Premerger Notification; Reporting and Waiting Period Requirements, 47733-47737 [05-16087]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 70, Number 156 (Monday, August 15, 2005)]
[Proposed Rules]
[Pages 47733-47737]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-16087]


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FEDERAL TRADE COMMISSION

16 CFR Part 803


Premerger Notification; Reporting and Waiting Period Requirements

AGENCY: Federal Trade Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commission is proposing amendments to the premerger 
notification rules (``the rules'') to enable filing parties to provide 
Internet links to certain documents in lieu of paper copies, and to 
address ``stale filing'' situations, in which parties make premerger 
notification filings but then fail to comply with a Request for 
Additional Information and Documentary Material (``second request''). 
Section 7A of the Clayton Act (``the Act'') requires the parties to 
certain mergers and acquisitions to file notification with the Federal 
Trade Commission (``the Commission'' or ``FTC'') and the Assistant 
Attorney General in charge of the Antitrust Division of the Department 
of Justice (``the Assistant Attorney General'' or ``DOJ'') and to wait 
a specified period of time before consummating such transactions. The 
reporting and waiting period requirements are intended to enable these 
enforcement agencies to determine whether a proposed merger or 
acquisition may violate the antitrust laws if consummated and, when 
appropriate, to seek a preliminary injunction in Federal court to 
prevent consummation. If either agency determines during the waiting 
period that further inquiry is necessary, it can issue a second 
request, which extends the waiting period for a specified period after 
all parties have complied with the request (or, in the case of a tender 
offer or a bankruptcy sale, after the acquiring person complies). The 
Commission is proposing a change to relieve the burden of complying 
with Items 4(a) and (b) of the Notification and Report Form (``the 
Form''). Currently, paper copies of annual reports, annual audit 
reports and regularly prepared balance sheets and copies of certain 
documents, such as 10Ks filed with the Securities and Exchange 
Commission (``SEC''), must be provided in response to these Items. The 
proposed modification would allow filing persons to provide an Internet 
address linking directly to the documents required by Items 4(a) and 
(b) in lieu of providing paper copies. The Commission is also proposing 
an amendment to the rules to specify that an acquiring person's 
notification, and an acquired person's notification in certain types of 
transactions, shall expire after eighteen months if a second request to 
them remains outstanding.

DATES: Comments must be received on or before October 14, 2005.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``HSR Proposed Rulemaking, Project No. 
P989316,'' to facilitate the organization of comments. A comment filed 
in paper form should include this reference both in the text and on the 
envelope, and should be mailed or delivered, with two complete copies, 
to the following address: Federal Trade Commission/Office of the 
Secretary, Room 135-H, 600 Pennsylvania Avenue, NW., Washington, DC 
20580. Because paper mail in the Washington area and at the Agency is 
subject to delay, please consider submitting your comments in 
electronic form, as prescribed below. Comments containing confidential 
material, however, must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with Commission Rule 4.9(c).\1\ The 
FTC is requesting that any comment filed in paper form be sent by 
courier or overnight service, if possible.
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
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    Comments filed in electronic form should be submitted by clicking 
on the following Weblink: https://secure.commentworks.com/ftc-
hsrexpirationofnotification and following the instructions on the Web-
based form. To ensure that the Commission considers an electronic 
comment, you must file it on the Web-based form at the https://
secure.commentworks.com/ftc-hsrexpirationofnotification Weblink. You 
also may visit https://www.regulations.gov to read this request for 
comment, and may file an electronic comment through that Web site. The 
Commission will consider all comments that regulations.gov forwards to 
it.
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at https://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at https://
www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Marian R. Bruno, Assistant Director, 
or B. Michael Verne, Compliance Specialist, Premerger Notification 
Office, Bureau of Competition, Room 303, Federal Trade Commission, 
Washington, DC 20580. Telephone: (202) 326-3100.

