[Congressional Record Volume 146, Number 134 (Tuesday, October 24, 2000)]
[Senate]
[Pages S10920-S10921]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PASSAGE OF S. 1854
Mr. LEAHY. Mr. President, last Thursday, the Senate passed the Hatch-
Leahy-DeWine-Kohl substitute amendment to S. 1854, the ``Hart-Scott-
Rodino Antitrust Improvements Act,'' that will make significant
improvements to this important antitrust law. Section 7 of the Clayton
Act, as amended by the Hart-Scott-Rodino Act of 1976 (HSR), requires
companies that plan to merge to notify the Justice Department's
Antitrust Division and the Federal Trade Commission of their intention
and submit certain information. HSR pre-merger notifications provide
advance notice of potentially anti-competitive transactions and allow
the antitrust agencies to block mergers before they are consummated,
which is easier than undoing them after-the-fact.
Since passage of the Hart-Scott-Rodino Act, this law has worked well
to help the American economy flourish, despite larger and more complex
mergers and consolidations within and among different industries. The
Hatch-Leahy-DeWine-Kohl substitute amendment to S. 1854, the ``Hart-
Scott-Rodino (HSR) Antitrust Improvements Act,'' will update this law
and make it work even better.
Specifically, the substitute would raise the minimum threshold for
the ``size of the transaction'' required to provide HSR notifications
from $15,000,000 to $50,000,000. Thus, no pre-merger filing will be
required if the transaction is valued at less than $50,000,000. A pre-
merger filing would always be required if the size of the transaction
is valued at more than $200,000,000. With regard to transactions valued
at between $50,000,000 and $200,000,000, the amendment would require
pre-merger filing if the total assets or net annual sales of one party
are over $100,000,000 annually while the other party's total assets or
net annual sales are over $10,000,000 annually. The thresholds may be
adjusted by the FTC every three years to reflect the percentage change
in the gross national product for that period. These threshold changes
are supported by the antitrust agencies.
The remaining part of the substitute directs the Federal Trade
Commission and the DOJ's Antitrust Division to implement regulations to
improve the manner in which these agencies obtain information as part
of the review of a proposed merger. The antitrust agencies do not
object to these parts of the substitute amendment.
As explained in more detail below, this substitute addresses the most
significant flaws in the original bill.
To appreciate the issues addressed in the bill, the pre-merger review
procedures currently in effect must be understood. Upon receipt of the
merger notification, the agency takes a ``quick look'' and determines
whether to open a Preliminary Investigation, PI. A PI may take from a
few weeks to several months to determine whether to close the PI or
proceed with a Second Request or Civil Investigative Demand, CID, for
additional information. Second Requests were issued in only 2.5 percent
of reported transactions in 1999.
Under statutory time limits, the Second Request must be made within
30 days from the initial filing. In addition, only a single Second
Request is allowed so it must be complete. This Second Request extends
the waiting period before the merger may be completed for up to 20 days
from the time that all responsive documents are submitted to the
agency. Second requests for voluminous documents, combined with the
requirement that ``all responsive documents'' have been supplied by the
companies to the agency, can cause substantial delays in the waiting
period and the time when a merger may be completed.
To address business concerns over broad second requests and the delay
such requests may cause, the original bill substantially limited the
scope of agencies' second requests and authorized judicial review of
both the scope of and compliance with these critical requests, as
detailed below.
First, the original bill would have limited the scope of second
requests to information or documents ``not unreasonably cumulative or
duplicative'' and that ``do not impose a burden or expense that
substantially outweighs the likely benefit of the information to the
agency.'' The antitrust agencies raised significant, valid questions
about whether these limitations were workable. In particular, at the
time a second request is issued, an agency generally cannot evaluate
the cost/benefit tradeoff because it does not know the costs of
production, and has only limited knowledge about the potential benefits
of the information for the investigation (in part because the
anticompetitive issues are often still indefinite). The documents
themselves provide this information.
The bill would also have required the antitrust agency to provide,
with each second request, a specific summary of the competitive
concerns presented by the proposed acquisition and the relation between
such concerns and the second request specifications. The antitrust
agencies questioned this requirement because anticompetitive concerns
are still often general and evolving at the time a second request is
issued. Consequently, a specific summary may not be possible at that
time and would likely be incomplete since additional competitive
concerns may be discovered during the investigation. Furthermore,
according to the agencies, this requirement was unnecessary since they
ordinarily provide a general explanation of their concerns and provide
more specific information as it develops, in face-to-face conferences
between parties (or their counsel) and investigating staff.
Second, the original bill would have limited the agencies' ability to
claim that the production of documents in response to a second request
is deficient only if the deficiency ``materially impairs the ability of
the agency to conduct a preliminary antitrust review.'' This proposed
standard for claiming deficiency (that is, for requiring further
document production) is higher than the ordinary standard for discovery
and would limit the agency's ability to investigate, especially given
HSR's stringent time frames and the fact that the second request is the
single opportunity to seek information in a premerger review. This
could have seriously harmed the agency's posture in court, as courts
often examine the entire substance of the agency's case even in a
preliminary injunction action.
Finally, the original bill would have authorized a merging company to
seek review by a magistrate judge of both the scope of the second
request and any claim of deficient production. The magistrate was
required to apply the scope and deficiency standards described above,
which impose more limits on antitrust agencies than general civil
discovery rules. Moreover, magistrates were unlikely to be familiar
with the types of information that form the basis for the complex
antitrust analysis required in predicting likely future competitive
effects of a proposed transaction--a shortcoming with possible adverse
consequences for antitrust agencies seeking relevant information for an
investigation since
[[Page S10921]]
this experience is particularly important in light of HSR's special
time constraints and the agencies' single opportunity to seek documents
prior to the merger.
The substitute amendment eliminates these three problematic
procedural limitations on the second request investigation process
contained in the original bill. Instead, the Hatch-Leahy-DeWine-Kohl
substitute amendment directs the agencies to reform the merger review
process to eliminate unnecessary delay, costly duplication and undue
delay. In addition, the agencies are directed to designate senior
officials within the agencies to review the second requests to
determine whether the requests are burdensome or duplicative and
whether the request has been substantially complied with by the merging
companies.
These changes are consistent with reforms that the FTC and Antitrust
Division already have underway. Indeed, the FTC on April 5, 2000, and
the Antitrust Division the next day, announced their adoption of new
procedures and other initiatives to improve the premerger ``second
request'' investigation process to make the process more efficient for
both businesses and the agencies. I commend both agencies for their
efforts in this regard and look forward to working with them to ensure
that implementation of their regulations proceeds smoothly.
The Hatch-Leahy-DeWine-Kohl substitute amendment also imposes a
reporting requirement on the FTC to provide the Congress with
information on the number of HSR notices filed and on the reviews
conducted by the antitrust agencies.
The antitrust agencies did not support the fee structure in the
Committee reported bill since, in their view, the level of fees
authorized in the substitute amendment would not provide them with the
ability to collect sufficient fees to meet their budget request for FY
2001. Although these agencies are funded by direct appropriations and
not by their fees, the reality is that the appropriations to these
agencies usually corresponds to the level of the fees collected.
Nevertheless, the Committee reported bill authorized the collection of
sufficient fees to be revenue neutral and at a level that would enable
the agencies, according to the CBO, to collect fees at a level
amounting to an increase of ten percent over the agencies' last year's
budget.
The Hatch-Leahy-DeWine-Kohl substitute amendment eliminates reference
to the revised fee structure. I intend to work with my colleagues and
the antitrust agencies, as I have in the past, to ensure that they
receive all the funding necessary to support their mission and carry
out their important work through the appropriations process.
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