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A top Federal Trade Commission official said Friday that companies involved in small mergers that could raise antitrust issues should contact the agency even if the deal is not reportable under the Hart-Scott-Rodino Act. Molly Boast, director of the competition bureau, said the alternative is to risk a lawsuit similar to the one brought Thursday against the Hearst Corp. In that action, the FTC asked a federal judge to undo the 1998 acquisition by Hearst’s First DataBank unit of Medi-Span Inc. on grounds the $38 million deal created a monopoly in the pharmaceutical database market. The litigation is seen as a warning for companies to not withhold documents that must be submitted with the HSR filing. That is because the FTC charged that the company failed to disclose key memorandums explaining how the transaction would affect competition. Boast said the case takes on added significance since Congress decided, effective Feb. 1, to exempt deals valued at less than $50 million from the pre-merger notification law. The old threshold was $15 million. The change is expected to cut in half the number of deals subject to the notification requirement. “If we get evidence of a merger to monopoly, we are entitled to pursue it as a monopolization case without regard to whether there is an HSR filing,” Boast said. “There is no safe harbor under $50 million.” To identify smaller deals that could raise competition issues, FTC officials are reviewing trade papers and reading complaints filed by customers and competitors. “We get competitor complaints all the time, and we get customer complaints all the time,” she said. “They are a means of giving us notice.” Boast suggests that companies involved in small mergers meet with FTC staff before a deal is completed. This can give the agency and the parties an opportunity to resolve any anticompetitive issues and reduce the likelihood the FTC will open a monopolization case after the transaction closes. The penalties for trying to sneak a small deal past the FTC can be severe. In the Hearst case, for example, the FTC is asking First DataBank to forfeit all profits earned since 1998 and for the unwinding of the merger. One antitrust lawyer, however, said he doubted whether companies would willingly submit to a merger review if they were exempt from HSR filing. Alerting the FTC risks a lengthy investigation, the lawyer said. While the merging companies would technically be free to close the deal at will, in reality they would be forced to wait for the agency to finish its review. That is because no company would incur the expense of integrating an acquisition if there is a strong risk the deal could be undone. The lawyer said such companies would actually be in a worse situation than firms subject to the HSR Act. The pre-merger notification law requires FTC to decide whether to challenge a deal in court within 30 days of a firm certifying compliance with the second request, which is the government’s formal demand for details on the deal. No similar timetable would exist for deals not covered by the HSR law. “You’d never take a $40 million deal into the agency,” the lawyer said. The better solution is for companies involved in a small merger to divest overlapping assets that could spark an antitrust review, the lawyer said. “You can’t assume you are going to sneak by,” he said. Copyright (c)2001 TDD, LLC. All rights reserved.

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