Commission Approval of Divestiture Agreements, 63833-63836 [2011-26463]
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Federal Register / Vol. 76, No. 199 / Friday, October 14, 2011 / Rules and Regulations
63833
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[FR Doc. 2011–26633 Filed 10–13–11; 8:45 am]
BILLING CODE 3510–NK–P
FEDERAL TRADE COMMISSION
16 CFR Part 2
Commission Approval of Divestiture
Agreements
AGENCY:
Federal Trade Commission
(FTC).
ACTION:
Final rule.
This final rule clarifies the
process whereby the FTC will consider
for approval a modification to a
divestiture agreement, which agreement
the Commission has either previously
approved or incorporated by reference
into a final order. As described fully
below, the final rule delegates to certain
senior staff at the Commission the
authority, following notice to the
Commissioners, to waive formal
application to the Commission for
approval of certain modifications, and
to waive the otherwise required period
for public comment; the delegation will
streamline the process for approval of
ministerial and other minor contract
modifications that will not diminish the
Commission’s order.
DATES: Effective Date: This rule shall be
effective on November 14, 2011.
FOR FURTHER INFORMATION CONTACT:
Daniel P. Ducore, Bureau of
Competition, Compliance Division, 600
Pennsylvania Avenue NW., Washington,
DC, 20580, (202) 326–2526,
dducore@ftc.gov.
SUMMARY:
SUPPLEMENTARY INFORMATION:
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I. Background
The Federal Trade Commission has
amended § 2.41 of its Rules of Practice,
16 CFR 2.41, which deals with requests
for the Commission’s approval of
divestitures and acquisitions, pursuant
to final orders. The Commission has
amended the section to add a new
paragraph (f)(5) and to modify existing
paragraphs (f)(1) and (f)(2). New
paragraph (f)(5) codifies and improves
the Commission’s existing process for
reviewing and approving modifications
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to certain agreements that have been
approved by the Commission or
incorporated by reference into the
Commission’s final orders. The
modifications to paragraphs (1) and (2)
add to the public comment
requirements in Rule 2.41(f)
applications for approval of agreement
modifications under new paragraph (5).
The Commission has also amended the
title to reflect better the subjects
addressed by the rule. These changes
are effective November 14, 2011.
The Federal Trade Commission, inter
alia, enforces Section 5 of the Federal
Trade Commission Act, 15 U.S.C. 45,
and, with the Department of Justice,
Section 7 of the Clayton Act, 15 U.S.C.
18, to challenge mergers and
acquisitions that the Commission has
reason to believe would unlawfully lead
to a substantial lessening of
competition. In some circumstances, the
Commission seeks to prevent such
mergers through litigation to enjoin the
merger. In other circumstances,
however, the Commission seeks to
prevent the harm either by unwinding
the merger entirely (if the merger has
already occurred) or, as is much more
common, by negotiating a settlement
with the parties that requires them to
sell off a business or set of assets, with
the goal of recreating, to the greatest
extent possible, the competition that is,
or would be, eliminated through the
merger.1
Rule 2.41(f) applies specifically to
final administrative orders issued by the
Commission. With the exception of
Federal court actions seeking to enjoin
a pending merger, the Commission
typically achieves its merger remedies
in one of two ways. If the acquirer has
been identified during negotiation of the
settlement, the order will require
divestiture to that acquirer pursuant to
the agreement(s) that are attached to and
incorporated into the order (known as a
divestiture with an ‘‘up-front buyer’’). If
the order requires the respondent to
divest within some deadline after the
order is final, it will require the
1 Most settlements are reached during the
Commission’s review of the merger, pursuant to the
premerger notification provisions of the Hart-ScottRodino Antitrust Improvements Act, 15 U.S.C. 18a.
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respondent to obtain subsequent
approval under Rule 2.41(f) (known as
a ‘‘post-order’’ divestiture). The criteria
used by the Commission to determine
whether a divestiture is more
appropriately ‘‘up-front’’ or ‘‘postorder’’ are detailed in Frequently Asked
Questions about Merger Consent Order
Provisions, available on the FTC’s Web
site at: https://www.ftc.gov/bc/
mergerfaq.shtm; and Statement of the
Federal Trade Commission’s Bureau of
Competition on Negotiating Merger
Remedies, available at: https://
www.ftc.gov/bc/mergerfaq.shtm.
Rule 2.41(f) sets forth the procedure
by which respondents must seek the
Commission’s approval of a divestiture
if such approval has not been explicitly
incorporated into a Commission order.
Briefly, pursuant to the Rule, a
respondent must file an application for
prior approval of a proposed
divestiture.2 The application, along with
relevant supporting material, is placed
on the public record for thirty days for
the receipt of public comments.
Confidential portions of the application
and supporting materials are not made
public.3 Only after the Commission has
approved an application for prior
approval may the respondent
consummate the proposed transaction.
