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FEDERAL TRADE COMMISSION

16 CFR Parts 801, 802 and 803

RIN 3084-AB46

Premerger Notification; Reporting and Waiting Period Requirements

AGENCY: Federal Trade Commission.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Federal Trade Commission (“FTC” or “Commission”) is proposing

amendments to the premerger notification rules (“the Rules”) that implement the HartScott-Rodino Antitrust Improvements Act (“the Act” or “HSR”) to change the definition

of “person” and create a new exemption. The Commission also proposes explanatory and

ministerial changes to the Rules, as well as necessary amendments to the HSR Form and

Instructions to effect the proposed changes.

DATES: Comments must be received on or before [INSERT DATE 60 DAYS AFTER

DATE OF PUBLICATION IN THE FEDERAL REGISTER].

ADDRESSES: Interested parties may file a comment online or on paper by following the

instructions in the Invitation to Comment part of the SUPPLEMENTARY

INFORMATION section below. Write “16 CFR Parts 801-803: Hart-Scott-Rodino

Coverage, Exemption, and Transmittal Rules; Project No. P110014” on your comment.

File your comment online at https://www.regulations.gov by following the instructions on

the web-based form. If you prefer to file your comment on paper, mail your comment to

the following address: Federal Trade Commission, Office of the Secretary, 600

Pennsylvania Avenue NW, Suite CC-5610 (Annex J), Washington, DC 20580, or deliver

your comment to the following address: Federal Trade Commission, Office of the

Secretary, Constitution Center, 400 7th Street, SW, 5th Floor, Suite 5610 (Annex J),

Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Robert Jones (202-326-3100),

Assistant Director, Premerger Notification Office, Bureau of Competition, Federal Trade

Commission, 400 7th Street SW, Room CC-5301, Washington, DC 20024.

SUPPLEMENTARY INFORMATION:

Invitation to Comment

You can file a comment online or on paper. For the Commission to consider

your comment, we must receive it on or before [INSERT DATE 60 DAYS AFTER

DATE OF PUBLICATION IN THE FEDERAL REGISTER]. Write “16 CFR Parts

801-803: Hart-Scott-Rodino Coverage, Exemption, and Transmittal Rules; Project No.

P110014” on your comment. Your comment – including your name and your state –

will be placed on the public record of this proceeding, including the

https://www.regulations.gov website.

Because of the public health emergency in response to the COVID-19 outbreak

and the agency’s heightened security screening, postal mail addressed to the Commission

will be subject to delay. We strongly encourage you to submit your comment online

through the https://www.regulations.gov website. To ensure the Commission considers

your online comment, please follow the instructions on the web-based form.

If you file your comment on paper, write “16 CFR Parts 801-803: Hart-ScottRodino Coverage, Exemption, and Transmittal Rules; Project No. P110014” on your

comment and on the envelope, and mail your comment to the following address: Federal

Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC5610 (Annex J), Washington, DC 20580, or deliver your comment to the following

address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th

Street SW, 5th Floor, Suite 5610 (Annex J), Washington, DC 20024. If possible, please

submit your paper comment to the Commission by courier or overnight service.

Because your comment will be placed on the publicly accessible website,

https://www.regulations.gov, you are solely responsible for making sure your comment

does not include any sensitive or confidential information. In particular, your comment

should not include sensitive personal information, such as your or anyone else’s Social

Security number; date of birth; driver’s license number or other state identification

number, or foreign country equivalent; passport number; financial account number; or

credit or debit card number. You are also solely responsible for making sure that your

comment does not include any sensitive health information, such as medical records or

other individually identifiable health information. In addition, your comment should not

include any “trade secret or any commercial or financial information which . . . is

privileged or confidential,” – as provided by Section 6(f) of the FTC Act, 15 U.S.C.

46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2) – including in particular

competitively sensitive information such as costs, sales statistics, inventories, formulas,

patterns, devices, manufacturing processes, or customer names.

Comments containing material for which confidential treatment is requested

must be filed in paper form, must be clearly labeled “Confidential,” and must comply

with FTC Rule 4.9(c). In particular, the written request for confidential treatment that

accompanies the comment must include the factual and legal basis for the request, and

must identify the specific portions of the comment to be withheld from the public

record. See FTC Rule 4.9(c). Your comment will be kept confidential only if the FTC

General Counsel grants your request in accordance with the law and the public interest.

Once your comment has been posted publicly at www.regulations.gov – as legally

required by FTC Rule 4.9(b) – we cannot redact or remove your comment, unless you

submit a confidentiality request that meets the requirements for such treatment under

FTC Rule 4.9(c), and the General Counsel grants that request.

Visit the FTC website to read this NPRM and the news release describing it. The

FTC Act and other laws that the Commission administers permit the collection of public

comments to consider and use in this proceeding as appropriate. The Commission will

consider all timely and responsive public comments it receives on or before [INSERT

DATE 60 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER].

For information on the Commission’s privacy policy, including routine uses permitted by

the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Overview

The Act and Rules require the parties to certain mergers and acquisitions to file

notifications (“HSR Filing”) with the Federal Trade Commission and with the Assistant

Attorney General in charge of the Antitrust Division of the Department of Justice (“the

Assistant Attorney General”) (collectively, “the Agencies”), and to wait a specified

period of time before consummating such transactions. The reporting and waiting period

requirements are intended to enable the Agencies to determine whether a proposed

merger or acquisition may violate the antitrust laws if consummated and, when

appropriate, to seek an injunction in federal court in order to enjoin anticompetitive

mergers prior to consummation.

In this notice of proposed rulemaking (“NPRM”), the Commission proposes

amendments to the § 801.1(a)(1) definition of “person” to require certain acquiring

persons to disclose additional information about their associates in Items 4 through 8 of

the HSR Form and to aggregate acquisitions in the same issuer across their associates

when making an HSR filing, as well as a ministerial change to § 801.1(d)(2). The

Commission also proposes a new exemption, § 802.15, which would exempt the

acquisition of 10% or less of an issuer’s voting securities when the acquiring person does

not already have a competitively significant relationship with the issuer. Finally, the

Commission proposes explanatory and ministerial changes to the Rules, as well as

necessary amendments to the HSR Form and Instructions to effect the proposed changes.

Section 7A(d)(1) of the Clayton Act, 15 U.S.C. 18a(d)(1), directs the

Commission, with the concurrence of the Assistant Attorney General, in accordance with

the Administrative Procedure Act, 5 U.S.C. 553, to require that premerger notification be

in such form and contain such information and documentary material as may be

necessary and appropriate to determine whether the proposed transaction may, if

consummated, violate the antitrust laws. In addition, Section 7A(d)(2) of the Clayton Act,

15 U.S.C. 18a(d)(2), grants the Commission, with the concurrence of the Assistant

Attorney General, in accordance with 5 U.S.C. 553, the authority to define the terms used

in the Act, exempt classes of transactions that are not likely to violate the antitrust laws,

and prescribe such other rules as may be necessary and appropriate to carry out the

purposes of Section 7A.

The Commission notes that comments it receives in response to this NPRM may

also inform the Advanced Notice of Proposed Rulemaking (ANPRM) published in the

Federal Register at the same time as this NPRM.

Part 801—Coverage Rules

§ 801.1 Definitions.

§ 801.2 Acquiring and acquired persons.

§ 801.12 Calculating percentage of voting securities.

Part 802—Exemption Rules

§ 802.15 De minimis acquisitions of voting securities.

Part 803—Transmittal Rules

Appendix A to Part 803—Notification and Report Form for Certain Mergers and

Acquisitions

Appendix B to Part 803—Instructions to the Notification and Report Form for Certain

Mergers and Acquisitions

Background

The HSR premerger notification program enables the Agencies to determine

which acquisitions are likely to be anticompetitive and to challenge them before they are

consummated when remedial action is most effective. Under the HSR program, the

Agencies typically evaluate thousands of transactions every year. Given the large number

of HSR filings submitted each year, the Agencies must use their resources effectively to

focus on transactions that may harm competition. The Agencies have a strong interest in

receiving HSR filings that contain enough information to conduct a preliminary

assessment of whether the proposed transaction presents competition concerns, while at

the same time not receiving filings related to acquisitions that are very unlikely to raise

competition concerns. In the Agencies’ experience, two particular categories of filings

make it difficult for the Agencies to focus their resources effectively:

•

Filings for acquisitions by certain investment entities. First, due to changes in

investor structure and behavior since the HSR Act and Rules went into effect,

filings from certain investment entities do not capture the complete

competitive impact of a transaction. When certain investment entities file as

acquiring persons, the Rules and Form do not currently require the disclosure

of substantive information concerning both the complete structure of the

acquiring person and the complete economic stake being acquired in an issuer.

•

Filings for acquisitions of 10% or less of an issuer. At the same time, the

Agencies regularly receive filings involving proposed acquisitions, not solely

for the purpose of investment, that would result in the acquiring person

holding 10% or less of an issuer. In the Agencies’ experience, these filings

almost never present competition concerns. 1

To help the Agencies use their resources more effectively, the Commission

proposes to address both issues in this proposed rulemaking. To obtain more complete

filings from investment entities filing as acquiring persons, the Commission proposes

amending the definition of person in § 801.1(a)(1) to include “associates,” a term that is

already defined in the Rules. This proposed change would require certain acquiring

persons to disclose additional information about their associates in Items 4 through 8 of

the HSR Form and to aggregate acquisitions in the same issuer across their associates

From FY 2001 to FY 2017, the Agencies received a total of 26,856 HSR filings, including 1,804 for

acquisitions of 10% of less of outstanding stock. During that same period, the Agencies did not challenge

any acquisitions involving a stake of 10% or less. Occasionally, the Agencies will require merging parties

to divest or make passive small investments in competitors that also carry rights to influence business

decisions at the firm. See U.S. v. AT&T Inc. and Dobson Communications Corp., 1:07-cv-01952 (D.D.C.

2007) (parties divested small stakes that carried significant rights to control core business decisions, obtain

critical confidential competitive information, and share in profits at a rate significantly greater than the

equity ownership share).

when making an HSR filing. In addition, the Commission proposes a new exemption,

§ 802.15, which would exempt the acquisition of 10% or less of an issuer’s voting

securities when the acquiring person does not already have a competitively significant

relationship with the issuer. Finally, the Commission proposes explanatory and

ministerial changes to the Rules, as well as necessary amendments to the HSR Form and

Instructions to effect the proposed changes.

Proposed Changes to Section 801.1 Definitions

Proposed Change to the Section 801.1(a)(1) Definition of “Person”

Since the promulgation of the Rules in 1978, the investment landscape has

undergone vast changes, including the proliferation of investment entities such as

investment funds and master limited partnerships (“MLPs”). Both investment funds and

MLPs facilitate investment through structures utilizing limited partnerships and limited

liability companies. The Rules define limited partnerships and limited liability companies

as “non-corporate entities,” and non-corporate entities are their own Ultimate Parent

Entity (“UPE”) under the Rules when no one holds the right to 50% or more of the profits

or assets upon dissolution. Thus, although each non-corporate entity exists within an

overall structure of a “family” of funds or MLP, each is typically its own UPE under the

HSR Rules. For instance, Parent Fund creates Fund Vehicle 1, Fund Vehicle 2, and Fund

Vehicle 3, each a non-corporate entity. No one controls these non-corporate entities, so

each fund vehicle is its own UPE even though they exist within the same family of funds.

