Premerger Notification; Reporting and Waiting Period Requirements, 42178-42218 [2023-13511]

Download as PDF 42178 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules FEDERAL TRADE COMMISSION 16 CFR Parts 801 and 803 RIN 3084–AB46 Premerger Notification; Reporting and Waiting Period Requirements Federal Trade Commission. Notice of proposed rulemaking. AGENCY: ACTION: Pursuant to Section 7A(d) of the Clayton Act, the Federal Trade Commission (‘‘FTC’’ or ‘‘Commission’’) is proposing amendments to the premerger notification rules (‘‘the Rules’’) that implement the Hart-ScottRodino Antitrust Improvements Act (‘‘the Act’’ or ‘‘HSR’’) and to the Premerger Notification and Report Form (the ‘‘Form’’) and Instructions (‘‘Instructions’’). These proposed changes would result in a redesign of the premerger notification process through both a reorganization of the information currently required and the addition of new information and document requirements. In addition, these changes would implement the Merger Filing Fee Modernization Act of 2022. The proposed amendments would involve changes to both the Rules and the Instructions, and the Commission proposes explanatory and ministerial changes to the Rules as well as necessary amendments to the Instructions to effect the proposed changes. SUMMARY: Comments must be received on or before August 28, 2023. 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. P239300’’ 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 H), Washington, DC 20580. lotter on DSK11XQN23PROD with PROPOSALS3 DATES: FOR FURTHER INFORMATION CONTACT: Robert Jones, Assistant Director, Premerger Notification Office, Bureau of Competition, Federal Trade Commission, 400 7th Street SW, Room CC–5301, Washington, DC 20024, or by telephone at (202) 326–3100. SUPPLEMENTARY INFORMATION: VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 Overview The Act and Rules currently require the parties to certain mergers and acquisitions to submit premerger notification filings (‘‘HSR Filings’’) to the Commission and to 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 short 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, including Section 7 of the Clayton Act, 15 U.S.C. 18, if consummated and, when appropriate, to seek an injunction in federal court in order to enjoin anticompetitive acquisitions prior to consummation. 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. In this notice of proposed rulemaking (‘‘NPRM’’), the Commission proposes amending the Rules (Part 801 and Part 803 and its appendices), the Form, and the Instructions to reorganize the information currently required with an HSR Filing and to require additional information critical to the Agencies’ initial review. These changes would improve the efficiency and effectiveness of that initial review by providing the information the Agencies need to identify during the initial 30-day waiting period any transaction that may pose competition concerns and potentially narrow the scope of any investigation or reduce the need to conduct a more in-depth investigation of the proposed transaction. These amendments also incorporate the changes to implement the collection of PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 information mandated by the Merger Filing Fee Modernization Act of 2022 (‘‘2022 Amendments’’) contained within the Consolidated Appropriations Act, 2023 (Pub. L. 117–328, 136 Stat. 4459) to Section 7(a) of the Clayton Act, 15 U.S.C. 18a. Finally, the Commission proposes explanatory and ministerial changes to the Rules as well as necessary amendments to the Instructions to effect the proposed changes. Background The premerger notification program is designed to provide the Commission and the Assistant Attorney General with the information and documentary material necessary and appropriate for an initial evaluation of the potential anticompetitive impact of transactions. The HSR premerger notification program is an essential tool for effective and efficient merger enforcement because it enables the Agencies to investigate acquisitions that may substantially lessen competition or tend to create a monopoly in violation of Section 7 of the Clayton Act and to challenge them before they are consummated and the businesses of the two companies are ‘‘scrambled’’ or integrated such that effective postmerger relief is much more difficult. Congress intended that premerger review would ‘‘strengthen the enforcement of Section 7 by giving the government antitrust agencies a fair and reasonable opportunity to detect and investigate large mergers of questionable legality before they are consummated.’’ 1 Premerger notification and review, including a mandatory waiting period during which they cannot consummate the transaction, gives the Agencies the procedural tools necessary to seek to prevent mergers in court before they cause harm or the operations of the firms become so integrated that the premerger state of competition cannot be restored. The HSR Act and Rules specify that transactions subject to the HSR Act cannot be consummated until 30 days for most transactions (cash tender offers and certain types of bankruptcies observe a 15-day waiting period) 2 after the parties submit an HSR Filing to the Agencies. These statutory deadlines for conducting an initial review are extraordinarily short, and the Agencies must work quickly to determine whether to take steps to prevent the consummation of potentially anticompetitive transactions. During the initial waiting period, the FTC’s 1 H.R. 2 15 E:\FR\FM\29JNP3.SGM Rep. No. 94–1373 at 5 (1976). U.S.C. 18a(b)(1)(B); 11 U.S.C. 363(b)(2). 29JNP3 lotter on DSK11XQN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules Premerger Notification Office (‘‘PNO’’) staff must review each HSR Filing to ensure it complies with the HSR Rules. Staff at both Agencies initially review the information and documents for substantive antitrust concerns, identify and assess the relevant facts, conduct a preliminary antitrust analysis, form preliminary recommendations regarding the investigation’s direction, and communicate those recommendations within each Agency. As staff formulate recommendations, they must also initiate clearance from the other agency for those transactions that merit collection of additional information to avoid any duplication of effort and ensure that only one agency investigates the transaction. Senior leadership at the investigating agency must review staff’s recommendations and determine whether to issue a Request for Additional Information (‘‘Second Request’’),3 which starts the second phase of the agency’s merger investigation. If there are other jurisdictions investigating, Agency staff coordinate with relevant state Attorneys General or international counterparts. All of this must happen during the initial waiting period, which is typically 30 days. Given the large number of HSR Filings submitted each year, the Agencies must use their resources efficiently and effectively to focus primarily on transactions that may harm competition. Information submitted as part of the HSR premerger notification process is a key starting point, and the information contained in the HSR Filing should be sufficient to allow the Agencies to conduct a thorough but quick evaluation of whether the proposed transaction is one that requires more in-depth investigation through the issuance of Second Requests. However, after a comprehensive review of the premerger notification process and based on the Agencies’ experience conducting in-depth investigations of challenged mergers, the Commission believes that the information currently reported in an HSR Filing is insufficient. In fact, the challenges of premerger review have expanded considerably over time as result of several factors. First, there has been tremendous growth in sectors of the economy that rely on technology and digital platforms to conduct business and, given the dynamic nature of these markets and the importance of acquisition strategies to success and market growth, mergers and acquisitions in these sectors present a unique 3 15 U.S.C. 18a(e). VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 challenge for the Agencies.4 In these sectors, some transactions involve firms whose premerger relationship is not clearly horizontal or vertical; rather, merger activity in these sectors increasingly involves firms in related business lines where the Agencies must closely examine the potential for direct competition in the future. In addition, the very nature of HSRreportable transactions has become more complex over time. Transaction structures have evolved to include not only the Ultimate Parent Entity (UPE) and its acquiring entity,5 but also other entities within the acquiring person. For instance, there can be numerous entities between the UPE and acquiring entity, and other investors can have a stake in any one of these entities. As a result, these investors could have a direct role in effectuating the transaction. Individuals or entities other than the those directly involved in the transaction may be able to exert influence over the transaction as well. The existence of subsidies or loans, among other means, may subject the buyer to additional pressures from individuals or entities not directly a party to the reportable transaction. Indeed, the use of board observers has become a more frequent way for outside players to gain direct access to company strategy. Each of these factors can affect a transaction’s impact on the competitive landscape. Consistent with this concern, the Commission’s NPRM also proposes changes to implement the collection of information about certain subsidies, as mandated by the 2022 Amendments. Congress determined that foreign subsidies can distort the competitive process or otherwise change the incentives of the firm in ways that undermine competition following an acquisition and are particularly problematic when provided by entities or countries that are strategic or economic threats to the United States.6 The proposed changes require filing parties to provide information about subsidies received from foreign entities 4 See, e.g., Fed. Trade Comm’n, Non-HSR Reported Acquisitions by Select Technology Platforms 23–24 (2021). 5 16 CFR 801.1(a). 6 Title II of the Merger Filing Fee Modernization Act of 2022, Public Law 117–329, Div. GG, sec. 201(a)(1) at 3826, 136 Stat. 4459. Congress pointed to remarks of former Commissioner Noah Phillips that ‘‘one area where antitrust needs to reckon with the strategic interests of other nations is when we scrutinize mergers or conduct involving stateowned entities . . . companies that are controlled, by varying degrees, by the state . . . [and] often are a government tool for implementing industrial policies or to protect national security.’’ Id. at sec. 201(a)(5). PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 42179 of concern, as discussed in more detail below. Another factor that has an impact on the complexity of premerger review is that consistent with the law and binding judicial precedent, the Agencies have stepped up efforts to review transactions for all their potential competitive impacts. The Agencies are responding to evidence that the U.S. economy is becoming increasingly concentrated overall.7 This concentration may reflect decreased competition, which can result in higher prices for consumers, decreased innovation, reduction in output, and lower wages for workers. For example, economists have estimated that workers’ share of national income has fallen sharply since 2000, such that the workers’ share of income today is now 6 to 8 percentage points below the 1980 level.8 These findings reveal that despite the Agencies’ efforts to prevent market consolidation through merger enforcement, many markets suffer from a lack of robust competition and mergers continue to cause harm.9 As President Biden noted in his Executive Order on Promoting Competition, industry consolidation and weakened competition ‘‘deny Americans the benefits of an open economy,’’ with ‘‘workers, farmers, small businesses, and consumers paying the price.’’ 10 7 See, e.g., Council of Econ. Advisers Issue Brief, Benefits of Competition and Indicators of Market Power at 4 (Apr. 2016), https://obamawhitehouse. archives.gov/sites/default/files/page/files/ 20160414_cea_competition_issue_brief.pdf (noting change in revenue share earned by the 50 largest firms in each sector); David Autor et al., The Fall of the Labor Share and the Rise of Superstar Firms, 135 Q.J. Econ. 645 (2020) (finding that the top 4 firms in the top sectors of the economy became steadily and significantly more concentrated); Thomas Philippon, Causes, Consequences, and Policy Responses to Market Concentration, in Aspen Economic Strategy Group, Maintaining the Strength of American Capitalism (2019) (reviewing literature on concentration in the U.S. economy). 8 See, e.g., Gene M. Grossman and Ezra Oberfield, The Elusive Explanation for the Declining Labor Share, 14:1 Ann. Rev. Econ. 93–124 (2022). 9 See, e.g., Keith Brand, Chris Garmon, Ted Rosenbaum, In the Shadow of Antitrust Enforcement: Price Effects of Hospital Mergers from 2009–2016, (forthcoming in J.L. Econ.); Zack Cooper et al., The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured, 134 Q.J. Econ. 51 (2019); Gautam Gowrisankaran, Aviv Nevo, and Robert Town, Mergers When Prices are Negotiated: Evidence from the Hospital Industry, 105 Am. Econ. Rev. 172 (2015); Orley Ashenfelter, Daniel Hosken, and Matthew C. Weinberg, Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers, 57 J.L. & Econ. S67 (2014). 10 Exec. Order No. 14,036, 86 FR 36,987 (July 14, 2021). See also The White House, Fact Sheet: Executive Order on Promoting Competition in the American Economy (July 9, 2021), https:// www.whitehouse.gov/briefing-room/statementsreleases/2021/07/09/fact-sheet-executive-orderonpromoting-competition-in-the-american- E:\FR\FM\29JNP3.SGM Continued 29JNP3 lotter on DSK11XQN23PROD with PROPOSALS3 42180 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules Each year, many of the transactions that are investigated by the Agencies are also investigated by another jurisdiction under their laws and procedures and this adds to the complexity of premerger review. Moreover, the Agencies’ experience gained while cooperating with international competition agencies that are conducting their own merger investigation reveals that better information can help address the increased complexity of premerger review and improve its efficiency. As compared to the Form, most international jurisdictions have merger filing forms that ask filers to provide significantly more information that their staff considers relevant to the competition analysis, including details about the transaction’s structure and rationale, horizontal overlaps, vertical and other relationships, and more detailed sales data. Importantly, many other jurisdictions rely on narrative responses from the parties that contain basic information about business lines or company operations, and several require the parties to self-report overlaps. For all these reasons, the Commission believes that the information currently collected by the Form is insufficient for the Agencies to conduct an effective and efficient initial evaluation of a transaction’s likely competitive impact on all of those who might be affected, including consumers, small businesses, and workers. In the Agencies’ experience, the current Form does not provide their staff with complete information, including information about the transaction; the filers’ business operations and those of any related entities; the premerger relationship between the acquiring person and the acquired entity; individuals or entities that may have influence over the operation of the relevant business lines; the full range of potential competitive implications of the transaction, including effects on workers; and prior acquisitions. To supplement the shortcomings of HSR Filings, Agency staff must often rely on voluntary cooperation from third parties—customers and competitors of the merging parties—during the initial waiting period to learn basic information about the parties’ business dealings and the markets in which they compete. In addition, staff needs to conduct independent research using publicly available information to supplement the modest amount of economy/ (noting that ‘‘Economists find that as competition declines, productivity growth slows, business investment and innovation decline, and income, wealth, and racial inequality widen.’’). VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 material submitted with the HSR Filing. Neither of these is reliable as a substitute for information provided by the parties themselves and certified as a complete response. Moreover, the additional effort required to discover basic business information about the parties to the transaction and their premerger relationship is inefficient and can result in both too few in-depth investigations when the information collected does not uncover a significant premerger competitive relationship as well as in-depth investigations that are either too broad or too narrow due to the insufficient detail about those relationships that is currently provided in HSR Filings. The information collected by the parties for their own premerger assessment of the transaction is paramount for the Agencies’ antitrust assessment and should be collected and submitted with the initial filing.11 The Commission therefore proposes additional questions and document requests to provide the Agencies with the information necessary to facilitate their initial review, as discussed further in this NPRM. At the same time, it has become clear to the Commission that certain required information currently submitted in the Form to aid the Agencies’ review is not as helpful as originally intended. For instance, as a general screening tool, reporting revenue by specific dollar amounts for specific industry codes, as defined by the North America Industry Classification System (‘‘NAICS’’), does not materially assist the Agencies in their initial review. Reporting revenue ranges for the NAICS codes, would sufficiently convey which lines of business of the filing person generate the most revenue. In addition, the requirement to report manufacturing revenues at a granular level has become less helpful to the Agencies during their initial review as a result of changes made by the United States Census Bureau (‘‘Census’’) to one of its revenue classification systems. Finally, the Commission believes that the identification of minority investors in target entities, other than those that will ‘‘roll over’’ their investments postconsummation, is of limited use. The Commission therefore proposes deleting these requirements, as discussed in further detail below. 11 ‘‘The House conferees contemplate that, in most cases, the Government will be requesting the very data that is already available to the merging parties, and has already been assembled and analyzed by them. If the merging parties are prepared to rely on it, all of it should be available to the Government.’’ 122 Cong. Rec. H30877 (Sept. 16, 1976) (remarks of Rep. Rodino). PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 The Commission anticipates that the proposed reorganization and collection of additional information in HSR Filings would greatly enhance the Agencies’ ability to complete the review of a reportable transaction in a short period of time, and that they are necessary and appropriate in order for the Agencies to vigorously enforce the nation’s antitrust laws. The changes would improve the efficiency and effectiveness of the Agencies’ initial review process and reduce the need to rely on the voluntary submission of additional information by the parties and third-party industry sources during the initial waiting period. Finally, the Commission notes that since the implementation of the Act and Rules in the late 1970s, there has never been a large-scale reorganization of the information required in an HSR Filing. As a result, the Commission is proposing a comprehensive redesign of the premerger notification process through both a reorganization of the information currently required and the addition of new information requirements. As the Agencies are currently working to complete an electronic filing (‘‘e-filing’’) platform, the exact structure of the redesign is unclear at this time. The Commission believes that the development and rollout of an e-filing platform will mark a significant improvement in the submission and processing of HSR Filings, with benefits for both filers and the Agencies. Thus, in this NPRM, the Commission is providing an overview of the proposed reorganization of the information currently required and the proposed new information requirements. The exact form of the redesign and how filers will submit this information will be more clearly laid out in any Final Rule after the Commission reviews all comments to this NPRM. Proposed Changes to the Rules I. Proposed Changes to Part 801 A. Section 801.1: Proposed Definitions of ‘‘Foreign Entity or Government of Concern’’ and ‘‘Subsidy’’ On December 29, 2022, the President signed into law the Consolidated Appropriations Act, 2023, which included amendments to the HSR Act in t2022 Amendments. Public Law 117– 328, 136 Stat. 4459. Congress found that foreign subsidies, particularly those from ‘‘countries or entities that constitute a strategic or economic threat E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS3 to United States interests,’’ 12 ‘‘can distort the competitive process by enabling the subsidized firm to submit a bid higher than other firms in the market, or otherwise change the incentives of the firm in ways that undermine competition’’ 13 post-merger. The 2022 Amendments require the Commission, with concurrence of the Assistant Attorney General, and in consultation with Chairperson of the Committee on Foreign Investment in the United States, the Secretary of Commerce, the Chair of the United States International Trade Commission, the United States Trade Representative, and heads of other appropriate agencies (‘‘Relevant Agencies’’), to promulgate a rule to require persons making an HSR Filing to disclose subsidies received from countries or entities that are strategic or economic threats to the United States. Congress identified those threats as ‘‘foreign entities of concern’’ as defined in section 40207 of the Infrastructure and Jobs Act, 42 U.S.C. 18741(a), and required the Commission to collect information about subsidies from these entities as part of HSR Filings. After conducting its own internal diligence to draft a rule and in consultation with the Relevant Agencies on this topic, the Commission proposes amending § 801.1 to add proposed paragraphs (r)(1) and (2), which define ‘‘foreign entity or government of concern’’ and ‘‘subsidy,’’ respectively. 1. Section 801.1(r)(1) Foreign Entity or Government of Concern In the 2022 Amendments, Congress found that foreign subsidies are particularly problematic when granted by countries or entities that constitute a strategic or economic threat to U.S. interests. To identify such subsidies, the Commission proposes new rule § 801.1(r)(1). This proposed rule defines, in proposed subsection (i), subsidies that would have to be disclosed, per Congress’ mandate, if received from a ‘‘foreign entity of concern’’ as the term is defined in section 40207 of the Infrastructure Investment and Jobs Act (‘‘IIJ Act’’), 42 U.S.C. 18741(a). The Commission therefore proposes adopting this definition in § 801.1(r)(1)(i). The Commission recognizes, however, that the definition of a ‘‘foreign entity of concern’’ in the IIJ Act does not explicitly include foreign governments or government agencies. To the extent 12 Title II of the Merger Filing Fee Modernization Act of 2022, Public Law 117–329, Div. GG, sec. 201(a)(2) at 3826, 136 Stat. 4459. 13 Id. at sec. 201(a)(1). VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 that HSR filers have received any subsidy directly from the government of a country designated by 42 U.S.C. 18741(a)(5)(C), the Commission believes that including these subsidies would be consistent with Congress’ mandate to capture information regarding subsidies when granted by entities posing a strategic and economic threat to the United States. Indeed, the Agencies’ understanding of the subsidies’ competitive significance would be incomplete without including subsidies granted by foreign governments or government agencies of foreign countries that are covered nations under 42 U.S.C. 18741(a)(5)(C). Therefore, the Commission proposes requiring persons making an HSR Filing to report subsidies received from governments (and their agencies) of foreign countries that are covered nations under 42 U.S.C. 18741(a)(5)(C) in proposed § 801.1(r)(1)(ii). Finally, the Commission proposes that proposed §§ 801.1(r)(1)(i) and (ii) retain the references to the respective sections of the IIJ Act rather than incorporating the current text of these sections to assure that the proposed rule remains consistent with any subsequent amendments to these sections within the IIJ Act. 2. Section 801.1(r)(2) Subsidy The 2022 Amendments found that ‘‘[f]oreign subsidies, which can take the form of direct subsidies, grants, loans (including below-market loans), loan guarantees, tax concessions, preferential government procurement policies, or government ownership or control, can distort the competitive process.’’ 14 Thus, the 2022 Amendments require the Commission to collect information about such subsidies to enable the Agencies to determine whether the transaction, if consummated, would violate the antitrust laws. But the statute does not define the term ‘‘subsidy’’ and its specific definition has, in fact, been heavily debated and negotiated in both U.S. legislation and international treaties in other contexts. The Commission is mindful of the relevant caselaw and expertise of other U.S. agencies that have developed over decades and, after consultation with the Relevant Agencies on this topic, the Commission proposes the adoption of the definition of subsidies in Title VII of the Tariff Act of 1930 (‘‘Tariff Act’’), 19 U.S.C. 1677(5)(B). The Tariff Act definition of ‘‘subsidy’’ is consistent with the definition in the World Trade Organization’s Agreement on Subsidies and Countervailing 14 Id. PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 42181 Measures (‘‘SCM’’), to which the United States is a party.15 The Commission believes that because this definition is found both in U.S. law and in the SCM, both U.S. and foreign filing parties, or the law firms that represent them, should be familiar with and able to apply. The Commission also believes this definition is consistent with the Congressional mandate in the 2022 Amendments. The Commission thus proposes adopting this definition in § 801.1(r)(2) and that the proposed rule retain the reference to the Tariff Act definition rather than incorporating the current text of that section to assure that the proposed rule remains consistent with any subsequent amendments to the Tariff Act. The incorporation of this proposed change into the Instructions is discussed below at III.E.1. II. Proposed Changes to Part 803 A. Sections 803.2, 803.5, and 803.10: Adoption of Electronic Filing The Commission proposes amending §§ 803.2(e) and (f); 803.5(a)(1), (3), and (b); and 803.10(c)(1)(i) and (ii) to eliminate references to paper and DVD filings to physical offices. In March 2020, the COVID–19 pandemic and resulting closures of federal office buildings prevented the Commission and Assistant Attorney General from physically accepting HSR Filings, as had been the practice since the original adoption of the Rules in 1978. As a result, on March 17, 2020, the Agencies began accepting filings electronically.16 Given the success of that system, the Commission proposes amending the Rules as noted above to adopt electronic filing and eliminate references to paper and DVD filings. This change benefits both the Agencies and filing parties by reducing reliance on the delivery and acceptance of paper filings or DVDs. B. Section 803.2: Requiring Separate Forms for Acquiring and Acquired Persons The Commission proposes amending § 803.2(a) and deleting § 803.2(b)(1)(v) so that filing persons that are both the acquiring and acquired person are required to make separate filings. Currently, the Rules, Instructions, and Form permit filers that are both an acquiring and an acquired person in a transaction to file only one Form. This 15 19 U.S.C. 3511(d)(12). Release, Fed. Trade Comm’n, Premerger Notification Office Implements Temporary e-Filing System (March 13, 2020), https://www.ftc.gov/newsevents/news/press-releases/2020/03/premergernotification-office-implements-temporary-e-filingsystem. 16 Press E:\FR\FM\29JNP3.SGM 29JNP3 42182 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules scenario arises most commonly when a seller will receive voting securities of the buyer as consideration for the sale of the target. In such transactions, both the acquisition of the target by the buyer and the acquisition of the buyer’s voting securities by the seller may be reportable. Thus, the buyer and seller can each be an acquiring and an acquired person. Although the Rules permit filers to use one Form for the two transactions in these cases, § 803.2(b)(1)(v) requires that separate responses be provided for Items 5 through 8, one set of responses as the acquiring person and one set as the acquired person. In the Commission’s experience, filers that opt to combine the information on a single Form often do not include everything that is required, and these filings are, in fact, very confusing for the Agencies to review. In contrast, when filers choose to submit two separate Forms for such transactions, these filings provide all the required information and in a much clearer format. The Commission thus proposes amending § 803.2(a) and deleting § 803.2(b)(1)(v) to require acquiring persons and acquired persons to submit separate HSR Filings, one as the acquiring person and one as an acquired person, in instances where filers qualify as both. This proposed approach would make the Agencies’ initial review much easier by more clearly separating information related to the acquiring person from the acquired person. No new information would be required, and technology allows parties to save copies of filings to reduce the need to input repetitive information. lotter on DSK11XQN23PROD with PROPOSALS3 C. Section 803.5(b): Requiring Draft Agreements or Term Sheets The Commission proposes amending § 803.5(b) to require filers who have not executed a definitive transaction agreement before making an HSR Filing to submit a draft agreement or term sheet that describes with sufficient detail the scope of the entire transaction that will be consummated after observing the waiting period required by the Act. Section 803.5(b) currently allows filers in any non-§ 801.30 acquisition to file on the basis of ‘‘a contract, agreement in principle or letter of intent to merge or acquire [that] has been executed’’ and an affidavit attesting to that execution as well as the good faith intention to complete the transaction. In permitting parties to file before the signing of a definitive agreement, the Commission has relied on the assumption that the filings would ‘‘contain sufficiently definitive information about the transaction to VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 permit accurate analysis.’’ 17 In the Commission’s experience, however, filings submitted on the basis of bare preliminary agreements, such as an indication of interest, non-binding letter of intent, or agreement in principle (‘‘Preliminary Agreements’’), typically do not meet this standard. Often, Preliminary Agreements reflect only very early discussions between the parties, and since there is currently no obligation to file a draft or final agreement once the HSR Filing is submitted, the Agencies must spend time during the initial waiting period simply trying to discover the scope and timing of the transaction. Moreover, given the preliminary nature of such a filing, the parties have often not yet undertaken a robust analysis of the transaction and therefore have drafted few, if any, documents responsive to Items 4(c) or 4(d) of the current Form. Permitting parties to submit an HSR Filing prior to a complete substantive analysis of the transaction, and at times even before the parties have done diligence on rationales or justifications for the transaction, puts the Agencies at a distinct disadvantage during the initial waiting period in determining what the transaction is and whether it may violate the antitrust laws if consummated. Additionally, HSR Filings made during the early phases of negotiations may be too uncertain to merit review. The original Statement of Basis and Purpose from 1978 (‘‘1978 SBP’’) provides clear guidance that ‘‘[b]ecause of the time and resource constraints upon the agency staffs,’’ the Agencies should not expend resources to review transactions so lacking in specifics that they could be considered merely ‘‘hypothetical.’’ 18 Yet allowing for the submission of a filing on the basis of a Preliminary Agreement often triggers the use of limited resources for hypothetical transactions, first to discover the full range of potential viable transactions, and then to assess the competitive impact of those potential iterations. The Commission therefore proposes amending § 803.5(b) to eliminate the ability to submit an HSR Filing on any Preliminary Agreement without providing a term sheet or draft agreement that reflects sufficient detail about the proposed transaction to allow the Agencies to understand the scope of the transaction and to confirm that the transaction is more than hypothetical. The Commission also proposes a corresponding change to the 17 43 18 Id. PO 00000 FR 33450, 33511 (July 31, 1978). at 33510–511. Frm 00006 Fmt 4701 Sfmt 4702 Instructions, as noted at III.C.6. Because detailed term sheets or draft agreements are often prepared in the ordinary course of deal negotiations, the Commission does not expect this change would impose a significant burden on filing parties. However, the Commission recognizes that eliminating the parties’ ability to make filings prior to the negotiation of such documents may change the timing of filing and would likely result in more robust filings that would take additional time to prepare. On balance, the Commission believes that this proposed change is consistent with the original intent of the Rules to prevent expending scarce Agency resources on hypothetical transactions and would allow the Agencies to focus on transactions definitive enough to permit accurate analysis. D. Section 803.8: Translation of Documents The Commission proposes amending § 803.8 to require submission of Englishlanguage translations for all foreignlanguage documents submitted with the initial HSR Filing. Section 803.8(a) currently provides that parties need not translate foreign-language materials submitted with the initial filing, and that English-language outlines, summaries, extracts, or verbatim translations need only be provided if they already exist. Section 803.8(b), in contrast, has required since 1983 that all foreign-language documents responsive to a Second Request be provided with English translations.19 In the Commission’s experience since the early 1980s when Rule 803.8 was first adopted, it is no longer enough to require translations of only those foreign-language documents submitted in response to Second Requests because today’s HSR Filings quite frequently contain foreign-language materials. These materials typically include key documents, such as the transaction agreements submitted in response to current Item 3(b) of the Form, the relevant financials submitted in response to current Item 4(b), and the documents submitted in response to current Items 4(c) and 4(d) of the Form. Parties often submit foreign-language materials in their HSR Filings with no translation at all or with only rough English-language outlines, summaries, or extracts, which may not accurately and fully convey the contents of the foreign-language document. As a result, the Agencies must either obtain their 19 The Commission proposed mandatory translation in 1981, 46 FR 38710 (July 29, 1981), and issued a final rule in 1983, 48 FR 34427 (July 29, 1983). E:\FR\FM\29JNP3.SGM 29JNP3 lotter on DSK11XQN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules own translations of these documents or miss out on potentially critical information, leaving the Agencies at a disadvantage during their initial review. Given the wide variety of foreign languages the Agencies typically see, it would be very costly for the Agencies to retain translation services for each filing that may contain some foreign-language material. Further, obtaining translations adds significant delay within the already time-constrained initial waiting period and would not allow for filing parties to review the translations for errors. These translations may be especially important for those transactions that report foreign subsidies. To address this issue, the Commission proposes combining §§ 803.8(a) and 803.8(b). Proposed § 803.8 would therefore be one paragraph requiring that verbatim English translations be provided with all foreign-language materials submitted as part of an HSR Filing or in response to a Second Request. For either an initial HSR Filing or in response to a Second Request, both the original document and the English translation would need to be submitted. Proposed § 803.8 would not require any particular method of translation but would specify that, whatever translation method the parties choose, all verbatim translations must be understandable, accurate, and complete. This proposed change would also be reflected in the Instructions, as specified below in III.A.4. Although the Commission noted in its 1983 final rulemaking that requiring translations created a burden for filing parties,20 the Commission now believes that translation tools available to the parties have become more abundant and that these tools provide many options for translation that should significantly reduce the burden of providing translations. Translations of foreignlanguage documents would greatly benefit the Agencies in allowing staff to know the content of responsive documents submitted in a foreign language. The Commission invites comment on whether there are categories of documents identified in this NPRM that would present a significant burden to translate and what other alternatives might achieve the Commission’s goal of being able to understand and assess foreign-language documents while creating less burden for filing parties. 20 48 FR 34427, 34440 (July 29, 1983). VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 E. Section 803.10: Commencement of Waiting Periods The Commission proposes amending § 803.10(c)(1)(i) to clarify when filings made electronically are to be credited as received by the Agencies. Specifically, the Commission proposes amending this rule to clarify that compliant filings will be credited as received on the date filed if: (i) the electronic submission is complete by 5:00 p.m. Eastern Time; and (ii) such date is not a Saturday, Sunday, legal public holiday (as defined in 5 U.S.C. 6103(a)), or the observed date of such legal public holidays. These clarifications are consistent with current and historical practices. Of course, historically, the Rules did not need to specify this information, since the receipt of physical filings (either on paper or DVD) required the offices of the Assistant Attorney General and Commission to be open. But because electronic filing platforms can allow submission of filings even when Agency staff is not available to receive the filings, the proposed amendments make clear that filings are only credited as received during regular business hours on regular business days. These proposed changes would provide clarity and thus benefit both filing parties and the Agencies. F. Section 803.12: Information To Be Updated With Refiling The Commission proposes amending § 803.12(c) to specify which responses to the items in the proposed Instructions would need to be updated if the acquiring person chooses to withdraw its HSR Filing and refile it (an ‘‘Updated HSR Filing’’). The procedure for voluntary withdrawal and refiling permits the acquiring person to restart the initial waiting period, so long as no material changes have been made to the transaction, to provide the Agencies an additional 15 or 30 days (depending on the transaction type) to review the transaction without issuing a Second Request. If the Updated HSR Filing is received within two business days of withdrawal, no new fee is required, but filers currently must provide a new affidavit and certification and update current Item 4 of the Form to provide the Agencies with more recent information that is likely relevant to the continued review. The Commission proposes eliminating the requirement to provide updated financials, currently required by Item 4(a) and (b), in the Updated HSR Filing. The Commission’s experience has shown that, given that the withdraw and refile procedure is completed within approximately one PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 42183 month of the original filing, the financial documents required by Item 4(a) and (b) are rarely changed and therefore updating them is not essential in this phase of its investigation. The Commission proposes requiring updated Transaction-Related Documents with the Updated HSR Filing, which, as discussed below in III.D.1.a., would comprise the current Item 4(c) and (d) documents subject to proposed modifications of the custodians and clarifications. Documents responsive to current Item 4(c) and (d) typically reflect the most relevant thinking of key individuals with knowledge of the transaction within the acquiring person and are required as part of an Updated HSR Filing. Therefore, the Commission believes these documents are essential to the Agencies’ initial antitrust assessment of the transaction. The Commission also proposes adding two new requirements for the Updated HSR Filing: updated transaction agreements and updated information about subsidies from Foreign Entities of Concern. Though the voluntary withdrawal and refiling process is only available if the transaction is materially the same, the Commission believes that the Agencies would benefit from having a complete understanding of all aspects of the status of and rationale for the transaction, including any changes that have occurred since the day the HSR Filing was submitted. Therefore, the Commission proposes requiring that the Updated HSR Filing include the latest version of the transaction agreements, including the most recent drafts, if a final version has not been executed. The Commission believes this proposed requirement would not impose a substantial burden, since this would be a limited set of documents that should be readily available to the acquiring person. The Commission also proposes requiring that the Updated HSR Filing include updated information regarding Subsidies from Foreign Entities or Governments of Concern, which is discussed below at III.E.1. The Commission believes that most updated HSR Filings would reflect no new information related to subsidies given the short period of time since the original HSR Filing. However, if new information about subsidies from foreign entities of concern were to become available, the Commission believes that it would be consistent with Congressional intent for the Agencies to have access to this information. E:\FR\FM\29JNP3.SGM 29JNP3 42184 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS3 Proposed Changes to the Instructions III. Part 803 Appendix A and Appendix B As mentioned above, the Agencies are developing an e-filing platform through which filers would submit information required by the HSR Rules via an online portal. As a result, this NPRM does not contain a new draft Form. Instead, this NPRM presents the information requirements as Instructions for collecting and submitting documents and information required by the HSR Rules. The proposed Instructions reorganize the information to reflect the planned layout of the e-filing platform in development, which would be described in any final rule. Prior to the implementation of the e-filing platform, the proposed Instructions contemplate filers would submit the proposed requests for information and narratives via uploads in a standard format such as PDF and Excel. The proposed changes to the information that filing parties would be required to provide are detailed below. The Commission recognizes that, in total, these proposed changes would be significant and impose additional burden on some filing parties. Some proposed changes ask for additional information or documents that the Commission believes are in the possession of the filing persons in a form that could be readily uploaded into the e-filing platform. Other proposed changes would require filing parties to compile or generate the requested information specifically for the HSR Filing, such as items requesting narrative responses, which would involve additional effort. As explained below, the Commission has determined that the additional burden associated with these proposed changes is justified because the requested documentary material and information is necessary and appropriate for effective and efficient review of HSR Filings to determine within the initial waiting period whether the transaction may, if consummated, violate the antitrust laws.21 Based on the Agencies’ experience conducting merger investigations, and as discussed above, the Commission believes that the limited information currently available to the Agencies in the HSR Filing is no longer sufficient to conduct an effective initial screening of the transaction for all types of competitive harm that may result from the transaction. The proposed set of reorganized revenue information, additional documents, and narrative 21 15 U.S.C. 18a(d). VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 responses would create a much more complete, accurate, and robust basis on which to screen the transaction for the various potential competitive effects, including those that arise from nonhorizontal transactions or combinations involving competing employers. These proposals would also provide a more reliable and robust set of information to determine when the transaction does not warrant an in-depth investigation, which often requires a substantial investment of time and resources for both the investigating agency and the merging parties. Based on the Agencies’ experience in reviewing and challenging illegal mergers, the proposals target the information that is most relevant and readily available to filing persons and would require it to be presented in a coherent and organized way that will facilitate quick antitrust review by the Agencies during the initial waiting period. But the Commission welcomes comments on the burden associated with and the appropriate balance of having to provide information in the form of revenues, documents, and narratives as part of the proposed changes in this NPRM and invites alternative proposals that meet the objectives described below. At their core, the proposed changes are motivated by the fundamental purpose of the HSR Act, which is to allow the Agencies, within a short period of time to review the information submitted with the Filing and identify potentially problematic transactions prior to consummation, and, where appropriate, initiate an in-depth review by issuing Second Requests. The fact that the Agencies must conduct their evaluation in an initial waiting period of 15 or 30 days, depending on the transaction type, means that the Agencies must have enough information to consider a wide range of potential effects on competition on an expedited basis. Based on the cumulative learning of the Commission and Assistant Attorney General over the course of decades of investigations, the Commission proposes requiring new information and narratives to address particular areas where the Agencies have found specific deficiencies in the type of information currently required by the Form. In addition, this NPRM would implement changes required by the 2022 Amendments, which are consistent with the need for sufficient information to screen for all types of competitive concerns. Despite the added burden for filing persons, on balance, the Commission believes that the benefit to the Agencies’ merger review would be significant and would help address information PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 asymmetries between Agency staff and the filing persons in the initial waiting period. The Agencies expend substantial resources during the initial waiting period to discover and confirm basic business information about the filing persons, information that is wellknown to them but not to Agency staff and is not available from any other source. These information asymmetries have become more acute as deals and companies have become more complex. In the Commission’s experience, the inefficiency created by information asymmetries can overwhelm the initial review process, especially when the volume of HSR reportable transactions is high.22 The proposed changes would also benefit filing persons where information contained in an HSR Filing would demonstrate to the Agencies that the transaction at issue does not need further investigation. Indeed, both the Agencies and filing persons have an interest in ensuring that HSR Filings are robust enough for the Agencies to quickly identify transactions that do not require further investigation during the initial waiting period. It is the Commission’s aim to be cognizant of all such interests in proposing the substantial changes contained in this NPRM. For ease of reference, the Commission includes the following materials regarding the proposed changes in this NPRM: • An outline of the reorganization contemplated in the proposed Instructions, • A chart that identifies proposed new locations of the current Items of the Form including whether substantive changes are proposed, and • A chart of proposed new categories of required information. These materials appear immediately below. Proposed Instructions Outline • General Instructions and Information • Ultimate Parent Entity Information Æ UPE Details Æ Organization Structure • Transaction Information Æ Parties Æ Filing Fee Æ Transaction Details 22 The Agencies experienced a surge in HSR reportable transactions during 2021 and 2022. For instance, FY 2021 HSR reportable transactions were double those of FY 2020 (1,637 versus 3,520), and in FY 2022, reportable HSR transactions remained high, at over 3,200. The pace and volume of HSR filings (generally two filings per transaction) during that time (in addition to on-going merger investigations) required the Agencies to adjust their HSR review process, including suspending the granting of requests for early termination of the waiting period. E:\FR\FM\29JNP3.SGM 29JNP3 42185 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules Æ Transaction Description Æ Joint Ventures Æ Agreements and Timeline • Competition and Overlaps Æ Business Documents Æ Competition Analysis Æ NAICS Codes Æ Controlled-Entity Overlaps Æ Minority-Held Entity Overlaps Æ Prior Acquisitions • Additional Information Æ Subsidies from Foreign Entities or Governments of Concern Æ Defense or Intelligence Contracts Æ Identification of Communications and Messaging Systems Æ Other Jurisdictions • Certification • Affidavits CROSS REFERENCE BETWEEN CURRENT FORM AND PROPOSED INSTRUCTIONS Substantive changes? Current form item New location Fee Information ......................................................................... Corrective Filing ........................................................................ Cash Tender Offer .................................................................... Bankruptcy ................................................................................. Foreign Jurisdictions ................................................................. Early Termination ...................................................................... Item 1(a) .................................................................................... Item 1(b) .................................................................................... Item 1(c) .................................................................................... Item 1(d) .................................................................................... Item 1(e) .................................................................................... Item 1(f) ..................................................................................... Item 1(g) .................................................................................... Item 1(h) .................................................................................... Item 2(a) .................................................................................... Item 2(b) .................................................................................... Item 2(c) .................................................................................... Item 2(d) .................................................................................... Item 3(a) (Entities) ..................................................................... Item 3(a) (Description) .............................................................. Item 3(b) .................................................................................... Item 4(a) .................................................................................... Item 4(b) .................................................................................... Item 4(c) .................................................................................... Item 4(d) .................................................................................... Item 5(a) .................................................................................... Item 5(b) .................................................................................... Item 6(a) .................................................................................... Item 6(b) .................................................................................... Item 6(c)(i) ................................................................................. Item 6(c)(ii) ................................................................................ Item 7(a)–(d) .............................................................................. Item 8(a) .................................................................................... Transaction Information/Filing Fee ........................................... Transaction Information/Transaction Details ............................ Transaction Information/Transaction Details ............................ Transaction Information/Transaction Details ............................ Additional Information/Other Jurisdictions ................................ Transaction Information/Transaction Description ..................... Ultimate Parent Entity Information/UPE Details ....................... Ultimate Parent Entity Information/UPE Details ....................... Ultimate Parent Entity Information/UPE Details ....................... Ultimate Parent Entity Information/UPE Details ....................... Ultimate Parent Entity Information/UPE Details ....................... Ultimate Parent Entity Information/Organization Structure ...... Ultimate Parent Entity Information/UPE Details ....................... Ultimate Parent Entity Information/UPE Details ....................... Transaction Information/Parties ................................................ Transaction Information/Transaction Details ............................ Transaction Information/Transaction Details ............................ Transaction Information/Transaction Details ............................ Transaction Information/Parties ................................................ Transaction Information/Transaction Description ..................... Transaction Information/Agreements and Timeline .................. Ultimate Parent Entity Information/UPE Details ....................... UPE Information/UPE Details ................................................... Competition and Overlaps/Business Documents ..................... Competition and Overlaps/Business Documents ..................... Competition and Overlaps/NAICS Codes ................................ Transaction Information/Joint Ventures .................................... Ultimate Parent Entity Information/Organization Structure ...... Ultimate Parent Entity Information/Organization Structure ...... Competition and Overlaps/Minority-Held Entity Overlaps ........ Competition and Overlaps/Minority-Held Entity Overlaps ........ Competition and Overlaps/Controlled-Entity Overlaps ............. Competition and Overlaps/Prior Acquisitions ........................... No. No. No. No. Yes. No. No. No. No. No. No. Yes. No. Yes. No. No. No. No. No. Yes. Yes. No. No. Yes. Yes. Yes. Yes. Yes. Yes. Yes. Yes. Yes. Yes. lotter on DSK11XQN23PROD with PROPOSALS3 PROPOSED NEW REQUIREMENTS AND CATEGORIES OF INFORMATION Proposed new sections Location New Definitions ......................................................................................................... Document Log ........................................................................................................... Translations ............................................................................................................... Organization of Controlled Entities ........................................................................... Identification of d/b/a or f/k/a names ........................................................................ Identification of Additional Minority Interest Holders ................................................ Narrative Describing Ownership Structure of the Acquiring and Acquired Entities Organizational Chart for Funds and Master Limited Partnerships ........................... Identification of Other Types of Interest Holders that May Exert Influence ............. Identification of Officers and Directors ...................................................................... Description of Acquiring Person ............................................................................... Narrative Describing Transaction Rationale ............................................................. Diagram of the Transaction ...................................................................................... Identification of Related Transactions ....................................................................... Expansion of Transaction Agreements to be Produced ........................................... Production of other Agreements between the Acquiring and Acquired Persons ..... Provision of a Transaction Timeline ......................................................................... Production of Certain Documents of the Supervisory Deal Team Lead(s) .............. Production of Certain Strategic Plans ....................................................................... Production of Certain Drafts ..................................................................................... Organizational Chart of Authors and Certain Recipients of Documents .................. Narrative Describing Horizontal Overlaps ................................................................. Narrative Describing Supply Relationships ............................................................... Narrative Describing Labor Markets ......................................................................... General Instructions and Information. General Instructions and Information. General Instructions and Information. Ultimate Parent Entity Information/Organization Structure. Passim. Ultimate Parent Entity Information/Organization Structure. Ultimate Parent Entity Information/Organization Structure. Ultimate Parent Entity Information/Organization Structure. Ultimate Parent Entity Information/Organization Structure. Ultimate Parent Entity Information/Organization Structure. Ultimate Parent Entity Information/Transaction Details. Ultimate Parent Entity Information/Transaction Details. Ultimate Parent Entity Information/Transaction Details. Ultimate Parent Entity Information/Transaction Details. Ultimate Parent Entity Information/Agreements and Timeline. Ultimate Parent Entity Information/Agreements and Timeline. Ultimate Parent Entity Information/Agreements and Timeline. Competition and Overlaps/Business Documents. Competition and Overlaps/Business Documents. Competition and Overlaps/Business Documents. Competition and Overlaps/Business Documents. Competition and Overlaps/Competition Analysis. Competition and Overlaps/Competition Analysis. Competition and Overlaps/Competition Analysis. VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 E:\FR\FM\29JNP3.SGM 29JNP3 42186 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules PROPOSED NEW REQUIREMENTS AND CATEGORIES OF INFORMATION—Continued Proposed new sections Location Identification of Minority Held Entities with Revenue Overlaps ................................ Provision of Geolocation for Certain Locations of Operations ................................. Identification of Additional Prior Acquisitions ............................................................ Disclosure of Subsidies from Foreign Entities or Governments of Concern ............ Identification of Certain Defense or Intelligence Contracts ...................................... Identification of Communications and Messaging Systems ..................................... Mandatory Disclosure of Foreign Filings .................................................................. Voluntary Waivers for International Competition Authorities .................................... Voluntary Waivers for State Attorneys General ........................................................ Statement of Penalties for False Statements ........................................................... Prevention of Destruction of Documents .................................................................. The following discussion of the proposed changes in this NPRM tracks the Proposed Instructions Outline above, explaining which information requirements are materially the same as those currently included in the Form and Instructions, which the Commission proposes changing, and which are proposed new categories of required information. Throughout the proposed Instructions, references to paper and DVDs have been eliminated, as discussed in II.A. above. A. General Instructions and Information The Commission proposes creating a General Instructions and Information section within the proposed Instructions that would largely parallel the General section of the current Instructions but would be significantly reorganized. Within the proposed General Instructions and Information section, the Commission proposes substantive changes to the following sections: Filing Person, Definitions, Responses, and Translations, as detailed below. lotter on DSK11XQN23PROD with PROPOSALS3 1. Definitions and Explanation of Terms The Commission proposes creating two new definitions and deleting an existing definition within the proposed Instructions. a. Economic Research Service’s (ERS’s) Commuting Zones (CZ) The Commission proposes adding a definition for Economic Research Service’s Commuting Zones. As discussed below at III.D.2.c., the Commission proposes new questions that would require the submission of information about the filing person’s employees to aid the Agencies’ evaluation of the potential impact of proposed transactions on labor markets. These proposed questions would require data to be submitted using the Department of Agriculture’s Economic Research Service Commuting Zones for the year 2000. These codes are available at https://www.ers.usda.gov/data- VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 Competition and Overlaps/Minority-Held Entity Overlaps. Competition and Overlaps/Controlled-Entity Overlaps. Competition and Overlaps/Prior Acquisitions. Additional Information. Additional Information. Additional Information. Additional Information. Additional Information. Additional Information. Certification. Certification. products/commuting-zones-and-labormarket-areas/. b. North American Product Classification System (NAPCS) Data The Commission proposes eliminating the reporting of 10-digit North American Product Classification System (‘‘NAPCS’’) based codes, as discussed in more detail below at III.D.3. Thus, the Commission proposes deleting the NAPCS definition from the proposed Instructions. c. Standard Occupational Classification The Commission proposes adding a definition for Standard Occupational Classification. As discussed below at III.D.2.c., the Commission proposes new questions that would require the submission of information about the filing person’s employees to aid the Agencies’ evaluation of the impact of proposed transactions on competition for workers in labor markets. The proposed definition of Standard Occupational Classification (‘‘SOC’’) would require filers to submit data by the first six digits of the relevant code, as published by the United States Bureau of Labor Statistics, available at https://www.bls.gov/soc/2018/ #classification. 2. Filing As discussed above at II.B., the Commission proposes amending § 803.2 and deleting § 803.2(b)(1)(v) to require filing persons to submit separate forms when filing as an acquiring and acquired person. The proposed Instructions would also reflect this proposed change. 3. Responses The Commission proposes replacing the current Responses section with a new Responses section that would provide details on how to provide the information responsive to the proposed new questions. This would include eliminating instructions that are specific to filings made on paper or DVD, see PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 above at II.A. The proposed revised Responses section would also describe the information that filing persons would need to provide in a log of responsive documents and narrative responses to be submitted with an HSR Filing. This information would generally be the same as the information currently required for documents submitted in response to Items 4(c) and 4(d) of the current Form, with two proposed expansions. First, the Commission proposes requiring the filing person to identify the request(s) to which the document would be responsive. Though the proposed Instructions do not include item numbers at this time, indented and bolded headings in the proposed Instructions should each be considered a separate request. The Commission routinely requires this type of referencing for document submissions pursuant to compulsory process, including in response to a Second Request, and it is extraordinarily helpful in quickly identifying materials responsive to a specific request. This proposed requirement would allow the Agencies to understand the content of filings more quickly by providing a cross-reference between information and documents, facilitating a more efficient review. Second, the Commission proposes modifying the requirements for identification of authors of documents prepared by third parties. For documents prepared by third parties at the request of a filing person, such as market studies, quality of earnings analyses, confidential information memoranda, management presentations, or board presentations, the Commission proposes that, in addition to providing the name of the third party that prepared the document, the filing person would be required to provide the name, title, and company of the individual within the filing person who supervised the preparation of the document or for whom the document E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules was prepared. Understanding who, within the filing person, was responsible for overseeing or receiving the work of outside consultants would materially assist the Agencies in identifying key decision-makers for the transaction. In the case of documents that were not commissioned by the filing person, such as subscription market reports, unsolicited banker’s books, or documents received from the other filing person, the Commission proposes that the filing person would only be required to list the document title and name of the third party that prepared the document. These proposed changes would allow the Agencies to quickly assess which documents were key to the decision to pursue the transaction and who within the filing person coordinated the assessment that resulted in that decision. lotter on DSK11XQN23PROD with PROPOSALS3 4. Translations As noted above at II.D., the Commission proposes amending § 803.8 to require the filing person to submit English translations of all foreignlanguage documents. The proposed Instructions would also reflect this change. B. Ultimate Parent Entity Information The Commission proposes the creation of an Ultimate Parent Entity (UPE) Information section within the proposed Instructions. Currently, information about the structure of the acquiring and acquiring persons is required in various sections of the Form: Item 1 contains basic contact information; Item 2 identifies the ultimate parent entities; Item 3 identifies the acquiring and acquired entities; and Item 6 identifies certain controlled and minority-held entities, as well as certain minority holders of the filing person. The Commission proposes the reorganization, clarification, and expansion of these items to require additional information about the acquiring person and acquired entity(s) in order for the Agencies to receive a more complete picture of the scope of the operations of each, and to identify points of contact for questions about the HSR Filing or potential Second Requests, as well as key interest holders. These proposed changes, discussed below, would fall within the following proposed categories: UPE Details and Organization Structure. 1. UPE Details The proposed UPE Details section within the proposed Instructions would contain most of the information currently required in Item 1 of the Form. VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 The Commission proposes adding a new Size of Person Stipulation item that would allow the filing person to stipulate that the size of person test is met, when applicable, making it easier for staff to determine that the size of person test is met and streamlining the review process as a result. The Commission also proposes clarifying which financials are required from acquiring persons who are natural persons. As a result of feedback from filers over the years, the Commission is aware that this item causes confusion. The proposed language in the Instructions would make it clear that natural persons who are acquiring persons must include the annual reports and/or annual audit reports of (1) the acquiring entity(s) and any entity controlled by the natural person whose dollar revenues contribute to a NAICS overlap, and (2) the highest-level entity(s) the natural person controls. It is the intent of the Commission that the Instructions require this information from natural persons, and the proposed change would make that intent clear. Finally, the Commission proposes requiring all filing persons to identify the person to whom Second Requests should be addressed. Current Item 1(g) requires the identification of two individuals to contact regarding the HSR Filing, and current Item 1(h) requires the identification of an individual located within the United States for the limited purpose of receiving a notice of a Second Request. But the Instructions currently limit application of Item 1(h) to filings made by foreign persons, so for U.S. filers, Second Requests are sent to the person identified in Item 1(g). The Commission now understands that U.S. filing persons sometimes have separate points of contact to answer questions regarding the HSR Filing as compared to questions regarding the receipt of Second Requests. Therefore, the Commission proposes requiring all filing persons to separately provide contacts for questions related to the HSR Filing and Second Requests. These proposed changes would provide clarity for filing persons, and the Agencies would benefit from receiving more precise information about the UPE. 2. Organization Structure The proposed Organization Structure section within the proposed Instructions would expand the required information about how the UPE is organized and the identity of other individuals and entities that may have influence over business decisions or access to confidential business information. The proposal PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 42187 would require the identification of entities within the acquiring person or acquired entity, minority shareholders, and other non-controlling entities, and create new requirements to identify certain other interest holders that may exert influence, as well as officers, directors, and board observers. a. Entities Within the Acquiring Person and Acquired Entity The proposed Entities Within the Acquiring Person and Acquired Entity section would contain information currently required by Items 1(f) and 6(a) of the Form. Item 1(f) requires the identification of the acquiring entity(s) or acquired entity(s) (as appropriate). Item 6(a) requires the acquiring person to list all entities it controls with total assets of $10 million or more (though foreign entities with no sales into the United States may be omitted). The acquired person currently has the same obligation, but the scope is limited to the acquired entity(s); the acquired person is not required to provide information about entities that are not part of the transaction. The Commission proposes requiring additional information about the reported entities within the filing persons. First, the Commission proposes requiring filing persons to organize the list of controlled entities by operating company or business. As filing persons have become more complex, an alphabetically or geographically organized list of the controlled entities, which is currently permitted by Item 6(a) of the Form, often does not provide the Agencies with a sufficient overview of the scope of the businesses that the acquiring person and acquired entity(s) control. Some filers currently organize the list of entities held by the acquiring person or acquired entity by operating company, and in the Commission’s experience, this is a much more useful way to present the information. Understanding which companies are part of an operating group or portfolio company would allow staff to identify the actual market participants from among all legal entities. The Commission thus proposes requiring that lists of controlled entities be submitted in this manner to aid the Agencies’ review during the initial waiting period. Second, for each such operating company or business, the Commission proposes that filers identify the name(s) by which the company or business does business, as well as any name(s) by which it formerly did business within the three years prior to filing. While it remains important for the Agencies to receive legal entity names, these names E:\FR\FM\29JNP3.SGM 29JNP3 42188 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules are often unrelated to the names used in the marketplace and may be unfamiliar to industry participants. Being able to connect the legal names to the ‘‘doing business as’’ and ‘‘formerly known as’’ names would greatly assist the Agencies in understanding the scope of the operations of the acquiring person and acquired entity and allow the identification of other public information about the entity during the initial waiting period. lotter on DSK11XQN23PROD with PROPOSALS3 b. Minority Shareholders and Other Non-Controlling Entities The proposed Minority Shareholders and Other Non-Controlling Entities section would contain information currently required by Item 6(b) of the Form, which requires identification of holders of 5% or more, but less than 50%, of the acquiring UPE and acquiring entity by the acquiring person, and of the acquired entity(s) by the acquired person. In order to provide the Agencies with a more complete understanding of the individuals or entities that have significant investments in the filing persons, the Commission proposes amending the current Item 6(b) requirements and expanding them to require the identification of additional minority interest holders.23 The identification of certain minority holders of the filing persons has been required since the first iteration of the Form in 1978, though the level of detail that has been required has changed over time.24 Prior to 2011, Item 6(b) only required the identification of holders of minority interests in voting securities. In 2011, Item 6(b) was amended to require the identification of holders of 5% or more but less than 50% of unincorporated entities.25 The Commission, however, made an exception for limited partnerships and only required the identification of the general partner. At that time, the Commission understood that limited partners had no control over the operations of the fund or portfolio companies and therefore did not see them as essential to the Agencies’ initial review.26 Since that time, the Commission has come to understand that the Agencies would benefit from more complete information about all 23 The acquisition of a minority position may be reportable under the Act, and failure to make an HSR Filing and observe the waiting period may result in significant civil penalties. 15 U.S.C. 18a(g). 24 See 43 FR 33450 (July 31, 1978); 52 FR 7066 (Mar. 6, 1987); 76 FR 42471 (July 19, 2011). 25 76 FR 42471 (July 19, 2011). 26 Proposed Rules, 75 FR 57110, 57118 (Sept. 17, 2010), adopted in 2011, 76 FR 42471 (July 19, 2011). VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 minority holders of the filing parties, including the identification of limited partners. As a result, the Commission proposes collecting information about minority holders of all entities within the acquiring person that are related to the transaction and requiring the identification of certain limited partners. The current limitation on providing minority holder information for only the acquiring ultimate parent entity and acquiring entity often prevents the identification of key interest holders. For example, co-investors often do not invest at the UPE or acquiring entity level but may hold a 5% or greater interest in an entity that is in between the UPE and the acquiring entity in the ownership structure. In particular, when funds make acquisitions, it can be the case that more than one fund may be substantively involved in the acquisition, using a variety of corporate or unincorporated entity types. The identification of not only the controlling person but also significant minority investors can be an important component of the Agencies’ evaluation of the potential competitive effects of the transaction during the initial waiting period,27 and obtaining a broader picture of relevant minority investments, where they exist, would aid the Agencies in their assessment of the nature of competitive decisionmaking within the relevant entity. In the case of limited partnerships, Item 6(b) currently does not require the identification of limited partners, even if they hold 5% or more. At the time this item was adopted, the Commission understood that limited partners had no control over the operations of the fund or portfolio companies and therefore did not see them as essential to the Agencies’ initial review.28 However, after more than a decade, the Commission now believes that it is inappropriate to make generalizations regarding the role of investors in limited partnership structures. Identification of limited partners can provide valuable information about co-investors and lead to the identification of potentially problematic overlapping investments resulting from the transaction that could violate Section 7.29 Thus, it is important that the Agencies know the identities of 27 43 FR 33450, 33531 (July 31, 1978). Rules, 75 FR 57110, 57118 (Sept. 17, 2010), adopted in 2011, 76 FR 42471 (July 19, 2011). 29 See, e.g., In re Red Ventures Holdco and Bankrate, FTC Dkt. C–4627 (Nov. 3, 2017) (enforcement action involving overlapping limited partnership holdings); United States v. Dairy Farmers of Am., 426 F. 3d 850 (6th Cir. 2005) (DFA stakes in competitors Flav-O-Rich and Southern Belle violated Section 7). 28 Proposed PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 limited partners to understand the transaction in its entirety and to uncover investment relationships that may have competitive significance. Accordingly, for the acquiring person, the Commission proposes the reporting of certain minority holders of (1) the acquiring entity, (2) any entity directly or indirectly controlled by the acquiring entity, (3) any entity that directly or indirectly controls the acquiring entity, and (4) any entity within the acquiring person that has been or will be created in contemplation of, or for the purposes of, effectuating the transaction. For entities affiliated with a master limited partnership, fund, or investment group, the ‘‘doing business as’’ or ‘‘street name’’ of that group would also be required. Under these proposals, minority holders that would have to be reported would include all entities or individuals, including limited partners, that hold 5% or more of the voting securities or non-corporate interests of one of the identified entities. To be clear, the Commission proposes requiring limited partnerships to identify all holders of 5% or more, but less than 50%, to harmonize the requirement for limited partnerships with the requirements for limited liability companies and corporations. The requirement to identify the general partner of a limited partnerships would remain the same. The Commission acknowledges that these proposed requirements may require significant additional information from investment entities, such as funds and master limited partnerships, for which organizational structures are often more complex. But the Commission believes that the disparate treatment of LLCs as compared to limited partnerships is no longer appropriate. Further, the complexity of these organizational structures makes it all the more important that the filing person provide this information with the HSR Filing. The complex structure of investment entities is not adequately captured by the current Form, and there is often no other source for Agencies to learn of these relationships. Though the introduction of the definition of ‘‘associate’’ in 2011 30 provides the Agencies with some valuable information with which to identify competitively significant relationships that exist through related holdings, it does not provide enough detail about all of the potential players involved in the structure of the acquiring person. As a result, the Commission believes that the 30 76 E:\FR\FM\29JNP3.SGM FR 42471 (July 19, 2011). 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS3 proposed identification of all minority investors of 5% or more in entities related to the transaction would allow the Agencies to more quickly identify potential competitive issues related to these holdings during the initial waiting period. To reduce the additional burden associated with these proposed changes, the Commission proposes limiting the information about minority holders collected from the acquired person. Currently, the acquired person must list certain minority interest holders of the acquired entity(s), but this requirement does not distinguish between minority holders that will be cashed out as a result of the transaction, and those that will continue investment after the transaction. On balance, the Commission believes that identifying only the minority holders that would continue to have an interest in the acquired entity(s), directly or indirectly, would provide the most relevant information to the Agencies during the initial waiting period. Therefore, the Commission proposes that the acquired person only be required to identify minority holders of the acquired entity(s) that will continue to hold interest in the acquired entity(s) or will acquire interests in any entity within the acquiring person as a result of the transaction. The Commission recognizes that in certain transactions to which § 801.30 applies, the acquired person might not have this information. In such cases, it would be permissible for the acquired person to indicate that the information is unknown. c. Other Types of Interest Holders That May Exert Influence The proposed Other Types of Interest Holders that May Exert Influence section would require the identification of entities or individuals that may have material influence on the management or operations of the acquiring person beyond those with the minority interests discussed above. Because these other interest holders retain the ability to influence decision-making by the acquiring person after the transaction, it is important for the Agencies to know about these relationships during the initial waiting period. The Commission has long recognized the potential influence of minority holders and the possibility that they may seek to change competitive decisions of the target firm.31 In the 31 See United States v. E.I. du Pont de Nemours & Co., 353 U.S. 568 (1957) (du Pont’s 23% stake in General Motors violated Section 7 by giving it an advantage over other suppliers and thereby resulting in a substantial lessening of competition). In considering the proper remedy, the Supreme VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 1978 SBP, the Commission explained that competitors, customers, or suppliers holding a significant interest in one of the parties can raise antitrust concerns.32 As originally conceived, minority holdings reported in Item 6 were designed to alert the Agencies to situations in which the potential antitrust impact of the transaction does not result solely or directly from the transaction itself, but may arise from direct or indirect shareholder relationships between the parties to the transaction.33 As entity structures have evolved and become more complex, the Commission now believes that relationships beyond those created by holding voting securities or non-corporate interests can give rise to similar and significant competitive concerns. For instance, some credit arrangements permit the creditor to exercise rights and influence similar to those of equity holders. Additionally, some equity interests that do not provide rights to vote for the board of directors can, nevertheless, provide rights to vote on or influence business practices of the company, including investments in future product or service lines. Further, contractual arrangements allowing individuals or entities to nominate directors or board observers have proliferated. In addition, some entities outsource the management of operations to third parties that do not beneficially own interests in the company. Each of these relationships can be relevant to understanding the transaction and its potential competitive effects. Without information about these relationships, the Agencies cannot easily identify those transactions where these relationships exist and may affect the competitive dynamics before and after the transaction. As a result, the Commission proposes that the acquiring person identify certain individuals (other than employees of the acquiring person) or entities that, in relation to the acquiring entity or any entity it directly or indirectly controls or is controlled by, (i) provide credit; (ii) hold non-voting securities, options, or warrants; (iii) are board members or board observers, or have nomination rights for board members or board observers; or (iv) have agreements to manage entities related to the transaction. Credit relationships would be limited to creditors that have, or would have, in conjunction with or Court found that divestiture of only voting rights was insufficient due to the on-going ‘‘special relationship’’ could still result in competitive harm. United States v. E.I. du Pont de Nemours & Co., 366 U.S. 316, 332 (1961). 32 43 FR 33450, 33531–32 (July 31, 1978). 33 Id. at 33531. PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 42189 result of the transaction, provided credit totaling 10% or more of the value of the entity in question. Holders of nonvoting securities, warrants, or options would be limited to those the value of which equals or exceeds 10% of the entity or could be converted to 10% or more of the voting securities or noncorporate interests of the company. The Commission recognizes that the compilation of this information would add to the burden of preparing an HSR Filing for an acquiring person with a complicated investment structure, but it is important that the HSR Filing contain this information because individuals or entities that fall into any of the four categories described above can have a material influence on the operations or strategy of the acquiring person. As with minority investors, these relationships can affect the competition analysis of the transaction, and the proposed identification of these individuals or entities would allow the Agencies to know the identity of those in a position to influence post-merger competition decisions. d. Officers, Directors, and Board Observers The proposed Officers, Directors, and Board Observers section would require the identification of the officers, directors, or board observers (or in the case of unincorporated entities, individuals exercising similar functions) of all entities within the acquiring person and acquired entity, as well as the identification of other entities for which these individuals currently serve, or within the two years prior to filing had served, as an officer, director, or board observer (or in the case of unincorporated entities, roles exercising similar functions). This information would allow the Agencies to know of existing, prior, or potential interlocking directorates and to assess the competitive implications of such relationships under both Sections 7 and 8 of the Clayton Act.34 Section 8 of the Clayton Act generally prohibits a person from serving as an officer or director of competing corporations, subject to certain categorical and de minimis exceptions. This section of the Clayton Act aims to prevent information sharing and coordination between competitors through a per se ban that prohibits the same individual from serving as an 34 Although Section 8 does not technically apply to unincorporated entities, information sharing and coordination can still raise concerns under Section 1 of the Sherman Act. E:\FR\FM\29JNP3.SGM 29JNP3 42190 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS3 officer or director of two competing firms.35 In the Agencies’ experience, many acquiring persons have board members who also serve on the boards of other companies. As a result, the Agencies often investigate existing board relationships as well as potential interlocks that would result from the transaction as part of its initial review. Section 8 bars interlocks that arise through rights to appoint board members to a competitor 36 or officers or directors serving on the boards of competing companies. Investment entities that acquire board seats across a diverse portfolio of companies may be particularly likely to encounter Section 8 compliance issues via a merger or acquisition.37 Currently, filers are not required to disclose the identity of the members of their boards of directors, and this makes it difficult for the Agencies to complete their assessment of potential Section 8 issues during the initial waiting period. Having information about potential interlocking directorates in the HSR Filing would allow the Agencies to take steps to prevent the sharing of boardlevel confidential information much more quickly. This information is also relevant to the competition analysis of the transaction, as well as concerns about potential gun-jumping, which may violate the Act or Section 1 of the Sherman Act.38 This is particularly 35 Like Section 7, Section 8 was designed to ‘‘nip in the bud incipient violations of the antitrust laws by removing the opportunity or temptation to such violations through interlocking directorates.’’ United States v. Sears, Roebuck & Co., 111 F. Supp. 614, 616 (S.D.N.Y. 1953). 36 See, e.g., Complaint, United States v. CommScope Inc., 1:07–cv–2200 (D.D.C.) (Dec. 6, 2007) https://www.justice.gov/atr/case-document/ complaint-69 (alleging violations of Sections 7 and 8 where buyer also acquired rights to appoint members to the board of its competitor). See also Press Release, U.S. Dep’t of Just., Tullett Prebon and ICAP Restructure Transaction after Justice Department Expresses Concerns about Interlocking Directorates, (Jul. 14, 2016). The Department of Justice has announced its intent to reinvigorate Section 8 enforcement, after seven directors resigned from corporate board positions. See Press Release, U.S. Dep’t of Just., Justice Department’s Ongoing Section 8 Enforcement Prevents More Potentially Illegal Interlocking Directorates (Mar. 9, 2023), https://www.justice.gov/opa/pr/justicedepartment-s-ongoing-section-8-enforcementprevents-more-potentially-illegal. 37 The Agencies also consider whether the acquiring person would be expanding into the business of the other company that shared a board member such that the two companies would have competing sales in excess of the de minimis amounts permitted by Section 8. 38 Any sharing of competitive information between or among competitors, including during the pendency of merger review, that results in competitive harm may be a violation of Section 1 of the Sherman Act, or Section 5 of the FTC Act. Complaint, United States v. Gemstar, cv 1:03–00198 (D.D.C. 2003), https://www.justice.gov/atr/case- VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 important given that post-merger enforcement of Section 8’s per se ban can be ineffective after the individual has been privy to the confidential business information of two competitors: Section 8 provides a oneyear grace period to remedy an illegal interlock that arises after the individual is elected or chosen to be an officer or director.39 Moreover, Section 8 does not provide for civil penalties or other monetary relief, only injunctions barring the individual from serving on the two boards. Information about board observers can also be relevant to the Agencies’ analysis of the proposed transaction. Board observers are not subject to the Section 8 ban on interlocking directorates, and yet may have access to the same materials that are shared with officers and directors. In December 2020, the Commission issued an advance notice of proposed rulemaking (‘‘ANPRM’’) that, among other things, sought to gather information about sources of influence on corporate decision-making outside the scope of voting securities.40 The Commission noted the possibility that there are ways to gain influence over a company other than through the acquisition of voting rights, for instance through board observers, and pointed to the increasing use of board observers as part of the governance structure. Because the acquisition of rights to be a board observer is not a reportable event under the HSR Act, the Commission sought information about whether having rights as a board observer provides opportunities to influence an issuer’s business decisions.41 The Commission received two comments in response to the ANPRM that discuss the role of board observers, and each comment indicated that individuals serving as board observers typically receive the same information as the board of directors, although there may be ways to exclude them from reviewing privileged or competitively document/complaint-108; Complaint, In re Insilco Corp., No. C–3783 (F.T.C. 1998), https:// www.ftc.gov/sites/default/files/documents/cases/ 1998/01/insilcocmp.pdf. 39 15 U.S.C. 19(b). 40 85 FR 77042 (Dec. 1, 2020). 41 ‘‘At the very least, board observers gain insight into an issuer’s strategic decision-making, which is not only useful to the investor sponsoring the board observer, but may also be useful to competitors in the market, especially when those board observers also serve as officers or directors of a competitor. Companies likely benefit from interacting with board observers because company management can obtain additional investor insight without having to alter the composition or voting balance on the board.’’ Id. at 77050. PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 sensitive information.42 In the Commission’s experience, board observers have become more prevalent and could be privy to the same information as members of the board. For that reason, information about who these individuals are and whether they also serve as officers, directors, or board observers with other companies is important for understanding other sources of influence on the company’s competitive decision-making and whether such individuals could share information between competitors. The Commission believes that having this information available during the initial waiting period would permit the Agencies to take steps to minimize the sharing of information prior to consummation. The Commission thus proposes that filing persons provide information about the officers, directors, and board observers (or in the case of unincorporated entities, individuals exercising similar functions) of the acquired entity(s) and entities within acquiring person(s), as applicable, for the prior two years, and for each individual, identify any other companies for which those individuals would serve or have served during the prior two years as officers, directors, or board observers. The Commission also proposes requiring the same information for the prospective officers, directors, or board observers of the acquired and acquiring entities after the transaction, as well as for any officers, directors, or board observers of new entities created as a result of the transaction (and, in each case, for unincorporated entities, individuals serving those functions). If it would be impossible to identify the specific officers, directors, and board observers, filers should describe who would have the authority to choose them. Information received through these proposals would help the Agencies identify individuals with the ability to participate in or influence competitively relevant decision-making related to the filing persons or with access to confidential business information, allowing the Agencies to engage in more effective enforcement of the antitrust laws. The Commission believes that this information should be known to or readily accessible by the filing parties, and in some cases already 42 See Am. Bar. Ass’n, Comment on Hart-ScottRodino Coverage, Exemption, and Transmittal Rules ANPRM, 10–11 (Feb. 1, 2021), https:// www.regulations.gov/comment/FTC-2020-00860015; Comput. & Commc’n Indus. Ass’n, Comment on Hart-Scott-Rodino Coverage, Exemption, and Transmittal Rules ANPRM, 11 (Jan. 26, 2021), https://www.regulations.gov/comment/FTC-20200086-0002. E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules collected as part of an incorporated entity’s antitrust compliance program. C. Transaction Information The Commission proposes the creation of a Transaction Information section within the proposed Instructions. Currently, information about the transaction is required in several sections of the Form: the initial portion of the current Form requires information about the filing fee and whether early termination of the waiting period is requested; Item 2(a) requires identification of the ultimate parent entities of the acquiring and acquired persons; Item 2(b) identifies the type of transaction; Item 2(c) identifies the § 801.1(h) threshold that will be crossed; Item 2(d) seeks information about the percentage and value of the voting securities, non-corporate interests, and/or assets to be required; Item 3(a) asks for identification of the acquiring and acquired persons and entities, as well as a description of the transaction; Item 3(b) requires the listing and attaching of the most recent transaction agreement, or letter of intent; and Item 5(b) requires information about joint ventures and formations. The Commission proposes the reorganization, clarification, and expansion of these items to require information that will aid the Agencies in understanding the totality of the transaction during the initial waiting period. These proposed changes, discussed below, would require information about the transaction to be reported in the following proposed categories: Parties, Filing Fee, Transaction Details, and Transaction Description. 1. Parties The proposed Parties section within the proposed Instructions would require the identification of the acquiring and acquired persons and the acquiring and acquired entities. This information is currently collected in Item 3(a) of the Form, and the Commission is not proposing any material changes to this requirement. lotter on DSK11XQN23PROD with PROPOSALS3 2. Filing Fee The proposed Filing Fee section within the proposed Instructions would require identification of the total filing fee required for the transaction and information about the payment, including identification of the paying entity and the Electronic Wire Transfer confirmation number.43 This 43 If electronic wire transfers are not available to the filing party, the Instructions would continue to provide instructions for paying by check. VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 information is currently collected in the Fee Information section of the Form, and the Commission is not proposing any material changes to this requirement. 3. Transaction Details The proposed Transaction Details section within the proposed Instructions would require the same information currently required by Items 2(b)–2(d) of the Form that detail whether the transaction involves the acquisition of voting securities, non-corporate interests or assets, and the approximate value of each, as well as whether a notification threshold is crossed. The Commission is not proposing any material changes to these requirements. 