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The Federal Trade Commission and the Department of Justice have reached agreement on new procedures for allocating merger and non-merger investigations between the two agencies. Public announcement of the agreement was originally scheduled for Jan. 17, but was delayed by opposition from some in Congress as well as two dissenting FTC Commissioners. The new procedures are intended to address disputes as to which of the antitrust agencies will review particular mergers. The agencies’ joint press release notes that since the beginning of fiscal year 2000, three hundred merger investigations were delayed an average of three weeks because of inefficiencies and interagency disputes during the agency “clearance” process. Some clearance disputes delayed investigations “for several months,” according to the press release. Delay in the clearance process impedes the ability of the merging parties during the initial thirty-day Hart-Scott-Rodino waiting period to persuade the reviewing agency to narrow the scope of its investigation or to forego further investigation altogether. The goal of the new procedures is to reduce the clearance process to 48 hours or less, thereby allowing parties and regulators to make fruitful use of the initial waiting period. The new procedures allocate merger and nonmerger investigations between the agencies. In many respects, the industry allocation memorializes longstanding agency policy about which there was little dispute (e.g., beer and newspapers being reviewed by the DOJ, chemicals and pharmaceuticals being reviewed by the FTC). In other respects, the agreement marks a departure from prior agency practice. Among the more noteworthy changes, in this regard, is the allocation to the DOJ of all “media” industry matters, defined to include, among other things, cable operators, programming, music, advertising, toys and games, gaming and publishing. Previously, both agencies had reviewed some cable, music and advertising mergers, and the FTC had reviewed toy company mergers. The agreement also eliminates the previous split between trucks (DOJ) and cars (FTC) by allocating both products to the FTC, and the assignment of all energy matters to the FTC will remove electrical utility mergers from the DOJ’s purview. The defense industry will continue to be split on a product-by-product basis with, for example, the FTC keeping airframes and munitions and the DOJ reviewing avionics, aerospace, and naval defense. The computer industry will also be split, with software matters going to the DOJ and hardware going to the FTC. Internet backbone hardware, however, is included within the “telecommunications” industry and is within the DOJ’s purview. An interagency “Convergence Committee” will monitor technological developments, such as wireless computers and PDAs that may blur the distinctions between computer hardware and telecommunications in the future. Notably, whether all or part of the commerce at issue in a merger takes place on the Internet will be irrelevant in determining clearance. The underlying nature of the industry will control the clearance decision in such cases. Conglomerate and multiproduct mergers will be allocated based on the relative magnitude of the horizontal product overlaps presented. The agreed-upon allocation of matters between the antitrust agencies should allow merging parties a more meaningful opportunity to address agency concerns during the initial HSR waiting period. The reassignment of certain industry groups is significant because, some would argue, the two agencies differ with respect to their investigatory procedures and their prosecutorial standards. David S. Neill is a partner at the law firm Wachtell, Lipton, Rosen & Katz, www.wlrk.com. Related chart: Inter-Agency Clearance Agreement: Industry Allocation

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