Our principal proposals involve (1) reduction of the extensive waiting period to a reasonable time; (2) elimination of the "additional relevant information" provision; (3) the substitution therefor of concrete specific statutory requirements for data to be supplied; (4) proper safeguards against publicity of information supplied; and (5) concentration of law enforcement in the agency duly constituted for that purpose. WAITING PERIOD UNFAIR TO GOVERNMENT AND INDUSTRY The bill prohibits consummation of a covered proposed merger until 60 days after delivery of a required, for all practical purposes preliminary, notice. We are unaware of any reason for the 60-day delay other perhaps than mere expediency-a view which would appear to be confirmed by the bill itself in the provisions for the establishment of procedures for waiver of all or part of the period in appropriate cases (p. 3, line 17 et seq.). Let us face facts. If adequate data is furnished with the initial notice-and we propose just that-the governmental agency would not, in our opinion, be in any better position to pass judgment at the end of 60 days than it would be in 30. Or put another way, assuming of course that you are concerned primarily with acquisitions, the examiner isn't going to be able to come to a considered conclusion worthy of the name on any twice-over lightly job in 60 days or even 90. And we should not lose sight of the further fact that the respective agencies are going to be so flooded with notices if this bill passes with all the apparently unintended and insignificant transactions included in its provisions, that they will be unable, even with an increased staff, to keep abreast of the volume of work heaped upon them. Again the bill itself recognizes the situation on page 3, lines 10-16: "Failure *** to interpose objection *** within the sixty-day period shall not bar the institution at any time of any action or proceeding with respect to such acquisition under any provision of law." The rights of the Government are fully protected not only by this provision but also by the existing law. Why complicate the picture with a meaningless 60 days? Now let us look at the other side of the coin-the businesses involved. From a practical standpoint any enforced waiting period endangers and in numerous instances will preclude corporate acquisitions. Many of these mergers undoubtedly would be advantageous not only to the parties concerned but also to the national economy as well. It follows therefore that Commerce & Industry Association believes a waiting period capable of such results to be unsound in principle. The absolute maximum time, if any, that reasonably might be required to elapse between notice and consummation is 30 days. RELEVANT INFORMATION A second objectionable feature of the legislation is the provision authorizing agencies of Government to demand and be furnished with "such additional relevant information" as may be requested by them within the prescribed waiting period. We find this provision to be wholly unjustifiable from at least three standpoints. First, no additional data of any kind should be required to be supplied in any case when and after the Government has instituted an injunction action brought prior to the expiration of the period allowed it for making the demand. Patently, where an action is in the courts, information should be obtainable only pursuant to the rules of civil procedure applicable to the conduct of judicial proceedings. Secondly, the term "additional relevant information" is so broad in scope as to permit of almost limitless interpretation by the demanding agency. Not only is "relevant" a completely indecisive unprecise word in itself but no statutory guide is provided to indicate to what the information should be relevant. Finally, no arbiter or procedure is provided to determine the plausibility, justifiability, or relevancy of the data requested. It is left completely to the unfettered discretion of the agency. It seems abundantly clear that the statute must achieve precision in this most important aspect. Information to be furnished should be limited by definitive language to such as would supplement the basic data relating to the specific corporations involved and required in the statutory notice provision of the bill. THREE BIRDS WITH ONE STONE The solution to (1) the legitimate requirements of government, (2) the objectionable waiting period, and (3) the need for clarification of the "relevant information" provision well might lie in the following three-part proposal designed on the one hand to furnish governmental agencies with all the data they need at the outset and, on the other, to let the businessman know just where he stands and what he must furnish : (a) Reduce the waiting period to 30 days (p. 2, line 17) and conform the bill in appropriate places such as page 3, line 14. (b) Delete the sentence relating to the furnishing of additional relevant information commencing on page 2, line 23. (c) Substitute for the deleted sentence the following: "Where not waived by the rules, regulations or procedures to be established by the Attorney General, appropriate Commission, or Board as hereinafter provided, or by special ruling in appropriate individual cases on application by the acquiring corporation, such