"Nothing in this section as amended shall apply to any transaction or proposed transaction which is required to be authorized by the Civil Aeronautics Board, Federal Communications Commission, Federal Power Commission, Interstate Commerce Commission, the Securities and Exchange Commission in the exercise of its jurisdiction under section 79 of this title, the United States Maritime Commission, or the Secretary of Agriculture under any statutory provision vesting such power in such Commission, Secretary, or Board." FEDERAL POWER COMMISSION, By JEROME K. KUYKENDALL, Chairman.' (The letter dated May 22, 1956, from the Small Business Administration is as follows:) Hon. JOSEPH C. O'MAHONEY, Acting Chairman, Subcommittee on Antitrust and Monopoly, Washington, D. C. MAY 22, 1956. DEAR SENATOR O’MAHONEY: Mr. Donald P. McHugh, chief counsel of the Subcommittee on Antitrust and Monopoly, in his letter of May 17, 1956, has asked the views of the Small Business Administration on H. R. 9424, S. 3341, and S. 3424. The three bills in question amend the Clayton Act to prohibit certain bank mergers and to require prior notification of certain corporate mergers. H. R. 9424, and S. 3424 appear to be identical. S. 3341 differs in its terms from the two former bills, but generally is similar in its effect. All three proposals amend the Clayton Act to make its provisions applicable to bank mergers. In addition, notice is required from certain corporations to appropriate Government agencies 90 days in advance of a proposed merger. The Clayton Act is also amended to provide that such merging companies must supply necessary and relevant information to the Government; and, further, that the Federal Trade Commission, as well as the Attorney General, may, when appropriate, bring suit in the United States district court to restrain mergers or proposed mergers in violation of the Clayton Act. There appears to be substantial agreement that the object of this legislation is a desirable one. The report of the Attorney General's National Committee To Study the Antitrust Laws, March 31, 1955, pointed out, on page 117, that the intent of section 7 of the Clayton Act is to cope with monopolistic tendencies in their incipiency well before they have attained such effects as will justify a Sherman Act proceeding. The Economic Report of the President, January 1956, recommended, among other things, that Congress amend the antitrust laws to extend Federal regulation to all mergers of banking institutions and to require advance notice of proposed mergers. It appears that, in general, the intention of these bills are in accord with the President's recommendations and the aims of section 7 of the Clayton Act. Insofar as small business is concerned, to the extent that H. R. 9424, S. 3424, or S. 3341 facilitate the enforcement of section 7 of the Clayton Act, the interests of small business will be served. We do not believe that small business I will be affected adversely by the requirement of prior notice of mergers, regardless of whether such requirement is applied to merging concerns who have, in the aggregate, capital, surplus, and undivided profits of $1 million as is proposed in S. 3341, or $10 million. We note, however, that S. 3424 and H. R. 9424 which contain the $10 million limitation also provide that the 90-day waiting period may be waived in appropriate cases. This would appear to be a useful provision, particularly if it were decided that the exemption to be applied to the merging firms should be as low as $1 million. The Small Business Administration concurs with the objectives of the three bills under consideration. It takes no position with respect to the technical sufficiency of the proposed legislation. In this regard, as well as in such matters as the dollar amount of any exemption and the penalties to be provided in event of violation, SBA would be guided by the advice of the Department of Justice and the Federal Trade Commission, the agencies charged with the responsibility for enforcement of the Clayton Act. The Bureau of the Budget has no objection to the submission of this report. Sincerely yours, WENDELL B. BARNES, Administrator. (Letter dated May 22, 1956, from the Department of Agriculture, is as follows:) Hon. JOSEPH C. O'MAHONEY, MAY 22, 1956. Acting Chairman, Subcommittee on Antitrust and Monopoly, Committee on the Judiciary, United States Senate. DEAR SENATOR O'MAHONEY: This is in response to the letter of May 17, 1956, from Donald P. McHugh, chief counsel, requesting a report from this Department on H. R. 9424, S. 3341, and S. 3424. H. R. 9424 and S. 3424 are similar bills and would amend sections 7 and 15 of the Clayton Act, as amended. These bills would amend section 7 so as to require prior notification to Government agencies of certain corporate mergers. They would require such notifications to be made to the Interstate Commerce Commission by common carriers subject to the Interstate Commerce Act, as amended, the Federal Communications Commission by common carriers engaged in wire or radio communication or radio transmission of energy, the Civil Aeronautics Board by air carriers and foreign air carriers subject to the Civil Aeronautics Act of 1938, the Federal Reserve Board by