The same is true when no one controls non-corporate entities within a MLP structure;

although they exist within the same MLP, each non-corporate entity is its own UPE.

Treating these non-corporate entities as separate entities under HSR is often at

odds with the realities of how fund families and MLPs are managed. In the fund context,

a fund vehicle typically has an entity that manages how that fund vehicle will invest, 2 and

this investment manager very often manages the investments of other fund vehicles

within the same family of funds. As a result, Fund Vehicle 1, Fund Vehicle 2, and Fund

Vehicle 3 might well have the same Investment Manager 3 and that Investment Manager

can use Fund Vehicle 1, Fund Vehicle 2, and Fund Vehicle 3 to make separate

investments in different issuers or the same issuer. MLPs, for their part, often have

similar structures involving non-corporate entities that are their own UPEs but under

common management. 4

When non-corporate entities are their own UPEs but under common management

as described above, this creates two scenarios in which it is difficult for the Agencies to

assess the competitive impact of a transaction based on the HSR filing. The first involves

filings from non-corporate entity UPEs as acquiring persons that do not contain a

complete enough picture of the investment fund or MLP. The Commission first addressed

this category of filings in 2011 when it created the “associates” concept. 5 Before that

time, filings from non-corporate entity UPEs within families of funds and MLPs

contained limited substantive information because non-corporate entity UPEs were not

required to disclose information on any other entity within the investment structure. For

instance, if Fund Vehicle 1 made a filing for a 100% interest in an Issuer, and Fund

As defined in 16 CFR 801.1(d)(2).

As defined in 16 CFR 801.1(d)(2); the management of MLPs does not have to involve investment

management.

76 FR 42472 (July 19, 2011).

Vehicle 2, under common investment management with Fund Vehicle 1, held 100% of a

competitor of the Issuer, Fund Vehicle 2’s holding was not disclosed in the filing because

Fund Vehicle 1 was its own UPE. A filing such as the one from Fund Vehicle 1 was of

limited use to the Agencies because it did not reveal relevant holdings within the same

family of funds. Filings received from newly-formed fund vehicles, which did not yet

own anything, were of even less use because these filings were largely blank. Filings

from non-corporate entities that were their own UPEs within MLP structures raised the

same issues.

In light of these issues, the Commission determined that updates to the HSR Form

would allow the Agencies to “receive the information they need to get a complete picture

of potential antitrust ramifications of an acquisition.” 6 Accordingly in 2010, 7 the

Commission introduced and proposed to define the term “associates” to capture

information in the HSR Form from certain entities that are under common management

with the acquiring person. The 2011 final rule 8 required certain acquiring persons to

disclose in their HSR filings what their associates hold in entities that generate revenue in

the same NAICS codes as the target. With this change, any fund vehicle filing as an

acquiring person must look to its investment manager to determine what other fund

vehicles that investment manager manages. For instance, Fund Vehicle 1’s investment

manager also manages the investments of Fund Vehicle 2, making Fund Vehicle 1 and

Fund Vehicle 2 associates. Fund Vehicle 1 makes an HSR filing for a 100% interest in

Issuer Q. Fund Vehicle 2 controls Entity Y and has a minority position in Entity Z, both

Id.

75 FR 57111 (Sept. 17, 2010).

76 FR 42471 (July 19, 2011).

of which report in the same NAICS code as Issuer Q. Fund Vehicle 1 must therefore

disclose in its HSR filing Fund Vehicle 2’s controlling interest in Y and minority interest

in Z. Non-corporate entity UPEs within MLP structures must disclose the same

information about their associates when filing as acquiring persons.

Although this additional information has been helpful in assessing the competitive

impact of a transaction, it is too limited to provide the Agencies with a sufficient

overview of investment funds and MLPs as acquiring persons. For instance, the

information currently required from associates is limited to controlling or minority

interests in entities that report in the same NAICS codes as the entity being acquired. In

the Agencies’ experience, competitors sometimes use different NAICS codes to describe

the same line of business, particularly in the case of companies engaged in technologybased businesses. In addition, associates currently are not required to provide any

substantive information, such as financials or revenues, about the entities they control,

making it difficult for the Agencies to determine whether an entity within an associate

might create a competitive concern in a given transaction.

It is also difficult for the Agencies to understand the potential competitive impact

of a transaction when a filing does not represent the total economic stake being acquired

in the same issuer. For instance, Investment Manager uses Fund Vehicle 1 to acquire 6%

of Issuer D and Fund Vehicles 2 and 3 to each acquire 3% of Issuer D. Only Fund

Vehicle 1’s acquisition of 6% of Issuer D’s voting securities is large enough to cross the

$50 million (as adjusted) size of transaction threshold. Fund Vehicle 1 makes an HSR

filing, but because it is its own UPE, it need not disclose the interests of Fund Vehicles 2

and 3 in Issuer D. As a result, the filing does not reflect the 12% aggregate interest in

Issuer D of the fund vehicles under common investment management. Another common

example arises when Investment Manager uses Fund Vehicle 1, Fund Vehicle 2, and

Fund Vehicle 3 to each acquire 2% in Issuer D. If none of these acquisitions of 2% is

large enough to cross the $50 million (as adjusted) size of transaction threshold, the

Agencies receive no HSR filing, even though the fund vehicles hold an aggregate 6% of

Issuer D. Although more rare, both of these scenarios can also play out in the MLP

context when non-corporate entity UPEs within the MLP structure make acquisitions in

the same issuer.

To help the Agencies accurately assess the potential competitive impact of a

pending transaction in these scenarios, the Commission proposes to amend the

§ 801.1(a)(1) definition of “person” to include associates, such that it would read as

follows: “Except as provided in paragraphs (a) and (b) of § 801.12, the term person

means (a) an ultimate parent entity and all entities which it controls directly or indirectly;

and (b) all associates of the ultimate parent entity.”

This proposed change would require a non-corporate entity UPE filing as an

acquiring person to disclose additional information from its associates in Items 4 through

8 of the Form 9 and to aggregate acquisitions in the same issuer across its associates.

Under the proposed rule, a non-corporate entity UPE filing as an acquiring person

would be part of a new, larger Acquiring Person. This Acquiring Person would include

non-corporate entity UPE, its associates (which would also be UPEs) and the entity that

manages non-corporate entity UPE and its associates (the “managing entity”). 10 The

For acquired persons, Items 5 through 7 of the Form will still be limited to the assets, voting securities, or

non-corporate interests being sold.

The same would be true for an Acquired Person under the proposed rule.

managing entity would make the filing on behalf of the Acquiring Person, identifying

itself in proposed Item 1(a) of the Form, and identify the relevant UPE making the

acquisition in proposed Item 1(c) of the Form. 11 If two UPEs within the same Acquiring

Person are making reportable acquisitions in the same issuer, the managing entity can

choose which one will be the relevant UPE for purposes of the form. The relevant UPE

can also file on behalf of the managing entity, as noted in proposed Item 1(c) of the

Form. For example:

Hypothetical #1

•

Fund Vehicles 1, 2 and 3, each non-corporate entities and their own UPEs, exist

within the same family of funds. Fund Vehicles 1, 2 and 3 have the same

Investment Manager, and are thus associates. Fund Vehicle 1 will acquire 6% of

Issuer D valued at $100 million, Fund Vehicle 2 will acquire 6% of Issuer D

valued at $100 million and Fund Vehicle 3 will acquire 3% of Issuer D valued at

$50 million. The Acquiring Person includes Fund Vehicles 1, 2 and 3, which are

all UPEs, and Investment Manager.

o Fund Vehicle 1 does not control any operating companies.

o Fund Vehicle 2 controls Portfolio Company A and Portfolio Company B.

Portfolio Company B was acquired two years ago and reports in the same

NAICS code as Issuer D.

o Fund Vehicle 3 controls Portfolio Company C, which does not report in

the same NAICS code as Issuer D. Fund Vehicle 3 also holds a minority

position in several entities, M, N, and O, which report in the same NAICS

code as Issuer D.

•

Investment Manager files on behalf of the Acquiring Person for the 15%

aggregate interest in Issuer D valued at $250 million by placing its name in Item

1(a) of the Form. Although Investment Manager could designate Fund Vehicle 1

or 2 as the UPE making the acquisition, Investment Manager indicates in Item

1(c) of the filing that Fund Vehicle 1 is making the acquisition. Fund Vehicle 1

can also indicate in Item 1(c) of the Form that it is filing on Investment Manager’s

behalf. The filing must include the following:

o Item 4(a): this item requires the Central Index Key (CIK) number of all

entities within the Acquiring Person, which now includes Investment

In the case of an Acquired Person, the managing entity would make the filing on behalf of the Acquired

Person, identifying itself in proposed Item 1(a) of the Form, and identifying the selling UPE in proposed

Item 1(c) of the Form. The selling UPE could also indicate in Item 1(c) of the Form that it is filing on the

managing entity’s behalf.

Manager, Fund Vehicle 1, Fund Vehicle 2, Fund Vehicle 3, Portfolio

Company A, Portfolio Company B, and Portfolio Company C.

Item 4(b): this item requires financials from the Acquiring Person, which

now includes Investment Manager, Fund Vehicle 1, Fund Vehicle 2, Fund

Vehicle 3, Portfolio Company A, Portfolio Company B, and Portfolio

Company C.

Item 4(c): this item requires responsive documents from the Acquiring

Person, which now includes Investment Manager, Fund Vehicle 1, Fund

Vehicle 2, Fund Vehicle 3, Portfolio Company A, Portfolio Company B,

and Portfolio Company C.

Item 4(d): this item requires responsive documents from the Acquiring

Person, which now includes Investment Manager, Fund Vehicle 1, Fund

Vehicle 2, Fund Vehicle 3, Portfolio Company A, Portfolio Company B,

and Portfolio Company C.

Item 5: this item requires revenues by NAICS and NAPCS codes for the

Acquiring Person, which now includes Investment Manager, Fund Vehicle

1, Fund Vehicle 2, Fund Vehicle 3, Portfolio Company A, Portfolio

Company B, and Portfolio Company C.

Item 6: Items 6(a) and 6(b) require information from the Acquiring

Person, which now includes Investment Manager, Fund Vehicle 1, Fund

Vehicle 2, Fund Vehicle 3, Portfolio Company A, Portfolio Company B,

and Portfolio Company C. Item 6(c) also requires information from the

Acquiring Person, which now includes Investment Manager, Fund Vehicle

1, Fund Vehicle 2, Fund Vehicle 3, Portfolio Company A, Portfolio

Company B, and Portfolio Company C. However, the information

required by Item 6(c) is still limited to minority holdings in entities that

report in the same NAICS code(s) as the target, here M, N and O.

Item 7: this item requires all responsive information from the Acquiring

Person, which now includes Investment Manager, Fund Vehicle 1, Fund

Vehicle 2, Fund Vehicle 3, Portfolio Company A, Portfolio Company B,

and Portfolio Company C. However, the information required by Item 7 is

still limited to entities that report in the same NAICS code(s) as the target,

here Portfolio Company B.

Item 8: this item requires information on prior acquisitions within the last

five years by the Acquiring Person, which now includes Investment

Manager, Fund Vehicle 1, Fund Vehicle 2, Fund Vehicle 3, Portfolio

Company A, Portfolio Company B, and Portfolio Company C. However,

the information required by Item 8 is still limited to entities that report in

the same NAICS code(s) as the target, here Portfolio Company B.

