[Senate Report 106-385]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 761
106th Congress                                                   Report
                                 SENATE
 2d Session                                                     106-385
_______________________________________________________________________



 
         FEDERAL TRADE COMMISSION REAUTHORIZATION ACT OF 1999

                               __________

                              R E P O R T

                                 of the

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                                S. 1687




                August 25, 2000.--Ordered to be printed

   Filed, under authority of the order of the Senate of July 26, 2000

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
                           WASHINGTON : 2000

       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
                       one hundred sixth congress
                             second session

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
SLADE GORTON, Washington             JOHN D. ROCKEFELLER IV, West 
TRENT LOTT, Mississippi                  Virginia
KAY BAILEY HUTCHISON, Texas          JOHN F. KERRY, Massachusetts
OLYMPIA SNOWE, Maine                 JOHN B. BREAUX, Louisiana
JOHN ASHCROFT, Missouri              RICHARD H. BRYAN, Nevada
BILL FRIST, Tennessee                BYRON L. DORGAN, North Dakota
SPENCER ABRAHAM, Michigan            RON WYDEN, Oregon
SAM BROWNBACK, Kansas                MAX CLELAND, Georgia
                       Mark Buse, Staff Director
                   Ann H. Choiniere, General Counsel
               Kevin D. Kayes, Democratic Staff Director
                  Moses Boyd, Democratic Chief Counsel
                Gregg Elias, Democratic General Counsel
                                                       Calendar No. 761
106th Congress                                                   Report
                                 SENATE
 2d Session                                                     106-385

======================================================================




          FEDERAL TRADE COMMISSION REAUTHORIZATION ACT OF 1999

                                _______
                                

                August 25, 2000.--Ordered to be printed

   Filed, under authority of the order of the Senate of July 26, 2000

                                _______
                                

       Mr. McCain, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 1687]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 1687) ``A Bill to amend the 
Federal Trade Commission Act to authorize appropriations for 
the Federal Trade Commission'', having considered the same, 
reports favorably thereon with amendments and recommends that 
the bill do pass.

                          Purpose of the Bill

  The purpose of S. 1687 is to reauthorize the Federal Trade 
Commission (FTC) for fiscal years 2001 and 2002 and to make 
revisions to the process for reviewing merger applications.

                          Background and Needs

  The FTC was last reauthorized in 1996 by Public Law 104-216 
which provided $107 million for fiscal year 1997 and $111 
million for fiscal year 1998. The Commission was not authorized 
for fiscal years 1999 and 2000. It now seeks an authorization 
level of $164 million for fiscal year 2001 and $177 million for 
fiscal year 2002. The FTC argues that the additional funding is 
necessary to address a series of issues involving the Internet 
such as privacy and fraud. The FTC would also use the 
additional funding to police an ever increasing number of 
mergers and acquisitions.
  During the hearing for S. 1687, the FTC discussed the types 
of fraudulent activity that occur online and its efforts to 
prevent fraud. The range of illegal activity includes bogus 
investments, sure-fire cures and ``guaranteed'' money making 
opportunities. In addition to those traditional scams, 
criminals have developed new methods such as webcramming and 
hijacking modems to charge consumers for services they have 
neither requested nor approved. In response to these online 
scams, Chairman Pitofsky of the FTC testified that it has 
brought more than 100 law enforcement actions on behalf of 
millions of online consumers, created a database of consumer 
fraud complaints (Consumer Sentinel) for use by law 
enforcement, and used ``surf days'' to identify more than 4,000 
sites with dubious claims or online scams.\1\
---------------------------------------------------------------------------
    \1\ Hearing on the Reauthorization of the Federal Trade Commission, 
S. 1687, before the Subcommittee on Consumer Affairs, Foreign Commerce 
and Tourism, Senate Commerce Committee, 106th Cong. (February 9, 2000) 
(Statement of Robert Pitofsky, Chairman of the Federal Trade 
Commission).
---------------------------------------------------------------------------
  During the hearing, the FTC also discussed the growing number 
of merger reviews conducted each year. Chairman Pitofsky 
testified that there were three times as many merger filings in 
1999 as in 1991 and that the total value of assets acquired 
through acquisition was 11 times as great as just 8 years 
ago.\2\
---------------------------------------------------------------------------
    \2\ Id.
---------------------------------------------------------------------------
  The Committee also heard testimony regarding the FTC's 
premerger review process. Under the Hart-Scott-Rodino Act (15 
U.S.C. 18), merging companies of a certain size must file 
premerger notifications with the Antitrust Division of the 
Department of Justice and the FTC. The purpose of the Act is to 
provide federal agencies with the opportunity to review mergers 
for anti-competitive effects before they become final. The Act 
also allows the agency to request more detailed information 
through a second request process before approving a merger. 
During the hearing the Committee heard testimony from several 
antitrust experts expressing their concerns about the merger 
review process and the second request process.
  Attorneys representing the U.S. Chamber of Commerce and the 
National Association of Manufacturers expressed their concerns 
that the second request process is extremely burdensome and 
requires reform. In short, they believe that in many instances 
second requests are overly broad requiring the costly 
production of documents that are not relevant to the review.
  Albert Foer of the American Antitrust Institute testified 
that the institute did not agree that the second request 
process was overly burdensome. However, he stated that if 
reforms are necessary the Committee should encourage the 
agencies to build upon internal reforms perhaps creating a more 
formally defined route for appeal within each agency 
structure.\3\
---------------------------------------------------------------------------
    \3\ Hearing, Supra note 1 (testimony of Albert Foer of the American 
Antitrust Institute).
---------------------------------------------------------------------------
  The Antitrust Section of the American Bar Association 
recently reviewed the Hart-Scott-Rodino Act. In an April 
report, the Section noted that while second requests are 
generally less than 3 percent of all transactions, they are a 
significant step increasing the costs to both the agency and 
the parties.\4\ The report encouraged the agency to move 
forward with internal reforms to the process and was supportive 
of Congressional action to ensure that reforms were lasting and 
practical.\5\
---------------------------------------------------------------------------
    \4\ Rep. of the Sec. Of the Antitrust Law on Proposed Hart-Scott-
Rodino Antitrust Improvement Act Amendments, A.B.A. Sec. Antitrust Law 
11 (2000).
    \5\ Id.
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                          Legislative History

