Premerger Notification; Reporting and Waiting Period Requirements, 77053-77093 [2020-21753]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 85, Number 231 (Tuesday, December 1, 2020)]
[Proposed Rules]
[Pages 77053-77093]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21753]


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FEDERAL TRADE COMMISSION

16 CFR Parts 801, 802 and 803

RIN 3084-AB46


Premerger Notification; Reporting and Waiting Period Requirements

AGENCY: Federal Trade Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') is 
proposing amendments to the premerger notification rules (``the 
Rules'') that implement the Hart-Scott-Rodino Antitrust Improvements 
Act (``the Act'' or ``HSR'') to change the definition of ``person'' and 
create a new exemption. The Commission also proposes explanatory and 
ministerial changes to the Rules, as well as necessary amendments to 
the HSR Form and Instructions to effect the proposed changes.

DATES: Comments must be received on or before February 1, 2021.

ADDRESSES: Interested parties may file a comment online or on paper by 
following the instructions in the Invitation to Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``16 CFR parts 801-803: 
Hart-Scott-Rodino Coverage, Exemption, and Transmittal Rules; Project 
No. P110014'' on your comment. File your comment online at https://www.regulations.gov by following the instructions on the web-based 
form. If you prefer to file your comment on paper, mail your comment to 
the following address: Federal Trade Commission, Office of the 
Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex J), 
Washington, DC 20580, or deliver your comment to the

[[Page 77054]]

following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex 
J), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Robert Jones (202-326-3100), Assistant 
Director, Premerger Notification Office, Bureau of Competition, Federal 
Trade Commission, 400 7th Street SW, Room CC-5301, Washington, DC 
20024.

SUPPLEMENTARY INFORMATION:

Invitation To Comment

    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before February 1, 
2021. Write ``16 CFR parts 801-803: Hart-Scott-Rodino Coverage, 
Exemption, and Transmittal Rules; Project No. P110014'' on your 
comment. Your comment--including your name and your state--will be 
placed on the public record of this proceeding, including the https://www.regulations.gov website.
    Because of the public health emergency in response to the COVID-19 
outbreak and the agency's heightened security screening, postal mail 
addressed to the Commission will be subject to delay. We strongly 
encourage you to submit your comment online through the https://www.regulations.gov website. To ensure the Commission considers your 
online comment, please follow the instructions on the web-based form.
    If you file your comment on paper, write ``16 CFR parts 801-803: 
Hart-Scott-Rodino Coverage, Exemption, and Transmittal Rules; Project 
No. P110014'' on your comment and on the envelope, and mail your 
comment to the following address: Federal Trade Commission, Office of 
the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex J), 
Washington, DC 20580, or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex J), Washington, DC 
20024. If possible, please submit your paper comment to the Commission 
by courier or overnight service.
    Because your comment will be placed on the publicly accessible 
website, https://www.regulations.gov, you are solely responsible for 
making sure your comment does not include any sensitive or confidential 
information. In particular, your comment should not include sensitive 
personal information, such as your or anyone else's Social Security 
number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. You are also 
solely responsible for making sure that your comment does not include 
any sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential,''--as provided 
by Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 
4.10(a)(2), 16 CFR 4.10(a)(2)--including in particular competitively 
sensitive information such as costs, sales statistics, inventories, 
formulas, patterns, devices, manufacturing processes, or customer 
names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the FTC General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted publicly at www.regulations.gov--as legally required by FTC 
Rule 4.9(b)--we cannot redact or remove your comment, unless you submit 
a confidentiality request that meets the requirements for such 
treatment under FTC Rule 4.9(c), and the General Counsel grants that 
request.
    Visit the FTC website to read this NPRM and the news release 
describing it. The FTC Act and other laws that the Commission 
administers permit the collection of public comments to consider and 
use in this proceeding as appropriate. The Commission will consider all 
timely and responsive public comments it receives on or before February 
1, 2021. For information on the Commission's privacy policy, including 
routine uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Overview

    The Act and Rules require the parties to certain mergers and 
acquisitions to file notifications (``HSR Filing'') with the Federal 
Trade Commission and with the Assistant Attorney General in charge of 
the Antitrust Division of the Department of Justice (``the Assistant 
Attorney General'') (collectively, ``the Agencies''), and to wait a 
specified period of time before consummating such transactions. The 
reporting and waiting period requirements are intended to enable the 
Agencies to determine whether a proposed merger or acquisition may 
violate the antitrust laws if consummated and, when appropriate, to 
seek an injunction in Federal court in order to enjoin anticompetitive 
mergers prior to consummation.
    In this notice of proposed rulemaking (``NPRM''), the Commission 
proposes amendments to the Sec.  801.1(a)(1) definition of ``person'' 
to require certain acquiring persons to disclose additional information 
about their associates in Items 4 through 8 of the HSR Form and to 
aggregate acquisitions in the same issuer across their associates when 
making an HSR filing, as well as a ministerial change to Sec.  
801.1(d)(2). The Commission also proposes a new exemption, Sec.  
802.15, which would exempt the acquisition of 10% or less of an 
issuer's voting securities when the acquiring person does not already 
have a competitively significant relationship with the issuer. Finally, 
the Commission proposes explanatory and ministerial changes to the 
Rules, as well as necessary amendments to the HSR Form and Instructions 
to effect the proposed changes.
    Section 7A(d)(1) of the Clayton Act, 15 U.S.C. 18a(d)(1), directs 
the Commission, with the concurrence of the Assistant Attorney General, 
in accordance with the Administrative Procedure Act, 5 U.S.C. 553, to 
require that premerger notification be in such form and contain such 
information and documentary material as may be necessary and 
appropriate to determine whether the proposed transaction may, if 
consummated, violate the antitrust laws. In addition, Section 7A(d)(2) 
of the Clayton Act, 15 U.S.C. 18a(d)(2), grants the Commission, with 
the concurrence of the Assistant Attorney General, in accordance with 5 
U.S.C. 553, the authority to define the terms used in the Act, exempt 
classes of transactions that are not likely to violate the antitrust 
laws, and prescribe such other rules as may be necessary and 
appropriate to carry out the purposes of Section 7A.
    The Commission notes that comments it receives in response to this 
NPRM may also inform the Advanced Notice of Proposed Rulemaking (ANPRM) 
published in the Federal Register at the same time as this NPRM.

Part 801--Coverage Rules

Sec.  801.1 Definitions.
Sec.  801.2 Acquiring and acquired persons.

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Sec.  801.12 Calculating percentage of voting securities.

Part 802--Exemption Rules

Sec.  802.15 De minimis acquisitions of voting securities.

Part 803--Transmittal Rules

Appendix A to Part 803--Notification and Report Form for Certain 
Mergers and Acquisitions
Appendix B to Part 803--Instructions to the Notification and Report 
Form for Certain Mergers and Acquisitions

Background

    The HSR premerger notification program enables the Agencies to 
determine which acquisitions are likely to be anticompetitive and to 
challenge them before they are consummated when remedial action is most 
effective. Under the HSR program, the Agencies typically evaluate 
thousands of transactions every year. Given the large number of HSR 
filings submitted each year, the Agencies must use their resources 
effectively to focus on transactions that may harm competition. The 
Agencies have a strong interest in receiving HSR filings that contain 
enough information to conduct a preliminary assessment of whether the 
proposed transaction presents competition concerns, while at the same 
time not receiving filings related to acquisitions that are very 
unlikely to raise competition concerns. In the Agencies' experience, 
two particular categories of filings make it difficult for the Agencies 
to focus their resources effectively:
     Filings for acquisitions by certain investment entities. 
First, due to changes in investor structure and behavior since the HSR 
Act and Rules went into effect, filings from certain investment 
entities do not capture the complete competitive impact of a 
transaction. When certain investment entities file as acquiring 
persons, the Rules and Form do not currently require the disclosure of 
substantive information concerning both the complete structure of the 
acquiring person and the complete economic stake being acquired in an 
issuer.
     Filings for acquisitions of 10% or less of an issuer. At 
the same time, the Agencies regularly receive filings involving 
proposed acquisitions, not solely for the purpose of investment, that 
would result in the acquiring person holding 10% or less of an issuer. 
In the Agencies' experience, these filings almost never present 
competition concerns.\1\
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    \1\ From FY 2001 to FY 2017, the Agencies received a total of 
26,856 HSR filings, including 1,804 for acquisitions of 10% of less 
of outstanding stock. During that same period, the Agencies did not 
challenge any acquisitions involving a stake of 10% or less. 
Occasionally, the Agencies will require merging parties to divest or 
make passive small investments in competitors that also carry rights 
to influence business decisions at the firm. See U.S. v. AT&T Inc. 
and Dobson Communications Corp., 1:07-cv-01952 (D.D.C. 2007) 
(parties divested small stakes that carried significant rights to 
control core business decisions, obtain critical confidential 
competitive information, and share in profits at a rate 
significantly greater than the equity ownership share).
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    To help the Agencies use their resources more effectively, the 
Commission proposes to address both issues in this proposed rulemaking. 
To obtain more complete filings from investment entities filing as 
acquiring persons, the Commission proposes amending the definition of 
person in Sec.  801.1(a)(1) to include ``associates,'' a term that is 
already defined in the Rules. This proposed change would require 
certain acquiring persons to disclose additional information about 
their associates in Items 4 through 8 of the HSR Form and to aggregate 
acquisitions in the same issuer across their associates when making an 
HSR filing. In addition, the Commission proposes a new exemption, Sec.  
802.15, which would exempt the acquisition of 10% or less of an 
issuer's voting securities when the acquiring person does not already 
have a competitively significant relationship with the issuer. Finally, 
the Commission proposes explanatory and ministerial changes to the 
Rules, as well as necessary amendments to the HSR Form and Instructions 
to effect the proposed changes.

I. Proposed Changes to Sec.  801.1 Definitions

A. Proposed Change to the Sec.  801.1(a)(1) Definition of ``Person''

    Since the promulgation of the Rules in 1978, the investment 
landscape has undergone vast changes, including the proliferation of 
investment entities such as investment funds and master limited 
partnerships (``MLPs''). Both investment funds and MLPs facilitate 
investment through structures utilizing limited partnerships and 
limited liability companies. The Rules define limited partnerships and 
limited liability companies as ``non-corporate entities,'' and non-
corporate entities are their own Ultimate Parent Entity (``UPE'') under 
the Rules when no one holds the right to 50% or more of the profits or 
assets upon dissolution. Thus, although each non-corporate entity 
exists within an overall structure of a ``family'' of funds or MLP, 
each is typically its own UPE under the HSR Rules. For instance, Parent 
Fund creates Fund Vehicle 1, Fund Vehicle 2, and Fund Vehicle 3, each a 
non-corporate entity. No one controls these non-corporate entities, so 
each fund vehicle is its own UPE even though they exist within the same 
family of funds. The same is true when no one controls non-corporate 
entities within a MLP structure; although they exist within the same 
MLP, each non-corporate entity is its own UPE.
    Treating these non-corporate entities as separate entities under 
HSR is often at odds with the realities of how fund families and MLPs 
are managed. In the fund context, a fund vehicle typically has an 
entity that manages how that fund vehicle will invest,\2\ and this 
investment manager very often manages the investments of other fund 
vehicles within the same family of funds. As a result, Fund Vehicle 1, 
Fund Vehicle 2, and Fund Vehicle 3 might well have the same Investment 
Manager \3\ and that Investment Manager can use Fund Vehicle 1, Fund 
Vehicle 2, and Fund Vehicle 3 to make separate investments in different 
issuers or the same issuer. MLPs, for their part, often have similar 
structures involving non-corporate entities that are their own UPEs but 
under common management.\4\
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    \2\ As defined in 16 CFR 801.1(d)(2).
    \3\ As defined in 16 CFR 801.1(d)(2).
    \4\ As defined in 16 CFR 801.1(d)(2); the management of MLPs 
does not have to involve investment management.
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    When non-corporate entities are their own UPEs but under common 
management as described above, this creates two scenarios in which it 
is difficult for the Agencies to assess the competitive impact of a 
transaction based on the HSR filing. The first involves filings from 
non-corporate entity UPEs as acquiring persons that do not contain a 
complete enough picture of the investment fund or MLP. The Commission 
first addressed this category of filings in 2011 when it created the 
``associates'' concept.\5\ Before that time, filings from non-corporate 
entity UPEs within families of funds and MLPs contained limited 
substantive information because non-corporate entity UPEs were not 
required to disclose information on any other entity within the 
investment structure. For instance, if Fund Vehicle 1 made a filing for 
a 100% interest in an Issuer, and Fund Vehicle 2, under common 
investment management with Fund Vehicle 1, held 100% of a competitor of 
the Issuer, Fund Vehicle 2's holding was not disclosed in the filing 
because Fund Vehicle 1 was its own UPE. A filing such as the one from 
Fund Vehicle 1 was of limited use to the Agencies

[[Page 77056]]

