[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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