4. Transaction Description The Commission proposes creating a Transaction Description section within the proposed Instructions to reorganize information currently required in the Transaction Description portion of Item 3(a) of the Form, and to expand the required information, as described below. a. Business of the Acquiring Person The Commission proposes requiring the acquiring person to describe its business operations. Currently, Item 3(a) of the Form requires filing persons to briefly describe the transaction, including whether assets, voting securities, or non-corporate interests (or some combination) are to be acquired. Filers must also describe the business operation being acquired or what the assets being acquired comprise.44 Although this information helps the Agencies understand what is proposed to be acquired, it does not provide any insight into the full range of business operations or other entities involved in the transaction on the part of the acquiring person. In the Commission’s experience, understanding the scope of the acquiring person’s business operations is critically important to determining whether the transaction poses any potential competition concern. Although this information is well known to the acquiring person, it is often not easily or quickly collected and confirmed from public sources during the initial waiting period. As a result, the Commission proposes requiring the acquiring person to briefly describe the business operations of all entities within the acquiring person to provide a clear overview of all aspects of the acquiring person’s pre-transaction business to facilitate the Agencies’ antitrust review during the initial 44 81 PO 00000 FR 60257 (Sept. 1, 2016). Frm 00015 Fmt 4701 Sfmt 4702 42191 waiting period. Many businesses have pre-prepared descriptions of their operations for use in press releases, marketing materials, and investor materials. Unlike the requirement to describe the entities or assets to be acquired, which would apply to both the acquiring and acquired person, the requirement to describe business operations would be limited to the acquiring person. b. Business of the Acquired Entity As noted above, Item 3(a) of the Form requires filing parties to briefly describe the transaction, including whether assets, voting securities, or noncorporate interests (or some combination) are to be acquired. Filing persons must also describe the business operation being acquired or what the assets being acquired comprise. The Commission is not proposing any material changes to this requirement. c. Non-Reportable UPE(s) Item 2(a) of the Form currently requires the identification of any UPE that is not required to file, and the Commission is not proposing any material changes to this requirement. d. Transaction Description Item 3(a) of the Form currently requires a brief description of the transaction. The Commission is not proposing any material changes to this requirement. e. Transaction Rationale The Commission proposes adding a new requirement that filing persons provide a narrative that would identify and explain each strategic rationale for the transaction. As helpful as the documents responsive to current Items 4(c) and 4(d) of the Form can be, they do not always convey each filing person’s cumulative views on the rationale(s) for the transaction. Indeed, such documents (when they are submitted and when they discuss rationales) often contain differing, and at times conflicting or mutually exclusive, statements regarding the transaction depending on when they were prepared or by whom. For example, different members of the deal team might have different perspectives on the potential motivations for the transaction at different times, and the submitted documents do not resolve the filing person’s ultimate thinking regarding the topic. Since documents responsive to Items 4(c) and 4(d) do not consistently provide an overview of the rationale(s) for the transaction, it would be of immense value for the Agencies to have during the initial waiting period a E:\FR\FM\29JNP3.SGM 29JNP3 42192 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS3 statement that discusses each the strategic rationale(s) from the perspective of each filing person. The Commission thus proposes that the acquiring and acquired person be required to submit a narrative describing all strategic rationales for the transaction, including, for example, those related to competition for current or known planned products or services that would or could compete with a current or known planned product or service of the other reporting person, expansion into new markets, hiring the sellers’ employees (so-called acquihires), obtaining certain intellectual property, or integrating certain assets into new or existing products, services or offerings. The Commission also proposes that the filing person identify which documents submitted with the HSR Filing support the rationale(s) described in the narrative. This proposed requirement would help ensure that the provided narrative is grounded in the filers’ ordinary-course documents and not mere advocacy designed to portray a favorable view of the transaction. Moreover, any cited documents that support the narrative would also provide additional context for the Agencies as they assess the parties’ stated rationale(s) in relation to any potential competitive consequences of the transaction. Understanding the business reason(s) for pursuing the transaction can materially affect the course and direction of the Agencies’ antitrust review during the initial waiting period. f. Transaction Diagram The Commission proposes a new requirement that the filing persons provide a diagram of the deal structure along with a corresponding chart that would explain the relevant entities and individuals involved in the transaction. The brief narrative currently required in Item 3(a) of the Form does not require filers to explain all the relevant entities or identify steps involved in the transaction and their sequence. As a result, the Agencies frequently request a more detailed account of these steps during the initial waiting period, but these submissions are voluntary, not uniform in their detail, and often lack important aspects of the transaction that may bear on the competitive analysis and the determination of whether the transaction warrants in-depth review. In the Commission’s experience, particularly in the case of complex or multi-step transactions, diagrams are generally more helpful than simple narratives in conveying the relationships of the relevant entities and the deal structure. VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 The Commission’s proposal that filing persons submit a diagram of the deal structure along with a corresponding chart explaining the entities involved in the transaction would further assist the Agencies’ conceptualization of the transaction and save considerable time in obtaining basic information about the entities involved and how the transaction would affect the operations of those entities. Such diagrams are often prepared by companies in the ordinary course of business for other purposes, such as for transaction diligence requirements. g. Related Transactions While Item 3(a) of the current Form asks parties to indicate whether there are additional filings related to the transaction, filers sometimes overlook this requirement. The proposed Instructions would clarify that filing persons must identify related transactions. The proposed Instructions would also provide a list of common circumstances in which multiple filings are required to guide filing parties in their responses. These proposed changes would provide clarity for both filing persons and the Agencies. h. Early Termination The proposed Early Termination section would ask whether the filing party requests early termination of the waiting period. This question is currently asked on page one of the Form, and the Commission is not proposing any material changes to this requirement. 5. Joint Ventures The proposed Joint Ventures section within the proposed Instructions would require information about transactions structured as a joint venture or formation pursuant to §§ 801.40 or 801.50. This information is currently collected in Item 5(b) of the Form and requires information about the contributions each person will make to the entity, what consideration will be received, the business in which the new entity will engage, and an allocation of revenue to industry codes. As discussed in section III.A.1.b. above and III.D.3. below, the Commission is proposing eliminating the use of 10-digit NAPCS codes. Therefore, the Commission proposes also eliminating the requirement to identify the NAPCS codes in which the joint venture will derive revenue. The Commission is not proposing any other material changes to this requirement. PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 6. Agreements and Timeline The proposed Agreements and Timeline section within the proposed Instructions would require filing persons to provide a term sheet or draft agreement that reflects sufficient detail about the proposed transaction to demonstrate the transaction is more than hypothetical, if a definitive agreement has not been executed, as described above in the proposed amendments to § 803.5(b) at II.C. In addition, the Commission proposes additional changes regarding which agreements must be submitted. These proposed changes, discussed below, include a requirement to submit the entirety of all agreements related to the transaction and a new requirement to submit other agreements between the filing persons that are not related to the transaction, as well as a timetable for the transaction. a. Transaction-Specific Agreements The Commission proposes requiring that all transaction-specific agreements be submitted with HSR Filings. Currently, Item 3(b) of the Form requires the submission of all documents that constitute the agreement(s) among the acquiring person(s) and the person(s) whose assets, voting securities, or noncorporate interests are to be acquired, as well as agreements not to compete and other agreements between the parties. The production of schedules to agreements is not currently required, unless the schedules contain agreements.45 In the Commission’s experience, the structure of transactions has become increasingly complex, often comprising not only multiple agreements between the filing persons but agreements with third parties. Understanding the entirety of the transaction, including but not limited to non-competition and non-solicitation agreements and other agreements negotiated with key employees, suppliers, or customers in conjunction with the transaction, is crucial to determining the totality of the transaction and assessing during the initial waiting period the transaction’s potential competitive impact. Moreover, schedules increasingly include descriptions of key terms and provisions. The Commission thus proposes requiring filing persons to produce all agreements, inclusive of schedules, exhibits, and the like, that relate to the transaction, regardless of whether both parties to the transaction are signatories. It is the Commission’s understanding 45 16 CFR 803 Appendix Notification and Report Form Instructions at page V. E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules that these documents are collected and are typically included in materials necessary for closing. Having a complete set of transaction-related agreements would provide the Agencies with a more complete understanding of the transaction under review. lotter on DSK11XQN23PROD with PROPOSALS3 b. Other Agreements Between the Parties The Commission also proposes requiring filing persons to submit all agreements between any entity within the acquiring person and any entity within the acquired person in effect at the time of filing or within the year prior to the date of filing. Understanding the scope of any existing contractual relationships between the filers would materially assist the Agencies’ review by revealing any business interactions or relationships that exist prior to the transaction and that may be affecting premerger competition. These might include licensing agreements, supply agreements, non-competition or nonsolicitation agreements, purchase agreements, distribution agreements, or franchise agreements, among others. Understanding the full extent of the filing parties’ existing contractual relationships would allow the Agencies to identify those relationships that contribute to the premerger competitive dynamics, which is material to assessing how the transaction may affect postmerger competition. c. Timeline The Commission also proposes that filing persons provide a narrative timeline of key dates and conditions for closing. Just as it is critical for the Agencies to understand the totality of the transaction during the initial waiting period, it is also critical to understand the timing of key milestones and the conditions to closing, which are often complex and not easily understood from the transaction documents themselves. The Agencies often cannot confirm basic deadlines for the transaction from the transaction documents and in those cases, the Agencies expend a great deal of time and effort to confirm with filers key dates, including the timing of preclosing conditions, during the initial waiting period. Understanding deal timing is critical to each Agency’s decisions regarding how to manage its merger workload on a priority basis, focusing available resources on those deals whose closing dates are imminent. This basic information about the timing of the transaction is not adequately captured in the current Form, and, to the extent the filing person knows at the time of the HSR Filing and can readily provide it, this information would help VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 the Agencies understand key deal milestones and better manage the timing and focus of the investigation during the initial waiting period. D. Competition and Overlaps The Commission proposes creating a Competition and Overlaps section within the proposed Instructions. This section would collect, in one place, information that reveals any existing business relationships between the filing persons that requires the Agencies to take a closer look to determine whether the transaction warrants an indepth investigation, which is the primary purpose of premerger notification and review. Information collected in this section would include information and documents currently collected in several parts of the Form: in Items 4(c) and 4(d), which require the production of certain documents created in conjunction with the evaluation of the transaction; Item 5(a), which requires the allocation of revenue from U.S. operations to industry and product codes; Item 6(c), which identifies certain minority-held entities of the filer; Item 7, which provides information about industries in which the acquiring person and acquired entity both participate; and Item 8, which requires the identification of certain prior acquisitions made by the acquiring person. The Commission proposes expanding and reorganizing the information and requiring additional documents that would bear directly on the premerger competitive relationship between the filing persons. The proposed Competition and Overlaps section would provide a new source of relevant information related to horizontal overlaps, as well as new information about supply relationships and employees, which would enable to Agencies to quickly identify and assess the potential impact of the transaction across many dimensions of competition. These proposed changes, discussed below, would be organized in the following proposed categories: Business Documents, Competition Analysis, NAICS Codes, Controlled-Entity Overlaps, Minority-Held Entity Overlaps, and Prior Acquisitions. 1. Business Documents The proposed Business Documents section within the proposed Instructions would require the submission of documents currently required by Items 4(c) and 4(d) of the Form and additional categories of documents. The Commission’s proposal for requiring additional documents is informed by a comparison of documents submitted by filing persons with the HSR Filing and PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 42193 those submitted during the Agencies’ indepth investigations that are not required by the current Form but would have been highly probative to the initial antitrust assessment of the transaction during the initial waiting period. The specific types of proposed business documents are discussed below. a. Transaction-Related Documents The proposed Transaction-Related Documents section would comprise the same types of documents currently required by Item 4(c) of the Form, which the Commission proposes to expand to include documents prepared by or for the supervisory deal team leads, and Item 4(d), which the Commission proposes to clarify without material changes. The Commission also proposes requiring the submission of certain previous draft versions of these documents. i. Documents Prepared by or for Officers, Directors, or Supervisory Deal Team Lead(s) In the proposed Documents Prepared by or for Officers, Directors, or the Supervisory Deal Team Lead section, the Commission proposes expanding the scope of requested documents evaluating the transaction by adding a requirement to submit such documents prepared by or for the supervisory deal team lead(s). Currently, Item 4(c) requires filing persons to provide all studies, surveys, reports, plans, and analyses prepared by or for officers or directors to evaluate the acquisition with respect to market shares, competition, competitors, markets, potential for sales growth, or expansion into products or geographic markets. These transaction-specific assessments of competition, past and future, provide the Agencies with invaluable insights into each party’s view of how the transaction could change the competitive landscape and, most importantly, narrow the inquiry to particular markets and companies that each party believes to be its competitors. Since the beginning of the premerger notification program, 4(c) documents have been a key screening tool for the Agencies to identify those transactions that require more than a cursory review during the initial waiting period. The proposed section would retain the same definition of transaction-related documents to be submitted but add the supervisory deal team lead(s) to the list of individuals to whom this item would apply. In some companies, an officer may lead the day-to-day activities of the deal team and would be considered the supervisory deal team lead, resulting in E:\FR\FM\29JNP3.SGM 29JNP3 lotter on DSK11XQN23PROD with PROPOSALS3 42194 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules no change to the documents currently required as part of Item 4(c) of the Form. But someone other than an officer or director often functionally leads the deal team. In the Commission’s experience, in those cases, responses to current Item 4(c) often do not contain documents with sufficient information about the filing person’s analysis of the competitive implications of the transaction to enable the Agencies to identify potentially problematic transactions. In fact, based on documents submitted in response to Second Requests, it is the Agencies’ experience that individuals other than officers and directors are often the authors or recipients of documents that are otherwise responsive to Item 4(c) of the Form but are not required to be submitted with the HSR Filing because they were not prepared by or for an officer or director. These documents, typically in the possession of the supervisory deal team lead(s), often include information that would have been crucial to the Agencies’ analysis of the transaction during the initial waiting period. The Commission thus proposes that in addition to requiring documents prepared by or for officer and directors, filing persons must also submit these transaction-related documents prepared by or for supervisory deal team lead(s). Identification of any supervisory deal team lead would not be based upon title alone. The Commission proposes that the filing person determine the individual or individuals who functionally lead or coordinate the dayto-day process for the transaction at issue. A supervisory deal team lead need not have ultimate decision-making authority but would have responsibility for preparing or supervising the assessment of the transaction and be involved in communicating with the individuals, such as officers or directors, that have the authority to authorize the transaction. Any such individual(s) might be the leader(s) of an investment committee, tasked with heading the analysis of mergers and acquisitions, or otherwise given supervisory capacity over the flow of information and documents related to transaction. The Commission believes this proposal strikes a balance between the interests of the Agencies and those of filing persons in requesting additional documents responsive to Item 4(c) of the Form. Requiring filing persons to include materials prepared by and for supervisory deal team lead(s) would allow the Agencies to receive additional key materials relevant to the analysis of the transaction without requiring VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 information from all deal team members, in light of the opportunity to obtain additional documents through the issuance of Second Requests. ii. Confidential Information Memoranda The proposed Confidential Information Memoranda section would collect the information currently required by Item 4(d)(i) of the Form. The Commission is not proposing any material changes to this requirement. iii. Studies, Surveys, Analyses, and Reports The proposed Studies, Surveys, Analyses, and Reports section would collect the information currently required by Item 4(d)(ii) of the Form. The Commission is not proposing any material changes to this requirement. iv. Synergies and Efficiencies The proposed Synergies and Efficiencies section would collect the information currently required by Item 4(d)(iii) of the Form, and the Commission proposes to clarify that forward-looking analyses are responsive. Currently, Item 4(d)(iii) asks for all studies, surveys, analyses, and reports evaluating or analyzing synergies, and/or efficiencies prepared by or for any officer(s) or director(s) (or, in the case of unincorporated entities, individuals exercising similar functions) for the purpose of evaluating or analyzing the acquisition. The Commission proposes to specifically include a reference to models and financial projections to make clear that filers should submit forward-looking assessments of synergies or efficiencies. This information is especially important for screening the competitive impact of products or services not yet generating revenue but projected to do so. As before, financial models without stated assumptions would not need to be provided. For many transactions, especially those involving markets in which competition occurs via on-going innovative efforts, these forward-looking assessments will materially benefit the Agencies’ identification of transactions that warrant in-depth review. v. Drafts Along with expanding the required Transaction-Related Documents as described above, the Commission also proposes requiring the submission of drafts responsive to these requests. It has been a long-standing position of the Commission’s PNO that the submission of draft versions of documents responsive to Item 4(c) or 4(d) is not required unless there is no final version, in which case the most recent draft has PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 been required, or unless a draft was sent to the board of directors. Under this guidance, if a draft version of a document is sent to the Board, it ceases to be a ‘‘draft’’ and must be submitted, even if a final version is also submitted. As a result, the Commission has not typically received many draft documents as part of HSR filings. The Agencies routinely ask for and receive draft documents in response to Second Requests and, in the Agencies’ experience, these drafts often reveal additional information about the transaction that would have been important to the Agencies’ review during the initial waiting period, such as references to specific product markets or competitors that were removed in subsequent versions. In addition, these drafts can contain highly relevant, probative, or candid statements about the competitive impact not reflected in the final version of the document. In some cases, it appears that the draft documents have been edited to remove candid assessments of factors relevant to competition prior to circulation to officers or directors. In others, the dates of the documents suggest that otherwise responsive drafts were not finalized or shared with officers or directors until after making an HSR Filing. The Commission therefore proposes clarifying in the Instructions that drafts of responsive transaction-related documents must be submitted if that document was provided to an officer, director, or supervisory deal team lead(s). This proposed change would ensure that the Agencies have access to documents that reflect pre-transaction assessments of business realities, as opposed to ‘‘sanitized’’ versions, to aid in their analysis during the initial waiting period. The addition of the supervisory deal team leader(s) to this requirement should capture draft materials important to managing the transaction but avoid the burden of having to submit prior versions that were not reviewed by senior managers or decision-makers. As stated elsewhere in this NPRM, the Commission aims to strike a balance between the Agencies’ need to obtain material information about the transaction and the burden on filing parties, so the scope of this request is limited so as not to require filing parties to search numerous company personnel beyond officers, directors, and supervisory deal team lead(s). The Commission recognizes that requiring draft transaction-related documents creates an additional burden for filing parties to collect and submit more documents to the Commission with their HSR filings and that, to some E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS3 degree, previous versions of submitted documents may contain repetitive information. Moreover, HSR filings that contain large document submissions could overwhelm the Agencies and undermine the goal of effective and efficient screening for transactions that require an in-depth investigation. For this reason, the Commission seeks comment on a potential alternate approach in which filing parties collect draft Transaction-Related Documents as part of preparing HSR filings but do not submit these documents until and unless agency staff reviewing the transaction requests the draft documents during the initial waiting period. In the event that agency staff requests the draft documents, the filing person would be required to submit them within 48 hours in order to retain the initial waiting period. The Commission invites comment on whether this alternative approach would reduce the burden for the parties and the Agencies compared with submitting all versions with the HSR Filing as described above, whether there are logistical issues with providing the collected draft documents within 48 hours, and the estimated volume of drafts collected. b. Periodic Plans and Reports The proposed Periodic Plans and Reports section would require filing persons to submit certain high-level strategic business documents that were not created in contemplation of the transaction but still contain information relevant to the antitrust analysis. As a result of decades of experience, the Agencies are aware that, as part of diligence for a potential transaction, companies often collect a targeted set of ordinary course documents that do not need to be submitted as part of an HSR Filing. Such documents typically include strategic plans and documents that are useful to those negotiating or evaluating the transaction because they discuss general market dynamics, competitors, or other potential mergers and acquisitions. The Commission understands that these documents are collected to provide key transaction decision-makers with the company’s internal assessment of commercial realities of the premerger marketplace. The Commission therefore proposes requiring certain plans and reports created in the ordinary course of business and not prepared solely for the purpose of evaluating the proposed transaction to be submitted as part of the HSR Filing. Periodic plans and reports created in the ordinary course of a company’s business often contain detailed assessments of core business segments, markets, competitors, other VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 acquisition targets, and projections about future competitive dynamics— insights that have direct bearing on the Agencies’ antitrust assessment of the transaction in the initial waiting period. The Commission proposes requiring the submission of semi-annual and quarterly plans and reports that discuss market shares, competition, competitors, or markets of any product or service that is provided by both the acquiring person and acquired entity, if those documents were shared with a chief executive of an entity involved in the transaction, or with certain individuals who report directly to a chief executive. The Commission also proposes requiring the submission of all plans and reports submitted to the board of directors (or, in the case of unincorporated entities, individuals exercising those functions) that discuss market shares, competition, competitors, or markets of any product or service that is provided by both the acquiring person and acquired entity. These proposed new document requirements would be limited in certain specific ways to minimize the overall number of documents submitted with the HSR Filing. First, the new Periodic Plans and Reports section would not require documents that analyze ‘‘the potential for sales growth or expansion into product or geographic markets’’ as is required by current Item 4(c). Additionally documents responsive to this item would be limited to those prepared or modified within one year of the date of the HSR Filing. The Commission believes that the submission of a limited set of ordinary course business documents that were not prepared specifically to evaluate the transaction but discuss premerger and future competitive dynamics and strategies broadly would provide valuable insight and context for the transaction-related documents submitted with the HSR Filing. These ordinary course business documents are routinely submitted during in-depth investigations in response to Second Requests and routinely contain unique information about the state of premerger competition, which if available during the initial review period would help the Agencies determine if an in-depth review is warranted and if so, its proper scope. The Commission is aware that this new requirement has the potential to result in the submission of a large number of documents for complex or large transactions. The Commission is also aware of the potential impact on the filing persons and on the Agencies of large document submissions. The Commission seeks to balance these PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 42195 interests and invites comment on how or whether narrowing the set of custodians for periodic reports and plans, or any other proposed limits, would still generate information about the premerger state of competition that is not specific to the transaction while reducing any burden on filers and the Agencies. Finally, the Commission notes that filing persons should not exchange additional information with respect to planned products or services to provide a response to this proposed requirement but should respond instead on the basis of regular diligence and the knowledge or belief of the filing person. The Commission recognizes that an acquired person would have limited information about the acquiring person’s operations, including products under development, and the Commission does not intend these proposed changes to encourage additional information sharing of this type of information. c. Organizational Chart of Authors As the final part of its proposed Business Documents section, the Commission proposes requiring filing persons to identify the authors of all responsive documents submitted with the HSR Filing and to provide additional information about each individual. Given the short period of time for review during the initial waiting period, it is crucial for the Agencies to have a clear understanding of how authors of key documents fit into the organization or entities of each filing person to determine the importance and perspective of the responsive documents submitted with the HSR Filing and to identify key employees within the organizations. Thus, the Commission proposes requiring an organizational chart(s) that would reflect the position(s) within the filing person’s organization held by identified authors, and for privileged documents, the recipients of each document submitted with the HSR Filing. The Commission also proposes requiring the filer to identify the individuals searched for responsive documents. It would be sufficient to indicate by notation on the organization chart(s) which individuals were searched. Providing a chart will help contextualize reporting relationships, as well as the relative seniority, of the authors and recipients and allow the Agencies to more quickly assess which documents contain high-level assessments from key employees. The benefit of being able to identify important decision-makers within the filing person and having context for key documents would allow the Agencies to E:\FR\FM\29JNP3.SGM 29JNP3 42196 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules quickly assess the probative value of the documents lotter on DSK11XQN23PROD with PROPOSALS3 2. Competition Analysis The Commission proposes creating a new Competition Analysis section within the proposed Instructions. This proposed section would create new requirements for filing persons to provide narratives that would, among other things, describe their basic business lines and provide product or service information for all related entities; identify current and potential future horizontal overlaps and supply relationships between the filing persons; and provide information about their employees and what services these employees provide. These proposed narrative requests would provide the Agencies with crucial information about current and future competitive relationships between the filing parties, including whether they compete to hire employees, which is information that is not required by the current Form. a. Horizontal Overlap Narrative The Commission proposes creating a new Horizontal Overlap Narrative section that would require each filing person to provide an overview of its principal categories of products and services (current and planned) as well as information on whether it currently competes with the other filing person. Such information is core to the Agencies’ substantive antitrust analysis during the initial waiting period and is not readily accessible from sources other than the filers themselves. In drafting the Horizontal Overlap Narrative, each filing person would describe its current and planned principal categories of products and services in the way that those business lines are referred to in the company’s day-to-day operations so that the Agencies could more readily understand the information in the context of current market realities. If any of the submitted documents support the information contained in the narrative, the filing person would also identify such documents. The products or services offered by the filing persons that currently or potentially compete with each other are often referred to by antitrust professionals as ‘‘horizontal overlaps.’’ The identification and assessment of such horizontal overlaps is an essential starting point for the Agencies’ substantive review of any transaction to determine whether it has the potential to violate the antitrust laws. As discussed elsewhere, NAICS code reporting can result in underreporting of horizontal overlaps, and not every HSR VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 Filing contains 4(c) documents that could potentially reveal overlaps not identified by NAICS code reporting. In such cases, the HSR Filing does not contain basic screening information that the Agencies need to determine whether the transaction merits closer scrutiny during the initial waiting period. Premerger notification is intended to allow the Agencies to scrutinize any transaction that eliminates competition between existing or potential competitors, and it is important for every HSR Filing to identify any existing or potential horizontal overlap created by the transaction. As a result, the Commission proposes that within the Horizontal Overlap Narrative, each filing person would be required to list each current or known planned product or service that competes with (or could compete with) a current or known planned product of the other filer. For each such overlapping product or service, the filing person would provide sales, customer information (including contacts), a description of any licensing arrangements, and any non-compete or non-solicitation agreements applicable to employees or business units related to the product or service. The proposed requirement for this information about each filing person’s market presence in overlapping products or services would enable the Agencies to quickly identify and assess the significance of the filers’ respective businesses both in relative and absolute terms. Proposed customer information would enable the Agencies to understand the customer base of the overlapping businesses and to promptly conduct, at the beginning of the initial waiting period, further industry research with customers likely to be affected by the transaction or those who are particularly knowledgeable about the parties’ business operations, relevant industry dynamics, and other market participants. Contacting customers to confirm basic market dynamics is a key step in the antitrust analysis conducted by Agency staff during the initial waiting period, and the parties are frequently asked to provide this information on a voluntary basis once one Agency has granted clearance to the other to conduct an initial investigation of the transaction. However, since this information is not compulsory, the Agencies do not always receive it in a timely fashion during the initial waiting period, hampering the ability of the Agencies to use that period to effectively screen for transactions that merit the issuance of Second Requests. The proposed requirement to describe any licensing, non-compete, or non- PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 solicitation agreements involving the overlapping products or services would enable the Agencies to assess specific categories of existing contracts that are likely to affect how the transaction will impact competition for those products or services. These existing relationships bear on premerger market conditions and may reflect that the filers already view themselves as competitors (in the case of non-compete or non-solicitation agreements) or as key trading partners (in the case of licensing agreements). The Commission acknowledges the burden drafting the proposed Horizontal Overlap Narrative could create for some filers, especially for transactions involving close competitors with multiple overlapping product or service lines. But identifying those transactions that present broad and complex competition issues is a critical first step for the Agencies. Once identified, the Agencies must then properly manage their review, first determining which markets could be impacted by the transaction and then deciding which of those necessitate in-depth review. On balance, this proposed requirement would significantly improve the information available to the Agencies to identify any existing or potential horizontal overlap to assess the competitive implications of a transaction during the initial waiting period. The Commission notes that in the Agencies’ experience, companies who are horizontal competitors prior to the transaction frequently assess the antitrust risk associated with the transaction prior to making an HSR Filing, and therefore the information required by this proposal may already be available, in whole or part, to include with the HSR Filing. Although the Agencies have not previously required this type of narrative to be submitted as part of the Form, other jurisdictions have required such narratives for many years. b. Supply Relationships Narrative The Commission proposes creating a Supply Relationships Narrative section that would require each filing person to provide information about existing or potential vertical, or supply, relationships between the filing persons. A prior version of the Form required similar information about vertical vendor-vendee relationships, but the requirement was eliminated in 2001 because the type of information collected did not prove useful enough to the Agencies as a screen for potential non-horizontal relationships to justify E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS3 the burden of providing it at that time.46 Based on the Agencies’ experience investigating vertical mergers in the intervening decades, the Commission believes that the current proposal would provide sufficiently robust information to allow the Agencies to identify vertical and other non-horizontal issues, including those presented by diagonal mergers. Non-horizontal relationships can be hard to detect in certain sectors where supply chains are not well defined, for instance in the provision of services rather than physical products. The Agencies have an interest in knowing whether a transaction in which the filing persons operate in related markets would result in any change in market structure or incentives that might affect post-merger competition. Early identification of potential nonhorizontal competitive issues is critical to determining whether further investigation is needed, as structural changes in these relationships require additional fact development to determine the nature and scope of potential non-horizontal competitive concerns, which can often be complex and unique. These issues are difficult to discern from the information currently required by the Form, and filing parties are in a unique position to identify existing or future non-horizontal business relationships between them. The Commission thus proposes to collect, in a narrative response, information for related sales and purchases between the filing persons or with other companies that use the filing person’s products, services, or assets to compete with the other filing person. Filing persons would report sales to the other filing person and to any other business that, to the best of the filing person’s knowledge, uses its product, service, or asset as an input for a product or service that competes or is intended to compete with the other filing person’s products or services. Filing persons would also provide information (including contact information and a description of the supply agreement) for other customers that use the product, service, or asset to compete with other filing person. Filing 46 The Form originally required information about any vendor-vendee relationship between the reporting parties regarding manufactured product during the most recent year; this information was intended to help the Agencies identify supply relationships that could give rise to concerns about foreclosure or other competitive consequences of vertical integration. The Commission eliminated this requirement in 2001 because it was not effective in identifying vertical issues, not because vertical acquisitions present no potential competitive risks. 66 FR 8680, 8686–87 (Feb. 1, 2001). Since 2001, the Form has not collected specific information related to vertical relationships. VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 persons would provide similar information for purchases made from the other filing person and from any other business that, to the best of the filing person’s knowledge, competes with the other filing party to provide a substantially similar product, service, or asset. This information would allow the Agencies to identify whether the transaction would create opportunities for post-merger foreclosure of rivals arising from vertical or diagonal relationships. The Commission acknowledges that this will increase the burden on filers whose transaction involves existing supply relationships or who supply or purchase from companies that compete with the other filing party. But the Commission believes that requiring filing parties to provide a narrative that reveals existing and potential supply relationships between the acquiring person and acquired entity is important for the Agencies because it would allow them to quickly identify those transactions that raise concerns about non-horizontal competitive effects. c. Labor Markets Information The Commission proposes creating a new Labor Markets section that would require each filing person to provide certain information about its workers in order to screen for potential labor market effects arising from the transaction. The Agencies have increasingly recognized the importance of evaluating the effect of mergers and acquisitions on labor markets and have stepped up efforts to identify and investigate potential labor market effects arising from reportable transactions. Transactions have been challenged on the basis that consummation would result in labor market harms,47 and consent agreements have included provisions that stop the use of certain non-compete clauses that limit the ability of potential market entrants to hire key employees.48 47 Press Release, U.S. Dep’t of Just., Justice Department Sues to Block Penguin Random House’s Acquisition of Rival Publisher Simon & Schuster, (Nov. 2, 2021), https://www.justice.gov/opa/pr/ justice-department-sues-block-penguin-randomhouse-s-acquisition-rival-publisher-simon. See also Concurring Statement of Commissioner Slaughter and Chair Khan regarding FTC and State of Rhode Island v. Lifespan Corporation and Care New England, at 1–2 (Feb. 17, 2022), https:// www.ftc.gov/system/files/ftc_gov/pdf/public_ statement_of_commr_slaughter_chair_khan_re_ lifespan-cne_redacted.pdf (recommending including a count in the complaint that the proposed merger would have violated Section 7 of the Clayton Act in a relevant labor market). 48 Press Release, Fed. Trade Comm’n, FTC Imposes Strict Limits on DaVita, Inc.’s Future Mergers Following Proposed Acquisition of Utah Dialysis Clinics (Oct. 25, 2021), https:// www.ftc.gov/news-events/news/press-releases/2021/ PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 42197 In transactions that involve two firms that purchase labor from the same labor market(s), the Agencies consider whether the transaction may substantially lessen competition for buyers of labor services. Every firm competes for labor in at least one labor market and, more commonly, in multiple labor markets. Companies that compete in the same product market may also compete in the same labor market. Employers, however, may compete in the same labor market even when they do not compete in the same product or input market. Yet the Form does not collect any information about employees that would allow the Agencies to conduct an initial screening for potential labor market effects, which has materially hampered their ability to protect employees from the harmful effects of mergers. To identify whether the filing persons compete to employ the same types of workers in a particular geographic area, the Commission proposes requiring certain information concerning each filing person’s workers before the transaction and any plans that would affect workers postconsummation. This proposed section would identify potential labor market overlaps and allow the Agencies to engage with the filers on potential labor market issues during the initial waiting period. i. Largest Employee Classifications The Commission proposes creating a Largest Employee Classifications section that would serve as a screening tool based on the SOC system, developed by the Bureau of Labor Statistics, which classifies workers into occupational categories. Labor markets have two dimensions: the type or features of work performed, and the location of the work. Because describing every relevant feature of each job would be burdensome for parties, the Commission proposes requiring filing persons to classify their workers into occupational categories based on the SOC system, a widely used system for reporting worker statistics. While SOC categories do not always provide exact comparisons, SOC codes would nevertheless provide the Agencies with an objective classification standard which can be used as an initial screen for potential labor market overlaps. The use of these codes as a screening tool is not intended to endorse their use for any other purpose, such as defining a relevant labor market. To implement this proposed screening 10/ftc-imposes-strict-limits-davita-incs-futuremergers-following-proposed-acquisition-utahdialysis. E:\FR\FM\29JNP3.SGM 29JNP3 42198 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules tool, the Commission proposes requiring filers to list their five largest categories of workers by the relevant 6-digit SOC classification and to provide the total number of employees for each 6-digit code identified. lotter on DSK11XQN23PROD with PROPOSALS3 ii. Geographic Market Information for Each Overlapping Employee Classification The Commission proposes creating a Geographic Market Information for Each Overlapping Employee Classification section that would serve as a screen for the geographic component of labor markets based on the United States Department of Agriculture’s ERS system. The ERS commuting zones were designed to delineate local economies based on where people live and work.49 Filers would be required to identify the top five largest 6-digit SOC codes in which both parties employ workers. This should provide enough information for the Agencies to use SOC classifications as an initial proxy for labor issues while balancing the burden on filers by limiting the request to their five largest categories of workers. Also, for each of the five largest SOC codes in which both parties employ workers, this section would require filing persons to list the overlapping ERS-defined commuting zone(s) from which the employees commute and the total number of employees within each commuting zone. This proposed requirement would be limited to overlapping geographies, expressed as commuting zones, to capture sufficient information to identify potential labor market concerns without requiring filing parties to provide a complete list of all commuting zones in which they have workers. This information would represent a material improvement in the data available to the Agencies during the initial waiting period. By relying on existing metrics that are familiar to U.S. companies and by limiting the request to the top five SOC classifications, the Commission’s intent is to minimize the burden on filers. Nonetheless, the Commission seeks comment on whether this information would be difficult or costly to collect, and any alternative means by which the Commission could screen HSR Filings for potential labor market overlaps, for example by collecting information on the number and types of workers employed at each of the filing person’s facilities. 49 See U.S. Dep’t of Agric., ERS Commuting Zones and Labor Market Areas, https://www.ers.usda.gov/ data-products/commuting-zones-and-labor-marketareas/. VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 iii. Worker and Workplace Safety Information The Commission proposes creating a Worker and Workplace Safety Information section that would require filing persons to identify any penalties or findings that were issued against the acquiring person or acquired entity by the U.S. Department of Labor’s Wage and Hour Division, the National Labor Relations Board, or the Occupational Safety and Health Administration during the five-year period before the filing. If a firm has a history of labor law violations, it may be indicative of a concentrated labor market where workers do not have the ability to easily find another job. The proposed five-year period limitation would capture the most relevant information for analysis during the initial waiting period while lessening the burden on filers to search through older files. This information is not always publicly available but is known to the filers and is relevant to identifying potential labor market effects. 3. NAICS Codes The Commission proposes creating a NAICS section within the proposed Instructions. This section proposes changes to certain information currently required by Item 5(a) of the Form, which now asks filing persons to submit information regarding dollar revenues and lines of commerce with respect to operations conducted within the United States during the most recently completed fiscal year. This includes products manufactured in the United States, regardless of where they are sold, products manufactured outside the United States but sold into the United States or through a U.S. entity, and products or services derived from U.S. operations, whether sold to a U.S. or foreign customer. The current version of Item 5 of the Form requires the reporting of revenue by industry and product codes developed by Census to track economic activity in the United States. Over the years, the Commission has revised Item 5 as it sought to balance the need to receive filing persons’ revenue information with the burden on filers to provide that revenue information.50 As 50 See 43 FR 33450, 33520 (July 31, 1978) (revenue reporting based upon Standard Industrial Classification codes of the U.S. Bureau of the Census); 66 FR 35541 (July 6, 2001) (amending the Form and Instructions to report revenue by North American Industry Classification System codes of the U.S. Bureau of the Census); 76 FR 42471 (July 19, 2011) (elimination of the requirement to report ‘‘base year’’ data); 84 FR 30595 (June 27, 2019) (amending the Form and Instructions to report manufacturing revenue by North American Product PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 part of the redesign of the premerger notification process contemplated in this NPRM, the Agencies reviewed the totality of revenue information currently required in Item 5(a) to determine which information is especially valuable, which is due for an update, and which is not sufficiently reliable or needed to conduct a robust initial assessment of reported transactions. As a result, the Commission now believes that it can further revise revenue reporting requirements to make reported revenue information more informative for the Agencies and less burdensome for filing parties. The Commission thus proposes a substantively different approach to revenue information through six proposed changes. The Commission also proposes a ministerial change to adopt the 2022 version of the NAICS codes, which are the most recent released by Census. Through these proposed changes, the Commission would expand and clarify the industry and product codes that filing persons would have to report, as well as limit the requirements on how revenue must be reported. First, the Commission proposes eliminating the requirement that filing persons provide the precise amount of revenue attributed to each NAICS code. The Commission intends for the proposed change to streamline revenue reporting for filers and result in figures that would be just as useful to the Agencies for identifying important business lines of each person. It is the Commission’s understanding that many businesses do not maintain detailed revenue information by NAICS code in the ordinary course of business and generating this information can require great effort. In fact, even obtaining estimates of revenue to the nearest $100,000, as is currently required, can still be burdensome for filers. The Commission therefore proposes that filing persons would only need to estimate revenue at five levels: prerevenue (for certain products and services, as described below); less than $10 million; between $10 million and $100 million; between $100 million and $1 billion; and more than $1 billion. The Commission anticipates these ranges would provide the Agencies with an important overview of the magnitude of revenue generated by particular products and services, an important factor in the analysis of transactions during the initial waiting period, while at the same time reducing the burden of reporting revenues for filers. The Commission welcomes comments on Classification System-based codes of the U.S. Bureau of the Census). E:\FR\FM\29JNP3.SGM 29JNP3 lotter on DSK11XQN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules the proposed ranges, as well as other potential ways to capture the relative magnitude of the business of the acquiring person or acquired entity attributable to each NAICS code. Second, the Commission proposes that NAICS codes be reported on a descriptive basis, encompassing all U.S. operations. Revenue reporting in Item 5(a) currently relies on the filing persons’ ordinary course financial records. In the Commission’s experience, reliance on these financial records often results in under-reporting or reporting in codes that may not actually be descriptive of the products or services provided. To address this issue, the Commission proposes requiring individuals familiar with the business operations of each operating company (or subdivision) to review the available NAICS codes to select the codes that would best describe the full line of products and services related to U.S. operations, regardless of whether the company tracks revenue by such codes in the ordinary course of business or relies on them for other reporting requirements. The Commission intends for this change to shift the collection of NAICS codes from how a company records revenue to align more closely with the full range of products and services offered. Because the Commission proposes to eliminate the requirement to specifically quantify the amount of revenue attributable to the codes, as described above, the Commission does not anticipate that this change will substantially increase the burden of collecting the information. Further, codes related to nonmanufacturing activities estimated to have generated less than $1 million in the last fiscal year would not need to be listed, unless they overlap with a code reported by the other filing person. Additionally, the Commission recognizes that some NAICS codes are imprecise, which can result in two filing persons engaged in similar businesses using different NAICS codes. Therefore, the Commission proposes that if more than one code might be appropriate, the filing persons would be required to list all the codes that describe the products or services offered and use end notes as needed to clarify selections and any potential overlap where the same revenues are reported in more than one NAICS code. This would assist the Agencies in understanding the businesses of the filing persons during the initial waiting period and address some of the shortcomings of NAICS code reporting. Third, the Commission proposes changing how NAICS codes should be organized. Currently, filing persons VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 must aggregate revenue across all entities within the acquiring person or acquired entity. But often the acquiring person or acquired entity comprises multiple operating companies or units, which may be engaged in multiple lines of business. For example, large companies can contain multiple operating units or subsidiaries that do business under separate brands and offer diverse products or services. Similarly, funds that file as acquiring persons may control many different operating companies. The Commission thus proposes to require acquiring persons and acquired entities with more than one operating company or unit to identify which entity(s) derives revenue in each code. This proposed requirement would facilitate efficient review and quickly identify the operating company(s) that may or may not be relevant to the antitrust analysis. From this information, the Agencies could quickly identify which entity within the filing person has competing or related business activities with the other filing party. Fourth, the Commission proposes requiring the reporting of certain NAICS codes for certain pipeline or prerevenue products. Currently, filers are not required to provide information about products or services that did not derive revenue in the last fiscal year. Yet these pre-revenue or early revenue activities are often core to the transaction rationale and essential to understanding the potential competitive impact of the transaction during the initial waiting period. This information is known to the filing person and is not available from other sources, as it is typically highly sensitive. As a result, the Commission proposes adding a requirement for acquiring and acquired persons to report NAICS codes for certain pipeline or pre-revenue products. The acquiring person would be required to identify any NAICS codes for products and services under development if those codes would overlap with the codes for current or known pipeline products or services of the acquired entity(s). The acquired person would identify the NAICS codes that would apply to the products or services of the acquired entity(s) that are under development or pre-revenue and anticipated to have annual revenue totaling more than $1 million within the following two years. The Commission believes the benefit to the Agencies would be substantial and anticipates that the burden associated with the collection of these codes would be minimal, as identification of these products and services would likely be PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 42199 completed during ordinary diligence. The Commission understands that the acquired person may have limited knowledge about the planned or underdevelopment products of the acquiring person and does not intend the filing persons to divulge this information for the purpose of making an HSR Filing. Fifth, the proposed NAICS code section would clarify that the acquired person must report the NAICS codes relevant to the acquired entity(s) at the time of closing. While most filers currently report in this manner, others have asserted that when an acquired entity is merely a shell at the time of the HSR Filing due to anticipated preconsummation reorganization, no NAICS codes are required. This is not the intent of the revenue reporting requirements in the current Form, and the Commission proposes clarifying this issue by requiring NAICS reporting that reflects the operations of the acquired entity(s) upon consummation. This would provide clarity and make NAICS code reporting more reliable for both filing persons and the Agencies. Finally, the Commission proposes eliminating the requirement for filing persons engaged in manufacturing to provide revenue by NAPCS-based codes. The requirement to allocate revenue to product codes dates from the promulgation of the Rules in 1978 and has been updated to reflect various product code formats implemented by Census over the years. The most recent Census industry code format is the 6digit NAICS format.51 Initially, Census also created 10-digit NAICS-based codes to provide more detail about the products within the 6-digit NAICS industry codes, and these were adopted by the Commission for use in HSR Filings in 2001.52 In 2018, Census discontinued the use and updating of 10-digit NAICS-based codes in favor of 10-digit NAPCS-based codes. As a result, in 2019, the Commission amended the Form and Instructions to require use of the NAPCS-based codes for manufactured products.53 However, these new NAPCS-based codes have been less useful for the Agencies’ analysis than the discontinued 10-digit NAICS-based codes and have created significant confusion for both filers and the Agencies. The NAICS-based system provided 6, 8, and 10-digit codes, with the description of the products becoming more precise as the number of 51 NAICS Codes were first published in 1997 and first used in the HSR Form in 2001. See 66 FR 23561 (May 9, 2001). 52 66 FR 35541 (July 6, 2001). 53 84 FR 30595 (June 27, 2019). E:\FR\FM\29JNP3.SGM 29JNP3 42200 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS3 digits in the code increased. But the 10digit NAPCS-based codes created by Census correspond to a combination of former 8-digit and 10-digit NAICS-based manufactured product codes. As a result, some parties inadvertently report revenue using a NAPCS code that corresponds to an 8-digit NAICS code. When this happens, the Agencies lack the more granular and descriptive nature of the NAPCS-based codes that correlate to the former 10-digit NAICSbased code that would allow the Agencies to more accurately identify mergers of companies that produce similar types of products. Additionally, when one filing party uses a NAPCSbased code that corresponds to an 8digit NAICS-based code and the other filing person uses a NAPCS-based code that corresponds to a 10-digit NAICSbased code, the filing may not properly capture codes in which both parties report revenues. This could result in filings that should report revenue overlap code(s) but do not, limiting the Agencies’ ability to rely on the codes to conduct an initial screen for competitive overlaps. Because the proposed Horizontal Overlap section of the proposed Instructions would require the identification of overlapping products or services, as discussed in III.D.2., the Commission believes that additional identification of products by NAPCS code would no longer be necessary. The elimination of NAPCS-based revenue reporting would lessen the burden on filers to collect and report these figures, which have become less useful to the Agencies as a tool for identifying horizontal overlaps. 4. Controlled-Entity Overlaps The Commission proposes creating a Controlled-Entity Overlaps section within the proposed Instructions. This section would continue to require the submission of information currently required by Item 7 of the Form, such as the identification of certain entities within the filing person that derive revenue in the same NAICS codes as the other filing person and geographic information regarding the operations and sales of such entities, but the Commission proposes certain changes to what information would be collected and reported. As explained below, specific information related to entities controlled by the filing person is critical to the Agencies’ initial antitrust review as it serves as the primary tool for identifying horizonal overlaps between the parties to the transaction and their controlled entities, especially for transactions involving a UPE with complex corporate structures and VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 multiple entities under its control. Compared to the current HSR Form, this proposed section would: (i) add a requirement to provide the name(s) by which entities have done business within the last three years, (ii) require the filing person to identify the overlapping entity within its own person, rather than the other filing person, (iii) update the NAICS codes that require geographic reporting at the street address level, (iv) require the identification of locations of franchisees for certain NAICS codes, and (v) add a requirement to provide geolocation data. a. NAICS Overlaps of Controlled Entities The Commission proposes that the new Controlled-Entity Overlaps section include the information currently required by Item 7(a), which requires the identification of the overlapping NAICS codes for the acquiring person (or an associate) and acquired entity, and Item 7(b), which requires the identification of the entities that derived revenue in overlapping NAICS codes within the UPE of the other filing person and, for the acquiring person, its associates. The Commission understands that filing persons often do not identify for the other filing person the entities that report in overlapping NAICS codes. Therefore, the Commission believes that it would be less of a burden for each filing person to only report entities within its own person that derive revenue in the overlapping NAICS codes. The Commission thus proposes requiring the acquiring person to identify the entity(s) within its own person that has operations in the same NAICS code as the acquired entity(s), and for the acquired person to identify the entity(s) within the acquired entity(s) that has operations in the same NAICS codes as the acquiring person. This proposed change would refine NAICS code reporting to provide the Agencies with a reliable source for identifying whether any entity within each filing person generates revenues in the same or related codes. As this information, unlike the current information required by Item 7(b), is known to the filing parties, the Commission anticipates that the burden of responding to this request will be diminished. The Commission proposes two additional changes to the current requirements of Item 7(b). First, the Commission proposes requiring the identification of ‘‘doing business as’’ or ‘‘formerly known as’’ names used within the last three years by entities with U.S. operations in overlapping NAICS codes. This information would PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 allow the Agencies to more efficiently collect information about the overlapping entities in publicly available resources during the initial waiting period by connecting each entity with any name by which it is known to other market participants. This information is known to filers and limited to a three-year look back period. In addition, the Commission proposes that filing persons be required to identify the entity(s) that have U.S. operations in the overlapping NAICS code(s). For acquiring persons, this would include entities controlled by associates that have U.S. operations in a NAICS code in which the acquired entity(s) report. Currently some filers voluntarily match the overlapping NAICS codes to the entities within the acquiring person (or its associates) or acquired entity. In the Commission’s experience, this information aids the Agencies in quickly identifying the entities within the filing person that may be relevant to the competitive analysis during the initial waiting period. b. Geographic Market Information The Commission proposes creating a Geographic Market Information section to collect the information currently required by Items 7(c) and 7(d) of the Form, which require, for each overlapping NAICS code, the identification of geographic markets where the entities controlled by the acquiring person (and its associates) and the acquired entity(s) do business. The Commission proposes to modify these requirements by updating the NAICS industries in which street-level reporting is required, requiring geolocation information for these addresses, and requiring the reporting of franchisees’ locations. The Commission periodically reviews which NAICS codes require more granular street, city, and state address information and which NAICS codes need only be reported at the state level.54 Recognizing the burden that providing the street-level address for each location of an entity can require, the Commission differentiates between (1) NAICS industry codes that either do not tend to involve small local or regional markets or involve local markets but nonetheless can adequately be reviewed if the parties specify only the state in which revenue is derived, and (2) those which do tend to involve local markets for which knowing the areas served by each filing person is important to identify locations where 54 See, e.g., 75 FR 57110 (Sept. 17, 2010), adopted by 76 FR 42471 (July 19, 2011). E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS3 both parties compete for sales (i.e., geographic overlaps). As part of this proposed rulemaking, the Agencies have reviewed the list of NAICS industries for which such street-level information is required and have adjusted the list of sectors which, based on their experience, require more granular geographic information than state-level information. The Commission thus proposes updating the list of NAICS codes for which locations need only be identified at the state level and NAICS codes for which street-level information would be required. The Commission proposes removing the Nondepository Credit Intermediation NAICS codes (codes beginning with 5222) from the list of codes for which street-level information is required. In the Agencies’ experience, these industries tend not to be locally focused. Therefore, for these codes, the Commission proposes requiring filing persons to list only the states within which they conduct operations, rather than street address as is now required. This proposal should reduce the burden on those filing persons who report sales in these NAICS codes. The Commission proposes that filers be required to provide street-level reporting for the following additional codes (codes with asterisks indicate that all NAICS codes that begin with the preceding numbers are included). 113*** Forestry and Logging 2211** Electric Power Generation, Transmission and Distribution 2212** Natural Gas Distribution 3115** Dairy Product Manufacturing 311611 Animal (except Poultry) Slaughtering 311613 Rendering and Meat Byproduct Processing 311615 Poultry Processing 31181* Bread and Bakery Product Manufacturing 321*** Wood Product Manufacturing 32221* Paperboard Container Manufacturing 324*** Petroleum and Coal Products Manufacturing 325110 Petrochemical Manufacturing 325130 Synthetic Dye and Pigment Manufacturing 325180 Other Basic Inorganic Chemical Manufacturing 325193 Ethyl Alcohol Manufacturing 325194 Cyclic Crude, Intermediate, and Gum and Wood Chemical Manufacturing 325199 All Other Basic Organic Chemical Manufacturing 325211 Plastics Material and Resin Manufacturing 3271** Clay Product and Refractory Manufacturing 3272** Glass and Glass Product Manufacturing 327310 Cement Manufacturing 327390 Other Concrete Product Manufacturing VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 42331* Lumber, Plywood, Millwork, and Wood Panel Merchant Wholesalers 42333* Roofing, Siding, and Insulation Material Merchant Wholesalers 42344* Other Commercial Equipment Merchant Wholesalers 42345* Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers 42346* Ophthalmic Goods Merchant Wholesalers 42349* Other Professional Equipment and Supplies Merchant Wholesalers 4239** Miscellaneous Durable Goods Merchant Wholesalers 4241** Paper and Paper Product Merchant Wholesalers 4242** Drugs and Druggists’ Sundries Merchant Wholesalers 42441* General Line Grocery Merchant Wholesalers 42442* Packaged Frozen Food Merchant Wholesalers 42451* Grain and Field Bean Merchant Wholesalers 42452* Livestock Merchant Wholesalers 4247** Petroleum and Petroleum Products Merchant Wholesalers 4248** Beer, Wine, and Distilled Alcoholic Beverage Merchant Wholesalers 42491* Farm Supplies Merchant Wholesalers 42495* Paint, Varnish, and Supplies Merchant Wholesalers 44911* Furniture Retailers 493*** Warehousing and Storage 54138* Testing Laboratories and Services 54194* Veterinary Services 562*** Waste Management and Remediation Services 7132** Gambling Industries 71394* Fitness and Recreational Sports Centers These are codes that represent industries in which the Agencies often determine that competition occurs on a local or regional basis. For those codes that represent regional competition, the Commission believes that there would be few individual addresses that would need to be provided, and therefore the burden would not be significantly higher than reporting the overlaps at the state level. The Commission acknowledges that for those industries where competition occurs on a very localized level, for example where customers travel to the company’s location to purchase goods or services, providing street-level revenue information can be challenging. However, because businesses often face different competitors in each of these markets, the Agencies have learned that businesses often track sales at the local level in the ordinary course of business for these sectors. Knowing where within a state the filer’s facilities are located is an important screening tool for the Agencies to quickly identify existing and potential geographic overlaps, and that benefit justifies requiring streetlevel reporting for these NAICS codes. PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 42201 Providing the Agencies with information to screen for geographic overlaps during the initial waiting period also benefits filing persons by reducing need to issue Second Requests to determine if there are such overlaps. The Commission recognizes that providing the street address of tens, hundreds, or, in certain cases, thousands of locations can impose a burden on filers. Therefore, the Agencies have reviewed the NAICS codes closely to identify only those codes for which the Agencies would most benefit from street-level information. For these transactions that require more than a cursory review, attempts to collect this information from the parties during the initial waiting period slows down the review and delays the decision on whether an indepth investigation of the transaction is needed. Further, the Commission believes that such information should be available in an accessible manner for most businesses that have a large number of facilities. Nonetheless, the Commission welcomes comments that identify, with rationales, NAICS codes that should either be added to or deleted from the list of codes for which statelevel information is required. The Commission also proposes requiring filers to report latitude and longitude information for street addresses so that the Agencies can easily and quickly use that information to populate mapping software and create maps to better identify possible geographic overlaps between the acquiring person and the acquired entity. Street addresses alone can be inadequate or inaccurate for isolating the exact location of facilities. Converting street addresses to coordinates is difficult due to abbreviations such as BLVD or ST, and street addresses often lack important information, such as South or North, or contain errors, such as mislabeling a Street address for an Avenue. Latitude and longitude information is unique, which reduces the likelihood of errors. Any errors in generating maps displaying the locations of the relevant facilities may affect screening for local markets, resulting in over- or underidentification of geographic overlaps. Since filing persons are familiar with the location of their own establishments, the Commission believes that they would be in best position to validate the accuracy of the locations through more precise latitude and longitude reporting. The Commission also proposes requiring filers to list locations where franchisees of the acquiring or acquired person (as appropriate) generate revenue E:\FR\FM\29JNP3.SGM 29JNP3 42202 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules in overlapping NAICS codes that require street-level reporting. Currently, there is no information submitted with the Form that allows the Agencies to begin this analysis for companies that do business through franchisees. Yet all company locations at issue in the transaction that generate revenues, both directly and indirectly through franchisees, must be accounted for when the Agencies analyze the existence and extent of competition between the filing persons. These proposed changes would provide the Agencies with all company locations to begin assessing geographic overlaps during the initial waiting period. Because franchisors must approve the location of franchisee operations and get regular sales reports from those operations, the Commission believes filers with these relationships will have this information about their franchisees. lotter on DSK11XQN23PROD with PROPOSALS3 5. Minority-Held Entity Overlaps The Commission proposes creating a Minority-Held Entity Overlaps section within the proposed Instructions that would amend certain information that is currently required by Item 6(c) of the Form. Item 6(c) currently requires filing persons to list all of the entities in which the acquiring person and associates of the acquiring person, or the acquired entity (as appropriate), holds a minority interest of 5% or more. As originally proposed by the Commission in 2010, this item was intended to focus on only those minority-held investments that provide products or services that report in the same NAICS code as the other filing person, but in the final version of the rule, in order to limit burden, the Commission permitted filers to list all minority-held companies rather than limiting the list to those that created a NAICS code overlap.55 However, in the Agencies’ experience with information collected in Item 6(c), permitting parties to list all minorityheld companies instead of only those that are in the same line of business or NAICS code has hindered the Agencies’ ability to determine which entities may be relevant to the competitive analysis of the transaction during the initial waiting period. Unlike the filing persons, which have likely done diligence on the companies in which they invest, the Agencies have no basis to determine from the entire list of minority-held companies which ones have competitively significant relationships with the other filing person as this information is not available from any other source. 55 75 FR 57110 (Sept. 17, 2010), adopted by 76 FR 42471 (July 19, 2011). VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 The Commission thus proposes eliminating the option to list all the minority-held entities of the acquiring person and its associates or acquired entity (as appropriate) and proposes once again to require identification of those that, to the filing person’s knowledge or belief, would derive revenue in the same NAICS codes or have operations in the same industry as the other filing person. The Commission also proposes requiring filers to provide the names by which the listed entities do business. As noted above, the d/b/a or f/k/a names of the businesses are especially helpful to the Agencies in conducting additional research about the entities using public or third-party sources. These proposed changes would significantly assist the Agencies in determining which minority-held entities may be relevant to the competitive analysis of the transaction during the initial waiting period. In the Agencies’ experience, there has been an increase in the number and type of companies in which the acquiring person and acquired entity have minority investments, and where they exist, understanding the business lines of these related companies can be important for determining any significant premerger competitive relationship between the filing persons that may be affected by the transaction. This is especially true where the important competitive relationship is not at the UPE level but arises from within the corporate structure or holdings of the filing persons. While the Commission recognizes that investors have more limited information regarding entities in which only a minority interest is held, the proposed Instructions would continue to permit filing persons to rely on their knowledge or belief. The Commission believes that filers have done some level of diligence to determine the business lines prior to investing in these entities, and should have some basis to identify overlaps. 6. Prior Acquisitions The Commission proposes creating a Prior Acquisitions section within the proposed Instructions that would include the information currently required by Item 8 of the Form, as well as additional information. At present, Item 8 requires the acquiring person to identify all NAICS codes in which the acquiring person derived $1 million or more in revenue and the acquired entity(s) or assets also derived $1 million or more. For such codes, the acquiring person is required to report acquisitions made within the five years prior to filing that (i) resulted in control of entities that had net sales or total PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 assets of greater than $10 million in the year prior to acquisition, or (ii) was an acquisition of assets valued at or above the statutory size-of-transaction threshold. The Commission proposes expanding the scope of prior acquisitions that would be identified and making the requirement applicable to the acquired entity as well. Information about prior acquisitions has always been important for the Agencies, allowing them to identify strategies to gain market share through acquisitions rather than internal expansion or more vigorous competition. Filers have been required to provide information about prior acquisitions from the beginning of the premerger notification program.56 This information can be especially important in sectors where acquisitions are typically not HSR-reportable but nonetheless can cause competitive harm and alter the market dynamics for the reported transaction.57 The Agencies have taken steps to address concerns about acquisition strategies that premerger review does not routinely capture. For instance, when the Commission identifies a company that has violated Section 7 and is engaging in a strategy of rolling up competitors, if it is likely that future acquisitions may not require an HSR Filing, the Commission may order the firm to provide prior notice or obtain prior approval for any future non-reportable acquisition.58 As the minimum threshold for making an HSR Filing has been adjusted over time (in accord with changes in gross national product) 59 from $50 million to its current $111 million, many acquisitions do not require premerger 56 43 FR 33450, 33534 (July 31, 1978). Press Release, Fed. Trade Comm’n, FTC Takes Second Action Against JAB Consumer Partners to Protect Pet Owners from Private Equity Firm’s Rollup of Veterinary Services Clinics (June 29, 2022), https://www.ftc.gov/news-events/news/ press-releases/2022/06/ftc-takes-second-actionagainst-jab-consumer-partners-protect-pet-ownersprivate-equity-firms-rollup-of-veterinary-servicesclinics. 58 See Press Release, Fed. Trade Comm’n, FTC Imposes Strict Limits on DaVita Inc.’s Future Mergers Following Proposed Acquisition of Utah Dialysis Clinics (Oct. 25, 2021), https:// www.ftc.gov/news-events/news/press-releases/2021/ 10/ftc-imposes-strict-limits-davita-incs-futuremergers-following-proposed-acquisition-utahdialysis; Press Release, Fed. Trade Comm’n, FTC Orders the Divestiture of Hundreds of Retail Stores Following 7-Eleven, Inc.’s Anticompetitive $21 Billion Acquisition of the Speedway Retail Fuel Chain (June 25, 2021), https://www.ftc.gov/newsevents/news/press-releases/2021/06/ftc-ordersdivestiture-hundreds-retail-stores-following-7eleven-incs-anticompetitive-21-billion. 59 Section 7A(a)(2) of the Act requires the FTC to revise thresholds annually based on the change in gross national product, in accordance with 15 U.S.C. 19(a)(5). 57 See E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS3 notification, especially in certain sectors.60 A recent Commission study revealed that five of the largest technology companies in the United States completed 819 acquisitions that were not reported to the Agencies over a ten-year period from 2010–2019.61 The Commission has thus identified a need to know more during the initial waiting period about prior acquisitions that may raise concerns about the filings parties’ acquisition or roll-up strategies.62 Acquisitions of small companies can cause harm, including in sectors where competition occurs on a local level. When the Agencies determine that a firm is violating Section 7 through a pattern of serial acquisitions that fuels consolidation by eliminating local competitors, they can seek to prevent future violations but this is often insufficient to prevent widespread harm.63 A pattern of serial acquisitions may also affect competition among innovative firms by consolidating innovation efforts into the hands of market leaders or other firms attempting to control the pace or direction of innovation.64 A history of acquisitions in the same or related business lines may be especially important information where market boundaries are fluid and firms engage in a 60 See e.g., Thomas Wollmann, How to Get Away With Merger: Stealth Consolidation and its Real Effects on US Healthcare (Nat’l Bureau of Econ. Rsch., Working Paper 27274, 2021); Thomas Wollmann, Stealth Consolidation: Evidence from an Amendment to the Hart-Scott-Rodino Act, 1 Am, Econ, Rev,: Insights 77, (2019). 61 Fed. Trade Comm’n, Non-HSR Reported Acquisitions by Select Technology Platforms 10–11 (2021). 62 See, e.g., Gerry Hansell, Decker Walker, and Jens Kengelbach, ‘‘Lessons from Successful Serial Acquirers: Unlocking Acquisitive Growth,’’ Boston Consulting Group (Oct. 1, 2014), https:// www.bcg.com/publications/2014/mergersacquisitions-unlocking-acquisitive-growth; Thomas Wollmann, Stealth Consolidation: Evidence from an Amendment to the Hart-Scott-Rodino Act, 1 Am, Econ, Rev,: Insights 77, (2019). 63 Paul J. Eliason et al., How Acquisitions Affect Firm Behavior and Performance: Evidence from the Dialysis Industry, 135 Q. J. ECON. 221, 235 (2020). See Press Release, Fed. Trade Comm’n, FTC Imposes Strict Limits on DaVita Inc’s Future Mergers Follow Proposed Acquisition of Utah Dialysis Clinics (Oct. 25, 2021), https:// www.ftc.gov/news-events/news/press-releases/2021/ 10/ftc-imposes-strict-limits-davita-incs-futuremergers-following-proposed-acquisition-utahdialysis. See also Martin Gaynor, Kate Ho, and Robert J Town, The industrial organization of health-care markets, J. of Econ. Literature, 53(2):235–284 (2015); Cory Capps, David Dranove, and Christopher Ody, ‘‘Physician Practice Consolidation Driven By Small Acquisitions, So Antitrust Agencies Have Few Tools To Intervene,’’ Health Affairs (Sept. 1, 2017), https:// www.healthaffairs.org/doi/full/10.1377/ hlthaff.2017.0054. 64 Colleen Cunningham, Florian Ederer, and Song Ma, Killer Acquisitions, 129 J. of Pol. Econ., 649– 702 (2021), https://ssrn.com/abstract=3241707. VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 significant number of nonreportable transactions. This is potentially true of both the acquiring person and the acquired entity. The Agencies endeavor to identify such strategies 65 but need more robust tools for identifying firms that are engaging in a strategy of consolidation through transactions that may violate Section 7. Thus, the Commission proposes several changes to expand the requirements for information related to prior acquisitions beyond what is currently required by Item 8. First, the Commission proposes requiring both the acquiring person and the acquired entity to provide information about prior acquisitions. The purpose of collecting information on all prior acquisitions by both filers is to assist the Agencies in identifying a potential pattern of acquisitions in a particular industry that has contributed to a trend toward concentration or vertical integration that affects the competitive dynamics for the parties to the transaction, as well as the commercial realities of post-merger competition.66 Second, the Commission proposes extending the time frame to report on prior acquisitions from five to ten years because the current five-year requirement for prior acquisitions is often insufficient to meaningfully identify patterns of serial acquisitions or a trend toward concentration or vertical integration. In 1987, the Agencies changed the reporting time period from ten years to five years.67 At the time, it was thought five years reporting of past acquisitions would be sufficient to put the Agencies on notice of possible trends towards consolidation in the affected industries.68 But based on decades of experience since then, along with changes to the economy and the varied acquisition strategies of filing parties, the Commission believes ten years would once again provide for a better framework to allow the Agencies to engage in a more detailed consideration of how numerous past acquisitions, including those in related sectors, affect the competitive landscape of the current transaction under review. Third, the Commission proposes eliminating the threshold for listing prior acquisitions, which currently limits reporting to only acquisitions of 65 See e.g., Note by the United States, Start-ups, killer acquisitions and merger control, OECD DAF/ COMP/WD (2020)23 (June 11, 2020), https:// www.ftc.gov/system/files/attachments/ussubmissions-oecd-2010-present-other-internationalcompetition-fora/oecd-killer_acquisiitions_us_ submission.pdf. 66 43 FR 33534 (July 31, 1978). 67 50 FR 38742, 38768 (Sept. 24, 1985). 68 Id. PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 42203 entities with annual net sales or total assets greater than $10 million in the year prior to the acquisition. Limiting the reporting requirement to acquisitions of entities with annual net sales or total assets over $10 million may not capture acquisitions of new entrants or other nascent competitors that, despite not yet having widespread commercial success, nonetheless are poised to affect competition among existing firms or disrupt market dynamics. In fact, the Commission’s technology acquisition study revealed that between 39.3% and 47.9% of transactions were for target entities that were less than five years old at the time of their acquisition.69 Given the relative nascency of these acquired companies, the Commission believes that excluding prior acquisitions of firms that have not yet had the chance to gain commercial traction to achieve $10 million in net sales or assets does not provide a comprehensive picture of each filer’s acquisition strategy. Learning more about the existence and patterns of these additional past acquisitions by both the acquiring person and the acquired entity, including acquisitions of companies that had not yet generated revenue, would help the Agencies better identify during the initial waiting period transactions that may, on their own or as part of a pattern of serial acquisitions, violate the antitrust laws. Fourth, the Commission proposes treating asset transactions involving the prior acquisition of substantially all of the assets of a business in the same manner as prior acquisitions of voting securities or non-corporate interests. Currently, Item 8 provides separate thresholds for acquisitions of control of entities and acquisitions of assets. This distinction, however, does not recognize that some asset transactions functionally reflect the acquisition of substantially all of the assets of an entity as opposed to the acquisition of a distinct asset such as a manufacturing plant or an exclusive license. Thus, the current rule treats acquisitions of an entity or business differently depending on the form of the agreement. The proposed Instructions would continue to require that the acquisition of a distinct asset be reported only if the then-in-place sizeof-transaction threshold was exceeded, but they would also require that a prior acquisition involving substantially all of the assets be reported in the same manner as prior acquisitions involving 69 Fed. Trade Comm’n, Non-HSR Reported Acquisitions by Select Technology Platforms 26 (2021). Note this percentage range could also be different (i.e., lower or higher) as target entities in 13.4% of the transactions did not have founding dates located in the three databases. E:\FR\FM\29JNP3.SGM 29JNP3 42204 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules voting securities or non-corporate interests. While the Commission expects that the expanded reporting requirements of past acquisitions would create additional burden for filing parties, the proposed Instructions would continue to limit the reporting to only acquisitions in industries for which the filers have reported horizontal overlaps, as identified by overlapping NAICS codes or in the filer’s Horizontal Overlaps Narrative. This limitation still provides the Agencies with sufficient information to identify transactions that may further a trend toward concentration or patterns of acquisitions that may, alone or in combination, substantially lessen competition. Moreover, given the difficulties in determining the value of small or nascent companies, the Commission believes it would be less burdensome for filers to report all acquisitions rather than expend additional time in assessing their value in terms of net sales or assets. The Commission invites comment on ways to limit the burden and exclude de minimis acquisitions of no competitive significance while still capturing acquisitions of entities worth less than $10 million and allowing the Agencies to conduct a robust screening for acquisition strategies that further consolidation trends. lotter on DSK11XQN23PROD with PROPOSALS3 E. Additional Information 1. Subsidies From Foreign Entities or Governments of Concern As discussed in I.A. above, the 2022 Amendments direct the Commission, with the concurrence of the Assistant Attorney General, and in consultation with the Relevant Agencies, to require persons making an HSR Filing to disclose information about foreign subsidies from countries or entities that threaten U.S. strategic or economic interests. Along with the proposed definitions discussed above, the Commission proposes changes to the Instructions to implement this mandate from Congress. The Commission proposes creating a Subsidies from Foreign Entities or Governments of Concern section within the proposed Instructions. This proposed section would include three questions. The first proposed question would track the requirements and stated purpose of the 2022 Amendments by requiring the acquiring and acquired person (as appropriate) to identify and describe certain subsidies, as defined by proposed § 801.1(r)(2), received or that are anticipated to be received by any entity within its person from a foreign entity or government of concern, as VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 defined by proposed § 801.1(r)(1). Given the complexity of subsidies, the Commission proposes stating that the question should be answered upon the knowledge or belief of the filing person. This would relieve the filing person of the obligation to conduct a complex legal analysis. The filing person, however, must conduct good faith diligence. In proposing this question, the Commission believes it is also consistent with Congressional intent to create reasonable limits to the required information on subsidies to benefit both the Agencies and filing parties. The Commission’s proposed two-year limitation would identify the subsidies most likely to affect the Agencies’ competitive analysis of a proposed transaction because those subsidies are most likely to affect current or future conduct of the parties. The Commission believes that this practical qualifier, coupled with the use of an existing definition of ‘‘subsidy,’’ as discussed in I.A.2. above, would provide the Agencies with the most pertinent information for the analysis of proposed transactions, while reasonably limiting the information required from filing parties. The Commission seeks comment on the temporal limitation for subsidies, as well as whether a de minimis value should be set, and if so, what administrable levels might be appropriate. The Commission believes that requiring information on countervailing duties 70 would be extremely useful in providing a complete picture of the potential impact of subsidies per Congress’s mandate and screening for subsidies that bear on whether the transaction may violate the antitrust laws. Thus, the Commission’s second proposed question would require the acquiring or acquired person (as appropriate) to identify any of its products produced in a country that is a covered nation under 42 U.S.C. 18741(a)(5)(C) that are subject to countervailing duties in any jurisdiction. The Commission would also ask the filing party to list the countervailing duty imposed and the 70 Countervailing duties are duties intended to offset the price effect of significant foreign government subsidies on a product or good. In the United States, the International Trade Administration of the Department of Commerce investigates whether imported products are subject to significant foreign government subsidies. The amount of the subsidies that the foreign producer receives from its government is the basis for the rate by which the subsidy is offset, or ‘‘countervailed,’’ through higher import duties enforced by U.S. Customs and Border Protection. See, e.g., Int’l Trade Admin., https://www.trade.gov/us-antidumpingand-countervailing-duties. PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 jurisdiction that imposed the duty. Such information about the countervailing duties and relevant products would help the Agencies determine in their initial analysis of a transaction whether subsidies from foreign entities or governments of concern might affect some aspect of competition in the future. The Commission believes that information about countervailing duties imposed by the United States should be readily available to filers because the Department of Commerce issues fact sheets that contain an overview of final subsidy findings and are available on its ‘‘recent case announcements’’ web page (https://www.trade.gov/caseannouncements-archives (case announcements for the prior year)) and on the International Trade Commission’s website (https://legacy. trade.gov/enforcement/operations/ scope/index.asp (older determinations)), and that information about countervailing duties imposed by other jurisdictions should be readily available to filing persons from similar sources as well. The Commission’s third proposed question would require the acquiring or acquired person (as appropriate) to identify, to its knowledge or belief, any of its products produced in whole or in part in a country that is a covered nation under 42 U.S.C. 18741(a)(5)(C) that are the subject of an investigation by any jurisdiction for potential countervailing duties. The Commission would also ask the filing person to list the jurisdiction conducting the investigation. Such information would help the Agencies identify products that may be subject to active subsidies and assist the Agencies in their assessment of the subsidies’ impact on competition. It is the Commission’s understanding, however, that the investigating agencies do not always inform all producers or market participants of an investigation; thus, the Commission proposes limiting the scope of this third question to the filing person’s knowledge or belief. The Commission believes that limiting this reporting requirement to the knowledge or belief of the filing person would provide filers with enough flexibility to respond to the question and certify the HSR Filing without having to confirm with various relevant agencies that no such investigation exists. The Congressional mandate to collect information about foreign subsidies is consistent with the Agencies’ desire to better understand whether there are significant ties to individuals or entities that may affect the Agencies’ assessment of the potential competitive risks associated with the transaction. For instance, a foreign government or entity E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS3 could have a financial relationship that gives it the ability to sway the filing person to make different choices in the marketplace than it would without the subsidy. As discussed in III.B., Agencies would benefit from more complete information about individuals and entities, including governments, that have the ability to control or influence competitive decision making. The Commission believes that, taken together, information about minority holdings, individuals with influence, officers, directors, and board observers, as well as information about foreign subsidies may reveal significant constraints on the competitiveness of the affected company that should be taken into account during the Agencies’ initial review. 