because it did not reveal relevant holdings within the same family of 
funds. Filings received from newly-formed fund vehicles, which did not 
yet own anything, were of even less use because these filings were 
largely blank. Filings from non-corporate entities that were their own 
UPEs within MLP structures raised the same issues.
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    \5\ 76 FR 42472 (July 19, 2011).
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    In light of these issues, the Commission determined that updates to 
the HSR Form would allow the Agencies to ``receive the information they 
need to get a complete picture of potential antitrust ramifications of 
an acquisition.'' \6\ Accordingly in 2010,\7\ the Commission introduced 
and proposed to define the term ``associates'' to capture information 
in the HSR Form from certain entities that are under common management 
with the acquiring person. The 2011 final rule \8\ required certain 
acquiring persons to disclose in their HSR filings what their 
associates hold in entities that generate revenue in the same NAICS 
codes as the target. With this change, any fund vehicle filing as an 
acquiring person must look to its investment manager to determine what 
other fund vehicles that investment manager manages. For instance, Fund 
Vehicle 1's investment manager also manages the investments of Fund 
Vehicle 2, making Fund Vehicle 1 and Fund Vehicle 2 associates. Fund 
Vehicle 1 makes an HSR filing for a 100% interest in Issuer Q. Fund 
Vehicle 2 controls Entity Y and has a minority position in Entity Z, 
both of which report in the same NAICS code as Issuer Q. Fund Vehicle 1 
must therefore disclose in its HSR filing Fund Vehicle 2's controlling 
interest in Y and minority interest in Z. Non-corporate entity UPEs 
within MLP structures must disclose the same information about their 
associates when filing as acquiring persons.
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    \6\ Id.
    \7\ 75 FR 57111 (Sept. 17, 2010).
    \8\ 76 FR 42471 (July 19, 2011).
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    Although this additional information has been helpful in assessing 
the competitive impact of a transaction, it is too limited to provide 
the Agencies with a sufficient overview of investment funds and MLPs as 
acquiring persons. For instance, the information currently required 
from associates is limited to controlling or minority interests in 
entities that report in the same NAICS codes as the entity being 
acquired. In the Agencies' experience, competitors sometimes use 
different NAICS codes to describe the same line of business, 
particularly in the case of companies engaged in technology-based 
businesses. In addition, associates currently are not required to 
provide any substantive information, such as financials or revenues, 
about the entities they control, making it difficult for the Agencies 
to determine whether an entity within an associate might create a 
competitive concern in a given transaction.
    It is also difficult for the Agencies to understand the potential 
competitive impact of a transaction when a filing does not represent 
the total economic stake being acquired in the same issuer. For 
instance, Investment Manager uses Fund Vehicle 1 to acquire 6% of 
Issuer D and Fund Vehicles 2 and 3 to each acquire 3% of Issuer D. Only 
Fund Vehicle 1's acquisition of 6% of Issuer D's voting securities is 
large enough to cross the $50 million (as adjusted) size of transaction 
threshold. Fund Vehicle 1 makes an HSR filing, but because it is its 
own UPE, it need not disclose the interests of Fund Vehicles 2 and 3 in 
Issuer D. As a result, the filing does not reflect the 12% aggregate 
interest in Issuer D of the fund vehicles under common investment 
management. Another common example arises when Investment Manager uses 
Fund Vehicle 1, Fund Vehicle 2, and Fund Vehicle 3 to each acquire 2% 
in Issuer D. If none of these acquisitions of 2% is large enough to 
cross the $50 million (as adjusted) size of transaction threshold, the 
Agencies receive no HSR filing, even though the fund vehicles hold an 
aggregate 6% of Issuer D. Although more rare, both of these scenarios 
can also play out in the MLP context when non-corporate entity UPEs 
within the MLP structure make acquisitions in the same issuer.
    To help the Agencies accurately assess the potential competitive 
impact of a pending transaction in these scenarios, the Commission 
proposes to amend the Sec.  801.1(a)(1) definition of ``person'' to 
include associates, such that it would read as follows: ``Except as 
provided in paragraphs (a) and (b) of Sec.  801.12, the term person 
means (a) an ultimate parent entity and all entities which it controls 
directly or indirectly; and (b) all associates of the ultimate parent 
entity.''
    This proposed change would require a non-corporate entity UPE 
filing as an acquiring person to disclose additional information from 
its associates in Items 4 through 8 of the Form \9\ and to aggregate 
acquisitions in the same issuer across its associates.
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    \9\ For acquired persons, Items 5 through 7 of the Form will 
still be limited to the assets, voting securities, or non-corporate 
interests being sold.
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    Under the proposed rule, a non-corporate entity UPE filing as an 
acquiring person would be part of a new, larger Acquiring Person. This 
Acquiring Person would include non-corporate entity UPE, its associates 
(which would also be UPEs) and the entity that manages non-corporate 
entity UPE and its associates (the ``managing entity'').\10\ The 
managing entity would make the filing on behalf of the Acquiring 
Person, identifying itself in proposed Item 1(a) of the Form, and 
identify the relevant UPE making the acquisition in proposed Item 1(c) 
of the Form.\11\ If two UPEs within the same Acquiring Person are 
making reportable acquisitions in the same issuer, the managing entity 
can choose which one will be the relevant UPE for purposes of the form. 
The relevant UPE can also file on behalf of the managing entity, as 
noted in proposed Item 1(c) of the Form. For example:
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    \10\ The same would be true for an Acquired Person under the 
proposed rule.
    \11\ In the case of an Acquired Person, the managing entity 
would make the filing on behalf of the Acquired Person, identifying 
itself in proposed Item 1(a) of the Form, and identifying the 
selling UPE in proposed Item 1(c) of the Form. The selling UPE could 
also indicate in Item 1(c) of the Form that it is filing on the 
managing entity's behalf.
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Hypothetical #1
     Fund Vehicles 1, 2 and 3, each non-corporate entities 
and their own UPEs, exist within the same family of funds. Fund 
Vehicles 1, 2 and 3 have the same Investment Manager, and are thus 
associates. Fund Vehicle 1 will acquire 6% of Issuer D valued at 
$100 million, Fund Vehicle 2 will acquire 6% of Issuer D valued at 
$100 million and Fund Vehicle 3 will acquire 3% of Issuer D valued 
at $50 million. The Acquiring Person includes Fund Vehicles 1, 2 and 
3, which are all UPEs, and Investment Manager.
    [cir] Fund Vehicle 1 does not control any operating companies.
    [cir] Fund Vehicle 2 controls Portfolio Company A and Portfolio 
Company B. Portfolio Company B was acquired two years ago and 
reports in the same NAICS code as Issuer D.
    [cir] Fund Vehicle 3 controls Portfolio Company C, which does 
not report in the same NAICS code as Issuer D. Fund Vehicle 3 also 
holds a minority position in several entities, M, N, and O, which 
report in the same NAICS code as Issuer D.
     Investment Manager files on behalf of the Acquiring 
Person for the 15% aggregate interest in Issuer D valued at $250 
million by placing its name in Item 1(a) of the Form. Although 
Investment Manager could designate Fund Vehicle 1 or 2 as the UPE 
making the acquisition, Investment Manager indicates in Item 1(c) of 
the filing that Fund Vehicle 1 is making the acquisition. Fund 
Vehicle 1 can also indicate in Item 1(c) of the Form that it is 
filing on Investment Manager's behalf. The filing must include the 
following:
    [cir] Item 4(a): This item requires the Central Index Key (CIK) 
number of all entities within the Acquiring Person, which now 
includes

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Investment Manager, Fund Vehicle 1, Fund Vehicle 2, Fund Vehicle 3, 
Portfolio Company A, Portfolio Company B, and Portfolio Company C.
    [cir] Item 4(b): This item requires financials from the 
Acquiring Person, which now includes Investment Manager, Fund 
Vehicle 1, Fund Vehicle 2, Fund Vehicle 3, Portfolio Company A, 
Portfolio Company B, and Portfolio Company C.
    [cir] Item 4(c): This item requires responsive documents from 
the Acquiring Person, which now includes Investment Manager, Fund 
Vehicle 1, Fund Vehicle 2, Fund Vehicle 3, Portfolio Company A, 
Portfolio Company B, and Portfolio Company C.
    [cir] Item 4(d): This item requires responsive documents from 
the Acquiring Person, which now includes Investment Manager, Fund 
Vehicle 1, Fund Vehicle 2, Fund Vehicle 3, Portfolio Company A, 
Portfolio Company B, and Portfolio Company C.
    [cir] Item 5: This item requires revenues by NAICS and NAPCS 
codes for the Acquiring Person, which now includes Investment 
Manager, Fund Vehicle 1, Fund Vehicle 2, Fund Vehicle 3, Portfolio 
Company A, Portfolio Company B, and Portfolio Company C.
    [cir] Item 6: Items 6(a) and 6(b) require information from the 
Acquiring Person, which now includes Investment Manager, Fund 
Vehicle 1, Fund Vehicle 2, Fund Vehicle 3, Portfolio Company A, 
Portfolio Company B, and Portfolio Company C. Item 6(c) also 
requires information from the Acquiring Person, which now includes 
Investment Manager, Fund Vehicle 1, Fund Vehicle 2, Fund Vehicle 3, 
Portfolio Company A, Portfolio Company B, and Portfolio Company C. 
However, the information required by Item 6(c) is still limited to 
minority holdings in entities that report in the same NAICS code(s) 
as the target, here M, N and O.
    [cir] Item 7: This item requires all responsive information from 
the Acquiring Person, which now includes Investment Manager, Fund 
Vehicle 1, Fund Vehicle 2, Fund Vehicle 3, Portfolio Company A, 
Portfolio Company B, and Portfolio Company C. However, the 
information required by Item 7 is still limited to entities that 
report in the same NAICS code(s) as the target, here Portfolio 
Company B.
    [cir] Item 8: This item requires information on prior 
acquisitions within the last five years by the Acquiring Person, 
which now includes Investment Manager, Fund Vehicle 1, Fund Vehicle 
2, Fund Vehicle 3, Portfolio Company A, Portfolio Company B, and 
Portfolio Company C. However, the information required by Item 8 is 
still limited to entities that report in the same NAICS code(s) as 
the target, here Portfolio Company B.
Hypothetical #2
     MLP creates LP1, LP2, and LP3, each a non-corporate 
entity and its own UPE, to separately hold the MLP's investments. 
LP1, LP2 and LP3 have the same Manager, and are thus associates. LP1 
will acquire 100% of Issuer R valued at $500 million. LP1 is the UPE 
but the Acquiring Person includes Manager, LP2 and LP3.
    [cir] LP1 controls two operating companies, OpCo 1 and OpCo 2, 
which report in the same NAICS code as Issuer R. OpCo 1 was acquired 
10 years ago and OpCo 2 was acquired 3 years ago.
    [cir] LP2 controls OpCo 3, which reports in the same NAICS code 
as Issuer R and was acquired 1 year ago, and OpCo 4, which does not 
report in the same NAICS code as Issuer R.
    [cir] LP3 holds minority positions in OpCo 5 and OpCo 6, and 
each reports in the same NAICS code as Issuer R.
     Manager places its name in Item 1(a) of the Form to 
file on behalf of the Acquiring Person for the 100% interest in 
Issuer R, and indicates in Item 1(c) of the Form that LP1 is making 
the acquisition. LP1 can also indicate in Item 1(c) that it is 
filing on Manager's behalf. The filing must include the following:
    [cir] Item 4(a): This item requires the CIK number of all 
entities within the Acquiring Person, which now includes Manager, 
LP1, LP2, LP3, OpCo 1, OpCo 2, OpCo 3 and OpCo 4.
    [cir] Item 4(b): This item requires financials from the 
Acquiring Person, which now includes Manager, LP1, LP2, LP3, OpCo 1, 
OpCo 2, OpCo 3 and OpCo 4.
    [cir] Item 4(c): This item requires responsive documents from 
the Acquiring Person, which now includes Manager, LP1, LP2, LP3, 
OpCo 1, OpCo 2, OpCo 3 and OpCo 4.
    [cir] Item 4(d): This item requires responsive documents from 
the Acquiring Person, which now includes Manager, LP1, LP2, LP3, 
OpCo 1, OpCo 2, OpCo 3 and OpCo 4.
    [cir] Item 5: This item requires revenues by NAICS and NAPCS 
codes for the Acquiring Person, which now includes Manager, LP1, 
LP2, LP3, OpCo 1, OpCo 2, OpCo 3 and OpCo 4.
    [cir] Item 6: Items 6(a) and 6(b) require information from the 
Acquiring Person, which now includes Manager, LP1, LP2, LP3, OpCo 1, 
OpCo 2, OpCo 3 and OpCo 4. Item 6(c) also requires information from 
the Acquiring Person, which now includes Manager, LP1, LP2, LP3, 
OpCo 1, OpCo 2, OpCo 3 and OpCo 4. However, the information required 
by Item 6(c) is still limited to minority holdings in entities that 
report in the same NAICS code(s) as the target, here OpCo 5 and OpCo 
6.
    [cir] Item 7: This item requires all responsive information from 
the Acquiring Person, which now includes Manager, LP1, LP2, LP3, 
OpCo 1, OpCo 2, OpCo 3 and OpCo 4. However, the information required 
by Item 7 is still limited to entities that report in the same NAICS 
code(s) as the target, here OpCo 1, OpCo 2, and OpCo 3.
    [cir] Item 8: This item requires information on prior 
acquisitions within the last five years by the Acquiring Person, 
which now includes Manager, LP1, LP2, LP3, OpCo 1, OpCo 2, OpCo 3 
and OpCo 4. However, the information required by Item 8 is still 
limited to entities that report in the same NAICS code(s) as the 
target, here OpCo 2 and OpCo 3, but OpCo 1 would not be listed 
because it was acquired more than five years ago.

    As these examples illustrate, the proposed change to Sec.  
801.1(a)(1) would require a non-corporate entity UPE filing as an 
acquiring person to disclose more substantive information about its 
associates. The additional information required by the Form would be of 
tremendous value to the Agencies in assessing the potential competitive 
impact of a pending transaction. Specifically, the proposed changes to 
Items 4, 5 and 6(a) would give the Agencies a much better picture of 
what entities are under common management. The proposed changes to Item 
6(b) would provide a clearer picture of the ways in which the entities 
within the acquiring person are connected, both within the investment 
structure and beyond. Proposed Item 8 would provide more complete 
information on entities within the acquiring person that have made 
acquisitions in the same industry as the target.\12\ All of this 
additional information would give the Agencies a much more complete 
picture of who is making the filing in the case of investment funds and 
MLPs filing as acquiring persons.
---------------------------------------------------------------------------

    \12\ There would be no change to the information Items 6(c) and 
7 require, because those items already require information from 
associates. Each of these items would, however, be consolidated in 
the HSR Instructions and Form to reflect the new definition of 
``person,'' as explained below.
---------------------------------------------------------------------------

    The additional information concerning acquisitions made by a non-
corporate entity UPE's associates in the same issuer would also be of 
great value to the Agencies. The proposed change to Sec.  801.1(a)(1) 
would give the Agencies a much clearer understanding of the total 
economic stake being acquired in a single issuer by entities under 
common management. In some cases, looking across a non-corporate entity 
UPE's associates for acquisitions in the same issuer will result in a 
filing when one would not have been required previously. For instance, 
in a scenario where associates Fund Vehicle 1, Fund Vehicle 2, and Fund 
Vehicle 3 will each acquire 2% of Issuer D for $40 million, the 
Agencies currently do not receive a filing because none of the three 
$40 million acquisitions is large enough to cross the $50 million (as 
adjusted) size of transaction threshold. Under the proposed rule, the 
Agencies would now receive a filing for the aggregate 6% interest 
valued at $120 million (assuming an exemption does not apply).\13\
---------------------------------------------------------------------------

    \13\ In addition, certain acquiring persons will also be much 
more likely to meet the size of person test when including 
information about their associates as required by the proposed rule.
---------------------------------------------------------------------------

    The Commission acknowledges that the proposed change to Sec.  
801.1(a)(1) would result in more filings and an increased burden for 
certain acquiring

[[Page 77058]]

persons. Non-corporate entity UPEs within families of funds and MLPs 
would have to provide significant additional information on behalf of 
their associates under the proposed change. These entities are, 
however, already accustomed to looking into the holdings of those 
associates for filings where they are acquiring persons because some 
information about associates' holdings must be provided even under the 
current Rules. Given that these entities already conduct such 
inquiries, the Commission believes requiring additional information 
about entities that have already been identified should be manageable. 
The breadth of certain items will still be limited, and the burden 
should lessen after the first inquiry under the new rule. Nevertheless, 
the Commission acknowledges that there might be other ways to achieve 
the same result. The Commission invites comments on alternative ways 
the Agencies could obtain this necessary information that would result 
in a more limited burden for investment funds and MLPs filing as 
acquiring persons.
    The proposed change to Sec.  801.1(a)(1) would result in fewer 
filings and a reduced burden for certain other acquiring persons. The 
proposed rule would streamline the number of filings and fees from 
families of funds and MLPs. For instance, in the scenario where 
associates Fund Vehicle 1, Fund Vehicle 2, and Fund Vehicle 3 will each 
acquire 7% of Issuer D for $200 million, each currently must make a 
filing and pay a separate $125,000 filing fee (assuming no exemptions 
apply). Under the proposed rule, the Agencies would receive one filing 
for 21% of Issuer D valued at $600 million and one $125,000 filing fee. 
In addition, the proposed rule would eliminate the need for a filing in 
the alternative. If the Investment Manager of associates Fund 1 and 
Fund 2 has not yet determined which of those funds should be the 
vehicle for a particular investment, the need to choose one for HSR 
filing purposes becomes moot under the proposed rule, eliminating the 
potential need to make two filings with two separate filing fees.
    The Commission also proposes an additional reduction in burden for 
acquired persons. The HSR Form already limits what acquired persons 
must report in Items 5 through 7 to information on those assets, voting 
securities, and non-corporate interests being acquired in the 
transaction at issue. The limitation for acquired persons in these 
items is an acknowledgment that only what is being sold is relevant to 
the Agencies' competition analysis. This is also the case for the 
financial information required in Items 4(a) and 4(b), and the 
Commission therefore proposes amending the HSR Instructions to create a 
similar limit for acquired persons with respect to these items. Under 
the proposed changes, an acquired person would provide relevant CIK 
numbers in response to Item 4(a) or financials in response to Item 4(b) 
only for (1) the assets, voting securities and non-corporate interests 
being acquired in the transaction at issue, and (2) the UPE of those 
assets, voting securities and non-corporate interests. This proposed 
amendment to the HSR Instructions would significantly limit what non-
corporate entity UPEs within families of funds and MLPs would have to 
provide as acquired persons in response to Items 4(a) and 4(b) and 
would not adversely affect the Agencies' competitive analysis.
    Finally, the Commission also acknowledges that certain non-
corporate entity UPEs within families of funds and MLPs and their 
associates may be structured as index funds, exchange-traded funds 
(ETFs) or the like. Since these entities base their investments on an 
index, it is possible that it is not appropriate to apply the proposed 
change to Sec.  801.1(a)(1) to these entities. The Commission invites 
comments on whether index funds, ETFs or the like should be 
differentiated under the proposed rule.