SUPPLEMENTARY INFORMATION:

Section 803.2 Instructions Applicable to Notification and Report Form

    In response to Items 4(a) and (b) of the Form, filing parties 
currently must provide paper copies of annual reports, annual audit 
reports and regularly prepared balance sheets and copies of certain 
documents, such as 10K's, filed with the SEC. Many of these documents 
are routinely submitted in electronic form to the SEC and are available 
on the SEC's Electronic Data Gathering, Analysis, and Retrieval 
(``EDGAR'') system, or via the Internet on company Web sites. Responses 
to these Items may often be voluminous and can account for the bulk of 
documents submitted with the Form.
    In view of the ease with which the antitrust agencies can access 
these documents via the Internet, the proposed modification of 
paragraph 803.2(e) and Instructions to the Form would allow filing 
parties to provide an Internet address linking directly to the 
documents required by Items 4(a) and 4(b) in lieu of providing paper 
copies. Incorporating documents by reference to Internet Web pages 
would only apply to Items 4(a) and 4(b) and would not be available for 
responding to other items on the Form.
    It would remain the filer's duty to ensure that the filing is 
accurate and complete, as attested by the filer's certification 
signature. Accordingly, it is proposed that Section 803.2 be further 
amended to provide that if an Internet link submitted is, or becomes, 
inoperative or the document that is linked to is incomplete, such that 
the

[[Page 47734]]

documents required by Items 4(a) or 4(b) are not available for review 
by the FTC and DOJ, the filer shall make the document(s) available by 
referencing operative Internet link(s) or provide paper copies of the 
relevant document(s) by 5 p.m. on the business day following any 
request by the FTC or the Assistant Attorney General. Failure to 
provide requested documents by the close of the next business day would 
result in notice of a deficient filing under Section 803.10(c)(2). 
Given the ability to incorporate such documents by linking, the 
previous option to cite the date and place of filing if copies are not 
readily available would no longer be necessary, and it is proposed that 
it be deleted from the Instructions.