Hypothetical #2

•

MLP creates LP1, LP2, and LP3, each a non-corporate entity and its own UPE, to

separately hold the MLP’s investments. LP1, LP2 and LP3 have the same

Manager, and are thus associates. LP1 will acquire 100% of Issuer R valued at

$500 million. LP1 is the UPE but the Acquiring Person includes Manager, LP2

and LP3.

o LP1 controls two operating companies, OpCo 1 and OpCo 2, which report

in the same NAICS code as Issuer R. OpCo 1 was acquired 10 years ago

and OpCo 2 was acquired 3 years ago.

o LP2 controls OpCo 3, which reports in the same NAICS code as Issuer R

and was acquired 1 year ago, and OpCo 4, which does not report in the

same NAICS code as Issuer R.

o LP3 holds minority positions in OpCo 5 and OpCo 6, and each reports in

the same NAICS code as Issuer R.

•

Manager places its name in Item 1(a) of the Form to file on behalf of the

Acquiring Person for the 100% interest in Issuer R, and indicates in Item 1(c) of

the Form that LP1 is making the acquisition. LP1 can also indicate in Item 1(c)

that it is filing on Manager’s behalf. The filing must include the following:

o Item 4(a): this item requires the CIK number of all entities within the

Acquiring Person, which now includes Manager, LP1, LP2, LP3, OpCo 1,

OpCo 2, OpCo 3 and OpCo 4.

o Item 4(b): this item requires financials from the Acquiring Person, which

now includes Manager, LP1, LP2, LP3, OpCo 1, OpCo 2, OpCo 3 and

OpCo 4.

o Item 4(c): this item requires responsive documents from the Acquiring

Person, which now includes Manager, LP1, LP2, LP3, OpCo 1, OpCo 2,

OpCo 3 and OpCo 4.

o Item 4(d): this item requires responsive documents from the Acquiring

Person, which now includes Manager, LP1, LP2, LP3, OpCo 1, OpCo 2,

OpCo 3 and OpCo 4.

o Item 5: this item requires revenues by NAICS and NAPCS codes for the

Acquiring Person, which now includes Manager, LP1, LP2, LP3, OpCo 1,

OpCo 2, OpCo 3 and OpCo 4.

o Item 6: Items 6(a) and 6(b) require information from the Acquiring

Person, which now includes Manager, LP1, LP2, LP3, OpCo 1, OpCo 2,

OpCo 3 and OpCo 4. Item 6(c) also requires information from the

Acquiring Person, which now includes Manager, LP1, LP2, LP3, OpCo 1,

OpCo 2, OpCo 3 and OpCo 4. However, the information required by Item

6(c) is still limited to minority holdings in entities that report in the same

NAICS code(s) as the target, here OpCo 5 and OpCo 6.

o Item 7: this item requires all responsive information from the Acquiring

Person, which now includes Manager, LP1, LP2, LP3, OpCo 1, OpCo 2,

OpCo 3 and OpCo 4. However, the information required by Item 7 is still

limited to entities that report in the same NAICS code(s) as the target, here

OpCo 1, OpCo 2, and OpCo 3.

o Item 8: this item requires information on prior acquisitions within the last

five years by the Acquiring Person, which now includes Manager, LP1,

LP2, LP3, OpCo 1, OpCo 2, OpCo 3 and OpCo 4. However, the

information required by Item 8 is still limited to entities that report in the

same NAICS code(s) as the target, here OpCo 2 and OpCo 3, but OpCo 1

would not be listed because it was acquired more than five years ago

As these examples illustrate, the proposed change to § 801.1(a)(1) would require a

non-corporate entity UPE filing as an acquiring person to disclose more substantive

information about its associates. The additional information required by the Form would

be of tremendous value to the Agencies in assessing the potential competitive impact of a

pending transaction. Specifically, the proposed changes to Items 4, 5 and 6(a) would give

the Agencies a much better picture of what entities are under common management. The

proposed changes to Item 6(b) would provide a clearer picture of the ways in which the

entities within the acquiring person are connected, both within the investment structure

and beyond. Proposed Item 8 would provide more complete information on entities

within the acquiring person that have made acquisitions in the same industry as the

target. 12 All of this additional information would give the Agencies a much more

complete picture of who is making the filing in the case of investment funds and MLPs

filing as acquiring persons.

The additional information concerning acquisitions made by a non-corporate

entity UPE’s associates in the same issuer would also be of great value to the Agencies.

The proposed change to § 801.1(a)(1) would give the Agencies a much clearer

understanding of the total economic stake being acquired in a single issuer by entities

under common management. In some cases, looking across a non-corporate entity UPE’s

associates for acquisitions in the same issuer will result in a filing when one would not

have been required previously. For instance, in a scenario where associates Fund Vehicle

There would be no change to the information Items 6(c) and 7 require, because those items already

require information from associates. Each of these items would, however, be consolidated in the HSR

Instructions and Form to reflect the new definition of “person,” as explained below.

1, Fund Vehicle 2, and Fund Vehicle 3 will each acquire 2% of Issuer D for $40 million,

the Agencies currently do not receive a filing because none of the three $40 million

acquisitions is large enough to cross the $50 million (as adjusted) size of transaction

threshold. Under the proposed rule, the Agencies would now receive a filing for the

aggregate 6% interest valued at $120 million (assuming an exemption does not apply). 13

The Commission acknowledges that the proposed change to § 801.1(a)(1) would

result in more filings and an increased burden for certain acquiring persons. Noncorporate entity UPEs within families of funds and MLPs would have to provide

significant additional information on behalf of their associates under the proposed

change. These entities are, however, already accustomed to looking into the holdings of

those associates for filings where they are acquiring persons because some information

about associates’ holdings must be provided even under the current Rules. Given that

these entities already conduct such inquiries, the Commission believes requiring

additional information about entities that have already been identified should be

manageable. The breadth of certain items will still be limited, and the burden should

lessen after the first inquiry under the new rule. Nevertheless, the Commission

acknowledges that there might be other ways to achieve the same result. The Commission

invites comments on alternative ways the Agencies could obtain this necessary

information that would result in a more limited burden for investment funds and MLPs

filing as acquiring persons.

The proposed change to § 801.1(a)(1) would result in fewer filings and a reduced

burden for certain other acquiring persons. The proposed rule would streamline the

In addition, certain acquiring persons will also be much more likely to meet the size of person test when

including information about their associates as required by the proposed rule.

number of filings and fees from families of funds and MLPs. For instance, in the scenario

where associates Fund Vehicle 1, Fund Vehicle 2, and Fund Vehicle 3 will each acquire

7% of Issuer D for $200 million, each currently must make a filing and pay a separate

$125,000 filing fee (assuming no exemptions apply). Under the proposed rule, the

Agencies would receive one filing for 21% of Issuer D valued at $600 million and one

$125,000 filing fee. In addition, the proposed rule would eliminate the need for a filing in

the alternative. If the Investment Manager of associates Fund 1 and Fund 2 has not yet

determined which of those funds should be the vehicle for a particular investment, the

need to choose one for HSR filing purposes becomes moot under the proposed rule,

eliminating the potential need to make two filings with two separate filing fees.

The Commission also proposes an additional reduction in burden for acquired

persons. The HSR Form already limits what acquired persons must report in Items 5

through 7 to information on those assets, voting securities, and non-corporate interests

being acquired in the transaction at issue. The limitation for acquired persons in these

items is an acknowledgment that only what is being sold is relevant to the Agencies’

competition analysis. This is also the case for the financial information required in Items

4(a) and 4(b), and the Commission therefore proposes amending the HSR Instructions to

create a similar limit for acquired persons with respect to these items. Under the proposed

changes, an acquired person would provide relevant CIK numbers in response to Item

4(a) or financials in response to Item 4(b) only for (1) the assets, voting securities and

non-corporate interests being acquired in the transaction at issue, and (2) the UPE of

those assets, voting securities and non-corporate interests. This proposed amendment to

the HSR Instructions would significantly limit what non-corporate entity UPEs within

families of funds and MLPs would have to provide as acquired persons in response to

Items 4(a) and 4(b) and would not adversely affect the Agencies’ competitive analysis.

Finally, the Commission also acknowledges that certain non-corporate entity

UPEs within families of funds and MLPs and their associates may be structured as index

funds, exchange-traded funds (ETFs) or the like. Since these entities base their

investments on an index, it is possible that it is not appropriate to apply the proposed

change to § 801.1(a)(1) to these entities. The Commission invites comments on whether

index funds, ETFs or the like should be differentiated under the proposed rule.

Proposed Changes to Section 801.1(d)

Along with the proposed change to § 801.1(a)(1), the Commission also proposes

conforming changes to the definition of associate in § 801.1(d)(2). Under the current

definition, associate is only relevant to Items 6 and 7 of the HSR Form and to acquiring

persons. 14 But the proposed change to the § 801.1(a)(1) definition of person would apply

the associates concept more broadly in the HSR Form and to both acquiring and acquired

persons. The Commission therefore proposes to eliminate the phrase “For purposes of

Items 6 and 7” from § 801.1(d)(2), capitalize the subsequent “An” in § 801.1(d)(2) and

include “or acquired” in § 801.1 (d)(2), § 801.1 (d)(2)(A) and § 801.1 (d)(2)(B) to reflect

this proposed change.

II.

Proposed Section 802.15: De Minimis Acquisitions of Voting Securities

To use their resources as effectively as possible, the Agencies have a strong

interest not only in receiving HSR filings that contain sufficient information to assess

whether proposed transactions present real competition concerns, but also in eliminating

16 CFR 801.1(d)(2).

filings for categories of acquisitions that are unlikely to create competitive concerns. In

1996, the Commission acknowledged this concern in issuing final rules exempting certain

ordinary course transactions, as well as certain types of acquisitions of realty and carbonbased mineral reserves. 15 The Commission explained, “[t]hese rules are designed to

reduce the compliance burden on the business community by eliminating the application

of the notification and waiting requirements to a significant number of transactions that

are unlikely to violate the antitrust laws. They will also allow the enforcement agencies to

focus their resources more effectively on those transactions that present the potential for

competitive harm.” 16

Under the same rationale, the Commission has long contemplated the exemption

of acquisitions of 10% or less of the voting securities of an issuer. These kinds of

acquisitions can take many forms. The most typical is when an entity acquires 10% or

less of an issuer in order to provide that issuer with needed capital. Sometimes certain

shareholders of the target will acquire less than 10% of the buyer’s voting securities as

consideration for the transaction (typically called shareholder backside acquisitions).

Except for a few instances when a shareholder backside acquisition of 10% or less of an

issuer’s voting securities was linked to a larger transaction that presented competitive

concerns, 17 the Commission has not sought to block any acquisition of 10% or less of an

issuer’s voting securities.

Recognizing that some acquisitions of 10% or less are less likely than others to

raise competitive concerns, the Act already includes an exemption for acquisitions of

61 FR 13666 (Mar. 28, 1996).

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

10% or less of the voting securities of an issuer made “solely for the purpose of

investment.” 18 This exemption is codified in § 802.9, 19 and § 801.1(i)(1) defines the term

“solely for the purpose of investment” so that filing parties may determine whether

§ 802.9 is available. “Voting securities are held or acquired ‘solely for the purpose of

investment’ if the person holding or acquiring such voting securities has no intention of

participating in the formulation, determination, or direction of the basic business

decisions of the issuer.” 20

The Statement of Basis and Purpose for the original 1978 Rules (“1978 SBP”)

lays out specific factors that further illuminate the § 801.1(i)(1) definition. “[M]erely

voting the stock will not be considered evidence of an intent inconsistent with investment

purpose. However, certain types of conduct could be so viewed. These include but are not

limited to: (1) Nominating a candidate for the board of directors of the Issuer; (2)

proposing corporate action requiring shareholder approval; (3) soliciting proxies; (4)

having a controlling shareholder, director, officer or employee simultaneously serving as

an officer or director of the Issuer; (5) being a competitor of the Issuer; or (6) doing any

of the foregoing with respect to any entity directly or indirectly controlling the Issuer.