The burden of proof for any request for
approval lies with the respondent.4
The Commission’s divestiture orders
mandate that the required divestiture be
made ‘‘only to an acquirer approved by
the Commission and only in a manner
approved by the Commission.’’ That is,
the Commission must approve both the
acquirer of the divested assets and all
agreements relating to the divestiture.
Further, once the Commission has
approved a divestiture agreement, a
respondent who does not perform as
required in that agreement fails to divest
in the approved manner, and thereby,
2 Rule 2.41(f) continues to apply as well to
applications for approval of acquisitions by a
respondent, if the particular order includes a
prohibition on acquisitions without the
Commission’s prior approval.
3 See Rules 4.9 and 4.10, 16 CFR 4.9, 4.10 for a
description of the Commission’s public records and
what items are exempt from public disclosure.
4 See Dr Pepper/Seven-Up Companies, Inc. v.
F.T.C., 991 F.2d 859, 863 (DC Cir. 1993).
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Federal Register / Vol. 76, No. 199 / Friday, October 14, 2011 / Rules and Regulations
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fails to comply with the underlying
divestiture order.5
The Commission has consistently
taken the position that it must approve
any changes to a divestiture agreement
previously approved through an order
or in response to an application filed
under Rule 2.41. The Commission must
review and approve changes to a
previously-approved divestiture
agreement to ensure that the agreement
remains consistent with the order and
will continue to achieve its purposes.
The Commission’s main concern is that
post-approval changes to the
agreements, although acceptable to both
the respondent and the acquirer, may
nevertheless diminish the competitive
and remedial effectiveness of the order.
Historically, the Commission’s
divestiture orders required a respondent
to divest a specified business or set of
assets, which the respondent
accomplished soon after the order
became final. Because the respondent’s
obligations under the divestiture
agreement were fully performed in a
short time frame, there was no need for
parties to modify their agreements. In
recent years, however, the
Commission’s orders have frequently
included ongoing obligations to supply
products or services to the acquirer for
some interim period, and at times the
parties have agreed to modify the
agreements implementing these
obligations. Therefore, the need to
review changes in divestiture
agreements has become more common.
The Commission recognizes, however,
that there may be instances in which the
parties change their agreements in ways
that are purely ministerial, or that are
unlikely under any plausible facts to
affect achieving the order’s remedial
purposes. There is currently no
procedure for distinguishing such
changes from those that more
appropriately require the Commission’s
approval.6 As detailed further below,
5 The Commission thoroughly evaluates the
proposed agreement (as well as the proposed
acquirer) to determine whether it will achieve the
order’s purpose and is consistent with both the
competition laws and any other provisions in the
order. This evaluation includes review of the
purchase and sale agreement, all exhibits and
appendices to that agreement, and all related and
ancillary documents.
6 The Commission’s orders do not exclude
particular types of future modifications from the
requirement to obtain approval. When a divestiture
agreement is approved, it is difficult to predict what
types of future modifications the parties may seek
or to define a meaningful category of modifications
that under no circumstances would implicate the
purposes an order. For example, ‘‘immaterial’’ may
have a specific meaning under contract law that is
not fully consistent with the remedial goals of the
order. Accordingly, the Commission will assess
those proposed changes at the time they are made,
and not hypothetically beforehand.
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the Commission has therefore modified
Rule 2.41 to authorize certain staff in
the Commission’s Bureau of
Competition to waive the prior approval
requirement—or to shorten, eliminate,
extend, or reopen the public comment
period—in appropriate circumstances.
II. The Amendment to the Rules
New paragraph (5) of § 2.41(f)
confirms the Commission’s longstanding position that modifications to
divestiture agreements must be
approved by the Commission. The new
paragraph, accordingly, expressly
provides that, before modifying an
agreement subject to paragraph § 2.41(f),
a respondent must obtain either the
Commission’s approval of the proposed
modification or a waiver of the approval
requirement.7 Item (i) Identifies the
types of agreements that are subject to
the proposed modification review and
approval process and states the approval
requirement. Item (ii) allows a waiver of
the approval requirement and the public
comment period, and item (iii) confirms
that a modified agreement remains
subject to the Commission’s order to the
same extent as the original unmodified
agreement, and that all modifications
shall be considered part of the original
agreement when determining
compliance with and enforcement of a
Commission order.
As described in item (i) of § 2.41(f)(5),
agreements subject to the new paragraph
are those that accomplish divestitures
and related remedial measures required
by orders issued by the Commission in
connection with an investigation of a
proposed or consummated merger,
acquisition or similar transaction. These
agreements are either incorporated into
a final Commission order or approved
by the Commission through the process
provided in Rule 2.41(f)(i).
Item (i) of the new paragraph states
that the respondent shall use the
process set forth in Rule 2.41(f)(1)–(4) to
submit an application requesting
approval of a proposed modification.
The process requires a respondent to
submit an application to the
Commission explaining the proposed
modification and describing its
necessity and purpose. The respondent
should also indicate that all signatories
to the agreement have agreed to the
proposed modification. The level of
detail required in an application for
approval of a proposed modification
will vary depending on the complexity
and significance of the proposed
modification, but it should be sufficient
7 In addition, applications for modifications have
been explicitly added to the public comment
requirements of § 2.41(f)(1) and (2).