Section 803.7 Expiration of Notification

    The Commission and the DOJ have encountered instances in which, 
after parties make premerger notification filings and after second 
requests are issued, the parties make no effort to comply with the 
second requests. Generally this occurs when the parties have decided 
not to go forward with the proposed acquisition, either because of the 
issuance of second requests or for business reasons unrelated to the 
government's antitrust investigation. In nearly all of these instances, 
the parties have voluntarily withdrawn their premerger notification 
filings. The agency is then able to close its investigation, as there 
no longer is a transaction pending with a waiting period.
    In some instances, however, the parties have refused to withdraw 
their notification even though they lack a present intention to 
undertake the acquisition. In such instances, the agency's 
investigation remains open indefinitely because the waiting period is 
suspended, and would only begin to run for the final 30 days if and 
when there was compliance with the second requests.
    The information contained in the parties' notifications becomes 
stale with the passage of time. In order to conduct the meaningful 
review contemplated by the Act, the agencies require information 
pertaining to the competitive implications of transactions. Indeed, 
since the rules' inception in 1978, Section 803.7 of the Rules has 
provided that notification with respect to an acquisition shall expire 
one year following expiration of the waiting period. As the Statement 
of Basis and Purpose (``SBP'') states, ``If the acquisition is to be 
consummated after that time, the possibility of changed circumstances 
warrants a fresh review by the enforcement agencies.''43 FR 33450 , 
33512 (July 31, 1978). Fresh review of a proposed acquisition cannot be 
assured when the information contained in the parties' notification has 
become outdated. Further, both Section 803.7 and the requirement in 
Section 803.5 of an affidavit attesting to a good faith intention to 
make the acquisition are intended in part to ensure that the parties 
intend to consummate the acquisition, so that the agencies are not 
forced to waste resources investigating hypothetical transactions. See 
43 FR 33450, 33510-12 (July 31, 1978).
    Parties should already be on notice, by virtue of Section 803.21, 
that they cannot toll their HSR waiting period indefinitely by failing 
to comply with a second request. Section 803.21 requires that all 
additional information or documentary material sought via a second 
request (or partial submission accompanied by a Section 803.3 statement 
of reasons for noncompliance) ``be supplied within a reasonable time.'' 
Although the SBP accompanying the promulgation of Section 803.21 states 
that the rule was ``designed primarily to prevent an acquired person in 
a transaction subject to Section 801.30 from frustrating the 
acquisition[,]'' \2\ the wording of the rule itself is not limited to 
certain types of transactions or persons.
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    \2\ 43 FR 33450, 33516 (July 31, 1978). The SBP goes on to state 
that absent Section 803.21, ``an uncooperative acquired person could 
delay the expiration of the waiting period indefinitely by not 
responding'' to a second request. Section 801.30 transactions are 
essentially non-consensual transactions, including tender offers, 
purchases from third parties, and open market purchases. While the 
Act addresses this problem in the context of tender offers by 
providing that a second request to an acquired person in a tender 
offer does not extend the waiting period, the problem existed for 
other types of non-consensual, Section 801.30 transactions without 
Section 803.21. ``Rather than extend [tender offer] treatment to all 
other Section 801.30 transactions, the Commission opted to impose a 
general obligation on all recipients to respond within a reasonable 
time.'' Id.
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    While Section 803.21 requires compliance with all second requests 
``within a reasonable time[,]'' it does not define ``a reasonable 
time'' and does not expressly provide the consequences for 
noncompliance. The Commission believes that there would come a point 
when the agency would have sound legal basis under Section 803.21 for 
disregarding, rejecting or deeming withdrawn or expired a notification 
where the party had failed to comply with a second request.
    The Commission believes, however, that it is preferable and would 
improve the certainty of the premerger notification process to clearly 
identify the specific time at which an acquiring person's Notification 
(or an acquired person's notification in a non-Section 801.30 
transaction) will expire when a second request remains outstanding to 
that person. The Commission proposes that such date be 18 months from 
the date of the initial notification (which typically would be 
approximately 17 months from the issuance of the second request). We 
are not aware of second request compliance ever having taken that long. 
Even in instances where the parties may have reason to delay their 
second request response for some period of time,\3\ eighteen months 
should provide them ample time. Beyond that time, the Commission 
believes that a more up-to-date Notification should be provided, 
triggering a new waiting period.
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    \3\ For example, the transaction may be subject to approval by a 
regulatory agency, which might take longer than HSR review. In that 
situation, the parties may not want their notification to expire 
before the expected regulatory agency approval is received. In such 
an extreme instance, the parties could also help themselves by 
delaying making their HSR filings to coincide more closely with the 
regulatory agency approval.
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    The Commission proposes specifying this 18-month requirement in 
Section 803.7, entitled ``Expiration of Notification''. Section 803.7 
would be split into two parts: one (the current provision) addressing 
expiration of notification when the waiting period has expired; the 
other (new language) addressing expiration of the waiting period due to 
failure to comply with a second request. The current text of Section 
803.7 would thus be redesignated ``(a) Waiting period expired.'' A new 
paragraph (b) would be added, along with a new example:
    (b) Failure to comply with request for additional information. An 
acquiring person's notification and, in the case of an acquisition to 
which section 801.30 does not apply, an acquired person's notification 
shall expire eighteen months following the date of receipt of such 
person's notification if a request for additional information or 
documentary material remains outstanding to such person (or entities 
included therein, officers, directors, partners, agents or employees 
thereof), without a certification as required by section 803.6(b), on 
such date. If either person's notification expires pursuant to this 
paragraph, both parties must file a new notification and observe the 
waiting period in order to carry out the transaction.

    Example: A files notification on January 15 of Year 1 to acquire 
voting securities of B. On February 15 of Year 1, prior to 
expiration of the waiting period, requests for additional 
information or documentary material are

[[Page 47735]]

issued to A and B. Before A supplies the information and documentary 
material requested, business conditions change and A and B decide 
not to go forward with the transaction. A does not withdraw its 
filing and takes the position that it will comply with the request 
for additional information and documentary material if and when the 
proposed transaction is ever revived. A's notification expires July 
15 of Year 2, eighteen months following the date of receipt of its 
notification. If A and B wish to revive their transaction, both 
parties must file a new notification and observe the waiting period 
in order to carry out the transaction.