The facts and circumstances of each case will be evaluated whenever any of these actions

have been taken by a person claiming that voting securities are held or acquired solely for

the purpose of investment and thus not subject to the act’s requirements.” 21

The Agencies have interpreted these factors narrowly: when an acquiring person

takes any of the enumerated actions or is a competitor of the issuer, § 802.9 is generally

15 USC 18a(c)(9).

16 CFR 802.9.

16 CFR 801.1(i)(1).

43 FR 33450, 33465 (July 31, 1978).

not available. 22 On the other end of the spectrum, § 802.9 is clearly available if the

acquiring person plans to do nothing but hold the stock. Given the changes in investor

behavior since the HSR Act was passed, 23 however, a great deal of potential shareholder

engagement involves more than merely holding (and potentially selling) stock, but does

not encompass what the 1978 SBP discusses. 24

Notably, some argue that communications between investors and management

encourage corporate accountability to shareholders, 25 and that HSR filing requirements

(and attendant obligations to provide notice to the issuer prior to purchase of the shares)

might chill this beneficial interaction, 26 particularly since, depending on the degree of

Letter from Thomas J. Campbell, Dir., Bureau of Competition, FTC, to Michael Sohn, Esq., Arnold &

Porter (Aug. 19, 1982) (on file with the 6th report to Congress).

See Scott Hirst & Lucian Bebchuk, The Specter of the Giant Three, 99 B.U. L. Rev. 721, 725-26 (2019).

(In 1950, U.S. equities were predominantly held by households, with institutional investors accounting for

only about six percent; now institutional investors hold 65 percent of U.S. equities); and then S&P Dow

Jones Indices, Comment, Re: FTC Hearing #8: Competition and Consumer Protection: Holdings of NonControlling Ownership Interests in Competing Companies, (Jan. 15, 2019),

https://www.ftc.gov/system/files/documents/public_comments/2019/01/ftc-2018-0107-d-0015-163643.pdf,

at 1 (“Fifty years ago, there were no index funds; all institutional (and retail) asset management was

conducted on an active basis. Today, we estimate that between 20 to 25 percent of the U.S. stock market is

held by index funds.”).

See, e.g., Blackrock, Investment Stewardship, Engagement Priorities for 2020,

https://www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pdf (identifying

and describing board quality, environmental risk and opportunities, corporate strategy and capital

allocation, compensation that promotes long-termism, and human capital management as engagement

priorities); Vanguard Investment Stewardship 2019 Annual Report, https://about.vanguard.com/investmentstewardship/perspectives-and-commentary/2019_investment_stewardship_annual_report.pdf (discussing

board composition (including diversity of gender, race and ethnicity) oversight of strategy and risk

(including environmental risk), structure of executive compensation, and governance structures to support

and ensure accountability of a company’s board and management to shareholders); and then State Street

Global Advisors Stewardship Report 2018-2019, https://www.ssga.com/librarycontent/products/esg/annual-asset-stewardship-report-2018-19.pdf (describing engagement with boards and

management teams, including, among other issues, “fearless girl campaign” to increase diversity of boards,

“climate risk and reporting”, ethical issues in the pharmaceutical industry, including marketing of addictive

substances, genetic engineering, and the use of personal data).

See David Hirschmann, Comment, FTC Hearings on Competition and Consumer Protection in the 21st

Century, (Dec. 6, 2018),

https://www.ftc.gov/system/files/documents/public_events/1422929/ftc_hearings_session_8_transcript_126-18_0.pdf, at 102 (“Engagement allows management to communicate with their shareholder base as they

implement strategies to generate long-term growth” and is “important for healthy capital markets.”).

See Council of Institutional Investors and the Managed Fuds Association, Comment, Re: Competition

and Consumption Protection in the 21st Century Hearings, Project Number P181201 – Investment

Community Request for HSR Reform, (Aug. 13, 2018),

shareholder engagement, it can be quite difficult to determine whether filing parties can

rely on the § 802.9 exemption. For instance, a discussion between shareholders and

company executives may begin with the amount of compensation each executive

receives, but then evolve into how each executive’s compensation will be determined by

the company’s performance. This discussion on a seemingly innocuous topic may touch

on basic business decisions, precluding use of the § 802.9 exemption. In the Agencies’

experience, even the simplest of topics can present subtleties that complicate whether

§ 802.9 might exempt an acquisition of 10% or less of an issuer’s voting securities.

Over the years, the Agencies have considered revising § 802.9 in order to provide

clearer guidance on when the acquisition of 10% or less of an issuer’s voting securities is

exempt from HSR filing requirements. In 1988, the Commission initiated a notice and

comment proceeding on a proposed approach and two alternative approaches:

The principal proposal would exempt from the premerger notification obligations

all acquisitions of 10% or less of an issuer's voting securities on the grounds that

such acquisitions are unlikely to violate the antitrust laws. The alternative

proposals would alter existing notification procedures for acquisitions of 10% or

less of an issuer’s voting securities. One would permit the purchase, but require

that the securities be placed in escrow pending antitrust review; the other would

eliminate the reporting requirement imposed on the target firm, thus freeing the

acquiror of its obligation to give the target prior notice. 27

https://www.ftc.gov/system/files/documents/public_comments/2018/08/ftc-2018-0048-d-0010-147719.pdf,

at 1-2, and 7 (“[T]he investment community is concerned that the Commission’s increasingly narrow

interpretation and application of the investment-only exemption under the HSR Act is imposing an undue

regulatory burden and unnecessary costs on institutional investors, such as employee pension funds,

charitable foundations and university endowments. That burden undermines the strong public policy in

favor of management-shareholder communications, involves significant and unnecessary costs, and is not

justified by the Commission’s mission to protect competition.” … “CII and MFA are concerned that the

current narrow application of the investment-only exemption is interfering with an animating policy

objective of the federal securities laws to ensure a free flow of information and disclosure from issuers of

securities to the investing public.”).

53 FR 36831 (Sept. 22, 1988).

The Commission’s principal proposal in 1988 was a new exemption, § 802.24,

that would have subsumed § 802.9 “by eliminating the filing requirement for all

acquisitions of 10 percent or less of an issuer's voting securities, regardless of the intent

of the acquired person.” Although the Commission had rejected calls to ignore

investment intent in 1978 when the original Rules were promulgated, it proposed to

exempt all acquisitions of 10% or less of an issuer’s voting securities based on ten years

of experience with reviewing those filings that were not solely for the purpose of

investment. “It is not possible to say that voting securities acquisitions of 10 percent or

less, or 5 percent or less, cannot violate the antitrust laws. The proposed exemption is

rather based on the evidently low likelihood that ‘the class of transactions’ will violate

the antitrust laws.” 28

But the Commission also considered alternative proposals that would more

directly address concerns related to other aspects of the Act that could increase the cost of

acquiring shares, specifically the requirement to wait for the expiration of the waiting

period before acquiring shares, and the requirement to notify the target of the intended

acquisition. 29 As a result, the Commission proposed two alternative approaches. The first,

proposed § 801.34, “would permit acquirors to purchase, but not take possession of, up to

10 percent of an issuer’s voting securities without filing a notification. The shares

purchased would be placed in escrow and voted by the escrow agent in proportion to the

votes cast by all other shares. The acquiror would be required to file and observe the

waiting period prior to purchasing more than 10 percent of an issuer’s voting securities or

Id. at 36841.

“Acquirors are reluctant to file premerger notifications because both the delay imposed by the waiting

period and informing the target could increase the cost to them of acquiring the issuer's voting securities.”

53 FR 36831, 36840 (Sept. 22, 1988).

prior to taking the shares out of escrow.” 30 The second proposal was an optional

notification for acquisitions of 10% or less of the voting securities of an issuer. “This

optional system would require the acquiror to submit specified public documents

describing the entity to be acquired, but would not require that the issuer be given notice

of the intended acquisition.” 31

The 1988 proposed rulemaking received eighteen comments. 32 Some encouraged

the Commission to move forward with the principal proposal that would exempt all

acquisitions of 10% or less of an issuer’s voting securities regardless of investment intent.

Several comments in favor of the principal proposal agreed with the Commission’s

assertion in the proposed rulemaking that acquisitions of 10% or less of an issuer’s voting

securities were unlikely to violate the antitrust laws. 33 In addition, some of the comments

noted that the proposed rule would “eliminate the incentive to avoid compliance with the

53 FR 36831, 36,842 (Sept. 22, 1988).

53 FR at 36843.

All comments are available at https://www.ftc.gov/policy/public-comments/2020/08/initiative-122.

See Robert S. Pirie, Comment, RE: Proposed Rulemaking Concerning Premerger Notification under

Hart-Scott-Rodino Antitrust Improvements Act of 1976, 53 FR 36831, (Oct. 18, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/10/p812937hsrrulemakingcomment02.

pdf; James E. Knox, Comment, RE: Proposed Rulemaking Concerning Premerger Notification under HartScott-Rodino Antitrust Improvements Act of 1976, 53 FR 36831, (Nov. 8, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment07.

pdf; Irving Scher, Comment, RE: Proposed Rulemaking Concerning Premerger Notification under HartScott-Rodino Antitrust Improvements Act of 1976, 53 FR 36831, (Nov. 21, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment09.

pdf; John A. Reid, Jr., Comment, Re: Proposed Changes to Premerger Notification Rules, 53 FR 36831,

(Nov. 18, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment11

-2.pdf; Howard E. Steinberg, Comment, Re: Proposed Changes to Premerger Notification Rules, 53 FR

36831, (Nov. 21, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment12.

pdf; and then William J. Kolasky, Jr., Comment, Re: Comments Submitted by Wilmer, Cutler & Pickering

Regarding Proposed Amendments to the Hart-Scott-Rodino Improvement Act of 1976, 53 FR 36831, (Nov.

21, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment13.

pdf.

H-S-R Act without prejudicing antitrust enforcement efforts” 34 and benefit the

Commission through the “freeing up of Commission resources currently expended on

compliance investigations regarding transactions that lack antitrust significance.” 35

Several comments also noted that the proposed rule would ease conflicts with the

securities laws. A company wrote that “by allowing the acquisition of securities under the

secrecy afforded by the securities laws, acquirors will be able to purchase stock at prices

that are not artificially inflated by the publicity which can be generated by an HSR Act

notification filing at the $15 million reporting threshold.” 36

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

The proposed exemption for a person who acquires up to 10% of the securities of

an issuer when such acquirer has the intent of influencing target’s management

(which is virtually always the case for an acquisition of 10% of an issuer’s stock)

is in diametric opposition to the fundamental purpose of the Act. Since power to

See Robert S. Pirie, Comment, RE: Proposed Rulemaking Concerning Premerger Notification under

Hart-Scott-Rodino Antitrust Improvements Act of 1976, 53 FR 36831, (Oct. 18, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/10/p812937hsrrulemakingcomment02.

pdf, at 1. See also James E. Knox, Comment, RE: Proposed Rulemaking Concerning Premerger

Notification under Hart-Scott-Rodino Antitrust Improvements Act of 1976, 53 FR 36831, (Nov. 8, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment07.

pdf.