B. Proposed Changes to Sec.  801.1(d)

    Along with the proposed change to Sec.  801.1(a)(1), the Commission 
also proposes conforming changes to the definition of associate in 
Sec.  801.1(d)(2). Under the current definition, associate is only 
relevant to Items 6 and 7 of the HSR Form and to acquiring persons.\14\ 
But the proposed change to the Sec.  801.1(a)(1) definition of person 
would apply the associates concept more broadly in the HSR Form and to 
both acquiring and acquired persons. The Commission therefore proposes 
to eliminate the phrase ``For purposes of Items 6 and 7'' from Sec.  
801.1(d)(2), capitalize the subsequent ``An'' in Sec.  801.1(d)(2) and 
include ``or acquired'' in Sec.  801.1 (d)(2), (d)(2)(A) and (B) to 
reflect this proposed change.
---------------------------------------------------------------------------

    \14\ 16 CFR 801.1(d)(2).
---------------------------------------------------------------------------

II. Proposed Sec.  802.15: De Minimis Acquisitions of Voting Securities

    To use their resources as effectively as possible, the Agencies 
have a strong interest not only in receiving HSR filings that contain 
sufficient information to assess whether proposed transactions present 
real competition concerns, but also in eliminating filings for 
categories of acquisitions that are unlikely to create competitive 
concerns. In 1996, the Commission acknowledged this concern in issuing 
final rules exempting certain ordinary course transactions, as well as 
certain types of acquisitions of realty and carbon-based mineral 
reserves.\15\ The Commission explained, ``[t]hese rules are designed to 
reduce the compliance burden on the business community by eliminating 
the application of the notification and waiting requirements to a 
significant number of transactions that are unlikely to violate the 
antitrust laws. They will also allow the enforcement agencies to focus 
their resources more effectively on those transactions that present the 
potential for competitive harm.'' \16\
---------------------------------------------------------------------------

    \15\ 61 FR 13666 (Mar. 28, 1996).
    \16\ 61 FR 13666 (Mar. 28, 1996).
---------------------------------------------------------------------------

    Under the same rationale, the Commission has long contemplated the 
exemption of acquisitions of 10% or less of the voting securities of an 
issuer. These kinds of acquisitions can take many forms. The most 
typical is when an entity acquires 10% or less of an issuer in order to 
provide that issuer with needed capital. Sometimes certain shareholders 
of the target will acquire less than 10% of the buyer's voting 
securities as consideration for the transaction (typically called 
shareholder backside acquisitions). Except for a few instances when a 
shareholder backside acquisition of 10% or less of an issuer's voting 
securities was linked to a larger transaction that presented 
competitive concerns,\17\ the Commission has not sought to block any 
acquisition of 10% or less of an issuer's voting securities.
---------------------------------------------------------------------------

    \17\ See, e.g., In re Time Warner, Inc., et al., Docket No. C-
3709, (Feb. 7, 1997).
---------------------------------------------------------------------------

    Recognizing that some acquisitions of 10% or less are less likely 
than others to raise competitive concerns, the Act already includes an 
exemption for acquisitions of 10% or less of the voting securities of 
an issuer made ``solely for the purpose of investment.'' \18\ This 
exemption is codified in Sec.  802.9,\19\ and Sec.  801.1(i)(1) defines 
the term ``solely for the purpose of investment'' so that filing 
parties may determine whether Sec.  802.9 is available. ``Voting 
securities are held or acquired `solely for the purpose of investment' 
if the person holding or acquiring such voting securities has no 
intention of participating in the formulation, determination, or 
direction of the basic business decisions of the issuer.'' \20\
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 18a(c)(9).
    \19\ 16 CFR 802.9.
    \20\ 16 CFR 801.1(i)(1).

---------------------------------------------------------------------------

[[Page 77059]]

    The Statement of Basis and Purpose for the original 1978 Rules 
(``1978 SBP'') lays out specific factors that further illuminate the 
Sec.  801.1(i)(1) definition. ``[M]erely voting the stock will not be 
considered evidence of an intent inconsistent with investment purpose. 
However, certain types of conduct could be so viewed. These include but 
are not limited to: (1) Nominating a candidate for the board of 
directors of the Issuer; (2) proposing corporate action requiring 
shareholder approval; (3) soliciting proxies; (4) having a controlling 
shareholder, director, officer or employee simultaneously serving as an 
officer or director of the Issuer; (5) being a competitor of the 
Issuer; or (6) doing any of the foregoing with respect to any entity 
directly or indirectly controlling the Issuer. The facts and 
circumstances of each case will be evaluated whenever any of these 
actions have been taken by a person claiming that voting securities are 
held or acquired solely for the purpose of investment and thus not 
subject to the act's requirements.'' \21\
---------------------------------------------------------------------------

    \21\ 43 FR 33450, 33465 (July 31, 1978).
---------------------------------------------------------------------------

    The Agencies have interpreted these factors narrowly: When an 
acquiring person takes any of the enumerated actions or is a competitor 
of the issuer, Sec.  802.9 is generally not available.\22\ On the other 
end of the spectrum, Sec.  802.9 is clearly available if the acquiring 
person plans to do nothing but hold the stock. Given the changes in 
investor behavior since the HSR Act was passed,\23\ however, a great 
deal of potential shareholder engagement involves more than merely 
holding (and potentially selling) stock, but does not encompass what 
the 1978 SBP discusses.\24\
---------------------------------------------------------------------------

    \22\ Letter from Thomas J. Campbell, Dir., Bureau of 
Competition, FTC, to Michael Sohn, Esq., Arnold & Porter (Aug. 19, 
1982) (on file with the 6th report to Congress).
    \23\ See Scott Hirst & Lucian Bebchuk, The Specter of the Giant 
Three, 99 B.U. L. Rev. 721, 725-26 (2019). (In 1950, U.S. equities 
were predominantly held by households, with institutional investors 
accounting for only about six percent; now institutional investors 
hold 65 percent of U.S. equities); and then S&P Dow Jones Indices, 
Comment, Re: FTC Hearing #8: Competition and Consumer Protection: 
Holdings of Non-Controlling Ownership Interests in Competing 
Companies, (Jan. 15, 2019), https://www.ftc.gov/system/files/documents/public_comments/2019/01/ftc-2018-0107-d-0015-163643.pdf, 
at 1 (``Fifty years ago, there were no index funds; all 
institutional (and retail) asset management was conducted on an 
active basis. Today, we estimate that between 20 to 25 percent of 
the U.S. stock market is held by index funds.'').
    \24\ See, e.g., Blackrock, Investment Stewardship, Engagement 
Priorities for 2020, https://www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pdf (identifying and 
describing board quality, environmental risk and opportunities, 
corporate strategy and capital allocation, compensation that 
promotes long-termism, and human capital management as engagement 
priorities); Vanguard Investment Stewardship 2019 Annual Report, 
https://about.vanguard.com/investment-stewardship/perspectives-and-commentary/2019_investment_stewardship_annual_report.pdf (discussing 
board composition (including diversity of gender, race and 
ethnicity) oversight of strategy and risk (including environmental 
risk), structure of executive compensation, and governance 
structures to support and ensure accountability of a company's board 
and management to shareholders); and then State Street Global 
Advisors Stewardship Report 2018-2019, https://www.ssga.com/library-content/products/esg/annual-asset-stewardship-report-2018-19.pdf 
(describing engagement with boards and management teams, including, 
among other issues, ``fearless girl campaign'' to increase diversity 
of boards, ``climate risk and reporting'', ethical issues in the 
pharmaceutical industry, including marketing of addictive 
substances, genetic engineering, and the use of personal data).
---------------------------------------------------------------------------

    Notably, some argue that communications between investors and 
management encourage corporate accountability to shareholders,\25\ and 
that HSR filing requirements (and attendant obligations to provide 
notice to the issuer prior to purchase of the shares) might chill this 
beneficial interaction,\26\ particularly since, depending on the degree 
of shareholder engagement, it can be quite difficult to determine 
whether filing parties can rely on the Sec.  802.9 exemption. For 
instance, a discussion between shareholders and company executives may 
begin with the amount of compensation each executive receives, but then 
evolve into how each executive's compensation will be determined by the 
company's performance. This discussion on a seemingly innocuous topic 
may touch on basic business decisions, precluding use of the Sec.  
802.9 exemption. In the Agencies' experience, even the simplest of 
topics can present subtleties that complicate whether Sec.  802.9 might 
exempt an acquisition of 10% or less of an issuer's voting securities.
---------------------------------------------------------------------------

    \25\ See David Hirschmann, Comment, FTC Hearings on Competition 
and Consumer Protection in the 21st Century, (Dec. 6, 2018), https://www.ftc.gov/system/files/documents/public_events/1422929/ftc_hearings_session_8_transcript_12-6-18_0.pdf, at 102 
(``Engagement allows management to communicate with their 
shareholder base as they implement strategies to generate long-term 
growth'' and is ``important for healthy capital markets.'').
    \26\ See Council of Institutional Investors and the Managed Fuds 
Association, Comment, Re: Competition and Consumption Protection in 
the 21st Century Hearings, Project Number P181201--Investment 
Community Request for HSR Reform, (Aug. 13, 2018), https://www.ftc.gov/system/files/documents/public_comments/2018/08/ftc-2018-0048-d-0010-147719.pdf, at 1-2, and 7 (``[T]he investment community 
is concerned that the Commission's increasingly narrow 
interpretation and application of the investment-only exemption 
under the HSR Act is imposing an undue regulatory burden and 
unnecessary costs on institutional investors, such as employee 
pension funds, charitable foundations and university endowments. 
That burden undermines the strong public policy in favor of 
management-shareholder communications, involves significant and 
unnecessary costs, and is not justified by the Commission's mission 
to protect competition.'' . . . ``CII and MFA are concerned that the 
current narrow application of the investment-only exemption is 
interfering with an animating policy objective of the federal 
securities laws to ensure a free flow of information and disclosure 
from issuers of securities to the investing public.'').
---------------------------------------------------------------------------

    Over the years, the Agencies have considered revising Sec.  802.9 
in order to provide clearer guidance on when the acquisition of 10% or 
less of an issuer's voting securities is exempt from HSR filing 
requirements. In 1988, the Commission initiated a notice and comment 
proceeding on a proposed approach and two alternative approaches:

    The principal proposal would exempt from the premerger 
notification obligations all acquisitions of 10% or less of an 
issuer's voting securities on the grounds that such acquisitions are 
unlikely to violate the antitrust laws. The alternative proposals 
would alter existing notification procedures for acquisitions of 10% 
or less of an issuer's voting securities. One would permit the 
purchase, but require that the securities be placed in escrow 
pending antitrust review; the other would eliminate the reporting 
requirement imposed on the target firm, thus freeing the acquiror of 
its obligation to give the target prior notice.\27\
---------------------------------------------------------------------------

    \27\ 53 FR 36831 (Sept. 22, 1988).

    The Commission's principal proposal in 1988 was a new exemption, 
Sec.  802.24, that would have subsumed Sec.  802.9 ``by eliminating the 
filing requirement for all acquisitions of 10 percent or less of an 
issuer's voting securities, regardless of the intent of the acquired 
person.'' Although the Commission had rejected calls to ignore 
investment intent in 1978 when the original Rules were promulgated, it 
proposed to exempt all acquisitions of 10% or less of an issuer's 
voting securities based on ten years of experience with reviewing those 
filings that were not solely for the purpose of investment. ``It is not 
possible to say that voting securities acquisitions of 10 percent or 
less, or 5 percent or less, cannot violate the antitrust laws. The 
proposed exemption is rather based on the evidently low likelihood that 
`the class of transactions' will violate the antitrust laws.'' \28\
---------------------------------------------------------------------------

    \28\ Id. at 36841.
---------------------------------------------------------------------------

    But the Commission also considered alternative proposals that would 
more directly address concerns related to other aspects of the Act that 
could increase the cost of acquiring shares, specifically the 
requirement to wait for the expiration of the waiting period before 
acquiring shares, and the requirement to notify the target of the 
intended acquisition.\29\ As a result, the

[[Page 77060]]

Commission proposed two alternative approaches. The first, proposed 
Sec.  801.34, ``would permit acquirors to purchase, but not take 
possession of, up to 10 percent of an issuer's voting securities 
without filing a notification. The shares purchased would be placed in 
escrow and voted by the escrow agent in proportion to the votes cast by 
all other shares. The acquiror would be required to file and observe 
the waiting period prior to purchasing more than 10 percent of an 
issuer's voting securities or prior to taking the shares out of 
escrow.'' \30\ The second proposal was an optional notification for 
acquisitions of 10% or less of the voting securities of an issuer. 
``This optional system would require the acquiror to submit specified 
public documents describing the entity to be acquired, but would not 
require that the issuer be given notice of the intended acquisition.'' 
\31\
---------------------------------------------------------------------------

    \29\ ``Acquirors are reluctant to file premerger notifications 
because both the delay imposed by the waiting period and informing 
the target could increase the cost to them of acquiring the issuer's 
voting securities.'' 53 FR 36831, 36840 (Sept. 22, 1988).
    \30\ 53 FR 36831, 36,842 (Sept. 22, 1988).
    \31\ 53 FR at 36843.
---------------------------------------------------------------------------