    The Commission is proposing the modification to Section 803.7 
rather than Section 803.21 because the ``stale filings'' situations 
that the agencies have encountered are separate and distinct from the 
problem, addressed by the ``reasonable time'' requirement of Section 
803.21, of an acquired person in a Section 801.30 transaction trying to 
frustrate the acquisition. Indeed, the proposed rule is drafted to 
exclude acquired persons in Section 801.30 transactions so as not to 
recreate the problem that Section 803.21 was designed to address. The 
new rule also fits well within the caption of Section 803.7, because it 
deals with expiration of notification.
    The Commission anticipates that if the proposed new rule is 
adopted, it will apply upon its adoption to pending transactions. Thus, 
for example, if there are any pending transactions in which the 
acquiring person (or the acquired person in a non-Section 801.30 
transaction) has failed to comply with a second request within 18 
months of that person's notification, that notification will expire 
upon adoption of the rule.

Request for Public Comment

    All comments should be filed as prescribed in the ADDRESSES section 
above, and must be received on or before October 14, 2005.

Communications by Outside Parties to Commissioners and Their Advisors

    Written communications and summaries or transcripts of oral 
communications respecting the merits of this proceeding from any 
outside party to any Commissioner or Commissioner's advisor will be 
placed on the public record. 16 CFR 1.26(b)(5).

Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires that the 
agency conduct an initial and final regulatory analysis of the 
anticipated economic impact of the proposed amendments on small 
businesses, except where the Commission certifies that the regulatory 
action will not have a significant economic impact on a substantial 
number of small entities. 5 U.S.C. 605.
    Because of the size of the transactions necessary to invoke a Hart-
Scott-Rodino filing, the premerger notification rules rarely, if ever, 
affect small businesses. Indeed, the 2000 amendments to the Act were 
intended to reduce the burden of the premerger notification program by 
exempting all transactions valued at $50 million or less\4\. Further, 
none of the proposed rule amendments expands the coverage of the 
premerger notification rules in a way that would affect small business. 
Accordingly, the Commission certifies that these proposed rules will 
not have a significant economic impact on a substantial number of small 
entities. This document serves as the required notice of this 
certification to the Small Business Administration.
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    \4\ That figure is now $53.1 million, adjusted for the change in 
the Gross Domestic Product, and will be adjusted annually.
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Paperwork Reduction Act

    The Paperwork Reduction Act, 44 U.S.C. 3501-3518, requires agencies 
to submit ``collections of information'' to the Office of Management 
and Budget (``OMB'') and obtain clearance before instituting them. Such 
collections of information include reporting, recordkeeping, or 
disclosure requirements contained in regulations. The information 
collection requirements in the HSR rules and Form have been reviewed 
and approved by OMB under OMB Control No. 3084-0005. The current 
clearance expires on May 31, 2007.
    The Commission's proposed revisions to the Form and rules do not 
``substantive [ly] or material[ly] modify'' the existing terms of the 
currently approved collection of information (OMB Control Number 3084-
0005) to necessitate OMB's further review and approval. See 44 U.S.C. 
3507(h)(3); 5 CFR 1320.5(g). It is highly unlikely that a Notification 
which expires under the proposed rule change would need to be re-filed 
by the parties because the rule changes are intended to apply to 
situations in which the parties have already abandoned the transaction.

List of Subjects in 16 CFR Part 803

    Antitrust.

    For the reasons stated in the preamble, the Federal Trade 
Commission proposes to amend 16 CFR part 803 as set forth below:

PART 803--TRANSMITTAL RULES

    1. The authority citation for part 803 continues to read as 
follows:

    Authority: 15 U.S.C. 18a(d).

