Premerger Notification; Reporting and Waiting Period Requirements, 73369-73377 [05-23884]
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Federal Register / Vol. 70, No. 237 / Monday, December 12, 2005 / Rules and Regulations
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[FR Doc. 05–23850 Filed 12–9–05; 8:45 am]
BILLING CODE 4910–13–P
FEDERAL TRADE COMMISSION
16 CFR Part 303
Rules and Regulations Under the
Textile Fiber Products Identification
Act
AGENCY: Federal Trade
ACTION: Final rule.
Commission.
SUMMARY: The Federal Trade
Commission (FTC or Commission)
amends the Rules and Regulations
under the Textile Fiber Products
Identification Act (Textile Rules)
pursuant to the Miscellaneous Trade
and Technical Corrections Act of 2004,
enacted December 3, 2004. That Act
imposes specific requirements for the
disclosure of country of origin of socks
included within certain Harmonized
Tariff Schedule subheadings. For the
affected socks, the country of origin
label must be on the front of the
package, adjacent to the size
designation. The amendments
announced herein conform the Textile
Rules to the amended Textile Fiber
Products Identification Act (Textile
Act). Because the amendments are
technical in nature and merely
incorporate the statutory change, the
Commission finds that notice and
comment are not required. See 5 U.S.C.
553(b). For this reason, the requirements
of the Regulatory Flexibility Act also do
not apply. See 5 U.S.C. 603, 604.
EFFECTIVE DATE: The amended Rules are
effective on March 3, 2006.
ADDRESSES: Requests for copies of the
amended Rules should be sent to the
Consumer Response Center, Room 202,
Federal Trade Commission, 600
Pennsylvania Avenue, NW.,
Washington, DC 20580. The notice
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17:27 Dec 09, 2005
Jkt 208001
announcing the amendments is
available on the Internet at the
Commission’s Web site: https://
www.ftc.gov.
FOR FURTHER INFORMATION CONTACT:
Carol Jennings, Attorney,
cjennings@ftc.gov, or Stephen Ecklund,
Senior Investigator, secklund@ftc.gov,
(202) 326–2996, Division of
Enforcement, Bureau of Consumer
Protection, Federal Trade Commission,
600 Pennsylvania Avenue, NW.,
Washington, DC 20580.
SUPPLEMENTARY INFORMATION: The
Textile Act, 15 U.S.C. 70, and
Commission rules pursuant to the Act,
16 CFR Part 303, require that sellers of
covered textile products mark each
product to show: (1) The fiber content,
(2) the country of origin, and (3) the
identity of the manufacturer or another
business responsible for marketing or
handling the item. The general
requirements for affixing textile labels
and the arrangement of information on
labels are set forth in 16 CFR 303.15 and
303.16.
The Miscellaneous Trade and
Technical Corrections Act of 2004,
Public Law No. 108–429, 118 Stat. 2594,
amends the Textile Act by adding a new
subsection, 15 U.S.C. 70b(k), which
imposes special requirements for the
country of origin labeling of socks that
are included within subheadings
6115.92.90, 6115.93.90, 6115.99.18,
6111.20.60, 6111.30.50, and 6111.90.50
of the Harmonized Tariff Schedule of
the United States, as in effect on
September 1, 2003. For those socks, the
country of origin marking must always
be placed on the front of the package.
If size information for the product also
appears on the front of the package, the
country of origin marking must be
adjacent to the size information for the
product. If no size information appears
on the package or if the size information
appears on the back of the package, the
country of origin marking must still be
placed on the front of the package. The
information must be set forth in a
manner that is clearly legible,
conspicuous, and readily accessible to
the consumer. In addition, the marking
must be as indelible or permanent as the
nature of the article or package will
permit. For socks that are not fully
enclosed in a package, but are banded
together by a label or hangtag, the
information must be placed on the front
of the label or tag.
There is an exception to this
requirement for socks included in a
package that also contains other types of
goods (for example, a baby outfit that
includes socks as well as other items of
clothing). However, such packages of
multiple items must comply with other
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relevant subsections of the Textile
Rules. See, e.g., 16 CFR 303.28
(products contained in packages) and
303.29 (labeling of pairs or products
containing two or more units).