    The 1988 proposed rulemaking received eighteen comments.\32\ Some 
encouraged the Commission to move forward with the principal proposal 
that would exempt all acquisitions of 10% or less of an issuer's voting 
securities regardless of investment intent. Several comments in favor 
of the principal proposal agreed with the Commission's assertion in the 
proposed rulemaking that acquisitions of 10% or less of an issuer's 
voting securities were unlikely to violate the antitrust laws.\33\ In 
addition, some of the comments noted that the proposed rule would 
``eliminate the incentive to avoid compliance with the H-S-R Act 
without prejudicing antitrust enforcement efforts'' \34\ and benefit 
the Commission through the ``freeing up of Commission resources 
currently expended on compliance investigations regarding transactions 
that lack antitrust significance.'' \35\ Several comments also noted 
that the proposed rule would ease conflicts with the securities laws. A 
company wrote that ``by allowing the acquisition of securities under 
the secrecy afforded by the securities laws, acquirors will be able to 
purchase stock at prices that are not artificially inflated by the 
publicity which can be generated by an HSR Act notification filing at 
the $15 million reporting threshold.'' \36\
---------------------------------------------------------------------------

    \32\ All comments are available at https://www.ftc.gov/policy/public-comments/2020/08/initiative-122.
    \33\ See Robert S. Pirie, Comment, RE: Proposed Rulemaking 
Concerning Premerger Notification under Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, 53 FR 36831, (Oct. 18, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/10/p812937hsrrulemakingcomment02.pdf; James E. Knox, Comment, RE: 
Proposed Rulemaking Concerning Premerger Notification under Hart-
Scott-Rodino Antitrust Improvements Act of 1976, 53 FR 36831, (Nov. 
8, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment07.pdf; Irving 
Scher, Comment, RE: Proposed Rulemaking Concerning Premerger 
Notification under Hart-Scott-Rodino Antitrust Improvements Act of 
1976, 53 FR 36831, (Nov. 21, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment09.pdf; John A. Reid, Jr., Comment, Re: 
Proposed Changes to Premerger Notification Rules, 53 FR 36831, (Nov. 
18, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment11-2.pdf; Howard 
E. Steinberg, Comment, Re: Proposed Changes to Premerger 
Notification Rules, 53 FR 36831, (Nov. 21, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment12.pdf; and then William J. Kolasky, Jr., 
Comment, Re: Comments Submitted by Wilmer, Cutler & Pickering 
Regarding Proposed Amendments to the Hart-Scott-Rodino Improvement 
Act of 1976, 53 FR 36831, (Nov. 21, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment13.pdf.
    \34\ See Robert S. Pirie, Comment, RE: Proposed Rulemaking 
Concerning Premerger Notification under Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, 53 FR 36831, (Oct. 18, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/10/p812937hsrrulemakingcomment02.pdf, at 1. See also James E. Knox, 
Comment, RE: Proposed Rulemaking Concerning Premerger Notification 
under Hart-Scott-Rodino Antitrust Improvements Act of 1976, 53 FR 
36831, (Nov. 8, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment07.pdf.
    \35\ See Howard E. Steinberg, Comment, Re: Proposed Changes to 
Premerger Notification Rules, 53 FR 36831, (Nov. 21, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment12.pdf, at 2. See also Robert S. Pirie, 
Comment, RE: Proposed Rulemaking Concerning Premerger Notification 
under Hart-Scott-Rodino Antitrust Improvements Act of 1976, 53 FR 
36831, (Oct. 18, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/10/p812937hsrrulemakingcomment02.pdf; and then 
James E. Knox, Comment, RE: Proposed Rulemaking Concerning Premerger 
Notification under Hart-Scott-Rodino Antitrust Improvements Act of 
1976, 53 FR 36831, (Nov. 8, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment07.pdf.
    \36\ See James E. Knox, Comment, RE: Proposed Rulemaking 
Concerning Premerger Notification under Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, 53 FR 36831, (Nov. 8, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment07.pdf, at 2. See also Robert S. Pirie, 
Comment, RE: Proposed Rulemaking Concerning Premerger Notification 
under Hart-Scott-Rodino Antitrust Improvements Act of 1976, 53 FR 
36831, (Oct. 18, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/10/p812937hsrrulemakingcomment02.pdf; and then 
William J. Kolasky, Jr., Comment, Re: Comments Submitted by Wilmer, 
Cutler & Pickering Regarding Proposed Amendments to the Hart-Scott-
Rodino Improvement Act of 1976, 53 FR 36831, (Nov. 21, 1988), 
https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment13.pdf.
---------------------------------------------------------------------------

    Other comments noted concerns with the proposed rule. One company 
wrote:

    The proposed exemption for a person who acquires up to 10% of 
the securities of an issuer when such acquirer has the intent of 
influencing target's management (which is virtually always the case 
for an acquisition of 10% of an issuer's stock) is in diametric 
opposition to the fundamental purpose of the Act. Since power to 
influence the target's management is the primary concern of Section 
7, it is beyond our comprehension why the FTC would exempt review 
for acquisitions of up to 10% of an issuer's stock when the 
acquisitions may be made for the purpose of influencing 
management.\37\
---------------------------------------------------------------------------

    \37\ See Dennis P. Codon, Comment, Re: Premerger Notification; 
Reporting and Waiting Period Requirements, 53 FR 36831, (Nov. 7, 
1988), https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment06.pdf, at 1.

    A trade association wrote: ``The real thrust of the suggestion is 
not that the $15 million threshold test serves no antitrust purpose, 
but rather that the FTC finds it difficult to force compliance by those 
who wish to make hostile tender offers. That, however, is not by itself 
an appropriate reason for the rules change. Violations cannot be 
ignored.'' \38\
---------------------------------------------------------------------------

    \38\ See John. W. Hetherington, Comment, Re: 16 CFR parts 801, 
802, and 803 Premerger Notification; Reporting and Waiting Period 
Requirements, 53 FR 36831, (Dec. 19, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/12/p812937hsrrulemakingcomment17.pdf, at 2.
---------------------------------------------------------------------------

    Members of Congress also weighed in on the proposed rulemaking. One 
argued that filing requirements should be enforced instead of changed 
\39\ while another argued that the Agencies lacked the authority to 
create an exemption that would, in effect, render irrelevant the 
statutory minimum threshold.\40\ Representative James J. Florio (then 
Chairman of the Subcommittee on Commerce, Consumer Protection, and 
Competitiveness of the Committee on Energy and Commerce) wrote: ``[t]he 
rulemaking notice points out that Congress was definitely interested in 
subjecting some types of acquisitions of 10 percent or less to 
premerger review.

[[Page 77061]]

In light of this Congressional intent, I am puzzled by the Commission's 
proposal to overrule Congressional intent by a blanket exemption.'' 
\41\
---------------------------------------------------------------------------

    \39\ See Jim Sasser, Comment, Re: Premerger Notification, 53 FR 
36831, (Oct. 25, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment08.pdf, at 1, 
(``Indeed, I find the rationale for the proposed amendments flawed. 
The premerger notification rules should not be relaxed because, as 
you say, there is too much incentive to avoid them; rather, they 
should be strengthened.'').
    \40\ See Jack Brooks, Comment, 53 FR 36831, (Dec. 9, 1988), 
https://www.ftc.gov/system/files/documents/public_comments/1988/12/p812937hsrrulemakingcomment14.pdf, at 1, (``The proposal would, for 
all practical purposes, eliminate the $15 million premerger 
notification threshold. I do not believe that Congress delegated 
authority to the Commission to repeal that statutory notification 
threshold.'').
    \41\ See James J. Florio, Chairman, Comment, Re: Premerger 
Notification; Reporting and Waiting Period Requirements, 53 FR 
36831, (Oct. 12, 1988), https://www.ftc.gov/system/files/documents/public_comments/1988/10/p812937hsrrulemakingcomment01.pdf, at 2.
---------------------------------------------------------------------------

    The Commission did not issue a final rule.
    Since 1988, the parameters of the HSR premerger notification 
program have undergone considerable change. In 2000, Congress amended 
the Act to raise the minimum reportability threshold from $15 million 
to $50 million, and at the same time built in an automatic annual 
adjustment of all of the Act's thresholds based on the change in gross 
national product. Currently, a transaction must be valued at more than 
$94 million to be potentially reportable, and the parties to that 
transaction must have sales or assets of at least $188 million and 
$18.8 million, respectively, unless the transaction is valued at more 
than $376 million. The statutory thresholds have increased steadily 
since 2000,\42\ which has reduced significantly the number of filings 
received by the Agencies.\43\
---------------------------------------------------------------------------

    \42\ The thresholds have increased every year except for 2010. 
75 FR 3468 (Jan. 21, 2010).
    \43\ As a result of these changes, many acquisitions of small 
stakes that would have resulted in an HSR filing prior to 2001 no 
longer trigger an HSR filing.
---------------------------------------------------------------------------

    Since 1988, the Commission has also gained over 30 years of 
additional experience reviewing filings for acquisitions of 10% or less 
of an issuer's voting securities. Since the promulgation of the Rules 
in 1978, the Agencies have not challenged a stand-alone acquisition of 
10% or less of an issuer, and have rarely engaged in a substantive 
initial review of a proposed acquisition of 10% or less of an 
issuer.\44\ The Commission believes that proposed acquisitions of 10% 
or less of an issuer should be exempt when they are unlikely to violate 
the antitrust laws and that exempting this category of acquisitions 
will allow the Agencies to better focus their resources on transactions 
that create the potential for competition concerns. To achieve this 
goal, the Commission proposes a new approach to exempt acquisitions of 
10% or less of an issuer's voting securities under certain conditions. 
Proposed Sec.  802.15 reads as follows:
---------------------------------------------------------------------------

    \44\ Note 1 supra.

Sec.  802.15 De minimis acquisitions of voting securities
    An acquisition of voting securities shall be exempt from the 
requirements of the act if as a result of the acquisition:
    (a) The acquiring person does not hold in excess of 10% of the 
outstanding voting securities of the issuer; and
    (b)(i) the acquiring person is not a competitor of the issuer 
(or any entity within the issuer);
    (ii) the acquiring person does not hold voting securities in 
excess of 1% of the outstanding voting securities (or, in the case 
of a non-corporate entity, in excess of 1% of the non-corporate 
interests) of any entity that is a competitor of the issuer (or any 
entity within the issuer);
    (iii) no individual who is employed by, a principal of, an agent 
of, or otherwise acting on behalf of the acquiring person, is a 
director or officer of the issuer (or of an entity within the 
issuer);
    (iv) no individual who is employed by, a principal of, an agent 
of, or otherwise acting on behalf of the acquiring person, is a 
director or officer of a competitor of the issuer (or of an entity 
within the issuer); and
    (v) there is no vendor-vendee relationship between the acquiring 
person and the issuer (or any entity within the issuer), where the 
value of sales between the acquiring person and the issuer in the 
most recently completed fiscal year is greater than $10 million in 
the aggregate.

    Proposed Sec.  802.15 exempts acquisitions that would result in the 
acquiring person holding 10% or less of the issuer's outstanding voting 
securities, unless the acquiring person already has a competitively 
significant relationship with the issuer, such as where the acquiring 
person operates competing lines of business, has an existing vertical 
relationship with the issuer, or employs or is otherwise represented by 
an individual who is an officer or director of the issuer or a 
competitor. Because these types of relationships render even a small 
stake potentially competitively significant, the Commission proposes to 
continue to receive filings for any such acquisitions that are not 
exempt under Sec.  802.9.
    Over the last several years, there has been ongoing discussion of 
the impact of a single entity holding small percentages of voting 
securities in competitors within the same industry, sometimes referred 
to as common ownership.\45\ The debate is not yet settled, but it has 
raised concerns about the competitive effect of common ownership 
because investors with small minority stakes may influence the behavior 
of an issuer. Thus, the Commission proposes that the exemption in Sec.  
802.15 not apply if the acquiring person is a competitor of the issuer 
or if the acquiring person holds more than 1% in a competitor of the 
issuer on an aggregate basis. For instance, Fund Vehicle 1 will acquire 
6% of Issuer D and Fund Vehicle 1 has two associates, Fund Vehicles 2 
and 3. Fund Vehicle 1 is the UPE but the Acquiring Person includes Fund 
Vehicles 1, 2 and 3 under the proposed change to Sec.  801.1(a)(1) 
discussed above. Fund Vehicles 1, 2 and 3 do not control any 
competitors of Issuer D and Fund Vehicle 1 does not hold any minority 
interest in a competitor of Issuer D, but Fund Vehicle 2 and Fund 
Vehicle 3 each holds a 1% minority interest in competitors of Issuer D. 
In this scenario, under the proposed rule, Fund Vehicle 1 would not be 
able to rely on proposed Sec.  802.15 because its associates hold more 
than 1% in a competitor of Issuer D. This exception to the exemption 
would ensure the Agencies receive filings that provide insights into 
the influence of holdings in competitors. The Commission invites 
comment on this approach, including whether a different level of 
ownership in a competitor of the issuer would be more appropriate in 
determining that the proposed exemption should not apply.
---------------------------------------------------------------------------

    \45\ FTC Hearings on Competition and Consumer Protection in the 
21st Century, Session 8, FTC.GOV. (Dec. 6, 2018), https://www.ftc.gov/news-events/events-calendar/ftc-hearing-8-competition-consumer-protection-21st-century. See also Submission of the United 
States to OECD Hearing on Common Ownership by institutional 
investors and its impact on competition, FTC.GOV. (Nov. 28, 2017), 
https://www.ftc.gov/system/files/attachments/us-submissions-oecd-2010-present-other-international-competition-fora/common_ownership_united_states.pdf.
---------------------------------------------------------------------------

    The Rules do not currently define the term ``competitor,'' and to 
implement this exception to the exemption, a definition must be added. 
The Commission proposes the following definition for the purpose of 
implementing Sec.  802.15: ``Sec.  801.1(r) Competitor. For purposes of 
these rules, the term competitor means any person that (1) reports 
revenues in the same six-digit NAICS Industry Group as the issuer, or 
(2) competes in any line of commerce with the issuer.'' This proposed 
definition of ``competitor'' would require two separate assessments to 
determine whether an acquiring person is a competitor of the issuer or 
holds interests in a competitor of the issuer. The first prong of the 
proposed definition would ask an acquiring person to look at the six-
digit NAICS codes of entities it controls and compare them with the 
NAICS codes the issuer reports. NAICS codes (and their predecessor 
Standard Industrial Classification (``SIC'') codes) have long been the 
basis for reporting revenues in the HSR Form, and they provide an 
objective and easy to administer measure of whether an acquiring person 
and an issuer compete. Moreover, because acquiring persons already 
compare their NAICS codes with those of the issuer in order to respond 
to items

[[Page 77062]]

in the Form, as discussed above, this approach would be familiar to 
acquiring persons.
    Filing parties can still be ``competitors'' even if they report in 
different NAICS codes. Thus, the second prong of the proposed 
definition of ``competitor'' would rely on filing parties to conduct a 
good faith assessment to determine whether any part of the acquiring 
person competes with or holds interests in entities that compete with 
the issuer, in any line of commerce.\46\ The Commission expects that 
parties would do so consistent with their ordinary course documentation 
and informational practices and be able to defend reliance on proposed 
Sec.  802.15 if challenged.
---------------------------------------------------------------------------

