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Federal U.S. antitrust agencies are experiencing a severe shortfall in fee collections, though the budgetary mess is not expected to affect merger enforcement efforts for another 12 months. For what may be the first time ever, Hart-Scott-Rodino Act filing fee collections were below budgeted levels. Total collections were $173 million for the 2001 fiscal year, according to Federal Trade Commission data. That is about $150 million less than forecast. It also is about $50 million below the 2000 fiscal year level and about $225 million less than President Bush expects the agencies to raise in the 2002 fiscal year. “This is a problem because Congress is tying their funding to the number of transactions, which as we can see can fluctuate from year to year,” said Joel Mitnick, a partner at law firm Sidley Austin Brown & Wood in New York. Officials at the FTC and the antitrust division at the Department of Justice had no immediate comment. Although funds carried from the previous year are expected to cover the shortfall, the drop in collections could make it tougher for antitrust authorities to persuade Congress to fully fund their enforcement agendas in the future. The 2002 fiscal year started Oct. 1. Congress has not yet approved final budgets for either the FTC or the antitrust division. Lawmakers could cut the 2002 budgets to reflect the decline in filing fees, but antitrust lawyers familiar with the process said it already is so late in the budgeting season that Congress is unlikely to make changes. The inaction for this year, however, increases the risks for the agencies for 2003, these lawyers said. The Office of Management and Budget and the congressional appropriators are likely to cut their HSR fee estimates for 2003 if filings do not recover quickly. If fees are cut, the administration and Congress would likely trim the budgets for FTC and the antitrust division, the lawyers said. Antitrust lawyers said the HSR collection shortfall was inevitable and underscores the drawback of funding law enforcement agencies with filing fees. “This is a bad way to run a government,” said Jan McDavid, a partner at Hogan & Hartson in Washington, D.C. “The operations of the FTC and the antitrust division should not be funded this way.” As an alternative, several lawyers argued that Congress should pay for antitrust enforcement independent of filing fees. “Congress should disconnect the relationship between the fees and the antitrust appropriation,” said Neil Imus, a partner at Vinson & Elkins in Washington. “In no way should a lack of fees cause any constraint on the agencies.” For 2001 collections, only a small portion of the decline appears attributable to Feb. 1 revisions to the HSR filing system. Congress replaced the flat $45,000 fee for all deals valued at more than $15 million with a new sliding scale. The agencies now charge $280,000 for deals valued at more than $500 million and $125,000 for deals valued at $100 million to $500 million. The fee for transactions valued at $50 million to $100 million continues to be $45,000, while deals valued at less than $50 million are now exempt from the filing requirement. During the first month under the new system, fees fell from an average of $15 million a month to a paltry $7 million. The drop was most pronounced for large deals subject to the $280,000 filing fee. Only 10 such deals were reported, the lowest for any month under the new system. Filings recovered by May, with the agencies collecting $18 million. June was the best month of the year, with $23 million in collections from 179 HSR filings. The picture, however, got bleak in July. The agencies collected $12 million from 91 deals. September was another bad month, tying July with 91 filings and $12 million in fees. The HSR system was supposed to be revenue-neutral. Judged on collections for fiscal year 2000, the revised system is a flop, with collections falling 21 percent. But filling fees would have fallen even without the HSR revisions. Collections for the four months prior to Feb. 1 would have resulted in an annualized HSR fee collection of $180 million, a drop of 18 percent. Copyright (c)2001 TDD, LLC. All rights reserved.

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