List of Subjects in 16 CFR Part 303
Labeling, Textile fiber products
identification, Trade Practices.
For the reasons set forth above, the
Commission amends 16 CFR Part 303 as
follows:
I
PART 303—RULES AND
REGULATIONS UNDER THE TEXTILE
FIBER PRODUCTS IDENTIFICATION
ACT
1. The authority citation for Part 303
continues to read as follows:
I
Authority: 15 U.S.C. 70 et seq.
2. Section 303.15 is amended by
adding paragraph (d) to read as follows:
I
§ 303.15 Required label and method of
affixing.
*
*
*
*
*
(d) Socks provided for in subheading
6115.92.90, 6115.93.90, 6115.99.18,
6111.20.60, 6111.30.50, or 6111.90.50 of
the Harmonized Tariff Schedule of the
United States, as in effect on September
1, 2003, shall be marked, as legibly,
indelibly, and permanently as the
nature of the article or package will
permit, to disclose the English name of
the country of origin. This disclosure
shall appear on the front of the package,
adjacent to the size designation of the
product, and shall be set forth in such
a manner as to be clearly legible,
conspicuous, and readily accessible to
the ultimate consumer. Provided,
however, any package that contains
several different types of goods and
includes socks classified under
subheading 6115.92.90, 6115.93.90,
6115.99.18, 6111.20.60, 6111.30.50, or
6111.90.50 of the Harmonized Tariff
Schedule of the United States, as in
effect on September 1, 2003, shall not be
subject to the requirements of this
subsection.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 05–23883 Filed 12–9–05; 8:45 am]
BILLING CODE 6750–01–P
FEDERAL TRADE COMMISSION
16 CFR Parts 801 and 803
Premerger Notification; Reporting and
Waiting Period Requirements
AGENCY:
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Federal Trade Commission.
12DER1
73370
ACTION:
Federal Register / Vol. 70, No. 237 / Monday, December 12, 2005 / Rules and Regulations
Final rules.
SUMMARY: The Federal Trade
Commission is amending the premerger
notification rules, which require the
parties to certain mergers or acquisitions
to file reports with the Commission and
with the Assistant Attorney General in
charge of the Antitrust Division of the
Department of Justice (‘‘DOJ’’) and to
wait a specified period of time before
consummating such transactions,
pursuant to Section 7A of the Clayton
Act (‘‘the Act’’). The filing and waiting
period requirements 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 Request for Additional
Information and Documentary Materials
(‘‘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
amending the Notification and Report
Form and its Instructions (‘‘the Form
and Instructions’’) to relieve some of the
burden when complying with Items 4(a)
and (b). 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
modification of paragraph 803.2(e) will
allow filing persons to provide an
operative Internet address linking
directly to the documents required by
Items 4(a) and (b) in lieu of providing
paper copies. The Commission is also
amending 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
either person remains outstanding. In
addition, the Commission is making
technical corrections to certain rules
and to the Form and Instructions to
address minor oversights in the final
rules promulgated in connection with
the treatment of unincorporated
entities.1
DATES: These final rules are effective
January 11, 2006.
FOR FURTHER INFORMATION CONTACT:
Marian R. Bruno, Assistant Director, or
B. Michael Verne, Compliance
1 70
FR 11502 (March 8, 2005).
VerDate Aug<31>2005
15:45 Dec 09, 2005
Specialist, Premerger Notification
Office, Bureau of Competition, Room
303, Federal Trade Commission,
Washington, DC 20580. Telephone:
(202) 326–3100.
SUPPLEMENTARY INFORMATION:
Statement of Basis and Purpose
On August 15, 2005, the Commission
published a Notice of Proposed
Rulemaking and Request for Public
Comment.2 The proposed rules would
allow Internet links to be used for
responses to Items 4(a) and (b) of the
Notification and Report Form, and
would provide an expiration date for
premerger notification when a second
request remains outstanding. The
comment period closed on October 14,
2005. No public comments were
received, and the Commission, with the
concurrence of the Assistant Attorney
General, therefore is adopting the
proposed rules as final with minor
changes for clarification. The unrelated
technical corrections are minor in
nature and are described in the sections
below.
Part 801—Coverage Rules
Section 801.
