Priority 5.—(Commercial & Industrial Equipment, Machinery and Supplies) This is an agglomeration of a number of heavy industry groupings which is more or less in a state of flux. The individual investigations included often develop into a separate industry grouping and are then removed from this category, while new matters are being added from time to time. It is believed that our original estimates for Fiscal 1970 and 1971 are realistic and adequate and no change is recommended. The breadth of this project encompasses many industries primarily in the broad manufacturing area. Since present indications are that merger activity in this area is not abating, the project is a continuing one which will probably require comparable man-power in FYs 1972-1974. Priority 6.--(Metals, Minerals and Mining) Hearings in the Kennecott matter have concluded and the preparation of proposed findings and briefs will be accomplished during FY 1970. Whatever initial decision is issued will undoubtedly be appealed and will create a continuing demand in FY 1971 upon the manpower resources of the Division. Considerable merger activity in the minerals and mining field is expected in the future as the ownership and control of natural resources becomes more important. With this in view, the Fiscal 1970 requirement has been raised to 4 man-years, with an additional increase to 5 man-years in Fiscal 1971. However, hopefully we will be past midstream with this project by FY 1972 when the manpower allocation can be reduced 2 or 3 man-years. Answering specifically regarding relative times for litigation, the experience of this Division is that merger cases generally take a minimum of one year and on an average of 11⁄2 years with the Hearing Examiner (from original assignment, pre-trial, trial, findings and briefs and initial decision); and an average of at least one year with the Commission (from notice of intention to appeal, briefs, oral argument and decision by the Commission). Priority 7.-(Lumber & Building Supplies) Like the preceding category, this involves control of natural resources, or raw timber, by the manufacturers of finished building products. The specific goal sought in this area is to preserve sources of supply to the small, non-integrated manufacturers insofar as is possible through enforcement of the Clayton Act. In this era of short money supply, with the building industry frozen due to lack of financial support, it is most important to preserve whatever competition exists, in the hope that when business improves there will be ample opportunity for entry and growth by the independents. The bringing of one or more test cases, as suggested, usually requires more than average manpower, and is one reason the relatively high estimate of 3 man-years for Fiscal 1970 and 4 man-years for 1971 has been presented. We are just initiating this project, consequently it will likely require at least comparable manpower in FYS 1972-1974. Priority 8.-(Apparel) This category is a favorite target of the conglomerateminded company because there are so many potential plums to be picked and because such a huge industry supports a large cash flow which is tempting. It is relatively safe from antitrust laws because merger market shares are usually quite small, making it difficult to prove substantial competitive effect. However, the number of mergers in the industry and the trend toward vertical integration make it important to maintain our interest in it, and to keep current of any trends. The 3 man-years for Fiscal 1970 and 1971 do not seem excessive for this work. Since a minimum of 2 complaints from pending investigations or future mergers are expected to develop, this project will likely continue during FYS 1972-1974. Priority 9.—(Paper & Paper Products) The present goal in maintaining an interest in this grouping is to preserve whatever gains have been attained through the Commission's past interest in challenging acquisitions and mergers in the industry. Some of the early Commission decisions under Section 7, such as Crown-Zellerbach, stand as a warning to industry members who may be acquisition-minded, and the Division must maintain a high degree of surveillance in order to keep the enforcement crusade alive. The 2 man-years estimated for Fiscal 1970 and 1971 appear minimal to accomplish this purpose. One man-year is allocated for the present outstanding complaint and the other man-year is in contemplation of at least one more complaint from pending investigations or future mergers. Hopefully, manpower requirements for this project will not be increased in FYS 1972-1974. Priority 10.