# FEDERAL TRADE COMMISSION (1985)

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Aftc%3A8176469cadcc6f2b

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

,. .

FEDERAL TRADE COMMISSION
WASHINGTON. O.C. 20580

OFFICE OF
THE CMAUIMAN

Nova~be~

12, 1986

~he Honorable George Bush
President of the Senate
United States Senate
Washington, D.C. 20510

The Honorable Thomas P. O'Neill, Jr.
Speaker of the Bouse of Representatives
Washington, D.C. 20515
Subject:

N. th Annual Re ort to Congress Pursuant to
Section
of the Hart-Scott-Rocino Antit=ust
Imorovements Act of 1976

Gentlemen:
Section 201 of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, Pub. L. 94-435, amended the Clayton Act by adding a
new Section 7A, 15 O.S.C. § 18a. Subsection (j) of this section
provides as follows:
Beginning not later than January 1, 1978, the
Federal T=ade Commission, with the concur=ence of
the Assistant Attorney General, shall annually
report to the Congress on the operation Df this
section. Such report shall include an assessment
of the effects of this section, of the effects,
purpose, and the need for any rules promulgated
pursuant thereto, and any recommendations for
revisions of this section.
This is the ninth annual report to Congress pursuant to
this provision.
In general, ~ection 7A establishes a mechanism under which
certain proposed acquisitions of stock or assets must be
reportec to the Federal Trade Commission and the Department of
Justice orior to consummation. The oarties must then wait a
S?ecifie~ period, usually thirty days (fifteen days in the case
of a cash tender of fer) , before they may complete the
transaction. wnether a oarticular acquisition is subject to
these requirements depen~s upon the v~lue of the acquisition and
the size of the parties, as measured by their sales and

assets. Small accruisitions, .acquisitions involving small
parties and other classes of acquisitions whic~ are unlikely to
raise antitrust concerns are excluded from the Act's coverage.
The primary purpose of the stitutory scheme, as the
legislative history makes clear, is to provide the antitrust
e~forcement agencies with a meaningful opportunity to review
mergers and acquisitions before they occur. The premerger
notification program, with its filing and wafting period
requirements, provides the agencies with both the time and the
information to conduct this review. Much of the information
needed for a preliminary antitrust evaluation is included in the
notification filed with the agencies and thus is immediately
available for review during the initial thirty-day waiting
period.
If either aqency determines during that initial waiting
that further inquiry is necessary, it is authorized by
Section 7A(e) to request additional information or documentary
materials from either or both of the parties to a reported
transaction. Such a reauest extends the waiting period for a
S?ecifiec period, usualiy twenty days, after all of the
reauested information and documents are received. ~his
additional time orovides the ·agencies with the opportunity to
review the informaticn and t'o take appro9riate action before the
transaction is consummated. If either agency belie.•1es that a
pro~osed transaction may violate the antitrust laws, Section
7A(f) allows the agency to seek an injunction in federal
district court to prohibit consummation of the transaction.
~eriod

Final rules implementing the premerger notification program
were promulgaten by the Commission, with the 1oncurrence of the
Assistant Attornev Gene=al, on July 31, 1978.
At that time, a
comprehensive Statement of Basis and Purpose was also published
containing a section-by-section analysis of th~ rules and an
item-by-item analysjs of the Premerger Notification and Report
~orm.·
The program became effective on September 5, 1978. In
1983, the Commission, wit~ the concurrence of the Assistant
Attorney General, made several changes in the premerger
notification rul1s. Those amendments became effective on
August 2~ ,. 1983.

1

43 Fed. Reg. 33,450 (1978). The rules also appear in 16
C.!.R. Parts 801 throuch 803. For more information
concerning the development of the rules and operating
procecures of the premerger notification program, see the
second, third and seve~th annual reports covering the years
1978, 1979 and 1?83, respectively.
48 Fed. Reg. 34,427 (1983l ·(codified at 16 C.F.R. Parts 801
through 803).
-2-.

Statistical Profile of the Premeraer Notification Procram
The a?pendices to this report provide a statistical summary
of the operation of the premerger notification program.
Appendix A shows for each year (or part of a year) in which the
orogram has been in operation the number of t;ansactions
reported, the number of filings received, the number of
transactions in which requests for additional information or
documentary material (hereinafter referred to as "second
requests") were issued, and the number of transactions in which
requests for early termination were received, granted, and
aenie~.
Apoendix B provides a month-by-month comparison of the
·number of filings received and the number of transactions
reported for 1983 through 1985. Appendix C shows, for calendar
years 1981-1985, the number of transactions in which the
agencies could have issued second requests, the number of seconc
requests issuec, and the percentage of transactions in which
second requests were issued. As we explained in the Eighth
Annual Report, we believe that Appendix C provides a more ·
meaningful measure of the second request rate than Appendix A
because Aooendix C elimina~~s from the total number of
transactions certain transactions ln which the agencies could
not, or as a oractical matter would not, issue second requests. 3
~he statistics set out in these appendices show that the
number of transactions reported in 1985 increased 25% over the
number reoorted in 1984 (1400 transactions were reoorted in
1984, 1749 in 1985). The statistics also report an increase in
the number of second requests issued. Appendix A shows that the
number of second requests issued increased from 77 in 1984 to 84
in 1985 while Ap~encix C shows an increase from 71 in 1984 to 84
in 1985. ~hese numbers reoresent, however, a slight decrease i~
the number of second requests issued as a percentage of reporte~
transactions (from 5.5% in 1984 to 4.8% in 1985, based on
Ap~enoix A, and from 6.3% in 1984 to 5.8% in 1985, based on
A??end ix C::) •
~he statistics also show that the number of transactions
involving ~equests for early termination has again increased

3

Appendix C, notes 1 and 2. The second request statistics
in Aopendices A and C also differ in two other respects.
Apoendix C incluces only the number ·of seconc requests iss~e=
for transactions reported in each specified year, while
Ap~endix A includes all second requests issued curins eac~
calennar year irrespective of when th~ filing.was actually
received. I~ andition, Aooendix A includes secondary
acquisitions while Ap~endl~ C does not.
~ee

-3-

dramatically. 4 In 1985, early termination was requested in 1415
transactfons, while in 19.84 it was requested {n only 1064 and in
only 643 in 1983! This represents, as a percentage of reported
transactions, a request rate of 80.9%, as compared with 65.0% in
1984 and 57.0% in 1983. ~he number of requests granted has
increased (from 847 in 1984 to 1077 in 1985), although the
o~rcentage ~f reauests granted has decreased (from 79.6% in 1984
to 76.1% in 1985).
We have also included in the reoort, as Exhibit A, eleven
tables containing other information about transactions reported
in calendar year 1984. Some tables break down the number of
transactions reported by the dollar value of transactions or by
the reoorting threshold and indicate the number and percentage
of clearances granted and second requests issued for each
cateoorv of transaction. Other tables orovide a breakdown of
transactions based on the sales or the ~ssets of the acquiring
~ersnn or the acquired entity or on the industry group (2-digit
SIC co~e) in which the acquiring person or the acquired entity
derive most of tbeir revenues. These statistics have been
!nclud•~ in prior annual reports for the calendar years 1981
1983.;,
~ecent

Develoo~ents

Relatino to Premeroer Notification Rules

an~

~rocer pp to '>O

291

26.0

'1

SO up lo 100

180

16.1

19

100 up to lSO

82

1.1

II

•

•••

"

~£Qfld R~~~!H.~~~·! __
_!!!!ll'h.!:__r_
__f!;.~~!:~'-- _y
[T£
00.1
!1'~
~~ T~·r ~ !!

2. l

4. '>

". 8

0

)

20

2.6

u. s

". l

4

9

"'

'> . II

.... s

11. 1

4

H

10.6

1.0

10.1

0

9.U

•>. 8

2

1 l. r,

II

2. 1

2.1

l. 1

l. 8

5.6

lO

l. 4

). 4

4. 8

R

2

4.4

l. 1

5.6

l9. s

2

1

2. 4

e.5

l l.O

4. 2

16.l

2

l

4.2

2. l

6.2

o• .,

18."

21. l

I

2

l. 1

1. 4

5. l

150 up to 200

48

4.1

,,

:mo up to 100

59

5.)

'>

•JOO up to SOO

51

4."

II

.,

I'>. 1

I ). 1

29. 4

l

4

5.9

1.6

l 1.1

SOii up to 101}0

22

2.0

4

J

I II. l

9. I

21. 1

I

l

4. s

4.5

g. l

1000 and up

20

I. B

J

'o'l.0

111. 0

65.0

6

I

10.0

s.o

15.0

l ll 9

100.0

"

1111

7.0

1. 9

1

s ."

ll

40

2. 0

). 6

".)

All Transactions

117

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~--~-~~-

.!/

The size of transaction Is based on the aqqre•Jale tot,ll .unount n{ votln•J sec11rltleR .ind assetR to, be held by the
acquiring person as a result of thfl lran!laction .tn•I i11 t.1k•!n If'"" lhn r1,spon,;r. to 1te1n l(c) of the'premecqer
notification and repo~t form.

y

Outlnq calendar year 1984, 1400 trans11ctlons •wre reportl!d un1lec the llarl-Scolt-Ro1tlno premett)er notlflcatlon pcoqram.
The smaller number, lll9, reflects a1lj11:Hm1!nts to elimin.1le lhc followin•J types of transaclions1 (II
9 transactions
reportl!ll uniter Section (c) (6) an1l 15'1 tcansilc:t Ions reporlt!cl .11111ler Sc1;llnn (O up to 2110

6

l.

R

0. r,

II. l

0.7

11. r,

". 2

l6.7

}. 4

1. l

4.6

200 up tu JOO

5

ll

16

II. "

I . II

I. 4

n. .,

In. 6

21. I

2.9

6. )

9.1

JOO up to 500

II

1

l'i

II • 1

II . Ii

l.)

Vi. 1

I I. 1

29.4

4. fi

4.0

8.6

500 up lo 1000

4

l

II . 1

II . I

o.s

'". 2

'LI

27.)

2.J

l. I

J.4

lOOl.I nn1J up

II

11

I . II

II. J

I. 2

'i'1.0

111. 0

6'i.O

6.J

I. I

7.4

f\11 Clrnr;1•1ces

'

'

07

011

llS

1 • II

I . 'I

Vi • fi

7. n

1..,

1•;. fi

49. 1

50. l

100.IJ.

-------------------------,---------- -------y

y
Nolet

Ourlriq calendar year 1904, 1400 lran!lactlonn werP repurtPd 11n1lrr thP. tl Ir. do en not howr.ver, r.xc lude lJ comp et I nq
ollern or 81. multlple-party t1.1nsacllnn!l 1tr.'ln!l.1cllm1ri lnvulvlnq l'!"o or more acc111lrlnq or acquired persone).
l't~rr.cnl1t. 6

14. I

I IJ. 1

Sii up to 100

II

2

10

II. 1

II • 2

0. IJ

4. 4

l. I

S.6

11. l

2.8

14. I

100 up to 1'•0

l

1

'

0.2

II • fl

O.R

2.4

R. 'l

11.0

2. 8

9. 9

12. l

ISO up lo 200

'J.

I

1

0. l

II. I

0. l

4. l

2. I

6.2

2.8

I. 4

4.2

:ZOO up to JOO

I

2

)

II . I

O.l

o. l

I. 1

t.4

S. I

I. 4

2. 8

4.2

)00.up to SOO

1

4

II • I

O', 4

0.6

'I. 'l

7.0

11. 1

4. 2

'i. 6

9.9

SOO up to 1000

l

I

2

II. I

0. I

0.2

4 • ,.I

4. ..

CJ. I

I. 4

l. 4

2.8

1000 a111I up

6

I

1

0. '•

II . I

0.6

10.0

't.O

lS.O

0. ')

I. 4

9.9

All Transactions

ll

40

71

l. u

I .fl

6. l

2. fl

l. 6

6. 1

41. 1

')6.]

100.0

.,
"

!/

ourlng calendar year 1984, 1400 transactions wI
'J :ilJCIHlllJry acqulsition!l (flt.eel pursuant to Section
ffOI. 10 (") 1411 r4!porteil as reuult of repnrt.-.hle pri1nary trannactions.
The t"hle clues not however, e•clude ll competing
offeru or 112 m11lllple-p1"11ly l1.111si1cllo11:; (l1.111:;.-.ctl1111!; i11volvi11•1 lw11 or more ,u;1111lrin•1 or ac'lulred persons).

1/

1•erc1:11l.1•11:n

tl••l••:

.1IH0

111:t.iil 1n.1y 11111

••PP•!"r

In T/\111.1·: I.

•••hi 111 lot.al 1lo1c lo 1111111.1111•1.

T/\111.1: V
l\t'UIJl:llTlllll:: llV lll:l'llllTINi: Tlllll:::11n1.11,

1·h
-- 1P.5hnI11
_, ---· ... -

l•111:;
-11-S-ll
- - - ·Tr- f1'C 111

1'111-t

1111.1

-· ..... ,· rri1i' ;,·;,;. ti i.

N•in•tt•r

Ffr

11ii.1

- _........ ~!l!•·•!" ,;, ...... _, ·FTC

l>O.I

TllTl\I,

'j • ')

'i. 'I

11. 0

}.

2. l

4 • r,

'·· n

Se co ml R_!!l.ue11t'.!_l:!_'.!!'."~~-­
l'er r:Pnl ,,11e O(
Nuooer
_!~~r ep]~!!J'.!.. G1~1~e_
fTC. - --i10J
rn:
llOJ
1'0T" L

--

----

6.8

-

l

20. l

2

14.J

--

----

-

2.1

2.)

-

). 4

-

J.4

19

20

2.CJ

J.O

5.9

Sl 5 HI l I Ion

11

I.")

15'

44

J.9

25\

59

5 •.l

II

-t

l I.,,

50t

665

59. 4

".,

"'·

1. 4

,.. '

l\ssets Only

127

29. 2

in

1·.

n. Ii

10. 1

l 'J. )

10

19

). l

'). 8

8.9

1

0.6

-

-

-

-

-

-

-

-

lll9

100.0

I. 0

1'. 9

11

40

2.8

). 6

6.)

Unclr.tf!C 111 I ne;1?1
l\ll Transactions

n1

011

.... ,

--------!J

Oorlnq calendar year 1984, 1400 tritn!lilr:tlorrn w('rr: rrpporte•I 11mler Sr.ctlon lcl CAI (transar.tlons lnvolvlnq certain
requlated Industries and flnanr:lill b11slnt>!H1esl1
121
72 tr;rn!lactlons which were followed by separate notlflcatlons for
one or more addltlon11I tr1111sar:t.lo1rn hrl"IP.P.n thr samr pilrtle!l cl111lnq 1994 (such tram1actlons 1ue listed here aa a aln9le
consollclaled t1ansactlonl1 2.fi tramrnctlons lnumJ lo be non-11"portahle1
(41
6 Incomplete tran11actlons (only one p11rty
In.each transaction rlle1I a compllilnt notlrlcatlonl 1 an1I,
('ii
9 secondary acquisitions (filed pursuant to Section
001.JO (a)(411rt>portecl11s result ol rl'port11hlr prlm,,.ry tran!lactlon!I. The table does not howevf!r, eitclude lJ cornpetln9
oflers or 92 multiple-party ltansactlon!'l (tran.r.ar.llf
~:! :!r!_!~~!~'J!'.....f ~~~r.

t'Tr

llO.I

.'.!'~T~!..!

29

• 2.6

I

-

).

"

-

l. 4

)CJ

I. 1

-

2

-

10 .'l

10.S

-

2

-

) 0. '>

JO.S

2S up to SO

S6

s.o

I.

4

l. ,,

1. I

10.l

-

2

-

l. 6

l.6

so up lo too

68

6. I

2

I

l. ')

4. 4

1.4

-

I

-

I.'>

I. s

11111 up lo J~O

.

11

6.9

b

'1

1. ')

6. '>

14. l

2

2.6

u

1.9

l

l

4. ')

(,. II

"

-

l

-

2.6

ISO up to 200

2. l

2.1

200 up lo JOO

61

6.0

'•

..

-

'1

I. '1

1. '•

14.9

l

2

4. '>

1.0

1.5

JOO up to SOO

102

9. I

4

,,

'i.'f

9.8

l

4

l.O

). 9

4.9

SOO up to 1000

Ill

10.S

(,

.•

I..,

'•.I

4. I

'l. 4

2

1

l. 1

2. 6

4.l

1000 an.J up

SH

46. II

'• ')

'•I

I I. I

•). 1

21. 0

2'•

19

4. R

). 6

8.4

I. 4

-

4

-

2S.O

2'l .O

-

4

-

2S.O

2S.O

100.0

Rl

011

7.8

1.9

I'•. 6

lt

40

2. II

l. 6

Ii. l

th,\n I'•

t.e~tl

IS up lo 2S

Anscts not
av;il I -'h I c
Alt Transactions

16 11

II I 9

!/

Ourlng calendar year 1984, 1400 transactions were reported uwler the llart-Scott-Rodlno premerger notification program.
The smaller n11nber, ))\'),reflects a1lj11:1lnwntn lo P.llmi11.ile lhe followln•t typP.S O( tranSdctlonsa ()l
9 transactions
reported under Section (c) (61 an1l l'>') tra11s.u:·t ions reportr•I umltH Seel Ion (•:) 18) (lrd11s.1ctlons Involving certain
rt!•111latert lndustrle9 and financial h11ni111!!itlC!•)1
121
·12 tranH.lctlons which wf!re followed hy separate notifications for
001! or more atldltlonal trans.ictions ltctw•!•!ll the s.1me pa1tle11 1lurln•1 l'lll4 (such transa..:tlons are listed here as a slnqle
..:unsollolated traneaction)1 26 transao:tion:i fo111HI to he 11on-reportahle1
141
6 Incomplete transactions (only one party
i11 e1vin•1 two or more acquirin') or acquired persons).

11

'Mtin c.1l~•J•HY ii> co111pose1I of 6 newly for111,.•I ac'111lrin•1 P•!rsons whoso! .1s:;ets co11tcl not he accurately deter,.lned based on
.!i11hml11 ... r 1lot:11m••nln1 2 priv.111! invcnl•11H who''" 11111. 1111!p.11c p•!r:io11,il 1•• ,1.111C•! :;h1!1!l!i; dll•I, 0 filinqR which were wltholrawn
h•!l111" lhci1 .i:i!it'I Sile co11lil he ,10:1:11r.1lcly 1l1·l1n111in1•ol.