Example 3 to Paragraph 801.1(b)(2) is
amended to properly reflect the
application of the control test for
nonprofit corporations.
Paragraph 801.1(f)(1)(i), the definition
of voting securities, is amended to
reflect the changes to the control test for
unincorporated entities in 801.1(b). The
reference to unincorporated entities
having individuals exercising similar
functions to directors of a corporation
should have been deleted to be
consistent with the test for control of
unincorporated entities.
Section 801.11
Total Assets
Annual Net Sales and
Section 801.11 is amended by adding
a reference to an acquisition of noncorporate interests in Paragraph (e). This
will allow the exclusion of cash to be
used in the acquisition of non-corporate
interests and the value of any securities
or assets of the acquired person already
held by an acquiring person with no
regularly prepared balance sheet.
Paragraph (e) currently already accords
this treatment to acquisitions of assets
or voting securities.
Section 801.14 Aggregate Total
Amount of Voting Securities and Assets
Section 801.14 is amended by the
addition of new Paragraph (c) that
corrects an inadvertent omission of a
2 70
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Definitions
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FR 47733 (August 15, 2005).
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reference to non-corporate interests. For
example, if an acquiring person is
acquiring controlling interests in two
unincorporated entities from the same
acquired person, Section 801.14(c) will
require that the value of the noncorporate interest in both entities be
aggregated to determine the value of the
transaction.
Part 803—Transmittal Rules
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 available via the Internet
on company Web sites or other 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
modification of paragraph 803.2(e) and
Instructions to the Form will 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.
Note that the Internet link must not
require payment for access.
Incorporating documents by reference to
Internet Web pages only applies to Items
4(a) and 4(b) and will not be available
for responding to other items on the
Form.
It remains the filer’s duty to ensure
that the filing is accurate and complete,
as attested by the filer’s certification
signature. Accordingly, Section 803.2 is
amended to provide that if an Internet
link submitted is, or becomes
inoperative, or the document it is linked
to is incomplete such that the
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 an
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 DOJ. Failure to provide requested
documents by the close of the next
business day will 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 is no longer necessary, and is
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Federal Register / Vol. 70, No. 237 / Monday, December 12, 2005 / Rules and Regulations
accordingly deleted from the
Instructions.
Section 803.7
Notification
Expiration of
The Commission and the DOJ have
encountered instances where, 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. 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
notifications, 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 were 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 current
information pertaining to the
competitive implications of
transactions. Indeed, since the rules’
inception in 1978, Section 803.7 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, 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
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15:45 Dec 09, 2005
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from frustrating the acquisition[,]’’ 3 the
wording of the rule does not limit its
application to certain types of
transactions or persons.
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 however, 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 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 if a second
request remains outstanding to that
person. Such date will be 18 months
from the date of the initial notification
(which typically would be
approximately 17 months from the
issuance of the second request). The
Commission is not aware of any 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,4 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.
This 18-month requirement is
contained in Section 803.7, entitled
‘‘Expiration of Notification.’’ Section
803.7 now has two subsections: (a)
3 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 would exist
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.
4 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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73371
addressing expiration of notification
when the waiting period has expired,
and (b) addressing expiration of
notification due to failure to comply
with a second request.
The Commission is modifying 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, where an
acquired person in a Section 801.30
transaction is trying to frustrate an
acquisition. Indeed, the new rule
excludes 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.
This amendment applies to
transactions with notification pending
with the agencies on the effective date
of this final rulemaking. Thus, for
example, if there are any pending
transactions in which the acquiring
person (or the acquired person in a nonSection 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.
Appendix: Premerger Notification and
Report Form
The Commission is also amending the
Form and its Instructions to correct
inadvertently omitted references to noncorporate interests and to allow the
incorporation by reference to an Internet
link in Items 4(a) and (b).
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 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.5 Further, none of the
rule amendments expand the coverage
5 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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Federal Register / Vol. 70, No. 237 / Monday, December 12, 2005 / Rules and Regulations
of the premerger notification rules in a
way that would affect small business.
Accordingly, the Commission certifies
that these 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.
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 to 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 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
that expires under the 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 abandoned the transaction.