    \46\ As part of a typical antitrust compliance program, a 
company may already identify other companies that have competing 
sales in order to avoid violating Section 8 of the Clayton Act. 
Subject to certain minimum thresholds, Section 8 prohibits a person 
from serving as a director or an officer of two or more corporations 
that are horizontal competitors.
---------------------------------------------------------------------------

    The Commission acknowledges that this proposed two-prong definition 
of ``competitor'' is broad. The Agencies and the public will benefit 
from such a broad definition because the Agencies, in fulfilling their 
obligations to enforce the antitrust laws, have a strong interest in 
receiving HSR filings that reveal any indicia of competition between 
the filing parties so the Agencies can fully evaluate the competitive 
impact of the proposed acquisition. Nevertheless, the Commission 
invites comment on other ways to define ``competitor'' that would still 
provide the Agencies with thorough information on the competition that 
exists between filing parties.
    Proposed Sec.  802.15 also asks filing parties to ascertain the 
existence of officer or director relationships between the acquiring 
person and the issuer. That is, the exemption in proposed Sec.  802.15 
would be unavailable if someone from the acquiring person is an officer 
or director of the issuer or a competitor of the issuer. To be an 
officer or director of any issuer is to be intimately connected to that 
issuer. Officers make the issuer's day-to-day business decisions, and 
directors determine the overall direction of the issuer. If someone 
within the acquiring person has that kind of influence over the issuer 
or a competitor of the issuer, the Agencies have a strong interest in 
receiving filings about that proposed transaction to better understand 
its competitive impact. Thus, this exception to the proposed exemption 
would ensure that acquisitions of potential competitive significance do 
not become exempt.
    Finally, the proposed Sec.  802.15 exemption would not be available 
if the acquiring person and the issuer are in a vertical relationship 
valued at $10 million or greater. There can be important competitive 
implications in vertical relationships, and the Agencies have a strong 
interest in reviewing transactions that create or expand vertical 
relationships. This exception to the exemption would ensure the 
Agencies receive filings where the buyer and issuer have a vertical 
relationship beyond the ordinary course. The Commission intends to 
exclude the purchase of ordinary course services and goods (e.g., 
office supplies, financial services, etc.) and invites comment on 
whether $10 million is an appropriate threshold to distinguish ordinary 
course vertical relationships from those with competitive significance.
    Proposed Sec.  802.15 would allow the Agencies ``to focus their 
resources more effectively on those transactions that present the 
potential for competitive harm.'' \47\ Proposed Sec.  802.15 would 
further the Agencies' goal of eliminating filings for acquisitions of 
10% or less of an issuer where there is no existing competitive 
relationship or significant vertical relationship between the acquiror 
and the issuer and where the acquisition therefore is unlikely to 
violate the antitrust laws. At the same time, proposed Sec.  802.15 
would balance the exemption of these kinds of acquisitions with the 
Agencies' interest in making sure that acquisitions of potential 
competitive significance are not exempt. The Commission invites comment 
on whether there are other factors to consider in evaluating the 
proposed exceptions to the exemption, or if other categories should be 
the subject of exceptions to the exemption.
---------------------------------------------------------------------------

    \47\ 61 FR 13666 (Mar. 28, 1996).
---------------------------------------------------------------------------

    Under proposed Sec.  802.15, acquiring persons would have to 
evaluate their connection to the issuer and the issuer's competitors in 
several ways. Although this approach is not without burden for 
acquiring persons, the Commission believes that information concerning 
competitors, relationships with the issuer's officers or directors, and 
vertical relationships will either already be in acquiring persons' 
possession or will be relatively straightforward to gather. On the 
whole, proposed 802.15 should benefit acquiring persons by exempting 
acquisitions of small amounts of voting securities without an 
examination of intent as required by Sec.  802.9. Section 802.9 would 
remain unchanged and would still be available to exempt acquisitions of 
10% or less of an issuer where there is no intention to be involved in 
the basic business decisions of that issuer. With the addition of 
proposed Sec.  802.15, acquiring persons would have two potential ways 
to exempt the acquisition of 10% or less of an issuer's voting 
securities.\48\
---------------------------------------------------------------------------

    \48\ Institutional investors can also continue to rely on Sec.  
802.64.
---------------------------------------------------------------------------

III. Proposed Explanatory and Ministerial Changes to the Rules and the 
Form and Instructions

    To help illustrate the proposed changes to Sec.  801.1 discussed 
above, the FTC proposes adding some examples to the Rules. The proposed 
changes to Sec.  801.1 would also require explanatory and ministerial 
updates to the Form and Instructions.

A. Revised Examples to Sec. Sec.  801.1, 801.2

    The Commission proposes revising the examples in Sec. Sec.  801.1 
and 801.2 to clarify the proposed definition of person.
Revised Examples to Sec.  801.1
    1. Edit example 4 to Sec.  801.1(a)(1) to make ``example'' plural:
    Example 4: See the examples to Sec.  801.2(a).
    2. Add example 5 and 6 to Sec.  801.1(a)(1):

    Example 5. Fund 1, Fund 2, and Fund 3, each a UPE, are all 
associates under the common investment management of Manager, as 
defined by Sec.  801.1(d)(2). Fund 1's portfolio company A is making 
a reportable acquisition. The acquiring person includes Manager, 
Fund 1, Fund 2, Fund 3, and A. Manager would file on behalf of the 
acquiring person by placing its name in Item 1(a) of the Form. 
Manager indicates in Item 1(c) of the filing that Fund 1 is making 
the acquisition. Fund 1 can also indicate in Item 1(c) of the Form 
that it is filing on Manager's behalf.
    Example 6. Fund A will be selling its portfolio company P. Fund 
A's investments are managed by Investment Manager, and Fund A's 
associates are Fund B, Fund C, and Fund D. The acquired person 
includes Investment Manager, Fund A, Fund B, Fund C, and Fund D. 
Investment Manager would file on behalf of Fund A, the selling UPE, 
by placing its name in Item 1(a) of the Form. Fund A could also 
indicate in Item 1(c) of the Form that it is filing on Investment 
Manager's behalf.

    3. Add example 4 to Sec.  801.1(a)(3):
    Example 4: See the examples to Sec.  801.1(a)(1).
    4. Edit text of Sec.  801.1(d)(2) by removing ``For purposes of 
Items 6 and 7 of the Form,'' capitalizing the subsequent ``An,'' and 
including ``or acquired'' as appropriate, so that Sec.  801.1(d)(2) 
reads as follows:
    (d)(2) Associate. An associate of an acquiring or acquired person 
shall be an

[[Page 77063]]

entity that is not an affiliate of such person but:
    (A) Has the right, directly or indirectly, to manage the operations 
or investment decisions of an acquiring or acquired entity (a 
``managing entity''); or
    (B) Has its operations or investment decisions, directly or 
indirectly, managed by the acquiring or acquired person; or
    (C) Directly or indirectly controls, is controlled by, or is under 
common control with a managing entity; or
    (D) Directly or indirectly manages, is managed by, or is under 
common operational or investment decision management with a managing 
entity.
Revised Examples to Sec.  801.2
    1. In Sec.  801.2(a), number the current example as ``Example 1'' 
and add example 2.
    Example 2: See the examples to Sec.  801.1(a)(1).
    2. Add examples 3 and 4 to Sec.  801.2(b)
    Example 3: See the examples to Sec.  801.1(a)(1).
    Example 4: See the examples to Sec.  801.12(a).
Revised Examples to Sec.  801.12(a)
    1. In Sec.  801.12(a), number the current example as ``example 1'' 
and add example 2:

    Example 2. Person ``A'' is composed of corporation A1 and 
subsidiary A2; person ``B'' is composed of Fund 1 and Fund 2, which 
are associates managed by Investment Manager. Both Fund 1 and Fund 2 
hold shares of Issuer. A2 will acquire all of Issuer's voting 
securities held by Fund 1 and Fund 2. Under this paragraph, for 
purposes of calculating the percentage of voting securities to be 
held, the ``acquired person'' is Issuer. For all other purposes, the 
acquired person is ``B.'' (For all purposes, the ``acquiring 
person'' is ``A.'')

B. Ministerial Changes to the Instructions and the Form

    The Commission also proposes the following changes to the 
Instructions and Form to clarify the definition of person as well as to 
streamline the Form where appropriate in light of the proposed changes:
    Definitions, p.I of Instructions:

    The terms ``person filing'' or ``filing person'' mean an 
ultimate parent entity (``UPE'') and its associates. Every person 
will have at least one UPE, and a person may be the same as its UPE. 
Not every person will have associates, but when a person has 
associates, the person will not be the same as its UPE(s). (See 
Sec.  801.1(a)(1) and (d)(2).)
    Item 1(a), p.IV of Instructions:
    Provide the name, headquarters address, and website (if one 
exists) of the person filing notification. A person includes 
associates, but not every person will have associates. In the case 
of a person that has associates, the person filing is the entity 
that manages the associates (``managing entity'') as defined by 
Sec.  801.1(d)(2). (See Sec.  801.1(a)(1) and (d)(2).)
    Item 1(c), p.IV of the Instructions:
    Put an X in the appropriate box to indicate whether the person 
in Item 1(a) is a corporation, unincorporated entity, natural 
person, managing entity or other (specify). If the person is a 
managing entity, indicate the UPE making the acquisition. Indicate 
if a UPE is filing on behalf of the managing entity. (See Sec.  
801.1 and (d)(2).)
    Item 1(c) in the Form:
    This item will include a new box for managing entity and space 
for listing the name of the UPE making the acquisition.
    Item 3(a), p.V of the Instructions:
    Clarify that the item calls for information on the UPEs that are 
party to the transaction.
    First paragraph: At the top of Item 3(a), list the name and 
mailing address of each acquiring and acquired UPE, and acquiring 
and acquired entity, that are party to the transaction whether or 
not required to file notification. It is not necessary to list every 
subsidiary wholly-owned by an acquired entity.
    Item 4(a), p.VI of the Instructions:
    Add a requirement for acquiring persons to organize by UPE and 
by entity within each UPE. Specify limits for acquired persons.
    Acquiring persons: Provide the names of all entities within the 
person filing notification, including all UPEs, that file annual 
reports (Form 10-K or Form 20-F) with the United States Securities 
and Exchange Commission, and provide the Central Index Key (``CIK'') 
number for each entity. Responses must be organized by UPE and by 
entity within each UPE.
    Acquired persons: Provide the names of all entities within the 
selling UPE, including the UPE, that file annual reports (Form 10-K 
or Form 20-F) with the United States Securities and Exchange 
Commission, and provide the Central Index Key (CIK) number for each 
entity.
    Item 4(b), p.VI of the Instructions:
    Specify limits for acquired persons. Add a requirement to 
organize by UPE and by entity within each UPE.
    Acquiring persons: provide the most recent annual reports and/or 
annual audit reports (or, if audited is unavailable, unaudited) of 
the person filing notification. The acquiring person should also 
provide the most recent reports of the acquiring entity(s) and any 
controlled entity whose dollar revenues contribute to an overlap 
reported in Item 7. Responses must be organized by UPE and by entity 
within each UPE. If some of the UPEs or entities do not prepare 
separate financial statements, explain how their financial 
information is consolidated in the financial statements that are 
being submitted.
    Acquired persons: Provide the most recent annual reports and/or 
annual audit reports (or, if audited is unavailable, unaudited) of 
the selling UPE. The acquired person should also provide the most 
recent reports of the acquired entity(s).
    Item 5, p.VII of the Instructions:
    Add a requirement to organize by UPE and by entity within each 
UPE.
    Second paragraph: Responses must be organized by UPE and entity 
within each UPE. List all NAICS and NAPCS codes in ascending order.
    Item 5(a), p.VII of the Instructions:
    Clarify requirement for persons.
    Last paragraph: Check the Overlap box for every 6-digit 
manufacturing and non-manufacturing NAICS code and every 10-digit 
NAPCS code in which both persons generate dollar revenues.
    Item 6(a), p.VIII of the Instructions:
    Add a requirement to organize by UPE and by entity within each 
UPE.
    Subsidiaries of filing person. List the name, city, and state/
county of all U.S. entities, and all foreign entities that have 
sales in or into the U.S., that are included within the person 
filing notification. Responses must be organized by UPE and by 
entity within each UPE. Entities with total assets of less than $10 
million may be omitted. Alternatively, the person filing 
notification may report all entities within it.
    Item 6(b), p.VIII of the Instructions:
    Add a requirement to organize by UPE and by entity within each 
UPE.
    Minority shareholders. For the acquired entity(s) and, for the 
acquiring person, the managing entity, all UPEs and the acquiring 
entity(s) or, in the case of natural persons, the top-level 
corporate or unincorporated entity(s) within the UPE(s), list the 
name and headquarters mailing address of each shareholder that holds 
5% or more but less than 50% of the outstanding voting securities or 
non-corporate interests of the entity, and the percentage of voting 
securities or non-corporate interests held by that person. Responses 
must be organized by UPE and entity within each UPE. (See Sec.  
801.1(c)).
    Item 6(c), p.VIII-IX of the Instructions:
    Item 6(c) is currently segmented into two different sections: 
Item 6(c)(i) deals with the person filing and Item 6(c)(ii) deals 
with that person's associates. Since the proposed definition of 
person would include associates, these two items within 6(c) would 
be collapsed and the Item renumbered to Item 6(c) with no subparts. 
The information required by this item would still be limited to 
entities within the acquiring person that report in the same NAICS 
code as the target. New 6(c) would read as follows:

Item 6(c)

    Minority holdings of filing person. If the person filing 
notification holds 5% or more but less than 50% of the voting 
securities of any issuer or non-corporate interests of any 
unincorporated entity, list the issuer and percentage of voting 
securities held, or in the case of an unincorporated entity, list 
the unincorporated entity and the percentage of non-corporate 
interests held.
    The acquiring person should limit its response, based on its 
knowledge or belief, to entities that derived dollar revenues in the 
most recent year from operations in industries within any 6-digit 
NAICS industry code in which the acquired entity(s) or assets also 
derived dollar revenues in the most recent year. The acquiring 
person may rely on its regularly prepared financials that list its 
investments, provided the financials are no more than three months 
old. Responses must be organized by UPE and by entity within each 
UPE.

[[Page 77064]]

    The acquired person should limit its response, based on its 
knowledge or belief, to entities that derive dollar revenues in the 
same 6-digit NAICS industry code as the acquiring person.
    If NAICS codes are unavailable, holdings in entities that have 
operations in the same industry, based on the knowledge or belief of 
the acquiring person, should be listed. In responding to Item 6(c), 
it is permissible for the acquiring person to list all entities in 
which it holds 5% or more but less than 50% of the voting securities 
of any issuer or non-corporate interests of any unincorporated 
entity. Holdings in those entities that have total assets of less 
than $10 million may be omitted.
    Item 7, p.IX-X of the Instructions:
    Item 7(a) currently requires information from both the acquiring 
person and its associates. Since the proposed definition of person 
would include associates, Item 7(a) would be revised to eliminate 
the separate reference to associates.