Nol,!:

llt•t.lil m.ty nnl

Ml•I lo lot.11 1l11e to (01111.lin•1.

T/\111.1~

VI I

Tll/\N!:/\CT ION:: llY !l/\l,f':fi 01' /\C()tll Ill NI: l'f':ll!lON!:,

Salr.n n .... n~r
H -HI ii Ic1nii)

!_l..::_S-R_!_!~nn.!c_~ I~''-"--

!'~~~~-«:.!. !/

Cl.-;u .... nr.e (:ranlr.cl lo f'TC or 1>0.f

-

· ·-- · - - ---- --- -

Prr cr.nl

H11111l1.-r

--~---·--

f'TC

. _r.'!_ I_ l!_f! __I~"!"~~!;~-;;;;:;;,-,i a·i•·-.,; -

'i. 4

1.en11 than I 'i

l'JR4

"

r, • 'J

-

6. I

A.2

14. 1

l

2

2.0

4.1

6. l

fl. A '

fl. R

IL6

-

2

-

).4

J.4

o;. 6

A.4

14 .o

)

4

2.8

J.1

6. o;

1

r•• 1

l. 6

1.6

)

2

2.)

I. 6

).9

'j 1

5'i

11. 4

11.0

7.2. 4

24

20

4.8

4.0

8.8

1. 4

1

-

11. l

-

11. I

100.11

Al

llA

l.A

1 . .,

1r._i;

JI

40

2.8

). 6

6. )

1.1 ·
" · f,

).

...

1
)

-

I\ 11

Tr a no act l onn

!/

011rln'} calendar year 1904, 1400 tran!1 .... ctlon!1 wer.- r1•portr1I 11111lr.r lhr 11 •...rt-Scott-nodlno premr.rqer notlflcatlon proqram.
Thr. nml1
(21
·12 lr11nsactlu11!1 which Wt!r. ,,

12

6

1•1.0

9. ~.

211. 6

4

2

6.).

1.2

9.5

IUlaets not
av"llahle

66 ]/

5.9

l

8

4. 5

12.'

16. 1

-

)

-

4. 5

4.5

lOO.O

07

88

1. 8

l.9

I'•. 6

') l

40

2.8

'

6.l

All Traneactlone

l ll 9

' 9. '

)

).

!/

The asset a of the acqul red ent lty were· taken f ro111 responnes to Item 2 Mt lit tAssets to be Acqul redt or rro·rrt Items 4 tat
or 41bl ISEC documents and annual reportsl of lh1i premcrqer not If icaticrn and report form.

y

011rln9 calendar year 1904, 1400 transactlnnn were rep~rtccl un•for the llart-Scott-Rolilno premerqer notlflcatlon proqram.
1'he smaller nuntler, 1119, reflects 1ulj11:>1me11ln lo ellmindte lhe followln•J types of lransactions1 II)
9 transactlons
repo1letl under Section tel 16) a11cl l')') lrd1111.1clions reporlecl under Sec:llon (cl 181 (transactions lnvolvlnq certain
rl!•Julated ln1h1strles and flnanclal l"'slne:l!lt!!l)J
121 72 tran!lactluns which were followed Ly separate notlflcatlons for
one or more aclmer9P.r not I I lc:at 1011 1 epor t Corm.

Y

Ourln9 calendar year 1984, 14011 tr.ansactlons wr.rP. rr.port,.rl onrlr.r the lll'lrt-Scott-nodlno premt>rqer notification proqran1.
1'he smaller nunber, 1~19, reflects adjuslm•~nt!l lo r.ll1nl11,1le tht> (ollowlnq lypr.s of trans11ctlons1 (l)
9 transactions
rt?portt>ctlon le) (01 (transactions lnvolvlnq certain
rr1111lilt1>d lncluntrles and flni\nr.lal h11iil111!S!ll'Sl1
121
72 tra1rn.-,ctlons which wP.rl' followt> parllr.n 1lurlm1 190'9 (such trann;1ctlons are listed here as a sln9le
eoll!mll-pcl no nales or revenues.

""t••t

IWt.-,11 m.1y 1111t a1l1I l'o tot.-,1 1l11r. to rou1ullmJ.

(SEC

1'1\111.t: IC

t Hllll!i'l'llY lillCllll' Of l\CQlll 11 I tfi 1•1m:;11H. I '.llli
2-nlqlt
~_!~~....!':~·!~ .!/

!!"!dllS!.!.l' OeS.£! !e~!.!!!l

---~-----·---~!;'J'!!~J~~ J'!:!-E~L
~~!!~.£!..
l

?/

clt,a1.1111:c Gr•111l.tHI
..... FTC or llll.I
'f~~--- !~~j--!fi~-!~~I

01

Aqriculture Productlon-Crhps

02

Aqr I culture Proc.luctlon-Ll vestock

1

10

Hetal Hlnlnq

14

12

Rltumlnous Coal and Llqnlte Minlnq

10

ll

Oil and Gas Extraction

40

14

Hlnlnq and Ouarrylnq of Hnnmetall le
Minerals, Except Fuels

1

2

l

llulldlnq Constructiun-Guneral Cuntract.u1s
and Operative Uuildcrs

12

l

'l

10

:ti

lS

Construct lon other than lhtl l1lln1J
Construcllon-General Cnt1lract~rs

}

11

Construct lon-Specl al Gr,1dc Con tr actor :1

1

20

•·0011 and l

2

JS

Hachlnery, E11cept Electrlc.tl

1r1

J6

f:lectr lc.1l ""'' 1-:1 .. rt ronlr H.1chl1wrv1
r.11u I pme~lt .1nd H11pp 111•!1

l r,

J7

1'r annpor tat Ion F: for 11 I nh I n•1 ,
iaorr!;
·

t'Tt'

11ii.i . ·- .T•1i.il

f.r.r.•Jnd RrflllP.!11 n
In sued

t:T~--[~).J_-· Tot~!

,..I
.1 ntl

l~quipmP.111

r I nr:•!!i

7.
10

'iO

t:a t I nq nncl Ur Ink i nr !J,
1lP.11lr.r!1, F:llcht111•11~!1, .1ncl Hervlcr>n

In

6J

ln!111rance

J 'i

6..,

Hr.al F:st11te

If,

61

llolrtlnq and

70

llot1> I !1, R•mm It~ llmt!l••n, Cilmpn, 111111
othr.r l.oll•Jlnq rlace!'I

IJ

7J

IJuslne!HJ Services

14

75

/\utomotlve Repair, Sr.rvlcr.!1, ancl 1:.11.1•1•"1

olltt~r

2/

110.'

l11.111 llank!I

lnv1?nt1nf't1I. Ol I l1:r:1

7.

-

2

I

-

I

tn

7.1

l

'

-

l
l

'l'/\111.I: X 1•:0111i11111!11)
IN11ll:>TICY 1;1e11111• OF /\•"UllllllNI; t1 t:tl!illN,
l-lli•1 it

~! ! ~ ~~"'!.: !/

.. ·-··-"·' :!1'! 1_r -~ ~1J _f'e! .!!! 1!! _ _ _ -~-----

t~·!~!! ~L~! :!~: ~_! l'~ ! !:!"

c I 1?:11 .11w1: t11to1hl1! prl1n.11y tr.1n:;M:ti1111s.
The lahl1: .101:!.I not howevt!r, e•clu.te 11
1
1-.1111111·lin•1 ol 1t•r:; or Ill 1n11ltipl•:-p.11ly lr.111:;,11:111111:1 (l111n:;,11:li1111!i i11v11lvl1111lwo11r rnore .lC•1'iirl1111 or acqulre•I persons!.

}/

1'r.111:;.11·ti1111!l i11cl11r.tock

10

Hr.la l

l2

n It um l nous Coa I .11111 I. I •I'll t f! HI n I 11'1

lJ

Oil itn•I f;as r.11lracl Ion

14

Hlnlnq nnct Qu11rryln•1 or Numnr.1.all Ir.

rt rniucl l·m·-1

V'"'. - 1111.i

110.1
...... ,j

!

-·~,'(~

·--0_r·-. !~·!~I

Humh•?r 11r 2-ll 'JI t
l11lr.1- lnch1!;\
__ Tl ~_1_rn~1c: ~Io~~-

ry

2

'}

r.11crpt

_2/

l-:-r.-

!i•·1·on1l ne•111r.st.n
l!rnue1l

2

I';

1110

.,

I

)

2

4

2

1

.,

26

2

. 2

n

2

2

l
2

4

17

Conr.tructlon-~prcl.11

20

roocl and Klnclred rrmluctn

21

Tohacco H.1nur itclt1! t'r r.

22

Te11tlle Hill rro1l11cln

I2

4

2J

/\pparr.l amt other Fin I r.hed Pr•ulucl.n m,1011•
from Fahrlcn .11111 Himll.H H,1tr.rl.1f:;

l r,

5

C:ra.Sr Contr.1c:tur!l

nI

II

11

24

6

9

5l

""' '"""'''

1'1'111.1·: II.

INllll:;TllY lilllllll' Ill' t.l\Jtllltt:n t:NTl'l'Y 1

1'1111

2-lll•tll

1H!: _1:~"'!! JI

! !~!!~•.! !.!:Y_!?~!!£~_ ! l!~L~~

-----~···1'..!l~_t;!•.!·:~!.!~y ____

.. ___ .
N11nilo1!r

~/

-

1: 1... u .1111:1· t~r .111t 1-.I

!of't:11n1I ncquc9t s

..... l·"I\'. 01 'llll.I

IH!lllCll

!-;i·( ·-- ,-1~1.(· -~i·n~~l

~.. 1;

2

2

4

2

)0

nul>hcr and Hise. Pl asl lcs rroclucts

2l

I

'l

.,

-

-

-

5

ll

I.eat her and l.eathcr l'roducts

ll

Stone, Clay, Glas9, and ConcrctP. rr o.lw: ts

11

4

-

4

2

-

2

1

j}

rr imarv Hctal

H

I

4

'>

l

l

2

10

H

Fahrlcated Hctal rr 01l11c ts, f.xcept H.1o:h I OtH v
a ntl 1'r ans purl al I on t:q11 I pmc11 t

16

I

6

'.I

-

l

l

9

)5

Haqhlnery, Except t:lectrlcal

4 '>

I

6

')

2

••

6

I4

16

Electrical ancl Electron le H.1ch I ncry,
Equipment a nil Suppl I e 9

., ,,

9

2

l1

4

l

5

1

24

ln1l11st1 les

'l'/\111.I: ll I

l•:n11I I 11111••11

lt111t1:t'l'llV 1;i111111• Ill' f\C'VlllUl:ll l:NTITV,

l'tll-1

7.-111•1 I I
!ii(" Coclc

I/

1. n·~~t_!l ~r_y_ l_)_c_!l_c:! _I l' I I""

... I·-·----··.

.. ---~c:~'!.!_r:_~c1_.r.1!~l~y-

c '"1r.uw .. 1:1.1t1lt>cl
To l"n· m

U111nl,.•r

2/

!Ill.I

F:1~ .. iti1.i

. ;'"'' .1T

!>1•co111I ll1·11111!Sl!l
lirn11r.d

'f:r~--.~>O:C- .T~·~i[

r--r.-

N11mhr.r or 2-llirpt
lntr')

6)

'•

'>

l

.

.
T/\111.1:

kI

t1·1111I I 1111t•1ll

tt11111:a11v 1;1111111• 111· l\•·0111111:11 1:nr1Tv,

1•111i1

2-11 i•t It
511' t:•1•lt'

,,

.

_l/

! !~lJ~.!! ~ !.L ~>.•~i;•:.!__ Ip~ J_• ~.

..... _____ .. _ ..... . . .. _____ ----"-''.'l~ J_i:_e_i!~nt_l_t_y_ _ _ _ __
c 1...... ,llll'f' 1:r.11••····
ltf'CllOU llf'•Jllcsts
N11mhrr or
N111nlu~r

I 11 !'lltr a nc P. 'l\•J en t !1 ,

nr ok •' r !1 , ,., m I 1:.. r v I r. •? H

?/

'1'11 l"'l'l' •11

1111,J

- i10.i

- •f·11\,:.. (

fi'·!~

.!/

1~ 1! 11 sU.~:!~~Jr1:. ~·~~

I 'HI 4

- --------fl•'•lr.1nc:c
--·--------------"~!1'!!
~~!L!;~~l ty
C.1.1ntNI
n1?co111I llC'lll•?sts
or 1>0.1
~·~· --· ,);;,r---·f;;~!!t
To F'l1:

~111nh1;~-

lj

I s1111e1I
f,~--f~~r- _!ottl

H11mh~r

of 2-0lqlt
Intra- I n1l11s try
_ _T!_~~!~~!..~~--

82

E1l11ca t Iona l Services

89

Miscellaneous Services

s

-

I

I

-

-

-

2

nv

Diversified Companieu

so

10

4

14

)

1

6

21

00

Not Avallahte

I4

I

-

I

-

-

-

9

I ti 9

07

OU

I l'i

11

40

11

4 \2

All Transactions

11

?-Digit SIC codes are part of the system of Stand.ucl ln1l11strlat Classification estahllshcci hy the,U.S. Government,
.!'!?~. F.•ecut Ive 01 I Ice uf the !'resident - Off ice of Hanaqeme(lt and BuI
9 Hc•:o111lary ac'ltilsitions f(ilctl pursuant to Section
1101.}0 (d) 1411 rt·p•Hlc•I 11R a rcmtlt of rt•p11rl.1hl11 p1 l1nosed ~!:;!: or
acquisiuon m1gi':: v1oia:e •i':e an:Jt:--.is:
laws if conswn:::ated and. when
. appropnate. to seek a preitr.:inar:;
ir.;:.:nc::on in fecie:al cou:-: to preven:
consu:::mauon. Dur:ng the se\·e:-: years
the :-ules have ~e!n 1:1 effec:. t."ie Fede!'al
Trace Ccc-..::ussior:. with :he
conc:.::-:ence oi t.":e ,;,ss:s:ant .~!torn!\·
Ger.e:al for An:Jt~st. has arnende~ :he
• '":'le~e: no11iica uor: rules se\·e:ai
s in orde: io 1m;:rove t.he prog::a::fs
e~.ec::veness u:crto lessen the :ii.::cen
of :or.:plying w1t!'l the :-ules. These
proposed rev1s1or:s are ir.tendec 10
for:he: rec:.:::e !te C:>Sf !O the ;:ii.:olic o{
compiying wuh the rules and to im?ro\·e
the pr:i@ra::i s ef! ec:i .,.er.ess.
DA ns: Cor::::-:cnts :::u;;: be received or:
or :i!fore O:::uber :~. 19J3.
AOO"'ESSES: ...... :":'.'.!:". .::or.::-::en:s shc..oiC:
be submi:tec !O !:lot!': (~ 1 :he Sec:-e!or-;.
Feceral Trade Cor._-n1ss:.Jn. Room 1~::.
Wesh:ngton. DC :0530. ar:d ;::: the
Ass:s:ar:: Ac:c:":'\e\· Ger:erai. .~::::-.;s:
Divmon. De~a7~:'!'1·'!r:: -:ii lus::ce. Room
3::H. Wasl:::ig~on. DC :?0530.
0

lfO" l'\:RTHEA IHl'OltMATIOH C:ONT AC:1':

john M. S1p~!e. Jr .. Senior .'\ttorney.
P:eme:;zt: >;ot1!'::;.a:.or: Offi.::e. or
Ker.net~ ~1 Da\·1cso:-•.~ttor.:e·;.
E\'a!i.:at:on C'~::ce. 8:;::'1:.: of ·
Co:npet:t1or:. Room 39:'.. Fede::! T:a::e
Co!':'.~:ss1o:i. \\ as!':::igton. DC ZOSoO.
Tele;:ihone: (ZO:?i .5ZJ-34C4
SUPPU:MEM'T ARY IHl'OlllMA TIOH:

Reiulrogr-am. t.".e
proposed amendments have been
submltled to OMB for review ur.cicr
aect:on 3504(h) of the Paperwork
Reduc:1on Act. Comments on t:Oat
1ubmission may be direc!ec to the
Of~:ce of Information and Regulatory
Affain. Office of Managerr:eni and
Budget. Attention: Desk Officer for the
Fede~al Trade Cor:--T.1ss1on.
Bac.kgrou.ad
Section 7 A of the C:u·:on Ac: r·the
act .. ). 15 t.:.S.C. 18a. u added by aec:1on
201 and :?OZ of the Hart-Sco!!·Rodi::c
Antitrust lmpro.,.eme:as .-'.c! of 1976.
requires persons contemplating ce!"ta1n
1cquisi11ons of asse!s or voting
sec:iritif's to g1\ t advance r:ouce to &.e
Fed'!ral 7rade Com=:::ssion :hereaft~:
refer.ec! to as "the Com!!:1ssion"J anc!
the Assistant A:tor.:e\' Ge:-:eral in
charge of :he Anm:--.:i1 D1v1s1on of the
Depar:;ner:t of Justice (hereafte:- refer.ec!
to as ··:he Assis:ant Attorney General")
and :o wait cer:ain de'1gnated period'

before the consummation of such
acqumtipo.a. The traruac:ions to which
the advance notlce requirement 11
applicable and the length of the w1111ng
penod required are aet out respectlveiy
in 1ub1eeucna (•I and (bl of section ; A.
nu., amendment to the Clayton Act
does not c:.b.ange I.he standan:ls used :n
determining the l~al.ity of mergers and
acquia,itions under the antitrust laws.
The l~slative history sugge5ts
eeveral purposes 1U1de:-ly1ng the act.
Fin!. Can.gm• dearly intended to
eliminate the 1-rge "ll1ld.rught me:-ge~ ··
wh1c., ia negotiated in aec:et and
an.nou.nced 1ust before. or sometlm1!5
only aft:r. the closing takes place.
Second. Congress wanted to asst.::-e :!':.:
large acquisiuons were sub1ected to
meaningful ec::ut1ny under the antit::.;s:
laws pnor to consumr-ation. Th1rc.
Congress provided an opportun:ry for
the Comm1s51on and the Ass1s:ar:t
Attomev ~nerai (who an! some11m1:s
hereaftir referred to collec:1veiy as t~~
-anttln.iat agenoes" or the ··eniorce::it!".1
agencies") to sttk a court ordel'
enjoining the corr.pleuon oft.hose
transcc:ion1 tha: the ager:cies dee~ :o
present s1gn1ficant antlt."'Ust proble:r.s
Finally. Congress sougnt to fac1L:a:e an
effec:ve remedy when i d:aliengoe :y
one of the enfort:ement agencies ;:ir.J\ ~c .
1uccessful. Thus t.he act requires t.!".a: :N
agencies receive pnor nouiicanon oi
a1gruficant acqu1sltlons. provides cer:;,,~
tools to fac:litace a prorr:.;:t. thorougn
tnvesngatton. and assures an
oppornm1ty to seek 1 pre!1mir:ar:;
in1unc:1on before !..':.e pa mes are leb~ :: :·
free to complete t.':.e transac:1on.
eliminaung the p~b!e::i of ur:s::a!'l': ;::;, :-.;
the as~ets aitel' the :ransac::cn i:as
taken pliice.
Subsec:1on 7A(.:}(~) of :.'le ac:. 15
U.S.C. 18a(d)[1). Ci:ec~s u'ie Cor.:::i:ssio:-.
with t~e conc:ir.ence of the ..a..ss1s:ant
Attome\' General. in accordance 1.1.::!': 5
U.S.C. SS3. to require that the
not1f:cauon be in such Cor:n and co:::a::-.
1Uc:h infonnation an::! docurr:e:-:!e .. ;:
requirements. and (CJ to ;:iresc::b! ~~~·
other n.iles as may be necess::: l " :
ap;:irop:'iate to ca~· out the ;:iur;;o~es c:
aec~ion :"A.