2. Defense or Intelligence Contracts The Commission proposes creating a Defense or Intelligence Contracts section within the proposed Instructions that would require filing persons to report certain contracts with defense or intelligence agencies. The Agencies regularly review filings from companies that supply the Department of Defense (‘‘DoD’’) or the intelligence community (‘‘IC’’) with products or services. During the initial waiting period, it is important for the Agency to quickly contact DoD and IC staff to collect key insights and information to prevent mergers that may have an anticompetitive impact on taxpayers through purchases made through DoD and IC programs. Yet without information about specific DoD or IC contracts or knowledge of which unit handles that contract, the Agencies often face difficulty and delay in identifying appropriate relevant personnel or stakeholders with knowledge of the contracts, programs, or products or services at issue. Such delays hinder the identification and evaluation of competition issues that would impact DoD or IC programs or budget during the initial waiting period. The Commission thus proposes adding a requirement that both the acquiring and acquired person identify whether they have existing or pending defense or intelligence procurement contracts, as defined by 10 U.S.C. 101(a)(6) and 50 U.S.C. 3033(4), valued at $10 million or more, and provide identifying information about the award and relevant DoD or IC personnel. For filings from companies that supply DoD or the IC with products or services, this information would greatly enhance the Agencies’ ability to identify and contact appropriate stakeholders within DoD or IC to seek their input as customers that might be impacted by the proposed transaction. This information is well VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 known to the companies that do business with these government entities. 3. Identification of Communications and Messaging Systems In conjunction with the proposed requirement that filing persons certify they have taken steps to prevent destruction of relevant information, as discussed in III.F. below, the Commission also proposes that filers identify and list all communications systems or messaging applications on any device used by the acquiring or acquired person (as appropriate) that could be used to store or transmit information or documents related to its business operations. Companies have increasingly been relying on new forms of communication—beyond email and other traditional document formats—to engage in business discussions and make key operational decisions. These systems can encompass internal chat technologies (such as so-called ephemeral messaging) or document management systems, including where content exchanged between the individuals is automatically deleted. In the Agencies’ experience, these communications systems contain highly relevant information on the transaction itself, as well as on topics that are critical for the Agencies’ assessment of the transaction such as competition, competitors, markets, customers, and industry characteristics. Company employees’ more frequent use of these communications systems and messaging applications, particularly in lieu of other traditional forms of communication such as email, has meant that these systems and applications have become an important part of Agencies’ investigations. Moreover, to the extent that these communications systems are being used to evade document retention and preservation requirements that exist for more traditional forms of communication, the Commission believes it is important for the parties to understand that their preservation and retention obligations apply to these systems as well. As yet, many parties do not appear to fully understand and/or comply with document preservation obligations for these new modalities. For these reasons, the Agencies would greatly benefit from having a complete and transparent picture of the filer’s applicable communication systems at the filing stage. The Commission further believes that this information is readily available to the filing person and that identifying these systems in use by the company with the HSR Filing would impose minimal burden. PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 42205 4. Other Jurisdictions The Commission proposes creating a new Other Jurisdictions section within the proposed Instructions. This section proposes to amend the requirements concerning antitrust filings outside of the United States and add a voluntary waivers section to allow for the sharing of HSR information with other enforcers. a. Transactions Subject to International Antitrust Notification The Commission proposes creating a Transactions Subject to International Antitrust Notification section that would require the identification of other jurisdictions that may be conducting a competition review. Currently, page one of the Form asks filing persons to voluntarily identify other jurisdictions where the transaction will trigger premerger notification under the laws of that jurisdiction. The Commission first proposed collecting information about filing in other jurisdictions in 1994, when it proposed a mandatory requirement.71 In 1999, the Commission noted that it was still considering the proposals included in its 1994 proposed rulemaking.72 The Commission then proposed a voluntary requirement in 2001 73 and the final rule was adopted in 2003.74 The Commission now proposes making the disclosure of international filing obligations a mandatory requirement. Since 2001, and certainly since 1994, merger enforcement by other competition authorities has become more robust as more jurisdictions have adopted competition laws that impose mandatory or voluntary premerger notification requirements. At the same time, a larger percentage of HSRreportable transactions now involve companies with international reach. As a result, more transactions are likely to be subject to review in multiple jurisdictions around the world. Even though the number of transactions subject to premerger notifications in multiple jurisdictions has increased over the years, most filers do not voluntarily disclose on the Form that their transactions will be subject to nonU.S. notification requirements. For many years, the Agencies have cooperated with numerous competition authorities on cases of common concern to help identify issues of common interest, gain a better understanding of relevant facts, and achieve, where possible, consistent or, at a minimum, 71 59 FR 30545, 30547 (June 14, 1994). FR 1203 (Jan. 8, 1999). 73 66 FR 8680, 8684 (Feb. 1, 2001). 74 68 FR 2425, 2429 (Jan. 17, 2003). 72 64 E:\FR\FM\29JNP3.SGM 29JNP3 42206 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules non-conflicting outcomes. In order to fully benefit from inter-agency consultations, the Agencies need to know which foreign jurisdictions may also be evaluating the proposed transaction as early as possible. The delay associated with confirming whether there will be reviews or investigations by other competition authorities undermines effective cooperation during the initial waiting period, when sharing expertise and knowledge with other competition enforcers would be especially helpful in identifying which transactions need more in-depth review. Moreover, review by other jurisdictions can often affect the timing, pace, or ability to close the transaction, especially for jurisdictions that also require suspension of the transaction until the competition review is completed. The Commission thus proposes a mandatory requirement to identify the jurisdictions where each filing person has already filed or is preparing notifications to be filed as well as a list of the jurisdictions where it has a good faith belief it will file. The Commission believes that upon execution of a definitive agreement, filers often know the jurisdictions where competition filings will be made. However, to account for the possibility that, at the time of the HSR Filing, parties may not have yet identified all the other jurisdictions where they will file, the proposed rule provides flexibility by stating that parties should respond based on their ‘‘good faith belief.’’ lotter on DSK11XQN23PROD with PROPOSALS3 b. Voluntary Waivers for International Competition Authorities and State Attorneys General The Commission proposes the creation of a voluntary waivers check box within an Other Jurisdictions section to allow filing persons to indicate that they agree to waive the confidentiality provisions of the Act, 15 U.S.C. 18a(h), for any jurisdiction identified by the filing person. As discussed above, transactions are often reviewed by non-U.S. competition authorities, or by one or more State Attorneys General. But the Act’s confidentiality provision contains limits on disclosing material collected as part of the Agencies’ HSR review of the transaction. As a result, merging parties and third parties waive statutory confidentiality protections so that the investigating Agency can share certain limited information with foreign or state competition authority counterparts, enabling the Agency to make more informed, consistent decisions, and VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 investigate the transaction more effectively, often expediting review.75 The Commission proposes amending the Instructions to allow filing persons to waive the confidentiality provision contained in the Act, 15 U.S.C. 18a(h), for any non-U.S. competition authorities or State Attorneys General they identify. Allowing filers to waive the confidentiality protections in the HSR Filing would provide an efficient mechanism for filers to consent to limited waivers of confidentiality at the outset to facilitate early cooperation among competition enforcers. The proposed voluntary waiver would allow the Agencies to disclose the existence of an HSR Filing and the information contained in the HSR filing, but only for those ex-U.S. competition authorities or State Attorneys General selected by the filing person. The Commission also proposes modifying the language that would inform filers about potential disclosures based on the waivers to track the language of the Act more closely. The waivers would be optional for the parties, but the Commission expects that some filers will benefit from providing these limited waivers of confidentiality. F. Certification The Commission proposes amending the language of the certification that filing persons must submit with HSR Filings to require affirmation that the filing person has taken the necessary steps to prevent the destruction of documents and information related to the transaction. When parties submit premerger notification filings, this triggers a Congressionally mandated initial phase investigation regarding the potential competitive effects of the proposed transaction. When making an HSR Filing, filers should be aware that the Agencies may, prior to the expiration of the initial waiting period, issue Second Requests to further investigate the proposed transaction.76 If issued, a Second Request requires the recipient to produce documents and information relevant to the transaction. If, as part of a filing person’s ordinary course business operations, relevant information is deleted or destroyed 75 The Agencies have developed a model waiver of confidentiality for use in civil matters involving non-U.S. competition agencies that has been in use for 10 years. Similarly, the Agencies have developed a protocol for coordination in merger investigations with State Attorneys General. See Fed. Trade Comm’n, https://www.ftc.gov/policy/ international/international-competition/ international-waivers-confidentiality-ftc-antitrustinvestigations and https://www.ftc.gov/adviceguidance/competition-guidance/protocolcoordination-merger-investigations. 76 15 U.S.C. 18a(e); 16 CFR 803.20. PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 during the initial waiting period, this could lead to a loss of information that may be critical to the investigating Agency and undermine its ability to conduct a full in-depth investigation pursuant to the Act to determine if the transaction is likely to violate Section 7 or any other antitrust law and to seek to prevent its consummation. Therefore, the Commission proposes adding to the certification an acknowledgement that the Agencies may require the submission of additional information or documents in response to a Second Request and a confirmation that the officer, director, or other individual described in § 803.6, as appropriate, has taken the necessary steps to prevent the destruction of documents and information related to the proposed transaction before the expiration of any waiting period. Such steps could include, for example, the suspension of auto-delete policies in place at any entity within the filing person. The Commission also proposes the addition of language in the Instructions that would serve to remind filers that there are criminal penalties under other federal statutes that prohibit various deceptive practices aimed at frustrating or impeding the legitimate functions of government departments or agencies. In recent years, the Agencies have observed an increasing number of instances where, in the course of an investigation or later litigation challenging the transaction, the filing parties disclaim or modify statements or information submitted as part of the Form, notwithstanding numerous federal laws that prescribe criminal penalties for submitting false information to the government, including as part of an HSR Filing. While the Commission’s proposed language does not intend to change any existing obligation to comply with other laws, it would provide notice to filers that the Commission takes those obligations seriously and may refer filers who do not comply with those obligations for potential criminal proceedings. The Commission does not expect this proposed reminder, which does not require any additional information or obligation, to result in additional burden for filing persons. G. Affidavit As discussed in the proposed changes to § 803.5(b) above at II.C., the Commission proposes requiring filings for transactions without definitive agreements to include a term sheet or draft agreement that describes with specificity the scope of the transaction that would be consummated. As a result, the Commission proposes that E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules parties making such filings attest in their affidavit that a term sheet or draft agreement that describes with specificity the scope of the transaction that will be consummated has been submitted with the executed letter of intent or agreement in principle. Severability Section 803.90 provides that, if any provision of the Rules (including the Form) or the application of any such provision to any person or circumstances is held invalid, the other provisions of the Rules and their application to other persons or circumstances shall be unaffected. This severability (or separability) provision would apply to any modifications of the HSR Filing requirements that the Commission adopts as final after issuing this NPRM and considering the public comments received. If a regulatory provision is severable, and one part of the provision is invalidated by a court, the court may allow the other parts of the provision to remain in effect.77 When analyzing whether a provision is severable, courts consider both (a) the agency’s intent and (b) whether severing the invalid parts of the provision would impair the function of the remaining parts.78 The Commission is not proposing any changes to the separability provision in § 803.90 but is confirming its intent that, if a court were to invalidate any of the HSR requirements, including any modifications that the Commission finalizes at the end of the rulemaking proceeding, the other requirements would remain in effect. lotter on DSK11XQN23PROD with PROPOSALS3 Communications by Outside Parties to Commissioners and Their Advisors Written communications and summaries or transcripts of oral communications respecting the merits of this proceeding, from any outside party to any Commissioner or Commissioner’s advisor, will be placed on the public record. See 16 CFR 1.26(b)(5). Paperwork Reduction Act Under the Paperwork Reduction Act of 1995 (‘‘PRA’’), 44 U.S.C. 3501 et seq., federal Agencies must obtain approval from the Office of Management and Budget (‘‘OMB’’) for each collection of information they conduct or sponsor. The term ‘‘collection of information’’ means agency requests or requirements that members of the public submit reports, keep records, or provide 77 See, e.g., Davis Cnty. Solid Waste Mgmt. v. EPA, 108 F.3d 1454, 1459 (D.C. Cir. 1997). 78 Id. at 1460. VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 information to a third party. 44 U.S.C. 3502(3); 5 CFR 1320.3(c). The current rule contains various provisions that constitute information collection requirements as defined by 5 CFR 1320.3(c), the definitional provision within OMB regulations implementing the PRA. 44 U.S.C. chapter 35. The existing information collection requirements in the HSR Rules and Form have been reviewed and approved by OMB (OMB Control No. 3084–0005). The current clearance expires on February 28, 2026. Because the rule amendments proposed in this NPRM would change existing reporting requirements, the Commission will submit this notice of proposed rulemaking and the associated Supporting Statement to OMB for review under the PRA. Increased Time Collecting Data for and Preparing an HSR Filing The proposed amendments are primarily changes to the information reported on the Notification and Report Form and do not affect the reportability of a transaction. Thus, the same number of filings projected for fiscal year 2023 in the most recent Supporting Statement submitted to OMB and also appearing in the associated Federal Register publication 79 will be used for these burden hour calculations. Some of the proposed changes are intended to reduce the burden of filing. The Commission anticipates that the proposals to report NAICS codes in ranges rather than by specific dollar amount would reduce the burden on almost all filers. Additionally, the proposed change to eliminate the requirement for filers that derive revenue from manufacturing operations to report NAPCS code revenues is also anticipated to reduce the burden for those filers. Finally, the Commission also proposes to limit the reporting of minority investors of the acquired entity. Some of the proposed changes offer clarifications to the current rules and are unlikely to change the burden on filers. These include the proposed changes to eliminate references to paper and DVD filings (§§ 803.2, 803.5, and 803.10) and to specifically discuss the commencement of the waiting period (§ 803.10). Certain proposed changes would require the acquiring person to collect and report information that the Commission believes is held in the acquiring person’s ordinary course of business records. These include proposed requirements for the acquiring 79 88 PO 00000 FR 3413, 3414 (Jan. 19, 2023). Frm 00031 Fmt 4701 Sfmt 4702 42207 person to describe its own business(es); report minority investors in additional entities related to the transaction; disclose relationships with individuals or entities that provide credit, hold nonvoting securities, have the right to appoint board observers, or have management agreements with entities related to the transaction; and to identify members of boards of directors. Once collected, the Commission anticipates that the burden associated with some of these proposals will lessen for subsequent filings by the same acquiring person, as the information would only need to be updated. Many of the proposed changes would increase the burden on all filers. These include new document collection requirements to produce transactionrelated documents from supervisory deal team members; business documents that relate to competition topics but were not produced specifically for the transaction; drafts of responsive documents; other agreements between the acquiring and acquired persons, and to log the request to which documents are responsive. Additionally, the proposed requirements to provide narratives regarding transaction rationale, diagrams of the transaction, and organizational charts for custodians of documents would be applicable to all filers. Some of the proposed changes would significantly increase the burden on only certain filers. These include those filers whose businesses have existing horizontal, non-horizontal, or labor market overlaps or relationships, with the largest burden falling on filers whose transaction involves many such relationships; transactions that involve a large number of foreign language documents; filing persons or transactions that have a complex structure; transactions that are filed on letters of intent or agreements in principle; and filing persons that receive subsidies from foreign entities of concern. PNO staff canvassed current Agency staff who had previously prepared HSR filings while in private practice to estimate the projected change in burden due to the proposed amendments to the Instructions. All have considerable experience with the HSR rules and with preparing HSR Filings for the types of transactions that are most likely to be affected by the proposed changes. These experts were asked to estimate the incremental increase in time to prepare HSR Filings, for both the company and its outside counsel, taking into account that transactions range in complexity—from relatively simple transactions with no overlaps and few E:\FR\FM\29JNP3.SGM 29JNP3 42208 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules documents (such as ones only involving executive compensation or other stock purchases by an individual), to moderately complex transactions (such as a fund buying or selling a portfolio company with limited overlaps) to very complex (for example, a strategic acquisition by a large company that sells many overlapping products in competition with the seller). The ranges from canvassed officials estimated that the proposed changes would result in approximately 12 to 222 additional hours per filing, depending on the complexity of the filing at issue. In the past five years, approximately 45% of filings had reported overlaps. To estimate an average number of additional hours, the Commission conservatively assumes that 45% of the filings may require an additional 222 hours to prepare and 55% may require an additional 12 hours to prepare. Thus, the Commission estimates an average of 107 additional hours (rounded to the nearest hour) will be allocated to nonindex filings.80 Added to the current estimate 37 hours,81 the total estimated hours would be 144 per filing. lotter on DSK11XQN23PROD with PROPOSALS3 Net Effect The proposed Rule and Notification and Report Form changes only affect non-index filings 82 which, for FY 2023, the FTC projects will total 7,096. As described above, the Commission estimates that he amendments to the HSR Rules and Notification and Report Form would increase the time required to prepare responses for non-index filings, with an estimated net increase of 107 hours per filing. Thus, the total estimated additional hours burden is 759,272 (7,096 non-indexed filing × 107 hours/each). Applying the revised estimated hours, 759,272, to the previous assumed hourly wage of $460 for executive and attorney compensation, yields approximately $350,000,000 in labor costs. The amendments are expected to impose either minimal or no additional capital or other non-labor costs, as businesses subject to the HSR Rules generally have or obtain necessary equipment for other business purposes. Staff believes that 80 Clayton Act section 7A(c)(6) and (c)(8) exempt from the requirements of the premerger notification program certain transactions that are subject to the approval of other agencies, but only if copies of the information submitted to these other agencies are also submitted to the FTC and the Assistant Attorney General. Thus, parties must submit copies of these ‘‘index’’ filings, but completing the task requires significantly less time than non-exempt transactions that require ‘‘non-index’’ filings. The proposed changes would not require any additional information from indexed filings. 81 88 FR 3413, 3414 (Jan. 19, 2023). 82 Id. VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 the above requirements necessitate ongoing, regular training so that covered entities stay current and have a clear understanding of federal mandates, but that this would be a small portion of and subsumed within the ordinary training that employees receive apart from that associated with the information collected under the HSR Rules and the corresponding Instructions. 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. Request for Comments The Commission invites comments on: (1) whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) the accuracy of the agency’s estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of these information collections on respondents. Comments on the proposed reporting requirements subject to PRA 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. 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 August 28, 2023. Write ‘‘16 CFR parts 801–803—Hart-Scott-Rodino Coverage, Exemption, and Transmittal Rules, Project No. P239300’’ on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including, to the extent practicable, on the https:// www.regulations.gov/ website. Because of the agency’s security screening, postal mail addressed to the Commission will be subject to delay. We strongly encourage you to submit your comment online through https:// www.regulations.gov/. 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—HartScott-Rodino Coverage, Exemption, and Transmittal Rules, Project No. P239300’’ 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 H), Washington, DC 20580. If possible, please submit your paper comment to the Commission by overnight service. Because your comment will be placed on the publicly accessible website, https://www.regulations.gov/, you are solely responsible for making sure that your comment does not include any sensitive or confidential information. In particular, your comment should not contain 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 responsible for making sure 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 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.83 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 $111 million. 83 See 13 CFR part 121 (regulations defining small business size). PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules any commercial or financial information which . . . is privileged or confidential,’’—as provided in 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), 16 CFR 4.9(c). 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(b). Your comment will be kept confidential only if the General Counsel grants your request in accordance with the law and the public interest. Once your comment has been posted publicly at https:// www.regulations.gov/—as legally required by FTC Rule 4.9(b), 16 CFR 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), 16 CFR 4.9(c), and the General Counsel grants that request. Visit the Commission’s website, www.ftc.gov, to read this publication 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 that it receives on or before August 28, 2023. 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. List of Subjects in 16 CFR Parts 801 and 803 Antitrust. For the reasons stated in the preamble, the Federal Trade Commission proposes amending 16 CFR parts 801 and 803 as set forth below: lotter on DSK11XQN23PROD with PROPOSALS3 PART 801—COVERAGE RULES 1. The authority citation for part 801 continues to read as follows: ■ Authority: 15 U.S.C. 18a(d). 2. Amend § 801.1 by adding paragraph (r) to read as follows: ■ § 801.1 * * Definitions * VerDate Sep<11>2014 * * 18:10 Jun 28, 2023 Jkt 259001 (r)(1) Foreign entity or government of concern. The term foreign entity or government of concern means: (i) An entity that is a foreign entity of concern as that term is defined in section 40207 of the Infrastructure Investment and Jobs Act (42 U.S.C. 18741(a)(5)); or (ii) A government, or an agency thereof, of a foreign country that is a covered nation as that term is defined in section 40207 of the Infrastructure Investment and Jobs Act (42 U.S.C. 18741(a)(5)(C)). (2) Subsidy. The term subsidy has the meaning given the term in Part IV of Title VII of the Tariff Act of 1930 (19 U.S.C. 1677(5)(B)). PART 803—TRANSMITTAL RULES 3. The authority citation for part 803 continues to read as follows: ■ Authority: 15 U.S.C. 18a(d). 4. Amend § 803.2 by: a. Redesignating paragraph (a) as (a)(1) and adding paragraph (a)(2); ■ b. Removing paragraph (b)(1)(v); and ■ c. Revising paragraphs (e) and (f). The revisions and additions read as follows: ■ ■ § 803.2 Instructions applicable to Notification and Report Form. (a)(1) The notification required by the act shall be filed by the preacquisition ultimate parent entity, or by any entity included within the person authorized by such preacquisition ultimate parent entity to file notification on its behalf. In the case of a natural person required by the act to file notification, such notification may be filed by his or her legal representative: Provided however, That notwithstanding §§ 801.1(c)(2) and 801.2 of this chapter, only one notification shall be filed by or on behalf of a natural person, spouse and minor children with respect to an acquisition as a result of which more than one such natural person will hold voting securities of the same issuer. Example: Jane Doe, her husband, and minor child collectively hold more than 50 percent of the shares of family corporation F. Therefore, Jane Doe (or her husband or minor child) is the ‘‘ultimate parent entity’’ of a ‘‘person’’ composed to herself (or her husband or minor child) and F; see paragraphs (a)(3), (b) and (c)(2) of § 801.1 of this chapter. If corporation F is to acquire corporation X, under this paragraph only one notification is to be filed by Jane Doe, her husband, and minor child collectively. (2) Persons that are both acquiring and acquired persons should submit separate forms, one as the acquiring person and one as the acquired person, PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 42209 following the appropriate instructions for each. * * * * * (e) For documents required by item 4(b) of the Notification and Report Form, a person filing the notification may, instead of submitting a document, provide a cite to an operative internet address directly linking to the document, if the linked document is complete and payment is not required to access the document. If an internet address becomes inoperative during the waiting period, or the document is otherwise rendered inaccessible or incomplete, upon notification by the Commission or Assistant Attorney General, the parties must make the document available to the agencies by either referencing an operative internet address where the complete document may be accessed or by providing electronic copies to the agencies as provided in § 803.10(c)(1) by 5 p.m. on the next regular business day. Failure to make the document available, by the internet or by providing electronic copies, by 5 p.m. on the next regular business day, will result in notice of a deficient filing pursuant to § 803.10(c)(2). (f) Filings must comply with all format requirements set forth at the Premerger Notification Office pages at https://www.ftc.gov. The use of any format not specified as acceptable, or any other failure to comply with the applicable format requirements, shall render the entire filing deficient within the meaning of § 803.10(c)(2). ■ 5. Amend § 803.5 by revising paragraphs (a)(1), (3) and (b) to read as follows: § 803.5 Affidavits required. (a)(1) Section 801.30 acquisitions. For acquisitions to which § 801.30 of this chapter applies, the notification required by the act from each acquiring person shall contain an affidavit attesting that the issuer or unincorporated entity whose voting securities or non-corporate interests are to be acquired has received written notice delivered to an officer (or a person exercising similar functions in the case of an entity without officers) by email, certified or registered mail, wire, or hand delivery, at its principal executive offices, of: * * * * * (3) The affidavit required by this paragraph must have attached to it a copy of the written notice received by the acquired person pursuant to paragraph (a)(1) of this section. (b) Non-section 801.30 acquisitions. For acquisitions to which § 801.30 of E:\FR\FM\29JNP3.SGM 29JNP3 42210 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules this chapter does not apply, the notification required by the act shall contain an affidavit attesting that a contract, agreement in principle, or letter of intent to merge or acquire has been executed, and further attesting to the good faith intention of the person filing notification to complete the transaction. If a definitive agreement is not provided, the affidavit must attest that a term sheet or draft agreement that describes with specificity the scope of the transaction that will be consummated has been submitted with the executed letter of intent or agreement in principle. ■ 6. Revise § 803.8 to read as follows: § 803.8 Foreign language documents. Documentary materials or information in a foreign language required to be submitted at the time of filing a Notification and Report Form and in response to a request for additional information or documentary material must be submitted with verbatim English language translations. All verbatim translations must be understandable, accurate, and complete. ■ 7. Amend § 803.10 by revising paragraphs (c)(1)(i) and (ii) to read as follows: § 803.10 Running of time. lotter on DSK11XQN23PROD with PROPOSALS3 * * * * * (c)(1)(i) The date of receipt shall be the date of electronic submission if such date is not a Saturday, Sunday, a legal public holiday (as defined in 5 U.S.C. 6103(a)), or a legal public holiday’s observed date, and the submission is completed by 5:00 p.m. eastern time. In the event electronic submission is unavailable, the FTC and DOJ may designate procedures for the submission of the filing. Notification of the alternate delivery procedures will normally be made through a press release and, if possible, on the https://www.ftc.gov website. (ii) Delivery effected after 5 p.m. eastern time on a business day, or at any time on any day other than a business day, shall be deemed effected on the next following business day. If submission of all required filings is not effected on the same date, the date of receipt shall be the latest of the dates on which submission is effected. * * * * * ■ 8. Amend § 803.12 by revising paragraph (c)(1)(iii) to read as follows: § 803.12 Withdraw and refile notification. * * * * * (c) * * * (1) * * * (iii) The resubmitted notification is recertified, and the submission, as it relates to Transaction- VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 specific Agreements (including the latest drafts, if definitive agreements have not been signed), TransactionRelated Documents (including Documents Prepared by or for Officers, Directors or Supervisory Deal Team Leads; Confidential Information Memorandum; Studies, Surveys, Analyses, and Reports; Synergies and Efficiencies) and Subsidies from Foreign Entities of Concern in the Instructions, is updated to the date of the resubmission; * * * * * ■ 9. Revise Appendices A and B to part 803 to read as follows: [INSERT GENERAL INSTRUCTIONS AND INFORMATION] Antitrust Improvements Act Notification for Certain Mergers and Acquisitions General Instructions And Information These instructions specify the information that must be submitted pursuant to § 803.1(a) of the premerger notification rules, 16 CFR parts 801–803 (‘‘the Rules’’). Submitted materials must be provided to the Federal Trade Commission (‘‘FTC’’) and to the Antitrust Division of the Department of Justice (‘‘DOJ’’) (together, ‘‘the Agencies’’). Information The central office for information and assistance concerning the Rules is: Premerger Notification Office Federal Trade Commission, Room #5301, 400 7th Street SW, Washington, DC 20024, Phone: (202) 326–3100, Email: HSRhelp@ftc.gov for rules questions, Premerger@ftc.gov for filing information. Copies of these Instructions, the Hart-ScottRodino Antitrust Improvements Act of 1976 (‘‘the Act’’), the Rules, Federal Register publications issuing the Rules and Rule amendments (‘‘Statements of Basis and Purpose’’), as well as information to assist in submitting the required information are available at the FTC’s Premerger Notification Office (‘‘PNO’’) website. Definitions and Explanation of Terms Unless otherwise indicated, the definitions provided in the Rules apply to these Instructions. Dollar Values All financial information should be expressed in millions of dollars rounded to the nearest hundred thousand. Economic Research Service’s Commuting Zones When submitting information by the Economic Research Service’s (‘‘ERS’s’’) Commuting Zones (‘‘CZ’’), refer to the U.S. Department of Agriculture’s Economic Research Service Commuting Zones for the year 2000, available at https://www.ers. usda.gov/data-products/commuting-zonesand-labor-market-areas/. Fee Information The filing fee is based on the aggregate total value of assets, voting securities, and PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 controlling non-corporate interests to be held as a result of the acquisition. Filing fee tiers are adjusted annually pursuant to 15 U.S.C. 18a(a)(note) based on the change in gross national product, in accordance with 15 U.S.C. 19(a)(5). For each fiscal year commencing after September 30, 2023, filing fees will increase by the percentage increase, if any, in the consumer price index (‘‘CPI’’) over the CPI for the fiscal year ending September 30, 2022, pursuant to 15 U.S.C. 18a(a)(note). For current thresholds and fee information, see the PNO website. North American Industry Classification System (NAICS) Data When reporting information by 6-digit NAICS code, refer to the North American Industry Classification System—United States, 2022, published by the Executive Office of the President, Office of Management and Budget, available at https:// www.census.gov/naics/. This website also provides guidance in choosing the proper code(s). Person Filing and Filing Person The terms ‘‘person filing’’ or ‘‘filing person’’ mean the ultimate parent entity (‘‘UPE’’). See § 801.1(a)(3). The terms are used herein interchangeably. Standard Occupational Classification When reporting information by 6-digit Standard Occupational Classification (‘‘SOC’’) code, refer to the 2018 SOC System, available at https://www.bls.gov/soc/2018/ #classification. Thresholds Notification thresholds are adjusted annually based on the change in gross national product, in accordance with 15 U.S.C. 19(a)(5). See § 801.1(h). The current threshold values can be found at Current Filing Thresholds. Year All references to ‘‘year’’ refer to calendar year. If data are not available on a calendar year basis, supply the requested data for the fiscal year reporting period that most nearly corresponds to the calendar year specified. References to ‘‘most recent year’’ mean the most recent calendar or fiscal year for which the requested information is available. Filing If the UPE is both an acquiring and acquired person, separate filings must be submitted, one as the acquiring person and one as the acquired person, following the appropriate instructions for each. See § 803.2(a)(2). Filings should be submitted electronically consistent with the instructions on the PNO website. If the electronic submission platform is unavailable, the Agencies may announce sites for delivery through the media and, if possible, at the PNO website. Responses Items that require the submission of documents or narrative responses should be produced in (1) searchable PDF format from which text can be copied or (2) Excel formats. All documents should be logged in an Excel File. The log should list all responsive E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules documents, regardless of whether the document is redacted or withheld for privilege. For each document, indicate: 1. The document number; 2. Request(s) to which the document is responsive; 3. Title; 4. Date; 5. Authors and job titles; and 6. Whether the document is privileged. Indented and bolded headings in these Instructions should each be considered a separate request. If a group of people prepared the document, list all the authors and their titles, identifying the principal authors. Alternatively, it is acceptable to indicate that the document was prepared under the supervision of the lead author and to provide the name and title of that author. If the filing person engaged a third party to prepare a document, provide the name of the third party, and the name, title, and company name for the individual within the filing person who supervised the creation of the document, or for whom the document was prepared. For materials received from a third party that was not engaged by the filing person, only the name of the third party is required. If parties submit documents in addition to what is required, such documents should be identified as ‘‘Voluntary’’. See § 803.1(b). Submit only one copy of identical responsive documents. For each narrative response, indicate the document number for each document that supports the narrative and the request to which the narrative is responsive. lotter on DSK11XQN23PROD with PROPOSALS3 Privilege For privileged documents, the filing person must also provide the following in the Responses log: 1. The privilege type (redacted or withheld); 2. The privilege claim; 3. Addressee(s) and all recipients, with company name and title, of the original and any copies; 4. Subject matter; 5. Document’s present location; and 6. Who has control over it. If a privileged document was circulated to a group, such as the board or an investment committee, the name of the group is sufficient, but the filing person should be prepared to disclose the names and titles/ positions of the individual group members, if requested. If the claim of privilege is based on advice from inside and/or outside counsel, the name of the inside and/or outside counsel providing the advice (and the law firm, if applicable) must be provided. If several lawyers participated in providing advice, identifying lead counsel is sufficient. In identifying who controls a document, the name of the law firm is sufficient. Translations Materials or information in a foreign language must be translated into English, with the English translation attached to the foreign language version. See § 803.8. VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 Non-Compliance If unable to answer any item fully, provide such information as is available and a statement of reasons for non-compliance as required by § 803.3. If exact answers to any item cannot be given, enter best estimates and indicate the source or basis of such estimates. Add an endnote with the notation ‘‘est.’’ to any item where data are estimated. Limited Response Information need not be supplied regarding assets, voting securities, or non-corporate interests currently being acquired when their acquisition is exempt under the Act or Rules. See § 803.2(c). Ultimate Parent Entity Information UPE Details Name Provide the name, headquarters address, and website (if one exists) of the person filing notification. The name of the person filing is the name of the UPE. See § 801.1(a)(3). Entity Type Specify whether the UPE is a corporation, unincorporated entity, natural person, or other entity type (specify). See § 801.1. Acquiring or Acquired Person Indicate whether the filing is being made as an acquiring or acquired person. Filing Made on Behalf of the UPE If the filing is being made on behalf of the UPE by another entity within the same person that is authorized by the UPE to file the notification on its behalf pursuant to § 803.2(a), or filed pursuant to § 803.4 on behalf of a foreign person, provide the name and mailing address of the entity filing the notification on behalf of the UPE. Contact Information Provide the name and title, firm name, address, telephone number, and email address of two individuals (primary and secondary) to contact regarding the filing. See § 803.20(b)(2)(ii). Second Request Contact Information Provide the name, firm name, address, telephone number, and email address of an individual located in the United States designated for the limited purpose of receiving notice of the issuance of a request for additional information or documentary material. See § 803.20(b)(2). Annual Reports and Financial Information Central Index Key Provide the names of all entities within the person filing the notification, 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. Annual Reports and Audit Reports 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 PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 42211 entity(s) and any entity controlled by the acquiring person whose revenues contribute to a NAICS overlap or any overlap identified in the Horizontal Overlap Narrative. The acquired person should also provide the most recent reports of the acquired entity(s). Natural person UPEs should not provide personal balance sheets or tax returns. Natural person UPEs should instead provide the most recent reports for the highest-level entity(s) they control. The person filing notification may incorporate a document responsive to this item by reference to an internet address directly linking to the document. See § 803.2(e). Size of Person If applicable, indicate whether the UPE stipulates that it meets the size of person test. See 15 U.S.C. 18a(a). Organization Structure If the acquisition includes only assets that do not comprise substantially all the assets of an operating unit, the acquired person should not complete the questions in this section. Otherwise, the acquired person must complete these questions for the portion of the transaction related to the voting securities, non-corporate interests, and assets that comprise substantially all the assets of an operating unit. Entities Within the Acquiring Person and Acquired Entity List the name, city, state/country, and zip code of all U.S. entities, and all foreign entities that have sales in or into the United States, that are included within the acquiring person, or acquired entity (as appropriate). Entities with total assets of less than $10 million may be omitted. Alternatively, the acquiring person or acquired entity (as appropriate) may report all entities within it. Also list all names under which the entities do business or have done business within the past 3 years (e.g., d/b/a or f/k/a names). The list of entities should be organized by operating company or operating business/ unit (‘‘top-level entity’’), if applicable. Minority Shareholders and Other NonControlling Entities Acquiring Person Provide a narrative response describing the ownership structure of the acquiring entity. For transactions where a fund or master limited partnership is the UPE, also provide an organizational chart sufficient to identify and show the relationship of all entities that are affiliates or associates. See § 801.1(d). Additionally, list the name, headquarters mailing address, and approximate percentage of holdings for any individual or entity that currently holds, or will hold as a result of the transaction, 5% or more but less than 50% of the voting securities or non-corporate interests of (1) the acquiring entity, (2) any entity directly or indirectly controlled by the acquiring entity, (3) any entity that directly or indirectly controls the acquiring entity, and (4) any entity within the acquiring person that has been or will be created in contemplation of, or for the purposes of, effectuating the transaction. Entities related E:\FR\FM\29JNP3.SGM 29JNP3 lotter on DSK11XQN23PROD with PROPOSALS3 42212 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules to master limited partnerships, funds, investment groups, or similar entities that do business under a common name should also have the d/b/a or ‘‘street name’’ of such group listed. For limited partnerships, the general partner(s), regardless of percentage held, should also be listed. If the identity of minority investors or percentage to be held is not finalized at time of filing, provide good faith estimates and explain. Acquired Person Provide a narrative response, describing the ownership structure of the acquired entity(s). Additionally, list the name, headquarters mailing address, and approximate percentage held for any holders of 5% or more but less than 50% of (1) the acquired entity(s), and (2) any entity within the acquired entity(s), but only if such holder will continue to hold an interest (whether voting securities or noncorporate interests) in such entity(s), or will acquire an interest in any entity within the acquiring person as a result of the transaction. For limited partnerships, the general partner(s), regardless of percentage held, should also be listed. Other Types of Interest Holders That May Exert Influence For the Acquiring Person Only: Identify every entity and individual (other than those employed by the acquiring person or an entity it controls) that, upon consummation or as a result of agreements related to consummation: 1. Provides, has provided (and still is a creditor), or will provide credit to the acquiring entity, an entity the acquiring entity directly or indirectly controls, or an entity that directly or indirectly controls the acquiring entity. Do not list individuals or entities if the amount of credit they have provided or will provide is less than 10% of the value of that entity; 2. Holds non-voting securities (including options or warrants) of the acquiring entity, an entity the acquiring entity directly or indirectly controls, or an entity that directly or indirectly controls the acquiring entity, where such non-voting securities are valued at more than 10% of that entity; 3. Is a board member or board observer or has the right to nominate or appoint a board member or board observer of the acquiring entity, an entity the acquiring entity directly or indirectly controls, or an entity that directly or indirectly controls the acquiring entity; or 4. Has an agreement to manage the acquiring entity, an entity the acquiring entity directly or indirectly controls, or an entity that directly or indirectly controls the acquiring entity. For every individual or entity identified, provide the name, contact information, the percent of voting securities or non-corporate interests owned (if any), and a description of the relevant relationship(s) above. Officers, Directors, and Board Observers For each entity within the acquiring person or acquired entity (as applicable), list by VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 entity all current officers, directors, and board observers (or in the case of unincorporated entities, individuals exercising similar functions), as well as those who have served in the position within the past 2 years. Additionally, list all individuals who will or are likely to serve as an officer, director, or board observer of an entity within the acquiring person as a result of or as contemplated by the transaction. Organize the response by entity and include entities that are not yet created but are expected to be created as a result of or as contemplated by the transaction. If the identities of the prospective officers, directors, and board observers are unknown, briefly describe who will have the authority to select them. For each officer, director and board observer identified, list all other entities for which the individual serves, or has served within the last two years, as an officer, director, or board observer. Transaction Information Parties List the name and mailing address of each acquiring and acquired person, and acquiring and acquired entity, whether or not required to file a notification. Do not list entities controlled by an acquired entity. Acquiring UPE Provide the name, headquarters address, and website (if one exists) of the acquiring person. Acquiring Entity If an entity other than the acquiring UPE is making the acquisition, provide the name, mailing address, and website of that entity. Acquired UPE Provide the name, headquarters address, and website (if one exists) of the acquired person. Acquired Entity If the assets, voting securities, or noncorporate interests of an entity other than the acquired UPE are being acquired, provide the name, mailing address, and website of that entity. Filing Fee Total Expected Filing Fee Indicate the value of the total required fee for the transaction. Parties Paying the Fee Indicate which filing party(s) is paying the filing fee and, if applicable, whether the portion of the fee being paid by the filer is being paid by multiple entities associated with the filer. For each entity paying a portion of the fee, provide the name of payer, the amount paid, the payment method, and the Electronic Wire Transfer (EWT) confirmation number or check number. Note on Paying by EWT: In order for the FTC to track payment, the payer must provide information required by the Fedwire Instructions to the financial institution initiating the EWT. A template of the Fedwire Instructions is available at the PNO website on the Filing Fee Information page. Note on Paying by Check: The FTC strongly discourages check payments. However, if an PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 EWT cannot be arranged, the FTC will accept a check, sent to Financial Operations. Cashiers’ or certified checks are preferred. Make the check payable to the Federal Trade Commission and deliver to: Federal Trade Commission, Financial Operations Division, 600 Pennsylvania Ave., Drop H–790, Washington, DC 20580. Please note that the waiting period may be delayed until the fee has been confirmed. Transaction Details 801.30 Transaction: Indicate whether the transaction is subject to § 801.30. Transaction Type Indicate whether the transaction is a(n): • Acquisition of voting securities; • Acquisition of non-corporate interests; • Acquisition of assets; • Merger (see § 801.2); • Consolidation (see § 801.2); • Formation of a joint venture, other corporation, or unincorporated entity (see §§ 801.40 and 801.50); • Bankruptcy that is subject to Section 363(b) of the Bankruptcy Code (11 U.S.C. 363); • Cash Tender Offer; • Acquisition subject to § 801.31; • Secondary acquisition subject to § 801.4; • Acquisition subject to § 801.2(e); and/or • Acquisition consummated in violation of the HSR Act. Acquisition Details Provide the requested information for the value and percentage of assets, voting securities, and non-corporate interests to be acquired. If a combination of assets, voting securities, and/or non-corporate interests are being acquired and allocation is not possible, note such information in an endnote. For determining percentage of voting securities, evaluate total voting power per § 801.12. For determining percentage of noncorporate interests, evaluate the economic interests per § 801.1(b)(1)(ii). • State the value of voting securities already held by the acquiring person. See § 801.10. • State the percentage of voting securities already held by the acquiring person. See § 801.12. • State the total value of voting securities to be held by the acquiring person as a result of the acquisition. See § 801.10. • State the total percentage of voting securities to be held by the acquiring person as a result of the acquisition. See § 801.12. • State the value of non-corporate interests already held by the acquiring person. See § 801.10. • State the percentage of non-corporate interests already held by the acquiring person. See § 801.1(b)(1)(ii). • State the total value of non-corporate interests to be held by the acquiring person as a result of the acquisition. See § 801.10. • State the total percentage of noncorporate interests to be held by the acquiring person as a result of the acquisition. See §§ 801.10 and 801.1(b)(1)(ii). • State the value of assets to be held by the acquiring person as a result of the acquisition. See § 801.10. E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS3 • State the aggregate total value of assets, voting securities, and non-corporate interests of the acquired person to be held by the acquiring person as a result of the acquisition. See §§ 801.10, 801.12, 801.13 and 801.14. Notification Threshold This item should only be completed by the acquiring person when voting securities are being acquired. If more than voting securities are being acquired, respond to this item only regarding voting securities. Indicate the highest applicable threshold for which notification is being filed. See § 801.1(h). • $50 million (as adjusted); • $100 million (as adjusted); • $500 million (as adjusted); • 25% (if the value of voting securities to be held is greater than $1 billion, as adjusted); • 50%; • N/A. Note that the 50% notification threshold is the highest threshold and should be used for any acquisition of 50% or more of the voting securities of an issuer, regardless of the value of the voting securities. For instance, an acquisition of 100% of the voting securities of an issuer valued in excess of $500 million (as adjusted) would cross the 50% notification threshold, not the $500 million (as adjusted) threshold. Transaction Description Business of the Acquiring Person Acquiring Person Only: Describe the business operation(s) of all entities within the acquiring person. Business of the Acquired Entity Describe the business operation(s) being acquired. If assets, describe the assets and whether they comprise a business operation. Non-Reportable UPE(s) Provide the names of any non-reportable UPE(s). Transaction Description Briefly describe the transaction, indicating whether assets, voting securities, or noncorporate interests (or some combination) are to be acquired. Indicate what consideration will be received by each party and the scheduled consummation date of the transaction. Also identify any special circumstances that apply to the filing, such as whether part of the transaction is exempt under one of the exemptions found in Part 802. If any attached transaction documents use code names to refer to the parties, provide an index identifying the codes. Transaction Rationale Identify and explain each strategic rationale for the transaction discussed or contemplated by the filing person, or any of its officers, directors, or employees. If the acquiring entity is different from the UPE, submit an explanation for each entity. Identify each document produced in the filing that confirms or discusses the stated rationale(s). Transaction Diagram Submit a diagram of the transaction and provide a chart explaining the relationship VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 between all entities and/or natural persons involved in the transaction. Related Transactions Indicate whether the transaction that is the subject of this filing has related filings because the transaction: • Is a principal transaction that triggers one or more shareholder backside transactions; • Is a shareholder backside transaction; • Has more than one acquiring UPE; • Has more than one acquired UPE; • Has more than one reportable step; • Is a joint venture; • Is a consolidation; • Is an exchange of assets; or • Has other circumstance that requires more than one filing. Provide additional details regarding the related transaction(s), such as party names and transaction numbers. Early Termination Indicate whether the filing person requests early termination. Notification of each grant of early termination will be published in the Federal Register, as required by 15 U.S.C. 18a(b)(2), and on the PNO website. Note that if either party in any transaction requests early termination, it may be granted and published. Joint Ventures See §§ 801.40 and 801.50. Contributions List the contributions that each person forming the joint venture corporation or unincorporated entity has agreed to make, specifying when each contribution is to be made and the value of the contribution as agreed by the contributors. Consideration Describe fully the consideration that each person forming the joint venture corporation or unincorporated entity will receive in exchange for its contribution(s). Business Description Describe generally the business in which the joint venture corporation or unincorporated entity will engage, including its principal types of products or activities, and the geographic areas in which it will do business. NAICS Codes Identify each 6-digit NAICS industry code in which the joint venture corporation or unincorporated entity will derive dollar revenues. Agreements and Timeline Transaction-Specific Agreements Furnish copies of all documents that constitute the agreement(s) related to the transaction, including, but not limited to, exhibits, schedules, side letters, agreements not to compete or solicit, and other agreements negotiated in conjunction with the transaction. Documents that constitute the agreement(s) (e.g., Agreement and Plan of Merger, Letter of Intent, Purchase and Sale Agreement, Asset Purchase Agreement, Stock/Securities Purchase Agreement) must be executed, PO 00000 Frm 00037 Fmt 4701 Sfmt 4702 42213 while supporting agreements, such as employment agreements and agreements not to compete may be provided in draft form if that is the most recent version. If there is no definitive executed agreement, provide a copy of the most recent draft agreement or term sheet that provides sufficient detail about the scope of the entire transaction that the parties intend to consummate. See § 803.5. Note that transactions subject to § 801.30 and bankruptcies under 11 U.S.C. 363(b) do not require an executed agreement. For bankruptcies, provide the order from the bankruptcy court. Other Agreements Between the Parties Provide all other agreements between the acquiring and acquired person, including but not limited to, non-compete or nonsolicitation agreements, supply agreements, or licensing agreements including current agreements and those that expired, have terminated, or were canceled within one year of the filing. Timeline Provide a detailed timetable for the transaction, including when the signatories intend to consummate the transaction, or implement all closing conditions, integration, affiliation, or other purchase agreements, and any other important deadlines for closing or terminating the merger agreement. Identify all provisions in the agreement that govern the extension of these deadlines and explain the conditions for extending deadlines and how long they may be extended. Also, if applicable, provide a description of any fee or other consideration paid or to be paid at key dates of the transaction or upon closing, including but not limited to termination fees, break fees, ticking fees, and any other arrangement intended to serve in lieu of a break fee. Competition and Overlaps Business Documents Transaction-Related Documents Documents Prepared by or for Officers, Directors, or Supervisory Deal Team Lead(s) Provide all studies, surveys, analyses, and reports prepared by or for any officer(s), director(s), or supervisory deal team lead(s) for the purpose of evaluating or analyzing the acquisition with respect to market shares, competition, competitors, markets, potential for sales growth, or expansion into product or geographic markets. For unincorporated entities, provide such documents prepared by or for individuals exercising similar functions as officers and directors, as well as the supervisory deal team lead(s). Confidential Information Memoranda Provide all confidential information memoranda prepared by or for any officer(s) or director(s) (or, in the case of unincorporated entities, individuals exercising similar functions) of the UPE of the acquiring or acquired person or of the acquiring or acquired entity(s) that specifically relate to the sale of the acquired entity(s) or assets. If no such confidential information memorandum exists, submit any document(s) given to any officer(s) or E:\FR\FM\29JNP3.SGM 29JNP3 lotter on DSK11XQN23PROD with PROPOSALS3 42214 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules director(s) of the buyer meant to serve the function of a confidential information memorandum. This does not include ordinary course documents and/or financial data shared in the course of due diligence, except to the extent that such materials served the purpose of a confidential information memorandum when no such confidential information memorandum exists. Documents responsive to this item are limited to those produced within one year before the date of filing. Studies, Surveys, Analyses, and Reports Provide all studies, surveys, analyses and reports prepared by investment bankers, consultants, or other third party advisors (‘‘third party advisors’’) for any officer(s) or director(s) (or, in the case of unincorporated entities, individuals exercising similar functions) of the UPE of the acquiring or acquired person or of the acquiring or acquired entity(s) for the purpose of evaluating or analyzing market shares, competition, competitors, markets, potential for sales growth or expansion into product or geographic markets that specifically relate to the sale of the acquired entity(s) or assets. This item requires only materials developed by third party advisors during an engagement or for the purpose of seeking an engagement. Documents responsive to this item are limited to those produced within one year before the date of filing. Synergies and Efficiencies Provide all studies, surveys, analyses, models, and reports evaluating or analyzing synergies, financial projections, and/or efficiencies prepared by or for any officer(s) or director(s) (or, in the case of unincorporated entities, individuals exercising similar functions) for the purpose of evaluating or analyzing the acquisition. Financial models without stated assumptions need not be provided. Drafts For each responsive Transaction-Related Document, provide drafts of the document that were sent to an officer, director, or supervisory deal team lead(s). Periodic Plans and Reports Provide all semi-annual or quarterly plans and reports that were provided to the Chief Executive Officer (CEO) of the acquiring or acquired entity (as appropriate) and any entity that it controls or is controlled by and individuals who report directly to each such CEO (but excluding individuals responsible solely for environmental, tax, human resources, pensions, benefits, ERISA, or OSHA issues) that analyze market shares, competition, competitors, or markets pertaining to any product or service also produced, sold, or known to be under development by the other party (acquiring person or acquired entity as appropriate). Documents responsive to this item are limited to those prepared or modified within one year of the date of filing. Provide all plans and reports (including semi-annual or quarterly) that were provided to the Board of Directors of the acquiring or acquired entity (as appropriate) and any entity that it controls or is controlled by that VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 analyze market shares, competition, competitors, or markets pertaining to any product or service also produced, sold, or known to be under development by the other party (acquiring person or acquired entity as appropriate). Documents responsive to this item are limited to those prepared or modified within one year of the date of filing. Organizational Chart of Authors and Recipients Provide an organizational chart(s) that identifies the position(s) held by authors, and for privileged documents, recipients, of all business documents submitted. Filing persons should indicate on the organizational chart(s) the individuals whose files were searched for documents responsive to these Instructions. Competition Analysis Horizontal Overlap Narrative Describe each of the principal categories of products and services (as defined in the dayto-day operations) of the acquiring person or acquired entity (as applicable). In addition, list and describe each of the current or known planned products or services of the acquiring person or acquired entity (as appropriate) that competes with (or could compete with) a current or known planned product or service of the other party (acquiring person or acquired entity as appropriate). Current or known planned products or services include those that the acquiring person or acquired entity researches, develops, manufactures, produces, sells, offers, provides, supplies, or distributes. For each such product or service listed, provide: 1. The sales (in units and dollars) for each of the past two fiscal years. For those products or services not generating revenue or whose performance is not measured by revenue in the ordinary course of business, provide projected revenue, estimates of the volume of products to be sold, time spent using the service, or any other metric by which the acquiring person or acquired entity (as appropriate) measures performance (e.g., daily users, new signups). 2. A description of all categories of customers of the acquiring person or acquired entity (as appropriate) that purchase or use the product or service (e.g., retailer, distributor, broker, government, military, educational, national account, local account, commercial, residential, or institutional), and an estimate of how much of the product or service each customer category purchased or used monthly for the last fiscal year. If no customers have yet used the product or service, provide the date that development of the product or service began; a description of the current stage in development, including any testing and regulatory approvals and any planned improvements or modifications; the date that development (including testing and regulatory approvals) was or will be completed; and the date that the product or service is expected to be sold or otherwise commercially launched. 3. Contact information (including individual’s name, title, phone, and email) for the acquiring person’s or acquired entity’s (as appropriate) top 10 customers in the last PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 fiscal year (as measured in both units and dollars), and the top 10 customers for each customer category identified. 4. A description of any licensing arrangements. 5. A description, including duration, of any non-compete or non-solicitation agreement applicable to employees or business units related to the product or service. Supply Relationships Narrative Related Sales: List and describe each product, service, or asset (including data) that the acquiring person or acquired entity (as applicable) has sold, licensed, or otherwise supplied in the last two fiscal years (1) to the other party (acquiring person or acquired entity as appropriate), or (2) to any other business that, to the filing person’s knowledge or belief, uses its product, service, or asset to compete with the other party’s products or services, or as an input for a product or service that competes or is intended to compete with the other party’s products or services. For each product, service, or asset listed, provide: 1. The sales (in units and dollars and any other appropriate measure) for each of the past two fiscal years, separately to (1) the other party (acquiring person or acquired entity as appropriate) and (2) any other business that, to the filing person’s knowledge or belief, uses its product, service, or asset to compete with the other party’s products or services, or as an input for a product or service that competes or is intended to compete with the other party’s products or services. 2. The top 10 customers (as measured in both units and dollars) of the acquiring person or acquired entity (as appropriate) that use the acquiring person’s or acquired entity’s (as appropriate) product, service, or asset to compete with the other party’s (acquiring person or acquired entity as appropriate) products or services, or as an input for a product or service that competes or is intended to compete with the other party’s products or services. For each such customer, provide contact information (including title, phone, and email) and a description of the acquiring person’s or acquired entity’s (as appropriate) supply or licensing agreement (or other comparable terms of supply). Related Purchases: List and describe each product, service, or asset (including data) that the acquiring person or acquired entity (as appropriate) incorporates as an input into any product or service and that the acquiring person or acquired entity (as appropriate) has purchased, licensed, or otherwise obtained in the last two years (1) from the other party (acquiring person or acquired entity as appropriate) or (2) from any other business that, to the filing person’s knowledge or belief, competes with the other party to provide a substantially similar product, service, or asset. For each product, service, or asset listed, provide: 1. The purchased amount (in units and dollars and any other appropriate measure) for each of the last two fiscal years, separately for (1) the other party and (2) any other business that, to the filing person’s E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules knowledge or belief, competes with the other party to provide a substantially similar product, service, or asset. 2. The top 10 suppliers (as measured in both units and dollars) for the associated input product, service, or asset, with contact information (including title, phone, and email) and a description of the acquiring person’s or acquired entity’s (as appropriate) purchase or licensing agreement (or other comparable terms of purchase). Labor Markets Information This section requests information about the largest categories of workers employed by the acquiring person or acquired entity (as appropriate) and the geographic area(s) where these employees work. Largest Employee Classifications Provide the aggregate number of employees of the acquiring person or acquired entity (as appropriate) for each of the five largest occupational categories (as categorized by the first six digits of the relevant SOC classifications). Geographic Market Information for Each Overlapping Employee Classification Indicate the five largest 6-digit SOC codes in which both parties (the acquiring person and the acquired entity) employ workers. For each overlapping 6-digit SOC code, list each ERS commuting zone in which both parties employ workers with the 6-digit classification and provide the aggregate number of classified employees in each ERS commuting zone. Worker and Workplace Safety Information Identify any penalties or findings issued against the filing person by the U.S. Department of Labor’s Wage and Hour Division (WHD), the National Labor Relations Board (NLRB), or the Occupational Safety and Health Administration (OSHA) in the last five years and/or any pending WHD, NLRB, or OSHA matters. For each identified penalty or finding, provide (1) the decision or issuance date, (2) the case number, (3) the JD number (for NLRB only), and (4) a description of the penalty and/or finding. lotter on DSK11XQN23PROD with PROPOSALS3 NAICS Codes This item requests information regarding the industry categories of the acquiring person or acquired entity(s) or assets (as appropriate) of products and services that derived revenue in the last fiscal year, as well as for products or services in development that would create overlaps with the other party (acquiring person or acquired entity as appropriate). NAICS Codes Describing U.S. Operations With Estimates of Revenue Acquiring Person Identify all 6-digit NAICS industry codes that describe the U.S. operations of the acquiring person, inclusive of all entities included within the acquiring person at the time the filing is made. Responses must be organized by NAICS code in ascending order. For each code, provide the name of the operating entity(s) that derive(s) revenue in that code and the VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 estimated revenue range: less than $10 million; $10 million or more but less than $100 million; $100 million or more but less than $1 billion; or $1 billion or more. Identify each 6-digit NAICS code in which both the acquiring person and acquired entity(s) or assets derive revenue. For products and services that derived revenue in the most recent fiscal year in a non-manufacturing NAICS code, if the revenue is estimated at less than one million dollars, that code may be omitted so long as the code does not overlap with a code in which the acquired entity(s) or assets derived revenue from U.S. operations. Acquiring persons should also list all NAICS codes for products or services under development by the acquiring person that would overlap with the products or services of the acquired entity(s) or assets, inclusive of products or services that are known to be under development by the acquired entity(s) or assets. NAICS codes that reflect only these pipeline products or services should be identified as ‘‘pre-revenue.’’ If more than one NAICS code describes the same operations of the acquiring person, list each code, and provide an estimate of revenue, as described above. End notes may be used to clarify the selection of codes or potential overlaps. Acquired Person Identify all 6-digit NAICS industry codes that describe the U.S. operations of the acquired entity(s) or assets, inclusive of all entities and assets anticipated to be included within the acquired entity(s) or assets at the time the transaction will be consummated. Responses must be organized by NAICS code in ascending order. For each code, provide the name of the operating entity(s) that derive(s) revenue in that code and the estimated revenue range: less than $10 million; $10 million or more but less than $100 million; $100 million or more, but less than $1 billion; or $1 billion or more. Identify each 6-digit NAICS code in which both the acquiring person and acquired entity(s) or assets derive revenue. For products and services that derived revenue in the most recent fiscal year in a non-manufacturing NAICS code, if the revenue is estimated at less than one million dollars, that code may be omitted so long as the code does not overlap with a code in which the acquiring person derived revenue from U.S. operations. Acquired persons should also list all NAICS codes for products or services under development by the acquired entity(s) or assets and expected to have annual revenue greater than $1 million within two years. NAICS codes that reflect only these pipeline products or services should be identified as ‘‘pre-revenue.’’ If more than one NAICS code describes the same operations of the acquired entity(s) or assets, list each code, and provide an estimate of revenue, as described above. End notes may be used to clarify the selection of codes or potential overlaps. No Revenue If there is no revenue to report, explain why. PO 00000 Frm 00039 Fmt 4701 Sfmt 4702 42215 Controlled-Entity Overlaps If, to the knowledge or belief of the person filing notification, the acquiring person, or any associate (see § 801.1(d)(2)) of the acquiring person, derived any amount of dollar revenues in the most recent year from operations: 1. In industries within any 6-digit NAICS industry code in which any acquired entity 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 or its associates not contributed to the joint venture. If the acquiring person reports an associate overlap only, the acquired person does not need to respond to this section. NAICS Overlaps of Controlled Entities Acquiring Person List the name of each entity within the acquiring person or associate of the acquiring person, that has U.S, operations in the same code as an acquired entity or assets. For each such entity, list the name(s) by which the entity does or has within the last 3 years done business, whether the listed entity is controlled by the filing person or an associate of the filing person, the overlapping NAICS code(s), NAICS description(s), and provide the appropriate Geographic Market Information, based upon the NAICS code. Organize responses by NAICS code. Acquired Person List the name of each entity within the acquired entity that has U.S. operations in the same code as the acquiring person. For each such entity, list the name(s) by which the entity does or has within the last 3 years done business, the overlapping NAICS code(s), NAICS description(s), and provide the appropriate Geographic Market Information, based upon the NAICS code. Organize responses by NAICS code. Geographic Market Information For each identified overlapping NAICS code, provide geographic information, as described below. 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. Except in the case of those NAICS industries in the sectors, subsectors, and codes that require street-address level reporting, the person filing notification may respond with the word ‘‘national’’ if business is conducted in all 50 states. State-Level Reporting Manufacturing Industries For each 6-digit NAICS code within the industry sector, subsector, or code listed below, list the states in which, to the knowledge or belief of the person filing the notification, the products in that 6-digit E:\FR\FM\29JNP3.SGM 29JNP3 lotter on DSK11XQN23PROD with PROPOSALS3 42216 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules 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). 31**** through 33**** Manufacturing, except: 3115** Dairy Product Manufacturing 311611 Animal (except Poultry) Slaughtering 311613 Rendering and Meat Byproduct Processing 311615 Poultry Processing 31181* Bread and Bakery Product Manufacturing 321*** Wood Product Manufacturing 32221* Paperboard Container Manufacturing 324*** Petroleum and Coal Products Manufacturing 3251** Basic Chemical Manufacturing 325521 Plastics Materials and Resin Manufacturing 3271** Clay Product and Refractory Manufacturing 3272** Glass and Glass Product Manufacturing 3273** Cement and Concrete Product Manufacturing Wholesale Trade For each 6-digit NAICS code within the industry sector, subsector, or code listed below, list the states or, if desired, portions thereof in which the customers of the person filing notification are located. 42**** Wholesale Trade, except: 42331* Lumber, Plywood, Millwork, and Wood Panel Merchant Wholesalers 42333* Roofing, Siding, and Insulation Material Merchant Wholesalers 42344* Other Commercial Equipment Merchant Wholesalers 42345* Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers 42346* Ophthalmic Goods Merchant Wholesalers 42349* Other Professional Equipment and Supplies Merchant Wholesalers 4239** Miscellaneous Durable Goods Merchant Wholesalers 4241** Paper and Paper Product Merchant Wholesalers 4242** Drug and Druggists’ Sundries Merchant Wholesalers 42441* General Line Grocery Merchant Wholesalers 42442* Packaged Frozen Food Merchant Wholesalers 42451* Grain and Field Bean Merchant Wholesalers 42452* Livestock Merchant Wholesalers 4247** Petroleum and Petroleum Products Merchant Wholesalers 4248** Beer, Wine, and Distilled Alcoholic Beverage Merchant Wholesalers 42491* Farm Supplies Merchant Wholesalers 42495* Paint, Varnish, and Supplies Merchant Wholesalers Insurance Carriers For the 6-digit NAICS code within the industry subsector listed below, list the VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 state(s) in which the person filing notification is licensed to write insurance. 5241** Insurance Carriers Other NAICS Sectors For each 6-digit NAICS code within the industry sector, subsector, or code listed below, list the states or, if desired, portions thereof in which the person filing notification conducts such operations. 11**** Agriculture, Forestry, Fishing, and Hunting, except: 113*** Forestry and Logging 21**** Mining, Quarrying, and Oil and Gas Extraction, except: 2123** Nonmetallic Mineral Mining and Quarrying 2213** Water, Sewage, and Other Systems 23**** Construction 44912* Home Furnishing Retailers 4492** Electronics and Appliance Retailers 48**** and 49**** Transportation and Warehousing, except: 493*** Warehousing and Storage 51**** Information, except: 512*** Motion Picture and Sound Recording Industries 5222** Nondepository Credit Intermediation 523*** Securities, Commodity Contracts, and Other Financial Investments and Related Activities 5242** Agencies, Brokerages, and Other Insurance Related Activities 525*** Funds, Trusts, and Other Financial Vehicles 531*** Real Estate 533*** Lessors of Nonfinancial Intangible Assets (Except Copyrighted Works) 54**** Professional, Scientific and Technical Services, except: 54138* Testing Laboratories and Services 54194* Veterinary Services 55**** Management of Companies and Enterprises 561*** Administrative and Support Services 61**** Educational Services 71**** Arts, Entertainment, and Recreation, except: 7132** Gambling Industries 71394* Fitness and Recreational Sports Centers 7212** RV (Recreational Vehicle) Parks and Recreational Camps 7213** Rooming and Boarding Houses, Dormitories, and Workers’ Camps 8114** Personal and Household Goods Repair and Maintenance 813*** Religious, Grantmaking, Civic, Professional, and Similar Organizations 814*** Private Households Street-Level Reporting For each 6-digit NAICS code within the industry sector, subsector, or code listed below, provide the street address, arranged by state, county and city or town, and latitude and longitude (each in degrees up to at least five decimal places) of each establishment from which dollar revenues were derived (either directly or by a franchisee) in the most recent year by the person filing notification. 113*** Forestry and Logging 2123** Nonmetallic Mineral Mining and Quarrying PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 22**** Utilities, except: 2213** Water, Sewage and Other Systems 3115** Dairy Product Manufacturing 311611 Animal (except Poultry) Slaughtering 311613 Rendering and Meat Byproduct Processing 311615 Poultry Processing 31181* Bread and Bakery Product Manufacturing 321*** Wood Product Manufacturing 32221* Paperboard Container Manufacturing 324*** Petroleum and Coal Products Manufacturing 3251** Basic Chemical Manufacturing 325521 Plastics Materials and Resin Manufacturing 3271** Clay Product and Refractory Manufacturing 3272** Glass and Glass Product Manufacturing 3273** Cement and Concrete Product Manufacturing 42331* Lumber, Plywood, Millwork, and Wood Panel Merchant Wholesalers 42333* Roofing, Siding, and Insulation Material Merchant Wholesalers 42344* Other Commercial Equipment Merchant Wholesalers 42345* Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers 42346* Ophthalmic Goods Merchant Wholesalers 42349* Other Professional Equipment and Supplies Merchant Wholesalers 4239** Miscellaneous Durable Goods Merchant Wholesalers 4241** Paper and Paper Product Merchant Wholesalers 4242** Drug and Druggists’ Sundries Merchant Wholesalers 42441* General Line Grocery Merchant Wholesalers 42442* Packaged Frozen Food Merchant Wholesalers 42451* Grain and Field Bean Merchant Wholesalers 42452* Livestock Merchant Wholesalers 4247** Petroleum and Petroleum Products Merchant Wholesalers 4248** Beer, Wine, and Distilled Alcoholic Beverage Merchant Wholesalers 42491* Farm Supplies Merchant Wholesalers 42495* Paint, Varnish, and Supplies Merchant Wholesalers 44**** and 45**** Retail Trade, except: 44912* Home Furnishings Retailers 4492** Electronics and Appliance Retailers 493*** Warehousing and Storage 512*** Motion Picture and Sound Recording Industries 521*** Monetary Authorities—Central Bank 5221** Depository Credit Intermediation 5223** Activities Related to Credit Intermediation 532*** Rental and Leasing Services 54138* Testing Laboratories and Services 54194* Veterinary Services 562*** Waste Management and Remediation Services 62**** Health Care and Social Assistance E:\FR\FM\29JNP3.SGM 29JNP3 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS3 7132** Gambling Industries 71394* Fitness and Recreational Sports Centers 72**** Accommodation and Food Services, except: 7212** RV (Recreational Vehicle) Parks and Recreational Camps 7213** Rooming and Boarding Houses, Dormitories, and Workers’ Camps 811*** Repair and Maintenance, except 8114** Personal and Household Goods Repair and Maintenance 812*** Personal and Laundry Services Minority-Held Entity Overlaps This section requires the disclosure of holdings of 5% or more but less than 50% of certain entities that derive dollar revenues in any 6-digit NAICS code reported by the other person filing notification. Holdings in those entities that have total assets of less than $10 million may be omitted. If NAICS codes are unavailable, holdings in entities that have operations in the same industry, based on the knowledge or belief of the filing person, should be listed. Holdings in those entities that have total assets of less than $10 million may be omitted. Minority Holdings of Acquiring Person and Its Associates If the acquiring person holds 5% or more but less than 50% of the voting securities of any issuer or non-corporate interests of any unincorporated entity that derived dollar revenues in the most recent year from operations in industries within any 6-digit NAICS code(s) reported by the acquired entity(s) or assets, provide such 6-digit NAICS code(s), the entity within the acquiring person that holds the minority interests, the name and d/b/a names (if known) of the minority held-entity, and percentage of voting securities or noncorporate interests held. Additionally, based on the knowledge or belief of the acquiring person, for each associate (see § 801.1(d)(2)) of the acquiring person holding: 1. 5% or more but less than 50% of the voting securities or non-corporate interests of an acquired entity; and/or 2. 5% or more but less than 50% of the voting securities of any issuer or noncorporate interests of any unincorporated entity 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, list the associate, the name and d/b/a names (if known) of the minority-held entity, and percentage of voting securities or noncorporate interests held. Responses should be organized alphabetically by the name of the entity in which minority interests are held. The acquiring person may rely on its regularly prepared financials that list its investments, and those of its associates that list their investments, provided the financials are no more than three months old. Minority Holdings of the Acquired Entity If an acquired entity holds 5% or more but less than 50% of the voting securities of any VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 issuer or non-corporate interests of any unincorporated entity that derived dollar revenues in the most recent year from operations in industries within any 6-digit NAICS industry code(s) reported by the acquiring person, provide such 6-digit NAICS code(s), the entity within the acquired entity that holds the minority interests, the name and d/b/a names (if known) of the minorityheld entity, and percentage of voting securities or non-corporate interests held. Responses should be organized alphabetically by the name of the entity in which minority interests are held. Prior Acquisitions This item should be completed for the acquiring person and the acquired entity, and pertains only to prior acquisitions of U.S. entities or assets and foreign entities or assets with sales in or into the U.S. that (i) derived revenue in an identified 6-digit NAICS industry code overlap or (ii) provided or produced a competitive overlap product or service as described in the Horizontal Overlap Narrative. Identify all such acquisitions of entities or assets made within the ten years prior to filing in which (i) 50% or more of the voting securities of an issuer, (ii) 50% or more of non-corporate interests of an unincorporated entity, or (iii) all or substantially all the assets of an operating unit were acquired. Additionally, identify all such acquisitions of assets that did not constitute all or substantially all of an operating unit but were valued at or above the statutory size-oftransaction test at the time of their acquisition. For each such acquisition, supply: 1. the 6-digit NAICS code(s) (by number and description) identified above in which the acquired entity derived dollar revenues, or the competitive overlap product(s) or service(s) provided; 2. the name of the entity from which the voting securities, non-corporate interests, or assets were acquired; 3. the headquarters address of that entity prior to the acquisition; 4. whether voting securities, non-corporate interests, or assets were acquired; 5. the consummation date of the acquisition; and 6. whether all or substantially all of the acquired voting securities, non-corporate interests, or assets are still held at the time of filing. Additional Information Subsidies From Foreign Entities or Governments of Concern To the knowledge or belief of the filing person, within the two years prior to filing, has the acquiring or acquired person (as appropriate) received any subsidy (or a commitment to provide a subsidy in the future) from any foreign entity or government of concern (see § 801.1(r))? If yes, list each entity or government from which such subsidy was received and provide a brief description of the subsidy. For products the acquiring or acquired person (as appropriate) produced in whole or in part in a country that is a covered nation under 42 U.S.C. 18741(a)(5)(C), is any PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 42217 product subject to countervailing duties imposed by any jurisdiction? If yes, list each product, the countervailing duty imposed, and the jurisdiction that imposed the duty. To the knowledge or belief of the filing person, for products the acquiring or acquired person (as appropriate) produced in whole or in part in a country that is a covered nation under 42 U.S.C. 18741(a)(5)(C), is any product the subject of a current investigation for countervailing duties in any jurisdiction? If yes, list each product and the jurisdiction conducting the investigation. Defense or Intelligence Contracts Identify pending or active procurement contracts with the U.S. Department of Defense or any member of the U.S. intelligence community, as defined by 10 U.S.C. 101(a)(6) or 50 U.S.C. 3033(4) valued at $10 million or more. The acquiring person should limit its response to the acquiring entity and any entity within the acquiring person that directly or indirectly controls the acquiring entity. The acquired person should limit its response to the acquired entity(s) and/or assets. Include (1) the name of the entity within the filing person (2) the contracting office, as defined by 48 CFR 2.101(b); (3) the Contracting Office ID; (5) the Award ID; (5) and the NAICS code(s), if any, listed in the System for Award Management database. Identification of Communications and Messaging Systems List all communications systems or messaging applications on any device used by the acquiring or acquired person (as appropriate) that could be used to store or transmit information or documents related to its business operations. Other Jurisdictions Transactions Subject to International Antitrust Notification If, to the knowledge or belief of the filing person at the time of filing, a non-U.S. antitrust or competition authority has been or will be notified of the transaction, list the name of each such authority. Identify, to the knowledge or belief of the filing person at the time of filing, any jurisdiction where (1) a merger notification has been filed, (2) a merger notification is being prepared for filing, or (3) the parties have a good faith belief that a merger notification will be made, along with the dates of the filing or planned filing. HSR Confidentiality Waiver for International Competition Authorities (VOLUNTARY) Indicate whether the filing person agrees to waive the disclosure exemption contained in the Hart-Scott-Rodino Act, 15 U.S.C. 18a(h) to permit the DOJ and FTC to disclose to nonU.S. competition authority/authorities listed by the filing person below (1) the fact that a notification was filed, (2) the waiting period associated with the notification, and (3) information and documents filed with the notification. This waiver will not cover materials provided in response to a request for additional information issued pursuant to 15 U.S.C. 18a(e) and does not preclude the filing person from providing a full waiver as provided for under FTC and DOJ practice as E:\FR\FM\29JNP3.SGM 29JNP3 42218 Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 / Proposed Rules reflected in the Model Waiver. The filing person should list the jurisdictions to which the waiver applies. This item is voluntary. HSR Confidentiality Waiver for State Attorneys General (VOLUNTARY) Indicate whether the filing person agrees to waive the disclosure exemption contained in the Hart-Scott-Rodino Act, 15 U.S.C. 18a(h) to permit the DOJ and FTC to disclose to State Attorneys General listed by the filing person below (1) the fact that a notification was filed, (2) the waiting period associated with the notification, and (3) information and documents filed with the notification. This waiver will not cover materials provided in response to a request for additional information issued pursuant to 15 U.S.C. 18a(e) and does not preclude the filing person from providing a full waiver as provided for under FTC and DOJ practice as reflected in the Model Waiver. The filing person should list the jurisdictions to which the waiver applies. This item is voluntary. lotter on DSK11XQN23PROD with PROPOSALS3 Certification See § 803.6 for requirements. The certification must be notarized or use the language found in 28 U.S.C. 1746 relating to unsworn declarations under penalty of perjury. Penalties for False Statements Federal law provides criminal penalties, including up to twenty years imprisonment, for any person who knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence an ongoing or anticipated federal investigation (see, e.g., Section 1519 of Title 18, United States Code.). It is also a criminal offense to knowingly make a false statement in a federal investigation, obstruct a federal investigation, or conspire to obstruct justice or obstruct or impede the lawful functioning of the government (see, e.g., Sections 371, 1001, and 1505 of Title 18, United States Code). Certification This NOTIFICATION AND REPORT FORM, together with any and all appendices and attachments thereto, was prepared and assembled under my supervision in accordance with instructions issued by the Commission. Subject to the recognition that, where so indicated, reasonable estimates have been made because books and records do not provide the required data, the information is, to the best of my knowledge, true, correct, and complete in accordance with the statute and rules. I acknowledge that the Commission or the Assistant Attorney General of the Antitrust VerDate Sep<11>2014 18:10 Jun 28, 2023 Jkt 259001 Division of the Department of Justice may, prior to the expiration of the initial waiting period pursuant to 15 U.S.C. 18a, require the submission of additional information or documentary material relevant to the proposed transaction. I have taken the necessary steps to prevent the destruction of documents and information related to the proposed transaction before the expiration of any waiting period. Affidavits Affidavit(s) required by § 803.5 must be notarized or use the language found in 28 U.S.C. 1746 relating to unsworn declarations under penalty of perjury. If an entity is filing on behalf of the acquiring or acquired person, the affidavit must still attest to the good faith of the UPE. In non-§ 801.30 transactions, the affidavit(s) (submitted by both persons filing) must attest that a definitive agreement to merge or acquire has been executed, or if a definitive agreement has not been executed, that a term sheet or draft agreement that describes with specificity the scope of the transaction that will be consummated has been submitted. The affidavit(s) must further attest to the good faith intention of the person filing notification to complete the transaction. (See § 803.5(b)). In § 801.30 transactions, the affidavit (submitted only by the acquiring person) must attest: 1. That the issuer whose voting securities or the unincorporated entity whose noncorporate interests are to be acquired has received notice, as described below, from the acquiring person; 2. In the case of a tender offer, that the intention to make the tender offer has been publicly announced; and 3. The good faith intention of the person filing notification to complete the transaction. Acquiring persons in § 801.30 transactions are also required to submit a copy of the notice received by the acquired person pursuant to § 803.5(a)(3) along with the filing. This notice must include: 1. The identity of the acquiring person and the fact that the acquiring person intends to acquire voting securities of the issuer or noncorporate interests of the unincorporated entity; 2. The specific notification threshold that the acquiring person intends to meet or exceed in an acquisition of voting securities; 3. The fact that the acquisition may be subject to the Act, and that the acquiring person will file notification under the Act; 4. The anticipated date of receipt of such notification by the Agencies; and PO 00000 Frm 00042 Fmt 4701 Sfmt 9990 5. The fact that the person within which the issuer or unincorporated entity is included may be required to file notification under the Act. (See § 803.5(a)). Privacy Act Statement Section 18a(a) of Title 15 of the U.S. Code authorizes the collection of this information. Our authority to collect Social Security numbers is 31 U.S.C. 7701. The primary use of information submitted on this Form is to determine whether the reported merger or acquisition may violate the antitrust laws. Taxpayer information is collected, used, and may be shared with other agencies and contractors for payment processing, debt collection and reporting purposes. Furnishing the information on the Form is voluntary. Consummation of an acquisition required to be reported by the statute cited above without having provided this information may, however, render a person liable to civil penalties up to the amount listed in 16 CFR 1.98(a) per day. We also may be unable to process the Form unless you provide all of the requested information. Disclosure Notice Public reporting burden for this report is estimated to vary from 20 to 382 hours per response, with an average of 144 hours per response, including time for reviewing instructions, searching existing data sources, gathering, and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding the burden estimate or any other aspect of this report, including suggestions for reducing this burden to: Premerger Notification Office, Federal Trade Commission, Room #5301, 400 7th Street SW, Washington, DC 20024 and Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, DC 20503 Under the Paperwork Reduction Act, as amended, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The operative OMB control number, 3084–0005, appears within the Notification and Report Form and these Instructions. By the direction of the Commission. April J. Tabor, Secretary. [FR Doc. 2023–13511 Filed 6–28–23; 8:45 am] BILLING CODE 6750–01–P E:\FR\FM\29JNP3.SGM 29JNP3