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to establish that the proposed
modification will not interfere with the
requirements or purpose of the
Commission-ordered remedial measures
implemented through the underlying
agreement. If an initial application lacks
sufficient detail, the Commission may
deny approval, or may request further
information to enable it to effectively
evaluate the proposed modification.
Pursuant to the provisions of existing
Rule 2.41(f), an application for approval
of a proposed modification, except for
confidential portions, will be placed on
the public record for comment.
Item (ii) of new paragraph (5)
delegates to certain Commission
officials, including the Bureau of
Competition’s Assistant Director for
Compliance, the authority, for good
cause shown, to shorten, eliminate,
extend or reopen the public comment
period for an application for
modification.8 As with the underlying
remedial agreements, modifications
subject to proposed paragraph (5) often
contain sensitive non-public
information, which is accorded
confidential treatment by the
Commission. See Rule 4.10, 16 CFR
4.10. In such cases, there may be little
information regarding the proposed
modification that can be disclosed
publicly, and therefore little benefit in
providing a public comment period.
Further, there may be cases where
prompt action on a modification is
necessary to prevent economic harm to
the parties or competition. Such
circumstances will often provide good
cause to shorten or eliminate the public
comment period. However, the
Commission will be unlikely to take that
step in cases where the comment period
may provide transparency or where the
proposed modification involves an issue
of general interest and applicability that
can be discussed without disclosing
confidential information.
Item (ii) of new paragraph (5) also
provides that, in order to expedite the
modification process, the designated
officials can, for good cause shown,
waive the modification approval
requirement when a proposed
modification is purely ministerial, or is
unlikely under any plausible facts to
affect achieving the remedial purposes
of the order at issue. The information a
respondent must provide to show good
cause for a waiver of the approval
8 The Commission anticipates that most requests
for waivers will be made to the Assistant Director
of the Compliance Division, as the Compliance
Division is responsible for reviewing and
monitoring remedial agreements approved by the
Commission and will be primarily responsible for
reviewing proposed modifications under this
paragraph.
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Federal Register / Vol. 76, No. 199 / Friday, October 14, 2011 / Rules and Regulations
requirement will depend on the nature
of the proposed modification. In all
cases, a respondent should provide the
exact language of the proposed
modification and verify that the
modification is agreed to by the
signatories to the underlying agreement.
It is anticipated that respondents will
often be able to establish good cause for
waiving approval for modifications that
are purely ministerial in nature, such as
a change in the method of service of
required notices, on the basis of this
information alone.
A modification that is more
substantial—for example, alteration of
the payment structure of an agreement—
may also qualify for a waiver if the
respondent can establish that the
proposed change does not affect
achievement of the order’s remedial
purposes. Respondents, however, will
generally be required to submit facts
beyond the language of the waiver itself
to substantiate that there is good cause
to grant a waiver for this type of
modification. If a respondent believes
there is good cause to waive the
approval requirement for a particular
proposed modification, the respondent
should discuss the matter with the
Commission’s staff and obtain guidance
on the type and level of information that
should be provided.
The waiver of the modification
approval requirement under the
foregoing delegation shall not be
effective, however, until the file has
been transmitted to the Secretary and
the Secretary shall have advised the
Commission of the decision to waive
and given the Commissioners three
business days thereafter to object. If,
upon the expiration of the three-day
period, no Commissioner shall have
objected, the Secretary shall enter upon
the records of the Commission the
waiver in the matter and take such other
action as the matter requires.
A respondent may effect a proposed
modification covered by proposed
paragraph (5) after the respondent has
obtained approval for the modification
or a waiver of the approval requirement.
In either case, staff will request that
respondent submit a copy of the
amendment to the agreement that
contains the modification. Further, as
item (iii) of the new paragraph confirms,
a Commission order that incorporates
the underlying agreement also
incorporates all approved modifications
to the agreement or modifications for
which a waiver of the approval
requirement was obtained.
Finally, the Commission has changed
the title of Rule 2.41 to better reflect the
subject matter included in the Rule. The
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previous title did not fully describe the
main provisions of the rule.
III. Procedural Requirements
A. Administrative Procedure Act
The FTC has determined that
implementation of this rule without
prior notice and the opportunity for
public comment is warranted because
this rule is one of agency procedure and
practice and therefore is exempt from
notice and comment rulemaking
requirements of the Administrative
Procedure Act at 5 U.S.C. 553(b)(A) and
(B).
B. Regulatory Flexibility Act
Because the Commission has
determined that it may issue this rule
without public comment, the
Commission is also not required to
publish any initial or final regulatory
flexibility analysis under the Regulatory
Flexibility Act as part of such action.
See 5 U.S.C. 601(2).
C. Paperwork Reduction Act of 1995
The rule revisions to part 2 are also
not subject to the requirements of the
Paperwork Reduction Act, which
contains an exemption for information
collected during the conduct of
administrative proceedings or
investigations against specific
individuals or entities. 44 U.S.C.