List of Subjects in 16 CFR Parts 801 and
803
charter ‘‘A’’ and ‘‘B’’ are each entitled to
appoint three of C’s six directors. ‘‘A’’ and
‘‘B’’ would each be deemed to control C,
pursuant to § 801.1(b)(2) because each is
deemed to have the contractual power
presently to designate 50 percent or more of
the directors of a not-for-profit corporation.
*
*
*
*
*
(f) * * *
(1) * * *
(i) Voting securities. The term voting
securities means any securities which at
present or upon conversion entitle the
owner or holder thereof to vote for the
election of directors of the issuer, or of
an entity included within the same
person as the issuer.
*
*
*
*
*
I 3. Amend § 801.11 by revising
paragraph (e)(1)(ii) to read as follows:
§ 801.11
Annual net sales and total assets.
*
*
*
*
*
(e) * * *
(1) * * *
(ii) Less all cash that will be used by
the acquiring person as consideration in
an acquisition of assets from, or in an
acquisition of voting securities issued
by, or in an acquisition of non-corporate
interests of, that acquired person (or an
entity within that acquired person) and
less all cash that will be used for
expenses incidental to the acquisition,
and less all securities of the acquired
person (or an entity within that acquired
person); and
*
*
*
*
*
I 4. Amend § 801.14 by adding
paragraph (c) to read as follows:
§ 801.14 Aggregate total amount of voting
securities and assets.
*
For the reasons stated in the preamble,
the Federal Trade Commission amends
16 CFR parts 801 and 803 as set forth
below:
*
*
*
*
(c) The value of all non-corporate
interests of the acquired person which
the acquiring person would hold as a
result of the acquisition, determined in
accordance with § 801.13(c).
PART 801—COVERAGE RULES
PART 803—TRANSMITTAL RULES
1. The authority citation for part 801
continues to read as follows:
I
Antitrust.
I
I
5. The authority citation for part 803
continues to read as follows:
Authority: 15 U.S.C. 18a(d).
Authority: 15 U.S.C. 18a(d).
2. Amend § 801.1 by revising example
3 to paragraph (b)(2) and by revising
paragraph (f)(1)(i) to read as follows:
I
§ 801.1
*
Definitions.
*
*
*
(b) Control * * *
(2) * * *
Examples. * * *
*
15:45 Dec 09, 2005
§ 803.2 Instructions applicable to
Notification and Report Form.
*
3. ‘‘A’’ is a nonprofit charitable foundation
that has formed a partnership joint venture
with ‘‘B,’’ a nonprofit university, to establish
C, a nonprofit hospital corporation that does
not issue voting securities. Pursuant to its
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6. Amend § 803.2 by revising
paragraph (e) to read as follows:
I
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*
*
*
*
(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
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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) and in response to
item 4(b) of the Notification and Report
Form. If an Internet address is
inoperative or becomes inoperative
during the waiting period, or the
document that is linked to it is
incomplete, or the link requires
payment to access the document, 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 § 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 § 803.10(c)(2).
I 7. Revise § 803.7 to read as follows:
§ 803.7
Expiration of notification.
(a) One year after 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 § 802.21 will permit ‘‘A’’
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) Upon failure to comply with
request for additional information. An
acquiring person’s notification and, in
the case of an acquisition to which
§ 801.30 does not apply, an acquired
E:\FR\FM\12DER1.SGM
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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
§ 803.6(b), on such date. If either
person’s notification expires pursuant to
this paragraph, both parties must file a
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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
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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.
8. Revise pages III and IV of the
Instructions, and pages 2 and 3 of the
Notification and Report Form For
Certain Mergers and Acquisitions, in the
Appendix to part 803 to read as follows:
I
Appendix to Part 803
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ER12DE05.003
BILLING CODE 6750–01–P
Agencies
[Federal Register Volume 70, Number 237 (Monday, December 12, 2005)]
[Rules and Regulations]
[Pages 73369-73377]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-23884]
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FEDERAL TRADE COMMISSION
16 CFR Parts 801 and 803
Premerger Notification; Reporting and Waiting Period Requirements
AGENCY: Federal Trade Commission.
[[Page 73370]]
ACTION: Final rules.