Federal Register I Vol. 50. No. 185 I Tuesday. Se?te:::ober :?4. 1985 i ~?osed Rules
On Oece!T.ber 15. 1976. the
Ccmmission iuued proposed rules and a
proposed No!ificauon and Report Form
("the Form") to implement the act. Thts
proposed rulemaking was published in
the Federal Reogister of December 20.
1975. 41 FR SS-988. Because of the volume
of public comment. it became clear to
the Commi!lsion that some substantial
revisions would ha\'e to be made in the
original rules. On Juiy 25. 1977, the
Com:nission determir.ed that additional
public comrr.e!'lt or. the rules would be
desirable ar.d a::ipro,·ed ~vised
;:~posed :-.;le~ and a revised proposed
r:o11ficat:on a::.c Repc:-1 For:n. The
rensec n.:ies ar:c Fo~ were pub!ished
ir. t~e Fede~;; Reiiste: of :\u~cs: 1. 1977.
4: F'R J~,j .-\.:c1t1c-r:ai cha~gcs in the
re\'\sed n.i:es and Fc.!":n we:e made after
:::e c!o~e of :!-;e co!'Tlme!'lt ;miod. The
Coram!u:on fo:-::-:aily prorr.u!~atl'd th!
L::.1i :-.;!es ar::! !='om. and :~scec ar.

v.!:ic!: ap;:ea: al 16 CFR P.w &01 w:.
~::c 3CJ. Par: 501 dc:!1.:ies a :iumuer ci
t!':!' IE~:::.s used in thl! ac: ar.ci :-ules. and
e .... ;::a1ns ""h1::h acqo.:1S1t1ons are suo1cc:
h ti"::! ;e;,>c:::::~ ar:u "crt fN~ w;:h a
r!'~:;::'c-r..P!'" :h:ll c::ir..~c;rat. d.;:a be
pr~,·;.::t'c fr.: :!ie ~ear 11:1;- This char.~P
w2~ :n2cit t-ec;ii;se tota! r!.'ve:i:ies for
the \ear 197'~ brol..u: dowr: O\ Sta:ic!ard
Ir.d~s:::ai C!2ss:f:::a:10:-: (SiC) codes
beca~e aqiiabie fror.-. the Bureau of :he
.Ce:isi;! The a~er.d~er.'. a;:'pP'ared ::i thP

federal Re-giater of Mardi S. 1980. 45 FR
14205. and was effecnve Mav J. 1980
The third set of changes w"ere
published by the Federal Trade
Ccmmission as proposed rules changes
in the federal R~ter of July ZS. 1981.
46 FR 38710. These revisions were
designed to clarify and improve the
effecuven~s of the rules and of the
Notification and Report Form as well as
to reduce the burden of filing
notification. Several comments on the
proposed changes were recer..·ed dur.:'lg
the comment penod. Final rules which
adopted some of the s1.1gges11ons
received dun.'lg :J:e comr:ie!'lt penod but
which were subs:ar.tiallv the same as
the proposed r.;Jes. wer~ publisned ln
the Fede:-.! Register on fuiy Z9. 198J. 48
FR 344Z:". and oecar::e effecttve on ·
Aug!ls: ::9. 1983.
ln additton. the Notificatton and
R~;:-ort For.:t. !cu:'ld in 16 CFR 803
(Append:.~). has been rev1sed twice. The
new versions were approved by the
Office of Management a::c! Budget on
Der.ember.~. 1981. anc! F'ebnJary :3.
195:t. respecn\'eiy. Sir.ce tl':a: :ir.ie the
;'.;otiiica11on and Report Form. in its
cur.er.: \'ersion w11t some add1~1or... !
mine~ c!ar:f1cat1ons. has been appro,ec
by the Off;ce of :-.1ana~e:ne!'l! and
Buc2Pt. The most rece!'lt approval came
on Sep:ember H. 1954.
The ge!'les1s oi this set of proposed
chan~!s to the premerge: notifica 110::
rules 1s a ccn11nui:::2 efic:: b\· tl'.e
Commission to red~ce the b~den of
fil:r::i p~!!!'!".er~e~ not1f::attons. That efio::
""as the !oc:.i~ of a ~1.111ce of Request fo~
Comments lht> Commission pubhsl":ec m
the Federal R!iister on fi.;Jy z. 198:. (.;;FR :916:). Wan two exceptions the
amendments to the rules proposed in
this :--;ouce are based on that Request
for Cor=:::te!'lts. the comme::ts rece!\'f:d
as a resu!t of that Request. and reiated
burden reduction efforts. The pro;::iosals
seek to accomplish this reductior: by: (1)
t-:arrowir.g the typ" of acquisitions that
mus: be reported through the
nouficatto:: process. (11 red:ic:.n~ the
doc:l!!'lents or information that must
accompany noulicat:ons. ar:ci (Jl
clarifying the meaning of the r:::u!ica:ion
n;Jes. The two proposals that de r:ot fit
this de~c:iptior. are d:sc:.iss!!d sepose . by entitiell that are not "eontrelled·· by
other persons f:-!quer.tlr are not
is to make the acql!ist!lons ~ if the
re;>ortable. The Commjesion ha'
ac:;u1smor.~ !'l•d been made direc:lv.
cor.c!uded :.hat such acqu1s1uon1 should
?:'opes;,! e ... ould til!:'l:nate a l:ttle ~sed
be reportable if the enoty s main
e:o.~:::;::tion to er.sure t.."l.i: certain
f..10:::t1on is to make the .icq:.us:uon and if
ilCQuisiuons ore subjl'c: to me.in::-:gf.:i
the ac:qu1S1 ti on would ha \'e been
ar.t;::-..:st rt,·ipw.
reportable hac the ent1:y·s ownen made
The Commission ir.v1tPs tnte~s:e:::
their acql.!isition.s directly instead of
pe!"Scns to s~bm1t cornmer:ts er. the
through that entity (or "acc;uiStti~n
natu:-e and ~co;::e of :ht- ;>robl1::ms
desc:-ibec in ~e P:'opose::i St.; t!men! of
vehicle"). The Commission proposes to
Basis zr.d P...::"?ose a~ .... e!l u t..".e
add a new rule. proposed l 801.5. to
ap;:::opr:a\er.ess of 1..':e ;::rc?o~er-:>:.ie:::s Tli'! Co:-r::::.ssion ir.·:1tes
be acc;umtion vehiclu. The de!:nitior. or
'tii:~G: att!!":!:·cr: ~o r.-rc?osa: 1
the terr.i "acquisition vehicle'' wowci be
.;:i:-::!••rur.; t!':e ··ac~·..:1.>i~'or. \'e~:c!e ..
placed in pro?osed § 801.l(r.).
r..:ie). ;:::::ccsa: 5 {cor.:e~·'.':g 1!-:e
For tax and othe: business rusons.
e~e:::;:it1::n of cer:ai:-: k!~ds of asse!s).
many acquisitions are road'e by a .newly·
propo,a: 6 '.con:e!'":':me ar: r:;c:Pase 1r. an
formed entity. The owner of that entity

typical..\y cont:ributea the capital or
~e.a fill' Joana that are uaed to m.Ue

the ac;quiaitian. Commonly. Uter an
1cqw1itioc i.a completed the ~al
IXlllenc! a{ eitbu the ac:.qwnd entlty or
the newly-latmad entity ia di11olved in i
1t&tutory merger.
In meat tr&Daactiom. thia formation of
an ei;aty to ~li.e an acqw.aiuon has no
effect on the parnu wbo are required to
file premuger aoufications. Tn:11caily
the newly-formef:! entity ia a wnoi;y
oWtied aubaidiary of an existing
corporauoa. Because. pursuant to
§ 801.l(a)(l). the subs1diarv 11 c.onuollec
by its pa~nt c.orporauon. tne n.;!es cee~
the ··w11mate parent entity .. to be :he
aeliwring persor.. Accordingiy the :ire·
existuig pa~nt corporanon is required
to file a premerger not1ficauor. ... ne\nc~
or not it creates a subsidiary to effect
.the acqumtion.
A1 the Statement of Basis and
Purpose to § 801.l(a)(!) notes. 1i :.":.:s
were net the result ··1.."le ultimate paren:
enttty would be able to evade tt:e
re-qu1~ments of the act by rr.anipu;a t:::~
the !subsidiaryj.- 43 FR 33456 ()uiy :il.
1978). Quite apart from the ques:1or. of
evasion. :.hat fili..'lg obligation 1s
appro?nate because the parent
cor;iorauon is the real par:y in in:e~es:.
The subsidiary. wha1ev~r the reasons
for its C'!Stlon. 1s not a tunc:~1o~:=i;:
bulllness. at leaat not unt1i !he
acqu1s1t1on i1 completeci. !111 a sh!!!
incapable of corporate ac:1on ur.::!
capital and corponite purposes are
suppiied by its owner. The ulu:nate
parent enllty 11. the:-efo~. the acq~:;::-:~
person. Mo~ve:. it is the cor.t:oi
obtained by the parent and the pot en na !
for ;nt1compeo11ve effects frorn
comb1n1ng its business Wlt.h tha1 of ~h~
acquired entity ther the act seeY.s to
ha~·e the enfon:ernent 1genc:es ~"i""'
These N!Uons for requiring
not1fic.at1cn.s also apply to aome
acqui11tion1 in whicn owners of
acqu1nng entities do not fit the
premel"!er Nies' defin1hon of ;n
"ult:::nate parent ennry." U. for exa:::;:!e.
four corpora tlon1 each acquire :.S
pe:cent of the voting sec:u::ues or asse:s
of another corporauon. the ac::;u1sittcn
would be re?ortable (asawnmg tbe· ac: !
s1z~·of-penon. 1ize-of-tnnsac:1or. a!lc
other notificaoon cite:ia are sat:s!:ec !.
The four teparate cra.naactiona woui~ :.e
uarr.ined to determine iI owne:-sr..; ;:i!
the acquired penon·a votlni secu.:-.:11!!
or assets by any of the fou~ 1a !tke!) !o
lessen compection. If. for pt:..~usts o:
ac:;uir:n.g the voting aecunoes. tnt fo-..::
we:-e to c.-e1te an enotv tQ maio:e t."te
ac::;w:sition. the anutru;t interest 1n ~i'.e.
transaction would be unchangec. In iac:.
suc."i acqw11uon1 ty;11cally are followed

Federal ~r I Vol. SO. No. 185 / Tuesday. ~J?mber 24. 1935 / Prop:o:aed Rules
1 a $Ututory tnel"'8er th.at is oot mbjec!
lO the rure's notification te.quiremmt.s

and that tran$fers direct ownership to
the four owne~. ln ~ instan~ not
only is the antitrust interest in the
traMection the 'eoe es in a direct
acquisition. the 1"Ulti"' legal ~ts in
the busine~~ ere identical: each would
then directly own ZS pereent of the
shares o{ the •cquired busin~s.
Ne,·crtheless. existing rules do not
cor:sider 1ny o{ these o"-nen to-be 1
p!!~nt o{ the •~iring entity (beeauu
lhl tt:e cnrity as that
te~ is d~fl::ed int BOU(a)(bl. i.e_ none
h .... eith:! 50 pe!'Cer.t
the '-otir.s
secur.ties of the ent:!'y OT' the contraet'Ual
l"'""·u to des!~ate a maior:ty of its
hc-e!'c! of di~-::tors:. Althout;h tbe
obi~cti,·e crite:-:3 of :h! C:'l.isa!"~ rules.
!i>.. t tht' one defining cor.::-oL have bee~
the key to n:akir.~ the pre~e!i'!! .-e\'ie"'·
progri.rr. wcrxabic in :::est
ci~.imstar:ces. tilt: consequence here is
tb ! cwn!:-s ::u y r:ot be ;eqi;:~ec t'l
r:.;:i::r. t!:c act;u::::ion. Ir: fa::. t!:e
tr!r::;ac:•~nn rr.1t;~! !!nt !>to reF~~;;!:!e by
:iny;Jr.t.
TwC' c:..a:n:;it:s ilk~:.,.at! !:ow t."ia rule5
d~ ;;(I: J!w;,:\:~ !'!':akc s:.ic: tr;;n~'IC!icns
~c;::"r•::~I~ a·::d w::; :h.;~ res:.:!: i~
i.-.app~pri?.'.!'. If th,. er.!1ty ~or,:,ed for
t!':C' ;11.;:?cs:- of ::-:;,k!n~ :hp ac:;.::!'.!ion is
• par::-.arsL;:. i:s ow~ers arc :lot
n-q:.::rcd :o rl'p':lrt acq:.::s1ttuns m1de by
the e::!;;~. tl:e e:::tity is :l coQoratc
ja:-~ n•:::!.!:1!. the :.rar:s•c:iur: a!s.:: may
not be l"'!?O~ab:c.
The p.trtr:ersh1;:i :n:ssc::on is usier
lt: folio~. Assume: l!le fo~: COQOrations
a:-t compc::iors of each o:..'l.e: and of t.b:
fi~ !o b~ acqwr·
corpo:-allcns. not p:irtners~:ps. The
•c:.iu:si:ior: b; the parmers:U;:> is not
reportable !.>e~use the par:riership does
nc! meet :he size-of-pe::;sor: lest o{
see!ion iA(a)l:: (that is. it does not have
tci:al asi:ets or ar•_-::.:al net sales of SlO
t::il!ion O:' more). anc it is !'lOt Cont.roiled
h' a::y other person. for reasons
dliuld
lose the advanta~ given them by the
aet in obtai.c..i.ng in!ormahon from the
owners of the new c.orporallon t!l.."'Ough
reques:i for additional information. U.
for u&mple. the acquisition vehicle
were formed sixty daya prior to filing for

ea

•c+-

:=r,4s

the SOeq'IM!Tll Kq!li'aition. the
911i~t ~nciM ~ hlfTe no

indicition ol what is ttlf: inteonded ta~!
and no basis for prevectma the joint
venture iL by it.el!. it does not violate
~ anritnm lll'W'S. Wlmt ttre itequuition
vehicie files
the rubsequmt
acqm~tion. fta cotfficatioc is li.lcz!y to
provide littie mdicaticm of the
c:i:>mpetiti'\"1! ~ap that could e'Xi1t as a
result of the transition. Moveove.r. lhe
°"'-ners might be bey-ond the reac of the
en!on:ement 1g-enoes· demand.s throush
,reqnests {or additional i.n!orcation.
In ort!er to emure acqui5itions by
newly fomied non-controlled entities a.re
reportable and an op;iortunity for
e:xarr.intQ$ competilrve con:sequences of
1ud1 acqusitions. lhe Com::.i.ssion
p:-oposf!' to treat suc:h transac:ions as if
lhe o"'-ners of the acquisition vehicle
had directly acquired the vo~
aec-.:.~ties or assets of the acquire::!
person. The existing def:.rution of
~person .. in § 601.l(a)(l) is des1g.ceci to
pre,·e::~ avoidance o! reporting
.
obligations by maiuns the for.::auon of
1ubs1r:lian" if'rele,·ant. Similar!\".
proposed § 801.S would ei.i!:lloaie ail
inquiry into th" rusons owners c."iose
the orunl.Z4tio:'lal fortr; use::! to ma).e an
ac:q~1tl~ The propouj ihouie of e:-:n!y fcor;>oration.
partnership. trust. etc.) or cot::bination
of entltlts ..... hether newly-formed or
already exi&:::--6. u long as ita principal
Pl!:"?Cse ia tc mair.e ar. acqi.:is:uon. The
-'efir.i::cn !1 not lun1:ec ro ent1t1es
e;;tec as evaSJon devices. Th:s :-ule
• p;::;i.u to al! new e:mt11!s· even where
the fo~ati.cn of :he e:"::i:y 1s dic:ated l:iy
aound bua1:-:ts! reas:ns. It includes all
ent111es except those that are

ntabliah.ed. ongoing businesees.
Ownen of an ongoing buainesa are
reqWnd to ttport acqui11ition1 of that
buainesa only i! the t:ranaaction mttu
the c:riteria off 801.90. that ia. if
atructund Mfor the purpoae o{ avoidir.g
the obli$ation to comply with the
requiremenu of the act.· Th.iJ ii made
clear by a p?'1lposed new example to be
added to that rule.

The Number of Young S«wities
Acquired
Section 801.13 establishes the method
o{ determuung how many voting

TM Val~ of Votzng Securitie3 and

As.reLS A.cquim .