See Howard E. Steinberg, Comment, Re: Proposed Changes to Premerger Notification Rules, 53 FR

36831, (Nov. 21, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment12.

pdf, at 2. See also Robert S. Pirie, Comment, RE: Proposed Rulemaking Concerning Premerger

Notification under Hart-Scott-Rodino Antitrust Improvements Act of 1976, 53 FR 36831, (Oct. 18, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/10/p812937hsrrulemakingcomment02.

pdf; and then James E. Knox, Comment, RE: Proposed Rulemaking Concerning Premerger Notification

under Hart-Scott-Rodino Antitrust Improvements Act of 1976, 53 FR 36831, (Nov. 8, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment07.

pdf.

See James E. Knox, Comment, RE: Proposed Rulemaking Concerning Premerger Notification under

Hart-Scott-Rodino Antitrust Improvements Act of 1976, 53 FR 36831, (Nov. 8, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment07.

pdf, at 2. See also Robert S. Pirie, Comment, RE: Proposed Rulemaking Concerning Premerger

Notification under Hart-Scott-Rodino Antitrust Improvements Act of 1976, 53 FR 36831, (Oct. 18, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/10/p812937hsrrulemakingcomment02.

pdf; and then William J. Kolasky, Jr., Comment, Re: Comments Submitted by Wilmer, Cutler & Pickering

Regarding Proposed Amendments to the Hart-Scott-Rodino Improvement Act of 1976, 53 FR 36831, (Nov.

21, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment13.

pdf.

influence the target’s management is the primary concern of Section 7, it is

beyond our comprehension why the FTC would exempt review for acquisitions of

up to 10% of an issuer’s stock when the acquisitions may be made for the purpose

of influencing management. 37

A trade association wrote: “The real thrust of the suggestion is not that the $15

million threshold test serves no antitrust purpose, but rather that the FTC finds it difficult

to force compliance by those who wish to make hostile tender offers. That, however, is

not by itself an appropriate reason for the rules change. Violations cannot be ignored.” 38

Members of Congress also weighed in on the proposed rulemaking. One argued

that filing requirements should be enforced instead of changed 39 while another argued

that the Agencies lacked the authority to create an exemption that would, in effect, render

irrelevant the statutory minimum threshold. 40 Representative James J. Florio (then

Chairman of the Subcommittee on Commerce, Consumer Protection, and

Competitiveness of the Committee on Energy and Commerce) wrote: “[t]he rulemaking

notice points out that Congress was definitely interested in subjecting some types of

acquisitions of 10 percent or less to premerger review. In light of this Congressional

See Dennis P. Codon, Comment, Re: Premerger Notification; Reporting and Waiting Period

Requirements, 53 FR 36831, (Nov. 7, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment06.

pdf, at 1.

See John. W. Hetherington, Comment, Re: 16 CFR Parts 801, 802, and 803 Premerger Notification;

Reporting and Waiting Period Requirements, 53 FR 36831, (Dec. 19, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/12/p812937hsrrulemakingcomment17.

pdf, at 2.

See Jim Sasser, Comment, Re: Premerger Notification, 53 FR 36831, (Oct. 25, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/11/p812937hsrrulemakingcomment08.

pdf, at 1, (“Indeed, I find the rationale for the proposed amendments flawed. The premerger notification

rules should not be relaxed because, as you say, there is too much incentive to avoid them; rather, they

should be strengthened.”).

See Jack Brooks, Comment, 53 FR 36831, (Dec. 9, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/12/p812937hsrrulemakingcomment14.

pdf, at 1, (“The proposal would, for all practical purposes, eliminate the $15 million premerger notification

threshold. I do not believe that Congress delegated authority to the Commission to repeal that statutory

notification threshold.”).

intent, I am puzzled by the Commission’s proposal to overrule Congressional intent by a

blanket exemption.” 41

The Commission did not issue a final rule.

Since 1988, the parameters of the HSR premerger notification program have

undergone considerable change. In 2000, Congress amended the Act to raise the

minimum reportability threshold from $15 million to $50 million, and at the same time

built in an automatic annual adjustment of all of the Act’s thresholds based on the change

in gross national product. Currently, a transaction must be valued at more than $94

million to be potentially reportable, and the parties to that transaction must have sales or

assets of at least $188 million and $18.8 million, respectively, unless the transaction is

valued at more than $376 million. The statutory thresholds have increased steadily since

2000, 42 which has reduced significantly the number of filings received by the Agencies. 43

Since 1988, the Commission has also gained over 30 years of additional

experience reviewing filings for acquisitions of 10% or less of an issuer’s voting

securities. Since the promulgation of the Rules in 1978, the Agencies have not challenged

a stand-alone acquisition of 10% or less of an issuer, and have rarely engaged in a

substantive initial review of a proposed acquisition of 10% or less of an issuer. 44 The

Commission believes that proposed acquisitions of 10% or less of an issuer should be

exempt when they are unlikely to violate the antitrust laws and that exempting this

See James J. Florio, Chairman, Comment, Re: Premerger Notification; Reporting and Waiting Period

Requirements, 53 FR 36831, (Oct. 12, 1988),

https://www.ftc.gov/system/files/documents/public_comments/1988/10/p812937hsrrulemakingcomment01.

pdf, at 2.

The thresholds have increased every year except for 2010. 75 FR 3468 (Jan. 21, 2010).

As a result of these changes, many acquisitions of small stakes that would have resulted in an HSR filing

prior to 2001 no longer trigger an HSR filing.

Note 1 supra.

category of acquisitions will allow the Agencies to better focus their resources on

transactions that create the potential for competition concerns. To achieve this goal, the

Commission proposes a new approach to exempt acquisitions of 10% or less of an

issuer’s voting securities under certain conditions. Proposed § 802.15 reads as follows:

§ 802.15 De minimis acquisitions of voting securities

An acquisition of voting securities shall be exempt from the requirements of the act

if as a result of the acquisition:

(a) the acquiring person does not hold in excess of 10% of the outstanding voting

securities of the issuer; and

(b)(i) the acquiring person is not a competitor of the issuer (or any entity within

the issuer);

(ii) the acquiring person does not hold voting securities in excess of 1% of the

outstanding voting securities (or, in the case of a non-corporate entity, in excess

of 1% of the non-corporate interests) of any entity that is a competitor of the

issuer (or any entity within the issuer);

(iii) no individual who is employed by, a principal of, an agent of, or otherwise

acting on behalf of the acquiring person, is a director or officer of the issuer (or of

an entity within the issuer);

(iv) no individual who is employed by, a principal of, an agent of, or otherwise

acting on behalf of the acquiring person, is a director or officer of a competitor of

the issuer (or of an entity within the issuer); and

(v) there is no vendor-vendee relationship between the acquiring person and the

issuer (or any entity within the issuer), where the value of sales between the

acquiring person and the issuer in the most recently completed fiscal year is

greater than $10 million in the aggregate.

Proposed § 802.15 exempts acquisitions that would result in the acquiring person

holding 10% or less of the issuer’s outstanding voting securities, unless the acquiring

person already has a competitively significant relationship with the issuer, such as where

the acquiring person operates competing lines of business, has an existing vertical

relationship with the issuer, or employs or is otherwise represented by an individual who

is an officer or director of the issuer or a competitor. Because these types of relationships

render even a small stake potentially competitively significant, the Commission proposes

to continue to receive filings for any such acquisitions that are not exempt under § 802.9.

Over the last several years, there has been ongoing discussion of the impact of a

single entity holding small percentages of voting securities in competitors within the

same industry, sometimes referred to as common ownership. 45 The debate is not yet

settled, but it has raised concerns about the competitive effect of common ownership

because investors with small minority stakes may influence the behavior of an issuer.

Thus, the Commission proposes that the exemption in § 802.15 not apply if the acquiring

person is a competitor of the issuer or if the acquiring person holds more than 1% in a

competitor of the issuer on an aggregate basis. For instance, Fund Vehicle 1 will acquire

6% of Issuer D and Fund Vehicle 1 has two associates, Fund Vehicles 2 and 3. Fund

Vehicle 1 is the UPE but the Acquiring Person includes Fund Vehicles 1, 2 and 3 under

the proposed change to § 801.1(a)(1) discussed above. Fund Vehicles 1, 2 and 3 do not

control any competitors of Issuer D and Fund Vehicle 1 does not hold any minority

interest in a competitor of Issuer D, but Fund Vehicle 2 and Fund Vehicle 3 each holds a

1% minority interest in competitors of Issuer D. In this scenario, under the proposed rule,

Fund Vehicle 1 would not be able to rely on proposed § 802.15 because its associates

hold more than 1% in a competitor of Issuer D. This exception to the exemption would

ensure the Agencies receive filings that provide insights into the influence of holdings in

FTC Hearings on Competition and Consumer Protection in the 21st Century, Session 8, FTC.GOV. (Dec.

6, 2018), https://www.ftc.gov/news-events/events-calendar/ftc-hearing-8-competition-consumer-protection21st-century. See also Submission of the United States to OECD Hearing on Common Ownership by

institutional investors and its impact on competition, FTC.GOV. (Nov. 28, 2017),

https://www.ftc.gov/system/files/attachments/us-submissions-oecd-2010-present-other-internationalcompetition-fora/common_ownership_united_states.pdf.

competitors. The Commission invites comment on this approach, including whether a

different level of ownership in a competitor of the issuer would be more appropriate in

determining that the proposed exemption should not apply.

The Rules do not currently define the term “competitor,” and to implement this

exception to the exemption, a definition must be added. The Commission proposes the

following definition for the purpose of implementing § 802.15: “§ 801.1(r) Competitor.

For purposes of these rules, the term competitor means any person that (1) reports

revenues in the same six-digit NAICS Industry Group as the issuer, or (2) competes in

any line of commerce with the issuer.” This proposed definition of “competitor” would

require two separate assessments to determine whether an acquiring person is a

competitor of the issuer or holds interests in a competitor of the issuer. The first prong of

the proposed definition would ask an acquiring person to look at the six-digit NAICS

codes of entities it controls and compare them with the NAICS codes the issuer reports.

NAICS codes (and their predecessor Standard Industrial Classification (“SIC”) codes)

have long been the basis for reporting revenues in the HSR Form, and they provide an

objective and easy to administer measure of whether an acquiring person and an issuer

compete. Moreover, because acquiring persons already compare their NAICS codes with

those of the issuer in order to respond to items in the Form, as discussed above, this

approach would be familiar to acquiring persons.

Filing parties can still be “competitors” even if they report in different NAICS

codes. Thus, the second prong of the proposed definition of “competitor” would rely on

filing parties to conduct a good faith assessment to determine whether any part of the

acquiring person competes with or holds interests in entities that compete with the issuer,

in any line of commerce. 46 The Commission expects that parties would do so consistent

with their ordinary course documentation and informational practices and be able to

defend reliance on proposed § 802.15 if challenged.