Agencies

FEDERAL TRADE COMMISSION

[Federal Register Volume 88, Number 124 (Thursday, June 29, 2023)]
[Proposed Rules]
[Pages 42178-42218]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-13511]

[[Page 42177]]

Vol. 88

Thursday,

No. 124

June 29, 2023

Part III

Federal Trade Commission

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16 CFR Parts 801 and 803

Premerger Notification; Reporting and Waiting Period Requirements;
Proposed Rule

Federal Register / Vol. 88, No. 124 / Thursday, June 29, 2023 /
Proposed Rules

[[Page 42178]]

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FEDERAL TRADE COMMISSION

16 CFR Parts 801 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: Pursuant to Section 7A(d) of the Clayton Act, 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'')
and to the Premerger Notification and Report Form (the ``Form'') and
Instructions (``Instructions''). These proposed changes would result in
a redesign of the premerger notification process through both a
reorganization of the information currently required and the addition
of new information and document requirements. In addition, these
changes would implement the Merger Filing Fee Modernization Act of
2022. The proposed amendments would involve changes to both the Rules
and the Instructions, and the Commission proposes explanatory and
ministerial changes to the Rules as well as necessary amendments to the
Instructions to effect the proposed changes.

DATES: Comments must be received on or before August 28, 2023.

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. P239300'' 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 H),
Washington, DC 20580.

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

SUPPLEMENTARY INFORMATION:

Overview

The Act and Rules currently require the parties to certain mergers
and acquisitions to submit premerger notification filings (``HSR
Filings'') to the Commission and to 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 short 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, including Section 7 of the Clayton Act, 15
U.S.C. 18, if consummated and, when appropriate, to seek an injunction
in federal court in order to enjoin anticompetitive acquisitions prior
to consummation.
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.
In this notice of proposed rulemaking (``NPRM''), the Commission
proposes amending the Rules (Part 801 and Part 803 and its appendices),
the Form, and the Instructions to reorganize the information currently
required with an HSR Filing and to require additional information
critical to the Agencies' initial review. These changes would improve
the efficiency and effectiveness of that initial review by providing
the information the Agencies need to identify during the initial 30-day
waiting period any transaction that may pose competition concerns and
potentially narrow the scope of any investigation or reduce the need to
conduct a more in-depth investigation of the proposed transaction.
These amendments also incorporate the changes to implement the
collection of information mandated by the Merger Filing Fee
Modernization Act of 2022 (``2022 Amendments'') contained within the
Consolidated Appropriations Act, 2023 (Pub. L. 117-328, 136 Stat. 4459)
to Section 7(a) of the Clayton Act, 15 U.S.C. 18a. Finally, the
Commission proposes explanatory and ministerial changes to the Rules as
well as necessary amendments to the Instructions to effect the proposed
changes.