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SUMMARY: The Federal Trade Commission is amending the premerger
notification rules, which require the parties to certain mergers or
acquisitions to file reports with the Commission and with the Assistant
Attorney General in charge of the Antitrust Division of the Department
of Justice (``DOJ'') and to wait a specified period of time before
consummating such transactions, pursuant to Section 7A of the Clayton
Act (``the Act''). The filing and waiting period requirements 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 Request for
Additional Information and Documentary Materials (``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 amending the Notification and Report Form and its
Instructions (``the Form and Instructions'') to relieve some of the
burden when complying with Items 4(a) and (b). 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 modification of paragraph 803.2(e) will
allow filing persons to provide an operative Internet address linking
directly to the documents required by Items 4(a) and (b) in lieu of
providing paper copies. The Commission is also amending 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 either person remains
outstanding. In addition, the Commission is making technical
corrections to certain rules and to the Form and Instructions to
address minor oversights in the final rules promulgated in connection
with the treatment of unincorporated entities.\1\
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\1\ 70 FR 11502 (March 8, 2005).
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DATES: These final rules are effective January 11, 2006.
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:
Statement of Basis and Purpose
On August 15, 2005, the Commission published a Notice of Proposed
Rulemaking and Request for Public Comment.\2\ The proposed rules would
allow Internet links to be used for responses to Items 4(a) and (b) of
the Notification and Report Form, and would provide an expiration date
for premerger notification when a second request remains outstanding.
The comment period closed on October 14, 2005. No public comments were
received, and the Commission, with the concurrence of the Assistant
Attorney General, therefore is adopting the proposed rules as final
with minor changes for clarification. The unrelated technical
corrections are minor in nature and are described in the sections
below.
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\2\ 70 FR 47733 (August 15, 2005).
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Part 801--Coverage Rules
Section 801. Definitions
Example 3 to Paragraph 801.1(b)(2) is amended to properly reflect
the application of the control test for nonprofit corporations.
Paragraph 801.1(f)(1)(i), the definition of voting securities, is
amended to reflect the changes to the control test for unincorporated
entities in 801.1(b). The reference to unincorporated entities having
individuals exercising similar functions to directors of a corporation
should have been deleted to be consistent with the test for control of
unincorporated entities.
Section 801.11 Annual Net Sales and Total Assets
Section 801.11 is amended by adding a reference to an acquisition
of non-corporate interests in Paragraph (e). This will allow the
exclusion of cash to be used in the acquisition of non-corporate
interests and the value of any securities or assets of the acquired
person already held by an acquiring person with no regularly prepared
balance sheet. Paragraph (e) currently already accords this treatment
to acquisitions of assets or voting securities.
Section 801.14 Aggregate Total Amount of Voting Securities and Assets
Section 801.14 is amended by the addition of new Paragraph (c) that
corrects an inadvertent omission of a reference to non-corporate
interests. For example, if an acquiring person is acquiring controlling
interests in two unincorporated entities from the same acquired person,
Section 801.14(c) will require that the value of the non-corporate
interest in both entities be aggregated to determine the value of the
transaction.
Part 803--Transmittal Rules
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 available via the Internet on company Web sites or other
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 modification of paragraph
803.2(e) and Instructions to the Form will 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. Note that the
Internet link must not require payment for access. Incorporating
documents by reference to Internet Web pages only applies to Items 4(a)
and 4(b) and will not be available for responding to other items on the
Form.
It remains the filer's duty to ensure that the filing is accurate
and complete, as attested by the filer's certification signature.
Accordingly, Section 803.2 is amended to provide that if an Internet
link submitted is, or becomes inoperative, or the document it is linked
to is incomplete such that the 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 an 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 DOJ. Failure to
provide requested documents by the close of the next business day will
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 is no longer necessary, and is
[[Page 73371]]
accordingly deleted from the Instructions.
Section 803.7 Expiration of Notification
The Commission and the DOJ have encountered instances where, 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. 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 notifications, 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 were 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 current
information pertaining to the competitive implications of transactions.
Indeed, since the rules' inception in 1978, Section 803.7 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, 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[,]'' \3\ the wording of
the rule does not limit its application to certain types of
transactions or persons.
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\3\ 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 would exist
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 however, 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 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 if a second request remains outstanding to that person.