Section !m.-14 establiabet the method
o{ determi.a.i.ng the aggregate value of

voting aecuritiea and auet1 held u a
reault of an ac:quiaition. The aggregate
total for each owner include:i. amens
oth~rs. Yoting aeo.uitiea and 111ets
acq~d by the acquiaitioi:i vehicle that
are attributed to it by propoa.ed
I 901.s{c). The attribution rules of
p&rqraph (c) are calculated in the aame
!ash.ion 11 the number of voting
aeewiti~ are calculated under propc.a.id
l 601.S(b ). The difference ia t.ha: the
dollar value treated u acquired by th
owner ia determined by a:.ultplyir:g the
qg:-egate value of voting sec-.mties and
useta held by the acquisiuon veh1c!e
inatead of by multiplying the total
number of voting aecunues heid by tl1t
acquisition vehicle.

aecunties are held as a result of a.n
acquisition. ACQ>~g tc that aec!lon.
an acquiring person hoid1 already held
votiJ18 1eewities. those to be acquired.
and.. as a result o{ p?'1lpoaed 1801.5.
those treated as beld or to be he!d.
Proposed 1801.S(b] pro,-ides the formula
for deter::n.i:Ung bow many 1barea held
When Attribution Cease3
by the acqu.ia1tion vehicle are at:ributed
Proposed l 801.S(d) declares that
to each of it• ow:lera. Paragraph (bl
votina seC'.iritie:i and useu helci by a:-.
eatabliahes two method:i. one for an
e:itlly shall not be treated as held b: it~
acquisition vehicle that i1 a 1\nile
ownen wbell the entity ceases to be ar:
corporation and the other for all other
acquisition vehicle. An enuty coses tu
ki..'ld1 of acqwsiuon vehicles.
be a:i acqu11ition vehic!e. punuttnt t.:i
When! the si."'l.g.ie corporation rule
·- the definition in propo1cd § 8011(nl.
applies. ead1 owner mult:pliu the total
when it commences ac::ive m.i:iage-nt~1
number of voting teciir:t1es wbicb will
of ii bua1nesa.
be held by the acqu.ialtion vehicle (for
A.~ia"oviLS R.~uired
example. lCXXl) tioe1 the J)f"rcer:tage of
ahues in the vehicle the owner hold11
The Cor:un:asion ;m:;io1e~ to est~'J!:~ 1 :
(for e:'l:ample. 2.5 percent) and that will
new proced~ to Worm t.~e acqi.:::-ec
pcnon of the acqui.·u·.g enury·s 1tat1..& 11s
give the nll:'lber o! voting seC'.iritles to
an acquisition ve!uc:le and the
be treated as acquired through the
cons'1:juent obligation of t..'ie acqu:red
acquisition vehicle (that i1. lCXXl x ..1!. or
pc!"!On to file notifications in response
ZSO votizli se~:uities). These vou:-..;
to filings by the owne:-3 of the veh1c:e
accuritiea would then be added to a::v
The new requin!:nents are similar to
other voting seewiues heid by the ·
those required by existing and propolt"d
owner to dete:mi.-ie if it had a repo:-nng
I 803.S(a) whid1 requires pel'3ons bu~ir:g
obligation.
·
votirli
securities to notify the isauer of
In other circumst&.ccea the number o!
iu obtigat:iona :o file a premerger
votins aecurities belc! by eec.h owner ia
notification form. The new procedures
determined by the 011t'tler' 1 beneficial
wi!l ret;uire owners to attacl. an
inten!st in the acquiai!jon vehicle. The
affidavit to their notification and re? or!
uae of beneficial ownU"siup criteria is
form"' stati.r.g that they have notified :!'H:
designed to facilitate t.ie calculation of
acquired enoty of the owner's 1tallJs u
proportional interetta where 1 aeries of · an acquiring person. The propostd
en:itiu including corporationa and
procedu.-es would be contained 1n a r:e"'
partnership:i obtain complex interests in
puagniph (c) of I 803.S These
an acquin!d entity. For these
amendments are di:icuned and set oi.;t
tranaac.::.:;iiy btcome ""acquired
;ir:-sons:· ln a traru..o,uor. descnbed by
~ 8Cl1.:l1. for ex.imple. those acce;iting a
non·cash tender offer tif the acquis1t1on
\·ch1cie"s se-::ur:ties would" not hold
\·011n2 s~r:t1es of the owner unless the
v1:h1cie were also a controlled person.
Owners do not b~come acquired
rr:sons solely because the \·eh1cle i!i an
~cc;:.iired perso::.
S,.r:.ion 801.10 Faiue of voting
·~~ ~·rities and assets UJ be acq:i~:
W!-1t;:: an acqu1sit1on vehicle ;;cquires
•Ht:s of vouna secu:ities. it must v•lue
!~1·::-: ic aceor::lar:ce w11h § 801 .10. The
(·"-:,.:s of :he \th1cie then ap;iir
:-·:•;:icse-:l ! 801.5!cl ro d~ter:':'lrne the
i:;>o:::or. of that qluc attributal:!e to ta:h

.,.,;u

Sc :::or. 8;JZ. :: (:J c;id (bl
r-:!::'.J!c:1~~.r: pe:-::!!.'ltc;!!s of 1·o!:n;

mmt first determine the number of
voting &ea1ntie1 of each das:s attributed
to it by proposed i 601.S(b). and then
calailate aa:mding to pn>p05ed
I SJ'l.ll{b) the ~ntage of \'Oting
securities it bolds.
Section 807~ Acquisitions
subseque!1t to exceeding threshold:
o.....ners of 1cquisition \"'ehicles are
required by § 801.20 to n!'Calculate their
entire holdings to detennine if as a
res.ult of the vehicle·s acquisition the
owners w;11 mett or exceed a reponing
threshold. Similarly. owners must
C2!c'l!!ate whether th"v conr!nue to
qualify for the five year e.xempuon
provided by § ao:-""l or the amended
tender offer exemption of i 80Z.ZJ.
Scc:ior: 801.:JO Tende:- offers and
acq?.Jisrtio~ of voung secunt:e'S from
t/Jird por.Jes: As wtlh other rules. each
owner inust determine for itself whether
it has repon1n; obligations under
§ 801.JO. U auc."t obli@ations exist. the
acquisition vetucle c.arulot acquire
'·oting secuntles until all of the stan.itory
waiting jjeriOO.., have ex;ared. T'J ta.ke
down shares befort then would transfer
the shares to a person (one of the
o.,.,-ne:-3J tr: \,olauon of the pl"l!me~er
rules. The acquired persor: muat file a
separate aot:fic.ation in r"sponse to
filings from eaC:: owner.
S«:ion 801.40 Forrnot:on of joint
ventu.'T! or ot.f1~r co.,,ar;t.1or:s: Owners
ca:: ha\·e L-: obii2a11on to file
notiiica11ot:s for the for.nanon of an
ac:::iu1smon Yehicle under i 801.40 as
111.·e:l as a separate obligation to report
acquisitions of t!ie veh.tc!e under
proposed § 801...S. The vehicle also can
have a separate obligation to l"l!port
111.·ht:n it ma.ku 1c::qw11uon1.
Proposed§§ 80:..l. &:12.2 and 802.:J
Acquisition of ~rs: When aneu are
attributed to ownen Wider these
proposed ruin. t.bey maintain the
exempt or non-exempt character they
had as a resi.:lt of the acquisition by the
vehicle. Thus whe!l a vehicle acquires
substantially all I.he assets of an
operating division. a oae-llurd owt1er
caMot cla1:n it n~ not report the
transaction because it bolds only one·
third of the acquired enu1y·s asse!3. The
owner has an undivided one-third
interest in all the as.sets and therefore
the transaction is not execpt.
Sec:.ion 802.9 Acquisition SJJlely for
t/Je pur;Jose of 1nves:mf!r.t: ln contrast to
assets. a specific nwn.bt':' of share~ held
bv t..'le vehicle can be a.nd are attributed
to each o....-r:er because eac.i share
represe:::.s an unciivided interest ir. the
1cqull'ed enUt]·. Nevertheless. the
Coir.mis.sion belie\·es :hat the intent of
an acquisition veh1c!e to acquire control

of an entity is 11 factor indicatit:g that
aone of its ownen have the "1olely for
the purpose of inve-3tment" intent
~nired for the exe:nption established
by I 802.1 At tbe Hme time the
Com.mission recogn1%e-s that attributing
1uc.b a.n ia&ent in all ac::quaihota Wll!
c::ute reporting obligations for passive
investcm m. for example. lnenged
, buyoat tramacticma where there is no
intention to alter the management of the
business and no desire by those
investors to play any role ill the
mani,iement of t.be buai!J.ess. As these
~ssive Ulveston are unlikely to ruse
anlltn:st conce~ by the11 acqu1s1t1on:s.
the Commission would welcome
augge:stions on how to exempt the:':': ret
include others who are part of a plan to
tracsform an acCjuired eotity.
Exempt tran.sac:ions gene.-ally: In
gene:eL the exempt character of •
transaction ia aot a.ff!1:1~ by the
attnbuuoa of a.sets or voting secun!Jes
pursuant to propo1ed f 801.5. For
example. transfe!"3 to or from I f~e~a!
agency (exempted by sectlon 7A(c)(-tiJ
or transac:rions subject to the approval
of the Federal Deposit Insurance
Cor;iorauon (exempted by ser::;on
7 ~cl(7)) will be exe:npt for both :.he
acqw.siuon vehide and its owners.
Owaers ne-ed nor re;iort transac::c::s or:
the baai1 of a~isillon' made by the:r
acquisition veiuc!e if the o.,.,-ners would
be exe:npt from reporn.ng a direc:
1cqui1illon equivale::t to I.he o::e
att.'ibuted 10 t.bem by proposed i 801 ..5.
A. Authority

The authonty for Puu 801~3
continues to read as follo""T
Authority: Sec. 7A/dl of the C!ayto!': Ac:. :5
U.S.C. lSat d l. u adl:ec !ly 1ec. 201 of t..'ie
Han-Sc:ott·Rod~o A.:::.it..""U61 lz:lp:-ovr~er::s

Act of 1;;e.. Pub. I.. ~3S. go S1a1. t:oo.

B. The Commission proposes to
amend it3 rules by the additior: of
I 80'1.l(n). I 80'1 ..S. and an Example 3 to·
I 801.90. as tel forth below.
PART 101-COVERAGE RUL.ES

f 101. 1 Deflnttlon&.
(n) Acr;uisiu·on vehicle. The temi
-1cquis111on vehicle .. means ar.y e::::ty
or senes of entlues Conned or il\·a1ied or
principally for the purpose of acquir:r.g
voting sKUl"ities or use!s. A.". e::t::y is
(or a series of entities are) an
acquisition \•ehicle notwithstanc::i; :he t
the particular orgamzat1or.i! for~ r1q.
pa:-:nership. corpora non. etc.I chose!":
fur.hers a legitimate busir.es~ pur;:ost ur
that the enury e::gages (or en:.llles
engage) in incidental or aunor bus:::es~
1C!1v11ies p:-ior to lbe acqumuon of

3at.;a

Federal Register / Vol. 50. No. 185 / Tuesday, ~te:::::!::er Z4. 1985 I Proposed Rules

.."ting secunties or assets. An entity
su to be an ac:iuis1tion vehicle when
-·~ entity commences acti~
management of a business other than
the buainess of acquiring voting
MCUntiH and HHlS~
~1JJ11pfn: 1. A parmrnhip is formed by a
CDfl)Orauon. A. 411d two indiv1duala. B and C.
A has &Mual net salts of S1 billion and is
enut1ed to 40 percent of the 1'1"0fits of the
partnership (or 40 percent of the uuu upon
dissolution 1. Tbe partnenhi~ wh1::."i l:as r.o
bus.neu of itJ own. acquires Oldeo for SSO
111111ion ,..th b11n'- loans gt:uantee!I by A. B
and C. Tbc partnel"Sh1p 1s an 1cqu1srnon
qr.id,. ~ard!ess of the ;)u,.,,osl! for •••h1ch it
"'"s fomied. :ncai:se 11 the :i:ne it acoual'Yd
Oidc.;u its iole f.incuon· "'U to mair.e the
acq.iis111nn. S'!auSI! ~?"?orauon A is an
acqu1smon ¥eh1cle. ··A · w11i be req1.11rec to
report tile a~ui•1Uon of 01.:lco punuant to
l !ll.'1.5 unle" the transa:ticin is otherw:se
e).t:mpt.
and -C' may also be re~::1red lo
file r.utificanons if thn mnt till! siu-of·
person and othll!r repnn1n! Cl"ltll!na.
%. !'ora11o:i :o e~port A·s
pr.,!iucn. Altl'IC'i:'h !ht cor;i~m1t1on wu
formll!d ar.d .. board or dirll!cton mer. the
r.or;ior.won nrvu be3;ir: operauons. Thrre
vf'ar1 later A c.,ntr.b11tcd 115 p;;tent to ~r,,.co
•nd sold sh•~ts of Nll!wco to B. C •nd 0 on
thl' tr.rms outlinll!d abo"' whll!:: :hr four
C:01'i'•.1r•Uo!ls C:rc::drd tc l:>v\ Olceo. Sll!""co is
an acQ:.1s11:or: ,-eh1eie b-.e.ai:n it nll!ver !'lad
any h•J~·~··~ o~erauc::s ar:d is now be1:i~
a,.,i .. ..! ui pr.,c::pally for the puryon of
acouinnv O;i::o.
~·. s~.:co. an acqu1s111on veh1cl!. tranafr:-s
all 111 assets 1n uchan~r for .4Q pll!rcen1 of the
vottnJ sec11rit1es of Oldc:o. Nll!wco uses it•
O!dc:o ne-.:.nues to norr.in•lf d:rtc:ton of
01..leo. Newco ceases to b• an acqumnon
'teh1cle ,.-he:-: it bll!a1n1 to direc:: or pan1c:pate
in tlle mar:a@ .. ment of Olcico notw11hs1anding
that :'.ll!wc:o·s only aue:s are voti::~ sl!C:.U'llles
or Oldc:o.

··s-

s,.,,..._..

§ 101.5 AcQulalllons tly an acQui11Uon
'11cie·.

,a 1Owne~s (holde~s of vot:::g
securities. ?a~tners. etc.] of an
1cqum11on vehicle shall. until the t\'ent

ahall no longer be treated u if they are
desi=ibetl in paragraph (d) of thia
al10 b..eld by iu (or"the!!) owners.
aecuon. be treated Under these rules u
if they auo hold on a proportional baa11
~a.rnplt!s: 1. A Cofl)Ontion t1>311!ther with B
voting securities or uaeu held by the
Cor';>oranon form• partDenhip for thll!
acquisition vehicle.
purpou o( buyicl 01dco for SlOO million. Tbe
(bl The number of voting aecurities
par:nll!rlltip (orm.1 Ne-c= to buy the Miam of
Oldco. Tbe parm.nhlp and Nll!wco are an
held by an acquisition vehicle that are
ae.quis1oon Teftide bec.llUM. puna1n1 to
treated as if they are or will be held by
I s:n.1(11~ they are a ac'lft o( enuuu formed
eacb of its owners 1hall be c::alc:u.lated u
lor tb.11! p!Ul)OM of .cquinng voting ftClltlOH.
follows:
A baa '\otal 111et.t •alued at S1 billion. B
(1 I If the acquisition vehicle is 1 1ingle
Cofl)Oranon has 11aet1 totalling $iii million
corporation or a single corporation and
and had net .. In o( SS cillion in thll!
wholly owned subsidiaries of that single
pre!lous year. B i1 entitlll!d to 5 pe=r of thP
corporation. the nu.'?lber of any clau of
proliu of I.he p&rmPl"lhip and would receive
voting ~curitiet attributed to each
lll'On di11olu11on 10 pereent of it• a11ets.
o""'-ner 1s the total number of uc.'l class
A!tho~ _A .. dou not c.ont?1)1 the
partnersiup punuant to t 801.l(bl. it will i:-~
of voting securities held by the .
reqlUl"ed to file a nonfic:anon bll!cau1e -,a,··
acq:;isition ....ehicle muluphed by the
meets the n:.11!-of·peraon O"lten~ of 1K11on
percentage of voting secuntie.s iuued by
1 A(a J(:J of I.he act and bec:av•e. punuant ro
the single corporation held by eac."1
l &01.S. A bu atlJ'lbuted to i! an a~u1s1111Jn
owner.
I.hat meets the aize-of·tranaa ::ion O"ltr:-:1 ol
(Z) In circumstances other than those
lll!Ctlon 7 A{a)(Jl(Bl of the act. Tbe ,·aiut oi
described by paragraph (bl(ll of this
the shares 1n Oldco that will be dll!emed
aection. the number of any clan of
acquired by A i• S95 cnillion. tiat 11. $100
voting securities attributed to each
million (thl' ac:qu1s1uon pnee t times 9S
owner 1s the total number of each clasa
pll!reent (the ;nooportion o( ;irofits :o wl:1c.~ A
ia mmlcd). -a·· ia not requ1M to fill! 1
of voting securities held by the
notification both becauar rta aull!!I and
acquisition vehicle multiplied by tht'
aMual net sale1 are Ina than the m1n1m11m
larger of the follbwing ratios:
au.e apll!Ofied in tl\e act and beca11se the
(i) The proporuon of profits of the
value of Its acqui11uon re1vlts 1n ..s·· hoic:,.,i:
acquisition ven1cle to wh1c.'l each owner
lll!ts than the SlS aullion in uaeu and ¥011n~
would be entitled iI all profits were
~nues.
distr.butec: or.
· • %. Cor;:>orauon1 A. B. C and 0 formed
(ii) The proportion of assets to which
Newco 1 tn wh1c.i eacli hii!ld ~ percent of:~~
each owner becomes entitled upon
voting sll!CUMllll!a. £.aeh carporauon hu
dissolution of the acquisition vehicle.
annual salu and to~l uaru Ill excess of 51
(cl The value of voting secunt1e5 and
billion. Aft!f formation Newco I r...ga~e~ '"
no bu11neu act1vlly bec:auu the bu11npu
assets held by an acquis1uon veh1c:e
o~orn.:ruty for wlucli it waa formll!d
that ane treated as if thev are or wtll be
diaapprtM. Subaequently A. B. C ar::! :l
held by eacn owner 1hafl be ~lc.ilated
dll!Clded to buy Oldco for SlOO lllJllion u11r.;
as follows:
~ewco I. !'lewco I then fomte-d ....ewcc U :o
(1 J If the acquisition vehicle is a single
buy certain uaeu of Oldc:o and ~ewcc II! :o
corporation or a single corporation and
acq11ire the ¥OUJ\8 secunues of Oldco ..i,. !!. C
wholly owned subsidiaries of that aingle
and 0 c:orporauotu ere uc!i. pun11ant :o
corporation. the value of an acqws:!ion
f aOl.S. de•med to be ac=lumng S:S :n1i;,.;:: :n
attributed to eac.'l owner ia the value of
aanta and ¥OUJ\8 tecurilles of Oldco anc: w1il
voung sec:.i.nnes and asaet1 held by the
bavll! to file not1fic:1uon1 pnor to the
acqvisiuon. They an! aharehoiders of Sewcu
acqu1s1tion vehicle multiplied by the
L wbu:h. although fanned for othu puTj)osu.
percentage of voting aecurities iasued by
wu at the time st became a fune:ionrng
the 1ingle corporation held by each
• buainll!st entiry ued pnnc:ipally for t.h,
owner.
purpoSll! of ac:qultifli Oldco. Nll!wco I will alsu
(Zl In drcw?Utances other than those
ba¥e to me a nonficauon for the acqu111t:or: u
described in paragraph (c)(l j of this
it mHtJ thll! ss:t of ~on teat of aecuon
aecuon. the value of the acquisition
1A(al(2) of thll! act.
attributed to each owner is tht' value of
. Aftu thll! 1cqui1iuon of OldCl:l and it'
the voting securities or assets held by
assets. Newco II wu mersed inlo Newco I.
Newco I then 1ought to acquire Othe!'OIC:cc.
the acquisition.vehicle multiplied by the
Becauall! Neweo I i• no lonaer a c:orporatt
larger of the following ratios:
ehell with neglible bv1inu1 ac:tiV'lty 113
(i) The proportion of profits of the
acqui11tion of Ot.heroldc.o i1 no long'~
acquisition vehicle to which each owner
attnbulablll! to it• 1luireholden pursuar:: •o
would be en tit.led if all profits we~
I 801..!. The obli11tion to file 1 nottfic•oen !!
distributed: or.
there ii one. will rtit aolely Wlth Se"' cc l.
(ii] The proportion of assets to which
f I01.90 Tranaac1Son9 or devices tor
eac.'l owner becomes entitled upon
8¥04dane4.
dissolution cf the acquisition vehic!e.
(d) When an enti!y ceasl!' (or a series
of entities ceast') to be an acquisit!on
E.t.ampies: •
3. Corponuona A. B. C and D. uc.!-... ,:•.
vehicle. the \'Oting securities or uset~
annual net aalll!s or total aull!t1'1n ex:eH ol
held by that entity (or those en:ities)

