As originally structured, the leveraged buyout involved Loewen acquiring $10 million of Prime voting securities, but the structure was changed so that Loewen acquired $16 million of Prime voting stock, exceeding the Act's $15 million threshold. According to the complaint, by consummating the acquisition prior to submitting a notification form and observing the mandatory waiting period, Loewen avoided the risk of losing a $20 million downpayment which could have been forfeited if the transaction had been delayed for antitrust review. Under the terms of the final judgment, Loewen agreed to pay a $500,000 civil penalty to settle the charges.
2. Amendments to the Rules
In fiscal year 1998, the Commission, with the concurrence of the Assistant Attorney General, amended Premerger Notification Rule 802.70.(16) This rule exempts from the reporting requirements acquisitions of assets or voting securities required to be divested by an order of the Commission or of any federal court in an action brought by the Commission or the Department of Justice. As amended, the rule also exempts divestitures pursuant to consent agreements that have been accepted for public comment, or have been filed with a court and are subject to public comment, but are not yet final orders. These transactions are adequately reviewed for potential antitrust issues during the approval process under the consent agreement and, thus, are unlikely to raise antitrust concerns.
MERGER ENFORCEMENT ACTIVITY DURING FISCAL YEAR 1998(17)
1. Department of Justice
The Antitrust Division challenged 51 merger transactions that it concluded could lessen competition if allowed to proceed as proposed during fiscal year 1998. In 15 of these instances the Antitrust Division filed a complaint in U.S. District Court.(18) Ten of these cases have been settled by consent decree, one was abandoned pursuant to a consent decree, and four others were abandoned after filing of the complaints.
In the other 36 challenges during fiscal year 1998, the Antitrust Division informed the parties to a proposed transaction that it would file suit challenging the transaction unless the parties restructured the proposal to avoid competitive problems or abandoned the proposal altogether.(19) In 24 instances, the parties restructured the proposed transactions, and in 12 instances, the parties abandoned the proposed transactions.
In United States v. Raytheon Company, General Motors Corporation and HE Holdings, Inc., the Division challenged Raytheon's $5.1 billion acquisition of General Motors' Hughes Aircraft subsidiary. The complaint alleged that the acquisition would have lessened competition substantially in infrared sensors used in both ground and aviation weapons systems, and in electro-optical systems for ground vehicles. A proposed consent decree was filed simultaneously settling the suit. The decree required divestiture of two defense electronics businesses in order to preserve competition in sophisticated technology for United States weapons systems, resulting at that time in the largest divestiture since the end of the Cold War. Raytheon was also required to establish "firewalls" prohibiting two competing teams--employees from Raytheon and Hughes--from disclosing information to each other and to Raytheon's senior management concerning the development and production of a new antitank missile for the Army. The complaint and proposed decree were filed after Raytheon reached an agreement with the Air Force setting firm prices for the AMRAAM air-to-air missile. Although Raytheon and Hughes had been competing bidders for the AMRAAM missile, the parties expected to achieve substantial efficiencies by combining production, and the setting of a firm price will pass along to the Air Force savings of $180 million over four years. The decree was entered by the court on January 27, 1998.