banks, banking associations, and trust companies, and the Federal Trade Commission by corporations engaged in all other character of commerce. H. R. 9424 and S. 3424 would also amend section 15 of the Clayton Act, as amended, so as to authorize the Federal Trade Commission to obtain a temporary injunction restraining certain mergers by corporations subject to its jurisdiction pending administrative proceedings with reference thereto before the Commission. S. 3341 would amend sections 7 and 11 of the Clayton Act, as amended, and section 1905 of title 18 of the United States Code. The amendment of section 7 would require the merger notifications to be made to the Attorney General and to the Federal Trade Commission. The bill would amend section 11 of the Clayton Act, as amended, so as to authorize the Federal Trade Commission to obtain a temporary injunction restraining certain mergers by any corporation pending administrative proceedings with reference thereto before the Commission. S. 3341 would also amend section 1905 of title 18 of the United States Code so as to make the provisions of such section applicable to the disclosure by employees of the United States of information contained in the required premerger reports. In 1950 section 7 of the Clayton Act was amended so as to prohibit, in addition to monopolistic capital stock acquisitions, the monopolistic acquisition of the assets of a corporation by another corporation. Section 11 was amended to provide for the enforcement of the prohibitions of section 7 by the agencies referred to above in their respective fields. The Federal Trade Commission was designated to handle the enforcement work in connection with corporations not specifically regulated by the other agencies. The Department of Agriculture is particularly interested in these bills because of their effect upon the regulation of the meat packing industry by the Secretary of Agriculture provided for by the Packers and Stockyards Act, 1921, as amended. Section 202 of the act contains comprehensive regulatory provisions relating to packers, prohibiting among other things packers from buying, selling, transferring, or receiving "any article for the purpose or with the effect of apportioning the supply * * * restraining commerce *** creating a monopoly ** * manipulating or controlling prices * * *." The act provides for administrative proceedings before the Secretary in connection with alleged violations and authorizes the issuance of cease-and-desist orders in appropriate cases. It was the intent of the Congress in passing the act, as expressed in section 406 (b) thereof, that meatpackers which previously had been subject to regulation by the Federal Trade Commission should be subject instead to the jurisdiction of the Secretary of Agriculture and that subsequent to the enactment of the statute the Commission should have no power or jurisdiction with respect to packers regulated under the act. We believe that packers should be subject to the same type of provisions with respect to mergers as are other corporations. While the Packers and Stockyards Act contains comprehensive provisions dealing with monopolistic acquisitions by packers, no provision in the statute requires premerger notifications to the Secretary by them, the act contains no specific divestiture authority, and no provision specifically authorizes proceedings by the Secretary for temporary injunctions in connection with mergers. We believe it would be desirable to name the Secretary in the proposed amendments discussed above so that these provisions would be applicable to the jurisdiction of the Secretary over packers. As presently drawn, the bills would seem to require the premerger notifications by packers to be made to the Federal Trade Commission which, as noted above, was specifically divested of jurisdiction over packers by the Packers and Stockyards Act. Moreover, section 11 by not providing for enforcement in the case of packers by the Secretary of Agriculture creates a question as to jurisdiction between the Secretary of Agriculture and the Federal Trade Commission. In order to make the provisions with reference to mergers by packers uniform with those relating to other corporations and to clarify the jurisdictional matters in connection therewith, we recommend that the changes set forth in the attachment hereto be made in the bills. The Bureau of the Budget advises that there is no objection to the submission of this report. Sincerely yours, EARL L. BUTZ, Acting Secretary. PROPOSED CHANGES IN H. R. 9424 1. Page 2, line 3, after the word "Commission" insert the phrase ", or the Secretary of Agriculture under title II of the Packers and Stockyards Act, 1921, as amended (42 Stat. 159, as amended; 7 U. S. C. 181 et seq.)." 2. Page 2, line 17, and page 3, lines 1 and 12, after the word "Board" insert the words "or Secretary". 3. Page 3, line 7, after the word "Commission," insert the words "the Secretary of Agriculture,". 4. Page 4, line 20, and page 5, line 17, after the word "Commission" insert the words "or the Secretary of Agriculture". 