fel"porauons decide on the foUoWUlg
balan~ 1heet for person.a who have
aiu:u of acuon for the PW"POff of avoacilni
filina 1 ooti/icacon under the act. A.'B. C and none. See 43 FR 33474 Uuly :n. 19'78). In
advising newly-formed persons of their
O cori>arationa ead! acquire one quaner of
obligation to prepare balance 1heets. the
the out111nding 1ecunt1es o! 1.ittleco for a
tDtal of S'l million. Littleco ia an ntab!Uhed
Comm.inion aaff bu advised that
canwacturing c:cnce:n wtth annual net aales
acquiring persom should not include u
and total use11 of leu than $'10 million. They
assets cash or loans that will be used to
Ulen lend Littleco $'100 millioo and cause it to
make an acquisition. The Commission
ac:qt.liiT Oldco. Bcc.auae the purpose of
now proposes to adopt thia staff position
a~uinng Oldc:c through Littleco (whic:h does
and incorporate it in a new §SC1.1l(e)
not mttt the siu of penon test of t 7A(a1(2)
which establishes the procedure for
of the ac:J wu to avoid tTporung the
calculating the total assets of newlytn.nsac::on. the u1s1ence of Littleco u an
for.ned penons. The proposed rule diJes
o:igotr.JJ corporation....;11 be disr"!ga!"ded.
not alter the manne! in which ongoing
WIUC uttleco wtil be tnaied IS 1f it wer"! a
business entity forr.:ed o~ ••·11led of to
firms detemune whether they meet the
~::1:-e O!dco punuant tot 801.5. -A-.'"!!"".
act's size-of-penon citeria. because
-C- and ·o·· each "'·ill be required to M!pon
they have regularly prepared financial
!!le acqi.:ismon of :.S peree::t or Oldco.
atatemenu 1ubject to § 801.ll(aHdJ.
The distinctior: between the
1.. Section 801.11 Total Asseta of a
calculation of assets for ongoing
l'\ewly-Formed PenC'D
business entities and newly-formed
The Commission proposes to amend
entities is based on the compet!tive
§ e~.11 to cod~fy a longs:and!::g
poten~ial of a newly-for::ned entity and
in!o~al ;:iositlon of the staff tb~t a
on the certainty and simplicity of the
newly-formed entity ge::erally should
existing balance sheet rule. In most
not include funds used to·make an
circumS\ances the s1u of an acqumng
acquis;:ion in ciete!'::li::1g its si:e. Under
penon provides scme measure of its
th:s ;:i:-ep:::sed rule. if an en!lt;"s on!y
competitive presence. Congress
asse!s are cuh tr.at w;Il be used to
. concluded that the amount of saies and
~e the ac:;uis1t1on and sec.:rities of
auets were useful c::tena. These size
e::t1:y it is ac:;uinng. it generally will
c::itena can be :1slead!ng. however.
not l':a\·e to file for :.':at acqu1liition
when applied to entities formed !or the
be:::ause the new ent:ty w:Ji be deemed
purposes of making acquisitions. Si.ch .
too s::lall to mee! the acf! size-of' enuties t;-pica!:y have had no sales ano
pe!"Sor. test. Cod1!ica11on of this inforr.:al
frequent!y ha ..·e no uaets other than tlle
posrnon is i.'lte::ced to limit cove:aie of
cash or loans used to make the
the ;:irer::e~3e:- ruies :o t~ose situations
acquisition. In suc.i circumstances the
whe:-e a:-: a::tit:-.:s: Yiolation is most
acquinng person !las no compet!l1ve
lil.e!y to be ;>resent. that is. where one
presence. The ac~u1S1tion does not
busanl"~• c:::1ry of a subs:antial s;ze
combine businesses and t.iercfore
a:::;u1res anothe: :i\!s1::ess entity of a
cannot reduce cor::petltion. The
s1.bs:c:r::1al size. The basic rule i.s
transaction ine?"e!y c:.l.:anges the .
cxpia:ned bti:w. The proposed r-~Je
ownenh1p of a 1i.n.gle Oll801ng b111a.ness.
contains an excr~tton where the new
Accordir.2ly. the Commission has
er:::1y acGutres asse:s or voting
concluded that no purpose is ser.,.ed by
M?::-.1:;!;es of rr.c:t than one pe:-son.
requiring such acquisitions to be
reported. The Commission will not coWlr
Tf:t P..Jt;.tost o.f tf.t P.-:;postd_.Rult
the cash whicil flows through the newlyA nouficatioo must be !iied prior to an formed entity to ~ake an 1u:quisition.
acqu:s;~1on oniy :! ti:! acqumng ar:d
because those assets do not add to the
acquired pe!'sor.s meei the minimum size competitive presence of the business
c:ite:-:a of sec:1on : A(a )(:) of the act. In
entitv whic.i results from the
genera! thi! requires one of ~e parties
acqutsition. (Of course. competition
to have at least &Mual net sales or total
could be lessened if the newly-formed
assets of S10 rrallion and the other at
business were owned by C".ll'Tent or
leas: annual ne! sales or total assetJ o!
potential competitors of the person
$100 million. Se::::io:: 801.'ll establishes
being acquired. P:-opoaed t 801.5 1s
the _procedure by which the size of
designed to ale~ the antitrust
parties to an acquis:::on is to be
enlorcement agencies to such
dete~1ned. Ex1san~ ~ &n.11 p~vides
acquisitions by requiring certain owners
that the anr:ual ne'. si!es and total
of newly-formed entities to !iie
·se!s of a pe:-sor: shail be 1he sales and
notification,.)
,e!s s:;;;.ted on its las: regu!ady
Similary. whe~e the newly.formed
pre;:iarec !:r:ar::::a! sta te:-::e::ts. I: does
businesa acquires voting sec:.uitles or
no: d::e::::!v add:ess :he questtcn of how
aueu of one-pe:-son (including
to cak:.:la:~ the size of a pe:-sor: that
aecu.nt1es iuued by ~ntitie1 wtt.lun that
~ •.ion. !Uther than ac:qwre Oldco directly or
from a new businesa entity to a~wre Oldco.

I .Proposed Rule~

38749

penon) in 1everal transactions._ the prior
poaaeseion of voting or non-voung
aecurities of that person generally does
not enhan~ the anticompetitive
potential of tbe tranaaction. The al.ready
acquired tealrities do t10t a:in1titute a
business enlity which when combined
with additioua.I aecuritiet of that iasuer
will lessen competition. There ia only
one busineaa being bought. However. if
the newly-formed entity acquires assets
or voting securities of more than one
person an anticompetiti\'e combination
could result. For that reason an
exception in propoaed l 801.ll(e)
requltes counting cash. loans and
1ec:.irit1es in those c'.rc:.imstances and
would make 1uch transactions
reportable.
Although it might be argued tl':at
existing corporations also should be
directed to deduct cuh or loans which
are earmarked for making the
acquis1uon and aecurittes issued by :he
entity being acquired from their tot~l
assets. the desirability of such a ru1e is
more questionable. To direct that sue!':
deductions be made would require mar.y
persons to prepue a new balance sheet
to dete:mine the reportability of
acquis1t1ons. Rules explaining how to
prepare that balance 1heet would
reintroduce the complexity of
·
compliance with t~e rales that the
Commission eliminated when it
promulgated the existing financial
stater::en:s rule of§ 801.ll (see 43 FR
3J4i3-4 (July n. 1978)). The
considerations set out below conf::-::: :hr
ongmal conclusion that the~e is no ne!-:
to revise paragraphs (aHd) of :he
existing rule.
Fint. the existing rule. to a large
degr-ee. automatically ar.fres at the
same result for ongoing cor;:iorat1ons as
proposed § 801.ll(e) does for new!y·
formed cor;:iorations. Unde~ :he ex1s::r.;
balance sheet rule. loans made to
ongoing corporations for the pur;>ose of
making an acquisition usually are not
included when calculating an ac:;:.iir.~g
pe!'Son·s total assets. Such loans are
normally made just prior to
conswnrnauon of the acquisition and are
the!'efore not reflected on the pe:-son's
last regularly prepared financial
atatement. Con.aequently even if loar:s
ought not to be aiunted there is little
need to deduci these aaaeta because
they usually are not included.
Second. there is value to the
predictability and convenience of the
balance sheet approach of the c:.irrent
rule even if it reaulta in small
inconsistenciea in measunng corporate
1ize. That approach ailows the vast
majority of1irm1 to rely on their balance
aheets to determine whethe:- they have

Federal RePst.u I Vol. so.. No. 1a.s I Tue.sdiy. Seo-c~"1~ 24. 1985 I Propose"rl Rules
a.n obligation to file a no.tiflcation..
Businesses can quickly deterinine from
existing record$ whether they must file ..
That convenience outweigM the value
o( tryifli to make mOT!! preciM! or more
uniform tbe calc-.ilaticn o{ d:ie dollar sue
criteria (whi'c::!! al"!! at be3t cmty very
preliminary ineuurn a{ emrrpe!lt!ve
1ignifican~ ). Acomfingfy the
CommiS"Sicm will C"Ontinue to rely on
~larly ~red balan~ sheets for
d~~ining the size a{ ongoing
bu.sineues. To do otJ:rerwiu would •
~arily complicate the roles.
introduce uncmainty aboat coverage
and make the i)roc"s of c:alc-.!!ating size
much more e:uc: than is wam1nrec b;·
the l'CU!h measure f!'!tab!ished by
Congress.

The Propos~ Rule
Cene!"al Rule
P:-ooosed s~:ion 801.ll(el states t.'lat
it applies only where the pe:-son does
not !'lave a regular!;; prepared balance
shee!. At. a prac!lcal matter the see:ion
a;:-plies on!;· :o newty.forr.led entities
(that are nor controlled by· any othe~
pe:"Son). Persons with outc!ated or
othel"'Ntse inc:impiete balar.ce sheets are
re~uired to rec::nst:-.Jc: the~ !i::ar:c1ai
documer:!s ln ac:orcfance wit.lo:
parag:aphs (aHd! of this sec:ion.
3ubsec:ion (e!(l) sets for:h the general
.rule :hat asse!S i.r.cfa:!ing cash or
sec:;:'itles are alwavs included on a
·pe~son·s !:laiance sheet. except for cash
th::it will be used :o z:3ke ar. aca.:isltion
an:l se:-.:..,lles issued b~· the acc;~ired
pe:-son (or an ent::y within the acquired
pe!"sor.l.
The exclusion of cash. loans or
secu:it1es es:abi1shed by ;iroposed
i ao:.:lfel con::::ues 1.:nul the acqui:-:::g
pe7so:: has a :egu!ar!y ir,e;::ared balance
s!':e~t. ~.. ! o::ks1on ~eans. for
exar.:pie. that a seri" of separate
acqi..is111ons of voting secur::1es of one
;ierso:: O\'e: a four mon:.i period by one
ar:quinng person will be treated as if the
st!;iu·are trar:sac:?ons all ~c-.:r:-ed at the
sa:ne r:r.ie because the non-ir:::lusior: is
not en~c!c. by thr !irst acquisition.
Ne. '.!ler t::? :ash to be used to acquire
acdi:1ona! \'Citing secunt:es ::or an~·
v.i:ing secuntles of the sa:ne acquired
person a!ready heid by the acqui:-:::g
person are counted as asse!s unnl :.iey
appear o:: its rqular!y pre;:iared balance
shee! Thus. if the acquir:ng person
w:ti'lot.:! a rPg>Jlar!y ;ir!;:a!"'ed ba:ance
s!:ee: accl::':':~!atl'd s:oo million in voting
se:u:-:t ..~s of o:ie person ov~!" the four
:::or:!!: ;ie!"iod. i' wcul.:l not rnee! t!':e
siu·cf·;>e!"s::::-. tPs! if :ts on!y 8'5f!!s "''e!"e
!'lose \'Ot:ns sec:.;:-:t1es and cash 10
ac:;u::e :':lore vo11r:s stcunli"' oi 11':;,1
same ;>e!"Son. In contrist. the proposal

has no effect OD the aql.1.Uiti.o:i of
assets. A.sets miuzt be rt:Lec.:.e.d oo !.he
newly·Cormed f!lltity'a b&!ao.ce sb.eet u
aeon as they are acqttired.
The first two exampl.n ill¥scate how.
in zenenL proposed i 801.ll(eJ
me~ures size . .E.x.ampJe 1 i.Iluse-ate-s the
applicability o{ pa.ragrap.b (el whe::i only
cash is used in the ac:qtrisition. Example
Z illu.strates the applicability of tfle rule
when the newly-formed CDmpany bas
non-c.ash assets. .Ex.ample Z dso
illustrates treatment of cash u an asut
. of an acquired person. Since the rule
only allows a person to exclude cash
·used to :naie an act;uisi.tion. • other
. cash is always included as an use! of a
newly.formed acquir!d pe:-son in
determir.i::g ill si:e.

competitive li"gnilia.DCL Ho...._u. the
~tea i.a Got awweoi good
b~ renaa• for C'N,,ljng 1 new

mtity with c:irsil aa its primary u:te! far
the purpo9'!! f1l becoming .n aeq?rTSrt1on
ta~ nor is !iris a typical farm of
transaction. Thi.IA it docs oot seem

aecess.at')' fer the pre.merger nb.es lo
Ire.at n.ewly-(or=ed ~red person.s 1.he
e.IJ1le u newly-htrmed ecq11inng
~ens. Aceord:ing.ly pro9QSed
I 801.ll{c)(2l c.alci&lates tbe tocal assrts
of a newly-fomte'Ci ~ ~on by
,including all aS"Sets.
C. Commission proposes to 11!\'ise
f 801.ll(a} acd add a new I 801.ll(e) as
aet forth below. New l&n~ge is
•
in di ca ted by arro...,: (• aew lan.gu.aS'I! ~ l

f I01.11

Annual net ..-- and tclJtl UM\
anc! any securiues of B that it holds.
the acquired person at the hme of tr..!
Sir:iilarly. in ineuuring the size of the
acq14is:ion .....
newly·!ormed entity to dete:-m:ne
.. ~pies: 1. A11YD1e that A 1s • new 1)·
whether the 1cquis1tion of B must be
· formed company wluc:il ia not c:onU"Ci!eo b;
re;iorted the ennty must include !he
any othe~ tnmy and whose formar1on "nc.1
securities of A it holt!s and casn lt:at
1ub1111:t to t 801.40. A.uu:-.. al.so &.at .:. hH
no Hits and doe' DO( liavt the firtar.c:.il
will be u3ed to acquire assets or \'Oti:ig
11a1e:r.e::ts dnc."'lbed in puagra;:il t'I oi :~.. !
sec:ir:ties of A. EJtar:iple 3 i!lust:a tes the
see!ion. A planJ 10 borrow S"lOS 1T.1 !!ior. ::-:
caic1.llation or total asse:s wben the
cuh and pun:han 1Sft!s ~ B fo~ !":nQ
·newly-formed e:i!ity will make two (or
auilior. A., total Hftts •~ dete=.1~"c ~'
mer!!) acquisitions after its (o!":':lanon.
1ub::ac:t1ng tht SlCXl lalllio11 rt:a~ 11 wC:i .;S• · ..
acqutt"f e·s· .Ull!tl frocn tne S'J05 1:":''.1on '.,.• :
Newiy-Fooed Acquired Persons
A "'ii! ha't ar the ti~ o! tlie 1cc::.1s1'..;.-.
The~e appear to be go"d M!asons for
Therefore. A bas 101ail uaets oi s.5 ~.,;· .:.·.
c:'!a~in; a new e:::i:y with (ew ass!'s
and does not m~I the 11zr·of·pt~sn·. :.;· '·
ot.!':e~ than cash to make en acc;uis111on.
sec::1on iA(a)(:?).
2. In example 1 a!:iove. assi.::nt :::, : ..i. •· .:
Suc!i transac:ions are frequent and. as
at the nme 11 acquires !rs usets. !".a' t S?~
discussed above. 11nlikely IO hlYe direct

Federal Register / Vol. SO. No. 185 / Tu~day. Se?tembeT 24. 1985 / Propo11ed Rule'
m1!Jio:: in cash and a factory value:! at S:O
· n1iiion. A w1il exchange I.he factory and SBG
million oash for B's assets. To determine A's
total assets A should subtract from the sas
aullion cash 11 has bol'T'Owed the S80 m1ll1on
that will be used to acquire assets from B &nd
cdd tht l'l!m11nder to the value of tr.e factory.
Thus. A has total auets o{ S::S atiJ.lion. Even
thou~h A wt!! use the factory as part o{ the
consideration for the a~u1S1hon. the value o(
the factory must still ~included in A"s total
asHU.
Note that A and B may also have to re~r.
the a~u1s11ion by B oi A"s con-ash assets
(i.e_ tl:e fact=ry \. for that acqui~1ttcr- the
value of the cuh A will use to buv e·s uae:s
is not excluded fro:":": A ·s total u,~ts. TI:us. in
the acqu1s1uon bv B. A·s total assets are S10:
tr;~~~.o~.