The Commission acknowledges that this proposed two-prong definition of

“competitor” is broad. The Agencies and the public will benefit from such a broad

definition because the Agencies, in fulfilling their obligations to enforce the antitrust

laws, have a strong interest in receiving HSR filings that reveal any indicia of

competition between the filing parties so the Agencies can fully evaluate the competitive

impact of the proposed acquisition. Nevertheless, the Commission invites comment on

other ways to define “competitor” that would still provide the Agencies with thorough

information on the competition that exists between filing parties.

Proposed § 802.15 also asks filing parties to ascertain the existence of officer or

director relationships between the acquiring person and the issuer. That is, the exemption

in proposed § 802.15 would be unavailable if someone from the acquiring person is an

officer or director of the issuer or a competitor of the issuer. To be an officer or director

of any issuer is to be intimately connected to that issuer. Officers make the issuer’s dayto-day business decisions, and directors determine the overall direction of the issuer. If

someone within the acquiring person has that kind of influence over the issuer or a

competitor of the issuer, the Agencies have a strong interest in receiving filings about that

proposed transaction to better understand its competitive impact. Thus, this exception to

As part of a typical antitrust compliance program, a company may already identify other companies that

have competing sales in order to avoid violating Section 8 of the Clayton Act. Subject to certain minimum

thresholds, Section 8 prohibits a person from serving as a director or an officer of two or more corporations

that are horizontal competitors.

the proposed exemption would ensure that acquisitions of potential competitive

significance do not become exempt.

Finally, the proposed § 802.15 exemption would not be available if the acquiring

person and the issuer are in a vertical relationship valued at $10 million or greater. There

can be important competitive implications in vertical relationships, and the Agencies

have a strong interest in reviewing transactions that create or expand vertical

relationships. This exception to the exemption would ensure the Agencies receive filings

where the buyer and issuer have a vertical relationship beyond the ordinary course. The

Commission intends to exclude the purchase of ordinary course services and goods (e.g.,

office supplies, financial services, etc.) and invites comment on whether $10 million is an

appropriate threshold to distinguish ordinary course vertical relationships from those with

competitive significance.

Proposed § 802.15 would allow the Agencies “to focus their resources more

effectively on those transactions that present the potential for competitive harm.” 47

Proposed § 802.15 would further the Agencies’ goal of eliminating filings for

acquisitions of 10% or less of an issuer where there is no existing competitive

relationship or significant vertical relationship between the acquiror and the issuer and

where the acquisition therefore is unlikely to violate the antitrust laws. At the same time,

proposed § 802.15 would balance the exemption of these kinds of acquisitions with the

Agencies’ interest in making sure that acquisitions of potential competitive significance

are not exempt. The Commission invites comment on whether there are other factors to

61 FR 13666 (Mar. 28, 1996).

consider in evaluating the proposed exceptions to the exemption, or if other categories

should be the subject of exceptions to the exemption.

Under proposed § 802.15, acquiring persons would have to evaluate their

connection to the issuer and the issuer’s competitors in several ways. Although this

approach is not without burden for acquiring persons, the Commission believes that

information concerning competitors, relationships with the issuer’s officers or directors,

and vertical relationships will either already be in acquiring persons’ possession or will

be relatively straightforward to gather. On the whole, proposed 802.15 should benefit

acquiring persons by exempting acquisitions of small amounts of voting securities

without an examination of intent as required by § 802.9. Section 802.9 would remain

unchanged and would still be available to exempt acquisitions of 10% or less of an issuer

where there is no intention to be involved in the basic business decisions of that issuer.

With the addition of proposed § 802.15, acquiring persons would have two potential

ways to exempt the acquisition of 10% or less of an issuer’s voting securities. 48

III.

Proposed Explanatory and Ministerial Changes to the Rules and the Form

and Instructions

To help illustrate the proposed changes to § 801.1 discussed above, the FTC

proposes adding some examples to the Rules. The proposed changes to § 801.1 would

also require explanatory and ministerial updates to the Form and Instructions.

Revised Examples to §§ 801.1, 801.2

The Commission proposes revising the examples in §§ 801.1 and 801.2 to clarify

the proposed definition of person.

Institutional investors can also continue to rely on § 802.64.

Revised examples to § 801.1

Edit example 4 to § 801.1(a)(1) to make “example” plural:

Example 4: See the examples to § 801.2(a).

Add example 5 and 6 to § 801.1(a)(1):

Example 5. Fund 1, Fund 2, and Fund 3, each a UPE, are all associates under the

common investment management of Manager, as defined by § 801.1(d)(2). Fund 1’s

portfolio company A is making a reportable acquisition. The acquiring person includes

Manager, Fund 1, Fund 2, Fund 3, and A. Manager would file on behalf of the acquiring

person by placing its name in Item 1(a) of the Form. Manager indicates in Item 1(c) of

the filing that Fund 1 is making the acquisition. Fund 1 can also indicate in Item 1(c) of

the Form that it is filing on Manager’s behalf.

Example 6. Fund A will be selling its portfolio company P. Fund A’s investments are

managed by Investment Manager, and Fund A’s associates are Fund B, Fund C, and Fund

D. The acquired person includes Investment Manager, Fund A, Fund B, Fund C, and

Fund D. Investment Manager would file on behalf of Fund A, the selling UPE, by placing

its name in Item 1(a) of the Form. Fund A could also indicate in Item 1(c) of the Form

that it is filing on Investment Manager’s behalf.

Add example 4 to § 801.1(a)(3):

Example 4: See the examples to § 801.1(a)(1).

Edit text of § 801.1(d)(2) by removing “For purposes of Items 6 and 7 of the

Form,” capitalizing the subsequent “An,” and including “or acquired” as appropriate, so

that § 801.1(d)(2) reads as follows:

(d)(2) Associate. An associate of an acquiring or acquired person shall be an entity that is

not an affiliate of such person but:

(A) Has the right, directly or indirectly, to manage the operations or investment decisions

of an acquiring or acquired entity (a “managing entity”); or

(B) Has its operations or investment decisions, directly or indirectly, managed by the

acquiring or acquired person; or

managing entity; or

(D) Directly or indirectly manages, is managed by, or is under common operational or

investment decision management with a managing entity.

Revised examples to § 801.2:

In § 801.2(a), number the current example as “Example 1” and add example 2.

Example 2: See the examples to § 801.1(a)(1).

Add examples 3 and 4 to § 801.2(b)

Example 3: See the examples to § 801.1(a)(1).

Example 4: See the examples to § 801.12(a).

Revised examples to § 801.12(a)

In § 801.12(a), number the current example as “example 1” and add example 2:

Example 2. Person “A” is composed of corporation A1 and subsidiary A2; person “B” is

composed of Fund 1 and Fund 2, which are associates managed by Investment Manager.

Both Fund 1 and Fund 2 hold shares of Issuer. A2 will acquire all of Issuer’s voting

securities held by Fund 1 and Fund 2. Under this paragraph, for purposes of calculating

the percentage of voting securities to be held, the “acquired person” is Issuer. For all

other purposes, the acquired person is “B.” (For all purposes, the “acquiring person” is

“A.”)

Ministerial Changes to the Instructions and the Form

The Commission also proposes the following changes to the Instructions and

Form to clarify the definition of person as well as to streamline the Form where

appropriate in light of the proposed changes:

Definitions, p.I of Instructions:

The terms “person filing” or “filing person” mean an ultimate parent entity (“UPE”) and

its associates. Every person will have at least one UPE, and a person may be the same as

its UPE. Not every person will have associates, but when a person has associates, the

person will not be the same as its UPE(s). (See § 801.1(a)(1) and § 801.1(d)(2).)

Item 1(a), p.IV of Instructions:

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

notification. A person includes associates, but not every person will have associates. In

the case of a person that has associates, the person filing is the entity that manages the

associates (“managing entity”) as defined by § 801.1(d)(2). (See § 801.1(a)(1) and §

801.1(d)(2).)

Item 1(c), p.IV of the Instructions:

Put an X in the appropriate box to indicate whether the person in Item 1(a) is a

corporation, unincorporated entity, natural person, managing entity or other (specify). If

the person is a managing entity, indicate the UPE making the acquisition. Indicate if a

UPE is filing on behalf of the managing entity. (See § 801.1 and § 801.1(d)(2).)

Item 1(c) in the Form:

This item will include a new box for managing entity and space for listing the name of

the UPE making the acquisition.

Item 3(a), p.V of the Instructions:

Clarify that the item calls for information on the UPEs that are party to the transaction.

First paragraph: At the top of Item 3(a), list the name and mailing address of each

acquiring and acquired UPE, and acquiring and acquired entity, that are party to the

transaction whether or not required to file notification. It is not necessary to list every

subsidiary wholly-owned by an acquired entity.

Item 4(a), p.VI of the Instructions:

Add a requirement for acquiring persons to organize by UPE and by entity within each

UPE. Specify limits for acquired persons.

Acquiring persons: provide the names of all entities within the person filing notification,

including all UPEs, that file annual reports (Form 10-K or Form 20-F) with the United

States Securities and Exchange Commission, and provide the Central Index Key (“CIK”)

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

UPE.

Acquired persons: provide the names of all entities within the selling UPE, including the

UPE, that file annual reports (Form 10-K or Form 20-F) with the United States Securities

and Exchange Commission, and provide the Central Index Key (CIK) number for each

entity.

Item 4(b), p.VI of the Instructions:

Specify limits for acquired persons. Add a requirement to organize by UPE and by entity

within each UPE.

Acquiring persons: provide the most recent annual reports and/or annual audit reports (or,

if audited is unavailable, unaudited) of the person filing notification. The acquiring

person should also provide the most recent reports of the acquiring entity(s) and any

controlled entity whose dollar revenues contribute to an overlap reported in Item 7.

Responses must be organized by UPE and by entity within each UPE. If some of the

UPEs or entities do not prepare separate financial statements, explain how their financial

information is consolidated in the financial statements that are being submitted.

Acquired persons: provide the most recent annual reports and/or annual audit reports (or,

if audited is unavailable, unaudited) of the selling UPE. The acquired person should also

provide the most recent reports of the acquired entity(s).

Item 5, p.VII of the Instructions:

Add a requirement to organize by UPE and by entity within each UPE.

Second paragraph: Responses must be organized by UPE and entity within each UPE.

List all NAICS and NAPCS codes in ascending order.

Item 5(a), p.VII of the Instructions:

Clarify requirement for persons.

Last paragraph: Check the Overlap box for every 6-digit manufacturing and nonmanufacturing NAICS code and every 10-digit NAPCS code in which both persons

generate dollar revenues.

Item 6(a), p.VIII of the Instructions:

Add a requirement to organize by UPE and by entity within each UPE.

Subsidiaries of filing person. List the name, city, and state/county of all U.S. entities,

and all foreign entities that have sales in or into the U.S., that are included within the

person filing notification. Responses must be organized by UPE and by entity within each

UPE. Entities with total assets of less than $10 million may be omitted. Alternatively, the

person filing notification may report all entities within it.

Item 6(b), p.VIII of the Instructions:

Add a requirement to organize by UPE and by entity within each UPE.

Minority shareholders. For the acquired entity(s) and for the acquiring entity(s) and its

UPE(s) or, in the case of natural persons, the top-level corporate or unincorporated

entity(s) within the UPE(s), list the name and headquarters mailing address of each

shareholder that holds 5% or more but less than 50% of the outstanding voting securities

or non-corporate interests of the entity, and the percentage of voting securities or noncorporate interests held by that person. Responses must be organized by UPE and entity

within each UPE. (See § 801.1(c)).