Background

The premerger notification program is designed to provide the
Commission and the Assistant Attorney General with the information and
documentary material necessary and appropriate for an initial
evaluation of the potential anticompetitive impact of transactions. The
HSR premerger notification program is an essential tool for effective
and efficient merger enforcement because it enables the Agencies to
investigate acquisitions that may substantially lessen competition or
tend to create a monopoly in violation of Section 7 of the Clayton Act
and to challenge them before they are consummated and the businesses of
the two companies are ``scrambled'' or integrated such that effective
post-merger relief is much more difficult. Congress intended that
premerger review would ``strengthen the enforcement of Section 7 by
giving the government antitrust agencies a fair and reasonable
opportunity to detect and investigate large mergers of questionable
legality before they are consummated.'' \1\ Premerger notification and
review, including a mandatory waiting period during which they cannot
consummate the transaction, gives the Agencies the procedural tools
necessary to seek to prevent mergers in court before they cause harm or
the operations of the firms become so integrated that the premerger
state of competition cannot be restored.
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\1\ H.R. Rep. No. 94-1373 at 5 (1976).
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The HSR Act and Rules specify that transactions subject to the HSR
Act cannot be consummated until 30 days for most transactions (cash
tender offers and certain types of bankruptcies observe a 15-day
waiting period) \2\ after the parties submit an HSR Filing to the
Agencies. These statutory deadlines for conducting an initial review
are extraordinarily short, and the Agencies must work quickly to
determine whether to take steps to prevent the consummation of
potentially anticompetitive transactions. During the initial waiting
period, the FTC's

[[Page 42179]]

Premerger Notification Office (``PNO'') staff must review each HSR
Filing to ensure it complies with the HSR Rules. Staff at both Agencies
initially review the information and documents for substantive
antitrust concerns, identify and assess the relevant facts, conduct a
preliminary antitrust analysis, form preliminary recommendations
regarding the investigation's direction, and communicate those
recommendations within each Agency. As staff formulate recommendations,
they must also initiate clearance from the other agency for those
transactions that merit collection of additional information to avoid
any duplication of effort and ensure that only one agency investigates
the transaction. Senior leadership at the investigating agency must
review staff's recommendations and determine whether to issue a Request
for Additional Information (``Second Request''),\3\ which starts the
second phase of the agency's merger investigation. If there are other
jurisdictions investigating, Agency staff coordinate with relevant
state Attorneys General or international counterparts. All of this must
happen during the initial waiting period, which is typically 30 days.
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\2\ 15 U.S.C. 18a(b)(1)(B); 11 U.S.C. 363(b)(2).
\3\ 15 U.S.C. 18a(e).
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Given the large number of HSR Filings submitted each year, the
Agencies must use their resources efficiently and effectively to focus
primarily on transactions that may harm competition. Information
submitted as part of the HSR premerger notification process is a key
starting point, and the information contained in the HSR Filing should
be sufficient to allow the Agencies to conduct a thorough but quick
evaluation of whether the proposed transaction is one that requires
more in-depth investigation through the issuance of Second Requests.
However, after a comprehensive review of the premerger notification
process and based on the Agencies' experience conducting in-depth
investigations of challenged mergers, the Commission believes that the
information currently reported in an HSR Filing is insufficient. In
fact, the challenges of premerger review have expanded considerably
over time as result of several factors. First, there has been
tremendous growth in sectors of the economy that rely on technology and
digital platforms to conduct business and, given the dynamic nature of
these markets and the importance of acquisition strategies to success
and market growth, mergers and acquisitions in these sectors present a
unique challenge for the Agencies.\4\ In these sectors, some
transactions involve firms whose premerger relationship is not clearly
horizontal or vertical; rather, merger activity in these sectors
increasingly involves firms in related business lines where the
Agencies must closely examine the potential for direct competition in
the future.
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\4\ See, e.g., Fed. Trade Comm'n, Non-HSR Reported Acquisitions
by Select Technology Platforms 23-24 (2021).
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In addition, the very nature of HSR-reportable transactions has
become more complex over time. Transaction structures have evolved to
include not only the Ultimate Parent Entity (UPE) and its acquiring
entity,\5\ but also other entities within the acquiring person. For
instance, there can be numerous entities between the UPE and acquiring
entity, and other investors can have a stake in any one of these
entities. As a result, these investors could have a direct role in
effectuating the transaction. Individuals or entities other than the
those directly involved in the transaction may be able to exert
influence over the transaction as well. The existence of subsidies or
loans, among other means, may subject the buyer to additional pressures
from individuals or entities not directly a party to the reportable
transaction. Indeed, the use of board observers has become a more
frequent way for outside players to gain direct access to company
strategy. Each of these factors can affect a transaction's impact on
the competitive landscape.
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\5\ 16 CFR 801.1(a).
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Consistent with this concern, the Commission's NPRM also proposes
changes to implement the collection of information about certain
subsidies, as mandated by the 2022 Amendments. Congress determined that
foreign subsidies can distort the competitive process or otherwise
change the incentives of the firm in ways that undermine competition
following an acquisition and are particularly problematic when provided
by entities or countries that are strategic or economic threats to the
United States.\6\ The proposed changes require filing parties to
provide information about subsidies received from foreign entities of
concern, as discussed in more detail below.
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\6\ Title II of the Merger Filing Fee Modernization Act of 2022,
Public Law 117-329, Div. GG, sec. 201(a)(1) at 3826, 136 Stat. 4459.
Congress pointed to remarks of former Commissioner Noah Phillips
that ``one area where antitrust needs to reckon with the strategic
interests of other nations is when we scrutinize mergers or conduct
involving state-owned entities . . . companies that are controlled,
by varying degrees, by the state . . . [and] often are a government
tool for implementing industrial policies or to protect national
security.'' Id. at sec. 201(a)(5).
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Another factor that has an impact on the complexity of premerger
review is that consistent with the law and binding judicial precedent,
the Agencies have stepped up efforts to review transactions for all
their potential competitive impacts. The Agencies are responding to
evidence that the U.S. economy is becoming increasingly concentrated
overall.\7\ This concentration may reflect decreased competition, which
can result in higher prices for consumers, decreased innovation,
reduction in output, and lower wages for workers. For example,
economists have estimated that workers' share of national income has
fallen sharply since 2000, such that the workers' share of income today
is now 6 to 8 percentage points below the 1980 level.\8\ These findings
reveal that despite the Agencies' efforts to prevent market
consolidation through merger enforcement, many markets suffer from a
lack of robust competition and mergers continue to cause harm.\9\ As
President Biden noted in his Executive Order on Promoting Competition,
industry consolidation and weakened competition ``deny Americans the
benefits of an open economy,'' with ``workers, farmers, small
businesses, and consumers paying the price.'' \10\
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\7\ See, e.g., Council of Econ. Advisers Issue Brief, Benefits
of Competition and Indicators of Market Power at 4 (Apr. 2016),
https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160414_cea_competition_issue_brief.pdf (noting change in revenue
share earned by the 50 largest firms in each sector); David Autor et
al., The Fall of the Labor Share and the Rise of Superstar Firms,
135 Q.J. Econ. 645 (2020) (finding that the top 4 firms in the top
sectors of the economy became steadily and significantly more
concentrated); Thomas Philippon, Causes, Consequences, and Policy
Responses to Market Concentration, in Aspen Economic Strategy Group,
Maintaining the Strength of American Capitalism (2019) (reviewing
literature on concentration in the U.S. economy).
\8\ See, e.g., Gene M. Grossman and Ezra Oberfield, The Elusive
Explanation for the Declining Labor Share, 14:1 Ann. Rev. Econ. 93-
124 (2022).
\9\ See, e.g., Keith Brand, Chris Garmon, Ted Rosenbaum, In the
Shadow of Antitrust Enforcement: Price Effects of Hospital Mergers
from 2009-2016, (forthcoming in J.L. Econ.); Zack Cooper et al., The
Price Ain't Right? Hospital Prices and Health Spending on the
Privately Insured, 134 Q.J. Econ. 51 (2019); Gautam Gowrisankaran,
Aviv Nevo, and Robert Town, Mergers When Prices are Negotiated:
Evidence from the Hospital Industry, 105 Am. Econ. Rev. 172 (2015);
Orley Ashenfelter, Daniel Hosken, and Matthew C. Weinberg, Did
Robert Bork Understate the Competitive Impact of Mergers? Evidence
from Consummated Mergers, 57 J.L. & Econ. S67 (2014).
\10\ Exec. Order No. 14,036, 86 FR 36,987 (July 14, 2021). See
also The White House, Fact Sheet: Executive Order on Promoting
Competition in the American Economy (July 9, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-onpromoting-competition-in-the-american-economy/ (noting that ``Economists find that as competition
declines, productivity growth slows, business investment and
innovation decline, and income, wealth, and racial inequality
widen.'').

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[[Page 42180]]

Each year, many of the transactions that are investigated by the
Agencies are also investigated by another jurisdiction under their laws
and procedures and this adds to the complexity of premerger review.
Moreover, the Agencies' experience gained while cooperating with
international competition agencies that are conducting their own merger
investigation reveals that better information can help address the
increased complexity of premerger review and improve its efficiency. As
compared to the Form, most international jurisdictions have merger
filing forms that ask filers to provide significantly more information
that their staff considers relevant to the competition analysis,
including details about the transaction's structure and rationale,
horizontal overlaps, vertical and other relationships, and more
detailed sales data. Importantly, many other jurisdictions rely on
narrative responses from the parties that contain basic information
about business lines or company operations, and several require the
parties to self-report overlaps.
For all these reasons, the Commission believes that the information
currently collected by the Form is insufficient for the Agencies to
conduct an effective and efficient initial evaluation of a
transaction's likely competitive impact on all of those who might be
affected, including consumers, small businesses, and workers. In the
Agencies' experience, the current Form does not provide their staff
with complete information, including information about the transaction;
the filers' business operations and those of any related entities; the
premerger relationship between the acquiring person and the acquired
entity; individuals or entities that may have influence over the
operation of the relevant business lines; the full range of potential
competitive implications of the transaction, including effects on
workers; and prior acquisitions.
To supplement the shortcomings of HSR Filings, Agency staff must
often rely on voluntary cooperation from third parties--customers and
competitors of the merging parties--during the initial waiting period
to learn basic information about the parties' business dealings and the
markets in which they compete. In addition, staff needs to conduct
independent research using publicly available information to supplement
the modest amount of material submitted with the HSR Filing. Neither of
these is reliable as a substitute for information provided by the
parties themselves and certified as a complete response. Moreover, the
additional effort required to discover basic business information about
the parties to the transaction and their premerger relationship is
inefficient and can result in both too few in-depth investigations when
the information collected does not uncover a significant premerger
competitive relationship as well as in-depth investigations that are
either too broad or too narrow due to the insufficient detail about
those relationships that is currently provided in HSR Filings. The
information collected by the parties for their own premerger assessment
of the transaction is paramount for the Agencies' antitrust assessment
and should be collected and submitted with the initial filing.\11\ The
Commission therefore proposes additional questions and document
requests to provide the Agencies with the information necessary to
facilitate their initial review, as discussed further in this NPRM.
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\11\ ``The House conferees contemplate that, in most cases, the
Government will be requesting the very data that is already
available to the merging parties, and has already been assembled and
analyzed by them. If the merging parties are prepared to rely on it,
all of it should be available to the Government.'' 122 Cong. Rec.
H30877 (Sept. 16, 1976) (remarks of Rep. Rodino).
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At the same time, it has become clear to the Commission that
certain required information currently submitted in the Form to aid the
Agencies' review is not as helpful as originally intended. For
instance, as a general screening tool, reporting revenue by specific
dollar amounts for specific industry codes, as defined by the North
America Industry Classification System (``NAICS''), does not materially
assist the Agencies in their initial review. Reporting revenue ranges
for the NAICS codes, would sufficiently convey which lines of business
of the filing person generate the most revenue. In addition, the
requirement to report manufacturing revenues at a granular level has
become less helpful to the Agencies during their initial review as a
result of changes made by the United States Census Bureau (``Census'')
to one of its revenue classification systems. Finally, the Commission
believes that the identification of minority investors in target
entities, other than those that will ``roll over'' their investments
post-consummation, is of limited use. The Commission therefore proposes
deleting these requirements, as discussed in further detail below.
The Commission anticipates that the proposed reorganization and
collection of additional information in HSR Filings would greatly
enhance the Agencies' ability to complete the review of a reportable
transaction in a short period of time, and that they are necessary and
appropriate in order for the Agencies to vigorously enforce the
nation's antitrust laws. The changes would improve the efficiency and
effectiveness of the Agencies' initial review process and reduce the
need to rely on the voluntary submission of additional information by
the parties and third-party industry sources during the initial waiting
period.
Finally, the Commission notes that since the implementation of the
Act and Rules in the late 1970s, there has never been a large-scale
reorganization of the information required in an HSR Filing. As a
result, the Commission is proposing a comprehensive redesign of the
premerger notification process through both a reorganization of the
information currently required and the addition of new information
requirements. As the Agencies are currently working to complete an
electronic filing (``e-filing'') platform, the exact structure of the
redesign is unclear at this time. The Commission believes that the
development and roll-out of an e-filing platform will mark a
significant improvement in the submission and processing of HSR
Filings, with benefits for both filers and the Agencies. Thus, in this
NPRM, the Commission is providing an overview of the proposed
reorganization of the information currently required and the proposed
new information requirements. The exact form of the redesign and how
filers will submit this information will be more clearly laid out in
any Final Rule after the Commission reviews all comments to this NPRM.

Proposed Changes to the Rules

I. Proposed Changes to Part 801

A. Section 801.1: Proposed Definitions of ``Foreign Entity or
Government of Concern'' and ``Subsidy''

On December 29, 2022, the President signed into law the
Consolidated Appropriations Act, 2023, which included amendments to the
HSR Act in t2022 Amendments. Public Law 117-328, 136 Stat. 4459.
Congress found that foreign subsidies, particularly those from
``countries or entities that constitute a strategic or economic threat

[[Page 42181]]

to United States interests,'' \12\ ``can distort the competitive
process by enabling the subsidized firm to submit a bid higher than
other firms in the market, or otherwise change the incentives of the
firm in ways that undermine competition'' \13\ post-merger. The 2022
Amendments require the Commission, with concurrence of the Assistant
Attorney General, and in consultation with Chairperson of the Committee
on Foreign Investment in the United States, the Secretary of Commerce,
the Chair of the United States International Trade Commission, the
United States Trade Representative, and heads of other appropriate
agencies (``Relevant Agencies''), to promulgate a rule to require
persons making an HSR Filing to disclose subsidies received from
countries or entities that are strategic or economic threats to the
United States. Congress identified those threats as ``foreign entities
of concern'' as defined in section 40207 of the Infrastructure and Jobs
Act, 42 U.S.C. 18741(a), and required the Commission to collect
information about subsidies from these entities as part of HSR Filings.
---------------------------------------------------------------------------

\12\ Title II of the Merger Filing Fee Modernization Act of
2022, Public Law 117-329, Div. GG, sec. 201(a)(2) at 3826, 136 Stat.
4459.
\13\ Id. at sec. 201(a)(1).
---------------------------------------------------------------------------

After conducting its own internal diligence to draft a rule and in
consultation with the Relevant Agencies on this topic, the Commission
proposes amending Sec. 801.1 to add proposed paragraphs (r)(1) and
(2), which define ``foreign entity or government of concern'' and
``subsidy,'' respectively.
1. Section 801.1(r)(1) Foreign Entity or Government of Concern
In the 2022 Amendments, Congress found that foreign subsidies are
particularly problematic when granted by countries or entities that
constitute a strategic or economic threat to U.S. interests. To
identify such subsidies, the Commission proposes new rule Sec.
801.1(r)(1). This proposed rule defines, in proposed subsection (i),
subsidies that would have to be disclosed, per Congress' mandate, if
received from a ``foreign entity of concern'' as the term is defined in
section 40207 of the Infrastructure Investment and Jobs Act (``IIJ
Act''), 42 U.S.C. 18741(a). The Commission therefore proposes adopting
this definition in Sec. 801.1(r)(1)(i).
The Commission recognizes, however, that the definition of a
``foreign entity of concern'' in the IIJ Act does not explicitly
include foreign governments or government agencies. To the extent that
HSR filers have received any subsidy directly from the government of a
country designated by 42 U.S.C. 18741(a)(5)(C), the Commission believes
that including these subsidies would be consistent with Congress'
mandate to capture information regarding subsidies when granted by
entities posing a strategic and economic threat to the United States.
Indeed, the Agencies' understanding of the subsidies' competitive
significance would be incomplete without including subsidies granted by
foreign governments or government agencies of foreign countries that
are covered nations under 42 U.S.C. 18741(a)(5)(C). Therefore, the
Commission proposes requiring persons making an HSR Filing to report
subsidies received from governments (and their agencies) of foreign
countries that are covered nations under 42 U.S.C. 18741(a)(5)(C) in
proposed Sec. 801.1(r)(1)(ii).
Finally, the Commission proposes that proposed Sec. Sec.
801.1(r)(1)(i) and (ii) retain the references to the respective
sections of the IIJ Act rather than incorporating the current text of
these sections to assure that the proposed rule remains consistent with
any subsequent amendments to these sections within the IIJ Act.
2. Section 801.1(r)(2) Subsidy
The 2022 Amendments found that ``[f]oreign subsidies, which can
take the form of direct subsidies, grants, loans (including below-
market loans), loan guarantees, tax concessions, preferential
government procurement policies, or government ownership or control,
can distort the competitive process.'' \14\ Thus, the 2022 Amendments
require the Commission to collect information about such subsidies to
enable the Agencies to determine whether the transaction, if
consummated, would violate the antitrust laws. But the statute does not
define the term ``subsidy'' and its specific definition has, in fact,
been heavily debated and negotiated in both U.S. legislation and
international treaties in other contexts. The Commission is mindful of
the relevant caselaw and expertise of other U.S. agencies that have
developed over decades and, after consultation with the Relevant
Agencies on this topic, the Commission proposes the adoption of the
definition of subsidies in Title VII of the Tariff Act of 1930
(``Tariff Act''), 19 U.S.C. 1677(5)(B).
---------------------------------------------------------------------------

\14\ Id.
---------------------------------------------------------------------------

The Tariff Act definition of ``subsidy'' is consistent with the
definition in the World Trade Organization's Agreement on Subsidies and
Countervailing Measures (``SCM''), to which the United States is a
party.\15\ The Commission believes that because this definition is
found both in U.S. law and in the SCM, both U.S. and foreign filing
parties, or the law firms that represent them, should be familiar with
and able to apply. The Commission also believes this definition is
consistent with the Congressional mandate in the 2022 Amendments.
---------------------------------------------------------------------------

\15\ 19 U.S.C. 3511(d)(12).
---------------------------------------------------------------------------

The Commission thus proposes adopting this definition in Sec.
801.1(r)(2) and that the proposed rule retain the reference to the
Tariff Act definition rather than incorporating the current text of
that section to assure that the proposed rule remains consistent with
any subsequent amendments to the Tariff Act.
The incorporation of this proposed change into the Instructions is
discussed below at III.E.1.

II. Proposed Changes to Part 803

A. Sections 803.2, 803.5, and 803.10: Adoption of Electronic Filing

The Commission proposes amending Sec. Sec. 803.2(e) and (f);
803.5(a)(1), (3), and (b); and 803.10(c)(1)(i) and (ii) to eliminate
references to paper and DVD filings to physical offices. In March 2020,
the COVID-19 pandemic and resulting closures of federal office
buildings prevented the Commission and Assistant Attorney General from
physically accepting HSR Filings, as had been the practice since the
original adoption of the Rules in 1978. As a result, on March 17, 2020,
the Agencies began accepting filings electronically.\16\ Given the
success of that system, the Commission proposes amending the Rules as
noted above to adopt electronic filing and eliminate references to
paper and DVD filings. This change benefits both the Agencies and
filing parties by reducing reliance on the delivery and acceptance of
paper filings or DVDs.
---------------------------------------------------------------------------

\16\ Press Release, Fed. Trade Comm'n, Premerger Notification
Office Implements Temporary e-Filing System (March 13, 2020),
https://www.ftc.gov/news-events/news/press-releases/2020/03/premerger-notification-office-implements-temporary-e-filing-system.
---------------------------------------------------------------------------

B. Section 803.2: Requiring Separate Forms for Acquiring and Acquired
Persons

The Commission proposes amending Sec. 803.2(a) and deleting Sec.
803.2(b)(1)(v) so that filing persons that are both the acquiring and
acquired person are required to make separate filings. Currently, the
Rules, Instructions, and Form permit filers that are both an acquiring
and an acquired person in a transaction to file only one Form. This

[[Page 42182]]

scenario arises most commonly when a seller will receive voting
securities of the buyer as consideration for the sale of the target. In
such transactions, both the acquisition of the target by the buyer and
the acquisition of the buyer's voting securities by the seller may be
reportable. Thus, the buyer and seller can each be an acquiring and an
acquired person.
Although the Rules permit filers to use one Form for the two
transactions in these cases, Sec. 803.2(b)(1)(v) requires that
separate responses be provided for Items 5 through 8, one set of
responses as the acquiring person and one set as the acquired person.
In the Commission's experience, filers that opt to combine the
information on a single Form often do not include everything that is
required, and these filings are, in fact, very confusing for the
Agencies to review. In contrast, when filers choose to submit two
separate Forms for such transactions, these filings provide all the
required information and in a much clearer format. The Commission thus
proposes amending Sec. 803.2(a) and deleting Sec. 803.2(b)(1)(v) to
require acquiring persons and acquired persons to submit separate HSR
Filings, one as the acquiring person and one as an acquired person, in
instances where filers qualify as both. This proposed approach would
make the Agencies' initial review much easier by more clearly
separating information related to the acquiring person from the
acquired person. No new information would be required, and technology
allows parties to save copies of filings to reduce the need to input
repetitive information.

C. Section 803.5(b): Requiring Draft Agreements or Term Sheets

The Commission proposes amending Sec. 803.5(b) to require filers
who have not executed a definitive transaction agreement before making
an HSR Filing to submit a draft agreement or term sheet that describes
with sufficient detail the scope of the entire transaction that will be
consummated after observing the waiting period required by the Act.
Section 803.5(b) currently allows filers in any non-Sec. 801.30
acquisition to file on the basis of ``a contract, agreement in
principle or letter of intent to merge or acquire [that] has been
executed'' and an affidavit attesting to that execution as well as the
good faith intention to complete the transaction. In permitting parties
to file before the signing of a definitive agreement, the Commission
has relied on the assumption that the filings would ``contain
sufficiently definitive information about the transaction to permit
accurate analysis.'' \17\ In the Commission's experience, however,
filings submitted on the basis of bare preliminary agreements, such as
an indication of interest, non-binding letter of intent, or agreement
in principle (``Preliminary Agreements''), typically do not meet this
standard.
---------------------------------------------------------------------------

\17\ 43 FR 33450, 33511 (July 31, 1978).
---------------------------------------------------------------------------

Often, Preliminary Agreements reflect only very early discussions
between the parties, and since there is currently no obligation to file
a draft or final agreement once the HSR Filing is submitted, the
Agencies must spend time during the initial waiting period simply
trying to discover the scope and timing of the transaction. Moreover,
given the preliminary nature of such a filing, the parties have often
not yet undertaken a robust analysis of the transaction and therefore
have drafted few, if any, documents responsive to Items 4(c) or 4(d) of
the current Form. Permitting parties to submit an HSR Filing prior to a
complete substantive analysis of the transaction, and at times even
before the parties have done diligence on rationales or justifications
for the transaction, puts the Agencies at a distinct disadvantage
during the initial waiting period in determining what the transaction
is and whether it may violate the antitrust laws if consummated.
Additionally, HSR Filings made during the early phases of
negotiations may be too uncertain to merit review. The original
Statement of Basis and Purpose from 1978 (``1978 SBP'') provides clear
guidance that ``[b]ecause of the time and resource constraints upon the
agency staffs,'' the Agencies should not expend resources to review
transactions so lacking in specifics that they could be considered
merely ``hypothetical.'' \18\ Yet allowing for the submission of a
filing on the basis of a Preliminary Agreement often triggers the use
of limited resources for hypothetical transactions, first to discover
the full range of potential viable transactions, and then to assess the
competitive impact of those potential iterations.
---------------------------------------------------------------------------

\18\ Id. at 33510-511.
---------------------------------------------------------------------------

The Commission therefore proposes amending Sec. 803.5(b) to
eliminate the ability to submit an HSR Filing on any Preliminary
Agreement without providing a term sheet or draft agreement that
reflects sufficient detail about the proposed transaction to allow the
Agencies to understand the scope of the transaction and to confirm that
the transaction is more than hypothetical. The Commission also proposes
a corresponding change to the Instructions, as noted at III.C.6.
Because detailed term sheets or draft agreements are often prepared in
the ordinary course of deal negotiations, the Commission does not
expect this change would impose a significant burden on filing parties.
However, the Commission recognizes that eliminating the parties'
ability to make filings prior to the negotiation of such documents may
change the timing of filing and would likely result in more robust
filings that would take additional time to prepare. On balance, the
Commission believes that this proposed change is consistent with the
original intent of the Rules to prevent expending scarce Agency
resources on hypothetical transactions and would allow the Agencies to
focus on transactions definitive enough to permit accurate analysis.

D. Section 803.8: Translation of Documents

The Commission proposes amending Sec. 803.8 to require submission
of English-language translations for all foreign-language documents
submitted with the initial HSR Filing. Section 803.8(a) currently
provides that parties need not translate foreign-language materials
submitted with the initial filing, and that English-language outlines,
summaries, extracts, or verbatim translations need only be provided if
they already exist. Section 803.8(b), in contrast, has required since
1983 that all foreign-language documents responsive to a Second Request
be provided with English translations.\19\
---------------------------------------------------------------------------

\19\ The Commission proposed mandatory translation in 1981, 46
FR 38710 (July 29, 1981), and issued a final rule in 1983, 48 FR
34427 (July 29, 1983).
---------------------------------------------------------------------------

In the Commission's experience since the early 1980s when Rule
803.8 was first adopted, it is no longer enough to require translations
of only those foreign-language documents submitted in response to
Second Requests because today's HSR Filings quite frequently contain
foreign-language materials. These materials typically include key
documents, such as the transaction agreements submitted in response to
current Item 3(b) of the Form, the relevant financials submitted in
response to current Item 4(b), and the documents submitted in response
to current Items 4(c) and 4(d) of the Form. Parties often submit
foreign-language materials in their HSR Filings with no translation at
all or with only rough English-language outlines, summaries, or
extracts, which may not accurately and fully convey the contents of the
foreign-language document. As a result, the Agencies must either obtain
their

[[Page 42183]]

own translations of these documents or miss out on potentially critical
information, leaving the Agencies at a disadvantage during their
initial review. Given the wide variety of foreign languages the
Agencies typically see, it would be very costly for the Agencies to
retain translation services for each filing that may contain some
foreign-language material. Further, obtaining translations adds
significant delay within the already time-constrained initial waiting
period and would not allow for filing parties to review the
translations for errors. These translations may be especially important
for those transactions that report foreign subsidies.
To address this issue, the Commission proposes combining Sec. Sec.
803.8(a) and 803.8(b). Proposed Sec. 803.8 would therefore be one
paragraph requiring that verbatim English translations be provided with
all foreign-language materials submitted as part of an HSR Filing or in
response to a Second Request. For either an initial HSR Filing or in
response to a Second Request, both the original document and the
English translation would need to be submitted. Proposed Sec. 803.8
would not require any particular method of translation but would
specify that, whatever translation method the parties choose, all
verbatim translations must be understandable, accurate, and complete.
This proposed change would also be reflected in the Instructions, as
specified below in III.A.4.
Although the Commission noted in its 1983 final rulemaking that
requiring translations created a burden for filing parties,\20\ the
Commission now believes that translation tools available to the parties
have become more abundant and that these tools provide many options for
translation that should significantly reduce the burden of providing
translations. Translations of foreign-language documents would greatly
benefit the Agencies in allowing staff to know the content of
responsive documents submitted in a foreign language. The Commission
invites comment on whether there are categories of documents identified
in this NPRM that would present a significant burden to translate and
what other alternatives might achieve the Commission's goal of being
able to understand and assess foreign-language documents while creating
less burden for filing parties.
---------------------------------------------------------------------------

\20\ 48 FR 34427, 34440 (July 29, 1983).
---------------------------------------------------------------------------

E. Section 803.10: Commencement of Waiting Periods

The Commission proposes amending Sec. 803.10(c)(1)(i) to clarify
when filings made electronically are to be credited as received by the
Agencies. Specifically, the Commission proposes amending this rule to
clarify that compliant filings will be credited as received on the date
filed if: (i) the electronic submission is complete by 5:00 p.m.
Eastern Time; and (ii) such date is not a Saturday, Sunday, legal
public holiday (as defined in 5 U.S.C. 6103(a)), or the observed date
of such legal public holidays.
These clarifications are consistent with current and historical
practices. Of course, historically, the Rules did not need to specify
this information, since the receipt of physical filings (either on
paper or DVD) required the offices of the Assistant Attorney General
and Commission to be open. But because electronic filing platforms can
allow submission of filings even when Agency staff is not available to
receive the filings, the proposed amendments make clear that filings
are only credited as received during regular business hours on regular
business days. These proposed changes would provide clarity and thus
benefit both filing parties and the Agencies.

F. Section 803.12: Information To Be Updated With Refiling

The Commission proposes amending Sec. 803.12(c) to specify which
responses to the items in the proposed Instructions would need to be
updated if the acquiring person chooses to withdraw its HSR Filing and
refile it (an ``Updated HSR Filing''). The procedure for voluntary
withdrawal and refiling permits the acquiring person to restart the
initial waiting period, so long as no material changes have been made
to the transaction, to provide the Agencies an additional 15 or 30 days
(depending on the transaction type) to review the transaction without
issuing a Second Request. If the Updated HSR Filing is received within
two business days of withdrawal, no new fee is required, but filers
currently must provide a new affidavit and certification and update
current Item 4 of the Form to provide the Agencies with more recent
information that is likely relevant to the continued review.
The Commission proposes eliminating the requirement to provide
updated financials, currently required by Item 4(a) and (b), in the
Updated HSR Filing. The Commission's experience has shown that, given
that the withdraw and refile procedure is completed within
approximately one month of the original filing, the financial documents
required by Item 4(a) and (b) are rarely changed and therefore updating
them is not essential in this phase of its investigation.
The Commission proposes requiring updated Transaction-Related
Documents with the Updated HSR Filing, which, as discussed below in
III.D.1.a., would comprise the current Item 4(c) and (d) documents
subject to proposed modifications of the custodians and clarifications.
Documents responsive to current Item 4(c) and (d) typically reflect the
most relevant thinking of key individuals with knowledge of the
transaction within the acquiring person and are required as part of an
Updated HSR Filing. Therefore, the Commission believes these documents
are essential to the Agencies' initial antitrust assessment of the
transaction.
The Commission also proposes adding two new requirements for the
Updated HSR Filing: updated transaction agreements and updated
information about subsidies from Foreign Entities of Concern. Though
the voluntary withdrawal and refiling process is only available if the
transaction is materially the same, the Commission believes that the
Agencies would benefit from having a complete understanding of all
aspects of the status of and rationale for the transaction, including
any changes that have occurred since the day the HSR Filing was
submitted. Therefore, the Commission proposes requiring that the
Updated HSR Filing include the latest version of the transaction
agreements, including the most recent drafts, if a final version has
not been executed. The Commission believes this proposed requirement
would not impose a substantial burden, since this would be a limited
set of documents that should be readily available to the acquiring
person.
The Commission also proposes requiring that the Updated HSR Filing
include updated information regarding Subsidies from Foreign Entities
or Governments of Concern, which is discussed below at III.E.1. The
Commission believes that most updated HSR Filings would reflect no new
information related to subsidies given the short period of time since
the original HSR Filing. However, if new information about subsidies
from foreign entities of concern were to become available, the
Commission believes that it would be consistent with Congressional
intent for the Agencies to have access to this information.

[[Page 42184]]

Proposed Changes to the Instructions

III. Part 803 Appendix A and Appendix B

As mentioned above, the Agencies are developing an e-filing
platform through which filers would submit information required by the
HSR Rules via an online portal. As a result, this NPRM does not contain
a new draft Form. Instead, this NPRM presents the information
requirements as Instructions for collecting and submitting documents
and information required by the HSR Rules. The proposed Instructions
reorganize the information to reflect the planned layout of the e-
filing platform in development, which would be described in any final
rule. Prior to the implementation of the e-filing platform, the
proposed Instructions contemplate filers would submit the proposed
requests for information and narratives via uploads in a standard
format such as PDF and Excel.
The proposed changes to the information that filing parties would
be required to provide are detailed below. The Commission recognizes
that, in total, these proposed changes would be significant and impose
additional burden on some filing parties. Some proposed changes ask for
additional information or documents that the Commission believes are in
the possession of the filing persons in a form that could be readily
uploaded into the e-filing platform. Other proposed changes would
require filing parties to compile or generate the requested information
specifically for the HSR Filing, such as items requesting narrative
responses, which would involve additional effort. As explained below,
the Commission has determined that the additional burden associated
with these proposed changes is justified because the requested
documentary material and information is necessary and appropriate for
effective and efficient review of HSR Filings to determine within the
initial waiting period whether the transaction may, if consummated,
violate the antitrust laws.\21\
---------------------------------------------------------------------------

\21\ 15 U.S.C. 18a(d).
---------------------------------------------------------------------------

Based on the Agencies' experience conducting merger investigations,
and as discussed above, the Commission believes that the limited
information currently available to the Agencies in the HSR Filing is no
longer sufficient to conduct an effective initial screening of the
transaction for all types of competitive harm that may result from the
transaction. The proposed set of reorganized revenue information,
additional documents, and narrative responses would create a much more
complete, accurate, and robust basis on which to screen the transaction
for the various potential competitive effects, including those that
arise from non-horizontal transactions or combinations involving
competing employers. These proposals would also provide a more reliable
and robust set of information to determine when the transaction does
not warrant an in-depth investigation, which often requires a
substantial investment of time and resources for both the investigating
agency and the merging parties. Based on the Agencies' experience in
reviewing and challenging illegal mergers, the proposals target the
information that is most relevant and readily available to filing
persons and would require it to be presented in a coherent and
organized way that will facilitate quick antitrust review by the
Agencies during the initial waiting period. But the Commission welcomes
comments on the burden associated with and the appropriate balance of
having to provide information in the form of revenues, documents, and
narratives as part of the proposed changes in this NPRM and invites
alternative proposals that meet the objectives described below.
At their core, the proposed changes are motivated by the
fundamental purpose of the HSR Act, which is to allow the Agencies,
within a short period of time to review the information submitted with
the Filing and identify potentially problematic transactions prior to
consummation, and, where appropriate, initiate an in-depth review by
issuing Second Requests. The fact that the Agencies must conduct their
evaluation in an initial waiting period of 15 or 30 days, depending on
the transaction type, means that the Agencies must have enough
information to consider a wide range of potential effects on
competition on an expedited basis. Based on the cumulative learning of
the Commission and Assistant Attorney General over the course of
decades of investigations, the Commission proposes requiring new
information and narratives to address particular areas where the
Agencies have found specific deficiencies in the type of information
currently required by the Form. In addition, this NPRM would implement
changes required by the 2022 Amendments, which are consistent with the
need for sufficient information to screen for all types of competitive
concerns.
Despite the added burden for filing persons, on balance, the
Commission believes that the benefit to the Agencies' merger review
would be significant and would help address information asymmetries
between Agency staff and the filing persons in the initial waiting
period. The Agencies expend substantial resources during the initial
waiting period to discover and confirm basic business information about
the filing persons, information that is well-known to them but not to
Agency staff and is not available from any other source. These
information asymmetries have become more acute as deals and companies
have become more complex. In the Commission's experience, the
inefficiency created by information asymmetries can overwhelm the
initial review process, especially when the volume of HSR reportable
transactions is high.\22\ The proposed changes would also benefit
filing persons where information contained in an HSR Filing would
demonstrate to the Agencies that the transaction at issue does not need
further investigation. Indeed, both the Agencies and filing persons
have an interest in ensuring that HSR Filings are robust enough for the
Agencies to quickly identify transactions that do not require further
investigation during the initial waiting period. It is the Commission's
aim to be cognizant of all such interests in proposing the substantial
changes contained in this NPRM.
---------------------------------------------------------------------------

\22\ The Agencies experienced a surge in HSR reportable
transactions during 2021 and 2022. For instance, FY 2021 HSR
reportable transactions were double those of FY 2020 (1,637 versus
3,520), and in FY 2022, reportable HSR transactions remained high,
at over 3,200. The pace and volume of HSR filings (generally two
filings per transaction) during that time (in addition to on-going
merger investigations) required the Agencies to adjust their HSR
review process, including suspending the granting of requests for
early termination of the waiting period.
---------------------------------------------------------------------------

For ease of reference, the Commission includes the following
materials regarding the proposed changes in this NPRM:
An outline of the reorganization contemplated in the
proposed Instructions,
A chart that identifies proposed new locations of the
current Items of the Form including whether substantive changes are
proposed, and
A chart of proposed new categories of required
information.
These materials appear immediately below.
Proposed Instructions Outline
General Instructions and Information
Ultimate Parent Entity Information
[cir] UPE Details
[cir] Organization Structure
Transaction Information
[cir] Parties
[cir] Filing Fee
[cir] Transaction Details

[[Page 42185]]

[cir] Transaction Description
[cir] Joint Ventures
[cir] Agreements and Timeline
Competition and Overlaps
[cir] Business Documents
[cir] Competition Analysis
[cir] NAICS Codes
[cir] Controlled-Entity Overlaps
[cir] Minority-Held Entity Overlaps
[cir] Prior Acquisitions
Additional Information
[cir] Subsidies from Foreign Entities or Governments of Concern
[cir] Defense or Intelligence Contracts
[cir] Identification of Communications and Messaging Systems
[cir] Other Jurisdictions
Certification
Affidavits

Cross Reference Between Current Form and Proposed Instructions
------------------------------------------------------------------------
Current form item New location Substantive changes?
------------------------------------------------------------------------
Fee Information............... Transaction No.
Information/
Filing Fee.
Corrective Filing............. Transaction No.
Information/
Transaction
Details.
Cash Tender Offer............. Transaction No.
Information/
Transaction
Details.
Bankruptcy.................... Transaction No.
Information/
Transaction
Details.
Foreign Jurisdictions......... Additional Yes.
Information/
Other
Jurisdictions.
Early Termination............. Transaction No.
Information/
Transaction
Description.
Item 1(a)..................... Ultimate Parent No.
Entity
Information/UPE
Details.
Item 1(b)..................... Ultimate Parent No.
Entity
Information/UPE
Details.
Item 1(c)..................... Ultimate Parent No.
Entity
Information/UPE
Details.
Item 1(d)..................... Ultimate Parent No.
Entity
Information/UPE
Details.
Item 1(e)..................... Ultimate Parent No.
Entity
Information/UPE
Details.
Item 1(f)..................... Ultimate Parent Yes.
Entity
Information/
Organization
Structure.
Item 1(g)..................... Ultimate Parent No.
Entity
Information/UPE
Details.
Item 1(h)..................... Ultimate Parent Yes.
Entity
Information/UPE
Details.
Item 2(a)..................... Transaction No.
Information/
Parties.
Item 2(b)..................... Transaction No.
Information/
Transaction
Details.
Item 2(c)..................... Transaction No.
Information/
Transaction
Details.
Item 2(d)..................... Transaction No.
Information/
Transaction
Details.
Item 3(a) (Entities).......... Transaction No.
Information/
Parties.
Item 3(a) (Description)....... Transaction Yes.
Information/
Transaction
Description.
Item 3(b)..................... Transaction Yes.
Information/
Agreements and
Timeline.
Item 4(a)..................... Ultimate Parent No.
Entity
Information/UPE
Details.
Item 4(b)..................... UPE Information/ No.
UPE Details.
Item 4(c)..................... Competition and Yes.
Overlaps/
Business
Documents.
Item 4(d)..................... Competition and Yes.
Overlaps/
Business
Documents.
Item 5(a)..................... Competition and Yes.
Overlaps/NAICS
Codes.
Item 5(b)..................... Transaction Yes.
Information/
Joint Ventures.
Item 6(a)..................... Ultimate Parent Yes.
Entity
Information/
Organization
Structure.
Item 6(b)..................... Ultimate Parent Yes.
Entity
Information/
Organization
Structure.
Item 6(c)(i).................. Competition and Yes.
Overlaps/
Minority-Held
Entity Overlaps.
Item 6(c)(ii)................. Competition and Yes.
Overlaps/
Minority-Held
Entity Overlaps.
Item 7(a)-(d)................. Competition and Yes.
Overlaps/
Controlled-
Entity Overlaps.
Item 8(a)..................... Competition and Yes.
Overlaps/Prior
Acquisitions.
------------------------------------------------------------------------

Proposed New Requirements and Categories of Information
------------------------------------------------------------------------
Proposed new sections Location
------------------------------------------------------------------------
New Definitions........................... General Instructions and
Information.
Document Log.............................. General Instructions and
Information.
Translations.............................. General Instructions and
Information.
Organization of Controlled Entities....... Ultimate Parent Entity
Information/Organization
Structure.
Identification of d/b/a or f/k/a names.... Passim.
Identification of Additional Minority Ultimate Parent Entity
Interest Holders. Information/Organization
Structure.
Narrative Describing Ownership Structure Ultimate Parent Entity
of the Acquiring and Acquired Entities. Information/Organization
Structure.
Organizational Chart for Funds and Master Ultimate Parent Entity
Limited Partnerships. Information/Organization
Structure.
Identification of Other Types of Interest Ultimate Parent Entity
Holders that May Exert Influence. Information/Organization
Structure.
Identification of Officers and Directors.. Ultimate Parent Entity
Information/Organization
Structure.
Description of Acquiring Person........... Ultimate Parent Entity
Information/Transaction
Details.
Narrative Describing Transaction Rationale Ultimate Parent Entity
Information/Transaction
Details.
Diagram of the Transaction................ Ultimate Parent Entity
Information/Transaction
Details.
Identification of Related Transactions.... Ultimate Parent Entity
Information/Transaction
Details.
Expansion of Transaction Agreements to be Ultimate Parent Entity
Produced. Information/Agreements and
Timeline.
Production of other Agreements between the Ultimate Parent Entity
Acquiring and Acquired Persons. Information/Agreements and
Timeline.
Provision of a Transaction Timeline....... Ultimate Parent Entity
Information/Agreements and
Timeline.
Production of Certain Documents of the Competition and Overlaps/
Supervisory Deal Team Lead(s). Business Documents.
Production of Certain Strategic Plans..... Competition and Overlaps/
Business Documents.
Production of Certain Drafts.............. Competition and Overlaps/
Business Documents.
Organizational Chart of Authors and Competition and Overlaps/
Certain Recipients of Documents. Business Documents.
Narrative Describing Horizontal Overlaps.. Competition and Overlaps/
Competition Analysis.
Narrative Describing Supply Relationships. Competition and Overlaps/
Competition Analysis.
Narrative Describing Labor Markets........ Competition and Overlaps/
Competition Analysis.

[[Page 42186]]

Identification of Minority Held Entities Competition and Overlaps/
with Revenue Overlaps. Minority-Held Entity
Overlaps.
Provision of Geolocation for Certain Competition and Overlaps/
Locations of Operations. Controlled-Entity Overlaps.
Identification of Additional Prior Competition and Overlaps/
Acquisitions. Prior Acquisitions.
Disclosure of Subsidies from Foreign Additional Information.
Entities or Governments of Concern.
Identification of Certain Defense or Additional Information.
Intelligence Contracts.
Identification of Communications and Additional Information.
Messaging Systems.
Mandatory Disclosure of Foreign Filings... Additional Information.
Voluntary Waivers for International Additional Information.
Competition Authorities.
Voluntary Waivers for State Attorneys Additional Information.
General.
Statement of Penalties for False Certification.
Statements.
Prevention of Destruction of Documents.... Certification.
------------------------------------------------------------------------

The following discussion of the proposed changes in this NPRM
tracks the Proposed Instructions Outline above, explaining which
information requirements are materially the same as those currently
included in the Form and Instructions, which the Commission proposes
changing, and which are proposed new categories of required
information.
Throughout the proposed Instructions, references to paper and DVDs
have been eliminated, as discussed in II.A. above.

A. General Instructions and Information

The Commission proposes creating a General Instructions and
Information section within the proposed Instructions that would largely
parallel the General section of the current Instructions but would be
significantly reorganized. Within the proposed General Instructions and
Information section, the Commission proposes substantive changes to the
following sections: Filing Person, Definitions, Responses, and
Translations, as detailed below.
1. Definitions and Explanation of Terms
The Commission proposes creating two new definitions and deleting
an existing definition within the proposed Instructions.
a. Economic Research Service's (ERS's) Commuting Zones (CZ)
The Commission proposes adding a definition for Economic Research
Service's Commuting Zones. As discussed below at III.D.2.c., the
Commission proposes new questions that would require the submission of
information about the filing person's employees to aid the Agencies'
evaluation of the potential impact of proposed transactions on labor
markets. These proposed questions would require data to be submitted
using the Department of Agriculture's Economic Research Service
Commuting Zones for the year 2000. These codes are available at https://www.ers.usda.gov/data-products/commuting-zones-and-labor-market-areas/.
b. North American Product Classification System (NAPCS) Data
The Commission proposes eliminating the reporting of 10-digit North
American Product Classification System (``NAPCS'') based codes, as
discussed in more detail below at III.D.3. Thus, the Commission
proposes deleting the NAPCS definition from the proposed Instructions.
c. Standard Occupational Classification
The Commission proposes adding a definition for Standard
Occupational Classification. As discussed below at III.D.2.c., the
Commission proposes new questions that would require the submission of
information about the filing person's employees to aid the Agencies'
evaluation of the impact of proposed transactions on competition for
workers in labor markets. The proposed definition of Standard
Occupational Classification (``SOC'') would require filers to submit
data by the first six digits of the relevant code, as published by the
United States Bureau of Labor Statistics, available at https://www.bls.gov/soc/2018/#classification.
2. Filing
As discussed above at II.B., the Commission proposes amending Sec.
803.2 and deleting Sec. 803.2(b)(1)(v) to require filing persons to
submit separate forms when filing as an acquiring and acquired person.
The proposed Instructions would also reflect this proposed change.
3. Responses
The Commission proposes replacing the current Responses section
with a new Responses section that would provide details on how to
provide the information responsive to the proposed new questions. This
would include eliminating instructions that are specific to filings
made on paper or DVD, see above at II.A. The proposed revised Responses
section would also describe the information that filing persons would
need to provide in a log of responsive documents and narrative
responses to be submitted with an HSR Filing. This information would
generally be the same as the information currently required for
documents submitted in response to Items 4(c) and 4(d) of the current
Form, with two proposed expansions.
First, the Commission proposes requiring the filing person to
identify the request(s) to which the document would be responsive.
Though the proposed Instructions do not include item numbers at this
time, indented and bolded headings in the proposed Instructions should
each be considered a separate request. The Commission routinely
requires this type of referencing for document submissions pursuant to
compulsory process, including in response to a Second Request, and it
is extraordinarily helpful in quickly identifying materials responsive
to a specific request. This proposed requirement would allow the
Agencies to understand the content of filings more quickly by providing
a cross-reference between information and documents, facilitating a
more efficient review.
Second, the Commission proposes modifying the requirements for
identification of authors of documents prepared by third parties. For
documents prepared by third parties at the request of a filing person,
such as market studies, quality of earnings analyses, confidential
information memoranda, management presentations, or board
presentations, the Commission proposes that, in addition to providing
the name of the third party that prepared the document, the filing
person would be required to provide the name, title, and company of the
individual within the filing person who supervised the preparation of
the document or for whom the document

[[Page 42187]]

was prepared. Understanding who, within the filing person, was
responsible for overseeing or receiving the work of outside consultants
would materially assist the Agencies in identifying key decision-makers
for the transaction. In the case of documents that were not
commissioned by the filing person, such as subscription market reports,
unsolicited banker's books, or documents received from the other filing
person, the Commission proposes that the filing person would only be
required to list the document title and name of the third party that
prepared the document.
These proposed changes would allow the Agencies to quickly assess
which documents were key to the decision to pursue the transaction and
who within the filing person coordinated the assessment that resulted
in that decision.
4. Translations
As noted above at II.D., the Commission proposes amending Sec.
803.8 to require the filing person to submit English translations of
all foreign-language documents. The proposed Instructions would also
reflect this change.

B. Ultimate Parent Entity Information

The Commission proposes the creation of an Ultimate Parent Entity
(UPE) Information section within the proposed Instructions. Currently,
information about the structure of the acquiring and acquiring persons
is required in various sections of the Form: Item 1 contains basic
contact information; Item 2 identifies the ultimate parent entities;
Item 3 identifies the acquiring and acquired entities; and Item 6
identifies certain controlled and minority-held entities, as well as
certain minority holders of the filing person. The Commission proposes
the reorganization, clarification, and expansion of these items to
require additional information about the acquiring person and acquired
entity(s) in order for the Agencies to receive a more complete picture
of the scope of the operations of each, and to identify points of
contact for questions about the HSR Filing or potential Second
Requests, as well as key interest holders. These proposed changes,
discussed below, would fall within the following proposed categories:
UPE Details and Organization Structure.
1. UPE Details
The proposed UPE Details section within the proposed Instructions
would contain most of the information currently required in Item 1 of
the Form. The Commission proposes adding a new Size of Person
Stipulation item that would allow the filing person to stipulate that
the size of person test is met, when applicable, making it easier for
staff to determine that the size of person test is met and streamlining
the review process as a result.
The Commission also proposes clarifying which financials are
required from acquiring persons who are natural persons. As a result of
feedback from filers over the years, the Commission is aware that this
item causes confusion. The proposed language in the Instructions would
make it clear that natural persons who are acquiring persons must
include the annual reports and/or annual audit reports of (1) the
acquiring entity(s) and any entity controlled by the natural person
whose dollar revenues contribute to a NAICS overlap, and (2) the
highest-level entity(s) the natural person controls. It is the intent
of the Commission that the Instructions require this information from
natural persons, and the proposed change would make that intent clear.
Finally, the Commission proposes requiring all filing persons to
identify the person to whom Second Requests should be addressed.
Current Item 1(g) requires the identification of two individuals to
contact regarding the HSR Filing, and current Item 1(h) requires the
identification of an individual located within the United States for
the limited purpose of receiving a notice of a Second Request. But the
Instructions currently limit application of Item 1(h) to filings made
by foreign persons, so for U.S. filers, Second Requests are sent to the
person identified in Item 1(g). The Commission now understands that
U.S. filing persons sometimes have separate points of contact to answer
questions regarding the HSR Filing as compared to questions regarding
the receipt of Second Requests. Therefore, the Commission proposes
requiring all filing persons to separately provide contacts for
questions related to the HSR Filing and Second Requests.
These proposed changes would provide clarity for filing persons,
and the Agencies would benefit from receiving more precise information
about the UPE.
2. Organization Structure
The proposed Organization Structure section within the proposed
Instructions would expand the required information about how the UPE is
organized and the identity of other individuals and entities that may
have influence over business decisions or access to confidential
business information. The proposal would require the identification of
entities within the acquiring person or acquired entity, minority
shareholders, and other non-controlling entities, and create new
requirements to identify certain other interest holders that may exert
influence, as well as officers, directors, and board observers.
a. Entities Within the Acquiring Person and Acquired Entity
The proposed Entities Within the Acquiring Person and Acquired
Entity section would contain information currently required by Items
1(f) and 6(a) of the Form. Item 1(f) requires the identification of the
acquiring entity(s) or acquired entity(s) (as appropriate). Item 6(a)
requires the acquiring person to list all entities it controls with
total assets of $10 million or more (though foreign entities with no
sales into the United States may be omitted). The acquired person
currently has the same obligation, but the scope is limited to the
acquired entity(s); the acquired person is not required to provide
information about entities that are not part of the transaction. The
Commission proposes requiring additional information about the reported
entities within the filing persons.
First, the Commission proposes requiring filing persons to organize
the list of controlled entities by operating company or business. As
filing persons have become more complex, an alphabetically or
geographically organized list of the controlled entities, which is
currently permitted by Item 6(a) of the Form, often does not provide
the Agencies with a sufficient overview of the scope of the businesses
that the acquiring person and acquired entity(s) control. Some filers
currently organize the list of entities held by the acquiring person or
acquired entity by operating company, and in the Commission's
experience, this is a much more useful way to present the information.
Understanding which companies are part of an operating group or
portfolio company would allow staff to identify the actual market
participants from among all legal entities. The Commission thus
proposes requiring that lists of controlled entities be submitted in
this manner to aid the Agencies' review during the initial waiting
period.
Second, for each such operating company or business, the Commission
proposes that filers identify the name(s) by which the company or
business does business, as well as any name(s) by which it formerly did
business within the three years prior to filing. While it remains
important for the Agencies to receive legal entity names, these names

[[Page 42188]]

are often unrelated to the names used in the marketplace and may be
unfamiliar to industry participants. Being able to connect the legal
names to the ``doing business as'' and ``formerly known as'' names
would greatly assist the Agencies in understanding the scope of the
operations of the acquiring person and acquired entity and allow the
identification of other public information about the entity during the
initial waiting period.
b. Minority Shareholders and Other Non-Controlling Entities
The proposed Minority Shareholders and Other Non-Controlling
Entities section would contain information currently required by Item
6(b) of the Form, which requires identification of holders of 5% or
more, but less than 50%, of the acquiring UPE and acquiring entity by
the acquiring person, and of the acquired entity(s) by the acquired
person. In order to provide the Agencies with a more complete
understanding of the individuals or entities that have significant
investments in the filing persons, the Commission proposes amending the
current Item 6(b) requirements and expanding them to require the
identification of additional minority interest holders.\23\
---------------------------------------------------------------------------

\23\ The acquisition of a minority position may be reportable
under the Act, and failure to make an HSR Filing and observe the
waiting period may result in significant civil penalties. 15 U.S.C.
18a(g).
---------------------------------------------------------------------------

The identification of certain minority holders of the filing
persons has been required since the first iteration of the Form in
1978, though the level of detail that has been required has changed
over time.\24\ Prior to 2011, Item 6(b) only required the
identification of holders of minority interests in voting securities.
In 2011, Item 6(b) was amended to require the identification of holders
of 5% or more but less than 50% of unincorporated entities.\25\ The
Commission, however, made an exception for limited partnerships and
only required the identification of the general partner. At that time,
the Commission understood that limited partners had no control over the
operations of the fund or portfolio companies and therefore did not see
them as essential to the Agencies' initial review.\26\ Since that time,
the Commission has come to understand that the Agencies would benefit
from more complete information about all minority holders of the filing
parties, including the identification of limited partners. As a result,
the Commission proposes collecting information about minority holders
of all entities within the acquiring person that are related to the
transaction and requiring the identification of certain limited
partners.
---------------------------------------------------------------------------

\24\ See 43 FR 33450 (July 31, 1978); 52 FR 7066 (Mar. 6, 1987);
76 FR 42471 (July 19, 2011).
\25\ 76 FR 42471 (July 19, 2011).
\26\ Proposed Rules, 75 FR 57110, 57118 (Sept. 17, 2010),
adopted in 2011, 76 FR 42471 (July 19, 2011).
---------------------------------------------------------------------------

The current limitation on providing minority holder information for
only the acquiring ultimate parent entity and acquiring entity often
prevents the identification of key interest holders. For example, co-
investors often do not invest at the UPE or acquiring entity level but
may hold a 5% or greater interest in an entity that is in between the
UPE and the acquiring entity in the ownership structure. In particular,
when funds make acquisitions, it can be the case that more than one
fund may be substantively involved in the acquisition, using a variety
of corporate or unincorporated entity types. The identification of not
only the controlling person but also significant minority investors can
be an important component of the Agencies' evaluation of the potential
competitive effects of the transaction during the initial waiting
period,\27\ and obtaining a broader picture of relevant minority
investments, where they exist, would aid the Agencies in their
assessment of the nature of competitive decision-making within the
relevant entity.
---------------------------------------------------------------------------

\27\ 43 FR 33450, 33531 (July 31, 1978).
---------------------------------------------------------------------------

In the case of limited partnerships, Item 6(b) currently does not
require the identification of limited partners, even if they hold 5% or
more. At the time this item was adopted, the Commission understood that
limited partners had no control over the operations of the fund or
portfolio companies and therefore did not see them as essential to the
Agencies' initial review.\28\ However, after more than a decade, the
Commission now believes that it is inappropriate to make
generalizations regarding the role of investors in limited partnership
structures. Identification of limited partners can provide valuable
information about co-investors and lead to the identification of
potentially problematic overlapping investments resulting from the
transaction that could violate Section 7.\29\ Thus, it is important
that the Agencies know the identities of limited partners to understand
the transaction in its entirety and to uncover investment relationships
that may have competitive significance.
---------------------------------------------------------------------------

\28\ Proposed Rules, 75 FR 57110, 57118 (Sept. 17, 2010),
adopted in 2011, 76 FR 42471 (July 19, 2011).
\29\ See, e.g., In re Red Ventures Holdco and Bankrate, FTC Dkt.
C-4627 (Nov. 3, 2017) (enforcement action involving overlapping
limited partnership holdings); United States v. Dairy Farmers of
Am., 426 F. 3d 850 (6th Cir. 2005) (DFA stakes in competitors Flav-
O-Rich and Southern Belle violated Section 7).
---------------------------------------------------------------------------

Accordingly, for the acquiring person, the Commission proposes the
reporting of certain minority holders of (1) the acquiring entity, (2)
any entity directly or indirectly controlled by the acquiring entity,
(3) any entity that directly or indirectly controls the acquiring
entity, and (4) any entity within the acquiring person that has been or
will be created in contemplation of, or for the purposes of,
effectuating the transaction. For entities affiliated with a master
limited partnership, fund, or investment group, the ``doing business
as'' or ``street name'' of that group would also be required.
Under these proposals, minority holders that would have to be
reported would include all entities or individuals, including limited
partners, that hold 5% or more of the voting securities or non-
corporate interests of one of the identified entities. To be clear, the
Commission proposes requiring limited partnerships to identify all
holders of 5% or more, but less than 50%, to harmonize the requirement
for limited partnerships with the requirements for limited liability
companies and corporations. The requirement to identify the general
partner of a limited partnerships would remain the same.
The Commission acknowledges that these proposed requirements may
require significant additional information from investment entities,
such as funds and master limited partnerships, for which organizational
structures are often more complex. But the Commission believes that the
disparate treatment of LLCs as compared to limited partnerships is no
longer appropriate. Further, the complexity of these organizational
structures makes it all the more important that the filing person
provide this information with the HSR Filing. The complex structure of
investment entities is not adequately captured by the current Form, and
there is often no other source for Agencies to learn of these
relationships. Though the introduction of the definition of
``associate'' in 2011 \30\ provides the Agencies with some valuable
information with which to identify competitively significant
relationships that exist through related holdings, it does not provide
enough detail about all of the potential players involved in the
structure of the acquiring person. As a result, the Commission believes
that the

[[Page 42189]]

proposed identification of all minority investors of 5% or more in
entities related to the transaction would allow the Agencies to more
quickly identify potential competitive issues related to these holdings
during the initial waiting period.
---------------------------------------------------------------------------

\30\ 76 FR 42471 (July 19, 2011).
---------------------------------------------------------------------------