3518(c)(1)(B)(ii); 5 CFR 1320.4(a)(2).
List of Subjects in 16 CFR Part 2
Administrative practice and
procedure, Investigations, Reporting and
recordkeeping requirements.
Authority and Issuance
For the reasons set forth in the
preamble, the FTC is amending Title 16,
Chapter I, part 2, as follows.
PART 2—RULES OF PRACTICE FOR
NONADJUDICATIVE INVESTIGATIONS
1. The authority citation for part 2
continues to read as follows:
■
Authority: 15 U.S.C. 46, unless otherwise
noted.
2. Amend § 2.41 by revising the
section heading and paragraphs (f)(1)
and (2), and adding paragraph (f)(5), to
read as follows:
■
§ 2.41 General compliance obligations and
specific obligations regarding acquisitions
and divestitures.
*
*
*
*
*
(f)(1) All applications for approval of
proposed divestitures, acquisitions, or
similar transactions subject to
Commission review under outstanding
orders (including modifications to
previously approved transactions) shall
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63835
fully describe the terms of the
transaction or modification and shall set
forth why the transaction or
modification merits Commission
approval. Such applications will be
placed on the public record, together
with any additional applicant
submissions that the Commission
directs be placed on the public record.
The Director of the Bureau of
Competition is delegated authority to
direct such placement.
(2) The Commission will receive
public comment on a prior approval
application submitted pursuant to
paragraphs (f)(1) or (5) of this section for
thirty (30) days. During the comment
period, any person may file formal
written objections or comments with the
Secretary of the Commission, and such
objections or comments shall be placed
on the public record. In appropriate
cases, the Commission may shorten,
eliminate, extend, or reopen a comment
period.
*
*
*
*
*
(5)(i) Any application to modify
either:
(A) An agreement that has been
approved by the Commission pursuant
to paragraph (f) of this section, or
(B) An agreement incorporated by
reference into a final order of the
Commission issued in connection with
a merger, acquisition, or similar
transaction shall be subject to review
and approval in the manner described
in paragraphs (f)(1) through (4) of this
section, except as provided in paragraph
(f)(5)(ii) of this section.
(ii) If the application establishes that
the proposed modification is purely
ministerial, or unlikely under any
plausible facts to affect achieving the
remedial purposes of the order at issue,
the Commission has delegated to the
Director, Deputy Directors, and
Assistant Director for Compliance of the
Bureau of Competition, without power
of redelegation, for good cause shown,
the authority.
(A) To waive the approval
requirement of paragraph (f)(5)(i) of this
section; and
(B) To shorten, eliminate, extend or
reopen the comment period pursuant to
paragraph (f)(2) of this section.
(iii) Any agreement containing a
modification approved, or for which the
approval requirement is waived,
pursuant to this paragraph (f)(5), shall
be subject to any outstanding
Commission order to the same extent as
was the original agreement.
*
*
*
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*
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Federal Register / Vol. 76, No. 199 / Friday, October 14, 2011 / Rules and Regulations
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2011–26463 Filed 10–13–11; 8:45 am]
BILLING CODE 6750–01–P
PENSION BENEFIT GUARANTY
CORPORATION
29 CFR Part 4022
Benefits Payable in Terminated SingleEmployer Plans; Interest Assumptions
for Paying Benefits
Pension Benefit Guaranty
Corporation.
ACTION: Final rule.
AGENCY:
This final rule amends the
Pension Benefit Guaranty Corporation’s
regulation on Benefits Payable in
Terminated Single-Employer Plans to
prescribe interest assumptions under
the regulation for valuation dates in
November 2011. The interest
assumptions are used for paying
benefits under terminating singleemployer plans covered by the pension
insurance system administered by
PBGC.
DATES: Effective November 1, 2011.
FOR FURTHER INFORMATION CONTACT:
Catherine B. Klion
(Klion.Catherine@pbgc.gov), Manager,
Regulatory and Policy Division,
Legislative and Regulatory Department,
Pension Benefit Guaranty Corporation,
1200 K Street, NW., Washington, DC
20005, 202–326–4024. (TTY/TDD users
may call the Federal relay service tollfree at 1–800–877–8339 and ask to be
connected to 202–326–4024.)
SUPPLEMENTARY INFORMATION: PBGC’s
regulation on Benefits Payable in
SUMMARY:
Rate set
For plans with a valuation
date
Before
*
11–1–11
3. In appendix C to part 4022, Rate Set
217, as set forth below, is added to the
table.
■
1.50
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List of Subjects in 29 CFR Part 4022
Employee benefit plans, Pension
insurance, Pensions, Reporting and
recordkeeping requirements.
In consideration of the foregoing, 29
CFR part 4022 is amended as follows:
PART 4022—BENEFITS PAYABLE IN
TERMINATED SINGLE-EMPLOYER
PLANS
1. The authority citation for part 4022
continues to read as follows:
■
Authority: 29 U.S.C. 1302, 1322, 1322b,
1341(c)(3)(D), and 1344.