  On October 5, 1999, S. 1687 was introduced by Chairman 
McCain. On February 9, 2000, Senator Ashcroft, Chairman of the 
Subcommittee on Consumer Affairs, held a hearing on S. 1687. On 
June 15, 2000, the bill was amended and reported from the 
Committee.

                            Estimated Costs

  In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:
                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 11, 2000.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1687, the Federal 
Trade Commission Reauthorization Act of 2000.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mark Hadley.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

               congressional budget office cost estimate

S. 1687--Federal Trade Commission Reauthorization Act of 2000

    Summary: S. 1687 would authorize appropriations for the 
Federal Trade Commission (FTC) for fiscal years 2001 and 2002. 
The bill also would direct the FTC and the Department of 
Justice (DOJ) to examine the process each agency uses to review 
merging businesses and to eliminate reporting burdens, 
duplication and delays where possible. Finally, the bill would 
require the FTC and the DOJ to report on the burden to private 
industry caused by the agencies' review of mergers.
    Based on the historical spending patterns of the FTC, CBO 
estimates that implementing S. 1687 would cost $339 million 
over the 2001-2005 period. S. 1687 would not affect direct 
spending or receipts; therefore, pay-as-you-go procedures would 
not apply.
    S. 1687 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.
    Estimated cost to the Federal Government: For this estimate 
CBO assumes that the amounts authorized by the bill will be 
appropriated near the start of each year. The estimated 
budgetary impact of S. 1687 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                By fiscal year, in millions of dollars
                                                     -----------------------------------------------------------
                                                        2000      2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Gross FTC spending under current law:
    Estimated budget authority \1\..................       125         3         0         0         0         0
    Estimated outlays...............................       123        13         0         0         0         0
Proposed changes:
    Authorization level.............................         0       162       177         0         0         0
    Estimated outlays...............................         0       149       176        14         0         0
Gross FTC Spending Under S. 1687:
    Authorization level.............................       125       165       177         0         0         0
    Estimated outlays...............................       123       162       176        14         0         0
----------------------------------------------------------------------------------------------------------------
\1\ The 2000 level is the gross amount appropriated for that year. Such spending is offset by collections of
  fees that cover most of the agency's costs. The 2001 amount is the CBO estimate of the funds provided as an
  advance appropriation for that year.