Item 7(b)

    The information required by Item 7(b) would be incorporated into 
Items 5 and 6(a), so this item would be eliminated.

Items 7(c) and 7(d)

    Current Item 7(c) deals with the person filing and Item 7(d) 
deals with that person's associates, so these two items would be 
collapsed and renumbered to new 7(b).
    New Item 7 would read as follows:
    If, to the knowledge or belief of the person filing 
notification, the acquiring person derived any amount of dollar 
revenues (even if omitted from Item 5) in the most recent year from 
operations:
    (1) In industries within any 6-digit NAICS industry code in 
which any acquired entity that is a party to the acquisition also 
derived any amount of dollar revenues in the most recent year; or
    (2) in which a joint venture corporation or unincorporated 
entity will derive dollar revenues;

then for each such 6-digit NAICS industry code follow the 
instructions below for this section.
    Note that if the acquired entity is a joint venture, the only 
overlaps that should be reported are those between the assets to be 
held by the joint venture and any assets of the acquiring person not 
contributed to the joint venture.
    Responses must be organized by UPE and by entity within each 
UPE.

Item 7(a)

Industry Code Overlap Information

    Provide the 6-digit NAICS industry code and description for the 
industry.

Item 7(b)

Geographic Market Information

    Use the 2-digit postal codes for states and territories and 
provide the total number of states and territories at the end of the 
response.
    Note that except in the case of those NAICS industries in the 
Sectors and Subsectors mentioned in Item 7(b)(iv)(b), the person 
filing notification may respond with the word ``national'' if 
business is conducted in all 50 states.

Item 7(b)(i)

NAICS Sectors 31-33

    For each 6-digit NAICS industry code within NAICS Sectors 31-33 
(manufacturing industries) listed in Item 7(a), list the relevant 
geographic information in which, to the knowledge or belief of the 
person filing the notification, the products in that 6-digit NAICS 
industry code produced by the person filing notification are sold 
without a significant change in their form (whether they are sold by 
the person filing notification or by others to whom such products 
have been sold or resold). Except for industries covered by Item 
7(b)(iv)(b), the relevant geographic information is all states or, 
if desired, portions thereof.

Item 7(b)(ii)

NAICS Sector 42

    For each 6-digit NAICS industry code within NAICS Sector 42 
(wholesale trade) listed in Item 7(a), list the states or, if 
desired, portions thereof in which the customers of the person 
filing notification are located.

Item 7(b)(iii)

NAICS Industry Group 5241

    For each 6-digit NAICS industry code within NAICS Industry Group 
5241 (insurance carriers) listed in Item 7(a), list the state(s) in 
which the person filing notification is licensed to write insurance.

Item 7(b)(iv)(a)

Other NAICS Sectors

    For each 6-digit NAICS industry code listed in item 7(a) within 
the NAICS Sectors or Subsectors below, list the states or, if 
desired, portions thereof in which the person filing notification 
conducts such operations.

11 agriculture, forestry, fishing and hunting
21 mining
22 utilities
23 construction
48-49 transportation and warehousing
511 publishing industries
515 broadcasting
517 telecommunications
71 arts, entertainment and recreation

Item 7(b)(iv)(b)

    For each 6-digit NAICS industry code listed in item 7(a) within 
the NAICS Sectors or Subsectors below, provide the address, arranged 
by state, county and city or town, of each establishment from which 
dollar revenues were derived in the most recent year by the person 
filing notification.

2123 nonmetallic mineral mining and quarrying
32512 industrial gases
32732 concrete
32733 concrete products
44-45 retail trade, except 442 (furniture and home furnishings 
stores), and 443 (electronics and appliance stores)
512 motion picture and sound recording industries
521 monetary authorities--central bank
522 credit intermediation and related activities
532 rental and leasing services
62 health care and social assistance
72 accommodations and food services, except 7212 (recreational 
vehicle parks and recreational camps), and 7213 (rooming and 
boarding houses)
811 repair and maintenance, except 8114 (personal and household 
goods repair and maintenance)
812 personal and laundry services

Item 7(b)(iv)(c)

    For each 6-digit NAICS industry code listed in item 7(a) within 
the NAICS Sectors or Subsectors below, list the states or, if 
desired, portions thereof in which the person filing notification 
conducts such operations.

442 furniture and home furnishings stores
443 electronics and appliance stores
516 internet publishing & broadcasting
518 internet service providers
519 other information services
523 securities, commodity contracts and other financial investments 
and related activities
5242 insurance agencies and brokerages, and other insurance related 
activities
525 funds, trusts and other financial vehicles
53 real estate and rental and leasing
54 professional, scientific and technical services
55 management of companies and enterprises
56 administrative and support and waste management and remediation 
services
61 educational services
7212 recreational vehicle parks and recreational camps
7213 rooming and boarding houses
813 religious, grantmaking, civic, professional, and similar 
organizations
8114 personal and household goods repair and maintenance

    Item 8, p.XI of the Instructions:
    Add a requirement to organize by UPE and by entity within each 
UPE.
    For each such acquisition, supply:
    (1) The 6-digit NAICS industry code (by number and description) 
identified above in which the acquired entity derived dollar 
revenues;
    (2) the name of the entity from which the assets, voting 
securities or non-corporate interests were acquired;
    (3) the headquarters address of that entity prior to the 
acquisition;
    (4) whether assets, voting securities or non-corporate interests 
were acquired; and
    (5) the consummation date of the acquisition.

    Responses must be organized by UPE and by entity within each UPE.

IV. Communications by Outside Parties to Commissioners and Their 
Advisors

    Written communications and summaries or transcripts of oral 
communications respecting the merits of this proceeding, from any 
outside party to any Commissioner or

[[Page 77065]]

Commissioner's advisor, will be placed on the public record. See 16 CFR 
1.26(b)(5).

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires that the 
agency conduct an initial and final regulatory analysis of the 
anticipated economic impact of the proposed amendments on small 
entities, 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 an HSR filing, the premerger 
notification rules rarely, if ever, affect small entities.\49\ The 2000 
amendments to the Act exempted all transactions valued at $50 million 
or less, with subsequent automatic adjustments to take account of 
changes in Gross National Product resulting in a current threshold of 
$94 million. Further, none of the proposed amendments expands the 
coverage of the premerger notification rules in a way that would affect 
small entities. Accordingly, the Commission certifies that these 
proposed amendments 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.
---------------------------------------------------------------------------

    \49\ See 13 CFR part 121 (regulations defining small business 
size).
---------------------------------------------------------------------------

VI. Paperwork Reduction Act

    The Paperwork Reduction Act, 44 U.S.C. 3501-3521, requires agencies 
to submit ``collections of information'' to the Office of Management 
and Budget (``OMB'') and obtain clearance before instituting them. Such 
collections of information include reporting, recordkeeping, or 
disclosure requirements contained in regulations. The existing 
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 January 31, 2023. Because the rule 
amendments proposed in this NPRM would change existing reporting 
requirements, the Commission is submitting a Supporting Statement for 
Information Collection Provisions (``Supporting Statement'') to OMB.

Amending Sec.  801.1(a)(1)--Acquiring Persons

    The Commission proposes to amend the Sec.  801.1(a)(1) definition 
of ``person'' to require certain acquiring persons to disclose 
additional information about their associates when making an HSR 
filing. Thus, Items 4 through 8 (excluding Items 6(c) and 7) \50\ on 
the Notification and Report Form (HSR Form) would be revised to seek 
information about associates of certain acquiring persons, including 
the aggregation of acquisitions in the same issuer across its 
associates. The Commission acknowledges that this proposed change would 
result in an increased burden for certain acquiring persons. Non-
corporate entity UPEs within families of funds and MLPs would be 
required to provide significant additional information on behalf of 
their associates under the proposed change. These entities are, 
however, already accustomed to looking into the holdings of those 
associates for filings where they are acquiring persons as a result of 
the treatment of associates under the current Rules. Given that these 
entities already conduct such inquiries, the Commission believes 
requiring additional information about entities that have already been 
identified should result in limited additional burden for filers. Based 
on filing data from the past five fiscal years, the Commission 
estimates that 17.28% of entities would be required to provide 
additional information on behalf of associates. From this, we 
anticipate 846 filings would be affected per fiscal year (17.28% x 4894 
filings per year, as estimated in the FTC's most recent PRA clearance 
for the HSR Rules). The Commission also estimates that each affected 
filer will need about 10-15 additional hours per filing to comply. 
Thus, the aggregation is expected to lead to 10,575 additional annual 
hours of burden (846 filings x 12.5 hours per filing). The Commission 
seeks comments to help inform such burden estimates, to the extent 
applicable.
---------------------------------------------------------------------------

    \50\ There would be no changes to what Items 6(c) and 7 require, 
because those items already require information from associates.
---------------------------------------------------------------------------

    The proposed change to Sec.  801.1(a)(1) would also result in a 
reduced burden for certain acquiring persons by eliminating the 
potential need for families of funds and MLPs to make multiple filings 
with multiple filing fees. Based on filing data from the past five 
fiscal years, the Commission estimates that 39 filings would be 
affected per fiscal year. Since the FTC's current clearance with OMB 
estimates an average reporting burden per responding filer of 37 hours 
per filing, the proposed change to Sec.  801.1(a)(1) would be a 
reduction of 1,443 hours of annual burden (39 filings x 37 hours per 
filing). The Commission seeks comments to help inform such burden 
estimates, to the extent applicable.

Acquired Persons

    Additionally, the Commission's proposal to revise the HSR 
Instructions to limit the financial information required in Items 4(a) 
and 4(b) should reduce burden for certain acquired persons. The HSR 
Form already limits what acquired persons must report in Items 5 
through 7 to information on those assets, voting securities and non-
corporate interests being acquired in the transaction at issue. The 
Commission's proposal to amend the HSR Instructions would create a 
similar limit for acquired persons with respect to Items 4(a) and 4(b) 
and should result in a reduction in the burden for families of funds 
and MLPs filing as acquired persons who will now face a more limited 
reporting burden after the amendments. Based on filing data from the 
past five fiscal years, the Commission estimates that 357 filings would 
be affected per fiscal year. The Commission also estimates that the 
burden on each affected filer will be reduced by 5 hours per filing. 
Thus, the proposed limit for acquired party reporting is expected to 
lead to a reduction in burden of 1,785 annual hours (357 filings x 5 
hours per filing). The Commission seeks comments to help inform such 
burden estimates, to the extent applicable.

Amending Sec.  802.15--Acquisition of 10% or less

    Additionally the Commission proposes a new exemption, Sec.  802.15, 
which would exempt the acquisition of 10% or less of an issuer's voting 
securities in certain circumstances. Proposed Sec.  802.15 exempts the 
acquisition of 10% or less of an issuer's voting securities unless the 
acquiring person already has a competitively significant relationship 
with the issuer, such as operating competing lines of business or 
having an existing vertical relationship, or where the investor (or its 
agent) is an officer or director of the issuer or a competitor. This 
proposed exemption would allow the acquisition of small amounts of 
voting securities without an examination of intent as required by Sec.  
802.9. As a result, the Commission anticipates that this exemption will 
reduce somewhat the number of transactions subject to review under the 
Rule and the number of entities that must engage in reporting under the 
Rule. Over the period from FY 2001 to FY 2017, the Commission received 
an average of 106 filings per fiscal year for acquisitions of 10% or

[[Page 77066]]

less.\51\ Some of these filings would fall within the exemption in 
proposed Sec.  802.15, leading to a reduction in burden for entities 
that would no longer need to report under the Rule. However, the 
Commission does not currently possess information as to how many 
entities would qualify for the proposed Sec.  802.15 exemption. The 
Commission therefore requests comment on the percentage of entities 
that would qualify for the proposed exemption.
---------------------------------------------------------------------------

    \51\ As set out in footnote 1, the Agencies received a total of 
1,804 HSR filings from FY 2001 to FY 2017 for acquisitions of 10% of 
less of outstanding stock. During that same period, the Agencies did 
not challenge any acquisitions involving a stake of 10% or less.
---------------------------------------------------------------------------

Explanatory and Ministerial Changes

    Finally, the Commission proposes explanatory and ministerial 
changes to the rules, as well as necessary amendments to the HSR Form 
and Instructions to effect the proposed changes. These changes will 
result in no change to the information collection burden under the 
Rule.

Request for Comments

    As noted above, the Commission invites comments on anticipated 
burdens for the proposed amendments and comments that will enable it 
to: (1) Evaluate whether the proposed collections of information are 
necessary for the proper performance of the functions of the 
Commission, including whether the information will have practical 
utility; (2) evaluate the accuracy of the Commission's estimate of the 
burden of the proposed collections of information, including the 
validity of the methodology and assumptions used; (3) enhance the 
quality, utility, and clarity of the information to be collected; and 
(4) minimize the burden of the collections of information on those who 
must comply, including through the use of appropriate automated, 
electronic, mechanical, or other technological techniques or other 
forms of information technology.
    Comments on the proposed reporting requirements subject to 
Paperwork Reduction Act review by OMB should additionally be submitted 
to www.reginfo.gov/public/do/PRAMain. Find this particular information 
collection by selecting ``Currently under 30-day Review--Open for 
Public Comments'' or by using the search function. The reginfo.gov web 
link is a United States Government website produced by OMB and the 
General Services Administration (GSA). Under PRA requirements, OMB's 
Office of Information and Regulatory Affairs (OIRA) reviews Federal 
information collections.

List of Subjects in 16 CFR Parts 801, 802, and 803

    Antitrust.

    For the reasons stated in the preamble, the Federal Trade 
Commission proposes to amend 16 CFR parts 801, 802, 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:
0
a. Revising paragraph (a)(1) introductory text;
0
b. Adding paragraphs (a)(1)(i) and (ii);
0
c. Revising example 4 to paragraph (a)(1);
0
d. Adding examples 5 and 6 to paragraph (a)(1);
0
e. Adding example 4 to paragraph (a)(3);
0
f. Revising paragraph (d)(2); and
0
g. Adding paragraph (r).
    The revisions and additions read as follows:


Sec.  801.1  Definitions.