2. In appendix B to part 4022, Rate Set
217, as set forth below, is added to the
table.
■
Appendix B to Part 4022—Lump Sum
Interest Rates for PBGC Payments
*
*
*
*
*
i1
i2
i3
4.00
*
4.00
4.00
*
n1
*
n2
*
7
Appendix C to Part 4022—Lump Sum
Interest Rates for Private-Sector
Payments
*
1 Appendix B to PBGC’s regulation on Allocation
of Assets in Single-Employer Plans (29 CFR part
4044) prescribes interest assumptions for valuing
need to determine and issue new
interest assumptions promptly so that
the assumptions can reflect current
market conditions as accurately as
possible.
Because of the need to provide
immediate guidance for the payment of
benefits under plans with valuation
dates during November 2011, PBGC
finds that good cause exists for making
the assumptions set forth in this
amendment effective less than 30 days
after publication.
PBGC has determined that this action
is not a ‘‘significant regulatory action’’
under the criteria set forth in Executive
Order 12866.
Because no general notice of proposed
rulemaking is required for this
amendment, the Regulatory Flexibility
Act of 1980 does not apply. See 5 U.S.C.
601(2).
Deferred annuities
(percent)
Immediate
annuity rate
(percent)
*
12–1–11
On or after
*
217 ....................................
Terminated Single-Employer Plans (29
CFR part 4022) prescribes actuarial
assumptions—including interest
assumptions—for paying plan benefits
under terminating single-employer
plans covered by title IV of the
Employee Retirement Income Security
Act of 1974. The interest assumptions in
the regulation are also published on
PBGC’s Web site (https://www.pbgc.gov).
PBGC uses the interest assumptions in
Appendix B to Part 4022 to determine
whether a benefit is payable as a lump
sum and to determine the amount to
pay. Appendix C to Part 4022 contains
interest assumptions for private-sector
pension practitioners to refer to if they
wish to use lump-sum interest rates
determined using PBGC’s historical
methodology. Currently, the rates in
Appendices B and C of the benefit
payment regulation are the same.
The interest assumptions are intended
to reflect current conditions in the
financial and annuity markets.
Assumptions under the benefit
payments regulation are updated
monthly. This final rule updates the
benefit payments interest assumptions
for November 2011.1
The November 2011 interest
assumptions under the benefit payments
regulation will be 1.50 percent for the
period during which a benefit is in pay
status and 4.00 percent during any years
preceding the benefit’s placement in pay
status. In comparison with the interest
assumptions in effect for October 2011,
these interest assumptions represent a
decrease of 0.25 percent in the
immediate annuity rate and are
otherwise unchanged.
PBGC has determined that notice and
public comment on this amendment are
impracticable and contrary to the public
interest. This finding is based on the
*
*
*
*
benefits under terminating covered single-employer
plans for purposes of allocation of assets under
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ERISA section 4044. Those assumptions are
updated quarterly.
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]]>Agencies
[Federal Register Volume 76, Number 199 (Friday, October 14, 2011)]
[Rules and Regulations]
[Pages 63833-63836]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26463]
=======================================================================
-----------------------------------------------------------------------
FEDERAL TRADE COMMISSION
16 CFR Part 2
Commission Approval of Divestiture Agreements
AGENCY: Federal Trade Commission (FTC).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule clarifies the process whereby the FTC will
consider for approval a modification to a divestiture agreement, which
agreement the Commission has either previously approved or incorporated
by reference into a final order. As described fully below, the final
rule delegates to certain senior staff at the Commission the authority,
following notice to the Commissioners, to waive formal application to
the Commission for approval of certain modifications, and to waive the
otherwise required period for public comment; the delegation will
streamline the process for approval of ministerial and other minor
contract modifications that will not diminish the Commission's order.
DATES: Effective Date: This rule shall be effective on November 14,
2011.
FOR FURTHER INFORMATION CONTACT: Daniel P. Ducore, Bureau of
Competition, Compliance Division, 600 Pennsylvania Avenue NW.,
Washington, DC, 20580, (202) 326-2526, dducore@ftc.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The Federal Trade Commission has amended Sec. 2.41 of its Rules of
Practice, 16 CFR 2.41, which deals with requests for the Commission's
approval of divestitures and acquisitions, pursuant to final orders.
The Commission has amended the section to add a new paragraph (f)(5)
and to modify existing paragraphs (f)(1) and (f)(2). New paragraph
(f)(5) codifies and improves the Commission's existing process for
reviewing and approving modifications to certain agreements that have
been approved by the Commission or incorporated by reference into the
Commission's final orders. The modifications to paragraphs (1) and (2)
add to the public comment requirements in Rule 2.41(f) applications for
approval of agreement modifications under new paragraph (5). The
Commission has also amended the title to reflect better the subjects
addressed by the rule. These changes are effective November 14, 2011.