corporation shall furnish so much of the following additional information as is within its knowledge or control: "1. Date of proposed consummation of merger. "2. Location, physical and financial size, past acquisitions, products and activities of the merging companies, individually and in combination. "3. Structure and size of the industry in terms of production and capacity. "4. Relative position in the industry of the two companies, individually and combined. "5. Number of companies reported active in the industry, their respective sizes and relative standing in sales and total assets. "6. Relevant market area or areas, if national in scope. "7. Sales, relevant standing, etc. of the two companies in definable market areas, and of their competitors, if reported. "S. Annual reports, profit and loss statements and balance sheets for both companies for the three years prior to the time of filing notice. "9. Patent position, and patents of primary importance that are involved in the merger. "10. Contract terms and reasons of both parties for the merger or acquisition and a statement as to the mechanics of the merger, with copy of the merger contract. "11. Copies of the minutes of the meetings of the boards of directors of both companies concerning the merger. "12. Any facts suggesting exemption, such as investment or failing corporations, etc." It will be noted that the above list of items of information is almost identical with the list enumerated by Judge Barnes in his appearance before this subcommittee a year ago as the type of data the Justice Department has sought in dealing with proposed mergers, This is the data the Government says it needs. Let it be furnished to the appropriate agency at the very outset. What we ask is certainty. Let it be specified in the statute. Let everyone know where he stands. Then obviously no extensive waiting period is needed. No "additional information" will be required. And a degree of certainty perforce must be brought to the waiver rules and regulations to restrict the fuller filings to those cases which might really mean something. But let it be clear, the list provided should be it, with no shirttail, coattail, or otherwise described catchall clauses tacked on. The law should be definitive and complete without loopholes or loose ends. INFORMATION SHOULD BE CONFIDENTIAL Common fairness demands the insertion in the bill of a provision making it a criminal offense for any governmental official or employee to disclose any of the data furnished pursuant to the bill's requirements except to authorized representatives of appropriate agencies of Government when so authorized by law. Anything short of such a prohibition would be almost meaningless and grossly unjust to private businesses and individuals who would be disclosing such a wealth of commercially valuable and theretofore confidentially held information. INJUNCTIVE RELIEF-IN THE DEPARTMENT WHERE IT BELONGS Duality or concurrency of jurisdiction is synonymous with waste, confusion, inefficiency and interagency empire building battles. The public is the principal loser, at the same time footing a double bill and getting poor administration for that double cost. The goat of course is the party directly involved and squeezed between the contending administrators. More often than not he does not have the problem of which set of orders or directives to follow-compliance with both is necessary to keep the agencies happy. This is a problem wrestled with by the Hoover Commission, one of whose most emphatic recommendations was elimination of overlapping and concurrent jurisdiction by various administrative agencies. Provisions of the bill which would vest the Federal Trade Commission with authority directly to seek injunctive relief in the courts, go precisely contrary to that recommendation. The Justice Department, as the constituted law-enforcement agency of the Federal Government, is charged with the responsibility of enforcing in the courts on the Government's behalf the many and varied laws in which the Government has a direct interest. No cogent reason is advanced why the Federal Trade Commission should not continue to refer to Justice matters in which it believes injunctions and restraining orders would be to the interest of the public. There is no need for developing in the Federal Trade Commission either additional staff to carry out Justice Department functions or new and perhaps conflicting criteria for determining finally the propriety of the Government's bringing a court action. Let us use what we have most efficiently and eschew the introduction of a greater confusion at a greater expense and for no gain. CONCLUSION Commerce & Industry Association does not oppose premerger notification as such. We are, however, opposed to H. R. 2143, as presently written and strongly urge its amendment to conform to the suggestions we have made. Hon. EMANUEL CELLER, House Office Building, Washington, D. C. CRAVATH, SWAINE & MOORE, DEAR REPRESENTATIVE CELLER: The committee on corporate law of the Association of the Bar of the City of New York, of which I am chairman, has given careful consideration to the pending bills, H. R. 2143 and S. 198, requiring advance notice of a multitude of corporate transactions. I am enclosing two copies of a