Item 6(c), p.VIII-IX of the Instructions:

Item 6(c) is currently segmented into two different sections: Item 6(c)(i) deals with the

person filing and Item 6(c)(ii) deals with that person’s associates. Since the proposed

definition of person would include associates, these two items within 6(c) would be

collapsed and the Item renumbered to Item 6(c) with no subparts. The information

required by this item would still be limited to entities within the acquiring person that

report in the same NAICS code as the target. New 6(c) would read as follows:

Item 6(c)

Minority holdings of filing person. If the person filing notification holds 5% or more

but less than 50% of the voting securities of any issuer or non-corporate interests of any

unincorporated entity, list the issuer and percentage of voting securities held, or in the

case of an unincorporated entity, list the unincorporated entity and the percentage of noncorporate interests held.

The acquiring person should limit its response, based on its knowledge or belief, to

entities that derived dollar revenues in the most recent year from operations in industries

within any 6-digit NAICS industry code in which the acquired entity(s) or assets also

derived dollar revenues in the most recent year. The acquiring person may rely on its

regularly prepared financials that list its investments, provided the financials are no more

than three months old. Responses must be organized by UPE and by entity within each

UPE.

The acquired person should limit its response, based on its knowledge or belief, to

entities that derive dollar revenues in the same 6-digit NAICS industry code as the

acquiring person.

If NAICS codes are unavailable, holdings in entities that have operations in the same

industry, based on the knowledge or belief of the acquiring person, should be listed. In

responding to Item 6(c), it is permissible for the acquiring person to list all entities in

which it holds 5% or more but less than 50% of the voting securities of any issuer or noncorporate interests of any unincorporated entity. Holdings in those entities that have total

assets of less than $10 million may be omitted.

Item 7, p.IX-X of the Instructions:

Item 7(a) currently requires information from both the acquiring person and its

associates. Since the proposed definition of person would include associates, Item 7(a)

would be revised to eliminate the separate reference to associates.

Item 7(b)

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

this item would be eliminated.

Items 7(c) and 7(d)

Current Item 7(c) deals with the person filing and Item 7(d) deals with that person’s

associates, so these two items would be collapsed and renumbered to new 7(b).

New Item 7 would read as follows:

If, to the knowledge or belief of the person filing notification, the acquiring person

derived any amount of dollar revenues (even if omitted from Item 5) in the most recent

year from operations:

1) in industries within any 6-digit NAICS industry code in which any acquired entity

that is a party to the acquisition also derived any amount of dollar revenues in the

most recent year; or

2) in which a joint venture corporation or unincorporated entity will derive dollar

revenues;

then for each such 6-digit NAICS industry code follow the instructions below for this

section.

Note that if the acquired entity is a joint venture, the only overlaps that should be

reported are those between the assets to be held by the joint venture and any assets of the

acquiring person not contributed to the joint venture.

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

Item 7(a)

Industry Code Overlap Information

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

Item 7(b)

Geographic Market Information

Use the 2-digit postal codes for states and territories and provide the total number of

states and territories at the end of the response.

Note that except in the case of those NAICS industries in the Sectors and Subsectors

mentioned in Item 7(b)(iv)(b), the person filing notification may respond with the word

“national” if business is conducted in all 50 states.

Item 7(b)(i)

NAICS Sectors 31-33

For each 6-digit NAICS industry code within NAICS Sectors 31-33 (manufacturing

industries) listed in Item 7(a), list the relevant geographic information in which, to the

knowledge or belief of the person filing the notification, the products in that 6-digit

NAICS industry code produced by the person filing notification are sold without a

significant change in their form (whether they are sold by the person filing notification or

by others to whom such products have been sold or resold). Except for industries covered

by Item 7(b)(iv)(b), the relevant geographic information is all states or, if desired,

portions thereof.

Item 7(b)(ii)

NAICS Sector 42

For each 6-digit NAICS industry code within NAICS Sector 42 (wholesale trade) listed

in Item 7(a), list the states or, if desired, portions thereof in which the customers of the

person filing notification are located.

Item 7(b)(iii)

NAICS Industry Group 5241

For each 6-digit NAICS industry code within NAICS Industry Group 5241 (insurance

carriers) listed in Item 7(a), list the state(s) in which the person filing notification is

licensed to write insurance.

Item 7(b)(iv)(a)

Other NAICS Sectors

For each 6-digit NAICS industry code listed in item 7(a) within the NAICS Sectors or

Subsectors below, list the states or, if desired, portions thereof in which the person filing

notification conducts such operations.

agriculture, forestry, fishing and hunting

mining

utilities

construction

48-49 transportation and warehousing

511

publishing industries

515

broadcasting

517

telecommunications

arts, entertainment and recreation

Item 7(b)(iv)(b)

For each 6-digit NAICS industry code listed in item 7(a) within the NAICS Sectors or

Subsectors below, provide the address, arranged by state, county and city or town, of

each establishment from which dollar revenues were derived in the most recent year by

the person filing notification.

2123 nonmetallic mineral mining and quarrying

32512 industrial gases

32732 concrete

32733 concrete products

44-45 retail trade, except 442 (furniture and home furnishings stores), and 443

(electronics and appliance stores)

512

motion picture and sound recording industries

521

monetary authorities - central bank

522

credit intermediation and related activities

532

rental and leasing services

health care and social assistance

accommodations and food services, except 7212 (recreational vehicle

parks and recreational camps), and 7213 (rooming and boarding houses)

811

repair and maintenance, except 8114 (personal and household goods repair

and maintenance)

812

personal and laundry services

Item 7(b)(iv)(c)

For each 6-digit NAICS industry code listed in item 7(a) within the NAICS Sectors or

Subsectors below, list the states or, if desired, portions thereof in which the person filing

notification conducts such operations.

442

443

516

518

519

523

5242

525

7212

7213

813

8114

furniture and home furnishings stores

electronics and appliance stores

internet publishing & broadcasting

internet service providers

other information services

securities, commodity contracts and other financial investments and

related activities

insurance agencies and brokerages, and other insurance related activities

funds, trusts and other financial vehicles

real estate and rental and leasing

professional, scientific and technical services

management of companies and enterprises

administrative and support and waste management and remediation

services

educational services

recreational vehicle parks and recreational camps

rooming and boarding houses

religious, grantmaking, civic, professional, and similar organizations

personal and household goods repair and maintenance

Item 8, p.XI of the Instructions:

Add a requirement to organize by UPE and by entity within each UPE.

For each such acquisition, supply:

1) the 6-digit NAICS industry code (by number and description) identified above in

which the acquired entity derived dollar revenues;

2) the name of the entity from which the assets, voting securities or non-corporate

interests were acquired;

3) the headquarters address of that entity prior to the acquisition;

4) whether assets, voting securities or non-corporate interests were acquired; and

5) the consummation date of the acquisition.

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

IV.

Communications by Outside Parties to Commissioners and Their Advisors

Written communications and summaries or transcripts of oral communications

respecting the merits of this proceeding, from any outside party to any Commissioner or

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

Regulatory Flexibility Act

The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires that the agency

conduct an initial and final regulatory analysis of the anticipated economic impact of the

proposed amendments on small entities, except where the Commission certifies that the

regulatory action will not have a significant economic impact on a substantial number of

small entities. 5 U.S.C. 605. Because of the size of the transactions necessary to invoke

an HSR filing, the premerger notification rules rarely, if ever, affect small entities. 49 The

2000 amendments to the Act exempted all transactions valued at $50 million or less, with

subsequent automatic adjustments to take account of changes in Gross National Product

resulting in a current threshold of $94 million. Further, none of the proposed amendments

expands the coverage of the premerger notification rules in a way that would affect small

entities. Accordingly, the Commission certifies that these proposed amendments will not

have a significant economic impact on a substantial number of small entities. This

document serves as the required notice of this certification to the Small Business

Administration.

VI.

Paperwork Reduction Act

The Paperwork Reduction Act, 44 U.S.C. 3501-3521, requires agencies to submit

“collections of information” to the Office of Management and Budget (“OMB”) and

obtain clearance before instituting them. Such collections of information include

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

reporting, recordkeeping, or disclosure requirements contained in regulations. The

existing information collection requirements in the HSR Rules and Form have been

reviewed and approved by OMB under OMB Control No. 3084-0005. The current

clearance expires on January 31, 2023. Because the rule amendments proposed in this

NPRM would change existing reporting requirements, the Commission is submitting a

Supporting Statement for Information Collection Provisions (“Supporting Statement”) to

OMB.

Amending § 801.1(a)(1) – Acquiring Persons

The Commission proposes to amend the § 801.1(a)(1) definition of “person” to

require certain acquiring persons to disclose additional information about their associates

when making an HSR filing. Thus, Items 4 through 8 (excluding Items 6(c) and 7) 50 on

the Notification and Report Form (HSR Form) would be revised to seek information

about associates of certain acquiring persons, including the aggregation of acquisitions in

the same issuer across its associates. The Commission acknowledges that this proposed

change would result in an increased burden for certain acquiring persons. Non-corporate

entity UPEs within families of funds and MLPs would be required to provide significant

additional information on behalf of their associates under the proposed change. These

entities are, however, already accustomed to looking into the holdings of those associates

for filings where they are acquiring persons as a result of the treatment of associates

under the current Rules. Given that these entities already conduct such inquiries, the

Commission believes requiring additional information about entities that have already

been identified should result in limited additional burden for filers. Based on filing data

There would be no changes to what Items 6(c) and 7 require, because those items already require

information from associates.

from the past five fiscal years, the Commission estimates that 17.28% of entities would

be required to provide additional information on behalf of associates. From this, we

anticipate 846 filings would be affected per fiscal year (17.28% x 4894 filings per year,

as estimated in the FTC’s most recent PRA clearance for the HSR Rules). The

Commission also estimates that each affected filer will need about 10-15 additional hours

per filing to comply. Thus, the aggregation is expected to lead to 10,575 additional

annual hours of burden (846 filings x 12.5 hours per filing). The Commission seeks

comments to help inform such burden estimates, to the extent applicable.

The proposed change to § 801.1(a)(1) would also result in a reduced burden for

certain acquiring persons by eliminating the potential need for families of funds and

MLPs to make multiple filings with multiple filing fees. Based on filing data from the

past five fiscal years, the Commission estimates that 39 filings would be affected per

fiscal year. Since the FTC’s current clearance with OMB estimates an average reporting

burden per responding filer of 37 hours per filing, the proposed change to § 801.1(a)(1)

would be a reduction of 1,443 hours of annual burden (39 filings x 37 hours per filing).

The Commission seeks comments to help inform such burden estimates, to the extent

applicable.

Acquired Persons

Additionally, the Commission’s proposal to revise the HSR Instructions to limit

the financial information required in Items 4(a) and 4(b) should reduce burden for certain

acquired persons. The HSR Form already limits what acquired persons must report in

Items 5 through 7 to information on those assets, voting securities and non-corporate

interests being acquired in the transaction at issue. The Commission’s proposal to amend

the HSR Instructions would create a similar limit for acquired persons with respect to

Items 4(a) and 4(b) and should result in a reduction in the burden for families of funds

and MLPs filing as acquired persons who will now face a more limited reporting burden

after the amendments. Based on filing data from the past five fiscal years, the

Commission estimates that 357 filings would be affected per fiscal year. The

Commission also estimates that the burden on each affected filer will be reduced by 5

hours per filing. Thus, the proposed limit for acquired party reporting is expected to lead

to a reduction in burden of 1,785 annual hours (357 filings x 5 hours per filing). The

Commission seeks comments to help inform such burden estimates, to the extent

applicable.