5. Page 4, line 22, delete the word "its" and insert the word "the" and after the word "jurisdiction" insert the phrase "of the Federal Trade Commission, or of the Secretary of Agriculture under title II of the Packers and Stockyards Act, 1921, as amended (42 Stat. 159, as amended; 7 U. S. C. 181 et seq,),". 6. Page 5, line 4, after the word "Commissioner" insert the words "or Secretary". 7. Page 5, lines 6 and 8, after the word "Commission" insert the words "or Secretary". 8. Page 5, line 8, delete the words "of its". 9. Page 5, line 8, delete the word "it" and insert the words "the Commission or the Secretary". 10. Add a new section 3 to read: "SEC. 3. (a) Section 11 of said Act is amended by inserting the phrase 'in the Secretary of Agriculture where applicable to packers as defined in title II of the Packers and Stockyards Act, 1921, as amended (42 Stat. 159, as amended; U. S. C. 181 et seq.),' immediately before the last phrase in the first paragraph of such section. "(b) Section 11 of such Act is further amended by inserting the words 'or Secretary' after the word 'Board' wherever such word appears in the section.” PROPOSED CHANGES IN S. 3424 Changes similar to those recommended above in H. R. 9424 should be made in S. 3424. PROPOSED CHANGES IN S. 3341 1. Page 2, line 1, after the word "Commission" insert the phrase ", or the Secretary of Agriculture under title II of the Packers and Stockyards Act, 1921, as amended (42 Stat. 159, as amended; 7 U. S. C. 181 et seq.)." 2. Page 3, line 2, after the word "Commission" insert the phrase ", or to the Attorney General and to the Secretary of Agriculture if the corporation is subject to the jurisdiction of the Secretary under title II of the Packers and Stockyards Act, 1921, as amended,". 3. Page 3, line 4, after the word "Commission," insert the phrase ", or to the Attorney General and to the Secretary of Agriculture as the case may be,". 4. Page 3, lines 5 and 13, and page 5, lines 2, 3, 4, and 6, after the word "Commission" insert the words "or the Secretary." 5. Page 4, line 19, after the word "Commission" insert the words "or the Secretary of Agriculture." 6. Page 4, line 21, after the word "corporation" insert the phrase "subject to the jurisdiction of the Federal Trade Commission, or of the Secretary_of Agriculture under title II of the Packers and Stockyards Act, 1921, as amended (42 Stat. 159, as amended; 7 U. S. C. 181 et seq.),". 7. Page 5, line 8, after the word "Commission" insert the words "or the Department of Agriculture." 8. Page 5, line 9, delete the word "it" and insert the words "the Commission or the Secretary." 9. Add a new paragraph (d) to section 1 of the bill to read: "(d) (1) Section 11 of such act is amended by inserting the phrase 'in the Secretary of Agriculture where applicable to packers as defined in title II of the Packers and Stockyards Act, 1921, as amended (42 Stat. 159, as amended; 7 U. S. C. 181 et seq.),' immediately before the last phrase in the first paragraph of such section. "(2) Section 11 of such Act is further amended by inserting the words 'or Secretary' after the word 'Board' whereever such word appears in the section." NOTE. The following typographical errors have been noted: 1. H. R. 9424-page 5, line 4, the word "Commissioner" should be "Commission". 2. S. 3341-page 5, line 8, the word "to" should be "by". (The letter dated May 24, 1956 from the Federal Communications Commission is as follows:) Hon. DONALD P. MCHUGH, MAY 24, 1956. Chief Counsel, Subcommittee on Antitrust and Monopoly, Committee on the Judiciary, United States Senate, Washington, D. C. DEAR MR. MCHUGH: In response to your letter of May 17, 1956, enclosed are che Commission's comments on H. R. 9424, S. 3341, and S. 3424, bills to amend the Clayton Act to require prior notification of certain corporate mergers. Should you or your committee desire any additional information, the Commission will be glad to furnish it. The Bureau of the Budget has advised us that it has no objection to the submission of these comments. Sincerely yours, GEORGE C. MCCONNAUGHEY, Chairman. COMMENTS OF THE FEDERAL COMMUNICATIONS COMMISSION ON H. R. 9424, S. 3341 AND S. 3424, BILLS TO AMEND THE CLAYTON ACT BY REQUESTING PRIOR NOTIFICATION OF CORPORATE MERGERS H. R. 9424, already passed by the House and S. 3424, now before the Senate, are identical bills to amend sections 7 and 15 of the Clayton Act (15 U. S. C. pars. 18, 21) to require prior notification of certain corporate mergers. These bills would amend section 7 to require corporations proposing to acquire the stock or assets of another corporation, where the combined capital, surplus and undivided profits of the two corporations exceed $10 million to notify the appropriate regulatory agency and the Attorney General or in the case of nonregulated corporations, the Federal Trade Commission and the Attorney General, 90 days in advance of the proposed transaction. S. 3341, a similar bill, would make prior notification to the Federal Trade Commission and the Attorney General mandatory in cases where either the acquiring or acquired corporation has capital, surplus, or undivided profits aggregating more than $1 million. In all three bills, the prior notification requirement is intended to cover, primarily, transactions which are in essence a merger or its equivalent. In order to insure notification of all such transactions the