* * * * *
    (a)(1) Person. Except as provided in paragraphs (a) and (b) of 
Sec.  801.12, the term person means:
    (i) An ultimate parent entity and all entities which it controls 
directly or indirectly; and
    (ii) All associates of the ultimate parent entity.
    Examples: * * * 4. See the examples to Sec.  801.2(a).5. Fund 1, 
Fund 2, and Fund 3, each a UPE, are all associates under the common 
investment management of Manager, as defined by Sec.  801.1(d)(2). Fund 
1's portfolio company A is making a reportable acquisition. The 
acquiring person includes Manager, Fund 1, Fund 2, Fund 3, and A. 
Manager would file on behalf of the acquiring person by placing its 
name in Item 1(a) of the Form. Manager indicates in Item 1(c) of the 
filing that Fund 1 is making the acquisition. Fund 1 can also indicate 
in Item 1(c) of the Form that it is filing on Manager's behalf.6. Fund 
A will be selling its portfolio company P. Fund A's investments are 
managed by Investment Manager, and Fund A's associates are Fund B, Fund 
C, and Fund D. The acquired person includes Investment Manager, Fund A, 
Fund B, Fund C, and Fund D. Investment Manager would file on behalf of 
Fund A, the selling UPE, by placing its name in Item 1(a) of the Form. 
Fund A could also indicate in Item 1(c) of the Form that it is filing 
on Investment Manager's behalf.
* * * * *
    (3) * * *
    Examples: * * *4. See the examples to Sec.  801.1(a)(1).
* * * * *
    (d) * * *
    (2) Associate. An associate of an acquiring or acquired person 
shall be an entity that is not an affiliate of such person but:
    (i) Has the right, directly or indirectly, to manage the operations 
or investment decisions of an acquiring or acquired entity (a 
``managing entity''); or
    (ii) Has its operations or investment decisions, directly or 
indirectly, managed by the acquiring or acquired person; or
    (iii) Directly or indirectly controls, is controlled by, or is 
under common control with a managing entity; or
    (iv) Directly or indirectly manages, is managed by, or is under 
common operational or investment decision management with a managing 
entity.
* * * * *
    (r) Competitor. For purposes of these rules, the term competitor 
means any person that:
    (1) Reports revenues in the same six-digit NAICS Industry Group as 
the issuer, or
    (2) Competes in any line of commerce with the issuer.
0
3. Amend Sec.  801.2 by revising the example to paragraph (a) and 
adding examples 3 and 4 to paragraph (b) to read as follows:


Sec.  801.2  Acquiring and acquired persons.

    (a) * * *


    Examples: 1. Assume that corporations A and B, which are each 
ultimate parent entitles of their respective ``persons,'' created a 
joint venture, corporation V, and that each holds half of V's 
shares. Therefore, A and B each control V (see Sec.  801.1(b)), and 
V is included within two persons, ``A'' and ``B.'' Under this 
section, if V is to acquire corporation X, both ``A'' and ``B'' are 
acquiring persons.

    2. See the examples to Sec.  801.1(a)(1).
    (b) * * *
    Examples: * * *3. See the examples to Sec.  801.1(a)(1).
    4. See the examples to Sec.  801.12(a).
* * * * *
0
4. Amend Sec.  801.12 by revising the example to paragraph (a) to read 
as follows:


Sec.  801.12  Calculating percentage of voting securities.

    (a) * * *


[[Page 77067]]


    Examples: 1. Person ``A'' is composed of corporation A1 and 
subsidiary A2; person ``B'' is composed of corporation B1 and 
subsidiary B2. Assume that A2 proposes to sell assets to B1 in 
exchange for common stock of B2. Under this paragraph, for purposes 
of calculating the percentage of voting securities to be held, the 
``acquired person'' is B2. For all other purposes, the acquired 
person is ``B.'' (For all purposes, the ``acquiring persons'' are 
``A'' and ``B.'')2. Person ``A'' is composed of corporation A1 and 
subsidiary A2; person ``B'' is composed of Fund 1 and Fund 2, which 
are associates managed by Investment Manager. Both Fund 1 and Fund 2 
hold shares of Issuer. A2 will acquire all of Issuer's voting 
securities held by Fund 1 and Fund 2. Under this paragraph, for 
purposes of calculating the percentage of voting securities to be 
held, the ``acquired person'' is Issuer. For all other purposes, the 
acquired person is ``B.'' (For all purposes, the ``acquiring 
person'' is ``A.'')
* * * * *

PART 802--EXEMPTION RULES

0
5. The authority citation for part 802 continues to read as follows:

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

0
6. Add Sec.  802.15 to read as follows:


Sec.  802.15  De minimis acquisitions of voting securities.

    An acquisition of voting securities shall be exempt from the 
requirements of the act if as a result of the acquisition:
    (a) The acquiring person does not hold in excess of 10% of the 
outstanding voting securities of the issuer; and
    (b)(1) The acquiring person is not a competitor of the issuer (or 
any entity within the issuer);
    (2) The acquiring person does not hold voting securities in excess 
of 1% of the outstanding voting securities (or, in the case of a non-
corporate entity, in excess of 1% of the non-corporate interests) of 
any entity that is a competitor of the issuer (or any entity within the 
issuer);
    (3) No individual who is employed by, a principal of, an agent of, 
or otherwise acting on behalf of the acquiring person, is a director or 
officer of the issuer (or of an entity within the issuer);
    (4) No individual who is employed by, a principal of, an agent of, 
or otherwise acting on behalf of the acquiring person, is a director or 
officer of a competitor of the issuer (or of an entity within the 
issuer); and
    (5) There is no vendor-vendee relationship between the acquiring 
person and the issuer (or any entity within the issuer), where the 
value of sales between the acquiring person and the issuer in the most 
recently completed fiscal year is greater than $10 million in the 
aggregate.

    Example 1 to paragraph (b)(5). Investment Manager manages the 
investments of Fund 1 and Fund 2, which are associates. Investment 
Manager, Fund 1 and Fund 2 are all part of the Acquiring Person. 
Fund 1 is acquiring 5% of Issuer. Fund 1 has a .4% interest in a 
competitor of Issuer and Fund 2 has a .5% interest in the same 
competitor of Issuer. The acquisition of the 5% interest in Issuer 
would be exempt under Sec.  802.15.
    Example 2 to paragraph (b)(5). Investment Manager manages the 
investments of Fund 1 and Fund 2, which are associates. Investment 
Manager, Fund 1 and Fund 2 are all part of the Acquiring Person. 
Fund 1 is acquiring 5% of Issuer. Fund 1 has a .4% interest in a 
competitor of Issuer and Fund 2 has a .3% interest in a different 
competitor of Issuer. The acquisition of the 5% interest in Issuer 
would be exempt under Sec.  802.15.
    Example 3 to paragraph (b)(5). Investment Manager manages the 
investments of Fund 1 and Fund 2, which are associates. Investment 
Manager, Fund 1 and Fund 2 are all part of the Acquiring Person. 
Fund 1 is acquiring 5% of Issuer. Fund 1 controls an operating 
company that is a competitor of Issuer. The acquisition of the 5% 
interest in Issuer would not be exempt under Sec.  802.15.
    Example 4 to paragraph (b)(5). Investment Manager manages the 
investments of Fund 1, Fund 2, Fund 3, and Fund 4, which are 
associates. Investment Manager, Fund 1, Fund 2, Fund 3 and Fund 4 
are all part of the Acquiring Person. Fund 1 is acquiring 5% of 
Issuer. Fund 2, Fund 3 and Fund 4 each have a .4% interest in a 
competitor of Issuer. The acquisition of the 5% interest in Issuer 
would not be exempt under Sec.  802.15.
    Example 5 to paragraph (b)(5). Investment Manager manages the 
investments of Fund 1 and Fund 2, which are associates. Investment 
Manager, Fund 1 and Fund 2 are all part of the Acquiring Person. 
Fund 1 is acquiring 5% of Issuer. One of Fund 2's officers (or the 
equivalent thereof) also serves as an officer of Issuer. The 
acquisition of the 5% interest in Issuer would not be exempt under 
Sec.  802.15.
    Example 6 to paragraph (b)(5). Investment Manager manages the 
investments of Fund 1, Fund 2, Fund 3, and Fund 4, which are 
associates. Investment Manager, Fund 1, Fund 2, Fund 3 and Fund 4 
are all part of the Acquiring Person. Fund 1 is acquiring 5% of 
Issuer. One of Fund 4's officers (or the equivalent thereof) also 
serves as an officer of a competitor of Issuer's subsidiary. The 
acquisition of the 5% interest in Issuer would not be exempt under 
Sec.  802.15.
    Example 7 to paragraph (b)(5). Investment Manager manages the 
investments of Fund 1 and Fund 2, which are associates. Investment 
Manager, Fund 1 and Fund 2 are all part of the Acquiring Person. 
Fund 1 is acquiring 5% of Issuer. Fund 1 controls an operating 
company that has a vendor-vendee relationships with Issuer valued in 
excess of $10 million. The acquisition of the 5% interest in Issuer 
would not be exempt under Sec.  802.15.

PART 803--TRANSMITTAL RULES

0
7. The authority citation for part 803 continues to read as follows:

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

0
8. Revise Appendix A to part 803 to read as follows:
BILLING CODE 6750-01-P

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0
9. Revise Appendix B to part 803 to read as follows:

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BILLING CODE 6750-01-C

    By direction of the Commission, Commissioner Chopra and 
Commissioner Slaughter dissenting.
April J. Tabor,
Acting Secretary.

    Note:  The following appendix will not appear in the Code of 
Federal Regulations.

Statement of Commissioner Noah Joshua Phillips

September 18, 2020

    Today, the Federal Trade Commission (the ``Commission'') voted 
to publish for public comment a Notice of Proposed Rulemaking 
(``NPRM'') and an Advance Notice of Proposed Rulemaking (``ANPRM''), 
both relating to the premerger notification rules that implement the 
Hart-Scott-Rodino Antitrust Improvements Act (the ``HSR Act'' or 
``HSR'').\1\ The NPRM proposes two non-ministerial changes: (1) 
Broadening the filing requirement to include holdings of affiliates

[[Page 77091]]

of the acquirer, and (2) the creation of a new exemption, discussed 
below. The ANPRM poses a series of questions around several topics 
that may inform future efforts to update and refine the rules.
---------------------------------------------------------------------------

    \1\ The HSR Act established the federal premerger notification 
program, which provides the Federal Trade Commission and the 
Department of Justice with information about large mergers and 
acquisitions before they occur. The parties may not close their deal 
until the waiting period outlined in the HSR Act has elapsed, or the 
government has granted early termination of the waiting period. 
Under this framework, the government may sue to block those deals it 
determines may violate the antitrust laws before the deals have been 
consummated.
---------------------------------------------------------------------------

    I write today to discuss the proposed exemption for de minimis 
acquisitions of voting securities, and to explain why I voted in 
favor of seeking comment on this proposal. In brief, the proposed 
exemption will carve out from the HSR Act's reporting requirements 
acquisitions of voting securities that leave the acquirer holding 
10% or less of the issuer's total voting stock,\2\ subject to 
several limitations.
---------------------------------------------------------------------------

    \2\ The 10% threshold applies to the acquirer's aggregate 
holdings of the issuer's voting securities. Therefore, the de 
minimis exemption does not permit those claiming it to avoid HSR 
review by acquiring control of an entity via a ``creeping'' series 
of acquisitions, each involving less than 10% of the firm's voting 
securities. Once an acquirer comes to own 10% of an issuer's voting 
securities, it may no longer avail itself of the exemption.
---------------------------------------------------------------------------

    The HSR Act was enacted to give the Commission and the Antitrust 
Division of the Department of Justice (the ``Division'') 
(collectively, the ``Agencies'') advance notice of mergers and 
acquisitions so that the Agencies could challenge anticompetitive 
transactions before they were consummated. Among other things, the 
system it established often allows the government and companies to 
avoid the more difficult process of ``unscrambling the eggs''--
separating, say, two illegally merged companies.
    That is a good thing; but, like most good things, it comes at a 
cost. Investors must notify the target of the acquisition, wait as 
long as a month, and pay a fee of $45,000 to $280,000. That can make 
simple transactions much more costly, and sometimes not worth doing. 
The target may publicize the deal, driving up the price. Management 
may take defensive measures. The waiting period may change the 
viability of the transaction. The fees are substantial. All of that 
leads investors to hold off, to keep quiet, and to hide what they 
are doing. They are less likely to pressure management, or share 
ideas, dampening operational and financial improvement--and, 
ultimately, competition. The HSR Act provides an exemption for the 
acquisition of 10% or less of voting securities made ``solely for 
the purpose of investment''.\3\ But the large grey area between what 
the investment-only exemption clearly permits shareholders to do 
(e.g., just hold on to their stock) and what it clearly forbids 
(e.g., proposing corporate action requiring shareholder approval) 
\4\ encompasses interactions with management that play a critical 
role in keeping corporations accountable and stoking competition.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 18a(c)(9).
    \4\ According to this definition, ``[v]oting securities are held 
or acquired `solely for the purpose of investment' if the person 
holding or acquiring such voting securities has no intention of 
participating in the formulation, determination, or direction of the 
basic business decisions of the issuer.'' 16 CFR 801.1(i)(1) (2020).
---------------------------------------------------------------------------

    Today, in effect, HSR operates as a tax on activities that can 
often be beneficial. But it is not supposed to be a tax, whether on 
shareholder input or mergers and acquisitions activity. It also is 
not supposed to be an early-warning system for tender offers and 
corporate takeovers--for that we have a number of laws at the 
federal and state level.\5\ And it is not supposed to be a 
monitoring system for equity investments generally. To the extent 
possible, it should not be any of those things. It should effectuate 
its purpose: Helping the Agencies spot transactions likely to 
violate the antitrust laws, so that we can stop or remedy them 
prophylactically.
---------------------------------------------------------------------------

    \5\ See, e.g., Williams Act, 15 U.S.C. 78m(d)-(e), 78n(d)-(f).
---------------------------------------------------------------------------

    That is why Congress gave the Commission, with the concurrence 
of the Division's Assistant Attorney General, the ability to exempt 
from premerger notification those ``acquisitions, transfers, or 
transactions which are not likely to violate the antitrust 
laws''.\6\ The proposed de minimis exemption covers transactions 
that we know are not likely to do so. The HSR Act was enacted in 
1976, and 44 years of experience since then have taught us that 
acquisitions of 10% or less of a company are extremely unlikely to 
raise competition concerns. According to the NPRM, the Agencies have 
reviewed a multitude of 10%-or-less acquisitions that do not qualify 
for the investment-only exemption over the last four decades; and 
none have warranted a challenge. For example, from fiscal year 2001 
to 2017, the Agencies received 1,804 10%-or-less filings. What do 
these real-world data show? Only a handful of 10%-or-less 
acquisitions required any substantive review whatsoever, and none 
were challenged by the Agencies. Not one.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 18a(d)(2)(B).
---------------------------------------------------------------------------

    Thus, the proposal represents an important step in tailoring the 
HSR regime to its intended purpose of identifying and addressing 
competition issues, while simultaneously eliminating unnecessary 
regulatory burdens on beneficial investment activity that does not 
harm competition and, indeed, often promotes it.\7\
---------------------------------------------------------------------------

    \7\ See Noah Joshua Phillips, Comm'r, U.S. Fed. Trade Comm'n, 
Competing for Companies: How M&A Drives Competition and Consumer 
Welfare, Keynote Address at the Global Antitrust Economics 
Conference (May 31, 2019), https://www.ftc.gov/system/files/documents/public_statements/1524321/phillips_-_competing_for_companies_5-31-19_0.pdf.
---------------------------------------------------------------------------

    Four-plus decades of real world experience should go a long way 
towards allaying concerns that the proposed de minimis exemption 
will allow competitively troubling acquisitions to fly under the 
Agencies' radar. But scholarship in recent years has raised the 
question whether common ownership of substantial but non-controlling 
interests in competing companies (often by large, diversified, asset 
managers) has an anticompetitive effect. That debate, including its 
implications for antitrust policy, continues.\8\ For now, the 
proposed de minimis exemption errs on the side of caution, excluding 
from its scope transactions that might implicate this concern. (To 
the extent that the feared competition harms of common ownership 
result from the passivity of the largest shareholders, the de 
minimis exemption may help mitigate the concern by facilitating the 
smaller, more active, voices.\9\) It also does not apply to other 
transactions where a competitively significant relationship between 
the issuer of the voting securities and the acquirer claiming the 
exemption exists. What it does reach are transactions that, in over 
40 years, have raised no competition issues.
---------------------------------------------------------------------------

    \8\ See Noah Joshua Phillips, Comm'r, U.S. Fed. Trade Comm'n, 
Taking Stock: Assessing Common Ownership, Keynote Address at the 
Global Antitrust Economics Conference (June 1, 2018), https://www.ftc.gov/system/files/documents/public_statements/1382461/phillips_-_taking_stock_6-1-18_0.pdf.
    \9\ See Noah Joshua Phillips, Comm'r, U.S. Fed. Trade Comm'n, 
Opening Remarks at FTC Hearing #8: Competition and Consumer 
Protection in the 21st Century: Corporate Governance, Institutional 
Investors, and Common Ownership (Dec. 6, 2018), https://www.ftc.gov/system/files/documents/public_statements/1454690/phillips_-_ftc_hearing_8_opening_remarks_12-6-18.pdf.
---------------------------------------------------------------------------

    In 1988, following complaints by investors about the negative 
impact HSR was having on their small stock purchases and a study 
that showed the Agencies had never challenged one as violating 
Section 7 of the Clayton Act, the FTC considered whether to exempt 
acquisitions of 10% or less of a company's voting securities from 
HSR reporting. Those problems are still with us, and the data today 
show the same thing. Transactions of 10% or less are just as 
unlikely to lessen competition today as they were 30 years ago; and 
small stock purchases have almost never needed even a second look. 
Those decades of experience speak volumes, and what they tell us is 
that, at great cost, the benefits of continuing to tax de minimis 
stock purchases are virtually non-existent. We can change that.