The Federal Trade Commission, inter alia, enforces Section 5 of the
Federal Trade Commission Act, 15 U.S.C. 45, and, with the Department of
Justice, Section 7 of the Clayton Act, 15 U.S.C. 18, to challenge
mergers and acquisitions that the Commission has reason to believe
would unlawfully lead to a substantial lessening of competition. In
some circumstances, the Commission seeks to prevent such mergers
through litigation to enjoin the merger. In other circumstances,
however, the Commission seeks to prevent the harm either by unwinding
the merger entirely (if the merger has already occurred) or, as is much
more common, by negotiating a settlement with the parties that requires
them to sell off a business or set of assets, with the goal of
recreating, to the greatest extent possible, the competition that is,
or would be, eliminated through the merger.\1\
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\1\ Most settlements are reached during the Commission's review
of the merger, pursuant to the premerger notification provisions of
the Hart-Scott-Rodino Antitrust Improvements Act, 15 U.S.C. 18a.
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Rule 2.41(f) applies specifically to final administrative orders
issued by the Commission. With the exception of Federal court actions
seeking to enjoin a pending merger, the Commission typically achieves
its merger remedies in one of two ways. If the acquirer has been
identified during negotiation of the settlement, the order will require
divestiture to that acquirer pursuant to the agreement(s) that are
attached to and incorporated into the order (known as a divestiture
with an ``up-front buyer''). If the order requires the respondent to
divest within some deadline after the order is final, it will require
the respondent to obtain subsequent approval under Rule 2.41(f) (known
as a ``post-order'' divestiture). The criteria used by the Commission
to determine whether a divestiture is more appropriately ``up-front''
or ``post-order'' are detailed in Frequently Asked Questions about
Merger Consent Order Provisions, available on the FTC's Web site at:
https://www.ftc.gov/bc/mergerfaq.shtm; and Statement of the Federal
Trade Commission's Bureau of Competition on Negotiating Merger
Remedies, available at: https://www.ftc.gov/bc/mergerfaq.shtm.
Rule 2.41(f) sets forth the procedure by which respondents must
seek the Commission's approval of a divestiture if such approval has
not been explicitly incorporated into a Commission order. Briefly,
pursuant to the Rule, a respondent must file an application for prior
approval of a proposed divestiture.\2\ The application, along with
relevant supporting material, is placed on the public record for thirty
days for the receipt of public comments. Confidential portions of the
application and supporting materials are not made public.\3\ Only after
the Commission has approved an application for prior approval may the
respondent consummate the proposed transaction. The burden of proof for
any request for approval lies with the respondent.\4\
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\2\ Rule 2.41(f) continues to apply as well to applications for
approval of acquisitions by a respondent, if the particular order
includes a prohibition on acquisitions without the Commission's
prior approval.
\3\ See Rules 4.9 and 4.10, 16 CFR 4.9, 4.10 for a description
of the Commission's public records and what items are exempt from
public disclosure.
\4\ See Dr Pepper/Seven-Up Companies, Inc. v. F.T.C., 991 F.2d
859, 863 (DC Cir. 1993).
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The Commission's divestiture orders mandate that the required
divestiture be made ``only to an acquirer approved by the Commission
and only in a manner approved by the Commission.'' That is, the
Commission must approve both the acquirer of the divested assets and
all agreements relating to the divestiture. Further, once the
Commission has approved a divestiture agreement, a respondent who does
not perform as required in that agreement fails to divest in the
approved manner, and thereby,
[[Page 63834]]
fails to comply with the underlying divestiture order.\5\
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\5\ The Commission thoroughly evaluates the proposed agreement
(as well as the proposed acquirer) to determine whether it will
achieve the order's purpose and is consistent with both the
competition laws and any other provisions in the order. This
evaluation includes review of the purchase and sale agreement, all
exhibits and appendices to that agreement, and all related and
ancillary documents.
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The Commission has consistently taken the position that it must
approve any changes to a divestiture agreement previously approved
through an order or in response to an application filed under Rule
2.41. The Commission must review and approve changes to a previously-
approved divestiture agreement to ensure that the agreement remains
consistent with the order and will continue to achieve its purposes.
The Commission's main concern is that post-approval changes to the
agreements, although acceptable to both the respondent and the
acquirer, may nevertheless diminish the competitive and remedial
effectiveness of the order.
Historically, the Commission's divestiture orders required a
respondent to divest a specified business or set of assets, which the
respondent accomplished soon after the order became final. Because the
respondent's obligations under the divestiture agreement were fully
performed in a short time frame, there was no need for parties to
modify their agreements. In recent years, however, the Commission's
orders have frequently included ongoing obligations to supply products
or services to the acquirer for some interim period, and at times the
parties have agreed to modify the agreements implementing these
obligations. Therefore, the need to review changes in divestiture
agreements has become more common.
The Commission recognizes, however, that there may be instances in
which the parties change their agreements in ways that are purely
ministerial, or that are unlikely under any plausible facts to affect
achieving the order's remedial purposes. There is currently no
procedure for distinguishing such changes from those that more
appropriately require the Commission's approval.\6\ As detailed further
below, the Commission has therefore modified Rule 2.41 to authorize
certain staff in the Commission's Bureau of Competition to waive the
prior approval requirement--or to shorten, eliminate, extend, or reopen
the public comment period--in appropriate circumstances.
