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The CHAIRMAX. Go ahead, Mr. Nash.

Mr. MALETZ. As the chairman pointed out, Mr. Nash, suppose you have a paper company which buys from its competitor a large amount of timberland; might not that transaction have a significant competitive effect ?

Mr. Nash. I suppose that it would in that case; I think you are right.

Mr. MALETZ. Second, would your proposed exemption relate to the purchase of oil leases from the Government?

Mr. Nash. It would not. I do not have in mind that it would relate to purchase of oil leases. Really what I have in mind is nonproductive, idle, real estate,

The CHAIRMAN. I think there is merit in your general statement, but I can see that it might involve some ramifications which the committee would consider.

Mr. Nash. I think that is right, Mr. Chairman.
The CHAIRMAN. Supposing you go ahead.

Mr. Nash. I won't comment on clause 8, because it relates to the bank question.

Clause 9, I think, fails to take into account one type of transaction. We would recommend that clause 9 be amended to exempt transactions where 50 percent or more of the stock of the acquiring corporation is owned by the corporation from which the assets are acquired.

That is just the reverse of what the first sentence of that clause now provides. And I can't see that it would make any difference which way you applied it. It seems to me it should be broad enough to include

The CHAIRMAN. Work both ways?
Mr. Nash. Work both ways.

Mr. MALETZ. I take it, Mr. Nash, you refer to a situation where the subsidiary corporation acquires the parent, is that essentially the situation you recommend be exempted?

Mr. Nash. That, or acquires assets of the parent company, leaving the parent, maybe, as just a holding company.

The CHAIRMAX. I think it is a very good suggestion.

Mr. Nash. One further type of transaction should, in our opinion, be incorporated in the exemption provisions of the bill. It is believed that transactions which involve pledging of stock or transfer of title solely for providing collateral and acquisitions of securities by persons acting as underwriters, and so forth, in connection with the marketing of securities, should be specifically exempted.

I don't believe that such transactions in and of themselves affect competition.

It is therefore recommended that the following language be added as clause 11:

(11) any acquisition of assets, stocks, or other share capital of a corporation in connection with a financing or borrowing transaction where title to such stock or asset is acquired as collateral for security purposes and not for investment or control; or any acquisition of stock or other share capital by any person acting as underwriter, dealer, or broker in connection with the marketing of such securities.

The CHAIRMAN. I think the Attorney General agrees with you.

Mr. Nash. I heard him make that statement this morning, Mr. Chairman.

With the minor modifications outlined above, the exemption provisions of H. R. 2143 would merit the unreserved endorsement of the Department of Commerce.

Now as to the consequences of notification or failure to notify.

The length of the waiting period should be held to as short a period as possible without denying the Government adequate time to make its determinations and take action, if needed. Assuming that information in addition to that required in the notice is needed and that the entire 30 days provided in the bill for furnishing the same is used up, the Government still would have 30 days for its own purposes.

Presumably the determination as to whether or not to request additional information could be made in a very short period, say 5 days. This would leave 25 days at the end for determining whether or not to take any action to delay the merger. The Department feels that perhaps this is longer than necessary, that perhaps 10 days would be adequate and that, therefore, the overall 60-day period could be safely shortened to 45 days.

I would like to add in that that I would think that probably the experience of the Department of Justice and the Federal Trade Commission in these matters should control, and I don't propose to recommend, if they feel that it should be 60'days, I don't propose to recommend that it be shortened.

Mr. KEATING. The Chairman of the Federal Trade Commission wants to increase it to 90 days?

Mr. Nash. I realize that.

Mr. KEATING. I think I agree with you that it should be as short as possible, if it is going to hold up a transaction.

a . The CHAIRMAN. I think the way you put it is very apt, the length of the waiting period should be held to as short a period as possible without denying the Government adequate time to make its determination to take action if needed. I think that is a very good way to

Mr. Nash. The reason I put the statement in here is because I would like to have that situation made just as short as possible, that waiting period. But on the other hand I realize you can't impair the effectiveness of the provision itself. And I think if it is made too short, it would be rendered perhaps largely ineffective.

H. R. 2143 as now drafted might be construed to make illegal any acquisition which does not fall within the exceptions and which does not have the effect substantially to lessen competition or to tend to create a monopoly, solely by reason of the fact that notice was not given or required information furnished.

Without clarification, the premerger notification requirements might be used as a basis for a divestiture suit by the Government or a triple-damage action by some person injured by the acquisition. If the language were so interpreted, these consequences would follow even though the failure to give notice or furnish information was not willful.

The CHAIRMAN. You may remember we had a colloquy —
Mr. Nash. I remember it very well, Mr. Chairman.

put it.