.
J. ::i exa~;:!e 1. us1;::.e :ha: .14,. bom:w•
Si 5') r:u:i1on 10 acq111r~ 5100 mi!li'>n or Ust!S
!ro~ ;:>erson B ar.e 5-15 m1!!;or. oi .,.ot;n;
sec1.:"'.::~= cir pe:-s.Jr. C. To d!:emune .r.S s111;

for ;:>w:;lnses of lls icq1:1!ll1on l!cr:: pe!'"Son e.
A s.;~strac::s the SiOO mtl!ion tb: ;t ,...,II ..:H
ro~ :!:at ac:::ussn;un. The:i:fore. }. l:.a!- tot•!
~r of dirr.ctors that each
l"!4S! may tler.t. The Cor::rr.ission new
p;oposes to codify ::.:s staff advice by
rens•r:! the fo:-:n:.:la for cakulattng
·
holdir:~s of \'C1t1r.6 !!'cur:r:e~ con:ained
in § 801.12{\J).
The \'O!::-:;: s:~er:2:h for:T'.1.ila is
i:::i)Ntar.t to- the ao!':"',::":!Strahon of the
pre~er~e~ noc;fi~a •?on orC'~rar.. Stveral
~;pressec u a percentage [. wh:d:l • The ra oo !or eac:i c~ss of voting
sec-Jrities ~uals;..,.
(i) •iA)..,. The ::u:.:'lber of votes for
directors of the issuer wiuc!: [ voti.-:g
ntW'llJes pr-e.ser.t!y er.u:.le] t.':e holde~
•of a class of vo~-.g secl.!.-it1es is
e:-:::tled .... to c:ut. •and ... [or.] as a
re~ui: of :.':e ac:i:.::s1r1or.. will ~ becor."le
er.:1tled...,. [ er.::t!e !he aci:p.:i:i::g
't3on) to cas:. [:ea!"'S to] ~CJ\"ldec
..... (111 ~(E) ..... Tne total n:.::::be~ of
votes !or Cl:e~!O!"S oi the issuer wh1c.'i
pr~ent!y :nay be c:-as: ~by that c!as.s .....

•.nd•

[or]
wh.ich will~ ~tit.led lo
be ca.at. •by that~- ci11rr tbe
·~~ [wtu.d2eTU i9 gnall!r.] •:
multipl.i.ed by.
fu)(A) th.I num~ al i:Li.ioectcz::s that
c:lua ~entitled t.o de:t. diVlded by. (B}
the tow number of~ ...
Eu.mpla: 111 eadl of die following
uampie1 ccm.;i..ay X bu !'WO c:i.aaMs o(
common 1todr. -..ociq ~ dau A.
caaai:atmg ol 1000 9harft w1'th 1.di share
bavina one voce. and clan B. caaai•Ulli of
100 aha,re, with eadl sl:.are ba viag cm• vote.
The c:.lua A 1t:an1 elec: {ou.: cI tbe ten
dirKtors and tr.e class B &hares elect aix o(
the ten di:-ectors.
~ t.lus 11n.non. pf"Ol!Csetl I 80'l.1:!b l
~ires calcuiauons o( the pe~iagl' o{
vo 11.--.g sec:::i ou b.ei d to be in.Gir 6"0rd1Jl8
to the foUowu:i.g fcnn11l1:

leQl"l

tle• el t!lie AitU! iM llllT teal U:r.e

~!'t"' c:a.b.l.a Cl!!l:i flor -:±i C::--.. Y
~ a mm! oJ
~t p.o poen:mf plue 36

se

pe"'IZlltl rzl cba -a.c ~· ol ~y
:L ....

. .
.

4. s.:tioa 91..l3

•
Acret&Oc>a o( AJ!Mt1

eel Voc:iq Sec:mitiet

SediODI 80l.13 and lln.14 reqoir-e
parties to a~ate their purchase' of
voting 1ecunt:ie-s and anets from the
same pencn to determine whether t."ie
act'• lS percl!:lt o{ voting securities or
SIS m.illlon notific.aoon lhruhol~ are
met. The purpoae of 1ggreog1tion 1s to
tn?at acquisrnons that are split into
aepani~ transac::ion• the &&me u
acqui1it1cna that are con1ummateci in a
single t:'ansaction. Unfortunateiy. the
ex.istir-i rule cao require ~ated and
Oil'l"C:e~so~ to
bold:.~• of clue B ttoc:it and no addit:onal
add :..'le ..-alue of any us~.J 1cqu1:-eci
percenc.ase ~:wed =-:m !:i.oid.i."l~I of claas A
within the put 180 day• to the va!:.Je of
uoclt. Conaequc:uy. Y !ioli:il • tow o! eo
any presenr acqwsiuon of assets fror.i
perce::! of the voti::a 11c:w.::es c! c:ompe::y X.
the same se!le:- to dete::nill'I! wne:::e~ :he
1. AS1wne due company Y holds SOO sha:es
o( clue A 11oci. and no sbans o( class B
present purchase ia re;:>ort.able. If aii
1toclt. Sy ¥\rtue of ill dus A !'l"ldifli'I. Y has
other reporung :-equ1reme:'lt!I ar-e met.
500 of I.be TCCXl 1001es wlucli may be cast by
therefore. an acqw:sition of SlO miilic::
cJau A to elec:: fo1Z1 o{ c:crrn;.acy X-1 ten
worth of assets WOWd have tO be
dinccors. Applyi"' the formula. Y c:al~res
~rted if it followed a $10 million
thar 11 holds S00/1000 x 4/10 or :0 pe=t of
asset p~aae frt>c the ~e pe~c:: :!':e
the vo~ aec:-.:."lUn of c::iopa:y X from its
previou.a mo.0th. Wbere the ongtnal
bolciir4s cI c:.!au A uoc:lr. and ao 1d.:ii11onal
·acquisition waa o{ vour.g secu."l:.ies.
percentaae denved !rom ~!dings o( clua B
I 801.14 imposes sU'!liiar reqwrez.e::u
11oci.. Cons~vently. Y holes a 1:::-1.al of Ul
pen:enc ol the vonng 1ec:-.:nnes of company X.
but includes no ~av time limit for
3. Asswne company Y holds SOO 1ha:u of
aggregatmg the current acquiswon oi
cl111 A s1oci anc eo sha~s of c:lus·S ,rock.
usets w11h the earlier stock pu~!:aiC
Y calcu!ates that it boid1 Ul perc.enc of the
Th;.:s. where :.he acquir.ng pers::;n
voting sec-.mau o! company X beU\llt of ils
acquired S8 m.ill.ion of SIOO I year a;:
holc:ns! o( class A 11oc:lr. :see eumpie Z).
a:::d now intecda tc p~e SO ::u:;;:;r.
Addittonalh·. u 1 ns11i1 of 11s clua S
of assets from the same c~r.:pany. :!':e
boll:l1t'-3s Y bas eo c! ce 100 "ocet •C1ch may
asset ?urc.~ase ia re?Ol"'..ao:e \&ss;.;~.;nt
be cast by :!au E J!ock tc eie::: s~ of
ccmpzl'ly x·s ten dltect:irs. A;:;il;"lr..: !hz
othe~ report!.'lg !"e1iaire:e::::s are
forr.iula. Y ealc-~a•es that it hold• 60/~00 x 6/
satisified).
10 or 36 ;ie:te-::: of the votmg 'ec:-.:rmes of
Aggregation can cause a~uir.~.i a:-:d
comp:tny X ~':l\ISf oflls hoJdi:-4' Of CUS a
acquired per-son.s to file mult1;:le
atocin process 1f ack:t1onal assets
-, .iiul!d at 515 m1ihon or !ells w-ere
t:;.;.sf~:rcci. But wb!e such ::ansac:ions
ar" ;iu:;sibie. 11 sc~:ns un:il•"iy that th:s
pr~1poss. In othe: .... orcis. th!! antllrusr
d~.·!".t1e~ wti! r,a\'e alreadv e:1.a:ninerl l."ie
:i;:::~-..:s: po1ent1•I of comb1n:ng ce~ain
aBPts of the b-..:s:ne3se5 of the two
por:ie~. L"l doing so they ma)' "'e!i°ha..-e
c:~s1dert'd :he O'- er.ii eife-;:t o·r
c::-:;:,1r.1n~ '.he entities and thus may be

auo

alerted lo the anticomplf!tiirve da~r o(
transferring the ant1coinpe11t1ve
·
ccmpones:il. espeQally if tbe tnasad.ion
mues .eme oc.Jy witb !Dat component.
In ad c:irc:lmst.anca A .au.baeque:rt
trmisac:ia.c.. ~if ~;:ian.ed. ia li.ke!y
to co.cne to the aa..e:au.oa oi tbe antitrust
agencies..
These c:on:side:ratiom do not eHmi:i.ate
the possibility I.hat antic:.ompentl"#e
transactions will avoid scutiny ander
the rules. but they a~est that few.
other thm penoru intending to evade
the act. will llne an !no!ntive to
1truc=u-e tr:ansac:.:iona to take .dvanta~
of the proposed aiodtfic:ations. Ne'i~r
the proposed Nie nor the existing ~
are designed t.o preve::t a w1Uful evasion
of th.e reporting obl~aoon.s Wlder ~
act. Under the e:Ustins rule a
deten:Uned evader c.an merely wait 180
days to coasuminate the eecond
transaction. Willful e"Va.sion.s are
addressed by l eauo and a.ec:ion 1 A{g}
ol the act. On the otht!"l' b.and the
proposed modification• malt:e poaaibie.
or 11 leul eliminate a bamer to.
cam peti ttve! y i.asigr.i.fi cant trana.a c:.i ons
that could be de~~d by the
requireme:it of filing multipie
nouficauon.s.
The a~aUOQ problem does not
arise when the Late~ tran.sac:1cn ia an
1cc;uis1tian oi voting securities only.
Under i ~.13(b)(2). an e.ariier
acq:zi.siti.on of asaetll Ill anly agg:-egated
with a subseque:it uset acqul.SIUOn. not
with a lat.er acquU1Uoc of voting
sec-mues. In adciucr_ where a aeries of
acquisitions involv~ only voung
securllles. § 801.11 e.xempu from
re?orting requinoenl.!
1nd:v1du.al
acq:zisiuons t:i:.C!;:'t :hose that meet. or
o.ceed the notificauon thresholds
defined Ul § 8al.1(h ).
The Coinr.:1ss1on proposes to ame:-:c!
l 801.13 so that previousl;--acqu::-ed
assets and vou::g secunt1es which ~a·:e
already bee:i subject to t:e re;:orting
and waiti.r:g penod requir'!mer::s of :h:!.
ac: will not be aggregated with a
subsequent icqumtion of 2ss2~s i:vm
the same person.
c.li.ai::ge would
maite the a.ggregation :-eqwre~en:s for
suc::essive use! aquisiuo::s more
consislent with :.he ag;;:-e;.ation
requi.:eoents for 1uc:::ss1ve stock
acquisitiocs. 1J:i addition.. I.be chznge
would e!i.-nt::ate the obligation to file for
uset acquisitions that. because of their
small size, are unhkely t.o violate the
ant:trust laws.
E. Ac.cordi.:lgly. the Coaun:3sion
proposes to ~end l ll01.13la)(!). ac!d a
new§ ao1.13(al(31. add e.xam;ile 4
follow~ 4 80l.13(al and revlSe
l ~.13(!:il(:?J(u) u aet for:.'l beiow. Saw
langua~ is ind.icated by a!"l"Ows: (•new

au

nus

r

language ... ~ed la~ h•
indx:..~ by bnsGet-s: [deieted

language].

f 101.13 Yoan th:1.;g'l
they had aot ;>revious!y b~n ac::.Ji~~c
and a~ being acqt:ll"CC as pa~ o! !!".e
pre-sen: ac.quisillon. The "alue of ir~
~ssela previoualy acquired wh1c!':. are
subied to thi1 subparagraph shail b~

· Federal Register I VoL SO. No. 185 I Tuesday. September 24. 1985 I P='oposed Rules
deter::Uned in aixordance with
• "'1.lO(b) as of the time of their prior

•

•

•

S. Sectioa1 aa:.1. SO:.:.. and eo:u
Aa{W.itiom of MMU

Proposed 11 802.l. 802.2. and 802.3
describe artaiB types of a~uisitions of
a11et.a that Ut! and are not exempt from
the notification requirements of the act.
The proposed rules have been
developed u a result of uncertainties
about the much less specific rule in the
existing t 802.l. The new language
re!1ec:s to a large degree informal
advice given by Commission staff in
response to questions. The proposals
int.-oduce and define a number of new
te~s. Unlike vtisttng § 80Z.l which was
based solely on the statutory exemption
in section 7 A(c)(l) of the act for
"acquisitions ... in the ordinary cour3e
of business·· and the Commission's
authonty (with the conCWTence of the
Assistant Attomev Ceneral for
Antlt."'JSt) in !f!C!ion 7 A(d)(Z)(Al to
Mdefine t.~e te~s used in [sec!lon 7A)."
the proposed rules al.so re~ly on the
authority in section 7 A(d}(Zl (BJ and (C}
to "exer:lpt ... transactions which are
not likely to \1olate the antitrust laws··
and to "p:esc:ibe sue.!'! other rules as
,
·be necessary ;ind ap~ropriste to
..•;·out the pu:"i)oses of [section 7A)."
The proposed rules outline basic kinds
of asset transactions that must u:1dergo
t.!'ie prei::erge~ sc:eening process
es:ablished by the act for the antitt-.ist
e::!orce~e~! age:lcies Trar:sact1ons a.re
exei=:piec 1£ it 1s not r.ecessary to
exa::-:ine the indi•1di.:al circumstances of
an ac:p.:1si!ion to deter.r:ine that the
categor-,- of acq1.:1s1tion has little
potenual to v:olate the ant::r-..;st laws. In
proposed § 802.l the pnncipal basis for
determining that potential is whether the
a!se:s t:ansfer.ed constitute
substant1al!y the equiYaient u( a
bi:siness e::tttv or are funcamen:al to
thP existence of a business. Tb1s
proposal makes most trar:sfe:-s of assets
ttat are the equ1Yalent of a business
reportable. When a transaction can be
desc:ibec that transfers assets that are
less than• fundamen:al e!emer:t of a
l.iusineu the proposed rule generally
e>..empts such transac:1ons. Proposed
§ 802.Z (concerning certain real property
assets) and proposed § SOZ.:J
(concerning carbon-based mineral
rights). in contrast. exe:n;:it acqulSltions
e\·en if they t::-ar:sfer an entire existing
business. These transac:ions are
-·,,posed to be e:1.e!':':p!_because the
;e sur:r:ly of the asse!s and the nature
-.... the ~arket !or those assets make it
urJike!~· that a transfer covered by the

UDconcemrat.ed narure of the marke! in
proposed rules will violate the antitrust
laws.
which the aaaets are transferred that
justifies theM exemptiona. Where auch
The use of the '"equivalent of a
uaeu are pJeatiful and widely held it 11
buainesa" and "fundamental element o(
not necn&&rJ to ex.amine indi\'idual
a biuineu" criteria for the exemption in
transactiom m determine if typical
propoaed f 802..l reflecu the obligations
tramactiom will violate the antitrust
o{ the enforcement agencies to identify
laws.
and prevent acquisitiom which are
likely to violate the antitr'Ult laws by
The Propouti Rules
leuening competition. Mergen or
The-propoeed rulea are divided into
•~uiaitions o( buaineasea (as opposed
to aales of goods or realty) can leuen
three parts. Propoaed I 802.l descnb"
three common c:at~or'iea of acquisitions
a:n:npetition because they automatically
of good.a. It describes aome of the
dim.iniah the number of competiton in a
c:ircu.mstanc21 in which such
maritet when the buyer is a competitor
transadona are and are not exempt ·
or potential competitor. Sue.~ merge!'3
from the notification obligations of thP
are more l.ikeiy to lessen competiuon
when the product or &ef'\"\Ce market has
act because the acquisitior.s are or are
not made in the ordinary course oi
few erimpetitors and the business that
disappears is of a substantial size.
business. Proposed ' aoz.: desc::bes
·certain real property transactions that
Accordingly. the proposed rule declares
would be exempt from the not1fica11on
transactions exempt if it can be
requirementa on the ground that sue;,
detemuned "ithout review of the
indh1c:.:al circumstances of a
acquisition are unlikely to violate the
transaction that the acquisition of assets antitrust law&. Proposed l 802.:3 would
exempt acquisitions of carbon-based
is not equivalent to the transfer of a
business.
minerals valued at S"lSO m11Jion or less.
Business equi\'llency and the need for also on the grounds that auch
transac.tiona are unlikely to violate tt.e
individual revtew are the basis for
anutn1st lawa.
exe~puons in the act and the eXlsting
rules. as w.:11 as the proposed rule. For
Asse!s Acqu~d 11! the Ordinc:-,,· C~1.1rsc
example. sec:ion i A(cJ(1) exempts
of
Business
"acquisitions of goods or realty
Proposed § 802.1 defines some of :he
transfe!':'ed 111 the ordinary coUMe of
circumstances in which the acqu1s1t10:-:
business ... lndi\,dual re\·iew of such
of assets is exempt from the not1ficat1on
transactions i1 unnecessar;· typically
obligations of the act.
because selling goods is the essence of
manufac:unng. wholesaling. and
Operating Divisions
retailing businesses. In no way do sales
Proposed I 802.l{a) provides gi.:1dance
in the ordinary coune of business
on when an acquisition of assets w:!! :ie
diminish :he capac:ty of the selling firm
considered equivaient to the acqu1smor:
to compete. Cons1ste::t with this
principle. t.t:e existing § 802.l(b) does not . of a business. It states that an
acquisition'is reportable if it 1nc!udes
exempt the sale of assets if they
consutute "subs:an:ially al! of the assets aubstanuallv all the assets of an
operating di'.vision and gh'es nume~ot.:s
of ... an operating div11ion:· A
examples of operating di\is1ons. The
business is often the sum of its assets.
terrn "operating division" is derived
thus the sale of assets can diminish the
from exisung I 802.l(b). Parag~aph (a)
p:-oductive capacity of the selling firm
·defines an operating division as assets
and ct1ncentrate productive capacity
that have been operated as a business
among the ~maining firms. Although it
entity. The sale of new tang:ble goods c~
is possible that the effects of selling
c:wnnt supplies by manufacture~s.
producti\·e assets might ?e to enhance
wholesale~ and retailers is gene~ally
competition in a particular industry. to
exempt except when aold as part oi :hi:
determine those effects each acquisition
sale of substantially all the asse~s of an
must be judged indi\idually. The rules
ongoing bt.;Sinesa. For example. if a firm
therefore require that such transactions
manufactures widgets and se!ls as par:
tie reported. Proposed f 802.l applies
of a sale of substantially all its assets an
this business eosed § 80:?.1( cl declares which of
:~"~" t:-ansac:1ons are e'emp1.
$utl;:i;H;;;i:apn tel(~ l exempts sales of
new ""d:.iri4ble ~oocis."" Because routine
soil's b:- man:.i!ac:ure~. ""'holesalers or