    Basis of estimate: Companies considering merging with 
another firm or acquiring another firm must file notice of 
their intentions with the Federal Trade Commission (FTC). 
Companies pay fees of $45,000 for each such filing. In 1999 and 
2000, these collections were recorded as an offset to the 
appropriated spending of the FTC and the Antitrust Division of 
the Department of Justice, with one-half of the collections 
credited to each agency. Each agency collected about $97 
million in 1999. Because the FTC is authorized to collect and 
spend these fees without further appropriation action, they are 
not shown in the table.
    S. 1687 would authorize appropriations for the FTC totaling 
about $165 million in 2001 and $177 million in 2002. Based on 
the historical spending pattern of the FTC, CBO estimates S. 
1687 would cost $339 over the 2001-2005 period. Based on 
information from the FTC, CBO estimates that the other 
provisions would have no significant budgetary impact.
    Pay-as-you-go considerations: None.
    Intergovernmental and private-sector impact: S. 1687 
contains no intergovernmental or private sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Estimate prepared by: Federal Costs: Mark Hadley; Impact on 
State, Local, and Tribal Governments: Shelley Finlayson; and 
Impact on the Private Sector: Jean Wooster.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                      Regulatory Impact Statement

  In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported:
  While S. 1687 does not create any new programs, it does 
require the FTC and the Department of Justice to review and 
reform the merger review process. The purpose of the review is 
to eliminate unnecessary burdens, costly duplication and undue 
delay, in order to achieve a more effective and more efficient 
merger review process. Since the purpose of the Act is to 
streamline the process, the Committee does not expect the 
legislation will have additional regulatory impact, or result 
in additional reporting requirements for businesses regulated 
by both agencies. In fact, the legislation could result in less 
paperwork for businesses complying with the merger review 
process. The legislation will have no further effect on the 
number or types of individuals and businesses regulated, the 
economic impact of such regulation, or the personal privacy of 
affected individuals.

                      Summary of Major Provisions

  S. 1687 will authorize the FTC at $164 million for fiscal 
year 2001 and $177 million for fiscal year 2002. It would also 
direct the FTC to work with the Attorney General to conduct an 
internal review of the merger review process and make changes 
to eliminate unnecessary procedures and streamline the process. 
The FTC and the Attorney General would be directed to appoint 
an official outside of the review process to review second 
requests by the FTC and the Attorney General to ensure that the 
information is not burdensome or duplicative. Finally, the bill 
would require the agency as part of an existing annual report 
to provide information which would help Congress measure the 
effectiveness of the reforms.

                      Section-by-Section Analysis


Section 1. Short title

  Section 1 provides that the bill may be cited as the 
``Federal Trade Commission Reauthorization Act of 2000''.

Section 2. Reauthorization

  Section 2 authorizes expenditures by the FTC of $164.6 
million in FY 2001 and $177.46 in FY 2002.

Section 3. Information and documentary requests

  Subsection (a) requires the Attorney General and the FTC to 
designate a senior official not directly involved in the merger 
review process to review second requests and hear petitions to 
determine if the requested material is unreasonably burdensome 
or duplicative and if the request has been fulfilled.
  Subsection (b) directs the Attorney General and the FTC to 
establish reasonable deadlines for expedited review of 
petitions.
  Subsection (c) directs the Attorney General and the FTC to 
conduct an internal review of the merger review process and 
implement reforms to eliminate unnecessary burdens and achieve 
a more effective and efficient merger review process.
  Subsection (d) requires the Attorney General and the FTC to 
amend their respective guidelines and agency rules where 
appropriate to implement the reforms developed from the review 
within 129 days of enactment.
  Subsection (e) requires the Attorney General and the FTC to 
report to Congress on the reforms adopted, steps taken to 
implement the reforms and the effect of the reforms within 180 
days of enactment.

Section 4. Annual reports

  Section 4 requires the Attorney General and the FTC to 
include additional material to monitor the effectiveness of 
these reforms in annual reports to Congress. The information 
includes: the number of second request petitions filed; the 
time it takes for parties to comply with a second request; the 
number of petitions for review filed; the amount of material 
submitted pursuant to second request; and the number of second 
requests made but not complied with prior to resolution of the 
case.

                        Changes in Existing Law

  In compliance with paragraph 12 of rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill, 
as reported, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new material is printed 
in italic, existing law in which no change is proposed is shown 
in roman):

                      FEDERAL TRADE COMMISSION ACT

                            [15 U.S.C. 57c]

                    authorization of appropriations

  Sec. 25. There are authorized to be appropriated to carry out 
the functions, powers, and duties of the Commission not to 
exceed $92,700,000 for fiscal year 1994; not to exceed 
$99,000,000 for fiscal year 1995; not to exceed $102,000,000 
for fiscal year 1996; not to exceed $107,000,000 for fiscal 
year 1997; [and] not to exceed $111,000,000 for fiscal year 
[1998.] 1998: not to exceed $164,600,000 for fiscal year 2001; 
and not to exceed $177,460,000 for fiscal year 2002.

                                  
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