The CHAIRMAN. We sort of left it this way, that we would either put some language in the bill to make that clear-or put it into a report so that the legislative history would leave no doubt. Maybe it would be better to put it right in the bill.

Mr. Nash. I think it would be better to put it in the bill, Mr. Chairman.

I have some language that is included in my statement here; I won't read that, but it follows right here after this.

We also urge inclusion of a provision for mandatory confidentiality for information provided under this statute with appropriate penalties and exceptions to allow litigation to proceed. This recommendation is made in the light of our experience with data given to the Department under several of its programs—the Census Bureau, Business and Defense Services Administration, and Bureau of Foreign Commerce, for example,

Such a provision would also do much to allay the fears of businessmen that prenotification proceedings would be tantamount to public announcement of the proposed transaction with all the attendant difficulties and problems that premature public disclosure may bring.

The CHAIRMAN. Let us have the benefit of your views, and submit some appropriate language you would suggest.

Mr. NASH. I have a draft here I would be glad to submit.

Incidentally, I note that the proposed fourth paragraph of section 7 commencing on page 6, line 13, though apparently intended to be a restatement of the present third paragraph of that section, omits the words "their immediate lawful business, or” after the words "actual carrying on of” at page 6, line 20. It seems to me that these words should be restored. Perhaps their omission was inadvertent.

I think that ought to go back in there.

The CHAIRMAN. I have been informed by counsel that it is a typographical error.

Mr. Nash. I think that is probably what it was.

Those are all the comments I have to make, Mr. Chairman. Thank you very much for the opportunity of presenting them.

The CHAIRMAN. Well, we are grateful to you, sir, and we are sorry we had to keep you waiting so long. But we will be very glad to take deeply into consideration your suggestions, and later on if you want to confer with counsel and give him any of that language that you want inserted in the bill, other than what you have indicated here in your statement, that would be welcome.

Mr. Nash. Thank you very much.

The CHAIRMAN. And I think we will put your statement right in the record.

Mr. Nash. Fine. (The complete prepared statement of Mr. Nash is as follows :) STATEMENT OF Hon. FREDERICK C. NASH, GENERAL COUNSEL, UNITED STATES

DEPARTMENT OF COMMERCE Mr. Chairman, I am Frederick C. Nash, General Counsel of the Department of Commerce. I am here to present the views of the Department with respect to H. R. 264 and H. R. 2143, bills to require prior notice to the Government of mergers and related business consolidations and acquisitions.

The Department believes that legislation to require prior notice of mergers and similar transactions which might have an adverse effect upon competition, or might promote monopolies, would be a highly desirable addition to the antitrust laws. Such legislation would enable the Government to make a preliminary determination as to whether or not the proposed transaction was in itself a violation of the antitrust acts and to take appropriate action in cases where it is deemed advisable. Wisely administered, such legislation would obviate the necessity of unscrambling corporate mergers entered into in violation of the antitrust acts; while at the same time provisions would, if carefully drawn, afford a minimum of inconvenience, delay, and disruption to private business.

On the other hand, premerger notification legislation which effectively prevented unobjectionable mergers, consolidations or similar transactions, either be. cause of the delay involved or the extra burden of work or risks placed upon the parties to the proposed transaction, would be viewed by the Department as creating a problem as great as the problem it is intended to meet. To avoid this result, the Department has some suggestions to make in connection with the exemptions and the consequences of notification or failure to notify.

In outlining the views of the Department as to what would constitute appropriate legislation in these areas, I shall relate my comments to H. R. 2143, which the Department believes to be, on the whole, a constructive approach to the problem.

The exemption provisions of the present bill represent, in our opinion, a substantial improvement over those of earlier proposals for this same general purpose. Rather than providing an inflexible requirement that transactions between corporations of a certain size are to be subject to its procedure, H. R. 2143 recognizes that, regardless of the size of the parties, there are many types of transactions which have no significant effect upon competition, and the bill exempts many such transactions from its provisions.

We wholeheartedly endorse this method of dealing with the problem, and by and large concur in the provisions of H. R. 2143 for this purpose found on pages 4, 5, and 6 of the bill.

We specifically endorse clauses 1, 2, 3, 4, 5, 7, and 10 of H. R. 2143. We wish to suggest the following amendments to these provisions which we regard as mainly technical in nature.

With respect to clause 6, on page 5, we recommend that the provision be broadened to exempt acquisition of unimproved real property.

Clause 8 appears to be a matter of primary concern to other agencies, and we have no comments with respect thereto.