prodlll:::ive caJ)4c::ity and generally-do
retaiien o ( !lr'l"P d:1ra bl e it>ods are
not le~seri. coicpeubao..
clearly in the normal ccune ai tbe.ir
b•iusn:• the ales are alw.y.a ~mpt.
Howevu• .i.n c.amraat to !he sa}e of a
Acquisitiam o{ D.eW z:aachiDes 1\.0rmally
£ailini company's uaet:s to a possible
only u;-nd p:oduct'iw ca,,.Oty and
competitor. a tranACtioa. that re-quires
therefore do nat tend ta lesseo
cal'!-by-eaM re'f'i~ by a:ntibi:st
competition.
authorities.. the Mie of used dunble
In contnsL Uie a~sitioa of -IZHd
goood:s by Or to dntel"I does 1'01 rrquire
durabie iood:s- tranrlen t'Xi•ting
routine uamination. The primary
productive c:Bl)llcity from one -penon to
reuon !or mdnid?:aily r.atninlng the
another. Such a9ed dureble goods
aeqtrisition of failing ~anie-s is to
transaction• may be common ind
determine if the buy~ ?I a c:t!nlpet'itive
ccn:sidered 0, the l)artie-5 to be in the
Qr potential competitor whose
ordinary course of their bu.iMst~.
•C'l1lri3'ition might lnaen amtpetition
Nevenhe~s. w~ bodl the 9'!ller and
and !o dete~e i:! the seller is goi."lg out
buyer uae such goods in thtrir .
o{ bu$in~s at it asserts. ln the C:3se of
bu:sinesse-s. 3ubpar11gn~ (c){2l doe-s not used durable good.3. t.lie sale to the
define auch acqu1siuor:s. hO"Wever
dealer resolves both of those issues. Sy
common. as ones in the cmiinary C'Otll"3e
deft.'lition the dealer is neither an ac:ual
because they ~n !us~ com~tition by
nor potential competitor. thus t.'iere :s no
concentrating productive apac:ty.
prospect of competitive har.n re;,uI!ins
Subpangnl)h (cl{ZI exer.:pts from the
from the sale to a dealer. And. t.he selle:requiretne':lt:s of the aC'! only t!:ose
does abandon the assets. Accord:ng!y
acquisitions or t:Sed durable goods in
the Commiss.ion can genel'alize about
whiC: either the b~r or seller is a
such transactions and exempt the
deaier and not a U3er of suc.'l goods.
acquisition oI used durable good' where
Such t:"ansac:ions ire in the ordinary
either the acquired· or aaiuir.ng i)e:-son
c:au.ne o! :he deai~·s bunness.
ia a dealer.
AlthoUih salu oI used dur2ble goods
To be sure. the combined efTec: of a
to a dealer may have eofn+)etittve
sale to a dealer a.nd a rn-.Je by :he
consequences. these do not nor::-•lly
dea!e~ to a competitor r:.an be the
·raise antitrust issues. The sale of sud:
equivalent
of a sale of aueta l>e!we!n
prod:1c:ive auets may represent an e:"tit
· com;:>e!ltors. The reuons !or the used
of a business from an indust.-1 and
· goods dealer exeruptio:i do not appi)
thereby lessen the number o!
when the inte~ediary is merely a
competitors. but then! is no basis iii the
conduit ior real parties in interest &.•t
anttt?'\lst laws for requirmg a fir.: to·
are use:-s o{ the durable gooc!s. As a
remain in the bwioess. Whe.n t."le buyer
coruequena. thl: proviso to
is not a com;:ietitor and has co plans to
aubparag:-aph (cl(:?) de:ties .the
enter the bu.sine". the~ u no e..'l'ect on
. exe::nptioo if the i.nte~edi•ri is
competition beyond the closing of the
acqui~ the as.set.s for a specific ;ie~on
sel.ler" s fac1lit.ies . .'\c.corc!ingly there is
who
use:s the goods. Th.:s cr::er:c:: 1s no1
notlling for the antit."'Ust authonti~s lo
whether the inter.TleC.:•;-:. i.s an ager.: oi
analrze and the trans.action is exe:-ipt
either seller or buye! or "'"hether the
from the noofieation reqwrerne:it!\.
ir:ter:nediary takes :,tJe and assur:ies the
For similar reuons there is litl.ie for
risk of loss over the soocis. ra:he: :t is
anhtnist olficiala to ~ew when a
whether the i:ite!":nec:ary h•s ag:eec!. at
dealer sells used durable goods. As wi:.h
the time it acquires the goocs. to when::
the sale o{ new dw-able goods. the most
it wiU resel! thoa! goods. lf the
usual effec: is to inc:ruse tbe productive
in:ermediary has made sucl: an
capacity of the industry. Conse-quently
agreemer.t then ill roie in the
the subparagra;:h exemp:s both sales
transacuon i1 ig:iorec! and the
and purchases of used goods
acquistt1on must be ~?Orted as one
tnnsa:tions by dealtn.
between the ;ie:-!ons who a:! use:-s of
Theri: is normally little reason for
the durable goo~. Allhou5n t..ie pr:viso
antitrust eoncem about sales of 1.1$ed
don
not affKt the dealer·s r1E'.::: to take
goods to dealers because the asse!s are
title to the goods fro~ :he se!le: ~ti: at
taken out of production. Unlike a
acquisition is exe:n?t un:!er propo\ed
competuor. a dealer ~s no rea~n to
§ 801.l{c)!ZI}. the provis".l d"~S ;:revent
pay a premium for the goods in orde:- to
the dealer from ccrr.;>leung :n~
redur~ incustry production cap.ac:ity.
transaction by transfemn~ 1he :.iHc!
Ra!her the goods are abandoned by
gc:lds to the buye: with wh~:r. !':~::as a
their former owner and lo5e thei:con::-act until both buyer a!':c! se:l!'~ h•-.·e
immediate compelltive significance.
com;:>lied with the nonficat::i!': and
Moreover when resold.by a dealr. they.
· wamng reqwre::nents Clf Llie act.
like the as.sets of a -failing comp.any:·
The term ·durable good·· i& new It is
are 5imtlar.to acqui&itiona o(new
defined in propo~ § 80Z.1{c}(>j to be•
durable goods whic.li normally enlarge

..
33756

Federal Repster / Vol. 50. No. 185 / Tuescay. September 24. 1985 I Proposed Rules

d wh1c..I: is used re?eat~dly and bas a
iul life of more than one year.

C4rtoin kai Property Transactions
Proposed § 802..2 exempts certain real
property tn.nsactions on the ground that
they are unlikely to lessen competition.
The kinds of property proposed i 802..2
would enmpt include unimproved land.
offi~ buildings and residential
properties. Most. if not alL transactions
conveying these kinds of property have
been considered exempt under existing
§ SOZ.1. E.xe::lption of such transactions.
howeve!. does not fit within the exf)licit
sale oi business rationale of proposed
I ao:.1. Unlike that section. wb.ic.'l
exempt ce~ain acouisiuons of .. current
supplies." and .. durable goods.- this
section exe:npts acquisitions of usets
that ~ns:itute freestanding business
entities. It is e\'ident therefore. that if
these real property transactions are to
conti~ue to be e:otempt. the exemption
must !lave a distinct justificatior.. The
Corr.mission !las concluded that
su!fic1ent justification exists to continue
exei::;:::~g these transactions.
Tht basts for exempting the named
catego~es of real prope:ty is that the
totai c;::ar:uty of the resources and the
l"~e r:u:nbe:- of aMual transact1or.s
.es the S1S millior: size-of.... nsac:ion citer:a of uctior:
iA(al(Jl(BI ove:fr inclusfre and
burciensorne. Althougi'! thrre is much
var1e!y in the market s::-ucture of
transactions affected by proposed
t so:.= (for exam;:!e. most competitors
are engagl"~ :n business in or:e or a fe\\,'
of :ne !nar:y diverse re~?lonal or local
ma~ke!s l thev have one charac:ensttc in
co:n::-:c::. It l~ ur.iike!y that acqu1s111ons
of ?~i"=-~Y named in ;>r~posed l SOU
wouid ha,·e ~:-::.· :ignificz:-:t j)Otent:al to
inc:ease rr:arx.et powe!. The low risk of
ar.!icompe:wve trar.sac:1ons 1s a result
of the w1de!y dispe!Sed holding of these
resources as we!! as the small size of
t~-;iical tra:-:~actionll relative tQ the total
amour.I oi resources. One indication of
how unlri..e!·. it Ill that a merger of re!ll
prope:-ty ho1cings would produce a
vioiat1on c{ the anttt:-..:st laws is
pro\ided b}' a computer sear::!! of
decided cases.. Pairing the words ..office
buildings." -residential properties:· and
"mergers" identified no cases. Even
adding the word ..antitrust" to the
1earc:, did not result in the identification
of ar:v relevant cases. Another
indicatton that such me:-ge:-s are unlike!y
to be ar:11cornpet1t1\·e is :he absence of
- .). star:::a! oar:'1e!S tc entry ir. these
. ;: ~ene:-ai categories of real prope~·.
--4p1tal is availabie to finance real
estate projec:s on a r:a tier.al basis. and.
ir: ge::e:-a:. anyone with financing can

. proposes therefore to limit this
enter a local or regional market in the
named industries.
exemption to acquis1tion3 valued at $150
The Commission propo.es to continue
million odeas.
the total exemption provided for
Currently «>me a~uisitions of
acquisitioru of these catet0ries of real
carbon-based mineral rightll are not
property. notwithstanding that the
reportable under informal
rationale for these exemptions is
interpretattons of the statutory
quantitiative (that is. tyi:Jical
exemption for acquisitions in the
transactions are too small to harm
ordi11ary course of business (see section
ccmpetiuon) rather than inherent in the
7A(c)(1) of the act). These staff
nature of the assets being tran.sferTed. It
interpretations have been applied to
is possible that competitive harm could
undeveloped mineral rightll. They are
result from an unusually large
ju.Stified on the grounds that the
transaction or series of transactions.
acquisitions are essentially routine
Neverthelellll the Com.mission believes it
purc."lases of raw mater:als by
it u.nwaminted to burden the many real
proc!llsors of carbon-based minerals rn
property tnnsactions that pose no
the ordinary course of their bus1r:ess.
threat to competition aoleiy on the
While the Com..-niss1on be!teves there is
ground that it is theoretically possible
1ome bas11 to the existing s:aff
that such transactioru could reduce
interpretation. it belie\·es the pnrnary
compeuuon.
justification for exempting the reserves
Proposed t 802..2 also exempts the
is not that they are current sup;:iii~s.
aequisiuon of voung securities of a
Rathe:. it 11 that there are ~ largl!
corporation holding only these real
number oi transac:ions valued at more
property assets. and incidental related
than S1S miilion that have little
asseu. This provision derived from the
anticompetitive potenual.
existiz1S t 802.l(a) which deems "an
The Commission has made nume~ous
acquisition of the voung securities of an
studies of the coal and the oil anc gas
entity whose assets c:ins1st solely of
industnes. includ:::g in recent yurs the
real ~roperry .. and related assets to be
1982 report on Mergers .'n the P~!.-olretation1
1ho;iping malls.
by the Commission staff. Persons who
desire advice on the exempt status of a
£.xample: Ca!l>Or.lion A. a n111on,..1de
proposed transaction shculd contact the
rinanee bustneM. doae1 all o( Ill :: offic'5 1n
Ptemerger !"Jotification Offic~. Bureau of
or.e me!ftlpoli11n area and se!!s all of a1
Compeution. Room 303. Federal T~ade
1ceount1 receivable from the" offices le
Commission. Washington. O.C. 20580. or
corporation B. The 1cq11ismon of :..'iest
phone (202) 523-3894. With these
ac::ounts by B ii net c:umi;:t 1111~e~ t sa:.::~ 1.
limitations in mind. the proposed rules
~cauae thne accounu rece1vabie cc:i~t::'Jte
1ubstan1i1lly all the u~eu of a !'ei!Cr.•: c~
should sit.':ificantly reduce confusion.
branc."1 u.nit \the rer.:ai:::rig use!s i~e o!!":c•
unnecessary filings and disputes over
auppliesj. It ia therefore t.he 1c:1ec:: to the no11!ica non :-equ1rem~u of the
ac:: l"4:::1n; ail other T't';'Ol":ing ~v1rement.1
.ire ::ie: .•

t; 902.2

•cquis!tions ol c:eru111 kinC.s ol

tal property.

(al Acqu1sit1cns cf unirt;x-c\~d lane
er the •oting sec:.mties of an enLity
w!-..,,sc a.ssets cor.s1s: s.oiely of

l ~t ~ i't~ m:iUion rn:nitati011 on ~"ir
urri!l'Tl'rovetl lanrl m: ex?::TPI fTom the
val\le of noa:office. non-ffttdenrtal spaa ia
requ~ts of the sa. The ter:n
calc.dated Jar nc:h mu~ md is not
"'unim~ land· tm::Ndes any ml
e:r.c:Hded in !!lis e:a~ becratt nie ••Ive
property 1!nl~ the a~te niue of
o{ th-4
ii s:ao miffiae faor
s~~. agricuit11rsi lmld. rceM"es of
timber Ot' m~ls and bjdro or
~·
geothemal power .-ccoant for more than • f~ ·' 1 ' 'NM et c:mrticao1 hMao
$15 million of the n!'Ce of the prol"TTY.
(bJ Acqumtions of offil:e baildi!?i' ar
An acqoUtion baaed aunertl ~se:-ve~
projected to ccme fram tilese functions
ia valued 11 S:CO million and ia not uempt •
iI the struc:TUr!! has generated co
revenue).
. I. s..::Doe .:.:D(b) !Dae.He ill the
(cj A.sseu iucide::tal LO the owne!"5h1p
'"Caa:croiled liMu&r. nzr....hold
of real property ex~pted b~·
Sec:ion aaz.2D(b) exempt• acquisi:1cr.s
paragrapia (a) and (bl (1udl as ash.
o( vot:i.ng secwilies v&lw!d at $15 ~on ·
pre?atd taxes or insurance. l"e!ltals
or less iI the voting 1ecuitin heid u a
re"'-e1vable and the IU.el shall not be
resdt of the 1cqu1s11Joa dD not c:mfer
considered par: of_ the oth.e:"o'oise non·
control of a.a iaauer that has total assets
exe~t property for purposes
or net azuiu&l aales of SZS millior: or less.
calcclaung the Sl.5 aullion limitations of
The Ccm.c:ii.s&ion proposes lo ex;:and
this sa:t1on.
this exem;:iticn (•nd parallel ex~pt1o~s
£;.ample: 1. ·A- 1c:qu1m cmimproved land
in U 80Z.50 and 802.51) by rais1:-:g :!:e
valued 11 S::OO million from T. TI>ona In!
raising the thruh.old from S::.S to S:OO
listtd in l 801.lSlbl. lellarate tnnsftn of
million would ellmu:iate the vast •
ununprouc land an •u~11ee in
• .majonty ol Lilli:l.gs required by paraffa;;h
acc:ord.a.na with l 801.lJ. A.a a mull al that
•ares:uon the •alue of Lbe otherw1Se aon(b ). while still reqwn°' reporu for those
eur:1pt ust!.S th11 will be held after the
which ~ve the greatest pos.sibility of
sKOnd transac::ion is Z1 millio11. The S1~
raising siiuific:.ant antitrust conce~s.
lllillion limHan:n of l l!IO"-Za l is therefore
The propo9ed chan~e would cons:itute
exc:ttded and the ennre.s::IO 111nlion transfer
a major inc:reaae in cm11: of the two s::emull be re;iorted unleH ii is exrmP1 under
of-tramactioa tats in the •ct and rules.
othl!!' ;in:rn11oaa of the Nlu or tbe act.
When read tap=ther. aection 7 A( al{ J II E;
2. ··A .. acq\lu-ea rwo offia buildlngs. each
.... tut!on citena of

.Cl!

..,,.,. .........