    2. Amend Sec.  803.2 by revising paragraph (e) to read as follows:


Sec.  803.2  Instructions applicable to Notification and Report Form.

* * * * *
    (e) A person filing notification may incorporate by reference:
    (1) To a previous filing, only documentary materials required to be 
filed in response to items 4(a) and 4(b) of the Notification and Report 
Form, which were previously filed by the same person and which are the 
most recent versions available; except that when the same parties file 
for a higher threshold no more than 90 days after having made filings 
with respect to a lower threshold, each party may incorporate by 
reference in the subsequent filing any documents or information in its 
earlier filing provided that the documents and information are the most 
recent available;
    (2) To an Internet address directly linking to the document, only 
documents required to be filed in response to item 4(a) of the 
Notification and Report Form and in response to item 4(b). If an 
Internet address is inoperative or becomes inoperative during the 
waiting period, or the document that is linked to is incomplete, upon 
notification by the Commission or Assistant Attorney General, the 
parties must make these documents available to the agencies by either 
referencing an operative Internet address or by providing paper copies 
to the agencies as provided in Sec.  803.10(c)(1) by 5 p.m. on the next 
regular business day. Failure to make the documents available, by the 
Internet or by providing paper copies, by 5 p.m. on the next regular 
business day will result in notice of a deficient filing pursuant to 
Sec.  803.10(c)(2).
    3. Revise Sec.  803.7 to read as follows:


Sec.  803.7  Expiration of notification.

    (a) Waiting period expired. Notification with respect to an 
acquisition shall expire 1 year following the expiration of the waiting 
period. If the acquiring person's holdings do not, within such time 
period, meet or exceed the notification threshold with respect to which 
the notification was filed, the requirements of the act must thereafter 
be observed with respect to any notification threshold not met or 
exceeded.

    Example: ``A'' files notification that in excess of $100 million 
(as adjusted) of the voting securities of corporation B are to be 
acquired. One year after the expiration of the waiting period, ``A'' 
has acquired less than $100 million (as adjusted) of B's voting 
securities. Although Sec.  802.21 will permit ``A''

[[Page 47736]]

to purchase any amount of B's voting securities short of $100 
million (as adjusted) within 5 years from the expiration of the 
waiting period, A's holdings may not meet or exceed the $100 million 
(as adjusted) notification threshold without ``A'' and ``B'' again 
filing notification and observing a waiting period.

    (b) Failure to comply with request for additional information. An 
acquiring person's notification and, in the case of an acquisition to 
which Sec.  801.30 does not apply, an acquired person's notification 
shall expire eighteen months following the date of receipt of such 
person's notification if a request for additional information or 
documentary material remains outstanding to such person (or entities 
included therein, officers, directors, partners, agents or employees 
thereof), without a certification as required by Sec.  803.6(b), on 
such date. If either person's notification expires pursuant to this 
paragraph, both parties must file a new notification in order to carry 
out the transaction.

    Example: A files notification on January 15 of Year 1 to acquire 
voting securities of B. On February 15 of Year 1, prior to 
expiration of the waiting period, requests for additional 
information or documentary material are issued to A and B. Before A 
supplies the information and documentary material requested, 
business conditions change, and A and B decide not to go forward 
with the transaction. A does not withdraw its filing and takes the 
position that it will comply with the request for additional 
information and documentary material if and when the proposed 
transaction is ever revived. A's notification expires July 15 of 
Year 2, eighteen months following the date of receipt of its 
notification. If A and B wish to revive their transaction, both 
parties must file a new notification and observe the waiting period 
in order to carry out the transaction.

    4. Revise page IV of the Instructions in the Appendix to part 803 
to read as follows:

Appendix to Part 803

* * * * *
BILLING CODE 6750-01-P

[[Page 47737]]

[GRAPHIC] [TIFF OMITTED] TP15AU05.004

* * * * *

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 05-16087 Filed 8-12-05; 8:45 am]
BILLING CODE 6750-01-P