Clause 9 fails to take account of one type of transaction. We recommend that clause 9 be amended to exempt those transactions where 50 percent or more of the stock of the acquiring corporation is owned by the corporation from which the assets are acquired.

One further type of transaction should in our opinion be incorporated in the exemption provisions of the bill. It is believed that transactions which involve pledging of stock or transfer of title solely for providing collateral, and acquisitions of securities by persons acting as underwriters, etc., in connection with marketings of securities should be specifically exempted. Such transactions do not of themselves affect competition.

It is therefore recommended that the following language be added as clause 11:

"(11) any acquisition of assets, stocks or other share capital of a corporation in connection with a financing or borrowing transaction where title to such stock or assets is acquired as collateral for security purposes and not for investment or control ; or any acquisition of stock or other share capital by any person acting as underwriter, dealer or broker in connection with the marketing of such securities."

With the minor modifications outlined above, the exemption provisions of H. R. 2143 would merit the unreserved endorsement of the Department of Commerce.

Now as to the consequences of notification or failure to notify:

The length of the waiting period should be held to as short a period as possible without denying the Government adequate time to make its determinations and take action, if needed. Assuming that information in addition to that required in the notice is needed and that the entire 30 days provided in the bill for furnishing the same is used up, the Government still would have 30 days for its own purposes. Presumably the determination as to whether or not to request additional information could be made in a very short period, say 5 days. This would leave 25 days at the end for determining whether or not to take any action to delay the merger. The Department feels that perhaps this is longer than necessary, that perhaps 10 days would be adequate and that, therefore, the overall 60-day period could be safely shortened to 45 days.

H. R, 2143 as now drafted might be construed to make illegal any acquisition which does not fall within the exceptions and which does not have the effect substantially to lessen competition or to tend to create a monopoly, solely by reason of the fact that notice was not given or required information furnished. Without clarification, the premerger notification requirements might be used as a basis for a divestiture suit by the Government or a triple damage action by some person injured by the acquisition. If the language were so interpreted, these consequences would follow even though the failure to give notice or furnish information was not willful. The Department believes that any such result would be undesirable and that the civil penalty provided in the bill should be the only remedy of the Government and that no other person should have any remedy under the antitrust laws. Furthermore, the Department feels that it should be made clear that the civil penalty can be collected only if the acquisition is consummated.

Accordingly, it is recommended that the sentence providing for the civil penalty on page 3 of H. R. 2143 be changed to read as follows:

Any corporation which has consummated an acquisiiton, notice of which is required to be given under this paragraph, and has willfully failed to give the notice or to furnish the required information shall be subject to a penalty of not less than $5,000 or more than $50,000 which may be recovered in a civil action brought by the Attorney General. If the acquisition does not constitute a violation of the provisions of the first paragraph of this section, the United States shall have no other remedy and no person shall be entitled to sue either party to the acquisition under the antitrust laws for failure to give notice or to furnish the required information under this paragraph."

We urge inclusion of a provision for mandatory confidentiality for information provided under this statute with appropriate penalties and exceptions to allow litigation to proceed. This recommendation is made in the light of our experience with data given to the Department under several of its programsthe Census Bureau, Business and Defense Services Administration, and Bureau of Foreign Commerce, for example.

Such a provision would also do much to allay the fears of businessmen that prenotification proceedings would be tantamount to public announcement of the proposed transaction with all the attendant difficulties and problems that premature public disclosure may bring.

Incidentally, I note that the proposed fourth paragraph of section 7 commencing on page 6, line 13, though apparently intended to be a restatement of the present third paragraph of that section, omits the words "their immediate lawful business, or” after the words "actual carrying on of” at page 6, line 20. It seems to me that these words should be restored. Perhaps their omission was inadvertent.

The Bureau of the Budget has advised that it would interpose no objection to the presentation of this statement before your committee.

I wish to thank you for the opportunity to present the views of the Department on this legislation.

Mr. MALETZ. Mr. Nash, do you have a draft of suggested changes beyond those set forth in your statement?

Mr. Nash. I have some language on the confidentiality that is not included in the statement.

The CHAIRMAN. He will submit that.

Mr. Nash. I only have one copy here, but I will submit several copies.

Mr. KEATING. You make it a criminal offense to disclose information of a confidential character ?

Mr. Nash. Yes; it makes it a criminal offense.

Mr. KEATING. The Attorney General indicated to us that that is already a antidisclosure criminal provision in the Federal Government. Do you know anything about that?

Mr. Nash. Yes; there is such a provision, but I think on account of the language of the section that it might not cover all of the information that would be disclosed on this kind of a proposition.

Mr. KEATING. It is not limited to security cases, the present law.

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