report of that committee expressing its opposition to the pending bills and stating the reasons for such opposition. I hope that this report can be included in the record of the hearings on the bills. Yours faithfully, LEONARD D. ADKINS. REPORT OF THE COMMITTEE ON CORPORATE LAW OF THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK WITH RESPECT TO S. 198 AND H. R. 2143, MARCH 19, 1957 The committee has considered those portions of S. 198 and H. R. 2143 (hereinafter collectively referred to as the bills), introduced January 7, 1957, by Senator O'Mahoney and by Mr. Celler, respectively, which relate to amendments to section 7 of the Clayton Act to require that advance notice of various transactions be given to various Government agencies. Without addressing itself to the basic question as to whether any such legislation is either necessary or desirable for enforcement of the antitrust laws, since that question is not one of corporate law, the committee is opposed to the pending bills on the grounds stated below: 1. The broad terms of the bills, encompassing countless corporate transactions carried out daily in this country, are bound to unduly fetter business activities. The bills are applicable to acquisitions of stock or assets, and literally apply to many corporations not engaged in commerce and whose activities may not affect commerce. The bills thus have a far broader reach than the substantive antitrust provisions of section 7 which screen out transactions which in themselves do not substantially lessen competition or tend to create a monopoly. As a result, all kinds of transactions come within the scope of the bills, regardless of whether they have competitive significance. 2. The bills can create gross discriminations. The notice provisions of the bills apply only to corporations, and will therefore discriminate against corporations engaged in activities that compete with partnerships or other noncorporate bodies. The most dramatic example of this is in the underwriting and distribution of securities, now handled by incorporated investment bankers as well as by partnerships. Another example appears in H. R. 2143 which, in exempting from the notice provisions acquisitions by banks or insurance companies of assets or nonvoting securities for the purpose of investment, would facilitate such acquisitions by banks and insurance companies to the prejudice of private corporate investors, foundations, or charitable corporations who in making such investments would be subject to notice requirements. 3. The scope of the bills is so vast that, in spite of the specified exceptions, they still encompass many transactions carried out daily in this country and as a result subject the participants to the harassment and delays that notice provisions create. A few of such transactions are (i) the acquisition by railroads of enormous amounts (running into hundreds of million of dollars) of operating equipment in the course of a year, (ii) the purchase by a shipping company of any sizable vessel, (iii) the acquisition of valuable leases, (iv) the granting of patent licenses and (v) the acquisition by municipal corporations or public utilities of large tracts of land or rights of way through eminent domain or condemnation. 4. The requirement of H. R. 2143 that a transaction be delayed until 60 days after the required notice has been given is unrealistic, particularly in light of its application to relatively insignificant transaction that have no anticompetitive effect. The waiting period of S. 198 is no better in view of the fact that the purported 20-day period may always be extended to 90 days. In light of that right to extend, it must, as a practical matter, be treated as a 90-day waiting requirement. 5. From the point of view of definition, the bills have shortcomings. Important terms of the bills which are ambiguous because of lack of definition include "assets," "fair market value of the consideration paid," "voting stock," "voting rights," "stock in trade," "solely for investment" and "solely for office space or residential use." Particularly noteworthy are those provisions of the bills which would empower Government agencies to request "additional relevant information" an open invitation to fishing expeditions of the worst kind. 6. Serious consideration should be given to whether it is appropriate to divide responsibility under the bills between the Department of Justice and the FTC or between the Department of Justice and other regulatory agencies. It would seem that such dual jurisdiction would contribute to delay and the other usual difficulties of dual jurisdiction. 7. It is noteworthy that S. 198 heeds the suggestion of witnesses who testified before the O'Mahoney subcommittee last year, and indicates that some sanctions should be imposed to prevent unauthorized disclosure of information with tre mendous commercial and financial value that would be given to Government agencies if one of the bills were enacted. Even though the applicable provision in S. 198 is not wholly adequate, the absence of any such provision from H. R. 2143 is most disturbing. The sanction against improper disclosure contained in S. 722, introduced by Senator Sparkman on January 17, 1957, has much to be said for it as against the related provision in S. 198. 