third paragraph of the bill provides that although notification is not required from a corporation purchasing stock solely for investment, or in the ordinary course of its business, such purchases will be subject to the notification requirement if the stock acquired or held exceeds 5 percent of the outstanding stock or other share capital of the corporation in which the investment is made, or if the assets acquired equal more than $5 million or more than 5 percent of the capital, surplus, and undivided profits of either the acquired or acquiring corporation, whichever is less. The last paragraph of section 7 of the Clayton Act is unchanged by any of the pending legislation. It provides: "Nothing contained in this section shall apply to transactions duly consummated pursuant to authority given by the *** Federal Communications Com79425-56——33 mission * * * under any statutory provisions vesting such power in (such) Commission * **" Section 310 (b) of the Communications Act of 1934 makes mandatory prior Commission approval of the transfer of control of any corporation holding any type of radio permit or license. Therefore, the proposed legislation would not affect the jurisdiction of the Commission or present procedures with respect to transfers of corporate stock which amount to transfers of radio license control. The only effect of the proposed legislation on corporations regulated by the Commission would be to require prior notification to the Federal Trade Commission and the Attorney General of transfers which do not amount to changes in control, but which do come within the standards set up by the 5-percent $5 million clause, or, pursuant to S. 3341, the $1 million standard. The proposed amendment may, however, raise some difficulties when applied to common carriers subject to the jurisdiction of the Commission. At the present time, telephone companies subject to the Communications Act, may, pursuant to section 221 (a), in their discretion, make application for authority to acquire the whole or any part of another telephone company. If such an application is made, section 221 (a) makes mandatory a public hearing by the Commission; if the Commission is satisfied that the proposed acquisition will serve the public interest, "*** it shall certify to that effect; and thereupon any act or acts of Congress making the proposed transaction unlawful shall not apply. ** *" Inasmuch as the three bills now being considered by Congress require prior notification and at the same time provide no real guaranty of protection against the operation of the antitrust laws, it would appear that the most expedient way for telephone companies acquiring stock in, or the assets of, other telephone companies to gain maximum protection from liability under the antitrust laws would be to make application for 221 (a) certificates under the Communications Act. It would also appear that the number of 221 (a) hearings would increase, resulting in an increase in the workload of the present Commission staff. If this possibility should materialize, the Commission might, in the future, require additional funds and staff. The Commission has long been of the opinion that mandatory public hearings pursuant to section 221 (a) are unnecessary, and has recommended an amendment to that section which would require public hearings only in cases in which the Commission determines that the public interest would be served thereby. The Commission is of the opinion that particularly if the Congress favors the passage of these proposed amendments to section 7 of the Clayton Act, the Commission's suggested amendment to section 221 (a) of the Clayton Act would be most helpful. The amendment to section 15 of the Clayton Act authorizes the Federal Trade Commission to file suit in the United States district court, before a merger is consummated, to prevent violations of section 7 and also to seek maintenance of the status quo after the merger has been completed. This amendment does not appear to affect the jurisdiction of this Commission in any way. In conclusion, except for the reservations indicated above with respect to the possible effect of this proposed legislation on the application of section 221 (a) of the Communications Act of 1934, the Commission has no objection to the three bills under consideration. They involve questions of national policy which should be resolved by the Congress. (A letter dated May 22, 1956 from the National Association of Motor Bus Operators, with attached statement is as follows:) Hon. JOSEPH C. O'MAHONEY, Acting Chairman, Subcommittee on the Judiciary, United States Senate, Washington, D. C. DEAR SENATOR O'MAHONEY: We are grateful for the opportunity to express the views of the association on H. R. 9424, S. 3341 and S. 3424, the premerger notification bills pending before your subcommittee. Since our comments are limited to what we believe to be a single, serious and common defect in each of these bills, we have determined that, rather than to present them through a witness and thereby impose upon the time of your subcommittee, we would submit the enclosed statement. We respectfully request that it be incorporated into the record of the hearings. Very truly yours, AUGUST W. KOEHLER, |