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\6\ The Commission's orders do not exclude particular types of
future modifications from the requirement to obtain approval. When a
divestiture agreement is approved, it is difficult to predict what
types of future modifications the parties may seek or to define a
meaningful category of modifications that under no circumstances
would implicate the purposes an order. For example, ``immaterial''
may have a specific meaning under contract law that is not fully
consistent with the remedial goals of the order. Accordingly, the
Commission will assess those proposed changes at the time they are
made, and not hypothetically beforehand.
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II. The Amendment to the Rules
New paragraph (5) of Sec. 2.41(f) confirms the Commission's long-
standing position that modifications to divestiture agreements must be
approved by the Commission. The new paragraph, accordingly, expressly
provides that, before modifying an agreement subject to paragraph Sec.
2.41(f), a respondent must obtain either the Commission's approval of
the proposed modification or a waiver of the approval requirement.\7\
Item (i) Identifies the types of agreements that are subject to the
proposed modification review and approval process and states the
approval requirement. Item (ii) allows a waiver of the approval
requirement and the public comment period, and item (iii) confirms that
a modified agreement remains subject to the Commission's order to the
same extent as the original unmodified agreement, and that all
modifications shall be considered part of the original agreement when
determining compliance with and enforcement of a Commission order.
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\7\ In addition, applications for modifications have been
explicitly added to the public comment requirements of Sec.
2.41(f)(1) and (2).
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As described in item (i) of Sec. 2.41(f)(5), agreements subject to
the new paragraph are those that accomplish divestitures and related
remedial measures required by orders issued by the Commission in
connection with an investigation of a proposed or consummated merger,
acquisition or similar transaction. These agreements are either
incorporated into a final Commission order or approved by the
Commission through the process provided in Rule 2.41(f)(i).
Item (i) of the new paragraph states that the respondent shall use
the process set forth in Rule 2.41(f)(1)-(4) to submit an application
requesting approval of a proposed modification. The process requires a
respondent to submit an application to the Commission explaining the
proposed modification and describing its necessity and purpose. The
respondent should also indicate that all signatories to the agreement
have agreed to the proposed modification. The level of detail required
in an application for approval of a proposed modification will vary
depending on the complexity and significance of the proposed
modification, but it should be sufficient to establish that the
proposed modification will not interfere with the requirements or
purpose of the Commission-ordered remedial measures implemented through
the underlying agreement. If an initial application lacks sufficient
detail, the Commission may deny approval, or may request further
information to enable it to effectively evaluate the proposed
modification. Pursuant to the provisions of existing Rule 2.41(f), an
application for approval of a proposed modification, except for
confidential portions, will be placed on the public record for comment.
Item (ii) of new paragraph (5) delegates to certain Commission
officials, including the Bureau of Competition's Assistant Director for
Compliance, the authority, for good cause shown, to shorten, eliminate,
extend or reopen the public comment period for an application for
modification.\8\ As with the underlying remedial agreements,
modifications subject to proposed paragraph (5) often contain sensitive
non-public information, which is accorded confidential treatment by the
Commission. See Rule 4.10, 16 CFR 4.10. In such cases, there may be
little information regarding the proposed modification that can be
disclosed publicly, and therefore little benefit in providing a public
comment period. Further, there may be cases where prompt action on a
modification is necessary to prevent economic harm to the parties or
competition. Such circumstances will often provide good cause to
shorten or eliminate the public comment period. However, the Commission
will be unlikely to take that step in cases where the comment period
may provide transparency or where the proposed modification involves an
issue of general interest and applicability that can be discussed
without disclosing confidential information.
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\8\ The Commission anticipates that most requests for waivers
will be made to the Assistant Director of the Compliance Division,
as the Compliance Division is responsible for reviewing and
monitoring remedial agreements approved by the Commission and will
be primarily responsible for reviewing proposed modifications under
this paragraph.
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Item (ii) of new paragraph (5) also provides that, in order to
expedite the modification process, the designated officials can, for
good cause shown, waive the modification approval requirement when a
proposed modification is purely ministerial, or is unlikely under any
plausible facts to affect achieving the remedial purposes of the order
at issue. The information a respondent must provide to show good cause
for a waiver of the approval
[[Page 63835]]
requirement will depend on the nature of the proposed modification. In
all cases, a respondent should provide the exact language of the
proposed modification and verify that the modification is agreed to by
the signatories to the underlying agreement. It is anticipated that
respondents will often be able to establish good cause for waiving
approval for modifications that are purely ministerial in nature, such
as a change in the method of service of required notices, on the basis
of this information alone.