Statement of Commissioner Rohit Chopra

September 21, 2020

Summary

     Premerger notification is a critical data source, but 
the Commission faces enormous information gaps when seeking to 
detect and halt anticompetitive transactions.
     While the proposed rule closes a loophole when it comes 
to investment manager holdings, the proposed approach to exempt a 
wide swath of minority stakes is concerning and adds to existing 
information gaps.
     The Commission needs to update the treatment of certain 
debt transactions when determining deal size for the purpose of 
premerger notification. The current approach allows dealmakers to 
structure anticompetitive transactions in ways that can go 
unreported.
    In September 1976, Congress gave the Federal Trade Commission an 
important tool enabling it to block harmful mergers. The Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (``HSR Act'') requires 
prior notification to the antitrust agencies in advance of closing 
certain mergers and acquisitions.\1\
---------------------------------------------------------------------------

    \1\ Clayton Act section 7A, 15 U.S.C. 18a.
---------------------------------------------------------------------------

    Prior to the HSR Act's enactment, companies could quickly 
``scramble the eggs'' of assets and operations, or even shut down

[[Page 77092]]

functions. This made it extremely difficult for the antitrust 
agencies to remedy competitive harms through divestitures of assets. 
Years of protracted litigation to stop further damage and 
distortions were often the result.\2\
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    \2\ For example, in United States v. El Paso Natural Gas Co., 
376 U.S. 651 (1964), it took seventeen years of litigation before a 
divestiture finally took place.
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    The HSR Act fundamentally changed the process of merger review 
by giving the antitrust agencies time to halt anticompetitive 
transactions before these deals closed. Today, the FTC focuses a 
substantial portion of its competition mission on investigating and 
challenging mergers reported under the HSR Act. Importantly, only a 
small set of transactions--the ones with the highest valuations--are 
subject to premerger notification. The HSR Act specifies the 
valuation threshold, currently set at $94 million, which is 
typically adjusted upward each year. Since there are many ways to 
determine a deal's valuation, Congress gave the FTC broad authority 
to implement rules so that buyers know if they need to report their 
transactions and what they are required to submit with their filing. 
The Commission can also exempt classes of transactions and tailor 
filing requirements.
    While premerger notification filings provide the Commission with 
certain nonpublic information,\3\ gathering and analyzing market 
intelligence on transaction activity and competitive dynamics is a 
major challenge. We need to continuously assess how we can enhance 
our market monitoring techniques and evolve our analytical 
approaches.
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    \3\ I agree with Commissioner Slaughter that current filing 
requirements, including for minority stakes, can have the beneficial 
effect of deterring certain anticompetitive transactions.
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    Today, the Commission is soliciting comment on two rulemaking 
notices regarding our policies to implement the HSR Act's premerger 
notification protocols. The first publication, a Notice of Proposed 
Rulemaking, proposes specific rules and exemptions. While some of 
the proposals are helpful improvements, I respectfully disagree with 
our approach to exempting a broad swath of transactions from 
reporting. The second publication, an Advance Notice of Proposed 
Rulemaking, requests comment on a broad range of topics to set the 
stage for modernizing the premerger notification program to align 
with market realities. I support soliciting input to rethink our 
approach. I discuss each of these notices below.

Notice of Proposed Rulemaking

    The Notice of Proposed Rulemaking outlines specific amendments 
that the Commission is proposing to the HSR rules. The aggregation 
and exemption provisions are particularly noteworthy. The 
aggregation provisions are worthwhile, since they close a loophole 
and align with market realities. However, I am concerned about the 
exemption provisions, since we will completely lose visibility into 
a large set of transactions involving non-controlling stakes.

Aggregation Provisions

    The financial services industry is well known for using an 
alphabet soup of small entities, like shell companies, partnerships, 
and other investment vehicles, to structure deals. Even though they 
may be under common management by the same person or group, like a 
private equity fund or a hedge fund, these smaller legal entities 
are all treated separately under the existing rules.
    The proposed aggregation provisions will help to prevent 
acquirers from splitting up transactions into small slices across 
multiple investment vehicles under their control to avoid reporting. 
The proposal would require investors and other buyers to add 
together their stakes across commonly managed funds to determine 
whether they need to report a transaction.

Exemption Provisions

    By creating a reporting threshold based on the value of a 
transaction, the law already exempts most transactions from agency 
review. Because of this, it is difficult to systematically track 
these transactions, and even harder to detect and deter those that 
are anticompetitive.
    Now, the FTC is proposing to widen that information gap by 
creating a new exemption for minority stakes of 10% or less, subject 
to certain conditions. Importantly, the proposal is not exempting 
specific aspects of the reporting requirements--it is a total 
exemption, so the agency will receive no information whatsoever from 
the buyer or the seller that the transaction even occurred. This 
adds to the burdens and information asymmetries that the agency 
already faces when it comes to detecting potentially harmful 
transactions.\4\
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    \4\ The FTC may not be able to rely on other sources of robust 
data required by other agencies. For example, the Securities and 
Exchange Commission has proposed eliminating reporting for thousands 
of registered investment funds that previously detailed their 
holdings to the public. See Statement of SEC Comm'r Allison Herren 
Lee Regarding Proposal to Substantially Reduce 13F Reporting (July 
10, 2020), https://www.sec.gov/news/public-statement/lee-13f-reporting-2020-07-10.
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    Companies and investors purchase minority, non-controlling 
stakes in a firm for a number of reasons. Sometimes, buyers might 
start with a minority stake, with the goal--or even with a 
contractual option--of an outright takeover as they learn more about 
the company's operations. Even though they might have a small stake, 
they can exert outsized control. In other cases, buyers might look 
for minority stakes in multiple, competing firms within a sector or 
industry, and some or all of these acquisitions may fall below the 
reporting thresholds. Of course, if they are able to obtain seats on 
boards of directors of competing companies, this can be illegal.
    Investors and buyers can only use the proposed exemption if they 
do not currently own stakes in firms that compete or do business 
with the company they plan to acquire. Since many investors might 
not know about the specific business dealings across companies, this 
may be difficult to enforce and puts more burden on the agency.
    Even if one believes that transactions involving a minority 
stake are less likely to be illegal, there are many potential 
alternatives to outright elimination of reporting. Unfortunately, 
the rulemaking notice does not outline alternative approaches (such 
as tailored, simplified filing requirements or shortened waiting 
periods) for minority stakes.

Advance Notice of Proposed Rulemaking

    As markets evolve, it is important that the HSR Act and its 
implementing rules reflect those developments. The Advance Notice of 
Proposed Rulemaking seeks input on a wide array of market-based 
issues that may affect the Commission's merger oversight. One topic 
of particular interest is whether to include debt as part of the 
valuation of a transaction. Since the HSR Act's passage, corporate 
debt markets have grown in importance for companies competing in 
developed economies. Many major deals involve vast sums of borrowed 
money.
    However, the Commission has not formally codified a view on the 
treatment of certain debt transactions. Instead, existing staff 
guidance excludes many debt transactions from the deal's overall 
value. This is worrisome, since it means that many potentially 
anticompetitive transactions can go unreported, since they may fall 
below the size threshold. In addition, this view has been provided 
informally, communicated through unofficial interpretations outside 
of formal rules or guidance. It will be important to take steps to 
collect input and codify the Commission's policies on valuation, 
particularly with respect to the treatment of debt, since formal 
guidance or rules will offer clarity and will be easier to enforce.
    The Advance Notice of Proposed Rulemaking also seeks information 
that will lay groundwork for broader reforms to our premerger 
notification program. I look forward to the data and written 
submissions to this document.

Conclusion

    Adequate premerger reporting is a helpful tool used to halt 
anticompetitive transactions before too much damage is done. 
However, the usefulness of the HSR Act only goes so far. This is 
because many deals can quietly close without any notification and 
reporting, since only transactions above a certain size are 
reportable.\5\ The FTC ends up missing a large number of 
anticompetitive mergers every year. In addition, since amendments to 
the HSR Act in 2000 raised the size

[[Page 77093]]

thresholds on an annual basis, the number of HSR-reportable 
transactions has decreased.
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    \5\ Small transactions can be just as harmful to competition as 
large transactions notified under the HSR Act. For example, ``catch 
and kill'' acquisitions of an upstart competitor in fast-moving 
markets can be particularly destructive. In addition, ``roll-ups,'' 
an acquisition strategy involving a series of acquisitions of small 
players to combine into a larger one, can have very significant 
negative effects on competition. See Statement of Fed. Trade Comm'r 
Rohit Chopra Regarding Private Equity Roll-ups and the Hart-Scott 
Rodino Annual Report to Congress, Comm'n File No. P110014 (July 8, 
2020), https://www.ftc.gov/system/files/documents/public_statements/1577783/p110014hsrannualreportchoprastatement.pdf.
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    I want to commend agency staff for their work in identifying 
potential blind spots in the premerger reporting regime. I also want 
to thank state legislatures and state attorneys general for enacting 
and implementing their own premerger notification laws to fill in 
some of these gaps. For example, a new law in State of Washington 
has taken effect, which requires advance notice of any transactions 
in the health care sector, where many problematic mergers fall below 
the radar.\6\
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    \6\ See Healthcare Transaction Notification Requirement, WASH. 
STATE OFF. OF THE ATT'Y GEN. (last visited Sept. 16, 2020), https://www.atg.wa.gov/healthcare-transactions-notification-requirement; see 
also S.H.B. 1607, 66th Leg., Reg. Sess. (Wash. 2019).
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    As we conduct this examination of the HSR Act, we should 
identify areas where laws may need to be changed or updated, 
especially when we cannot fill those gaps through amendments to our 
rules. For example, we may need to pursue reforms to ensure that 
``roll ups'' are reported, where a buyer might acquire a large 
number of small companies that may not be individually reportable. 
We may also need to look carefully at the length of the waiting 
period, to determine if it is long enough to conduct a thorough 
investigation. I look forward to reviewing the input to these two 
rulemaking notices, so that our approach reflects market realities.

Statement of Commissioner Rebecca Kelly Slaughter

September 18, 2020

    Today, the Commission voted to advance two proposals with 
respect to our HSR premerger notification rules. I support the broad 
solicitation of input in the Advance Notice of Proposed Rulemaking 
and the proposed aggregation provisions in the Notice of Proposed 
Rulemaking (NPRM). But I oppose provisions in the NPRM that would 
broaden the categories of transactions exempt from filing HSR 
notice.
    I share the concerns Commissioner Chopra articulated, and write 
separately only to add a few points. I share the general view that 
we should do what we can to right-size our HSR requirements. We 
generally benefit when the universe of transactions that are 
required to file under HSR matches as closely as possible the 
universe of transactions that are competitively problematic. Too 
many filings on non-problematic transactions are an unnecessary 
resource drain for the agency, and too few filings on problematic 
transactions clearly would allow anticompetitive acquisitions to 
proceed unnoticed and unchallenged. I also generally agree that 
transaction size (the main trigger for HSR filing under current law) 
is not the only or even necessarily the best indicator of 
competitive significance.
    However, I am concerned about the expanded de minimis exemptions 
in the proposal released today for two reasons: Its broadening of 
the black box of unseen transactions and its effect on corporate 
governance.
    Commissioner Phillips is correct that, of the filings the agency 
has reviewed of sub-10% acquisitions, none have led to enforcement 
action. But we cannot conclude that sub-10% acquisitions could never 
be problematic, because we do not know if any problematic 
transactions were deterred from consummation for fear of disclosures 
that are required in a filing, nor do we know how many might fall 
into that category. I worry that adding exemptions broadens the 
category of transactions outside of the agencies' view, and 
therefore share Commissioner Chopra's preference that the agency 
consider something other than a full exemption.
    My other concern is that expanding the de minimis exemptions 
will have profound policy effects primarily in an area outside of 
the FTC's particular expertise and jurisdiction: Corporate 
governance. Commissioner Phillips in his statement points out the 
ways in which the current HSR filing requirement for non-passive 
acquisitions can chill investors. He notes the rules around HSR may 
lead ``investors to hold off, to keep quiet, and to hide what they 
are doing. They are less likely to pressure management, or share 
ideas, dampening operational and financial improvement--and, 
ultimately, competition.'' Although I have not seen evidence to 
support his conclusion about the effect on competition, the evidence 
we have seen, even anecdotally, supports his assertions about 
investor behavior. It follows, therefore, that expanding HSR 
exemptions may likely change investor incentives and behavior.
    These changes may ultimately be a good thing as a matter of 
public policy, and they might not be; the concern for me is that 
they would effect a public policy goal outside the realm of 
antitrust, and I am hesitant for the FTC unilaterally to enact rules 
outside the scope of our primary authority. I certainly understand 
that the rules as they exist today have a public policy effect 
outside antitrust, but they are the rules that we have, and 
disrupting the status quo is something that should be done only 
after careful consideration of and in consultation with experts on 
corporate governance, investor behavior, and securities law and 
policy.
    So, I welcome comments on this NPRM from those in the corporate 
governance and securities community, and experts on investor 
behavior, to help us better understand the implications of such a 
change--including whether it would, as Commissioner Phillips 
asserts, actually improve competition.

[FR Doc. 2020-21753 Filed 11-30-20; 8:45 am]
BILLING CODE 6750-01-P