Amending § 802.15 – Acquisition of 10% or less

Additionally the Commission proposes a new exemption, § 802.15, which would

exempt the acquisition of 10% or less of an issuer’s voting securities in certain

circumstances. Proposed § 802.15 exempts the acquisition of 10% or less of an issuer’s

voting securities unless the acquiring person already has a competitively significant

relationship with the issuer, such as operating competing lines of business or having an

existing vertical relationship, or where the investor (or its agent) is an officer or director

of the issuer or a competitor. This proposed exemption would allow the acquisition of

small amounts of voting securities without an examination of intent as required by

§ 802.9. As a result, the Commission anticipates that this exemption will reduce

somewhat the number of transactions subject to review under the Rule and the number of

entities that must engage in reporting under the Rule. Over the period from FY 2001 to

FY 2017, the Commission received an average of 106 filings per fiscal year for

acquisitions of 10% or less. 51 Some of these filings would fall within the exemption in

proposed § 802.15, leading to a reduction in burden for entities that would no longer need

to report under the Rule. However, the Commission does not currently possess

information as to how many entities would qualify for the proposed § 802.15 exemption.

The Commission therefore requests comment on the percentage of entities that would

qualify for the proposed exemption.

Explanatory and Ministerial Changes

Finally, the Commission proposes explanatory and ministerial changes to the

rules, as well as necessary amendments to the HSR Form and Instructions to effect the

proposed changes. These changes will result in no change to the information collection

burden under the Rule.

Request for Comments

As noted above, the Commission invites comments on anticipated burdens for the

proposed amendments and comments that will enable it to: (1) evaluate whether the

proposed collections of information are necessary for the proper performance of the

functions of the Commission, including whether the information will have practical

utility; (2) evaluate the accuracy of the Commission’s estimate of the burden of the

proposed collections of information, including the validity of the methodology and

assumptions used; (3) enhance the quality, utility, and clarity of the information to be

collected; and (4) minimize the burden of the collections of information on those who

As set out in footnote 1, the Agencies received a total of 1,804 HSR filings from FY 2001 to FY 2017 for

acquisitions of 10% of less of outstanding stock. During that same period, the Agencies did not challenge

any acquisitions involving a stake of 10% or less.

must comply, including through the use of appropriate automated, electronic, mechanical,

or other technological techniques or other forms of information technology.

Comments on the proposed reporting requirements subject to Paperwork

Reduction Act review by OMB should additionally be submitted to

www.reginfo.gov/public/do/PRAMain. Find this particular information collection by

selecting “Currently under 30-day Review - Open for Public Comments” or by using the

search function. The reginfo.gov web link is a United States Government website

produced by OMB and the General Services Administration (GSA). Under PRA

requirements, OMB’s Office of Information and Regulatory Affairs (OIRA) reviews

Federal information collections.

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

Antitrust

For the reasons stated in the preamble, the Federal Trade Commission proposes to

amend 16 CFR parts 801, 802, and 803 as set forth below:

PART 801—COVERAGE RULES

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

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

2. Amend § 801.1 by revising paragraph (a)(1) , revising the examples to paragraph

(a)(1), revising the examples to paragraph (a)(3), revising paragraph (d)(2), and adding

paragraph (r), to read as follows:

§ 801.1 Definitions.

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(a)(1) Person. Except as provided in paragraphs (a) and (b) of § 801.12, the term person

means (a) an ultimate parent entity and all entities which it controls directly or indirectly;

and (b) all associates of the ultimate parent entity.

Examples:

***

4. See the examples to § 801.2(a).

5. Fund 1, Fund 2, and Fund 3, each a UPE, are all associates under the common

investment management of Manager, as defined by § 801.1(d)(2). Fund 1’s portfolio

company A is making a reportable acquisition. The acquiring person includes Manager,

Fund 1, Fund 2, Fund 3, and A. Manager would file on behalf of the acquiring person by

placing its name in Item 1(a) of the Form. Manager indicates in Item 1(c) of the filing

that Fund 1 is making the acquisition. Fund 1 can also indicate in Item 1(c) of the Form

that it is filing on Manager’s behalf.

6. Fund A will be selling its portfolio company P. Fund A’s investments are managed by

Investment Manager, and Fund A’s associates are Fund B, Fund C, and Fund D. The

acquired person includes Investment Manager, Fund A, Fund B, Fund C, and Fund D.

Investment Manager would file on behalf of Fund A, the selling UPE, by placing its

name in Item 1(a) of the Form. Fund A could also indicate in Item 1(c) of the Form that it

is filing on Investment Manager’s behalf.

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(a) * * *

(3) * * *

Examples:

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4. See the examples to § 801.1(a)(1).

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(d) * * *

(2) Associate. An associate of an acquiring or acquired person shall be an entity that is

not an affiliate of such person but

(A) Has the right, directly or indirectly, to manage the operations or investment decisions

of an acquiring or acquired entity (a “managing entity”); or

(B) Has its operations or investment decisions, directly or indirectly, managed by the

acquiring or acquired person; or

managing entity; or

(D) Directly or indirectly manages, is managed by, or is under common operational or

investment decision management with a managing entity.

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(r) Competitor. For purposes of these rules, the term competitor means any person that

(1) reports revenues in the same six-digit NAICS Industry Group as the issuer, or (2)

competes in any line of commerce with the issuer.

3. Amend § 801.2 by revising the examples to paragraph (a) and revising the examples to

paragraph (b) to read as follows:

§ 801.2 Acquiring and acquired persons.

(a) * * *

Examples:

1. Assume that corporations A and B, which are each ultimate parent entitles of their

respective “persons,” created a joint venture, corporation V, and that each holds half of

V's shares. Therefore, A and B each control V (see § 801.1(b)), and V is included within

two persons, “A” and “B.” Under this section, if V is to acquire corporation X, both “A”

and “B” are acquiring persons.

2. See the examples to § 801.1(a)(1).

(b) * * *

Examples:

***

3. See the examples to § 801.1(a)(1).

4. See the examples to § 801.12(a).

4. Amend § 801.12(a) by revising the examples to paragraph (a) to read as follows:

§ 801.12 Calculating percentage of voting securities.

(a) * * *

Examples: 1. Person “A” is composed of corporation A1 and subsidiary A2; person “B”

is composed of corporation B1 and subsidiary B2. Assume that A2 proposes to sell assets

to B1 in exchange for common stock of B2. Under this paragraph, for purposes of

calculating the percentage of voting securities to be held, the “acquired person” is B2. For

all other purposes, the acquired person is “B.” (For all purposes, the “acquiring persons”

are “A” and “B.”)

2. Person “A” is composed of corporation A1 and subsidiary A2; person “B” is composed

of Fund 1 and Fund 2, which are associates managed by Investment Manager. Both Fund

1 and Fund 2 hold shares of Issuer. A2 will acquire all of Issuer’s voting securities held

by Fund 1 and Fund 2. Under this paragraph, for purposes of calculating the percentage

of voting securities to be held, the “acquired person” is Issuer. For all other purposes, the

acquired person is “B.” (For all purposes, the “acquiring person” is “A.”)

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PART 802—EXEMPTION RULES

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

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

6. Add § 802.15 to read as follows:

§ 802.15 De minimis acquisitions of voting securities.

An acquisition of voting securities shall be exempt from the requirements of the act if as a

result of the acquisition:

(a) the acquiring person does not hold in excess of 10% of the outstanding voting

securities of the issuer; and

(b)(i) the acquiring person is not a competitor of the issuer (or any entity within the

issuer);

(ii) the acquiring person does not hold voting securities in excess of 1% of the

outstanding voting securities (or, in the case of a non-corporate entity, in excess of 1%

of the non-corporate interests) of any entity that is a competitor of the issuer (or any

entity within the issuer);

(iii) no individual who is employed by, a principal of, an agent of, or otherwise acting on

behalf of the acquiring person, is a director or officer of the issuer (or of an entity

within the issuer);

(iv) no individual who is employed by, a principal of, an agent of, or otherwise acting on

behalf of the acquiring person, is a director or officer of a competitor of the issuer (or

of an entity within the issuer); and

(v) there is no vendor-vendee relationship between the acquiring person and the issuer (or

any entity within the issuer), where the value of sales between the acquiring person

and the issuer in the most recently completed fiscal year is greater than $10 million in

the aggregate.

Examples: 1. Investment Manager manages the investments of Fund 1 and Fund 2, which

are associates. Investment Manager, Fund 1 and Fund 2 are all part of the Acquiring

Person. Fund 1 is acquiring 5% of Issuer. Fund 1 has a .4% interest in a competitor of

Issuer and Fund 2 has a .5% interest in the same competitor of Issuer. The acquisition of

the 5% interest in Issuer would be exempt under § 802.15.

2. Investment Manager manages the investments of Fund 1 and Fund 2, which are

associates. Investment Manager, Fund 1 and Fund 2 are all part of the Acquiring

Person. Fund 1 is acquiring 5% of Issuer. Fund 1 has a .4% interest in a competitor of

Issuer and Fund 2 has a .3% interest in a different competitor of Issuer. The acquisition of

the 5% interest in Issuer would be exempt under § 802.15.

3. Investment Manager manages the investments of Fund 1 and Fund 2, which are

associates. Investment Manager, Fund 1 and Fund 2 are all part of the Acquiring

Person. Fund 1 is acquiring 5% of Issuer. Fund 1 controls an operating company that is a

competitor of Issuer. The acquisition of the 5% interest in Issuer would not be exempt

under § 802.15.

4. Investment Manager manages the investments of Fund 1, Fund 2, Fund 3, and Fund 4,

which are associates. Investment Manager, Fund 1, Fund 2, Fund 3 and Fund 4 are all

part of the Acquiring Person. Fund 1 is acquiring 5% of Issuer. Fund 2, Fund 3 and Fund

4 each have a .4% interest in a competitor of Issuer. The acquisition of the 5% interest in

Issuer would not be exempt under § 802.15.

5. Investment Manager manages the investments of Fund 1 and Fund 2, which are

associates. Investment Manager, Fund 1 and Fund 2 are all part of the Acquiring

Person. Fund 1 is acquiring 5% of Issuer. One of Fund 2’s officers (or the equivalent

thereof) also serves as an officer of Issuer. The acquisition of the 5% interest in Issuer

would not be exempt under § 802.15.

6. Investment Manager manages the investments of Fund 1, Fund 2, Fund 3, and Fund 4,

which are associates. Investment Manager, Fund 1, Fund 2, Fund 3 and Fund 4 are all

part of the Acquiring Person. Fund 1 is acquiring 5% of Issuer. One of Fund 4’s officers

(or the equivalent thereof) also serves as an officer of a competitor of Issuer’s

subsidiary. The acquisition of the 5% interest in Issuer would not be exempt under §

802.15.

7. Investment Manager manages the investments of Fund 1 and Fund 2, which are

associates. Investment Manager, Fund 1 and Fund 2 are all part of the Acquiring

Person. Fund 1 is acquiring 5% of Issuer. Fund 1 controls an operating company that has

a vendor-vendee relationships with Issuer valued in excess of $10 million. The

acquisition of the 5% interest in Issuer would not be exempt under § 802.15.

PART 803—TRANSMITTAL RULES

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

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

8. Revise Appendix A and Appendix B to Part 803 as follows: