturers comment, Senate hearings, p. of Attorney General Brownell before 210; American Mining Congress com- House Antitrust Subcommittee, March ment, Senate hearings, p. 279).

6, 1957, p. 19).

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OBJECTION OR RECOMMENDATION

PROVISIONS OF H, R. 2143 20. (a) "[M]any classes of nonbus- 20. Suggested amendment to H. R. iness corporations * * because the 2143 to provide exemption from notice transactions in which they participate and waiting requirements for "acquisiare of such a nature that they do not tion of stocks or assets by corporations substantially lessen competition or tend engaged wholly in religiouseducato create a monopoly. * * *

tional, or charitable activities,” (state“Such corporations include munici- ment of Attorney General Brownell pal, educational, charitable, fraternal, before House Antitrust Subcommittee, and cooperative corporations" (R. L. March 6, 1957, p. 19). Gilpatric comment, Cravath, Swaine & Moore, Senate hearings, p. 406).

21. (a) The notice and waiting re. 21. Suggested amendment to H. R. quirements "shall not apply to any 2143 to provide exemption from notice acquisition of stock, other share capital, and waiting requirements for "corpoor assets of a corporation in connection ration[s] in connection with a financing with a financing or borrowing transac- or borrowing transaction where title to tion when title to such stock, other such stock or assets is acquired for share capital, or assets is acquired as collateral or security purposes” (statecollateral for security purposes and not ment of Attorney General Brownell befor investment or control" (American fore House Antitrust Subcommittee, Mining Congress comment, Senate hear- March 6, 1957, p. 19). ings, p. 278).

(6) Justice Department proposal "was intended to remove from the coverage of the bill commercial lending transactions involving transfer of assets as security for loans for foreclosure upon such loan security” (Department of Commerce comment, Senate hearings, p. 320).

22. (a) "[T]he notification provi- 22. Suggested amendment to H. R. sions shall not apply to binding written 2143 to provide for the retroactive safemerger or acquisition agreements en- guard : "Nothing contained in this tered into prior to date of enactment of [Act] shall be held to affect or impair the bill” (Department of Commerce any right heretofore legally acquired comment, Senate hearings, p. 373). * * *" (statement of Attorney General

(b) "[The notification provisions] Brownell before House Antitrust Subshall not be applicable to any acquisi- committee, March 6, 1957). tion contracted for in writing prior to such date or effected pursuant to a contractual right, obligation, or commitment made in writing prior to such date” (American Mining Congress comment, Senate hearings, p. 277).

Mr. KEATING. Can you give us some exemptions which you feel should not be put in the bill?

Mr. BROWNELL. No; only those that have been raised up to date as to exemptions that should be included, and arguments in support of it. That will be introduced in the record as an exhibit then!

The CHAIRMAN. Yes; that has been accepted.

Mr. BROWNELL. I call the attention of the subcommittee members to the fact that H. R. 2143 at least gives authority to the appropriate commission or board in the Attorney General's Office to establish regulations for waiving this notice provision, at least during the first 120 days while the bill would be in operation.

We think that is a salutary provision, because it may develop in the practical operation of this biĩl that there are other fact situations which we have not thought of where it would be appropriate to waive the notice requirements, and that does give a 120-day period where consideration could be given to those special situations and regulations issued accordingly.

I think that completes my presentation this morning.

The CHAIRMAN. I think you have something that is very important on page 20, a retroactive feature.

Mr. BROWNELL. Oh, yes. I thank you for calling that to my attention, because I did want to mention that.

In the original section 7 of the Clayton Act and in your 1950 amendment you had the following sentence in the bill :

Nothing contained in this section shall be held to affect or impair any right heretofore legally acquired : Provided, That nothing in this section shall be held or construed to authorize or make lawful anything heretofore prohibited or made illegal by the antitrust laws, or to exempt any person from the penalty provisions thereof or the civil remedies therein provided.

I would think that the same sentence should be included in this bill.

Mr. KEATING. Mr. Attorney General, you have not dealt in your statement at all with this provision in these bills about the Federal Trade Commission having the same or similar rights or similar rights to bring injunction suits?

Mr. BROWNELL. That is correct.
Mr. KEATING. Do you favor that?

Mr. BROWNELL. Yes; we do. I believe Chairman Gwynne is slated to follow me on the witness stand this morning and I have therefore left the presentation of that portion of the bill to him.

Mr. KEATING. Is there danger that the prize will be to the swift there? There will be a race between the FIC and the Attorney General to see who gets there first?

Mr. BROWNELL. As I think you know, we have a very fine working relationship with the FTC now. We have liaison officers that exchange information daily, and I would be inclined to think that that situation would not develop.

Under the present law, of course, we work it out that if a preliminary injunction seems to be required, whether the matter first comes to the attention of the FTC or ourselves, we cooperate with them and bring the necessary action so that it is not as though the situation were critical or anything of that sort, because by liaison machinery we can work this out.

But the reasons for the proposed change I think it would be more appropriate perhaps to have Chairman Gwynne present to the committee because they may involve some matters peculiarly within the province of the Trade Commission, and I would like to have him make the formal presentation.

Mr. MALETZ. Mr. Attorney General, is it not correct that where two corporations propose to merge and as part of the transaction plan to exchange stock or issue new stock, they must file a registration statement with the SEC showing full financial details?

Mr. BROWNELL. Subject to a dollar limitation there, I think anything under $300,000 or $500,000, something of that sort is exempted.

Mr. MALETZ. That is required by the Securities Act of 1933, isn't that right?

a

Mr. BROWNELL. I have forgotten whether it is the 1933 or the 1934 act.

Mr. MALETZ. And is it not correct that under the Securities Act there is required as a minimum a 20-day waiting period before a registration statement can become effective?

Mr. BROWNELL. I think that is the minimum, yes.

Mr. MALETZ. And is it not also a fact that in some circumstances the waiting period is far longer?

Mr. BROWNELL. Oh, yes.

Mr. MALETZ. And it is true also, is it not, that the merger in such cases cannot take place until the registration statement becomes effective?

Mr. BROW NELL. That is in the case where the issuance of additional stock over a certain dollar amout is required.

Mr. MALETZ. So therefore would you not agree that a waiting period in connection with a proposed merger transaction does not constitute a novel departure from traditional American jurisprudence?

Mr. BROWNELL. It is certainly in the SEC Act.
The CHAIRMAN. And also the SEC Act requires notice?

Mr. BROWNELL. Yes; and I think the same thing is true with certain mergers and acquisitions under special regulatory control before the CAB and FCC and a number of others, so I think it is fair to say that this is not a novel principle.

The CHAIRMAN. So that when we hear this is a very novel and startling proposal, that is not quite true?

Mr. BROWNELL. No; it certainly is not.

Mr. MALETZ. Now, sir, the Federal Trade Commission believes that a 90-day waiting period would be preferable to a 60-day waiting period.

Do you have any particular choice?

Mr. BROWNELL. There is no magic about the number of days. The way we settled on the 60 days was this: We have to have à certain time in which to proceed in an orderly way to consider the matter. We would like to keep the waiting period as short as possible within those limits, but we believe that we need, our experience shows, about 60 days to really develop the necessary facts.

If we can cut it down by administrative practice, we will do so for the benefit of the people who have the proposed merger under consideration.

But I think, to be safe in the matter, we ought to have about 60 days, and that would be sufficient so far as our work is concerned.

Mr. MALETZ. Considerable objection has been made to the bill on the basis that information supplied to the Department of Justice or the Federal Trade Commission in connection with an important merger might not be kept confidential and might reach the hands of some competitors.

Would you suggest an amendment making it a crime for any employee of the Department of Justice or appropriate board to make public any information pertaining to filing except in connection with court proceedings?

Mr. BROWNELL. It is my impression that there is a statute on the books general in nature to cover that. I would doubt if a special statute were needed. I don't think any department of the Govern

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