8. It is worth noting that the bills (said to enable antitrust enforcement agencies to receive advance notice of transactions in time to permit them to stay their harmful effects) have express reservations of the power to proceed against a transaction under the antitrust laws at any time regardless of the fact that advance notice of the transaction has been given. In this connection, some consideration should be given to the provision contained in H. R. 559, introduced on January 3, 1957, by Mr. Bennett, which would empower the United States district courts to adjudicate the legality of any proposed or consummated acquisition with respect to which the Attorney General or the FTC has threatened suit or which has otherwise been asserted to be illegal. LEONARD D. ADKINS, Chairman. Hon. EMANUEL CELLER, HOPKINS, SUTTER, OWEN, MULROY & WENTZ, Chairman, Committee on the Judiciary, House of Representatives, Washington, D. C. DEAR MR. CHAIRMAN: This is in further reference to your letter dated February 27, 1957, extending an opportunity to testify at the hearings before the House Antitrust Subcommittee on H. R. 264 and H. R. 2143, dealing with premerger notification of certain corporate mergers. Later I learned from the chief counsel of your subcommittee, Mr. Herbert N. Maletz, that the point on which I had sought an opportunity to express my views had been fully covered in the testimony of Hon. Frederick C. Nash, General Counsel of the Department of Commerce. Accordingly, I discussed with Mr. Samuel Pierce, associate counsel to the subcommittee, whether it would be permissible to file a written statement in lieu of a personal appearance, which I understand to be acceptable. It is respectfully requested that the enclosed statement be included in the printed record of the hearings of your subcommittee on this legislation. Sincerely yours, STATEMENT OF CHARLES W. DAVIS CHARLES W. DAVIS. Both H. R. 264 and H. R. 2143 recognize that in some cases it would be inappropriate to apply the requirement of prior notification of corporate mergers. H. R. 2143 adds to the authorization for waiver by the appropriate commission or board and the Attorney General of all or part of the notification and waitingperiod requirements in appropriate cases and in categories of cases. In addition, exemption from such requirements is provided for specific kinds of acquisitions in which notification and a waiting period apparently are deemed unnecessary to effectuate enforcement of section 7 of the Clayton Act. The inclusion in H. R. 2143 of the paragraphs providing for express exemption of these several types of acquisitions from the notification and waiting-period provisions was approved by Hon. Herbert Brownell, Jr., Attorney General of the United States, in his testimony before this subcommittee on March 6, 1957, in the interest of requiring notification of mergers that are likely to be significant and, at the same time, avoiding "an unnecessary burden on prosecuting staffs and the smaller businessmen by not requiring notification of mergers that are unlikely to be fraught with anticompetitive effects." The Attorney General also sug, gested broadening of certain of the exemptions and the addition of other exemptions. The ninth exemption provides that the notification and waiting period provisions shall not apply to the acquisition by a parent corporation of assets or stock of a subsidiary corporation in which it already owns more than 50 percent of the outstanding voting stock; nor do they apply to mergers of 2 corporations, if more than 50 percent of the outstanding voting stock of each is already owned by the same corporation. Thus, premerger notification and waiting period provisions would not apply to merger of a subsidiary into its parent, nor the merger of one subsidiary into another subsidiary of a common parent. The apparent purpose of paragraph (9), as explained by Attorney General Brownell, is that "they are already owned and controlled by the parent company, so there would be no purpose, I think, in requiring them to give notice." Surely there can be no question as to the wisdom of the apparent purpose and policy expressly to exempt from the premerger notification and waiting period provisions of H. R. 264 and H. R. 2143 transfers between corporations already under common control. Paragraph (9) of H. R. 2143, in its present form, however, requires amendment in order to effectuate this policy fully and effectively. Such amendment would permit the merger of a corporate parent into a subsidiary, more than 50 percent of the voting stock of which is owned by the parent. Such mergers are of fairly frequent occurrence, and it is believed that failure to add such an amendment might very well create doubt that a type of transaction so completely in accord with the apparent purpose and policy of paragraph (9) was intended to be exempt under the general authority to waive the premerger notification and waiting period provisions. For this reason it is urged that the subcommittee accept the recommendation of Hon. Frederick C. Nash, General Counsel, Department of Commerce, in his testimony before the subcommittee on March 6, 1957, in which the following discussion occurred among Mr. Nash, the chairman, and the chief counsel of the subcommittee: |