Such date will be 18 months from the date of the initial notification
(which typically would be approximately 17 months from the issuance of
the second request). The Commission is not aware of any 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,\4\ 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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\4\ 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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This 18-month requirement is contained in Section 803.7, entitled
``Expiration of Notification.'' Section 803.7 now has two subsections:
(a) addressing expiration of notification when the waiting period has
expired, and (b) addressing expiration of notification due to failure
to comply with a second request.
The Commission is modifying 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, where an
acquired person in a Section 801.30 transaction is trying to frustrate
an acquisition. Indeed, the new rule excludes 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.
This amendment applies to transactions with notification pending
with the agencies on the effective date of this final rulemaking. 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.
Appendix: Premerger Notification and Report Form
The Commission is also amending the Form and its Instructions to
correct inadvertently omitted references to non-corporate interests and
to allow the incorporation by reference to an Internet link in Items
4(a) and (b).
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 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.\5\ Further,
none of the rule amendments expand the coverage
[[Page 73372]]
of the premerger notification rules in a way that would affect small
business. Accordingly, the Commission certifies that these 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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\5\ 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 to 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 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
that expires under the 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 abandoned the transaction.
List of Subjects in 16 CFR Parts 801 and 803
Antitrust.
0
For the reasons stated in the preamble, the Federal Trade Commission
amends 16 CFR parts 801 and 803 as set forth below:
PART 801--COVERAGE RULES
0
1. The authority citation for part 801 continues to read as follows:
Authority: 15 U.S.C. 18a(d).
0
2. Amend Sec. 801.1 by revising example 3 to paragraph (b)(2) and by
revising paragraph (f)(1)(i) to read as follows:
Sec. 801.1 Definitions.
* * * * *
(b) Control * * *
(2) * * *
Examples. * * *
3. ``A'' is a nonprofit charitable foundation that has formed a
partnership joint venture with ``B,'' a nonprofit university, to
establish C, a nonprofit hospital corporation that does not issue
voting securities. Pursuant to its charter ``A'' and ``B'' are each
entitled to appoint three of C's six directors. ``A'' and ``B''
would each be deemed to control C, pursuant to Sec. 801.1(b)(2)
because each is deemed to have the contractual power presently to
designate 50 percent or more of the directors of a not-for-profit
corporation.
* * * * *
(f) * * *
(1) * * *
(i) Voting securities. The term voting securities means any
securities which at present or upon conversion entitle the owner or
holder thereof to vote for the election of directors of the issuer, or
of an entity included within the same person as the issuer.
* * * * *
0
3. Amend Sec. 801.11 by revising paragraph (e)(1)(ii) to read as
follows:
Sec. 801.11 Annual net sales and total assets.
* * * * *
(e) * * *
(1) * * *
(ii) Less all cash that will be used by the acquiring person as
consideration in an acquisition of assets from, or in an acquisition of
voting securities issued by, or in an acquisition of non-corporate
interests of, that acquired person (or an entity within that acquired
person) and less all cash that will be used for expenses incidental to
the acquisition, and less all securities of the acquired person (or an
entity within that acquired person); and
* * * * *
0
4. Amend Sec. 801.14 by adding paragraph (c) to read as follows:
Sec. 801.14 Aggregate total amount of voting securities and assets.
* * * * *
(c) The value of all non-corporate interests of the acquired person
which the acquiring person would hold as a result of the acquisition,
determined in accordance with Sec. 801.13(c).
PART 803--TRANSMITTAL RULES
0
5. The authority citation for part 803 continues to read as follows:
Authority: 15 U.S.C. 18a(d).
0
6. 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) and in response
to item 4(b) of the Notification and Report Form. If an Internet
address is inoperative or becomes inoperative during the waiting
period, or the document that is linked to it is incomplete, or the link
requires payment to access the document, 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).
0
7. Revise Sec. 803.7 to read as follows:
Sec. 803.7 Expiration of notification.
(a) One year after 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'' 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) Upon 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
[[Page 73373]]
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.
0
8. Revise pages III and IV of the Instructions, and pages 2 and 3 of
the Notification and Report Form For Certain Mergers and Acquisitions,
in the Appendix to part 803 to read as follows:
Appendix to Part 803
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[FR Doc. 05-23884 Filed 12-9-05; 8:45 am]
BILLING CODE 6750-01-P