To reduce the additional burden associated with these proposed
changes, the Commission proposes limiting the information about
minority holders collected from the acquired person. Currently, the
acquired person must list certain minority interest holders of the
acquired entity(s), but this requirement does not distinguish between
minority holders that will be cashed out as a result of the
transaction, and those that will continue investment after the
transaction. On balance, the Commission believes that identifying only
the minority holders that would continue to have an interest in the
acquired entity(s), directly or indirectly, would provide the most
relevant information to the Agencies during the initial waiting period.
Therefore, the Commission proposes that the acquired person only be
required to identify minority holders of the acquired entity(s) that
will continue to hold interest in the acquired entity(s) or will
acquire interests in any entity within the acquiring person as a result
of the transaction. The Commission recognizes that in certain
transactions to which Sec. 801.30 applies, the acquired person might
not have this information. In such cases, it would be permissible for
the acquired person to indicate that the information is unknown.
c. Other Types of Interest Holders That May Exert Influence
The proposed Other Types of Interest Holders that May Exert
Influence section would require the identification of entities or
individuals that may have material influence on the management or
operations of the acquiring person beyond those with the minority
interests discussed above. Because these other interest holders retain
the ability to influence decision-making by the acquiring person after
the transaction, it is important for the Agencies to know about these
relationships during the initial waiting period.
The Commission has long recognized the potential influence of
minority holders and the possibility that they may seek to change
competitive decisions of the target firm.\31\ In the 1978 SBP, the
Commission explained that competitors, customers, or suppliers holding
a significant interest in one of the parties can raise antitrust
concerns.\32\ As originally conceived, minority holdings reported in
Item 6 were designed to alert the Agencies to situations in which the
potential antitrust impact of the transaction does not result solely or
directly from the transaction itself, but may arise from direct or
indirect shareholder relationships between the parties to the
transaction.\33\
---------------------------------------------------------------------------

\31\ See United States v. E.I. du Pont de Nemours & Co., 353
U.S. 568 (1957) (du Pont's 23% stake in General Motors violated
Section 7 by giving it an advantage over other suppliers and thereby
resulting in a substantial lessening of competition). In considering
the proper remedy, the Supreme Court found that divestiture of only
voting rights was insufficient due to the on-going ``special
relationship'' could still result in competitive harm. United States
v. E.I. du Pont de Nemours & Co., 366 U.S. 316, 332 (1961).
\32\ 43 FR 33450, 33531-32 (July 31, 1978).
\33\ Id. at 33531.
---------------------------------------------------------------------------

As entity structures have evolved and become more complex, the
Commission now believes that relationships beyond those created by
holding voting securities or non-corporate interests can give rise to
similar and significant competitive concerns. For instance, some credit
arrangements permit the creditor to exercise rights and influence
similar to those of equity holders. Additionally, some equity interests
that do not provide rights to vote for the board of directors can,
nevertheless, provide rights to vote on or influence business practices
of the company, including investments in future product or service
lines. Further, contractual arrangements allowing individuals or
entities to nominate directors or board observers have proliferated. In
addition, some entities outsource the management of operations to third
parties that do not beneficially own interests in the company. Each of
these relationships can be relevant to understanding the transaction
and its potential competitive effects. Without information about these
relationships, the Agencies cannot easily identify those transactions
where these relationships exist and may affect the competitive dynamics
before and after the transaction.
As a result, the Commission proposes that the acquiring person
identify certain individuals (other than employees of the acquiring
person) or entities that, in relation to the acquiring entity or any
entity it directly or indirectly controls or is controlled by, (i)
provide credit; (ii) hold non-voting securities, options, or warrants;
(iii) are board members or board observers, or have nomination rights
for board members or board observers; or (iv) have agreements to manage
entities related to the transaction. Credit relationships would be
limited to creditors that have, or would have, in conjunction with or
result of the transaction, provided credit totaling 10% or more of the
value of the entity in question. Holders of non-voting securities,
warrants, or options would be limited to those the value of which
equals or exceeds 10% of the entity or could be converted to 10% or
more of the voting securities or non-corporate interests of the
company.
The Commission recognizes that the compilation of this information
would add to the burden of preparing an HSR Filing for an acquiring
person with a complicated investment structure, but it is important
that the HSR Filing contain this information because individuals or
entities that fall into any of the four categories described above can
have a material influence on the operations or strategy of the
acquiring person. As with minority investors, these relationships can
affect the competition analysis of the transaction, and the proposed
identification of these individuals or entities would allow the
Agencies to know the identity of those in a position to influence post-
merger competition decisions.
d. Officers, Directors, and Board Observers
The proposed Officers, Directors, and Board Observers section would
require the identification of the officers, directors, or board
observers (or in the case of unincorporated entities, individuals
exercising similar functions) of all entities within the acquiring
person and acquired entity, as well as the identification of other
entities for which these individuals currently serve, or within the two
years prior to filing had served, as an officer, director, or board
observer (or in the case of unincorporated entities, roles exercising
similar functions). This information would allow the Agencies to know
of existing, prior, or potential interlocking directorates and to
assess the competitive implications of such relationships under both
Sections 7 and 8 of the Clayton Act.\34\
---------------------------------------------------------------------------

\34\ Although Section 8 does not technically apply to
unincorporated entities, information sharing and coordination can
still raise concerns under Section 1 of the Sherman Act.
---------------------------------------------------------------------------

Section 8 of the Clayton Act generally prohibits a person from
serving as an officer or director of competing corporations, subject to
certain categorical and de minimis exceptions. This section of the
Clayton Act aims to prevent information sharing and coordination
between competitors through a per se ban that prohibits the same
individual from serving as an

[[Page 42190]]

officer or director of two competing firms.\35\
---------------------------------------------------------------------------

\35\ Like Section 7, Section 8 was designed to ``nip in the bud
incipient violations of the antitrust laws by removing the
opportunity or temptation to such violations through interlocking
directorates.'' United States v. Sears, Roebuck & Co., 111 F. Supp.
614, 616 (S.D.N.Y. 1953).
---------------------------------------------------------------------------

In the Agencies' experience, many acquiring persons have board
members who also serve on the boards of other companies. As a result,
the Agencies often investigate existing board relationships as well as
potential interlocks that would result from the transaction as part of
its initial review. Section 8 bars interlocks that arise through rights
to appoint board members to a competitor \36\ or officers or directors
serving on the boards of competing companies. Investment entities that
acquire board seats across a diverse portfolio of companies may be
particularly likely to encounter Section 8 compliance issues via a
merger or acquisition.\37\
---------------------------------------------------------------------------

\36\ See, e.g., Complaint, United States v. CommScope Inc.,
1:07-cv-2200 (D.D.C.) (Dec. 6, 2007) https://www.justice.gov/atr/case-document/complaint-69 (alleging violations of Sections 7 and 8
where buyer also acquired rights to appoint members to the board of
its competitor). See also Press Release, U.S. Dep't of Just.,
Tullett Prebon and ICAP Restructure Transaction after Justice
Department Expresses Concerns about Interlocking Directorates, (Jul.
14, 2016). The Department of Justice has announced its intent to
reinvigorate Section 8 enforcement, after seven directors resigned
from corporate board positions. See Press Release, U.S. Dep't of
Just., Justice Department's Ongoing Section 8 Enforcement Prevents
More Potentially Illegal Interlocking Directorates (Mar. 9, 2023),
https://www.justice.gov/opa/pr/justice-department-s-ongoing-section-8-enforcement-prevents-more-potentially-illegal.
\37\ The Agencies also consider whether the acquiring person
would be expanding into the business of the other company that
shared a board member such that the two companies would have
competing sales in excess of the de minimis amounts permitted by
Section 8.
---------------------------------------------------------------------------

Currently, filers are not required to disclose the identity of the
members of their boards of directors, and this makes it difficult for
the Agencies to complete their assessment of potential Section 8 issues
during the initial waiting period. Having information about potential
interlocking directorates in the HSR Filing would allow the Agencies to
take steps to prevent the sharing of board-level confidential
information much more quickly. This information is also relevant to the
competition analysis of the transaction, as well as concerns about
potential gun-jumping, which may violate the Act or Section 1 of the
Sherman Act.\38\ This is particularly important given that post-merger
enforcement of Section 8's per se ban can be ineffective after the
individual has been privy to the confidential business information of
two competitors: Section 8 provides a one-year grace period to remedy
an illegal interlock that arises after the individual is elected or
chosen to be an officer or director.\39\ Moreover, Section 8 does not
provide for civil penalties or other monetary relief, only injunctions
barring the individual from serving on the two boards.
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\38\ Any sharing of competitive information between or among
competitors, including during the pendency of merger review, that
results in competitive harm may be a violation of Section 1 of the
Sherman Act, or Section 5 of the FTC Act. Complaint, United States
v. Gemstar, cv 1:03-00198 (D.D.C. 2003), https://www.justice.gov/atr/case-document/complaint-108; Complaint, In re Insilco Corp., No.
C-3783 (F.T.C. 1998), https://www.ftc.gov/sites/default/files/documents/cases/1998/01/insilcocmp.pdf.
\39\ 15 U.S.C. 19(b).
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Information about board observers can also be relevant to the
Agencies' analysis of the proposed transaction. Board observers are not
subject to the Section 8 ban on interlocking directorates, and yet may
have access to the same materials that are shared with officers and
directors. In December 2020, the Commission issued an advance notice of
proposed rulemaking (``ANPRM'') that, among other things, sought to
gather information about sources of influence on corporate decision-
making outside the scope of voting securities.\40\ The Commission noted
the possibility that there are ways to gain influence over a company
other than through the acquisition of voting rights, for instance
through board observers, and pointed to the increasing use of board
observers as part of the governance structure. Because the acquisition
of rights to be a board observer is not a reportable event under the
HSR Act, the Commission sought information about whether having rights
as a board observer provides opportunities to influence an issuer's
business decisions.\41\
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\40\ 85 FR 77042 (Dec. 1, 2020).
\41\ ``At the very least, board observers gain insight into an
issuer's strategic decision-making, which is not only useful to the
investor sponsoring the board observer, but may also be useful to
competitors in the market, especially when those board observers
also serve as officers or directors of a competitor. Companies
likely benefit from interacting with board observers because company
management can obtain additional investor insight without having to
alter the composition or voting balance on the board.'' Id. at
77050.
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The Commission received two comments in response to the ANPRM that
discuss the role of board observers, and each comment indicated that
individuals serving as board observers typically receive the same
information as the board of directors, although there may be ways to
exclude them from reviewing privileged or competitively sensitive
information.\42\ In the Commission's experience, board observers have
become more prevalent and could be privy to the same information as
members of the board. For that reason, information about who these
individuals are and whether they also serve as officers, directors, or
board observers with other companies is important for understanding
other sources of influence on the company's competitive decision-making
and whether such individuals could share information between
competitors. The Commission believes that having this information
available during the initial waiting period would permit the Agencies
to take steps to minimize the sharing of information prior to
consummation.
---------------------------------------------------------------------------

\42\ See Am. Bar. Ass'n, Comment on Hart-Scott-Rodino Coverage,
Exemption, and Transmittal Rules ANPRM, 10-11 (Feb. 1, 2021),
https://www.regulations.gov/comment/FTC-2020-0086-0015; Comput. &
Commc'n Indus. Ass'n, Comment on Hart-Scott-Rodino Coverage,
Exemption, and Transmittal Rules ANPRM, 11 (Jan. 26, 2021), https://www.regulations.gov/comment/FTC-2020-0086-0002.
---------------------------------------------------------------------------

The Commission thus proposes that filing persons provide
information about the officers, directors, and board observers (or in
the case of unincorporated entities, individuals exercising similar
functions) of the acquired entity(s) and entities within acquiring
person(s), as applicable, for the prior two years, and for each
individual, identify any other companies for which those individuals
would serve or have served during the prior two years as officers,
directors, or board observers. The Commission also proposes requiring
the same information for the prospective officers, directors, or board
observers of the acquired and acquiring entities after the transaction,
as well as for any officers, directors, or board observers of new
entities created as a result of the transaction (and, in each case, for
unincorporated entities, individuals serving those functions). If it
would be impossible to identify the specific officers, directors, and
board observers, filers should describe who would have the authority to
choose them. Information received through these proposals would help
the Agencies identify individuals with the ability to participate in or
influence competitively relevant decision-making related to the filing
persons or with access to confidential business information, allowing
the Agencies to engage in more effective enforcement of the antitrust
laws. The Commission believes that this information should be known to
or readily accessible by the filing parties, and in some cases already

[[Page 42191]]

collected as part of an incorporated entity's antitrust compliance
program.

C. Transaction Information

The Commission proposes the creation of a Transaction Information
section within the proposed Instructions. Currently, information about
the transaction is required in several sections of the Form: the
initial portion of the current Form requires information about the
filing fee and whether early termination of the waiting period is
requested; Item 2(a) requires identification of the ultimate parent
entities of the acquiring and acquired persons; Item 2(b) identifies
the type of transaction; Item 2(c) identifies the Sec. 801.1(h)
threshold that will be crossed; Item 2(d) seeks information about the
percentage and value of the voting securities, non-corporate interests,
and/or assets to be required; Item 3(a) asks for identification of the
acquiring and acquired persons and entities, as well as a description
of the transaction; Item 3(b) requires the listing and attaching of the
most recent transaction agreement, or letter of intent; and Item 5(b)
requires information about joint ventures and formations. The
Commission proposes the reorganization, clarification, and expansion of
these items to require information that will aid the Agencies in
understanding the totality of the transaction during the initial
waiting period. These proposed changes, discussed below, would require
information about the transaction to be reported in the following
proposed categories: Parties, Filing Fee, Transaction Details, and
Transaction Description.
1. Parties
The proposed Parties section within the proposed Instructions would
require the identification of the acquiring and acquired persons and
the acquiring and acquired entities. This information is currently
collected in Item 3(a) of the Form, and the Commission is not proposing
any material changes to this requirement.
2. Filing Fee
The proposed Filing Fee section within the proposed Instructions
would require identification of the total filing fee required for the
transaction and information about the payment, including identification
of the paying entity and the Electronic Wire Transfer confirmation
number.\43\ This information is currently collected in the Fee
Information section of the Form, and the Commission is not proposing
any material changes to this requirement.
---------------------------------------------------------------------------

\43\ If electronic wire transfers are not available to the
filing party, the Instructions would continue to provide
instructions for paying by check.
---------------------------------------------------------------------------

3. Transaction Details
The proposed Transaction Details section within the proposed
Instructions would require the same information currently required by
Items 2(b)-2(d) of the Form that detail whether the transaction
involves the acquisition of voting securities, non-corporate interests
or assets, and the approximate value of each, as well as whether a
notification threshold is crossed. The Commission is not proposing any
material changes to these requirements.
4. Transaction Description
The Commission proposes creating a Transaction Description section
within the proposed Instructions to reorganize information currently
required in the Transaction Description portion of Item 3(a) of the
Form, and to expand the required information, as described below.
a. Business of the Acquiring Person
The Commission proposes requiring the acquiring person to describe
its business operations. Currently, Item 3(a) of the Form requires
filing persons to briefly describe the transaction, including whether
assets, voting securities, or non-corporate interests (or some
combination) are to be acquired. Filers must also describe the business
operation being acquired or what the assets being acquired
comprise.\44\ Although this information helps the Agencies understand
what is proposed to be acquired, it does not provide any insight into
the full range of business operations or other entities involved in the
transaction on the part of the acquiring person. In the Commission's
experience, understanding the scope of the acquiring person's business
operations is critically important to determining whether the
transaction poses any potential competition concern. Although this
information is well known to the acquiring person, it is often not
easily or quickly collected and confirmed from public sources during
the initial waiting period.
---------------------------------------------------------------------------

\44\ 81 FR 60257 (Sept. 1, 2016).
---------------------------------------------------------------------------

As a result, the Commission proposes requiring the acquiring person
to briefly describe the business operations of all entities within the
acquiring person to provide a clear overview of all aspects of the
acquiring person's pre-transaction business to facilitate the Agencies'
antitrust review during the initial waiting period. Many businesses
have pre-prepared descriptions of their operations for use in press
releases, marketing materials, and investor materials. Unlike the
requirement to describe the entities or assets to be acquired, which
would apply to both the acquiring and acquired person, the requirement
to describe business operations would be limited to the acquiring
person.
b. Business of the Acquired Entity
As noted above, Item 3(a) of the Form requires filing parties to
briefly describe the transaction, including whether assets, voting
securities, or non-corporate interests (or some combination) are to be
acquired. Filing persons must also describe the business operation
being acquired or what the assets being acquired comprise. The
Commission is not proposing any material changes to this requirement.
c. Non-Reportable UPE(s)
Item 2(a) of the Form currently requires the identification of any
UPE that is not required to file, and the Commission is not proposing
any material changes to this requirement.
d. Transaction Description
Item 3(a) of the Form currently requires a brief description of the
transaction. The Commission is not proposing any material changes to
this requirement.
e. Transaction Rationale
The Commission proposes adding a new requirement that filing
persons provide a narrative that would identify and explain each
strategic rationale for the transaction. As helpful as the documents
responsive to current Items 4(c) and 4(d) of the Form can be, they do
not always convey each filing person's cumulative views on the
rationale(s) for the transaction. Indeed, such documents (when they are
submitted and when they discuss rationales) often contain differing,
and at times conflicting or mutually exclusive, statements regarding
the transaction depending on when they were prepared or by whom. For
example, different members of the deal team might have different
perspectives on the potential motivations for the transaction at
different times, and the submitted documents do not resolve the filing
person's ultimate thinking regarding the topic. Since documents
responsive to Items 4(c) and 4(d) do not consistently provide an
overview of the rationale(s) for the transaction, it would be of
immense value for the Agencies to have during the initial waiting
period a

[[Page 42192]]

statement that discusses each the strategic rationale(s) from the
perspective of each filing person.
The Commission thus proposes that the acquiring and acquired person
be required to submit a narrative describing all strategic rationales
for the transaction, including, for example, those related to
competition for current or known planned products or services that
would or could compete with a current or known planned product or
service of the other reporting person, expansion into new markets,
hiring the sellers' employees (so-called acqui-hires), obtaining
certain intellectual property, or integrating certain assets into new
or existing products, services or offerings. The Commission also
proposes that the filing person identify which documents submitted with
the HSR Filing support the rationale(s) described in the narrative.
This proposed requirement would help ensure that the provided narrative
is grounded in the filers' ordinary-course documents and not mere
advocacy designed to portray a favorable view of the transaction.
Moreover, any cited documents that support the narrative would also
provide additional context for the Agencies as they assess the parties'
stated rationale(s) in relation to any potential competitive
consequences of the transaction. Understanding the business reason(s)
for pursuing the transaction can materially affect the course and
direction of the Agencies' antitrust review during the initial waiting
period.
f. Transaction Diagram
The Commission proposes a new requirement that the filing persons
provide a diagram of the deal structure along with a corresponding
chart that would explain the relevant entities and individuals involved
in the transaction. The brief narrative currently required in Item 3(a)
of the Form does not require filers to explain all the relevant
entities or identify steps involved in the transaction and their
sequence. As a result, the Agencies frequently request a more detailed
account of these steps during the initial waiting period, but these
submissions are voluntary, not uniform in their detail, and often lack
important aspects of the transaction that may bear on the competitive
analysis and the determination of whether the transaction warrants in-
depth review. In the Commission's experience, particularly in the case
of complex or multi-step transactions, diagrams are generally more
helpful than simple narratives in conveying the relationships of the
relevant entities and the deal structure.
The Commission's proposal that filing persons submit a diagram of
the deal structure along with a corresponding chart explaining the
entities involved in the transaction would further assist the Agencies'
conceptualization of the transaction and save considerable time in
obtaining basic information about the entities involved and how the
transaction would affect the operations of those entities. Such
diagrams are often prepared by companies in the ordinary course of
business for other purposes, such as for transaction diligence
requirements.
g. Related Transactions
While Item 3(a) of the current Form asks parties to indicate
whether there are additional filings related to the transaction, filers
sometimes overlook this requirement. The proposed Instructions would
clarify that filing persons must identify related transactions. The
proposed Instructions would also provide a list of common circumstances
in which multiple filings are required to guide filing parties in their
responses. These proposed changes would provide clarity for both filing
persons and the Agencies.
h. Early Termination
The proposed Early Termination section would ask whether the filing
party requests early termination of the waiting period. This question
is currently asked on page one of the Form, and the Commission is not
proposing any material changes to this requirement.
5. Joint Ventures
The proposed Joint Ventures section within the proposed
Instructions would require information about transactions structured as
a joint venture or formation pursuant to Sec. Sec. 801.40 or 801.50.
This information is currently collected in Item 5(b) of the Form and
requires information about the contributions each person will make to
the entity, what consideration will be received, the business in which
the new entity will engage, and an allocation of revenue to industry
codes. As discussed in section III.A.1.b. above and III.D.3. below, the
Commission is proposing eliminating the use of 10-digit NAPCS codes.
Therefore, the Commission proposes also eliminating the requirement to
identify the NAPCS codes in which the joint venture will derive
revenue. The Commission is not proposing any other material changes to
this requirement.
6. Agreements and Timeline
The proposed Agreements and Timeline section within the proposed
Instructions would require filing persons to provide a term sheet or
draft agreement that reflects sufficient detail about the proposed
transaction to demonstrate the transaction is more than hypothetical,
if a definitive agreement has not been executed, as described above in
the proposed amendments to Sec. 803.5(b) at II.C. In addition, the
Commission proposes additional changes regarding which agreements must
be submitted. These proposed changes, discussed below, include a
requirement to submit the entirety of all agreements related to the
transaction and a new requirement to submit other agreements between
the filing persons that are not related to the transaction, as well as
a timetable for the transaction.
a. Transaction-Specific Agreements
The Commission proposes requiring that all transaction-specific
agreements be submitted with HSR Filings. Currently, Item 3(b) of the
Form requires the submission of all documents that constitute the
agreement(s) among the acquiring person(s) and the person(s) whose
assets, voting securities, or non-corporate interests are to be
acquired, as well as agreements not to compete and other agreements
between the parties. The production of schedules to agreements is not
currently required, unless the schedules contain agreements.\45\ In the
Commission's experience, the structure of transactions has become
increasingly complex, often comprising not only multiple agreements
between the filing persons but agreements with third parties.
Understanding the entirety of the transaction, including but not
limited to non-competition and non-solicitation agreements and other
agreements negotiated with key employees, suppliers, or customers in
conjunction with the transaction, is crucial to determining the
totality of the transaction and assessing during the initial waiting
period the transaction's potential competitive impact. Moreover,
schedules increasingly include descriptions of key terms and
provisions.
---------------------------------------------------------------------------

\45\ 16 CFR 803 Appendix Notification and Report Form
Instructions at page V.
---------------------------------------------------------------------------

The Commission thus proposes requiring filing persons to produce
all agreements, inclusive of schedules, exhibits, and the like, that
relate to the transaction, regardless of whether both parties to the
transaction are signatories. It is the Commission's understanding

[[Page 42193]]

that these documents are collected and are typically included in
materials necessary for closing. Having a complete set of transaction-
related agreements would provide the Agencies with a more complete
understanding of the transaction under review.
b. Other Agreements Between the Parties
The Commission also proposes requiring filing persons to submit all
agreements between any entity within the acquiring person and any
entity within the acquired person in effect at the time of filing or
within the year prior to the date of filing. Understanding the scope of
any existing contractual relationships between the filers would
materially assist the Agencies' review by revealing any business
interactions or relationships that exist prior to the transaction and
that may be affecting premerger competition. These might include
licensing agreements, supply agreements, non-competition or non-
solicitation agreements, purchase agreements, distribution agreements,
or franchise agreements, among others. Understanding the full extent of
the filing parties' existing contractual relationships would allow the
Agencies to identify those relationships that contribute to the
premerger competitive dynamics, which is material to assessing how the
transaction may affect post-merger competition.
c. Timeline
The Commission also proposes that filing persons provide a
narrative timeline of key dates and conditions for closing. Just as it
is critical for the Agencies to understand the totality of the
transaction during the initial waiting period, it is also critical to
understand the timing of key milestones and the conditions to closing,
which are often complex and not easily understood from the transaction
documents themselves. The Agencies often cannot confirm basic deadlines
for the transaction from the transaction documents and in those cases,
the Agencies expend a great deal of time and effort to confirm with
filers key dates, including the timing of pre-closing conditions,
during the initial waiting period. Understanding deal timing is
critical to each Agency's decisions regarding how to manage its merger
workload on a priority basis, focusing available resources on those
deals whose closing dates are imminent. This basic information about
the timing of the transaction is not adequately captured in the current
Form, and, to the extent the filing person knows at the time of the HSR
Filing and can readily provide it, this information would help the
Agencies understand key deal milestones and better manage the timing
and focus of the investigation during the initial waiting period.

D. Competition and Overlaps

The Commission proposes creating a Competition and Overlaps section
within the proposed Instructions. This section would collect, in one
place, information that reveals any existing business relationships
between the filing persons that requires the Agencies to take a closer
look to determine whether the transaction warrants an in-depth
investigation, which is the primary purpose of premerger notification
and review. Information collected in this section would include
information and documents currently collected in several parts of the
Form: in Items 4(c) and 4(d), which require the production of certain
documents created in conjunction with the evaluation of the
transaction; Item 5(a), which requires the allocation of revenue from
U.S. operations to industry and product codes; Item 6(c), which
identifies certain minority-held entities of the filer; Item 7, which
provides information about industries in which the acquiring person and
acquired entity both participate; and Item 8, which requires the
identification of certain prior acquisitions made by the acquiring
person. The Commission proposes expanding and reorganizing the
information and requiring additional documents that would bear directly
on the premerger competitive relationship between the filing persons.
The proposed Competition and Overlaps section would provide a new
source of relevant information related to horizontal overlaps, as well
as new information about supply relationships and employees, which
would enable to Agencies to quickly identify and assess the potential
impact of the transaction across many dimensions of competition. These
proposed changes, discussed below, would be organized in the following
proposed categories: Business Documents, Competition Analysis, NAICS
Codes, Controlled-Entity Overlaps, Minority-Held Entity Overlaps, and
Prior Acquisitions.
1. Business Documents
The proposed Business Documents section within the proposed
Instructions would require the submission of documents currently
required by Items 4(c) and 4(d) of the Form and additional categories
of documents. The Commission's proposal for requiring additional
documents is informed by a comparison of documents submitted by filing
persons with the HSR Filing and those submitted during the Agencies'
in-depth investigations that are not required by the current Form but
would have been highly probative to the initial antitrust assessment of
the transaction during the initial waiting period. The specific types
of proposed business documents are discussed below.
a. Transaction-Related Documents
The proposed Transaction-Related Documents section would comprise
the same types of documents currently required by Item 4(c) of the
Form, which the Commission proposes to expand to include documents
prepared by or for the supervisory deal team leads, and Item 4(d),
which the Commission proposes to clarify without material changes. The
Commission also proposes requiring the submission of certain previous
draft versions of these documents.
i. Documents Prepared by or for Officers, Directors, or Supervisory
Deal Team Lead(s)
In the proposed Documents Prepared by or for Officers, Directors,
or the Supervisory Deal Team Lead section, the Commission proposes
expanding the scope of requested documents evaluating the transaction
by adding a requirement to submit such documents prepared by or for the
supervisory deal team lead(s). Currently, Item 4(c) requires filing
persons to provide all studies, surveys, reports, plans, and analyses
prepared by or for officers or directors to evaluate the acquisition
with respect to market shares, competition, competitors, markets,
potential for sales growth, or expansion into products or geographic
markets. These transaction-specific assessments of competition, past
and future, provide the Agencies with invaluable insights into each
party's view of how the transaction could change the competitive
landscape and, most importantly, narrow the inquiry to particular
markets and companies that each party believes to be its competitors.
Since the beginning of the premerger notification program, 4(c)
documents have been a key screening tool for the Agencies to identify
those transactions that require more than a cursory review during the
initial waiting period. The proposed section would retain the same
definition of transaction-related documents to be submitted but add the
supervisory deal team lead(s) to the list of individuals to whom this
item would apply.
In some companies, an officer may lead the day-to-day activities of
the deal team and would be considered the supervisory deal team lead,
resulting in

[[Page 42194]]

no change to the documents currently required as part of Item 4(c) of
the Form. But someone other than an officer or director often
functionally leads the deal team. In the Commission's experience, in
those cases, responses to current Item 4(c) often do not contain
documents with sufficient information about the filing person's
analysis of the competitive implications of the transaction to enable
the Agencies to identify potentially problematic transactions. In fact,
based on documents submitted in response to Second Requests, it is the
Agencies' experience that individuals other than officers and directors
are often the authors or recipients of documents that are otherwise
responsive to Item 4(c) of the Form but are not required to be
submitted with the HSR Filing because they were not prepared by or for
an officer or director. These documents, typically in the possession of
the supervisory deal team lead(s), often include information that would
have been crucial to the Agencies' analysis of the transaction during
the initial waiting period.
The Commission thus proposes that in addition to requiring
documents prepared by or for officer and directors, filing persons must
also submit these transaction-related documents prepared by or for
supervisory deal team lead(s). Identification of any supervisory deal
team lead would not be based upon title alone. The Commission proposes
that the filing person determine the individual or individuals who
functionally lead or coordinate the day-to-day process for the
transaction at issue. A supervisory deal team lead need not have
ultimate decision-making authority but would have responsibility for
preparing or supervising the assessment of the transaction and be
involved in communicating with the individuals, such as officers or
directors, that have the authority to authorize the transaction. Any
such individual(s) might be the leader(s) of an investment committee,
tasked with heading the analysis of mergers and acquisitions, or
otherwise given supervisory capacity over the flow of information and
documents related to transaction.
The Commission believes this proposal strikes a balance between the
interests of the Agencies and those of filing persons in requesting
additional documents responsive to Item 4(c) of the Form. Requiring
filing persons to include materials prepared by and for supervisory
deal team lead(s) would allow the Agencies to receive additional key
materials relevant to the analysis of the transaction without requiring
information from all deal team members, in light of the opportunity to
obtain additional documents through the issuance of Second Requests.
ii. Confidential Information Memoranda
The proposed Confidential Information Memoranda section would
collect the information currently required by Item 4(d)(i) of the Form.
The Commission is not proposing any material changes to this
requirement.
iii. Studies, Surveys, Analyses, and Reports
The proposed Studies, Surveys, Analyses, and Reports section would
collect the information currently required by Item 4(d)(ii) of the
Form. The Commission is not proposing any material changes to this
requirement.
iv. Synergies and Efficiencies
The proposed Synergies and Efficiencies section would collect the
information currently required by Item 4(d)(iii) of the Form, and the
Commission proposes to clarify that forward-looking analyses are
responsive. Currently, Item 4(d)(iii) asks for all studies, surveys,
analyses, and reports evaluating or analyzing synergies, and/or
efficiencies prepared by or for any officer(s) or director(s) (or, in
the case of unincorporated entities, individuals exercising similar
functions) for the purpose of evaluating or analyzing the acquisition.
The Commission proposes to specifically include a reference to models
and financial projections to make clear that filers should submit
forward-looking assessments of synergies or efficiencies. This
information is especially important for screening the competitive
impact of products or services not yet generating revenue but projected
to do so. As before, financial models without stated assumptions would
not need to be provided. For many transactions, especially those
involving markets in which competition occurs via on-going innovative
efforts, these forward-looking assessments will materially benefit the
Agencies' identification of transactions that warrant in-depth review.
v. Drafts
Along with expanding the required Transaction-Related Documents as
described above, the Commission also proposes requiring the submission
of drafts responsive to these requests. It has been a long-standing
position of the Commission's PNO that the submission of draft versions
of documents responsive to Item 4(c) or 4(d) is not required unless
there is no final version, in which case the most recent draft has been
required, or unless a draft was sent to the board of directors. Under
this guidance, if a draft version of a document is sent to the Board,
it ceases to be a ``draft'' and must be submitted, even if a final
version is also submitted. As a result, the Commission has not
typically received many draft documents as part of HSR filings.
The Agencies routinely ask for and receive draft documents in
response to Second Requests and, in the Agencies' experience, these
drafts often reveal additional information about the transaction that
would have been important to the Agencies' review during the initial
waiting period, such as references to specific product markets or
competitors that were removed in subsequent versions. In addition,
these drafts can contain highly relevant, probative, or candid
statements about the competitive impact not reflected in the final
version of the document. In some cases, it appears that the draft
documents have been edited to remove candid assessments of factors
relevant to competition prior to circulation to officers or directors.
In others, the dates of the documents suggest that otherwise responsive
drafts were not finalized or shared with officers or directors until
after making an HSR Filing.
The Commission therefore proposes clarifying in the Instructions
that drafts of responsive transaction-related documents must be
submitted if that document was provided to an officer, director, or
supervisory deal team lead(s). This proposed change would ensure that
the Agencies have access to documents that reflect pre-transaction
assessments of business realities, as opposed to ``sanitized''
versions, to aid in their analysis during the initial waiting period.
The addition of the supervisory deal team leader(s) to this requirement
should capture draft materials important to managing the transaction
but avoid the burden of having to submit prior versions that were not
reviewed by senior managers or decision-makers. As stated elsewhere in
this NPRM, the Commission aims to strike a balance between the
Agencies' need to obtain material information about the transaction and
the burden on filing parties, so the scope of this request is limited
so as not to require filing parties to search numerous company
personnel beyond officers, directors, and supervisory deal team
lead(s).
The Commission recognizes that requiring draft transaction-related
documents creates an additional burden for filing parties to collect
and submit more documents to the Commission with their HSR filings and
that, to some

[[Page 42195]]

degree, previous versions of submitted documents may contain repetitive
information. Moreover, HSR filings that contain large document
submissions could overwhelm the Agencies and undermine the goal of
effective and efficient screening for transactions that require an in-
depth investigation. For this reason, the Commission seeks comment on a
potential alternate approach in which filing parties collect draft
Transaction-Related Documents as part of preparing HSR filings but do
not submit these documents until and unless agency staff reviewing the
transaction requests the draft documents during the initial waiting
period. In the event that agency staff requests the draft documents,
the filing person would be required to submit them within 48 hours in
order to retain the initial waiting period. The Commission invites
comment on whether this alternative approach would reduce the burden
for the parties and the Agencies compared with submitting all versions
with the HSR Filing as described above, whether there are logistical
issues with providing the collected draft documents within 48 hours,
and the estimated volume of drafts collected.
b. Periodic Plans and Reports
The proposed Periodic Plans and Reports section would require
filing persons to submit certain high-level strategic business
documents that were not created in contemplation of the transaction but
still contain information relevant to the antitrust analysis. As a
result of decades of experience, the Agencies are aware that, as part
of diligence for a potential transaction, companies often collect a
targeted set of ordinary course documents that do not need to be
submitted as part of an HSR Filing. Such documents typically include
strategic plans and documents that are useful to those negotiating or
evaluating the transaction because they discuss general market
dynamics, competitors, or other potential mergers and acquisitions. The
Commission understands that these documents are collected to provide
key transaction decision-makers with the company's internal assessment
of commercial realities of the premerger marketplace.
The Commission therefore proposes requiring certain plans and
reports created in the ordinary course of business and not prepared
solely for the purpose of evaluating the proposed transaction to be
submitted as part of the HSR Filing. Periodic plans and reports created
in the ordinary course of a company's business often contain detailed
assessments of core business segments, markets, competitors, other
acquisition targets, and projections about future competitive
dynamics--insights that have direct bearing on the Agencies' antitrust
assessment of the transaction in the initial waiting period. The
Commission proposes requiring the submission of semi-annual and
quarterly plans and reports that discuss market shares, competition,
competitors, or markets of any product or service that is provided by
both the acquiring person and acquired entity, if those documents were
shared with a chief executive of an entity involved in the transaction,
or with certain individuals who report directly to a chief executive.
The Commission also proposes requiring the submission of all plans and
reports submitted to the board of directors (or, in the case of
unincorporated entities, individuals exercising those functions) that
discuss market shares, competition, competitors, or markets of any
product or service that is provided by both the acquiring person and
acquired entity.
These proposed new document requirements would be limited in
certain specific ways to minimize the overall number of documents
submitted with the HSR Filing. First, the new Periodic Plans and
Reports section would not require documents that analyze ``the
potential for sales growth or expansion into product or geographic
markets'' as is required by current Item 4(c). Additionally documents
responsive to this item would be limited to those prepared or modified
within one year of the date of the HSR Filing. The Commission believes
that the submission of a limited set of ordinary course business
documents that were not prepared specifically to evaluate the
transaction but discuss premerger and future competitive dynamics and
strategies broadly would provide valuable insight and context for the
transaction-related documents submitted with the HSR Filing. These
ordinary course business documents are routinely submitted during in-
depth investigations in response to Second Requests and routinely
contain unique information about the state of premerger competition,
which if available during the initial review period would help the
Agencies determine if an in-depth review is warranted and if so, its
proper scope.
The Commission is aware that this new requirement has the potential
to result in the submission of a large number of documents for complex
or large transactions. The Commission is also aware of the potential
impact on the filing persons and on the Agencies of large document
submissions. The Commission seeks to balance these interests and
invites comment on how or whether narrowing the set of custodians for
periodic reports and plans, or any other proposed limits, would still
generate information about the premerger state of competition that is
not specific to the transaction while reducing any burden on filers and
the Agencies.
Finally, the Commission notes that filing persons should not
exchange additional information with respect to planned products or
services to provide a response to this proposed requirement but should
respond instead on the basis of regular diligence and the knowledge or
belief of the filing person. The Commission recognizes that an acquired
person would have limited information about the acquiring person's
operations, including products under development, and the Commission
does not intend these proposed changes to encourage additional
information sharing of this type of information.
c. Organizational Chart of Authors
As the final part of its proposed Business Documents section, the
Commission proposes requiring filing persons to identify the authors of
all responsive documents submitted with the HSR Filing and to provide
additional information about each individual. Given the short period of
time for review during the initial waiting period, it is crucial for
the Agencies to have a clear understanding of how authors of key
documents fit into the organization or entities of each filing person
to determine the importance and perspective of the responsive documents
submitted with the HSR Filing and to identify key employees within the
organizations. Thus, the Commission proposes requiring an
organizational chart(s) that would reflect the position(s) within the
filing person's organization held by identified authors, and for
privileged documents, the recipients of each document submitted with
the HSR Filing. The Commission also proposes requiring the filer to
identify the individuals searched for responsive documents. It would be
sufficient to indicate by notation on the organization chart(s) which
individuals were searched.
Providing a chart will help contextualize reporting relationships,
as well as the relative seniority, of the authors and recipients and
allow the Agencies to more quickly assess which documents contain high-
level assessments from key employees. The benefit of being able to
identify important decision-makers within the filing person and having
context for key documents would allow the Agencies to

[[Page 42196]]

quickly assess the probative value of the documents
2. Competition Analysis
The Commission proposes creating a new Competition Analysis section
within the proposed Instructions. This proposed section would create
new requirements for filing persons to provide narratives that would,
among other things, describe their basic business lines and provide
product or service information for all related entities; identify
current and potential future horizontal overlaps and supply
relationships between the filing persons; and provide information about
their employees and what services these employees provide. These
proposed narrative requests would provide the Agencies with crucial
information about current and future competitive relationships between
the filing parties, including whether they compete to hire employees,
which is information that is not required by the current Form.
a. Horizontal Overlap Narrative
The Commission proposes creating a new Horizontal Overlap Narrative
section that would require each filing person to provide an overview of
its principal categories of products and services (current and planned)
as well as information on whether it currently competes with the other
filing person. Such information is core to the Agencies' substantive
antitrust analysis during the initial waiting period and is not readily
accessible from sources other than the filers themselves. In drafting
the Horizontal Overlap Narrative, each filing person would describe its
current and planned principal categories of products and services in
the way that those business lines are referred to in the company's day-
to-day operations so that the Agencies could more readily understand
the information in the context of current market realities. If any of
the submitted documents support the information contained in the
narrative, the filing person would also identify such documents.
The products or services offered by the filing persons that
currently or potentially compete with each other are often referred to
by antitrust professionals as ``horizontal overlaps.'' The
identification and assessment of such horizontal overlaps is an
essential starting point for the Agencies' substantive review of any
transaction to determine whether it has the potential to violate the
antitrust laws. As discussed elsewhere, NAICS code reporting can result
in underreporting of horizontal overlaps, and not every HSR Filing
contains 4(c) documents that could potentially reveal overlaps not
identified by NAICS code reporting. In such cases, the HSR Filing does
not contain basic screening information that the Agencies need to
determine whether the transaction merits closer scrutiny during the
initial waiting period. Premerger notification is intended to allow the
Agencies to scrutinize any transaction that eliminates competition
between existing or potential competitors, and it is important for
every HSR Filing to identify any existing or potential horizontal
overlap created by the transaction.
As a result, the Commission proposes that within the Horizontal
Overlap Narrative, each filing person would be required to list each
current or known planned product or service that competes with (or
could compete with) a current or known planned product of the other
filer. For each such overlapping product or service, the filing person
would provide sales, customer information (including contacts), a
description of any licensing arrangements, and any non-compete or non-
solicitation agreements applicable to employees or business units
related to the product or service.
The proposed requirement for this information about each filing
person's market presence in overlapping products or services would
enable the Agencies to quickly identify and assess the significance of
the filers' respective businesses both in relative and absolute terms.
Proposed customer information would enable the Agencies to understand
the customer base of the overlapping businesses and to promptly
conduct, at the beginning of the initial waiting period, further
industry research with customers likely to be affected by the
transaction or those who are particularly knowledgeable about the
parties' business operations, relevant industry dynamics, and other
market participants. Contacting customers to confirm basic market
dynamics is a key step in the antitrust analysis conducted by Agency
staff during the initial waiting period, and the parties are frequently
asked to provide this information on a voluntary basis once one Agency
has granted clearance to the other to conduct an initial investigation
of the transaction. However, since this information is not compulsory,
the Agencies do not always receive it in a timely fashion during the
initial waiting period, hampering the ability of the Agencies to use
that period to effectively screen for transactions that merit the
issuance of Second Requests.
The proposed requirement to describe any licensing, non-compete, or
non-solicitation agreements involving the overlapping products or
services would enable the Agencies to assess specific categories of
existing contracts that are likely to affect how the transaction will
impact competition for those products or services. These existing
relationships bear on premerger market conditions and may reflect that
the filers already view themselves as competitors (in the case of non-
compete or non-solicitation agreements) or as key trading partners (in
the case of licensing agreements).
The Commission acknowledges the burden drafting the proposed
Horizontal Overlap Narrative could create for some filers, especially
for transactions involving close competitors with multiple overlapping
product or service lines. But identifying those transactions that
present broad and complex competition issues is a critical first step
for the Agencies. Once identified, the Agencies must then properly
manage their review, first determining which markets could be impacted
by the transaction and then deciding which of those necessitate in-
depth review. On balance, this proposed requirement would significantly
improve the information available to the Agencies to identify any
existing or potential horizontal overlap to assess the competitive
implications of a transaction during the initial waiting period. The
Commission notes that in the Agencies' experience, companies who are
horizontal competitors prior to the transaction frequently assess the
antitrust risk associated with the transaction prior to making an HSR
Filing, and therefore the information required by this proposal may
already be available, in whole or part, to include with the HSR Filing.
Although the Agencies have not previously required this type of
narrative to be submitted as part of the Form, other jurisdictions have
required such narratives for many years.
b. Supply Relationships Narrative
The Commission proposes creating a Supply Relationships Narrative
section that would require each filing person to provide information
about existing or potential vertical, or supply, relationships between
the filing persons. A prior version of the Form required similar
information about vertical vendor-vendee relationships, but the
requirement was eliminated in 2001 because the type of information
collected did not prove useful enough to the Agencies as a screen for
potential non-horizontal relationships to justify

[[Page 42197]]

the burden of providing it at that time.\46\ Based on the Agencies'
experience investigating vertical mergers in the intervening decades,
the Commission believes that the current proposal would provide
sufficiently robust information to allow the Agencies to identify
vertical and other non-horizontal issues, including those presented by
diagonal mergers. Non-horizontal relationships can be hard to detect in
certain sectors where supply chains are not well defined, for instance
in the provision of services rather than physical products. The
Agencies have an interest in knowing whether a transaction in which the
filing persons operate in related markets would result in any change in
market structure or incentives that might affect post-merger
competition. Early identification of potential non-horizontal
competitive issues is critical to determining whether further
investigation is needed, as structural changes in these relationships
require additional fact development to determine the nature and scope
of potential non-horizontal competitive concerns, which can often be
complex and unique. These issues are difficult to discern from the
information currently required by the Form, and filing parties are in a
unique position to identify existing or future non-horizontal business
relationships between them.
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\46\ The Form originally required information about any vendor-
vendee relationship between the reporting parties regarding
manufactured product during the most recent year; this information
was intended to help the Agencies identify supply relationships that
could give rise to concerns about foreclosure or other competitive
consequences of vertical integration. The Commission eliminated this
requirement in 2001 because it was not effective in identifying
vertical issues, not because vertical acquisitions present no
potential competitive risks. 66 FR 8680, 8686-87 (Feb. 1, 2001).
Since 2001, the Form has not collected specific information related
to vertical relationships.
---------------------------------------------------------------------------

The Commission thus proposes to collect, in a narrative response,
information for related sales and purchases between the filing persons
or with other companies that use the filing person's products,
services, or assets to compete with the other filing person. Filing
persons would report sales to the other filing person and to any other
business that, to the best of the filing person's knowledge, uses its
product, service, or asset as an input for a product or service that
competes or is intended to compete with the other filing person's
products or services. Filing persons would also provide information
(including contact information and a description of the supply
agreement) for other customers that use the product, service, or asset
to compete with other filing person. Filing persons would provide
similar information for purchases made from the other filing person and
from any other business that, to the best of the filing person's
knowledge, competes with the other filing party to provide a
substantially similar product, service, or asset. This information
would allow the Agencies to identify whether the transaction would
create opportunities for post-merger foreclosure of rivals arising from
vertical or diagonal relationships.
The Commission acknowledges that this will increase the burden on
filers whose transaction involves existing supply relationships or who
supply or purchase from companies that compete with the other filing
party. But the Commission believes that requiring filing parties to
provide a narrative that reveals existing and potential supply
relationships between the acquiring person and acquired entity is
important for the Agencies because it would allow them to quickly
identify those transactions that raise concerns about non-horizontal
competitive effects.
c. Labor Markets Information
The Commission proposes creating a new Labor Markets section that
would require each filing person to provide certain information about
its workers in order to screen for potential labor market effects
arising from the transaction. The Agencies have increasingly recognized
the importance of evaluating the effect of mergers and acquisitions on
labor markets and have stepped up efforts to identify and investigate
potential labor market effects arising from reportable transactions.
Transactions have been challenged on the basis that consummation would
result in labor market harms,\47\ and consent agreements have included
provisions that stop the use of certain non-compete clauses that limit
the ability of potential market entrants to hire key employees.\48\
---------------------------------------------------------------------------

\47\ Press Release, U.S. Dep't of Just., Justice Department Sues
to Block Penguin Random House's Acquisition of Rival Publisher Simon
& Schuster, (Nov. 2, 2021), https://www.justice.gov/opa/pr/justice-department-sues-block-penguin-random-house-s-acquisition-rival-publisher-simon. See also Concurring Statement of Commissioner
Slaughter and Chair Khan regarding FTC and State of Rhode Island v.
Lifespan Corporation and Care New England, at 1-2 (Feb. 17, 2022),
https://www.ftc.gov/system/files/ftc_gov/pdf/public_statement_of_commr_slaughter_chair_khan_re_lifespan-cne_redacted.pdf (recommending including a count in the complaint
that the proposed merger would have violated Section 7 of the
Clayton Act in a relevant labor market).
\48\ Press Release, Fed. Trade Comm'n, FTC Imposes Strict Limits
on DaVita, Inc.'s Future Mergers Following Proposed Acquisition of
Utah Dialysis Clinics (Oct. 25, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/10/ftc-imposes-strict-limits-davita-incs-future-mergers-following-proposed-acquisition-utah-dialysis.
---------------------------------------------------------------------------

In transactions that involve two firms that purchase labor from the
same labor market(s), the Agencies consider whether the transaction may
substantially lessen competition for buyers of labor services. Every
firm competes for labor in at least one labor market and, more
commonly, in multiple labor markets. Companies that compete in the same
product market may also compete in the same labor market. Employers,
however, may compete in the same labor market even when they do not
compete in the same product or input market.
Yet the Form does not collect any information about employees that
would allow the Agencies to conduct an initial screening for potential
labor market effects, which has materially hampered their ability to
protect employees from the harmful effects of mergers. To identify
whether the filing persons compete to employ the same types of workers
in a particular geographic area, the Commission proposes requiring
certain information concerning each filing person's workers before the
transaction and any plans that would affect workers post-consummation.
This proposed section would identify potential labor market overlaps
and allow the Agencies to engage with the filers on potential labor
market issues during the initial waiting period.
i. Largest Employee Classifications
The Commission proposes creating a Largest Employee Classifications
section that would serve as a screening tool based on the SOC system,
developed by the Bureau of Labor Statistics, which classifies workers
into occupational categories. Labor markets have two dimensions: the
type or features of work performed, and the location of the work.
Because describing every relevant feature of each job would be
burdensome for parties, the Commission proposes requiring filing
persons to classify their workers into occupational categories based on
the SOC system, a widely used system for reporting worker statistics.
While SOC categories do not always provide exact comparisons, SOC codes
would nevertheless provide the Agencies with an objective
classification standard which can be used as an initial screen for
potential labor market overlaps. The use of these codes as a screening
tool is not intended to endorse their use for any other purpose, such
as defining a relevant labor market. To implement this proposed
screening

[[Page 42198]]

tool, the Commission proposes requiring filers to list their five
largest categories of workers by the relevant 6-digit SOC
classification and to provide the total number of employees for each 6-
digit code identified.
ii. Geographic Market Information for Each Overlapping Employee
Classification
The Commission proposes creating a Geographic Market Information
for Each Overlapping Employee Classification section that would serve
as a screen for the geographic component of labor markets based on the
United States Department of Agriculture's ERS system. The ERS commuting
zones were designed to delineate local economies based on where people
live and work.\49\ Filers would be required to identify the top five
largest 6-digit SOC codes in which both parties employ workers. This
should provide enough information for the Agencies to use SOC
classifications as an initial proxy for labor issues while balancing
the burden on filers by limiting the request to their five largest
categories of workers. Also, for each of the five largest SOC codes in
which both parties employ workers, this section would require filing
persons to list the overlapping ERS-defined commuting zone(s) from
which the employees commute and the total number of employees within
each commuting zone. This proposed requirement would be limited to
overlapping geographies, expressed as commuting zones, to capture
sufficient information to identify potential labor market concerns
without requiring filing parties to provide a complete list of all
commuting zones in which they have workers.
---------------------------------------------------------------------------

\49\ See U.S. Dep't of Agric., ERS Commuting Zones and Labor
Market Areas, https://www.ers.usda.gov/data-products/commuting-zones-and-labor-market-areas/.
---------------------------------------------------------------------------

This information would represent a material improvement in the data
available to the Agencies during the initial waiting period. By relying
on existing metrics that are familiar to U.S. companies and by limiting
the request to the top five SOC classifications, the Commission's
intent is to minimize the burden on filers. Nonetheless, the Commission
seeks comment on whether this information would be difficult or costly
to collect, and any alternative means by which the Commission could
screen HSR Filings for potential labor market overlaps, for example by
collecting information on the number and types of workers employed at
each of the filing person's facilities.
iii. Worker and Workplace Safety Information
The Commission proposes creating a Worker and Workplace Safety
Information section that would require filing persons to identify any
penalties or findings that were issued against the acquiring person or
acquired entity by the U.S. Department of Labor's Wage and Hour
Division, the National Labor Relations Board, or the Occupational
Safety and Health Administration during the five-year period before the
filing. If a firm has a history of labor law violations, it may be
indicative of a concentrated labor market where workers do not have the
ability to easily find another job. The proposed five-year period
limitation would capture the most relevant information for analysis
during the initial waiting period while lessening the burden on filers
to search through older files. This information is not always publicly
available but is known to the filers and is relevant to identifying
potential labor market effects.
3. NAICS Codes
The Commission proposes creating a NAICS section within the
proposed Instructions. This section proposes changes to certain
information currently required by Item 5(a) of the Form, which now asks
filing persons to submit information regarding dollar revenues and
lines of commerce with respect to operations conducted within the
United States during the most recently completed fiscal year. This
includes products manufactured in the United States, regardless of
where they are sold, products manufactured outside the United States
but sold into the United States or through a U.S. entity, and products
or services derived from U.S. operations, whether sold to a U.S. or
foreign customer.
The current version of Item 5 of the Form requires the reporting of
revenue by industry and product codes developed by Census to track
economic activity in the United States. Over the years, the Commission
has revised Item 5 as it sought to balance the need to receive filing
persons' revenue information with the burden on filers to provide that
revenue information.\50\ As part of the redesign of the premerger
notification process contemplated in this NPRM, the Agencies reviewed
the totality of revenue information currently required in Item 5(a) to
determine which information is especially valuable, which is due for an
update, and which is not sufficiently reliable or needed to conduct a
robust initial assessment of reported transactions. As a result, the
Commission now believes that it can further revise revenue reporting
requirements to make reported revenue information more informative for
the Agencies and less burdensome for filing parties. The Commission
thus proposes a substantively different approach to revenue information
through six proposed changes. The Commission also proposes a
ministerial change to adopt the 2022 version of the NAICS codes, which
are the most recent released by Census. Through these proposed changes,
the Commission would expand and clarify the industry and product codes
that filing persons would have to report, as well as limit the
requirements on how revenue must be reported.
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\50\ See 43 FR 33450, 33520 (July 31, 1978) (revenue reporting
based upon Standard Industrial Classification codes of the U.S.
Bureau of the Census); 66 FR 35541 (July 6, 2001) (amending the Form
and Instructions to report revenue by North American Industry
Classification System codes of the U.S. Bureau of the Census); 76 FR
42471 (July 19, 2011) (elimination of the requirement to report
``base year'' data); 84 FR 30595 (June 27, 2019) (amending the Form
and Instructions to report manufacturing revenue by North American
Product Classification System-based codes of the U.S. Bureau of the
Census).
---------------------------------------------------------------------------

First, the Commission proposes eliminating the requirement that
filing persons provide the precise amount of revenue attributed to each
NAICS code. The Commission intends for the proposed change to
streamline revenue reporting for filers and result in figures that
would be just as useful to the Agencies for identifying important
business lines of each person. It is the Commission's understanding
that many businesses do not maintain detailed revenue information by
NAICS code in the ordinary course of business and generating this
information can require great effort. In fact, even obtaining estimates
of revenue to the nearest $100,000, as is currently required, can still
be burdensome for filers. The Commission therefore proposes that filing
persons would only need to estimate revenue at five levels: pre-revenue
(for certain products and services, as described below); less than $10
million; between $10 million and $100 million; between $100 million and
$1 billion; and more than $1 billion. The Commission anticipates these
ranges would provide the Agencies with an important overview of the
magnitude of revenue generated by particular products and services, an
important factor in the analysis of transactions during the initial
waiting period, while at the same time reducing the burden of reporting
revenues for filers. The Commission welcomes comments on

