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The Commission appreciates the opportunity to offer further comment on S. 382, the "Competition Improvements Act of 1979." The Commission has no objection to S. 382 in its current form.

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The Commission is pleased to comment on the revised
version of S. 382, the Competition Improvements Act of 1979.
As you know, the Commission has commented twice previously
on earlier drafts of this legislation, in letters to you
dated March 15, 1979, and July 11, 1978. In addition, for-
mer Commission Chairman Roderick M. Hills testified on
S. 2028, the Competition Improvements Act of 1975, before
the Subcommittee on Antitrust and Monopoly on February 5,
1976. In each of these instances, the Commission has

the competition improvements" bills as drafted.

As you know, the Commission has long supported the
policy of encouraging competition in the securities mar-
kets and believes that, in making regulatory decisions,
it should weigh carefully any burdens on competition that
its regulation would impose. Nevertheless, we believe
that while the proposed standard in S. 382, as revised,
is an improvement over the prior versions of the bill,
it still would not be the appropriate standard to be
applied to the Commission's regulatory decision-making.

S. 382 would establish a special requirement for cer-
tain kinds of agency action that may affect competition.
It would prohibit a federal agency from taking any such
action unless the agency had considered the competitive
effects of such action and concluded that such action is
the least competitive alternative legally and practicably
available to achieve statutory goals. 1/ An agency's
action would be subject to that requirement if it:

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S. 382, Section 3(a).

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It appears that a large proportion of the Commission's actions under the various statutes it administers would not be subject to that requirement. As a general matter, the Commission is not usually called upon to allocate valuable franchises between or among competing applicants, nor does the Commission fix the prices at which most securitiesrelated services are offered or, in most cases, establish limitations on the number of market participants that are allowed to compete. Nevertheless, the Commission is required, particularly in

e under the Securities Exchange Act of 1934 (the "Securities Exchange Act"), to take action that could fall within the categories enumerated in S. 382, as revised. - It is in view of those statutory mandates that the Commission believes the proposed requirement would be inappropriate.

The Securities Exchange Act directs the Commission to regulate a large number of competing entities and to use its authority to facilitate the establishment of both a national market system and a nationwide system for the clearance and settlement of securities transactions. 2/ In carrying out those responsibilities, and in certain other contexts under the Securities Exchange Act, the Commission is frequently called upon to Competition agai

for balance the need for oral other obaveory objectives, competition against such as the coʻtabliolment of effferent components of


several other

Statutory objectives, such the establishment of efficient

2/ Sections 11A and 17A of the Securities Exchange Act.

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national market system or

a national clearance and settlement mge and set


markot fat kemerle system. In some cases, greater efficiency of operation, needed methods of protecting investors and safeguarding funds and securities may, in the Commission's justify action judgment, justify tretej competition. In- that inhibits deed, while the maintenance of a fair field of competi- competition. tion is generally an important goal under the Securities Exchange Act, the Commission must also consider the other goals articulated by Congress. In balancing these various public policy objectives, the Commission must give due deference to the need for competition. At the same time, it should neither overestimate nor underestimate the relative importance of competitive objectives as compared to the other statutory purposes.

The Congress recently considered the role the Commission should play in assessing burdens on competition. When


S. 382, as revised

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it enacted the Securities Acts Amendments of 1975, the Con- rejected a proposed by the Department of Justice — a formula similar to that contained in statutory and gave greater latitude, and more responsibility, to the Commission in determining whether burdens on competition should be tolerated. The Department of Justice had argued that the Commission should be required, in issuing rules and orders, to adopt the least anticompetitive means" available to achieve the other statutory goals. 3/ In rejecting that approach, the Congress instead directed the Commission (1) to evaluate competitive burdens imposed by its own rules, as well as by rules of the stock exchanges and the other self-regulatory organizations, and (2) such barder imposed

to allow such burdens to be imposed

3/ Attachment A to Statement of Donald J. Baker, Deputy
Assistant Attorney General, Antitrust Division, Depart-
ment of Justice (Feb. 19, 1975), reprinted in Securities
Acts Amendments of 1975, Hearings on S. 249 Before the
Subcomm. on Securities of the Senate Comm. on Banking,
Housing and Urban Affairs, 94th Cong., 1st Sess. 257

A second inappropriate feature of S. 382 is the requirement that federal agencies establish special procedures for


pay. 5/ That requirement is unnecessarily duplicative of existing notice requirements under the Administrative Procedure Act. We do not believe it is necessary for the Justice Department to be given more extensive notice than is provided to members of the public who are directly affected by the agency's action.

providing notice

to the Justice

Department concerning actions to which the

bill would apply.

Finally, we note that, in certain other respects, S. 382 remains unchanged from its prior versions. The Commission continues to object, for the reasons stated in our previous comments, to the provisions that give the Department of Justice and the Federal Trade Commission the ability to intervene as a party of right" in Commission proceedings involving competition related issues, and that would, in effect, give the Justice Department and the FTC broad discovery rights not afforded other participants in such agency proceedings.

We appreciate this opportunity to comment on the revised version of S. 382. The views expressed here are those of the Commission, and do not necessarily represent the views of the Administration. A copy of this letter is being submitted simultaneously to the Office of Management and Budget, and we will inform you of any further advice received from that Office concerning the views of the Administration.


5/ 5 U.S.C. 551 et seq.

Philip A. Commis

Philip A. Loomis, Jr.

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