-(Miscellaneous) This is a catch-all group, but it encompasses individual investigations which may easily develop into litigated cases. The Division gives a high degree of attention to many of the individual investigations included herein, and for the lack of any other priority grouping to which they may be assigned we feel that this is a reasonable attempt to provide some coverage in the budget estimates. Our original estimate was only a token figure, and upon reflection has been increased to 4 man-years for Fiscal 1970 and 6 manyears for Fiscal 1971. The new manpower estimate was increased with the idea of allowing the Division some flexibility to deal with unanticipated and unexpected mergers and merger trends which likely will occur and will require prompt action. Since this is a continuing broad project, comparable manpower requirements will be required in FYs 1972-1974. Non-priority Projects.-In our original Fiscal 1970 estimate there was no breakdown between priority and nonpriority projects. As a matter of fact, the present nonpriority industries which were in the original estimate called for an allocation of 16 man-years. After the directive from the Chairman which called for priority groupings, our total estimated requirements were put under "priority," while "nonpriority" received nothing. In view the Commissioner Nicholson's memorandum and the readjustment which it provoked, the 10 nonpriority industries are estimated to require a total of 4 man-years for Fiscal 1970. This will support a caretaker type operation only, and would undoubtedly be increased if sufficient manpower is made available in the near future. There is an additional reason why these investigations cannot be preemptorily closed out. The Administrative Manual, Appendix I, paragraph 6-051.14C does not list "insufficient manpower" as an acceptable reason for closing an investigative file. Nevertheless, the Division plans to continue its present policy of having the staff (whenever there is any spare time) close out old investigations. C. Summary Lastly, the June 10th memorandum suggests submission of a summary of man-year estimates in a form different from that used heretofore, either for the budget requirements or in response to Commissioner Jones' memorandum. In line with that suggestion, the following is an effort to realign the Division of Mergers requirements for Fiscal 1971. FORMAL MERGER CASES NOW IN LITIGATION Case "A"-Cabinet hardware; sales of companies $228 million; investment to 4/30/69, 1.3 man-years; completion during FY 1971 with 1 man-year needed; appeal involves an expansion of theory of elimination of potental competition; not related to any industrywide approach. Case "B".-Pneumatic staplers & nailers; sales of acquiring $68.2 million, of acquired $9.6 million; investment to 4/30/69, 1.3 man-years; settlement agreed to by parties and if accepted no man-years will be needed, otherwise 1 man-year with completion in FY 1970; no appeal likely; not related to industrywide approach. Case "C"-Typewriters; sales of acquiring $1.9 billion, of acquired $12.9 million; investment to date, 6.9 man-years; needed to complete, 4 man-years; completion in FY 1973; court appeal likely; no novel theory; not related to industrywide approach. Case "D".-Auto parts; combined sales $225 million; investment to 4/30/69, 6.8 man-years; needed to complete, 2 man-years; completion by FY 1971; appeal to courts is likely; no novel theory involved; not related to industrywide approach. Case "E".-cement; sales of acquiring $83 million, of acquired $11 million; investment to date, 4.8 man-years; needed to complete, 1 man-year; completion in FY 1971; likely to be appealed to courts; no novel theory; directly related to policy statement re Vertical Mergers In The Cement Industry. Case "F".-cement; sales of acquiring $24 million, of acquired $3 million; investment to 4/30/69, three-tenths of one man-year; needed to complete, 2 manyears; completion during FY 1970; no appeal likely; no novel theory; related to enforcement policy statement re Vertical Mergers in the Cement Industry. Case "G"-auto parts and components: sales of acquiring $200 million, of acquired $13 million; investment to 4/30/69, one-half man-year; needed to complete, 2 man-years; completion in FY 1970; appeal to courts probable; no novel theory involved; related to the automotive parts industry project. Case "H".