[[Page 42199]]

the proposed ranges, as well as other potential ways to capture the
relative magnitude of the business of the acquiring person or acquired
entity attributable to each NAICS code.
Second, the Commission proposes that NAICS codes be reported on a
descriptive basis, encompassing all U.S. operations. Revenue reporting
in Item 5(a) currently relies on the filing persons' ordinary course
financial records. In the Commission's experience, reliance on these
financial records often results in under-reporting or reporting in
codes that may not actually be descriptive of the products or services
provided. To address this issue, the Commission proposes requiring
individuals familiar with the business operations of each operating
company (or subdivision) to review the available NAICS codes to select
the codes that would best describe the full line of products and
services related to U.S. operations, regardless of whether the company
tracks revenue by such codes in the ordinary course of business or
relies on them for other reporting requirements. The Commission intends
for this change to shift the collection of NAICS codes from how a
company records revenue to align more closely with the full range of
products and services offered. Because the Commission proposes to
eliminate the requirement to specifically quantify the amount of
revenue attributable to the codes, as described above, the Commission
does not anticipate that this change will substantially increase the
burden of collecting the information. Further, codes related to non-
manufacturing activities estimated to have generated less than $1
million in the last fiscal year would not need to be listed, unless
they overlap with a code reported by the other filing person.
Additionally, the Commission recognizes that some NAICS codes are
imprecise, which can result in two filing persons engaged in similar
businesses using different NAICS codes. Therefore, the Commission
proposes that if more than one code might be appropriate, the filing
persons would be required to list all the codes that describe the
products or services offered and use end notes as needed to clarify
selections and any potential overlap where the same revenues are
reported in more than one NAICS code. This would assist the Agencies in
understanding the businesses of the filing persons during the initial
waiting period and address some of the shortcomings of NAICS code
reporting.
Third, the Commission proposes changing how NAICS codes should be
organized. Currently, filing persons must aggregate revenue across all
entities within the acquiring person or acquired entity. But often the
acquiring person or acquired entity comprises multiple operating
companies or units, which may be engaged in multiple lines of business.
For example, large companies can contain multiple operating units or
subsidiaries that do business under separate brands and offer diverse
products or services. Similarly, funds that file as acquiring persons
may control many different operating companies. The Commission thus
proposes to require acquiring persons and acquired entities with more
than one operating company or unit to identify which entity(s) derives
revenue in each code. This proposed requirement would facilitate
efficient review and quickly identify the operating company(s) that may
or may not be relevant to the antitrust analysis. From this
information, the Agencies could quickly identify which entity within
the filing person has competing or related business activities with the
other filing party.
Fourth, the Commission proposes requiring the reporting of certain
NAICS codes for certain pipeline or pre-revenue products. Currently,
filers are not required to provide information about products or
services that did not derive revenue in the last fiscal year. Yet these
pre-revenue or early revenue activities are often core to the
transaction rationale and essential to understanding the potential
competitive impact of the transaction during the initial waiting
period. This information is known to the filing person and is not
available from other sources, as it is typically highly sensitive. As a
result, the Commission proposes adding a requirement for acquiring and
acquired persons to report NAICS codes for certain pipeline or pre-
revenue products. The acquiring person would be required to identify
any NAICS codes for products and services under development if those
codes would overlap with the codes for current or known pipeline
products or services of the acquired entity(s). The acquired person
would identify the NAICS codes that would apply to the products or
services of the acquired entity(s) that are under development or pre-
revenue and anticipated to have annual revenue totaling more than $1
million within the following two years. The Commission believes the
benefit to the Agencies would be substantial and anticipates that the
burden associated with the collection of these codes would be minimal,
as identification of these products and services would likely be
completed during ordinary diligence. The Commission understands that
the acquired person may have limited knowledge about the planned or
under-development products of the acquiring person and does not intend
the filing persons to divulge this information for the purpose of
making an HSR Filing.
Fifth, the proposed NAICS code section would clarify that the
acquired person must report the NAICS codes relevant to the acquired
entity(s) at the time of closing. While most filers currently report in
this manner, others have asserted that when an acquired entity is
merely a shell at the time of the HSR Filing due to anticipated pre-
consummation reorganization, no NAICS codes are required. This is not
the intent of the revenue reporting requirements in the current Form,
and the Commission proposes clarifying this issue by requiring NAICS
reporting that reflects the operations of the acquired entity(s) upon
consummation. This would provide clarity and make NAICS code reporting
more reliable for both filing persons and the Agencies.
Finally, the Commission proposes eliminating the requirement for
filing persons engaged in manufacturing to provide revenue by NAPCS-
based codes. The requirement to allocate revenue to product codes dates
from the promulgation of the Rules in 1978 and has been updated to
reflect various product code formats implemented by Census over the
years. The most recent Census industry code format is the 6-digit NAICS
format.\51\ Initially, Census also created 10-digit NAICS-based codes
to provide more detail about the products within the 6-digit NAICS
industry codes, and these were adopted by the Commission for use in HSR
Filings in 2001.\52\ In 2018, Census discontinued the use and updating
of 10-digit NAICS-based codes in favor of 10-digit NAPCS-based codes.
As a result, in 2019, the Commission amended the Form and Instructions
to require use of the NAPCS-based codes for manufactured products.\53\
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\51\ NAICS Codes were first published in 1997 and first used in
the HSR Form in 2001. See 66 FR 23561 (May 9, 2001).
\52\ 66 FR 35541 (July 6, 2001).
\53\ 84 FR 30595 (June 27, 2019).
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However, these new NAPCS-based codes have been less useful for the
Agencies' analysis than the discontinued 10-digit NAICS-based codes and
have created significant confusion for both filers and the Agencies.
The NAICS-based system provided 6, 8, and 10-digit codes, with the
description of the products becoming more precise as the number of

[[Page 42200]]

digits in the code increased. But the 10-digit NAPCS-based codes
created by Census correspond to a combination of former 8-digit and 10-
digit NAICS-based manufactured product codes. As a result, some parties
inadvertently report revenue using a NAPCS code that corresponds to an
8-digit NAICS code. When this happens, the Agencies lack the more
granular and descriptive nature of the NAPCS-based codes that correlate
to the former 10-digit NAICS-based code that would allow the Agencies
to more accurately identify mergers of companies that produce similar
types of products. Additionally, when one filing party uses a NAPCS-
based code that corresponds to an 8-digit NAICS-based code and the
other filing person uses a NAPCS-based code that corresponds to a 10-
digit NAICS-based code, the filing may not properly capture codes in
which both parties report revenues. This could result in filings that
should report revenue overlap code(s) but do not, limiting the
Agencies' ability to rely on the codes to conduct an initial screen for
competitive overlaps.
Because the proposed Horizontal Overlap section of the proposed
Instructions would require the identification of overlapping products
or services, as discussed in III.D.2., the Commission believes that
additional identification of products by NAPCS code would no longer be
necessary. The elimination of NAPCS-based revenue reporting would
lessen the burden on filers to collect and report these figures, which
have become less useful to the Agencies as a tool for identifying
horizontal overlaps.
4. Controlled-Entity Overlaps
The Commission proposes creating a Controlled-Entity Overlaps
section within the proposed Instructions. This section would continue
to require the submission of information currently required by Item 7
of the Form, such as the identification of certain entities within the
filing person that derive revenue in the same NAICS codes as the other
filing person and geographic information regarding the operations and
sales of such entities, but the Commission proposes certain changes to
what information would be collected and reported. As explained below,
specific information related to entities controlled by the filing
person is critical to the Agencies' initial antitrust review as it
serves as the primary tool for identifying horizonal overlaps between
the parties to the transaction and their controlled entities,
especially for transactions involving a UPE with complex corporate
structures and multiple entities under its control. Compared to the
current HSR Form, this proposed section would: (i) add a requirement to
provide the name(s) by which entities have done business within the
last three years, (ii) require the filing person to identify the
overlapping entity within its own person, rather than the other filing
person, (iii) update the NAICS codes that require geographic reporting
at the street address level, (iv) require the identification of
locations of franchisees for certain NAICS codes, and (v) add a
requirement to provide geolocation data.
a. NAICS Overlaps of Controlled Entities
The Commission proposes that the new Controlled-Entity Overlaps
section include the information currently required by Item 7(a), which
requires the identification of the overlapping NAICS codes for the
acquiring person (or an associate) and acquired entity, and Item 7(b),
which requires the identification of the entities that derived revenue
in overlapping NAICS codes within the UPE of the other filing person
and, for the acquiring person, its associates. The Commission
understands that filing persons often do not identify for the other
filing person the entities that report in overlapping NAICS codes.
Therefore, the Commission believes that it would be less of a burden
for each filing person to only report entities within its own person
that derive revenue in the overlapping NAICS codes. The Commission thus
proposes requiring the acquiring person to identify the entity(s)
within its own person that has operations in the same NAICS code as the
acquired entity(s), and for the acquired person to identify the
entity(s) within the acquired entity(s) that has operations in the same
NAICS codes as the acquiring person. This proposed change would refine
NAICS code reporting to provide the Agencies with a reliable source for
identifying whether any entity within each filing person generates
revenues in the same or related codes. As this information, unlike the
current information required by Item 7(b), is known to the filing
parties, the Commission anticipates that the burden of responding to
this request will be diminished.
The Commission proposes two additional changes to the current
requirements of Item 7(b). First, the Commission proposes requiring the
identification of ``doing business as'' or ``formerly known as'' names
used within the last three years by entities with U.S. operations in
overlapping NAICS codes. This information would allow the Agencies to
more efficiently collect information about the overlapping entities in
publicly available resources during the initial waiting period by
connecting each entity with any name by which it is known to other
market participants. This information is known to filers and limited to
a three-year look back period.
In addition, the Commission proposes that filing persons be
required to identify the entity(s) that have U.S. operations in the
overlapping NAICS code(s). For acquiring persons, this would include
entities controlled by associates that have U.S. operations in a NAICS
code in which the acquired entity(s) report. Currently some filers
voluntarily match the overlapping NAICS codes to the entities within
the acquiring person (or its associates) or acquired entity. In the
Commission's experience, this information aids the Agencies in quickly
identifying the entities within the filing person that may be relevant
to the competitive analysis during the initial waiting period.
b. Geographic Market Information
The Commission proposes creating a Geographic Market Information
section to collect the information currently required by Items 7(c) and
7(d) of the Form, which require, for each overlapping NAICS code, the
identification of geographic markets where the entities controlled by
the acquiring person (and its associates) and the acquired entity(s) do
business. The Commission proposes to modify these requirements by
updating the NAICS industries in which street-level reporting is
required, requiring geolocation information for these addresses, and
requiring the reporting of franchisees' locations.
The Commission periodically reviews which NAICS codes require more
granular street, city, and state address information and which NAICS
codes need only be reported at the state level.\54\ Recognizing the
burden that providing the street-level address for each location of an
entity can require, the Commission differentiates between (1) NAICS
industry codes that either do not tend to involve small local or
regional markets or involve local markets but nonetheless can
adequately be reviewed if the parties specify only the state in which
revenue is derived, and (2) those which do tend to involve local
markets for which knowing the areas served by each filing person is
important to identify locations where

[[Page 42201]]

both parties compete for sales (i.e., geographic overlaps). As part of
this proposed rulemaking, the Agencies have reviewed the list of NAICS
industries for which such street-level information is required and have
adjusted the list of sectors which, based on their experience, require
more granular geographic information than state-level information. The
Commission thus proposes updating the list of NAICS codes for which
locations need only be identified at the state level and NAICS codes
for which street-level information would be required.
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\54\ See, e.g., 75 FR 57110 (Sept. 17, 2010), adopted by 76 FR
42471 (July 19, 2011).
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The Commission proposes removing the Nondepository Credit
Intermediation NAICS codes (codes beginning with 5222) from the list of
codes for which street-level information is required. In the Agencies'
experience, these industries tend not to be locally focused. Therefore,
for these codes, the Commission proposes requiring filing persons to
list only the states within which they conduct operations, rather than
street address as is now required. This proposal should reduce the
burden on those filing persons who report sales in these NAICS codes.
The Commission proposes that filers be required to provide street-
level reporting for the following additional codes (codes with
asterisks indicate that all NAICS codes that begin with the preceding
numbers are included).

113*** Forestry and Logging
2211** Electric Power Generation, Transmission and Distribution
2212** Natural Gas Distribution
3115** Dairy Product Manufacturing
311611 Animal (except Poultry) Slaughtering
311613 Rendering and Meat Byproduct Processing
311615 Poultry Processing
31181* Bread and Bakery Product Manufacturing
321*** Wood Product Manufacturing
32221* Paperboard Container Manufacturing
324*** Petroleum and Coal Products Manufacturing
325110 Petrochemical Manufacturing
325130 Synthetic Dye and Pigment Manufacturing
325180 Other Basic Inorganic Chemical Manufacturing
325193 Ethyl Alcohol Manufacturing
325194 Cyclic Crude, Intermediate, and Gum and Wood Chemical
Manufacturing
325199 All Other Basic Organic Chemical Manufacturing
325211 Plastics Material and Resin Manufacturing
3271** Clay Product and Refractory Manufacturing
3272** Glass and Glass Product Manufacturing
327310 Cement Manufacturing
327390 Other Concrete Product Manufacturing
42331* Lumber, Plywood, Millwork, and Wood Panel Merchant
Wholesalers
42333* Roofing, Siding, and Insulation Material Merchant Wholesalers
42344* Other Commercial Equipment Merchant Wholesalers
42345* Medical, Dental, and Hospital Equipment and Supplies Merchant
Wholesalers
42346* Ophthalmic Goods Merchant Wholesalers
42349* Other Professional Equipment and Supplies Merchant
Wholesalers
4239** Miscellaneous Durable Goods Merchant Wholesalers
4241** Paper and Paper Product Merchant Wholesalers
4242** Drugs and Druggists' Sundries Merchant Wholesalers
42441* General Line Grocery Merchant Wholesalers
42442* Packaged Frozen Food Merchant Wholesalers
42451* Grain and Field Bean Merchant Wholesalers
42452* Livestock Merchant Wholesalers
4247** Petroleum and Petroleum Products Merchant Wholesalers
4248** Beer, Wine, and Distilled Alcoholic Beverage Merchant
Wholesalers
42491* Farm Supplies Merchant Wholesalers
42495* Paint, Varnish, and Supplies Merchant Wholesalers
44911* Furniture Retailers
493*** Warehousing and Storage
54138* Testing Laboratories and Services
54194* Veterinary Services
562*** Waste Management and Remediation Services
7132** Gambling Industries
71394* Fitness and Recreational Sports Centers

These are codes that represent industries in which the Agencies
often determine that competition occurs on a local or regional basis.
For those codes that represent regional competition, the Commission
believes that there would be few individual addresses that would need
to be provided, and therefore the burden would not be significantly
higher than reporting the overlaps at the state level. The Commission
acknowledges that for those industries where competition occurs on a
very localized level, for example where customers travel to the
company's location to purchase goods or services, providing street-
level revenue information can be challenging. However, because
businesses often face different competitors in each of these markets,
the Agencies have learned that businesses often track sales at the
local level in the ordinary course of business for these sectors.
Knowing where within a state the filer's facilities are located is an
important screening tool for the Agencies to quickly identify existing
and potential geographic overlaps, and that benefit justifies requiring
street-level reporting for these NAICS codes. Providing the Agencies
with information to screen for geographic overlaps during the initial
waiting period also benefits filing persons by reducing need to issue
Second Requests to determine if there are such overlaps.
The Commission recognizes that providing the street address of
tens, hundreds, or, in certain cases, thousands of locations can impose
a burden on filers. Therefore, the Agencies have reviewed the NAICS
codes closely to identify only those codes for which the Agencies would
most benefit from street-level information. For these transactions that
require more than a cursory review, attempts to collect this
information from the parties during the initial waiting period slows
down the review and delays the decision on whether an in-depth
investigation of the transaction is needed. Further, the Commission
believes that such information should be available in an accessible
manner for most businesses that have a large number of facilities.
Nonetheless, the Commission welcomes comments that identify, with
rationales, NAICS codes that should either be added to or deleted from
the list of codes for which state-level information is required.
The Commission also proposes requiring filers to report latitude
and longitude information for street addresses so that the Agencies can
easily and quickly use that information to populate mapping software
and create maps to better identify possible geographic overlaps between
the acquiring person and the acquired entity. Street addresses alone
can be inadequate or inaccurate for isolating the exact location of
facilities. Converting street addresses to coordinates is difficult due
to abbreviations such as BLVD or ST, and street addresses often lack
important information, such as South or North, or contain errors, such
as mislabeling a Street address for an Avenue. Latitude and longitude
information is unique, which reduces the likelihood of errors. Any
errors in generating maps displaying the locations of the relevant
facilities may affect screening for local markets, resulting in over-
or under-identification of geographic overlaps. Since filing persons
are familiar with the location of their own establishments, the
Commission believes that they would be in best position to validate the
accuracy of the locations through more precise latitude and longitude
reporting.
The Commission also proposes requiring filers to list locations
where franchisees of the acquiring or acquired person (as appropriate)
generate revenue

[[Page 42202]]

in overlapping NAICS codes that require street-level reporting.
Currently, there is no information submitted with the Form that allows
the Agencies to begin this analysis for companies that do business
through franchisees. Yet all company locations at issue in the
transaction that generate revenues, both directly and indirectly
through franchisees, must be accounted for when the Agencies analyze
the existence and extent of competition between the filing persons.
These proposed changes would provide the Agencies with all company
locations to begin assessing geographic overlaps during the initial
waiting period. Because franchisors must approve the location of
franchisee operations and get regular sales reports from those
operations, the Commission believes filers with these relationships
will have this information about their franchisees.
5. Minority-Held Entity Overlaps
The Commission proposes creating a Minority-Held Entity Overlaps
section within the proposed Instructions that would amend certain
information that is currently required by Item 6(c) of the Form. Item
6(c) currently requires filing persons to list all of the entities in
which the acquiring person and associates of the acquiring person, or
the acquired entity (as appropriate), holds a minority interest of 5%
or more. As originally proposed by the Commission in 2010, this item
was intended to focus on only those minority-held investments that
provide products or services that report in the same NAICS code as the
other filing person, but in the final version of the rule, in order to
limit burden, the Commission permitted filers to list all minority-held
companies rather than limiting the list to those that created a NAICS
code overlap.\55\ However, in the Agencies' experience with information
collected in Item 6(c), permitting parties to list all minority-held
companies instead of only those that are in the same line of business
or NAICS code has hindered the Agencies' ability to determine which
entities may be relevant to the competitive analysis of the transaction
during the initial waiting period. Unlike the filing persons, which
have likely done diligence on the companies in which they invest, the
Agencies have no basis to determine from the entire list of minority-
held companies which ones have competitively significant relationships
with the other filing person as this information is not available from
any other source.
---------------------------------------------------------------------------

\55\ 75 FR 57110 (Sept. 17, 2010), adopted by 76 FR 42471 (July
19, 2011).
---------------------------------------------------------------------------

The Commission thus proposes eliminating the option to list all the
minority-held entities of the acquiring person and its associates or
acquired entity (as appropriate) and proposes once again to require
identification of those that, to the filing person's knowledge or
belief, would derive revenue in the same NAICS codes or have operations
in the same industry as the other filing person. The Commission also
proposes requiring filers to provide the names by which the listed
entities do business. As noted above, the d/b/a or f/k/a names of the
businesses are especially helpful to the Agencies in conducting
additional research about the entities using public or third-party
sources. These proposed changes would significantly assist the Agencies
in determining which minority-held entities may be relevant to the
competitive analysis of the transaction during the initial waiting
period. In the Agencies' experience, there has been an increase in the
number and type of companies in which the acquiring person and acquired
entity have minority investments, and where they exist, understanding
the business lines of these related companies can be important for
determining any significant premerger competitive relationship between
the filing persons that may be affected by the transaction. This is
especially true where the important competitive relationship is not at
the UPE level but arises from within the corporate structure or
holdings of the filing persons. While the Commission recognizes that
investors have more limited information regarding entities in which
only a minority interest is held, the proposed Instructions would
continue to permit filing persons to rely on their knowledge or belief.
The Commission believes that filers have done some level of diligence
to determine the business lines prior to investing in these entities,
and should have some basis to identify overlaps.
6. Prior Acquisitions
The Commission proposes creating a Prior Acquisitions section
within the proposed Instructions that would include the information
currently required by Item 8 of the Form, as well as additional
information. At present, Item 8 requires the acquiring person to
identify all NAICS codes in which the acquiring person derived $1
million or more in revenue and the acquired entity(s) or assets also
derived $1 million or more. For such codes, the acquiring person is
required to report acquisitions made within the five years prior to
filing that (i) resulted in control of entities that had net sales or
total assets of greater than $10 million in the year prior to
acquisition, or (ii) was an acquisition of assets valued at or above
the statutory size-of-transaction threshold. The Commission proposes
expanding the scope of prior acquisitions that would be identified and
making the requirement applicable to the acquired entity as well.
Information about prior acquisitions has always been important for
the Agencies, allowing them to identify strategies to gain market share
through acquisitions rather than internal expansion or more vigorous
competition. Filers have been required to provide information about
prior acquisitions from the beginning of the premerger notification
program.\56\ This information can be especially important in sectors
where acquisitions are typically not HSR-reportable but nonetheless can
cause competitive harm and alter the market dynamics for the reported
transaction.\57\ The Agencies have taken steps to address concerns
about acquisition strategies that premerger review does not routinely
capture. For instance, when the Commission identifies a company that
has violated Section 7 and is engaging in a strategy of rolling up
competitors, if it is likely that future acquisitions may not require
an HSR Filing, the Commission may order the firm to provide prior
notice or obtain prior approval for any future non-reportable
acquisition.\58\
---------------------------------------------------------------------------

\56\ 43 FR 33450, 33534 (July 31, 1978).
\57\ See Press Release, Fed. Trade Comm'n, FTC Takes Second
Action Against JAB Consumer Partners to Protect Pet Owners from
Private Equity Firm's Rollup of Veterinary Services Clinics (June
29, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-takes-second-action-against-jab-consumer-partners-protect-pet-owners-private-equity-firms-rollup-of-veterinary-services-clinics.
\58\ See Press Release, Fed. Trade Comm'n, FTC Imposes Strict
Limits on DaVita Inc.'s Future Mergers Following Proposed
Acquisition of Utah Dialysis Clinics (Oct. 25, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/10/ftc-imposes-strict-limits-davita-incs-future-mergers-following-proposed-acquisition-utah-dialysis; Press Release, Fed. Trade Comm'n, FTC
Orders the Divestiture of Hundreds of Retail Stores Following 7-
Eleven, Inc.'s Anticompetitive $21 Billion Acquisition of the
Speedway Retail Fuel Chain (June 25, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/06/ftc-orders-divestiture-hundreds-retail-stores-following-7-eleven-incs-anticompetitive-21-billion.
---------------------------------------------------------------------------

As the minimum threshold for making an HSR Filing has been adjusted
over time (in accord with changes in gross national product) \59\ from
$50 million to its current $111 million, many acquisitions do not
require premerger

[[Page 42203]]

notification, especially in certain sectors.\60\ A recent Commission
study revealed that five of the largest technology companies in the
United States completed 819 acquisitions that were not reported to the
Agencies over a ten-year period from 2010-2019.\61\ The Commission has
thus identified a need to know more during the initial waiting period
about prior acquisitions that may raise concerns about the filings
parties' acquisition or roll-up strategies.\62\
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\59\ Section 7A(a)(2) of the Act requires the FTC to revise
thresholds annually based on the change in gross national product,
in accordance with 15 U.S.C. 19(a)(5).
\60\ See e.g., Thomas Wollmann, How to Get Away With Merger:
Stealth Consolidation and its Real Effects on US Healthcare (Nat'l
Bureau of Econ. Rsch., Working Paper 27274, 2021); Thomas Wollmann,
Stealth Consolidation: Evidence from an Amendment to the Hart-Scott-
Rodino Act, 1 Am, Econ, Rev,: Insights 77, (2019).
\61\ Fed. Trade Comm'n, Non-HSR Reported Acquisitions by Select
Technology Platforms 10-11 (2021).
\62\ See, e.g., Gerry Hansell, Decker Walker, and Jens
Kengelbach, ``Lessons from Successful Serial Acquirers: Unlocking
Acquisitive Growth,'' Boston Consulting Group (Oct. 1, 2014),
https://www.bcg.com/publications/2014/mergers-acquisitions-unlocking-acquisitive-growth; Thomas Wollmann, Stealth
Consolidation: Evidence from an Amendment to the Hart-Scott-Rodino
Act, 1 Am, Econ, Rev,: Insights 77, (2019).
---------------------------------------------------------------------------

Acquisitions of small companies can cause harm, including in
sectors where competition occurs on a local level. When the Agencies
determine that a firm is violating Section 7 through a pattern of
serial acquisitions that fuels consolidation by eliminating local
competitors, they can seek to prevent future violations but this is
often insufficient to prevent widespread harm.\63\ A pattern of serial
acquisitions may also affect competition among innovative firms by
consolidating innovation efforts into the hands of market leaders or
other firms attempting to control the pace or direction of
innovation.\64\ A history of acquisitions in the same or related
business lines may be especially important information where market
boundaries are fluid and firms engage in a significant number of
nonreportable transactions. This is potentially true of both the
acquiring person and the acquired entity. The Agencies endeavor to
identify such strategies \65\ but need more robust tools for
identifying firms that are engaging in a strategy of consolidation
through transactions that may violate Section 7.
---------------------------------------------------------------------------

\63\ Paul J. Eliason et al., How Acquisitions Affect Firm
Behavior and Performance: Evidence from the Dialysis Industry, 135
Q. J. ECON. 221, 235 (2020). See Press Release, Fed. Trade Comm'n,
FTC Imposes Strict Limits on DaVita Inc's Future Mergers Follow
Proposed Acquisition of Utah Dialysis Clinics (Oct. 25, 2021),
https://www.ftc.gov/news-events/news/press-releases/2021/10/ftc-imposes-strict-limits-davita-incs-future-mergers-following-proposed-acquisition-utah-dialysis. See also Martin Gaynor, Kate Ho, and
Robert J Town, The industrial organization of health-care markets,
J. of Econ. Literature, 53(2):235-284 (2015); Cory Capps, David
Dranove, and Christopher Ody, ``Physician Practice Consolidation
Driven By Small Acquisitions, So Antitrust Agencies Have Few Tools
To Intervene,'' Health Affairs (Sept. 1, 2017), https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2017.0054.
\64\ Colleen Cunningham, Florian Ederer, and Song Ma, Killer
Acquisitions, 129 J. of Pol. Econ., 649-702 (2021), https://ssrn.com/abstract=3241707.
\65\ See e.g., Note by the United States, Start-ups, killer
acquisitions and merger control, OECD DAF/COMP/WD (2020)23 (June 11,
2020), https://www.ftc.gov/system/files/attachments/us-submissions-oecd-2010-present-other-international-competition-fora/oecd-killer_acquisiitions_us_submission.pdf.
---------------------------------------------------------------------------

Thus, the Commission proposes several changes to expand the
requirements for information related to prior acquisitions beyond what
is currently required by Item 8. First, the Commission proposes
requiring both the acquiring person and the acquired entity to provide
information about prior acquisitions. The purpose of collecting
information on all prior acquisitions by both filers is to assist the
Agencies in identifying a potential pattern of acquisitions in a
particular industry that has contributed to a trend toward
concentration or vertical integration that affects the competitive
dynamics for the parties to the transaction, as well as the commercial
realities of post-merger competition.\66\
---------------------------------------------------------------------------

\66\ 43 FR 33534 (July 31, 1978).
---------------------------------------------------------------------------

Second, the Commission proposes extending the time frame to report
on prior acquisitions from five to ten years because the current five-
year requirement for prior acquisitions is often insufficient to
meaningfully identify patterns of serial acquisitions or a trend toward
concentration or vertical integration. In 1987, the Agencies changed
the reporting time period from ten years to five years.\67\ At the
time, it was thought five years reporting of past acquisitions would be
sufficient to put the Agencies on notice of possible trends towards
consolidation in the affected industries.\68\ But based on decades of
experience since then, along with changes to the economy and the varied
acquisition strategies of filing parties, the Commission believes ten
years would once again provide for a better framework to allow the
Agencies to engage in a more detailed consideration of how numerous
past acquisitions, including those in related sectors, affect the
competitive landscape of the current transaction under review.
---------------------------------------------------------------------------

\67\ 50 FR 38742, 38768 (Sept. 24, 1985).
\68\ Id.
---------------------------------------------------------------------------

Third, the Commission proposes eliminating the threshold for
listing prior acquisitions, which currently limits reporting to only
acquisitions of entities with annual net sales or total assets greater
than $10 million in the year prior to the acquisition. Limiting the
reporting requirement to acquisitions of entities with annual net sales
or total assets over $10 million may not capture acquisitions of new
entrants or other nascent competitors that, despite not yet having
widespread commercial success, nonetheless are poised to affect
competition among existing firms or disrupt market dynamics. In fact,
the Commission's technology acquisition study revealed that between
39.3% and 47.9% of transactions were for target entities that were less
than five years old at the time of their acquisition.\69\ Given the
relative nascency of these acquired companies, the Commission believes
that excluding prior acquisitions of firms that have not yet had the
chance to gain commercial traction to achieve $10 million in net sales
or assets does not provide a comprehensive picture of each filer's
acquisition strategy. Learning more about the existence and patterns of
these additional past acquisitions by both the acquiring person and the
acquired entity, including acquisitions of companies that had not yet
generated revenue, would help the Agencies better identify during the
initial waiting period transactions that may, on their own or as part
of a pattern of serial acquisitions, violate the antitrust laws.
---------------------------------------------------------------------------

\69\ Fed. Trade Comm'n, Non-HSR Reported Acquisitions by Select
Technology Platforms 26 (2021). Note this percentage range could
also be different (i.e., lower or higher) as target entities in
13.4% of the transactions did not have founding dates located in the
three databases.
---------------------------------------------------------------------------

Fourth, the Commission proposes treating asset transactions
involving the prior acquisition of substantially all of the assets of a
business in the same manner as prior acquisitions of voting securities
or non-corporate interests. Currently, Item 8 provides separate
thresholds for acquisitions of control of entities and acquisitions of
assets. This distinction, however, does not recognize that some asset
transactions functionally reflect the acquisition of substantially all
of the assets of an entity as opposed to the acquisition of a distinct
asset such as a manufacturing plant or an exclusive license. Thus, the
current rule treats acquisitions of an entity or business differently
depending on the form of the agreement. The proposed Instructions would
continue to require that the acquisition of a distinct asset be
reported only if the then-in-place size-of-transaction threshold was
exceeded, but they would also require that a prior acquisition
involving substantially all of the assets be reported in the same
manner as prior acquisitions involving

[[Page 42204]]

voting securities or non-corporate interests.
While the Commission expects that the expanded reporting
requirements of past acquisitions would create additional burden for
filing parties, the proposed Instructions would continue to limit the
reporting to only acquisitions in industries for which the filers have
reported horizontal overlaps, as identified by overlapping NAICS codes
or in the filer's Horizontal Overlaps Narrative. This limitation still
provides the Agencies with sufficient information to identify
transactions that may further a trend toward concentration or patterns
of acquisitions that may, alone or in combination, substantially lessen
competition. Moreover, given the difficulties in determining the value
of small or nascent companies, the Commission believes it would be less
burdensome for filers to report all acquisitions rather than expend
additional time in assessing their value in terms of net sales or
assets. The Commission invites comment on ways to limit the burden and
exclude de minimis acquisitions of no competitive significance while
still capturing acquisitions of entities worth less than $10 million
and allowing the Agencies to conduct a robust screening for acquisition
strategies that further consolidation trends.

E. Additional Information

1. Subsidies From Foreign Entities or Governments of Concern
As discussed in I.A. above, the 2022 Amendments direct the
Commission, with the concurrence of the Assistant Attorney General, and
in consultation with the Relevant Agencies, to require persons making
an HSR Filing to disclose information about foreign subsidies from
countries or entities that threaten U.S. strategic or economic
interests. Along with the proposed definitions discussed above, the
Commission proposes changes to the Instructions to implement this
mandate from Congress.
The Commission proposes creating a Subsidies from Foreign Entities
or Governments of Concern section within the proposed Instructions.
This proposed section would include three questions. The first proposed
question would track the requirements and stated purpose of the 2022
Amendments by requiring the acquiring and acquired person (as
appropriate) to identify and describe certain subsidies, as defined by
proposed Sec. 801.1(r)(2), received or that are anticipated to be
received by any entity within its person from a foreign entity or
government of concern, as defined by proposed Sec. 801.1(r)(1). Given
the complexity of subsidies, the Commission proposes stating that the
question should be answered upon the knowledge or belief of the filing
person. This would relieve the filing person of the obligation to
conduct a complex legal analysis. The filing person, however, must
conduct good faith diligence.
In proposing this question, the Commission believes it is also
consistent with Congressional intent to create reasonable limits to the
required information on subsidies to benefit both the Agencies and
filing parties. The Commission's proposed two-year limitation would
identify the subsidies most likely to affect the Agencies' competitive
analysis of a proposed transaction because those subsidies are most
likely to affect current or future conduct of the parties. The
Commission believes that this practical qualifier, coupled with the use
of an existing definition of ``subsidy,'' as discussed in I.A.2. above,
would provide the Agencies with the most pertinent information for the
analysis of proposed transactions, while reasonably limiting the
information required from filing parties. The Commission seeks comment
on the temporal limitation for subsidies, as well as whether a de
minimis value should be set, and if so, what administrable levels might
be appropriate.
The Commission believes that requiring information on
countervailing duties \70\ would be extremely useful in providing a
complete picture of the potential impact of subsidies per Congress's
mandate and screening for subsidies that bear on whether the
transaction may violate the antitrust laws. Thus, the Commission's
second proposed question would require the acquiring or acquired person
(as appropriate) to identify any of its products produced in a country
that is a covered nation under 42 U.S.C. 18741(a)(5)(C) that are
subject to countervailing duties in any jurisdiction. The Commission
would also ask the filing party to list the countervailing duty imposed
and the jurisdiction that imposed the duty. Such information about the
countervailing duties and relevant products would help the Agencies
determine in their initial analysis of a transaction whether subsidies
from foreign entities or governments of concern might affect some
aspect of competition in the future. The Commission believes that
information about countervailing duties imposed by the United States
should be readily available to filers because the Department of
Commerce issues fact sheets that contain an overview of final subsidy
findings and are available on its ``recent case announcements'' web
page (https://www.trade.gov/case-announcements-archives (case
announcements for the prior year)) and on the International Trade
Commission's website (https://legacy.trade.gov/enforcement/operations/scope/index.asp (older determinations)), and that information about
countervailing duties imposed by other jurisdictions should be readily
available to filing persons from similar sources as well.
---------------------------------------------------------------------------

\70\ Countervailing duties are duties intended to offset the
price effect of significant foreign government subsidies on a
product or good. In the United States, the International Trade
Administration of the Department of Commerce investigates whether
imported products are subject to significant foreign government
subsidies. The amount of the subsidies that the foreign producer
receives from its government is the basis for the rate by which the
subsidy is offset, or ``countervailed,'' through higher import
duties enforced by U.S. Customs and Border Protection. See, e.g.,
Int'l Trade Admin., https://www.trade.gov/us-antidumping-and-countervailing-duties.
---------------------------------------------------------------------------

The Commission's third proposed question would require the
acquiring or acquired person (as appropriate) to identify, to its
knowledge or belief, any of its products produced in whole or in part
in a country that is a covered nation under 42 U.S.C. 18741(a)(5)(C)
that are the subject of an investigation by any jurisdiction for
potential countervailing duties. The Commission would also ask the
filing person to list the jurisdiction conducting the investigation.
Such information would help the Agencies identify products that may be
subject to active subsidies and assist the Agencies in their assessment
of the subsidies' impact on competition. It is the Commission's
understanding, however, that the investigating agencies do not always
inform all producers or market participants of an investigation; thus,
the Commission proposes limiting the scope of this third question to
the filing person's knowledge or belief. The Commission believes that
limiting this reporting requirement to the knowledge or belief of the
filing person would provide filers with enough flexibility to respond
to the question and certify the HSR Filing without having to confirm
with various relevant agencies that no such investigation exists.
The Congressional mandate to collect information about foreign
subsidies is consistent with the Agencies' desire to better understand
whether there are significant ties to individuals or entities that may
affect the Agencies' assessment of the potential competitive risks
associated with the transaction. For instance, a foreign government or
entity

[[Page 42205]]

could have a financial relationship that gives it the ability to sway
the filing person to make different choices in the marketplace than it
would without the subsidy. As discussed in III.B., Agencies would
benefit from more complete information about individuals and entities,
including governments, that have the ability to control or influence
competitive decision making. The Commission believes that, taken
together, information about minority holdings, individuals with
influence, officers, directors, and board observers, as well as
information about foreign subsidies may reveal significant constraints
on the competitiveness of the affected company that should be taken
into account during the Agencies' initial review.
2. Defense or Intelligence Contracts
The Commission proposes creating a Defense or Intelligence
Contracts section within the proposed Instructions that would require
filing persons to report certain contracts with defense or intelligence
agencies. The Agencies regularly review filings from companies that
supply the Department of Defense (``DoD'') or the intelligence
community (``IC'') with products or services. During the initial
waiting period, it is important for the Agency to quickly contact DoD
and IC staff to collect key insights and information to prevent mergers
that may have an anticompetitive impact on taxpayers through purchases
made through DoD and IC programs. Yet without information about
specific DoD or IC contracts or knowledge of which unit handles that
contract, the Agencies often face difficulty and delay in identifying
appropriate relevant personnel or stakeholders with knowledge of the
contracts, programs, or products or services at issue. Such delays
hinder the identification and evaluation of competition issues that
would impact DoD or IC programs or budget during the initial waiting
period.
The Commission thus proposes adding a requirement that both the
acquiring and acquired person identify whether they have existing or
pending defense or intelligence procurement contracts, as defined by 10
U.S.C. 101(a)(6) and 50 U.S.C. 3033(4), valued at $10 million or more,
and provide identifying information about the award and relevant DoD or
IC personnel. For filings from companies that supply DoD or the IC with
products or services, this information would greatly enhance the
Agencies' ability to identify and contact appropriate stakeholders
within DoD or IC to seek their input as customers that might be
impacted by the proposed transaction. This information is well known to
the companies that do business with these government entities.
3. Identification of Communications and Messaging Systems
In conjunction with the proposed requirement that filing persons
certify they have taken steps to prevent destruction of relevant
information, as discussed in III.F. below, the Commission also proposes
that filers identify and list all communications systems or messaging
applications on any device used by the acquiring or acquired person (as
appropriate) that could be used to store or transmit information or
documents related to its business operations. Companies have
increasingly been relying on new forms of communication--beyond email
and other traditional document formats--to engage in business
discussions and make key operational decisions. These systems can
encompass internal chat technologies (such as so-called ephemeral
messaging) or document management systems, including where content
exchanged between the individuals is automatically deleted.
In the Agencies' experience, these communications systems contain
highly relevant information on the transaction itself, as well as on
topics that are critical for the Agencies' assessment of the
transaction such as competition, competitors, markets, customers, and
industry characteristics. Company employees' more frequent use of these
communications systems and messaging applications, particularly in lieu
of other traditional forms of communication such as email, has meant
that these systems and applications have become an important part of
Agencies' investigations. Moreover, to the extent that these
communications systems are being used to evade document retention and
preservation requirements that exist for more traditional forms of
communication, the Commission believes it is important for the parties
to understand that their preservation and retention obligations apply
to these systems as well. As yet, many parties do not appear to fully
understand and/or comply with document preservation obligations for
these new modalities. For these reasons, the Agencies would greatly
benefit from having a complete and transparent picture of the filer's
applicable communication systems at the filing stage. The Commission
further believes that this information is readily available to the
filing person and that identifying these systems in use by the company
with the HSR Filing would impose minimal burden.
4. Other Jurisdictions
The Commission proposes creating a new Other Jurisdictions section
within the proposed Instructions. This section proposes to amend the
requirements concerning antitrust filings outside of the United States
and add a voluntary waivers section to allow for the sharing of HSR
information with other enforcers.
a. Transactions Subject to International Antitrust Notification
The Commission proposes creating a Transactions Subject to
International Antitrust Notification section that would require the
identification of other jurisdictions that may be conducting a
competition review. Currently, page one of the Form asks filing persons
to voluntarily identify other jurisdictions where the transaction will
trigger premerger notification under the laws of that jurisdiction. The
Commission first proposed collecting information about filing in other
jurisdictions in 1994, when it proposed a mandatory requirement.\71\ In
1999, the Commission noted that it was still considering the proposals
included in its 1994 proposed rulemaking.\72\ The Commission then
proposed a voluntary requirement in 2001 \73\ and the final rule was
adopted in 2003.\74\ The Commission now proposes making the disclosure
of international filing obligations a mandatory requirement.
---------------------------------------------------------------------------

\71\ 59 FR 30545, 30547 (June 14, 1994).
\72\ 64 FR 1203 (Jan. 8, 1999).
\73\ 66 FR 8680, 8684 (Feb. 1, 2001).
\74\ 68 FR 2425, 2429 (Jan. 17, 2003).
---------------------------------------------------------------------------

Since 2001, and certainly since 1994, merger enforcement by other
competition authorities has become more robust as more jurisdictions
have adopted competition laws that impose mandatory or voluntary
premerger notification requirements. At the same time, a larger
percentage of HSR-reportable transactions now involve companies with
international reach. As a result, more transactions are likely to be
subject to review in multiple jurisdictions around the world. Even
though the number of transactions subject to premerger notifications in
multiple jurisdictions has increased over the years, most filers do not
voluntarily disclose on the Form that their transactions will be
subject to non-U.S. notification requirements.
For many years, the Agencies have cooperated with numerous
competition authorities on cases of common concern to help identify
issues of common interest, gain a better understanding of relevant
facts, and achieve, where possible, consistent or, at a minimum,

[[Page 42206]]

non-conflicting outcomes. In order to fully benefit from inter-agency
consultations, the Agencies need to know which foreign jurisdictions
may also be evaluating the proposed transaction as early as possible.
The delay associated with confirming whether there will be reviews or
investigations by other competition authorities undermines effective
cooperation during the initial waiting period, when sharing expertise
and knowledge with other competition enforcers would be especially
helpful in identifying which transactions need more in-depth review.
Moreover, review by other jurisdictions can often affect the timing,
pace, or ability to close the transaction, especially for jurisdictions
that also require suspension of the transaction until the competition
review is completed.
The Commission thus proposes a mandatory requirement to identify
the jurisdictions where each filing person has already filed or is
preparing notifications to be filed as well as a list of the
jurisdictions where it has a good faith belief it will file. The
Commission believes that upon execution of a definitive agreement,
filers often know the jurisdictions where competition filings will be
made. However, to account for the possibility that, at the time of the
HSR Filing, parties may not have yet identified all the other
jurisdictions where they will file, the proposed rule provides
flexibility by stating that parties should respond based on their
``good faith belief.''
b. Voluntary Waivers for International Competition Authorities and
State Attorneys General
The Commission proposes the creation of a voluntary waivers check
box within an Other Jurisdictions section to allow filing persons to
indicate that they agree to waive the confidentiality provisions of the
Act, 15 U.S.C. 18a(h), for any jurisdiction identified by the filing
person. As discussed above, transactions are often reviewed by non-U.S.
competition authorities, or by one or more State Attorneys General. But
the Act's confidentiality provision contains limits on disclosing
material collected as part of the Agencies' HSR review of the
transaction. As a result, merging parties and third parties waive
statutory confidentiality protections so that the investigating Agency
can share certain limited information with foreign or state competition
authority counterparts, enabling the Agency to make more informed,
consistent decisions, and investigate the transaction more effectively,
often expediting review.\75\
---------------------------------------------------------------------------

\75\ The Agencies have developed a model waiver of
confidentiality for use in civil matters involving non-U.S.
competition agencies that has been in use for 10 years. Similarly,
the Agencies have developed a protocol for coordination in merger
investigations with State Attorneys General. See Fed. Trade Comm'n,
https://www.ftc.gov/policy/international/international-competition/international-waivers-confidentiality-ftc-antitrust-investigations
and https://www.ftc.gov/advice-guidance/competition-guidance/protocol-coordination-merger-investigations.
---------------------------------------------------------------------------

The Commission proposes amending the Instructions to allow filing
persons to waive the confidentiality provision contained in the Act, 15
U.S.C. 18a(h), for any non-U.S. competition authorities or State
Attorneys General they identify. Allowing filers to waive the
confidentiality protections in the HSR Filing would provide an
efficient mechanism for filers to consent to limited waivers of
confidentiality at the outset to facilitate early cooperation among
competition enforcers. The proposed voluntary waiver would allow the
Agencies to disclose the existence of an HSR Filing and the information
contained in the HSR filing, but only for those ex-U.S. competition
authorities or State Attorneys General selected by the filing person.
The Commission also proposes modifying the language that would inform
filers about potential disclosures based on the waivers to track the
language of the Act more closely. The waivers would be optional for the
parties, but the Commission expects that some filers will benefit from
providing these limited waivers of confidentiality.

F. Certification

The Commission proposes amending the language of the certification
that filing persons must submit with HSR Filings to require affirmation
that the filing person has taken the necessary steps to prevent the
destruction of documents and information related to the transaction.
When parties submit premerger notification filings, this triggers a
Congressionally mandated initial phase investigation regarding the
potential competitive effects of the proposed transaction. When making
an HSR Filing, filers should be aware that the Agencies may, prior to
the expiration of the initial waiting period, issue Second Requests to
further investigate the proposed transaction.\76\ If issued, a Second
Request requires the recipient to produce documents and information
relevant to the transaction. If, as part of a filing person's ordinary
course business operations, relevant information is deleted or
destroyed during the initial waiting period, this could lead to a loss
of information that may be critical to the investigating Agency and
undermine its ability to conduct a full in-depth investigation pursuant
to the Act to determine if the transaction is likely to violate Section
7 or any other antitrust law and to seek to prevent its consummation.
Therefore, the Commission proposes adding to the certification an
acknowledgement that the Agencies may require the submission of
additional information or documents in response to a Second Request and
a confirmation that the officer, director, or other individual
described in Sec. 803.6, as appropriate, has taken the necessary steps
to prevent the destruction of documents and information related to the
proposed transaction before the expiration of any waiting period. Such
steps could include, for example, the suspension of auto-delete
policies in place at any entity within the filing person.
---------------------------------------------------------------------------

\76\ 15 U.S.C. 18a(e); 16 CFR 803.20.
---------------------------------------------------------------------------

The Commission also proposes the addition of language in the
Instructions that would serve to remind filers that there are criminal
penalties under other federal statutes that prohibit various deceptive
practices aimed at frustrating or impeding the legitimate functions of
government departments or agencies. In recent years, the Agencies have
observed an increasing number of instances where, in the course of an
investigation or later litigation challenging the transaction, the
filing parties disclaim or modify statements or information submitted
as part of the Form, notwithstanding numerous federal laws that
prescribe criminal penalties for submitting false information to the
government, including as part of an HSR Filing. While the Commission's
proposed language does not intend to change any existing obligation to
comply with other laws, it would provide notice to filers that the
Commission takes those obligations seriously and may refer filers who
do not comply with those obligations for potential criminal
proceedings. The Commission does not expect this proposed reminder,
which does not require any additional information or obligation, to
result in additional burden for filing persons.

G. Affidavit

As discussed in the proposed changes to Sec. 803.5(b) above at
II.C., the Commission proposes requiring filings for transactions
without definitive agreements to include a term sheet or draft
agreement that describes with specificity the scope of the transaction
that would be consummated. As a result, the Commission proposes that

[[Page 42207]]

parties making such filings attest in their affidavit that a term sheet
or draft agreement that describes with specificity the scope of the
transaction that will be consummated has been submitted with the
executed letter of intent or agreement in principle.

Severability

Section 803.90 provides that, if any provision of the Rules
(including the Form) or the application of any such provision to any
person or circumstances is held invalid, the other provisions of the
Rules and their application to other persons or circumstances shall be
unaffected. This severability (or separability) provision would apply
to any modifications of the HSR Filing requirements that the Commission
adopts as final after issuing this NPRM and considering the public
comments received. If a regulatory provision is severable, and one part
of the provision is invalidated by a court, the court may allow the
other parts of the provision to remain in effect.\77\ When analyzing
whether a provision is severable, courts consider both (a) the agency's
intent and (b) whether severing the invalid parts of the provision
would impair the function of the remaining parts.\78\ The Commission is
not proposing any changes to the separability provision in Sec. 803.90
but is confirming its intent that, if a court were to invalidate any of
the HSR requirements, including any modifications that the Commission
finalizes at the end of the rulemaking proceeding, the other
requirements would remain in effect.
---------------------------------------------------------------------------

\77\ See, e.g., Davis Cnty. Solid Waste Mgmt. v. EPA, 108 F.3d
1454, 1459 (D.C. Cir. 1997).
\78\ Id. at 1460.
---------------------------------------------------------------------------

Communications by Outside Parties to Commissioners and Their Advisors

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

Paperwork Reduction Act

Under the Paperwork Reduction Act of 1995 (``PRA''), 44 U.S.C. 3501
et seq., federal Agencies must obtain approval from the Office of
Management and Budget (``OMB'') for each collection of information they
conduct or sponsor. The term ``collection of information'' means agency
requests or requirements that members of the public submit reports,
keep records, or provide information to a third party. 44 U.S.C.
3502(3); 5 CFR 1320.3(c). The current rule contains various provisions
that constitute information collection requirements as defined by 5 CFR
1320.3(c), the definitional provision within OMB regulations
implementing the PRA. 44 U.S.C. chapter 35. The existing information
collection requirements in the HSR Rules and Form have been reviewed
and approved by OMB (OMB Control No. 3084-0005). The current clearance
expires on February 28, 2026. Because the rule amendments proposed in
this NPRM would change existing reporting requirements, the Commission
will submit this notice of proposed rulemaking and the associated
Supporting Statement to OMB for review under the PRA.

Increased Time Collecting Data for and Preparing an HSR Filing

The proposed amendments are primarily changes to the information
reported on the Notification and Report Form and do not affect the
reportability of a transaction. Thus, the same number of filings
projected for fiscal year 2023 in the most recent Supporting Statement
submitted to OMB and also appearing in the associated Federal Register
publication \79\ will be used for these burden hour calculations.
---------------------------------------------------------------------------

\79\ 88 FR 3413, 3414 (Jan. 19, 2023).
---------------------------------------------------------------------------

Some of the proposed changes are intended to reduce the burden of
filing. The Commission anticipates that the proposals to report NAICS
codes in ranges rather than by specific dollar amount would reduce the
burden on almost all filers. Additionally, the proposed change to
eliminate the requirement for filers that derive revenue from
manufacturing operations to report NAPCS code revenues is also
anticipated to reduce the burden for those filers. Finally, the
Commission also proposes to limit the reporting of minority investors
of the acquired entity.
Some of the proposed changes offer clarifications to the current
rules and are unlikely to change the burden on filers. These include
the proposed changes to eliminate references to paper and DVD filings
(Sec. Sec. 803.2, 803.5, and 803.10) and to specifically discuss the
commencement of the waiting period (Sec. 803.10).
Certain proposed changes would require the acquiring person to
collect and report information that the Commission believes is held in
the acquiring person's ordinary course of business records. These
include proposed requirements for the acquiring person to describe its
own business(es); report minority investors in additional entities
related to the transaction; disclose relationships with individuals or
entities that provide credit, hold non-voting securities, have the
right to appoint board observers, or have management agreements with
entities related to the transaction; and to identify members of boards
of directors. Once collected, the Commission anticipates that the
burden associated with some of these proposals will lessen for
subsequent filings by the same acquiring person, as the information
would only need to be updated.
Many of the proposed changes would increase the burden on all
filers. These include new document collection requirements to produce
transaction-related documents from supervisory deal team members;
business documents that relate to competition topics but were not
produced specifically for the transaction; drafts of responsive
documents; other agreements between the acquiring and acquired persons,
and to log the request to which documents are responsive. Additionally,
the proposed requirements to provide narratives regarding transaction
rationale, diagrams of the transaction, and organizational charts for
custodians of documents would be applicable to all filers.
Some of the proposed changes would significantly increase the
burden on only certain filers. These include those filers whose
businesses have existing horizontal, non-horizontal, or labor market
overlaps or relationships, with the largest burden falling on filers
whose transaction involves many such relationships; transactions that
involve a large number of foreign language documents; filing persons or
transactions that have a complex structure; transactions that are filed
on letters of intent or agreements in principle; and filing persons
that receive subsidies from foreign entities of concern.
PNO staff canvassed current Agency staff who had previously
prepared HSR filings while in private practice to estimate the
projected change in burden due to the proposed amendments to the
Instructions. All have considerable experience with the HSR rules and
with preparing HSR Filings for the types of transactions that are most
likely to be affected by the proposed changes.
These experts were asked to estimate the incremental increase in
time to prepare HSR Filings, for both the company and its outside
counsel, taking into account that transactions range in complexity--
from relatively simple transactions with no overlaps and few

[[Page 42208]]

documents (such as ones only involving executive compensation or other
stock purchases by an individual), to moderately complex transactions
(such as a fund buying or selling a portfolio company with limited
overlaps) to very complex (for example, a strategic acquisition by a
large company that sells many overlapping products in competition with
the seller). The ranges from canvassed officials estimated that the
proposed changes would result in approximately 12 to 222 additional
hours per filing, depending on the complexity of the filing at issue.
In the past five years, approximately 45% of filings had reported
overlaps. To estimate an average number of additional hours, the
Commission conservatively assumes that 45% of the filings may require
an additional 222 hours to prepare and 55% may require an additional 12
hours to prepare. Thus, the Commission estimates an average of 107
additional hours (rounded to the nearest hour) will be allocated to
non-index filings.\80\ Added to the current estimate 37 hours,\81\ the
total estimated hours would be 144 per filing.
---------------------------------------------------------------------------

\80\ Clayton Act section 7A(c)(6) and (c)(8) exempt from the
requirements of the premerger notification program certain
transactions that are subject to the approval of other agencies, but
only if copies of the information submitted to these other agencies
are also submitted to the FTC and the Assistant Attorney General.
Thus, parties must submit copies of these ``index'' filings, but
completing the task requires significantly less time than non-exempt
transactions that require ``non-index'' filings. The proposed
changes would not require any additional information from indexed
filings.
\81\ 88 FR 3413, 3414 (Jan. 19, 2023).
---------------------------------------------------------------------------

Net Effect

The proposed Rule and Notification and Report Form changes only
affect non-index filings \82\ which, for FY 2023, the FTC projects will
total 7,096. As described above, the Commission estimates that he
amendments to the HSR Rules and Notification and Report Form would
increase the time required to prepare responses for non-index filings,
with an estimated net increase of 107 hours per filing. Thus, the total
estimated additional hours burden is 759,272 (7,096 non-indexed filing
x 107 hours/each).
---------------------------------------------------------------------------

\82\ Id.
---------------------------------------------------------------------------

Applying the revised estimated hours, 759,272, to the previous
assumed hourly wage of $460 for executive and attorney compensation,
yields approximately $350,000,000 in labor costs. The amendments are
expected to impose either minimal or no additional capital or other
non-labor costs, as businesses subject to the HSR Rules generally have
or obtain necessary equipment for other business purposes. Staff
believes that the above requirements necessitate ongoing, regular
training so that covered entities stay current and have a clear
understanding of federal mandates, but that this would be a small
portion of and subsumed within the ordinary training that employees
receive apart from that associated with the information collected under
the HSR Rules and the corresponding Instructions.

Request for Comments

The Commission invites comments on: (1) whether the proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information will
have practical utility; (2) the accuracy of the agency's estimate of
the burden of the proposed collection of information, including the
validity of the methodology and assumptions used; (3) ways to enhance
the quality, utility, and clarity of the information to be collected;
and (4) ways to minimize the burden of these information collections on
respondents.
Comments on the proposed reporting requirements subject to PRA
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.

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.\83\ 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
$111 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.
---------------------------------------------------------------------------

\83\ See 13 CFR part 121 (regulations defining small business
size).
---------------------------------------------------------------------------

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 August 28, 2023.
Write ``16 CFR parts 801-803--Hart-Scott-Rodino Coverage, Exemption,
and Transmittal Rules, Project No. P239300'' on your comment. Your
comment--including your name and your state--will be placed on the
public record of this proceeding, including, to the extent practicable,
on the https://www.regulations.gov/ website.
Because of the agency's security screening, postal mail addressed
to the Commission will be subject to delay. We strongly encourage you
to submit your comment online through https://www.regulations.gov/. 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. P239300'' 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 H),
Washington, DC 20580. If possible, please submit your paper comment to
the Commission by overnight service.
Because your comment will be placed on the publicly accessible
website, https://www.regulations.gov/, you are solely responsible for
making sure that your comment does not include any sensitive or
confidential information. In particular, your comment should not
contain 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 responsible for making sure 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

[[Page 42209]]

any commercial or financial information which . . . is privileged or
confidential,''--as provided in 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), 16 CFR 4.9(c).
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(b). Your comment will be kept
confidential only if the General Counsel grants your request in
accordance with the law and the public interest. Once your comment has
been posted publicly at https://www.regulations.gov/--as legally
required by FTC Rule 4.9(b), 16 CFR 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), 16 CFR
4.9(c), and the General Counsel grants that request.
Visit the Commission's website, www.ftc.gov, to read this
publication 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 that
it receives on or before August 28, 2023. 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.

List of Subjects in 16 CFR Parts 801 and 803

Antitrust.

For the reasons stated in the preamble, the Federal Trade
Commission proposes amending 16 CFR parts 801 and 803 as set forth
below:

PART 801--COVERAGE RULES

0
1. The authority citation for part 801 continues to read as follows:

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

0
2. Amend Sec. 801.1 by adding paragraph (r) to read as follows:

Sec. 801.1 Definitions

* * * * *
(r)(1) Foreign entity or government of concern. The term foreign
entity or government of concern means: (i) An entity that is a foreign
entity of concern as that term is defined in section 40207 of the
Infrastructure Investment and Jobs Act (42 U.S.C. 18741(a)(5)); or
(ii) A government, or an agency thereof, of a foreign country that
is a covered nation as that term is defined in section 40207 of the
Infrastructure Investment and Jobs Act (42 U.S.C. 18741(a)(5)(C)).
(2) Subsidy. The term subsidy has the meaning given the term in
Part IV of Title VII of the Tariff Act of 1930 (19 U.S.C. 1677(5)(B)).

PART 803--TRANSMITTAL RULES

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

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

0
4. Amend Sec. 803.2 by:
0
a. Redesignating paragraph (a) as (a)(1) and adding paragraph (a)(2);
0
b. Removing paragraph (b)(1)(v); and
0
c. Revising paragraphs (e) and (f). The revisions and additions read as
follows:

Sec. 803.2 Instructions applicable to Notification and Report Form.

(a)(1) The notification required by the act shall be filed by the
preacquisition ultimate parent entity, or by any entity included within
the person authorized by such preacquisition ultimate parent entity to
file notification on its behalf. In the case of a natural person
required by the act to file notification, such notification may be
filed by his or her legal representative: Provided however, That
notwithstanding Sec. Sec. 801.1(c)(2) and 801.2 of this chapter, only
one notification shall be filed by or on behalf of a natural person,
spouse and minor children with respect to an acquisition as a result of
which more than one such natural person will hold voting securities of
the same issuer.
Example:
Jane Doe, her husband, and minor child collectively hold more than
50 percent of the shares of family corporation F. Therefore, Jane Doe
(or her husband or minor child) is the ``ultimate parent entity'' of a
``person'' composed to herself (or her husband or minor child) and F;
see paragraphs (a)(3), (b) and (c)(2) of Sec. 801.1 of this chapter.
If corporation F is to acquire corporation X, under this paragraph only
one notification is to be filed by Jane Doe, her husband, and minor
child collectively.
(2) Persons that are both acquiring and acquired persons should
submit separate forms, one as the acquiring person and one as the
acquired person, following the appropriate instructions for each.
* * * * *
(e) For documents required by item 4(b) of the Notification and
Report Form, a person filing the notification may, instead of
submitting a document, provide a cite to an operative internet address
directly linking to the document, if the linked document is complete
and payment is not required to access the document. If an internet
address becomes inoperative during the waiting period, or the document
is otherwise rendered inaccessible or incomplete, upon notification by
the Commission or Assistant Attorney General, the parties must make the
document available to the agencies by either referencing an operative
internet address where the complete document may be accessed or by
providing electronic copies to the agencies as provided in Sec.
803.10(c)(1) by 5 p.m. on the next regular business day. Failure to
make the document available, by the internet or by providing electronic
copies, by 5 p.m. on the next regular business day, will result in
notice of a deficient filing pursuant to Sec. 803.10(c)(2).
(f) Filings must comply with all format requirements set forth at
the Premerger Notification Office pages at https://www.ftc.gov. The use
of any format not specified as acceptable, or any other failure to
comply with the applicable format requirements, shall render the entire
filing deficient within the meaning of Sec. 803.10(c)(2).
0
5. Amend Sec. 803.5 by revising paragraphs (a)(1), (3) and (b) to read
as follows:

Sec. 803.5 Affidavits required.