A modification that is more substantial--for example, alteration of
the payment structure of an agreement--may also qualify for a waiver if
the respondent can establish that the proposed change does not affect
achievement of the order's remedial purposes. Respondents, however,
will generally be required to submit facts beyond the language of the
waiver itself to substantiate that there is good cause to grant a
waiver for this type of modification. If a respondent believes there is
good cause to waive the approval requirement for a particular proposed
modification, the respondent should discuss the matter with the
Commission's staff and obtain guidance on the type and level of
information that should be provided.
The waiver of the modification approval requirement under the
foregoing delegation shall not be effective, however, until the file
has been transmitted to the Secretary and the Secretary shall have
advised the Commission of the decision to waive and given the
Commissioners three business days thereafter to object. If, upon the
expiration of the three-day period, no Commissioner shall have
objected, the Secretary shall enter upon the records of the Commission
the waiver in the matter and take such other action as the matter
requires.
A respondent may effect a proposed modification covered by proposed
paragraph (5) after the respondent has obtained approval for the
modification or a waiver of the approval requirement. In either case,
staff will request that respondent submit a copy of the amendment to
the agreement that contains the modification. Further, as item (iii) of
the new paragraph confirms, a Commission order that incorporates the
underlying agreement also incorporates all approved modifications to
the agreement or modifications for which a waiver of the approval
requirement was obtained.
Finally, the Commission has changed the title of Rule 2.41 to
better reflect the subject matter included in the Rule. The previous
title did not fully describe the main provisions of the rule.
III. Procedural Requirements
A. Administrative Procedure Act
The FTC has determined that implementation of this rule without
prior notice and the opportunity for public comment is warranted
because this rule is one of agency procedure and practice and therefore
is exempt from notice and comment rulemaking requirements of the
Administrative Procedure Act at 5 U.S.C. 553(b)(A) and (B).
B. Regulatory Flexibility Act
Because the Commission has determined that it may issue this rule
without public comment, the Commission is also not required to publish
any initial or final regulatory flexibility analysis under the
Regulatory Flexibility Act as part of such action. See 5 U.S.C. 601(2).
C. Paperwork Reduction Act of 1995
The rule revisions to part 2 are also not subject to the
requirements of the Paperwork Reduction Act, which contains an
exemption for information collected during the conduct of
administrative proceedings or investigations against specific
individuals or entities. 44 U.S.C. 3518(c)(1)(B)(ii); 5 CFR
1320.4(a)(2).
List of Subjects in 16 CFR Part 2
Administrative practice and procedure, Investigations, Reporting
and recordkeeping requirements.
Authority and Issuance
For the reasons set forth in the preamble, the FTC is amending
Title 16, Chapter I, part 2, as follows.
PART 2--RULES OF PRACTICE FOR NONADJUDICATIVE INVESTIGATIONS
0
1. The authority citation for part 2 continues to read as follows:
Authority: 15 U.S.C. 46, unless otherwise noted.
0
2. Amend Sec. 2.41 by revising the section heading and paragraphs
(f)(1) and (2), and adding paragraph (f)(5), to read as follows:
Sec. 2.41 General compliance obligations and specific obligations
regarding acquisitions and divestitures.
* * * * *
(f)(1) All applications for approval of proposed divestitures,
acquisitions, or similar transactions subject to Commission review
under outstanding orders (including modifications to previously
approved transactions) shall fully describe the terms of the
transaction or modification and shall set forth why the transaction or
modification merits Commission approval. Such applications will be
placed on the public record, together with any additional applicant
submissions that the Commission directs be placed on the public record.
The Director of the Bureau of Competition is delegated authority to
direct such placement.
(2) The Commission will receive public comment on a prior approval
application submitted pursuant to paragraphs (f)(1) or (5) of this
section for thirty (30) days. During the comment period, any person may
file formal written objections or comments with the Secretary of the
Commission, and such objections or comments shall be placed on the
public record. In appropriate cases, the Commission may shorten,
eliminate, extend, or reopen a comment period.
* * * * *
(5)(i) Any application to modify either:
(A) An agreement that has been approved by the Commission pursuant
to paragraph (f) of this section, or
(B) An agreement incorporated by reference into a final order of
the Commission issued in connection with a merger, acquisition, or
similar transaction shall be subject to review and approval in the
manner described in paragraphs (f)(1) through (4) of this section,
except as provided in paragraph (f)(5)(ii) of this section.
(ii) If the application establishes that the proposed modification
is purely ministerial, or unlikely under any plausible facts to affect
achieving the remedial purposes of the order at issue, the Commission
has delegated to the Director, Deputy Directors, and Assistant Director
for Compliance of the Bureau of Competition, without power of
redelegation, for good cause shown, the authority.
(A) To waive the approval requirement of paragraph (f)(5)(i) of
this section; and
(B) To shorten, eliminate, extend or reopen the comment period
pursuant to paragraph (f)(2) of this section.
(iii) Any agreement containing a modification approved, or for
which the approval requirement is waived, pursuant to this paragraph
(f)(5), shall be subject to any outstanding Commission order to the
same extent as was the original agreement.
* * * * *
[[Page 63836]]
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2011-26463 Filed 10-13-11; 8:45 am]
BILLING CODE 6750-01-P