-synthetic nylon yarn, webbing and belting; sales of acquiring $1.2 billion, of acquired $34.2 million; investment to 4/30/69, 2 man-years; needed to complete, 1 man-year; completion during FY 1970; appeal to courts likely; no novel theory; not related to an industrywide approach. Case "I".-auto parts; sales of acquiring $1.3 billion, of acquired $67 million; investment to 4/30/69, 8.1 man-years; needed to complete, 1⁄2 man-year; completion in FY 1970; appeal likely; involves an expansion of theory of potential competition; related to the automotive parts industry project. Case "J".-coal; sales of acquiring $740 million, of acquired $234 million; investment to 4/30/69, 3.6 man-years; needed to complete, 34 man-year; completion during FY 1970; appeal likely if divestiture is ordered; involves an expansion of theory of elimination of potential competition; not related to an industrywide approach. Case "K".-gift wrap and ribbons; sales of acquiring $24 million, of acquired $21 million; investment to 4/30/69, three-tenths of one man-year; needed to complete, 1 man-year; completion (after appeal to Commission) in FY 1971; appeal to courts likely; no novel theory involved; not related to industrywide approach. Case "L".-cement; sales of acquiring $84 million, of acquired $8 million; no man-year investment to date as case was reopened by the Commission for consideration of a revised order; needed to complete, 14 man-year; completion during FY 1970; appeal not likely; falls within the enforcement policy statement re Vertical Mergers in the Cement Industry. APPENDIX B DIVISION OF MERGERS PENDING COMPLAINTS (NOT YET IN LITIGATION) 671 0655-Studebaker Corp. 671 0644-Studebaker Corp. 671 0610-Tung-Sol Electric, Inc. Auto parts and electric generators; combined sales $710 million; combined investment for these three files, to be made into a single complaint, as of April 30, 1969, 1.8 man-years; needed to complete, 4 man-years, with completion in FY 1972; appeal to courts likely; involves a further expansion of the elimination of potential competition theory; not related to an industrywide approach. 661 0641-Sterling Drug, Inc. Non-food household consumer products; combined sales $425 million; investment to date, 1.6 man-years; needed to complete 1 man-year; completion during FY 1971; appeal to courts likely; involves application of theory of elimination of potential competition to broad lines of commerce in addition to traditional lines of commerce; not related to an industrywide approach. 691 0621-Stapling Machines Co. Gummed tape dispensers; accurate sales figures not available; investment to date, no man-years; needed to complete, 1/12 man-year; completion by settlement predicted for FY 1970; no court appeal likely; no novel theory; no industrywide approach applicable. 681 0654-General Mills, Inc. Frozen packaged seafood; sales figures not available at this time; investment to date, 9/10 man-year; needed for completion, 4 man-years; completion in FY 1972; appeal to courts likely; no novel theory; no industrywide approach applicable. 691 0643-Monsanto Co. Control valves, instrumentations and systems; Monsanto sales $1.8 billion, Fisher Governor sales $72 million; investment to date, no man-years; needed for completion, 1 man-year; completion in FY 1971; appeal to court likely; no novel theory; no industrywide approach applicable. 681 0667-The American Tobacco Co. Prune juice and applesauce; American's sales $1.5 billion, Duffy-Mott's sales $71 million; investment to date, 10 man-year; needed for completion 1.5 manyears; completion in FY 1971; appeal to court likely; no novel theory; no industrywide approach applicable. 691 0603-Beatrice Foods Co. Institutional wholesaling of dry groceries, frozen food, etc.; Beatrice sales $1.3 billion, John Sexton & Co. sales $90 million; investment to date, 10 man-year; needed for completion, 1 man-year; completion in FY 1970; court appeal likely; no novel theory; no industrywide approach applicable. 681 0644-Textron, Inc. Ball bearings; Textron sales $1.7 billion, Fafnir Bearing Co. sales $106 million; investment to date, o man-year; needed for completion, 6 man-years; completion in FY 1972; appeal to court likely; no novel theory; no industrywide approach applicable. 691 0633-Oregon Portland Cement Co. Cement; Oregon's sales $9.7 million, Idaho Portland's sales $1.9 million; investment to date, no man-years; needed for completion, 1 man-year completion in FY 1970, probably by consent order; appeal to court unpredictable; no novel theory; enforcement policy statement for Vertical Mergers in the Cement Industry applicable. 