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Give and Take

BY Jaret Seiberg and Shanon D. Murray
by Jaret Seiberg and Shanon D. Murray on 3/27/01.

Dorgan bends on airline merger billRather than see his airline merger moratorium bill defeated, Sen. Byron Dorgan, D-N.D., has agreed to exempt AMR Corp.'s acquisition of Trans World Airlines Inc. from the legislation.

In a letter sent Friday to Sen. Jean Carnahan, D-Mo., Dorgan said he would accept her amendment excluding the TWA deal from the proposed two-year ban on large airline mergers.

"I wanted to advise you that I do want to push forward and get a moratorium on mergers enacted," Dorgan wrote. "But I understand that in order to do that I will have to accept an amendment that you offer to exclude the American-TWA previously approved transaction, and I will support your amendment."

Carnahan plans to introduce the amendment when the bill is debated before the Senate Commerce Committee. It is unclear when or if such a vote would take place. That decision largely rests with Commerce Committee Chairman John McCain, R-Ariz., who has yet to give an opinion on the moratorium bill.

Dorgan said he would have preferred that TWA remain an independent carrier. Besides hoping to save the bill, Dorgan said he is acting because the Department of Justice has already approved the merger.

The compromise appears to render moot efforts by Sen. Kit Bond, R-Mo., to keep the moratorium from coming up for debate on the Senate floor. Bond last week put a hold on the legislation, a procedural maneuver to avert considering it. Senators would have to vote to overturn the hold.

While Bond's move would keep the Senate from taking up Dorgan's bill directly, it would not affect other airline legislation. That means the door is open for Dorgan to incorporate the guts of his moratorium into another measure. Unger's SEC holidayWhile President Bush takes his time in appointing a permanent chair for the Securities and Exchange Commission, acting Chairwoman Laura Unger is getting comfortable.

Despite Unger having only a modest outside chance of becoming permanent head of the agency, she has moved into the office of former Chairman Arthur Levitt, has begun setting SEC agenda and has appointed staff to serve her in her new capacity.

Bush appointed Unger, the only Republican commissioner, as acting chairwoman in February when Levitt stepped down after eight years at the SEC helm. She was sworn in as a commissioner in 1997. Her term expires in June.

Before being appointed to the SEC, Unger was securities counsel to the Senate Committee on Banking, Housing and Urban Affairs, where she advised former Republican Sen. Alfonse M. D'Amato of New York. Prior to working on Capitol Hill, she was an attorney for the SEC's enforcement division.

During a speech earlier this month at a securities conference, Unger signaled a shift in the SEC's agenda to ensuring a "fair, free and competitive" marketplace, instead of Levitt's priority of investor protection.

She has also named two top advisers. Last week, she appointed Thu Ta, formerly of the SEC's office of legal policy, as her adviser on enforcement matters. Unger appointed Brian A. Bussey, formerly of the SEC's chief counsel office for the division of market regulation, as counselor to the chairman.

The leading contenders to permanently replace Levitt are presumed to include Joseph Grundfest, a Stanford Law School professor and former SEC commissioner; William Heyman, executive vice president of Citigroup Inc.'s private equity arm and a former SEC division head; James Doty, senior partner in Washington law firm Baker Botts llp and a former SEC general counsel; and Rep. Christopher Cox, a California Republican who never worked for the commission. Whither corporate registration feesThe House Financial Services Committee scheduled a markup session today for legislation to reduce the corporate fees collected by the SEC.

Federal laws allow the SEC to collect three types of fees: registration fees, transaction fees and fees on mergers and tender offers. Congress first instituted the charges to fund the SEC's operating budget.

This year, however, about $2 billion in excess fees will go into the government's general treasury.

Wednesday, the House Capital Markets subcommittee approved the "Investor and Capital Markets Fee Relief Act" via voice vote. Thursday, the full Senate approved its version, the "Competitive Market Supervision Act," in a procedure similar to a voice vote. While there are some technical differences between the two bills, both would cut SEC fee collections by $14 billion over 10 years. They both also include pay raises for SEC staff.

The full House may be able to consider the legislation before Congress breaks for the Easter recess. extricating Heinz from the FTCScore one for Ted Henneberry, the Howrey, Simon, Arnold & White partner who represents H.J. Heinz Co. Henneberry helped convince three Federal Trade Commission members to overturn a staff recommendation last week to challenge Heinz's acquisition of Vlasic Foods International Inc. The companies have a business overlap in unrefrigerated jarred pickles in several geographic markets.

Voting against the staff were FTC Chairman Robert Pitofsky and Commissioners Thomas Leary and Orson Swindle. Only Commissioner Mozelle Thompson sided with the staff. (Commissioner Sheila Anthony recused herself from the case.)

Henneberry said Heinz officials met with the commissioners shortly after the staff decided to recommend against the deal. Heinz argued the competitive overlaps were not as severe as portrayed. They also noted that Vlasic was bankrupt and unlikely to survive without the merger.

The victory was awash in irony. In February 2000, the FTC commissioners voted to overturn a staff decision to let Heinz acquire Beech-Nut Nutrition Corp. That sparked a year-long legal fight, with the case pending before the U.S. Court of Appeals for the District of Columbia.

Last week's consent decree freeing DTE Energy Co. to acquire MCN Energy Group Inc. contained a novel solution to a thorny problem of how to ensure competition in a market with what many have been considered natural monopolies-natural gas pipelines.

The agreement calls for MCN to provide an indefinite easement on its southern Michigan pipelines to a competing natural gas provider. That part is not necessarily novel. Companies frequently agree to conduct remedies to get merger approval.

But what makes this different is the use of an auditor to oversee the agreement and resolve disputes between the parties. Unlike trustees appointed to oversee other consent decrees, the auditor will be in place for as long as Exelon Corp. exercises its right to deliver gas via the MCN pipes.

"We usefully saw this as a way to get the deal done,"' said Bill Young, a partner in the Washington office of Hunton & Williams law firm, which represented DTE in the 17-month negotiations.

Legislation allowing the Department of Transportation to reassign gates and slots at airports dominated by a single carrier got slammed last week by former Transportation Department Secretary James Burnely.

The bill was passed two weeks ago by the Senate Commerce Committee and is sponsored by Sens. McCain and Ernest Hollings, D-S.C. The senators have expressed reservations about a slew of recently proposed airline mergers, and they hope the bill will prevent any carrier from dominating travel in a particular city.

But Burnely, a partner in the Winston & Strawn law firm and Transportation secretary in the Reagan administration, said at a Citizens for a Sound Economy
forum that the legislation is a bad idea.

"If the legislation is to break up hubs, that is like putting Band-Aids on bullet wounds," he said.

Burnely said such legislation could bolster competition for flights between major cities but would kill service to smaller markets because a carrier is not going to give up flights to New York to service Peoria. "If you break up a hub, which flights go first?" he asked. "Will it be the wide bodies? I don't think so."

The solution: Build more capacity at airports, including alternative facilities near major cities such as the White Plains, N.Y., airport.