(a)(1) Section 801.30 acquisitions. For acquisitions to which Sec.
801.30 of this chapter applies, the notification required by the act
from each acquiring person shall contain an affidavit attesting that
the issuer or unincorporated entity whose voting securities or non-
corporate interests are to be acquired has received written notice
delivered to an officer (or a person exercising similar functions in
the case of an entity without officers) by email, certified or
registered mail, wire, or hand delivery, at its principal executive
offices, of:
* * * * *
(3) The affidavit required by this paragraph must have attached to
it a copy of the written notice received by the acquired person
pursuant to paragraph (a)(1) of this section.
(b) Non-section 801.30 acquisitions. For acquisitions to which
Sec. 801.30 of

[[Page 42210]]

this chapter does not apply, the notification required by the act shall
contain an affidavit attesting that a contract, agreement in principle,
or letter of intent to merge or acquire has been executed, and further
attesting to the good faith intention of the person filing notification
to complete the transaction. If a definitive agreement is not provided,
the affidavit must attest that a term sheet or draft agreement that
describes with specificity the scope of the transaction that will be
consummated has been submitted with the executed letter of intent or
agreement in principle.
0
6. Revise Sec. 803.8 to read as follows:

Sec. 803.8 Foreign language documents.

Documentary materials or information in a foreign language required
to be submitted at the time of filing a Notification and Report Form
and in response to a request for additional information or documentary
material must be submitted with verbatim English language translations.
All verbatim translations must be understandable, accurate, and
complete.
0
7. Amend Sec. 803.10 by revising paragraphs (c)(1)(i) and (ii) to read
as follows:

Sec. 803.10 Running of time.

* * * * *
(c)(1)(i) The date of receipt shall be the date of electronic
submission if such date is not a Saturday, Sunday, a legal public
holiday (as defined in 5 U.S.C. 6103(a)), or a legal public holiday's
observed date, and the submission is completed by 5:00 p.m. eastern
time. In the event electronic submission is unavailable, the FTC and
DOJ may designate procedures for the submission of the filing.
Notification of the alternate delivery procedures will normally be made
through a press release and, if possible, on the https://www.ftc.gov
website.
(ii) Delivery effected after 5 p.m. eastern time on a business day,
or at any time on any day other than a business day, shall be deemed
effected on the next following business day. If submission of all
required filings is not effected on the same date, the date of receipt
shall be the latest of the dates on which submission is effected.
* * * * *
0
8. Amend Sec. 803.12 by revising paragraph (c)(1)(iii) to read as
follows:

Sec. 803.12 Withdraw and refile notification.

* * * * *
(c) * * *
(1) * * * (iii) The resubmitted notification is recertified, and
the submission, as it relates to Transaction-specific Agreements
(including the latest drafts, if definitive agreements have not been
signed), Transaction-Related Documents (including Documents Prepared by
or for Officers, Directors or Supervisory Deal Team Leads; Confidential
Information Memorandum; Studies, Surveys, Analyses, and Reports;
Synergies and Efficiencies) and Subsidies from Foreign Entities of
Concern in the Instructions, is updated to the date of the
resubmission;
* * * * *
0
9. Revise Appendices A and B to part 803 to read as follows:
[INSERT GENERAL INSTRUCTIONS AND INFORMATION]

Antitrust Improvements Act Notification for Certain Mergers and
Acquisitions

General Instructions And Information

These instructions specify the information that must be
submitted pursuant to Sec. 803.1(a) of the premerger notification
rules, 16 CFR parts 801-803 (``the Rules''). Submitted materials
must be provided to the Federal Trade Commission (``FTC'') and to
the Antitrust Division of the Department of Justice (``DOJ'')
(together, ``the Agencies'').

Information

The central office for information and assistance concerning the
Rules is: Premerger Notification Office Federal Trade Commission,
Room #5301, 400 7th Street SW, Washington, DC 20024, Phone: (202)
326-3100, Email: [email protected] for rules questions,
[email protected] for filing information.
Copies of these Instructions, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (``the Act''), the Rules, Federal Register
publications issuing the Rules and Rule amendments (``Statements of
Basis and Purpose''), as well as information to assist in submitting
the required information are available at the FTC's Premerger
Notification Office (``PNO'') website.

Definitions and Explanation of Terms

Unless otherwise indicated, the definitions provided in the
Rules apply to these Instructions.

Dollar Values

All financial information should be expressed in millions of
dollars rounded to the nearest hundred thousand.

Economic Research Service's Commuting Zones

When submitting information by the Economic Research Service's
(``ERS's'') Commuting Zones (``CZ''), refer to the U.S. Department
of Agriculture's Economic Research Service Commuting Zones for the
year 2000, available at https://www.ers.usda.gov/data-products/commuting-zones-and-labor-market-areas/.

Fee Information

The filing fee is based on the aggregate total value of assets,
voting securities, and controlling non-corporate interests to be
held as a result of the acquisition. Filing fee tiers are adjusted
annually pursuant to 15 U.S.C. 18a(a)(note) based on the change in
gross national product, in accordance with 15 U.S.C. 19(a)(5). For
each fiscal year commencing after September 30, 2023, filing fees
will increase by the percentage increase, if any, in the consumer
price index (``CPI'') over the CPI for the fiscal year ending
September 30, 2022, pursuant to 15 U.S.C. 18a(a)(note). For current
thresholds and fee information, see the PNO website.

North American Industry Classification System (NAICS) Data

When reporting information by 6-digit NAICS code, refer to the
North American Industry Classification System--United States, 2022,
published by the Executive Office of the President, Office of
Management and Budget, available at https://www.census.gov/naics/.
This website also provides guidance in choosing the proper code(s).

Person Filing and Filing Person

The terms ``person filing'' or ``filing person'' mean the
ultimate parent entity (``UPE''). See Sec. 801.1(a)(3). The terms
are used herein interchangeably.

Standard Occupational Classification

When reporting information by 6-digit Standard Occupational
Classification (``SOC'') code, refer to the 2018 SOC System,
available at https://www.bls.gov/soc/2018/#classification.

Thresholds

Notification thresholds are adjusted annually based on the
change in gross national product, in accordance with 15 U.S.C.
19(a)(5). See Sec. 801.1(h). The current threshold values can be
found at Current Filing Thresholds.

Year

All references to ``year'' refer to calendar year. If data are
not available on a calendar year basis, supply the requested data
for the fiscal year reporting period that most nearly corresponds to
the calendar year specified. References to ``most recent year'' mean
the most recent calendar or fiscal year for which the requested
information is available.

Filing

If the UPE is both an acquiring and acquired person, separate
filings must be submitted, one as the acquiring person and one as
the acquired person, following the appropriate instructions for
each. See Sec. 803.2(a)(2).
Filings should be submitted electronically consistent with the
instructions on the PNO website. If the electronic submission
platform is unavailable, the Agencies may announce sites for
delivery through the media and, if possible, at the PNO website.

Responses

Items that require the submission of documents or narrative
responses should be produced in (1) searchable PDF format from which
text can be copied or (2) Excel formats.
All documents should be logged in an Excel File. The log should
list all responsive

[[Page 42211]]

documents, regardless of whether the document is redacted or
withheld for privilege. For each document, indicate:
1. The document number;
2. Request(s) to which the document is responsive;
3. Title;
4. Date;
5. Authors and job titles; and
6. Whether the document is privileged.
Indented and bolded headings in these Instructions should each
be considered a separate request.
If a group of people prepared the document, list all the authors
and their titles, identifying the principal authors. Alternatively,
it is acceptable to indicate that the document was prepared under
the supervision of the lead author and to provide the name and title
of that author. If the filing person engaged a third party to
prepare a document, provide the name of the third party, and the
name, title, and company name for the individual within the filing
person who supervised the creation of the document, or for whom the
document was prepared. For materials received from a third party
that was not engaged by the filing person, only the name of the
third party is required.
If parties submit documents in addition to what is required,
such documents should be identified as ``Voluntary''. See Sec.
803.1(b).
Submit only one copy of identical responsive documents.
For each narrative response, indicate the document number for
each document that supports the narrative and the request to which
the narrative is responsive.

Privilege

For privileged documents, the filing person must also provide
the following in the Responses log:
1. The privilege type (redacted or withheld);
2. The privilege claim;
3. Addressee(s) and all recipients, with company name and title,
of the original and any copies;
4. Subject matter;
5. Document's present location; and
6. Who has control over it.
If a privileged document was circulated to a group, such as the
board or an investment committee, the name of the group is
sufficient, but the filing person should be prepared to disclose the
names and titles/positions of the individual group members, if
requested.
If the claim of privilege is based on advice from inside and/or
outside counsel, the name of the inside and/or outside counsel
providing the advice (and the law firm, if applicable) must be
provided. If several lawyers participated in providing advice,
identifying lead counsel is sufficient. In identifying who controls
a document, the name of the law firm is sufficient.

Translations

Materials or information in a foreign language must be
translated into English, with the English translation attached to
the foreign language version. See Sec. 803.8.

Non-Compliance

If unable to answer any item fully, provide such information as
is available and a statement of reasons for non-compliance as
required by Sec. 803.3. If exact answers to any item cannot be
given, enter best estimates and indicate the source or basis of such
estimates. Add an endnote with the notation ``est.'' to any item
where data are estimated.

Limited Response

Information need not be supplied regarding assets, voting
securities, or non-corporate interests currently being acquired when
their acquisition is exempt under the Act or Rules. See Sec.
803.2(c).

Ultimate Parent Entity Information

UPE Details

Name

Provide the name, headquarters address, and website (if one
exists) of the person filing notification. The name of the person
filing is the name of the UPE. See Sec. 801.1(a)(3).

Entity Type

Specify whether the UPE is a corporation, unincorporated entity,
natural person, or other entity type (specify). See Sec. 801.1.

Acquiring or Acquired Person

Indicate whether the filing is being made as an acquiring or
acquired person.

Filing Made on Behalf of the UPE

If the filing is being made on behalf of the UPE by another
entity within the same person that is authorized by the UPE to file
the notification on its behalf pursuant to Sec. 803.2(a), or filed
pursuant to Sec. 803.4 on behalf of a foreign person, provide the
name and mailing address of the entity filing the notification on
behalf of the UPE.

Contact Information

Provide the name and title, firm name, address, telephone
number, and email address of two individuals (primary and secondary)
to contact regarding the filing. See Sec. 803.20(b)(2)(ii).

Second Request Contact Information

Provide the name, firm name, address, telephone number, and
email address of an individual located in the United States
designated for the limited purpose of receiving notice of the
issuance of a request for additional information or documentary
material. See Sec. 803.20(b)(2).

Annual Reports and Financial Information

Central Index Key

Provide the names of all entities within the person filing the
notification, 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.

Annual Reports and Audit Reports

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 entity controlled by the
acquiring person whose revenues contribute to a NAICS overlap or any
overlap identified in the Horizontal Overlap Narrative.
The acquired person should also provide the most recent reports
of the acquired entity(s).
Natural person UPEs should not provide personal balance sheets
or tax returns. Natural person UPEs should instead provide the most
recent reports for the highest-level entity(s) they control.
The person filing notification may incorporate a document
responsive to this item by reference to an internet address directly
linking to the document. See Sec. 803.2(e).

Size of Person

If applicable, indicate whether the UPE stipulates that it meets
the size of person test. See 15 U.S.C. 18a(a).

Organization Structure

If the acquisition includes only assets that do not comprise
substantially all the assets of an operating unit, the acquired
person should not complete the questions in this section. Otherwise,
the acquired person must complete these questions for the portion of
the transaction related to the voting securities, non-corporate
interests, and assets that comprise substantially all the assets of
an operating unit.

Entities Within the Acquiring Person and Acquired Entity

List the name, city, state/country, and zip code of all U.S.
entities, and all foreign entities that have sales in or into the
United States, that are included within the acquiring person, or
acquired entity (as appropriate). Entities with total assets of less
than $10 million may be omitted. Alternatively, the acquiring person
or acquired entity (as appropriate) may report all entities within
it. Also list all names under which the entities do business or have
done business within the past 3 years (e.g., d/b/a or f/k/a names).
The list of entities should be organized by operating company or
operating business/unit (``top-level entity''), if applicable.

Minority Shareholders and Other Non-Controlling Entities

Acquiring Person

Provide a narrative response describing the ownership structure
of the acquiring entity.
For transactions where a fund or master limited partnership is
the UPE, also provide an organizational chart sufficient to identify
and show the relationship of all entities that are affiliates or
associates. See Sec. 801.1(d).
Additionally, list the name, headquarters mailing address, and
approximate percentage of holdings for any individual or entity that
currently holds, or will hold as a result of the transaction, 5% or
more but less than 50% of the voting securities or non-corporate
interests of (1) the acquiring entity, (2) any entity directly or
indirectly controlled by the acquiring entity, (3) any entity that
directly or indirectly controls the acquiring entity, and (4) any
entity within the acquiring person that has been or will be created
in contemplation of, or for the purposes of, effectuating the
transaction. Entities related

[[Page 42212]]

to master limited partnerships, funds, investment groups, or similar
entities that do business under a common name should also have the
d/b/a or ``street name'' of such group listed.
For limited partnerships, the general partner(s), regardless of
percentage held, should also be listed.
If the identity of minority investors or percentage to be held
is not finalized at time of filing, provide good faith estimates and
explain.

Acquired Person

Provide a narrative response, describing the ownership structure
of the acquired entity(s).
Additionally, list the name, headquarters mailing address, and
approximate percentage held for any holders of 5% or more but less
than 50% of (1) the acquired entity(s), and (2) any entity within
the acquired entity(s), but only if such holder will continue to
hold an interest (whether voting securities or non-corporate
interests) in such entity(s), or will acquire an interest in any
entity within the acquiring person as a result of the transaction.
For limited partnerships, the general partner(s), regardless of
percentage held, should also be listed.

Other Types of Interest Holders That May Exert Influence

For the Acquiring Person Only: Identify every entity and
individual (other than those employed by the acquiring person or an
entity it controls) that, upon consummation or as a result of
agreements related to consummation:
1. Provides, has provided (and still is a creditor), or will
provide credit to the acquiring entity, an entity the acquiring
entity directly or indirectly controls, or an entity that directly
or indirectly controls the acquiring entity. Do not list individuals
or entities if the amount of credit they have provided or will
provide is less than 10% of the value of that entity;
2. Holds non-voting securities (including options or warrants)
of the acquiring entity, an entity the acquiring entity directly or
indirectly controls, or an entity that directly or indirectly
controls the acquiring entity, where such non-voting securities are
valued at more than 10% of that entity;
3. Is a board member or board observer or has the right to
nominate or appoint a board member or board observer of the
acquiring entity, an entity the acquiring entity directly or
indirectly controls, or an entity that directly or indirectly
controls the acquiring entity; or
4. Has an agreement to manage the acquiring entity, an entity
the acquiring entity directly or indirectly controls, or an entity
that directly or indirectly controls the acquiring entity.
For every individual or entity identified, provide the name,
contact information, the percent of voting securities or non-
corporate interests owned (if any), and a description of the
relevant relationship(s) above.

Officers, Directors, and Board Observers

For each entity within the acquiring person or acquired entity
(as applicable), list by entity all current officers, directors, and
board observers (or in the case of unincorporated entities,
individuals exercising similar functions), as well as those who have
served in the position within the past 2 years.
Additionally, list all individuals who will or are likely to
serve as an officer, director, or board observer of an entity within
the acquiring person as a result of or as contemplated by the
transaction. Organize the response by entity and include entities
that are not yet created but are expected to be created as a result
of or as contemplated by the transaction. If the identities of the
prospective officers, directors, and board observers are unknown,
briefly describe who will have the authority to select them.
For each officer, director and board observer identified, list
all other entities for which the individual serves, or has served
within the last two years, as an officer, director, or board
observer.

Transaction Information

Parties

List the name and mailing address of each acquiring and acquired
person, and acquiring and acquired entity, whether or not required
to file a notification. Do not list entities controlled by an
acquired entity.

Acquiring UPE

Provide the name, headquarters address, and website (if one
exists) of the acquiring person.

Acquiring Entity

If an entity other than the acquiring UPE is making the
acquisition, provide the name, mailing address, and website of that
entity.

Acquired UPE

Provide the name, headquarters address, and website (if one
exists) of the acquired person.

Acquired Entity

If the assets, voting securities, or non-corporate interests of
an entity other than the acquired UPE are being acquired, provide
the name, mailing address, and website of that entity.

Filing Fee

Total Expected Filing Fee

Indicate the value of the total required fee for the
transaction.

Parties Paying the Fee

Indicate which filing party(s) is paying the filing fee and, if
applicable, whether the portion of the fee being paid by the filer
is being paid by multiple entities associated with the filer. For
each entity paying a portion of the fee, provide the name of payer,
the amount paid, the payment method, and the Electronic Wire
Transfer (EWT) confirmation number or check number.
Note on Paying by EWT: In order for the FTC to track payment,
the payer must provide information required by the Fedwire
Instructions to the financial institution initiating the EWT. A
template of the Fedwire Instructions is available at the PNO website
on the Filing Fee Information page.
Note on Paying by Check: The FTC strongly discourages check
payments. However, if an EWT cannot be arranged, the FTC will accept
a check, sent to Financial Operations. Cashiers' or certified checks
are preferred. Make the check payable to the Federal Trade
Commission and deliver to: Federal Trade Commission, Financial
Operations Division, 600 Pennsylvania Ave., Drop H-790, Washington,
DC 20580.
Please note that the waiting period may be delayed until the fee
has been confirmed.

Transaction Details

801.30 Transaction:
Indicate whether the transaction is subject to Sec. 801.30.

Transaction Type

Indicate whether the transaction is a(n):
Acquisition of voting securities;
Acquisition of non-corporate interests;
Acquisition of assets;
Merger (see Sec. 801.2);
Consolidation (see Sec. 801.2);
Formation of a joint venture, other corporation, or
unincorporated entity (see Sec. Sec. 801.40 and 801.50);
Bankruptcy that is subject to Section 363(b) of the
Bankruptcy Code (11 U.S.C. 363);
Cash Tender Offer;
Acquisition subject to Sec. 801.31;
Secondary acquisition subject to Sec. 801.4;
Acquisition subject to Sec. 801.2(e); and/or
Acquisition consummated in violation of the HSR Act.

Acquisition Details

Provide the requested information for the value and percentage
of assets, voting securities, and non-corporate interests to be
acquired. If a combination of assets, voting securities, and/or non-
corporate interests are being acquired and allocation is not
possible, note such information in an endnote.
For determining percentage of voting securities, evaluate total
voting power per Sec. 801.12.
For determining percentage of non-corporate interests, evaluate
the economic interests per Sec. 801.1(b)(1)(ii).
State the value of voting securities already held by
the acquiring person. See Sec. 801.10.
State the percentage of voting securities already held
by the acquiring person. See Sec. 801.12.
State the total value of voting securities to be held
by the acquiring person as a result of the acquisition. See Sec.
801.10.
State the total percentage of voting securities to be
held by the acquiring person as a result of the acquisition. See
Sec. 801.12.
State the value of non-corporate interests already held
by the acquiring person. See Sec. 801.10.
State the percentage of non-corporate interests already
held by the acquiring person. See Sec. 801.1(b)(1)(ii).
State the total value of non-corporate interests to be
held by the acquiring person as a result of the acquisition. See
Sec. 801.10.
State the total percentage of non-corporate interests
to be held by the acquiring person as a result of the acquisition.
See Sec. Sec. 801.10 and 801.1(b)(1)(ii).
State the value of assets to be held by the acquiring
person as a result of the acquisition. See Sec. 801.10.

[[Page 42213]]

State the aggregate total value of assets, voting
securities, and non-corporate interests of the acquired person to be
held by the acquiring person as a result of the acquisition. See
Sec. Sec. 801.10, 801.12, 801.13 and 801.14.

Notification Threshold

This item should only be completed by the acquiring person when
voting securities are being acquired. If more than voting securities
are being acquired, respond to this item only regarding voting
securities. Indicate the highest applicable threshold for which
notification is being filed. See Sec. 801.1(h).
$50 million (as adjusted);
$100 million (as adjusted);
$500 million (as adjusted);
25% (if the value of voting securities to be held is
greater than $1 billion, as adjusted);
50%;
N/A.
Note that the 50% notification threshold is the highest
threshold and should be used for any acquisition of 50% or more of
the voting securities of an issuer, regardless of the value of the
voting securities. For instance, an acquisition of 100% of the
voting securities of an issuer valued in excess of $500 million (as
adjusted) would cross the 50% notification threshold, not the $500
million (as adjusted) threshold.

Transaction Description

Business of the Acquiring Person

Acquiring Person Only: Describe the business operation(s) of all
entities within the acquiring person.

Business of the Acquired Entity

Describe the business operation(s) being acquired. If assets,
describe the assets and whether they comprise a business operation.

Non-Reportable UPE(s)

Provide the names of any non-reportable UPE(s).

Transaction Description

Briefly describe the transaction, indicating whether assets,
voting securities, or non-corporate interests (or some combination)
are to be acquired. Indicate what consideration will be received by
each party and the scheduled consummation date of the transaction.
Also identify any special circumstances that apply to the filing,
such as whether part of the transaction is exempt under one of the
exemptions found in Part 802.
If any attached transaction documents use code names to refer to
the parties, provide an index identifying the codes.

Transaction Rationale

Identify and explain each strategic rationale for the
transaction discussed or contemplated by the filing person, or any
of its officers, directors, or employees. If the acquiring entity is
different from the UPE, submit an explanation for each entity.
Identify each document produced in the filing that confirms or
discusses the stated rationale(s).

Transaction Diagram

Submit a diagram of the transaction and provide a chart
explaining the relationship between all entities and/or natural
persons involved in the transaction.

Related Transactions

Indicate whether the transaction that is the subject of this
filing has related filings because the transaction:
Is a principal transaction that triggers one or more
shareholder backside transactions;
Is a shareholder backside transaction;
Has more than one acquiring UPE;
Has more than one acquired UPE;
Has more than one reportable step;
Is a joint venture;
Is a consolidation;
Is an exchange of assets; or
Has other circumstance that requires more than one
filing.
Provide additional details regarding the related transaction(s),
such as party names and transaction numbers.

Early Termination

Indicate whether the filing person requests early termination.
Notification of each grant of early termination will be published in
the Federal Register, as required by 15 U.S.C. 18a(b)(2), and on the
PNO website. Note that if either party in any transaction requests
early termination, it may be granted and published.

Joint Ventures

See Sec. Sec. 801.40 and 801.50.

Contributions

List the contributions that each person forming the joint
venture corporation or unincorporated entity has agreed to make,
specifying when each contribution is to be made and the value of the
contribution as agreed by the contributors.

Consideration

Describe fully the consideration that each person forming the
joint venture corporation or unincorporated entity will receive in
exchange for its contribution(s).

Business Description

Describe generally the business in which the joint venture
corporation or unincorporated entity will engage, including its
principal types of products or activities, and the geographic areas
in which it will do business.

NAICS Codes

Identify each 6-digit NAICS industry code in which the joint
venture corporation or unincorporated entity will derive dollar
revenues.

Agreements and Timeline

Transaction-Specific Agreements

Furnish copies of all documents that constitute the agreement(s)
related to the transaction, including, but not limited to, exhibits,
schedules, side letters, agreements not to compete or solicit, and
other agreements negotiated in conjunction with the transaction.
Documents that constitute the agreement(s) (e.g., Agreement and
Plan of Merger, Letter of Intent, Purchase and Sale Agreement, Asset
Purchase Agreement, Stock/Securities Purchase Agreement) must be
executed, while supporting agreements, such as employment agreements
and agreements not to compete may be provided in draft form if that
is the most recent version. If there is no definitive executed
agreement, provide a copy of the most recent draft agreement or term
sheet that provides sufficient detail about the scope of the entire
transaction that the parties intend to consummate. See Sec. 803.5.
Note that transactions subject to Sec. 801.30 and bankruptcies
under 11 U.S.C. 363(b) do not require an executed agreement. For
bankruptcies, provide the order from the bankruptcy court.

Other Agreements Between the Parties

Provide all other agreements between the acquiring and acquired
person, including but not limited to, non-compete or non-
solicitation agreements, supply agreements, or licensing agreements
including current agreements and those that expired, have
terminated, or were canceled within one year of the filing.

Timeline

Provide a detailed timetable for the transaction, including when
the signatories intend to consummate the transaction, or implement
all closing conditions, integration, affiliation, or other purchase
agreements, and any other important deadlines for closing or
terminating the merger agreement. Identify all provisions in the
agreement that govern the extension of these deadlines and explain
the conditions for extending deadlines and how long they may be
extended. Also, if applicable, provide a description of any fee or
other consideration paid or to be paid at key dates of the
transaction or upon closing, including but not limited to
termination fees, break fees, ticking fees, and any other
arrangement intended to serve in lieu of a break fee.

Competition and Overlaps

Business Documents

Transaction-Related Documents

Documents Prepared by or for Officers, Directors, or Supervisory Deal
Team Lead(s)

Provide all studies, surveys, analyses, and reports prepared by
or for any officer(s), director(s), or supervisory deal team lead(s)
for the purpose of evaluating or analyzing the acquisition with
respect to market shares, competition, competitors, markets,
potential for sales growth, or expansion into product or geographic
markets. For unincorporated entities, provide such documents
prepared by or for individuals exercising similar functions as
officers and directors, as well as the supervisory deal team
lead(s).

Confidential Information Memoranda

Provide all confidential information memoranda prepared by or
for any officer(s) or director(s) (or, in the case of unincorporated
entities, individuals exercising similar functions) of the UPE of
the acquiring or acquired person or of the acquiring or acquired
entity(s) that specifically relate to the sale of the acquired
entity(s) or assets. If no such confidential information memorandum
exists, submit any document(s) given to any officer(s) or

[[Page 42214]]

director(s) of the buyer meant to serve the function of a
confidential information memorandum. This does not include ordinary
course documents and/or financial data shared in the course of due
diligence, except to the extent that such materials served the
purpose of a confidential information memorandum when no such
confidential information memorandum exists.
Documents responsive to this item are limited to those produced
within one year before the date of filing.

Studies, Surveys, Analyses, and Reports

Provide all studies, surveys, analyses and reports prepared by
investment bankers, consultants, or other third party advisors
(``third party advisors'') for any officer(s) or director(s) (or, in
the case of unincorporated entities, individuals exercising similar
functions) of the UPE of the acquiring or acquired person or of the
acquiring or acquired entity(s) for the purpose of evaluating or
analyzing market shares, competition, competitors, markets,
potential for sales growth or expansion into product or geographic
markets that specifically relate to the sale of the acquired
entity(s) or assets. This item requires only materials developed by
third party advisors during an engagement or for the purpose of
seeking an engagement.
Documents responsive to this item are limited to those produced
within one year before the date of filing.

Synergies and Efficiencies

Provide all studies, surveys, analyses, models, and reports
evaluating or analyzing synergies, financial projections, and/or
efficiencies prepared by or for any officer(s) or director(s) (or,
in the case of unincorporated entities, individuals exercising
similar functions) for the purpose of evaluating or analyzing the
acquisition. Financial models without stated assumptions need not be
provided.

Drafts

For each responsive Transaction-Related Document, provide drafts
of the document that were sent to an officer, director, or
supervisory deal team lead(s).

Periodic Plans and Reports

Provide all semi-annual or quarterly plans and reports that were
provided to the Chief Executive Officer (CEO) of the acquiring or
acquired entity (as appropriate) and any entity that it controls or
is controlled by and individuals who report directly to each such
CEO (but excluding individuals responsible solely for environmental,
tax, human resources, pensions, benefits, ERISA, or OSHA issues)
that analyze market shares, competition, competitors, or markets
pertaining to any product or service also produced, sold, or known
to be under development by the other party (acquiring person or
acquired entity as appropriate). Documents responsive to this item
are limited to those prepared or modified within one year of the
date of filing.
Provide all plans and reports (including semi-annual or
quarterly) that were provided to the Board of Directors of the
acquiring or acquired entity (as appropriate) and any entity that it
controls or is controlled by that analyze market shares,
competition, competitors, or markets pertaining to any product or
service also produced, sold, or known to be under development by the
other party (acquiring person or acquired entity as appropriate).
Documents responsive to this item are limited to those prepared or
modified within one year of the date of filing.

Organizational Chart of Authors and Recipients

Provide an organizational chart(s) that identifies the
position(s) held by authors, and for privileged documents,
recipients, of all business documents submitted. Filing persons
should indicate on the organizational chart(s) the individuals whose
files were searched for documents responsive to these Instructions.

Competition Analysis

Horizontal Overlap Narrative

Describe each of the principal categories of products and
services (as defined in the day-to-day operations) of the acquiring
person or acquired entity (as applicable).
In addition, list and describe each of the current or known
planned products or services of the acquiring person or acquired
entity (as appropriate) that competes with (or could compete with) a
current or known planned product or service of the other party
(acquiring person or acquired entity as appropriate). Current or
known planned products or services include those that the acquiring
person or acquired entity researches, develops, manufactures,
produces, sells, offers, provides, supplies, or distributes. For
each such product or service listed, provide:
1. The sales (in units and dollars) for each of the past two
fiscal years. For those products or services not generating revenue
or whose performance is not measured by revenue in the ordinary
course of business, provide projected revenue, estimates of the
volume of products to be sold, time spent using the service, or any
other metric by which the acquiring person or acquired entity (as
appropriate) measures performance (e.g., daily users, new signups).
2. A description of all categories of customers of the acquiring
person or acquired entity (as appropriate) that purchase or use the
product or service (e.g., retailer, distributor, broker, government,
military, educational, national account, local account, commercial,
residential, or institutional), and an estimate of how much of the
product or service each customer category purchased or used monthly
for the last fiscal year. If no customers have yet used the product
or service, provide the date that development of the product or
service began; a description of the current stage in development,
including any testing and regulatory approvals and any planned
improvements or modifications; the date that development (including
testing and regulatory approvals) was or will be completed; and the
date that the product or service is expected to be sold or otherwise
commercially launched.
3. Contact information (including individual's name, title,
phone, and email) for the acquiring person's or acquired entity's
(as appropriate) top 10 customers in the last fiscal year (as
measured in both units and dollars), and the top 10 customers for
each customer category identified.
4. A description of any licensing arrangements.
5. A description, including duration, of any non-compete or non-
solicitation agreement applicable to employees or business units
related to the product or service.

Supply Relationships Narrative

Related Sales: List and describe each product, service, or asset
(including data) that the acquiring person or acquired entity (as
applicable) has sold, licensed, or otherwise supplied in the last
two fiscal years (1) to the other party (acquiring person or
acquired entity as appropriate), or (2) to any other business that,
to the filing person's knowledge or belief, uses its product,
service, or asset to compete with the other party's products or
services, or as an input for a product or service that competes or
is intended to compete with the other party's products or services.
For each product, service, or asset listed, provide:
1. The sales (in units and dollars and any other appropriate
measure) for each of the past two fiscal years, separately to (1)
the other party (acquiring person or acquired entity as appropriate)
and (2) any other business that, to the filing person's knowledge or
belief, uses its product, service, or asset to compete with the
other party's products or services, or as an input for a product or
service that competes or is intended to compete with the other
party's products or services.
2. The top 10 customers (as measured in both units and dollars)
of the acquiring person or acquired entity (as appropriate) that use
the acquiring person's or acquired entity's (as appropriate)
product, service, or asset to compete with the other party's
(acquiring person or acquired entity as appropriate) products or
services, or as an input for a product or service that competes or
is intended to compete with the other party's products or services.
For each such customer, provide contact information (including
title, phone, and email) and a description of the acquiring person's
or acquired entity's (as appropriate) supply or licensing agreement
(or other comparable terms of supply).
Related Purchases: List and describe each product, service, or
asset (including data) that the acquiring person or acquired entity
(as appropriate) incorporates as an input into any product or
service and that the acquiring person or acquired entity (as
appropriate) has purchased, licensed, or otherwise obtained in the
last two years (1) from the other party (acquiring person or
acquired entity as appropriate) or (2) from any other business that,
to the filing person's knowledge or belief, competes with the other
party to provide a substantially similar product, service, or asset.
For each product, service, or asset listed, provide:
1. The purchased amount (in units and dollars and any other
appropriate measure) for each of the last two fiscal years,
separately for (1) the other party and (2) any other business that,
to the filing person's

[[Page 42215]]

knowledge or belief, competes with the other party to provide a
substantially similar product, service, or asset.
2. The top 10 suppliers (as measured in both units and dollars)
for the associated input product, service, or asset, with contact
information (including title, phone, and email) and a description of
the acquiring person's or acquired entity's (as appropriate)
purchase or licensing agreement (or other comparable terms of
purchase).

Labor Markets Information

This section requests information about the largest categories
of workers employed by the acquiring person or acquired entity (as
appropriate) and the geographic area(s) where these employees work.

Largest Employee Classifications

Provide the aggregate number of employees of the acquiring
person or acquired entity (as appropriate) for each of the five
largest occupational categories (as categorized by the first six
digits of the relevant SOC classifications).

Geographic Market Information for Each Overlapping Employee
Classification

Indicate the five largest 6-digit SOC codes in which both
parties (the acquiring person and the acquired entity) employ
workers. For each overlapping 6-digit SOC code, list each ERS
commuting zone in which both parties employ workers with the 6-digit
classification and provide the aggregate number of classified
employees in each ERS commuting zone.

Worker and Workplace Safety Information

Identify any penalties or findings issued against the filing
person by the U.S. Department of Labor's Wage and Hour Division
(WHD), the National Labor Relations Board (NLRB), or the
Occupational Safety and Health Administration (OSHA) in the last
five years and/or any pending WHD, NLRB, or OSHA matters.
For each identified penalty or finding, provide (1) the decision
or issuance date, (2) the case number, (3) the JD number (for NLRB
only), and (4) a description of the penalty and/or finding.

NAICS Codes

This item requests information regarding the industry categories
of the acquiring person or acquired entity(s) or assets (as
appropriate) of products and services that derived revenue in the
last fiscal year, as well as for products or services in development
that would create overlaps with the other party (acquiring person or
acquired entity as appropriate).

NAICS Codes Describing U.S. Operations With Estimates of Revenue

Acquiring Person

Identify all 6-digit NAICS industry codes that describe the U.S.
operations of the acquiring person, inclusive of all entities
included within the acquiring person at the time the filing is made.
Responses must be organized by NAICS code in ascending order.
For each code, provide the name of the operating entity(s) that
derive(s) revenue in that code and the estimated revenue range: less
than $10 million; $10 million or more but less than $100 million;
$100 million or more but less than $1 billion; or $1 billion or
more. Identify each 6-digit NAICS code in which both the acquiring
person and acquired entity(s) or assets derive revenue.
For products and services that derived revenue in the most
recent fiscal year in a non-manufacturing NAICS code, if the revenue
is estimated at less than one million dollars, that code may be
omitted so long as the code does not overlap with a code in which
the acquired entity(s) or assets derived revenue from U.S.
operations.
Acquiring persons should also list all NAICS codes for products
or services under development by the acquiring person that would
overlap with the products or services of the acquired entity(s) or
assets, inclusive of products or services that are known to be under
development by the acquired entity(s) or assets. NAICS codes that
reflect only these pipeline products or services should be
identified as ``pre-revenue.''
If more than one NAICS code describes the same operations of the
acquiring person, list each code, and provide an estimate of
revenue, as described above. End notes may be used to clarify the
selection of codes or potential overlaps.

Acquired Person

Identify all 6-digit NAICS industry codes that describe the U.S.
operations of the acquired entity(s) or assets, inclusive of all
entities and assets anticipated to be included within the acquired
entity(s) or assets at the time the transaction will be consummated.
Responses must be organized by NAICS code in ascending order.
For each code, provide the name of the operating entity(s) that
derive(s) revenue in that code and the estimated revenue range: less
than $10 million; $10 million or more but less than $100 million;
$100 million or more, but less than $1 billion; or $1 billion or
more. Identify each 6-digit NAICS code in which both the acquiring
person and acquired entity(s) or assets derive revenue.
For products and services that derived revenue in the most
recent fiscal year in a non-manufacturing NAICS code, if the revenue
is estimated at less than one million dollars, that code may be
omitted so long as the code does not overlap with a code in which
the acquiring person derived revenue from U.S. operations.
Acquired persons should also list all NAICS codes for products
or services under development by the acquired entity(s) or assets
and expected to have annual revenue greater than $1 million within
two years. NAICS codes that reflect only these pipeline products or
services should be identified as ``pre-revenue.''
If more than one NAICS code describes the same operations of the
acquired entity(s) or assets, list each code, and provide an
estimate of revenue, as described above. End notes may be used to
clarify the selection of codes or potential overlaps.

No Revenue

If there is no revenue to report, explain why.

Controlled-Entity Overlaps

If, to the knowledge or belief of the person filing
notification, the acquiring person, or any associate (see Sec.
801.1(d)(2)) of the acquiring person, derived any amount of dollar
revenues in the most recent year from operations:
1. In industries within any 6-digit NAICS industry code in which
any acquired entity 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 or
its associates not contributed to the joint venture.
If the acquiring person reports an associate overlap only, the
acquired person does not need to respond to this section.

NAICS Overlaps of Controlled Entities

Acquiring Person

List the name of each entity within the acquiring person or
associate of the acquiring person, that has U.S, operations in the
same code as an acquired entity or assets. For each such entity,
list the name(s) by which the entity does or has within the last 3
years done business, whether the listed entity is controlled by the
filing person or an associate of the filing person, the overlapping
NAICS code(s), NAICS description(s), and provide the appropriate
Geographic Market Information, based upon the NAICS code. Organize
responses by NAICS code.

Acquired Person

List the name of each entity within the acquired entity that has
U.S. operations in the same code as the acquiring person. For each
such entity, list the name(s) by which the entity does or has within
the last 3 years done business, the overlapping NAICS code(s), NAICS
description(s), and provide the appropriate Geographic Market
Information, based upon the NAICS code. Organize responses by NAICS
code.

Geographic Market Information

For each identified overlapping NAICS code, provide geographic
information, as described below. 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.
Except in the case of those NAICS industries in the sectors,
subsectors, and codes that require street-address level reporting,
the person filing notification may respond with the word
``national'' if business is conducted in all 50 states.

State-Level Reporting

Manufacturing Industries

For each 6-digit NAICS code within the industry sector,
subsector, or code listed below, list the states in which, to the
knowledge or belief of the person filing the notification, the
products in that 6-digit

[[Page 42216]]

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).

31**** through 33**** Manufacturing, except:
3115** Dairy Product Manufacturing
311611 Animal (except Poultry) Slaughtering
311613 Rendering and Meat Byproduct Processing
311615 Poultry Processing
31181* Bread and Bakery Product Manufacturing
321*** Wood Product Manufacturing
32221* Paperboard Container Manufacturing
324*** Petroleum and Coal Products Manufacturing
3251** Basic Chemical Manufacturing
325521 Plastics Materials and Resin Manufacturing
3271** Clay Product and Refractory Manufacturing
3272** Glass and Glass Product Manufacturing
3273** Cement and Concrete Product Manufacturing

Wholesale Trade

For each 6-digit NAICS code within the industry sector,
subsector, or code listed below, list the states or, if desired,
portions thereof in which the customers of the person filing
notification are located.

42**** Wholesale Trade, except:
42331* Lumber, Plywood, Millwork, and Wood Panel Merchant
Wholesalers
42333* Roofing, Siding, and Insulation Material Merchant
Wholesalers
42344* Other Commercial Equipment Merchant Wholesalers
42345* Medical, Dental, and Hospital Equipment and Supplies
Merchant Wholesalers
42346* Ophthalmic Goods Merchant Wholesalers
42349* Other Professional Equipment and Supplies Merchant
Wholesalers
4239** Miscellaneous Durable Goods Merchant Wholesalers
4241** Paper and Paper Product Merchant Wholesalers
4242** Drug and Druggists' Sundries Merchant Wholesalers
42441* General Line Grocery Merchant Wholesalers
42442* Packaged Frozen Food Merchant Wholesalers
42451* Grain and Field Bean Merchant Wholesalers
42452* Livestock Merchant Wholesalers
4247** Petroleum and Petroleum Products Merchant Wholesalers
4248** Beer, Wine, and Distilled Alcoholic Beverage Merchant
Wholesalers
42491* Farm Supplies Merchant Wholesalers
42495* Paint, Varnish, and Supplies Merchant Wholesalers

Insurance Carriers

For the 6-digit NAICS code within the industry subsector listed
below, list the state(s) in which the person filing notification is
licensed to write insurance.

5241** Insurance Carriers

Other NAICS Sectors

For each 6-digit NAICS code within the industry sector,
subsector, or code listed below, list the states or, if desired,
portions thereof in which the person filing notification conducts
such operations.

11**** Agriculture, Forestry, Fishing, and Hunting, except:
113*** Forestry and Logging
21**** Mining, Quarrying, and Oil and Gas Extraction, except:
2123** Nonmetallic Mineral Mining and Quarrying
2213** Water, Sewage, and Other Systems
23**** Construction
44912* Home Furnishing Retailers
4492** Electronics and Appliance Retailers
48**** and 49**** Transportation and Warehousing, except:
493*** Warehousing and Storage
51**** Information, except:
512*** Motion Picture and Sound Recording Industries
5222** Nondepository Credit Intermediation
523*** Securities, Commodity Contracts, and Other Financial
Investments and Related Activities
5242** Agencies, Brokerages, and Other Insurance Related Activities
525*** Funds, Trusts, and Other Financial Vehicles
531*** Real Estate
533*** Lessors of Nonfinancial Intangible Assets (Except Copyrighted
Works)
54**** Professional, Scientific and Technical Services, except:
54138* Testing Laboratories and Services
54194* Veterinary Services
55**** Management of Companies and Enterprises
561*** Administrative and Support Services
61**** Educational Services
71**** Arts, Entertainment, and Recreation, except:
7132** Gambling Industries
71394* Fitness and Recreational Sports Centers
7212** RV (Recreational Vehicle) Parks and Recreational Camps
7213** Rooming and Boarding Houses, Dormitories, and Workers' Camps
8114** Personal and Household Goods Repair and Maintenance
813*** Religious, Grantmaking, Civic, Professional, and Similar
Organizations
814*** Private Households

Street-Level Reporting

For each 6-digit NAICS code within the industry sector,
subsector, or code listed below, provide the street address,
arranged by state, county and city or town, and latitude and
longitude (each in degrees up to at least five decimal places) of
each establishment from which dollar revenues were derived (either
directly or by a franchisee) in the most recent year by the person
filing notification.

113*** Forestry and Logging
2123** Nonmetallic Mineral Mining and Quarrying
22**** Utilities, except:
2213** Water, Sewage and Other Systems
3115** Dairy Product Manufacturing
311611 Animal (except Poultry) Slaughtering
311613 Rendering and Meat Byproduct Processing
311615 Poultry Processing
31181* Bread and Bakery Product Manufacturing
321*** Wood Product Manufacturing
32221* Paperboard Container Manufacturing
324*** Petroleum and Coal Products Manufacturing
3251** Basic Chemical Manufacturing
325521 Plastics Materials and Resin Manufacturing
3271** Clay Product and Refractory Manufacturing
3272** Glass and Glass Product Manufacturing
3273** Cement and Concrete Product Manufacturing
42331* Lumber, Plywood, Millwork, and Wood Panel Merchant
Wholesalers
42333* Roofing, Siding, and Insulation Material Merchant Wholesalers
42344* Other Commercial Equipment Merchant Wholesalers
42345* Medical, Dental, and Hospital Equipment and Supplies Merchant
Wholesalers
42346* Ophthalmic Goods Merchant Wholesalers
42349* Other Professional Equipment and Supplies Merchant
Wholesalers
4239** Miscellaneous Durable Goods Merchant Wholesalers
4241** Paper and Paper Product Merchant Wholesalers
4242** Drug and Druggists' Sundries Merchant Wholesalers
42441* General Line Grocery Merchant Wholesalers
42442* Packaged Frozen Food Merchant Wholesalers
42451* Grain and Field Bean Merchant Wholesalers
42452* Livestock Merchant Wholesalers
4247** Petroleum and Petroleum Products Merchant Wholesalers
4248** Beer, Wine, and Distilled Alcoholic Beverage Merchant
Wholesalers
42491* Farm Supplies Merchant Wholesalers
42495* Paint, Varnish, and Supplies Merchant Wholesalers
44**** and 45**** Retail Trade, except:
44912* Home Furnishings Retailers
4492** Electronics and Appliance Retailers
493*** Warehousing and Storage
512*** Motion Picture and Sound Recording Industries
521*** Monetary Authorities--Central Bank
5221** Depository Credit Intermediation
5223** Activities Related to Credit Intermediation
532*** Rental and Leasing Services
54138* Testing Laboratories and Services
54194* Veterinary Services
562*** Waste Management and Remediation Services
62**** Health Care and Social Assistance

[[Page 42217]]

7132** Gambling Industries
71394* Fitness and Recreational Sports Centers
72**** Accommodation and Food Services, except:
7212** RV (Recreational Vehicle) Parks and Recreational Camps
7213** Rooming and Boarding Houses, Dormitories, and Workers'
Camps
811*** Repair and Maintenance, except
8114** Personal and Household Goods Repair and Maintenance
812*** Personal and Laundry Services

Minority-Held Entity Overlaps

This section requires the disclosure of holdings of 5% or more
but less than 50% of certain entities that derive dollar revenues in
any 6-digit NAICS code reported by the other person filing
notification. Holdings in those entities that have total assets of
less than $10 million may be omitted.
If NAICS codes are unavailable, holdings in entities that have
operations in the same industry, based on the knowledge or belief of
the filing person, should be listed. Holdings in those entities that
have total assets of less than $10 million may be omitted.

Minority Holdings of Acquiring Person and Its Associates

If the acquiring person holds 5% or more but less than 50% of
the voting securities of any issuer or non-corporate interests of
any unincorporated entity that derived dollar revenues in the most
recent year from operations in industries within any 6-digit NAICS
code(s) reported by the acquired entity(s) or assets, provide such
6-digit NAICS code(s), the entity within the acquiring person that
holds the minority interests, the name and d/b/a names (if known) of
the minority held-entity, and percentage of voting securities or
non-corporate interests held.
Additionally, based on the knowledge or belief of the acquiring
person, for each associate (see Sec. 801.1(d)(2)) of the acquiring
person holding:
1. 5% or more but less than 50% of the voting securities or non-
corporate interests of an acquired entity; and/or
2. 5% or more but less than 50% of the voting securities of any
issuer or non-corporate interests of any unincorporated entity 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,

list the associate, the name and d/b/a names (if known) of the
minority-held entity, and percentage of voting securities or non-
corporate interests held.
Responses should be organized alphabetically by the name of the
entity in which minority interests are held.
The acquiring person may rely on its regularly prepared
financials that list its investments, and those of its associates
that list their investments, provided the financials are no more
than three months old.

Minority Holdings of the Acquired Entity

If an acquired entity holds 5% or more but less than 50% of the
voting securities of any issuer or non-corporate interests of any
unincorporated entity that derived dollar revenues in the most
recent year from operations in industries within any 6-digit NAICS
industry code(s) reported by the acquiring person, provide such 6-
digit NAICS code(s), the entity within the acquired entity that
holds the minority interests, the name and d/b/a names (if known) of
the minority-held entity, and percentage of voting securities or
non-corporate interests held.
Responses should be organized alphabetically by the name of the
entity in which minority interests are held.

Prior Acquisitions

This item should be completed for the acquiring person and the
acquired entity, and pertains only to prior acquisitions of U.S.
entities or assets and foreign entities or assets with sales in or
into the U.S. that (i) derived revenue in an identified 6-digit
NAICS industry code overlap or (ii) provided or produced a
competitive overlap product or service as described in the
Horizontal Overlap Narrative.
Identify all such acquisitions of entities or assets made within
the ten years prior to filing in which (i) 50% or more of the voting
securities of an issuer, (ii) 50% or more of non-corporate interests
of an unincorporated entity, or (iii) all or substantially all the
assets of an operating unit were acquired. Additionally, identify
all such acquisitions of assets that did not constitute all or
substantially all of an operating unit but were valued at or above
the statutory size-of-transaction test at the time of their
acquisition.
For each such acquisition, supply:
1. the 6-digit NAICS code(s) (by number and description)
identified above in which the acquired entity derived dollar
revenues, or the competitive overlap product(s) or service(s)
provided;
2. the name of the entity from which the voting securities, non-
corporate interests, or assets were acquired;
3. the headquarters address of that entity prior to the
acquisition;
4. whether voting securities, non-corporate interests, or assets
were acquired;
5. the consummation date of the acquisition; and
6. whether all or substantially all of the acquired voting
securities, non-corporate interests, or assets are still held at the
time of filing.

Additional Information

Subsidies From Foreign Entities or Governments of Concern

To the knowledge or belief of the filing person, within the two
years prior to filing, has the acquiring or acquired person (as
appropriate) received any subsidy (or a commitment to provide a
subsidy in the future) from any foreign entity or government of
concern (see Sec. 801.1(r))? If yes, list each entity or government
from which such subsidy was received and provide a brief description
of the subsidy.
For products the acquiring or acquired person (as appropriate)
produced in whole or in part in a country that is a covered nation
under 42 U.S.C. 18741(a)(5)(C), is any product subject to
countervailing duties imposed by any jurisdiction? If yes, list each
product, the countervailing duty imposed, and the jurisdiction that
imposed the duty.
To the knowledge or belief of the filing person, for products
the acquiring or acquired person (as appropriate) produced in whole
or in part in a country that is a covered nation under 42 U.S.C.
18741(a)(5)(C), is any product the subject of a current
investigation for countervailing duties in any jurisdiction? If yes,
list each product and the jurisdiction conducting the investigation.

Defense or Intelligence Contracts

Identify pending or active procurement contracts with the U.S.
Department of Defense or any member of the U.S. intelligence
community, as defined by 10 U.S.C. 101(a)(6) or 50 U.S.C. 3033(4)
valued at $10 million or more. The acquiring person should limit its
response to the acquiring entity and any entity within the acquiring
person that directly or indirectly controls the acquiring entity.
The acquired person should limit its response to the acquired
entity(s) and/or assets. Include (1) the name of the entity within
the filing person (2) the contracting office, as defined by 48 CFR
2.101(b); (3) the Contracting Office ID; (5) the Award ID; (5) and
the NAICS code(s), if any, listed in the System for Award Management
database.

Identification of Communications and Messaging Systems

List all communications systems or messaging applications on any
device used by the acquiring or acquired person (as appropriate)
that could be used to store or transmit information or documents
related to its business operations.

Other Jurisdictions

Transactions Subject to International Antitrust Notification

If, to the knowledge or belief of the filing person at the time
of filing, a non-U.S. antitrust or competition authority has been or
will be notified of the transaction, list the name of each such
authority. Identify, to the knowledge or belief of the filing person
at the time of filing, any jurisdiction where (1) a merger
notification has been filed, (2) a merger notification is being
prepared for filing, or (3) the parties have a good faith belief
that a merger notification will be made, along with the dates of the
filing or planned filing.

HSR Confidentiality Waiver for International Competition Authorities
(VOLUNTARY)

Indicate whether the filing person agrees to waive the
disclosure exemption contained in the Hart-Scott-Rodino Act, 15
U.S.C. 18a(h) to permit the DOJ and FTC to disclose to non-U.S.
competition authority/authorities listed by the filing person below
(1) the fact that a notification was filed, (2) the waiting period
associated with the notification, and (3) information and documents
filed with the notification. This waiver will not cover materials
provided in response to a request for additional information issued
pursuant to 15 U.S.C. 18a(e) and does not preclude the filing person
from providing a full waiver as provided for under FTC and DOJ
practice as

[[Page 42218]]

reflected in the Model Waiver. The filing person should list the
jurisdictions to which the waiver applies. This item is voluntary.

HSR Confidentiality Waiver for State Attorneys General (VOLUNTARY)

Indicate whether the filing person agrees to waive the
disclosure exemption contained in the Hart-Scott-Rodino Act, 15
U.S.C. 18a(h) to permit the DOJ and FTC to disclose to State
Attorneys General listed by the filing person below (1) the fact
that a notification was filed, (2) the waiting period associated
with the notification, and (3) information and documents filed with
the notification. This waiver will not cover materials provided in
response to a request for additional information issued pursuant to
15 U.S.C. 18a(e) and does not preclude the filing person from
providing a full waiver as provided for under FTC and DOJ practice
as reflected in the Model Waiver. The filing person should list the
jurisdictions to which the waiver applies. This item is voluntary.

Certification

See Sec. 803.6 for requirements.
The certification must be notarized or use the language found in
28 U.S.C. 1746 relating to unsworn declarations under penalty of
perjury.

Penalties for False Statements

Federal law provides criminal penalties, including up to twenty
years imprisonment, for any person who knowingly alters, destroys,
mutilates, conceals, covers up, falsifies, or makes a false entry in
any record, document, or tangible object with the intent to impede,
obstruct, or influence an ongoing or anticipated federal
investigation (see, e.g., Section 1519 of Title 18, United States
Code.). It is also a criminal offense to knowingly make a false
statement in a federal investigation, obstruct a federal
investigation, or conspire to obstruct justice or obstruct or impede
the lawful functioning of the government (see, e.g., Sections 371,
1001, and 1505 of Title 18, United States Code).

Certification

This NOTIFICATION AND REPORT FORM, together with any and all
appendices and attachments thereto, was prepared and assembled under
my supervision in accordance with instructions issued by the
Commission. Subject to the recognition that, where so indicated,
reasonable estimates have been made because books and records do not
provide the required data, the information is, to the best of my
knowledge, true, correct, and complete in accordance with the
statute and rules.
I acknowledge that the Commission or the Assistant Attorney
General of the Antitrust Division of the Department of Justice may,
prior to the expiration of the initial waiting period pursuant to 15
U.S.C. 18a, require the submission of additional information or
documentary material relevant to the proposed transaction. I have
taken the necessary steps to prevent the destruction of documents
and information related to the proposed transaction before the
expiration of any waiting period.

Affidavits

Affidavit(s) required by Sec. 803.5 must be notarized or use
the language found in 28 U.S.C. 1746 relating to unsworn
declarations under penalty of perjury. If an entity is filing on
behalf of the acquiring or acquired person, the affidavit must still
attest to the good faith of the UPE.
In non-Sec. 801.30 transactions, the affidavit(s) (submitted by
both persons filing) must attest that a definitive agreement to
merge or acquire has been executed, or if a definitive agreement has
not been executed, that a term sheet or draft agreement that
describes with specificity the scope of the transaction that will be
consummated has been submitted. The affidavit(s) must further attest
to the good faith intention of the person filing notification to
complete the transaction. (See Sec. 803.5(b)).
In Sec. 801.30 transactions, the affidavit (submitted only by
the acquiring person) must attest:
1. That the issuer whose voting securities or the unincorporated
entity whose non-corporate interests are to be acquired has received
notice, as described below, from the acquiring person;
2. In the case of a tender offer, that the intention to make the
tender offer has been publicly announced; and
3. The good faith intention of the person filing notification to
complete the transaction.
Acquiring persons in Sec. 801.30 transactions are also required
to submit a copy of the notice received by the acquired person
pursuant to Sec. 803.5(a)(3) along with the filing. This notice
must include:
1. The identity of the acquiring person and the fact that the
acquiring person intends to acquire voting securities of the issuer
or non-corporate interests of the unincorporated entity;
2. The specific notification threshold that the acquiring person
intends to meet or exceed in an acquisition of voting securities;
3. The fact that the acquisition may be subject to the Act, and
that the acquiring person will file notification under the Act;
4. The anticipated date of receipt of such notification by the
Agencies; and
5. The fact that the person within which the issuer or
unincorporated entity is included may be required to file
notification under the Act. (See Sec. 803.5(a)).

Privacy Act Statement

Section 18a(a) of Title 15 of the U.S. Code authorizes the
collection of this information. Our authority to collect Social
Security numbers is 31 U.S.C. 7701. The primary use of information
submitted on this Form is to determine whether the reported merger
or acquisition may violate the antitrust laws. Taxpayer information
is collected, used, and may be shared with other agencies and
contractors for payment processing, debt collection and reporting
purposes. Furnishing the information on the Form is voluntary.
Consummation of an acquisition required to be reported by the
statute cited above without having provided this information may,
however, render a person liable to civil penalties up to the amount
listed in 16 CFR 1.98(a) per day.
We also may be unable to process the Form unless you provide all
of the requested information.

Disclosure Notice

Public reporting burden for this report is estimated to vary
from 20 to 382 hours per response, with an average of 144 hours per
response, including time for reviewing instructions, searching
existing data sources, gathering, and maintaining the data needed,
and completing and reviewing the collection of information. Send
comments regarding the burden estimate or any other aspect of this
report, including suggestions for reducing this burden to:

Premerger Notification Office, Federal Trade Commission, Room #5301,
400 7th Street SW, Washington, DC 20024

and

Office of Information and Regulatory Affairs, Office of Management
and Budget, Washington, DC 20503

Under the Paperwork Reduction Act, as amended, an agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid OMB
control number. The operative OMB control number, 3084-0005, appears
within the Notification and Report Form and these Instructions.

By the direction of the Commission.
April J. Tabor,
Secretary.
[FR Doc. 2023-13511 Filed 6-28-23; 8:45 am]
BILLING CODE 6750-01-P

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