651 0628-Ash Grove Cement Co. Cement; Ash Grove's sales $25 million, acquired companies sales $4 million; investment to date, 10 man-year; needed for completion, 2 man-years completion in FY 1970; no appeal likely; no novel theory; enforcement policy statement for Vertical Mergers in the Cement Industry applicable. 691 0637-OKC Corp. Cement; OKC sales $39 million, acquired company sales $11 million; investment to date, 3/10 man-year; needed for completion, 1 man-year; completion in FY 1971; court appeal likely; no novel theory; enforcement policy statement re Vertical Mergers in the Cement Industry applicable. 691 0625-Chemtron Corp. Arc welding apparatus; combined sales $350 million; investment to date, 2/10 man year; needed for completion, no man-years (consent order has been accepted by the Commission); completion in FY 1970; no novel theory; enforcement policy re Vertical Mergers in the Cement Industry applicable. 661 0627-Hercules, Inc. Polypropylene resin and rope; Hercules sales $582 million, Columbia Rope Co. sales $11 million; investment to date, 1.4 man-years; needed for completion, no man-years (consent settlement anticipated); completion in FY 1970; no appeal likely ; no novel theory; no industrywide approach applicable. 651 0647-McCrory Corp. Retail trade general merchandise, apparel and accessories; sales of McCrory $181 million, sales of 3 acquired firms $467 million; investment to date, 1 manyear; needed for completion, 4 man-years; completion in FY 1972; court appeal, perhaps; no novel theory; Apparel Industry Project industrywide approach applicable. 691 0624-White Consolidated Industries Machinery; sales of White $800 million, sales of Allis-Chalmers $800 million; investment to date, 6/10 man-year; needed for completion, 1 man-year; completion in FY 1970, probably by consent settlement; no appeal likely; theory involves broadening the line of commerce under Elimination of Potential Competition category; no industrywide approach applicable. 36-138-70 vol. 350 MEMORANDUM Subject: Response to Commissioner Nicholson on Budget Plans. JUNE 18, 1969. From: Francis C. Mayer, Chief, Division of Discriminatory Practices. Attached hereto are five (5) separate memoranda treating our priority major projects. The projects, in order of priority, are (1) Chain-Grocers-Food Distribution (2) Apparel Industry (3) Dairy Industry (4) Fresh Fruits and Vegetables (5) Tri-Partite Arrangements and (6) Publishing Industry. These show our justification for being in each industry. In addition, we are attaching a copy of our response to Commissioner Jones' request showing justification for other projects engaged in by Division. They cover Automotive Parts, Drug Industry, Department Store Industry, Baking Industry, Drapery Hardware Industry and a sample of miscellaneous cases. As to the selection process, a lot of thinking and planning is continuously being done on what resource investments should be made. We do not launch a new investigation for every complaint we receive from businessmen who allege that they are being unlawfully injured in the competitive struggle. In fact, increased selectivity in screening has been our policy and practice for many years. In fiscal 1969, approximately 49 investigations were selected out of approximately 800 applications for complaints. The selection process required an evaluation of, among other things, the market structure, requisite public interest. congressional interest, relative size of the participants, substantiality of the practice, jurisdiction and likelihood of a successful remedy. Moreover, when we did initiate an investigation we were moving into areas where we had reason to believe that a violation was occurring. Also transmitted herewith is a schedule showing a comparison between actual FY 1969 experience with previous budget estimates for FY 1969. Experience in FY 1970 should approximate that for FY 1969. Also attached are schedules showing information requested on formal and pending complaints. COMPARISON OF ACTUAL FISCAL YEAR 1969 EXPERIENCE WITH ESTIMATES FOR FISCAL YEAR 1969 Note. Estimate for fiscal year 1970 should approximate fiscal year 1969 experience. I. Pending Matters A. Cases in litigation—4[(a)—(d)] 1. Industries involved: (a) Liquefied petroleum gas (b) Corn products (c) Food and non-edible grocery store products (d) Women's apparel 10 1 11 47105 10 15 |