_

no

Federal R~ter I Vol. SO. No. 185 / Tuesday. September 24. 1985 I Proposed Rules
ssets of the acquired person valued at
· pe?"C!!nt of the total aecond reque5ts. An
..nore than $15 million: or
analysis ol the agg:rr:gate 4ata for all
(2) Sufficient voting seeuri~ to
th.rH yearz uaing a chi &quim!! test of
control a
which. together with all
1tatisncal independenc.e 1bows then ia
the entities the acquin!d firm controls.
a lesa than one percent chance that the
has annual net sales or total asseu of
lower interest in $15 million or U!S3
SZS million.
tranaactioru ii a re!lection o( aamplins
erTOr. The observed diffttene1!3 in
The first minimum siu-of-transaction
clearance rates aud aea>nd reque5t
test ia the one more a>mmonly ineL It
rates for tra.nsac:tiOt:ll valued at $15
establishes the basic rule that a filin3 is
million or leu and more than S'lS million
required (assuming other requirements
are tl:lere!ore 1tati3tieally 1i.gnificant. On
are mat) whenever a transaction is
the basis of these 1tati1tics and the fart
.. lued at more than S'l5 million. Almost
that no enforcement aOioru have been
90 percent of the trans.ctions reported
meet this Criterion. The second minii:::um instituted based on ~orted
transactions valued at S'l5 million OT
sin-of-transaction test provides a
less. the Commission beliens
limited supplement to thi' basic n.i!e.
l 80Z.20(b} 1hould be altered.
Rough!;· 100 transacjons a·year have
been n!ported under this ~:erion. Thes~
&Foi:1c:n-e1'T IHTERES1' IN 115 ~ ~
transactiuns valued at S'15 mil!ion or
L£ss Re~o T.~s •
!e's are reported wheneve:- one J)a::y
t1•1-•1Ul
will acquin! enough voting securi!ies to
cont:ol a firm with sales or aueu o[ S:S
I •Ml I •ea: I ....
million or more. (Control is defined ir.
• _,
! 801.l(bJ.) The proposed revision woulc - - .. SIS p
IU
Cl
substantially inc:use the threshold in
$1$~---~ .. :
the second test but not affect the first.
13.0 . "
tZ.l
The decision to increase the thnshoid
j
in l 802..ZJ(bj is supported by an
11.S
1:Z
•.3
Wo'9 ,_SIS -:
analvsis of enforcement interest in
::I.I
tl.5
~.
s1s_.,
____ I
t:ransae!ions filed under the act dunng
I.I
the years 1981. 198Z and 19a3. The c.l.iart
1 u
..:u
Wl:n1W111S--~·
-~··
below shows the antitrust ag!mCit>s had
u
a consistently loweT interest in
,.._,,...T_IOl _ _ _ I O _
transactions valued at $15 a:illion or
- - .......... IO ~ 10 S-:- 21:1 01 ...... ~ ~ &l'l'ft .... ""lllO'O o 4•• ..tr.Q fl' 1t7• tcr ...
less ti:an in other transactions.·
_.. ..... •M2. 1113 .
. (E::io::emen! inte:-est is reflec:ed by two
kinds of agency actions: ''clearance.~ the
The Commission has considered. but
first indication of ant:t.-Jst concern.
rejee!'!d. deleting f 80:UO(bl enure!y. A1
init:ates a procedure by whic!l the two
the Commission has noted before. t.he
age!'l::ies decide which will begin an in
two different transaction si:e thresholds
de;:Hh revie.,.. of a transac:ion. and
in the act indicate Ma clear a>ngnssional
"second req;.ies:s.'' a pr:icedure uncie:
intenuon to re.ach at least some
lbe act for obt2!n1ng ac::itional
acquisitiora that s.i tisfy only the
infer.nation fTom the parties anc!
percentage (of voting sec:.ir.tiesJ test.M
g~nerally an indication of a greater level
even though the 1bsolute value of the
o' conce~.) lr. 1983. for exar.:;'le. :he
1ecurities purchased may be reiat:vely
fi:·st level of interest ··clearance5.low. Se~ 43 FR 33450. 3J491 Uuly 31.
showed that in only seven of ev~
19i8): 4-i FR 66i81. 66:"82 (November n.
h:.inc:-ed transac!ior:s vaiued at $15
19i9. The Commission's proposal would
million or less was it :onside:ed at all
preseTVe this staa.itory design.
prcbable that a violatjon might o.ist. In
The separate controlled iuuer crite!'ia
con::ast. for transactions above S15
of S SO:UO(b j. can be 1 valuabie
mil!ion. ii was felt worthwhile to
supplement wbe the value of the
determine wh1c!-i agency shoulc! e:-1:ar.:ine acquired entiry·s \•oting securities dces
tran!'actions mo~ closely in fiftee:: of
not adequate!;· re!Lect its c:lmpetit.ive
eac.i.i hundred transactio~s. or twice as
presence. For example. the aa;iui.""e::i
often. The dispan~· ir. interest was even
aecurities could represent SO percent of
~ater for "second ~q~ests.'' where the
the issue(• voting sec-.uities. but a muc.'1
1geneie:1 were !."iree times as !ikeh· to
smaller percentge of the to:al
request adJitional infer.nation frorn
c.a;:iitalizaticn of a larg'! a>mpan;·. Aho.
pa:tie~ to transac:ions valued at rr.ore
if a company is failing as a bc.siness
U:.:i:: Si'~ m1t:1v;;. To ;iut it anotht: wa·•.
enterprise. its r:iarke! value may be low
a!t-hocg:O: :he S1~ rr.11!icn or less
•
regardle!s of the competitive
transac:ions cor.s::tuted ove: tw~!·. e
significance of its assets. Sucb a fir.:i
percent of the total re;:iorted in 1963.
awld. for exantj)le. have a l.a.ee marke!
ti:ey macie up ius: over six pe:-cent of the share and a strong competitive position.
total clearances and not quite four
~t face bank."Uptcy 1olely as a result of

rxrm

-:.==-"' .. ----1

.

··:..=;·

....

----··

"'I ,,,

., ,

38~9

liabilities baaed on prior tortious
cond4ct. Athough the purchase of a
large but fail.ina com'!= 1.ny will often be
permissible under the "failing company"
de!enH. that de!enae requires a careful
o.amin&tion of the aa;iuired company°•
actual prospeeu. the competitive
importallee o{ ita productive asset1 and
Jnventory, and the poaaibi!ity o( its
acquisition by a non-competing
company. That determination can only
be made after a tO"Utiny of the proposed
acquiaition; the required distinctions are
la.r too complex to be written into the
1"eportin; thnshold.
Raising the thz-e.,hold of § 80:...:0(b 1to
SZOC million re!1ects a balancing oi tht!
possibility of anticompetttive
tran.aactiona valued at $15 million or
lest with the Comm.ission·s expenence
that few 1uc.h transactions are liidei\ to
occur. The requirement that the acq·~1~~J
entity have annual net sale:1 or toral
asseu of S2DO million or more wouid
have exempted over ninety percent of
the !~1 than SlS million transactions
filed dunng 1982 and 198:3 (the most
recent yean for wh1ci:I complete
staustic:.a existJ. At the same ti.::::ie it
pre:1erves for premerg~r review by •":e
anutruat enforc:emenr agenc1e5
transactions in whic.i.i fir::is of
1ubstannal si:e are acquieci.
The Com.cn1as1on also propo:ies to
raise the corresponding controlled 15;.,. .. ~.
threshold in I 802.50 (a)(ZJ and (bl(::: .
• AcquiS1tions by foreign asset! or vor::-.::
sec:.uities of a foreign issuer by l1 ~11ec
States persons.'' and t 80Z.51(b)I:).
-Acquisitior:1 by foreign persor.3:· fro:..
szs.rnillion to $200 million. Althoui;:n !he
number of transactions filed u.nde; :!':e .. e
J>rovtsion~ are too sma!!.to pe~1t
meaningful analysis. the cons1dera •:u::)
in evaluaung t.i.ie cor.:pe!1t1ve
1ignificance of acquinr.g fir.ns valuec a r
S15 million or less are the sar.:e. T!:e
Corr..miasicn proposes th~refore ro
continue the parallel th~sholcs in
U 802..20(b). 802.50(a)(2). 802.50(!:>){2!
and 802.Sl(b)(ZJ.
C. The Com.-n.issior. proposes to re' .• e
l SO:UO(b) and its exam?le.
I 802.SO(a )(:?) a;:,d its example 2..
t 802..SO(b)(ZI and its example.
t 802.Sl(bj!Z) and its exarr.;:!e 2.. t!':e
example to i 802..52 ar:d u.arr.;ile 3
following paragraph (d) of§ 601.2. as ~·:t
forth below. New language i& inc:ca:ec
by arrows: (•new language•). Dei1-•-.j
language is indicated by bracke!s:
[deleted language).
§ 802.20

U'"'rnvm dollar 't91uerson transaction' borh
apply to an ESOP tru.st's acqu1si:ion of
an employe:· 1 voting securities. The
Commission therefore proposes to
create a new exemption for au:;,
acquisitions ~ud on the di$Unc:ive
c.i,aracteristics of ESOP trusts d1sc:.:ssec
below.
Acquis11lons of an employer·,
seC'.lrities punuant to
ESOP enabie
employers to receive adnntageous tall
treatment .,..hen their sec:Jri:ies are
acquired with bor."Owed money. See
gene:ally 25 U.S.t:. 401 et seq. T;-pically
employers initiate lhe formation of
ESOPs and appoint and ren:ove the
ll'ustees who m.a.nage the asse:s of a
plan. Howe\·er. lo es:ablish sue.Ii plo!'l!I>
requires the approval of the plan br
affec:ed employees. See Z5 l!.S.C.
401(bl:~J(A). Once the trus: is
established. the employees of a publicly
held c.or;iroation. not the trustees. \•ote
the employer aeOJ.rities held by the tn;st.
25 l!.S.C. 409A{e)(2). The empioyn·
appointed trustees retain th!! power to
sell the employer aecu.--i:ies or to
purchase additional .ecurities.
Despi:e l.tese characteristics.
§ 801.l(c) (4) and (S) dttrn th!! ~e::.ir:ttes
to be held solely by the trust For oost
non-ESOP trusts. that i.s the apprcpnall:!
result because trustees usually han thi-

nei sales er total asset3 of [S:S]

• -.,oo~ million or more.

amp.~· 1. Acqlliri.a& penon - A- ~

f 802..50 Acqujaltions of Tor.19n ~ or
o1 ¥OftncJ -=antla erl a fO!'e!'gn Issue!' by
Unn.c! Stat•

,..,...,.,s.

(al Ass~ts. • • •
(Zl The acquisition of assets located
outside the United States. to wtlic.i sales
in or into the United States are
atr:-:butable. shall be eitempt from the
requireme!'ts of the act unless as a
result of the acquisition the acquiMntz
pe:rson would hold asse!s of the
~cquired ~:-son to .,..hich such s:iles
a~gre~atins [S:SJ .s:oo~ r:lil!ion or
mo:e durins the aaiuired ~rson·s most
i'ecc:ii fisc .. I year "'e!"! at!r'.butahle.
EH:::;~/1-:n
ir. int mos! rean: fis.c;.I ve;,or. Since -c·
-.01;!::! !k •a;u1::n11 th~· '~cond ;!lanr ..·11!\io
111"• oc ~ $ n{ th1r li:sl pl•nL bo!h ritar:ts wuuld
lw CC.:'l~•rirrc:! d'+I~ vf -.:...·· ni;w hcid by -a··.
51.·" l ei:r..n1t 0 1~:: Sin~ :hi' rt11al annual
~;,.~ •!' nr :n1n t!':' L'::11ce
l!:\Co!cd
[~~] •S::Y.1 • rr.::lit·I"• rhl! ac::u1s1r•o:i of
l!:t" 51-q1'lri f';•01 \lt>t'•.,'d O The eovenimeut oI Lir&ip
=untry X haa decided to nII useu cf it.a

wholly owned corporatttin. B. all of wbic ue
located m f~ cooanu,. X. Th'!! bG,n i3
•A•. a US penc>IL ~~- tJ{ the
~te aanal . . - i.n or Ulto the Umted
Stai. annbu:lblc ta tJMi of a the
tra~cuon i.I e~ undc!- dUa aection. (If

auc.li a.grepte annul wlu were '-as tban
(SlOJ .. S2.00~ millian. lbe ~cnon

would also 0. exempt under t aaz.so.1

f 801.2

Ac:qul.ring and aCQUir'wd peraonL

(di.
(21 • • •

{iii) • • •
£:tampln: •
3. In the aoov' e:Yml)le. ~se th"'
con:mierauon for Y is 50 ~to{ cite voting
seeunnes of Z. a wbolly-o'W'lled aubs.idiary of
A whu:h. together wtth all enuties it controi&.
h&s aMual ne! sale.• •nd tofal .,.,.s oC Ins
than [S:::]
million. Su.;fpoae also
th.at !he value of these seeunties 1$ S.S
m11!1or. or il:!u. Si:icl! tile •CX1u1a1:10n of tile
vo1in1 wcun11es oC Z is exenr;:n ander Cie
aununum dollar value exerr.;moo 1t1 l SO:..:O.

•!ZOO•

-A.- ...

mreport in t.hu tnns.acuon d an
··a-· as ao 1u:qu1red

ac:qull"lng penon oniy and

person only.

1. SeCtioc 802.JS

Acquisitions by

Employee Trusts
The Federal T:ade Commission
p!':>poses to e:'\e::tpl fror:i the Pl!portin;
provisions of the act acquisitions of an
employer's \•oting securities by ur:ain
employ2e trusts. It i.s common for
pensio::. plans. ;:irofit sharing ;:ilans and
bonu~ p!ans :o acquire shares in an
emplcyer·s business on behalf of its
employees. Trpically thtse plar.s hold
shares in trust for the emplo)·ees. E~·en
whe!'e the tn.cstees of the plaru are
appcin!ed by the employer. the Cl.IM'ent
rules makP. sue.': acquisitions of
emplore!' vo:mg secu.--ioes reportable
(assc=1ns the act's other notification
c:ri:eria are r:iet). Proposed § 802.lS
v.·ould cxe~pt acGuisitions of the
employer's \•cting sec-mties by qualified
trus!s pursuan: to Employee Stock
Ov.":te:-ship Plans (-ESoPs .. ). The
proposed rule wcu!d nc: exempt an
ESOP"s acquisi:ion of securities issued
by pe!"Sons other than the employer.
Under existing ;:irP::ie~er rules.
acquisi :ions of an err:plorer"s securities
pu:~u•n: to an ESOP are likely to be
suojec: to the nolificatio::. r!quire:nents
of the act Sudl acquisitions are onen
larg-e enough !o satist) the S'lS million
sin-of-transa~ion c:iterion of section

represc-!ll an .inexpensive source of

finGCin8 for dlle employer. Also. the

•a

ft'

tfH'i&t& es;:e+s & ·

ea· 75i?

Federal Register I Vol. 50. r-io. 185 / Tuesday. September 24. 1985 / Proposed Rules
1uthonty to both vote and dispose of all
1eC"mties. From an antitrust viewpoint.
therefore. a danger of lessening
Ctlmpetition would result i! those non·
E.SOP trusts ac:titz~ vofin8 seCW"lties of
the employer and of competing firms. In
the case of an ESOP trust which auo
held securiti" of boc the employer and
•competing company. however. the two
sets of 1ec-.uities would not ~ voted by
the ESOP trust The employees would
•ote the 1ecurities of their employer.
CAnsequently most ESOP trusts do not
pose t.he same lund of antitnut c:oocem
a1 ct.her trusts.
This does not mean that employee
stocit o....':':e~h!p tt\\Sts can not pose any
antitrJst conce:-:'ls. only that othe.r
proceoures of the preme!'iel' sC'eening
prograo •Ni 1dec;uate to protect the
remaining antlt-ust iJlterests. For
e:umple. the !nflue:'lce of the employer
over the trust ccn be great due to its
1uthor.ry to appoint and remove
tn:sten. An employer mig.iit use thi1
influence to obtain con~I o( a
eompentor through the O"Ust. It also
might u:e~ great influence ovr.- the way
its ~pioyees vote as shareholders. The
existing pre!ne!'ier :-uies explicitly
recogn::e t.lie poasib11ity of influe:'lce
throu£.': control ove:- trJstees. Because
the empioyer controls the ll"Ust. the ~Jles
require the employer to re;>9rt the trust"J
ac::;uis1tion of snares in a com!)enng (or
other) f::-::: as its owr.. Se~tion !01.l(cl
dee!"~' that a per,on controls an entity
(incluc!ing a tru11) iJ it has :he right to
.. des:gnare a :najor.!y of the directors of
a co~oration. or 1n the case of
ur::r:co"?orated entities. of inch·iduals
e'e~:sin~ mnii=:- functions .. (i.e ..
tr.:31ee' ). Cor:sec;::en:!y. the cor::!)e!ill\'e
1:":":;::!i~!i!:'r:s of ac::;:.;!r:nf another fi~ · s
\"•Jt1ng secu:i:1e' woulc cor.ur.ue lo !:Je
~·.;twe~ uncer the ac! even if the
acquis1t1on of the empioyen own
secur:!:" ,,.. e:-e mad! not subject to the
nouiication requm~ments . as the
Commissi~r: prop"'cs ro~o here.
The Com:':':i,sicn !':a~ considered
e'e~;::ins el'::ployee ~..:s: .-cqu1si:ions
e:!her by expandinF the ir:traper:"on
t'Xel'::;::10'1 in § ao:.:io or !:iy changing :he
defimoon of .. ho'.d .. in § SOU ( e ). lt
reje::s both of rho!le soli.::i•lr:s fr.r the
reasor::ot stated bek\·•
In most cireums:anc~s u: a:qu:s::ion
~ u.em;it where a ccntroiled enti:y
acqu1r~s voting ~ecur::•es of another
er:tll\ ur:der thr 5:7:':':~ cor::rol. Howe·:er.
§ Sl'l:.Jo 'i~1 ! s :h.,; ;xt~~t11"1:-i :o
c:rc~!nst11:ic-::s w~rrt ..:or:irol ;:i
exerc1sec ::y ru~o:-: of hoic.;.g securi!ies
incl :he r15;:~1 :o ap;:.~ ::-.1 c ! r~::o:11 or
•r..:s:ee~) :-~e ~eas::i ::r th1~ ~:1.ce;::'.:cn
to the exe~;:1::n is tl:a: the r..iles do not
reG:.ii:e fiilr.g • n.ot :!ico :;"n prior to

making an ac:::;uiaibon of the right to
appoint directors {or t:Nst.u.a~ Cllly prior
lo an acquisition of aueu or voting
le1:'Uri ties. Expand.ini the in r:ra pers.on
exemption to iJlclucie ESOP~ would
permit a penon ta avoid the reporting
process entirely by first acquiritli the
right to &!)point ~tors {wbic..b is not
reportable). and then acq1.liri:t3 the
voting securities o! the then o:llltroiled
entity. It is therefore n.ot advi&.able lo
expand that exe?nption.
It would be pouible to exempt 10me
1cqui1itions by ESOP 1TU1t1 by altering
the ""hoid .. provision• of l 80'1.l{c). Thi•
rule a>uld be altered to dec!are that
benefioaries hold vo~ sec:.;nties
w1t.'iin a truat if the beneiicianes (in the
c.aae of an ESOP. the employees) have
the right to·vote tho•e seCW'iUes. Th.11
aolution. however. i1 inadequate
bec:au1e it would not exempt
acqui11tiona of an em!)loyer·a voting
M~ties pu."'Suant to an ESOP wbere
the employe:: ii not a publidy beid
company. Closely-held compcn.ies are
required to accord voting righu to
employees iii auc..'i plan& only "with
respecl to a c:Drporate maner wb1C:i. (by
law or c..'iarter) mual be dec:ded by more
than a tnajonty vote of ouuianding
common shares vote3'. 25 U-5.C.
409A{e)(JJ. Coruequently. alten:1g t!:e
•bold"" provi11ons will aot exempt
acquiaiuor..s by employee :ruata t.hat do
not re(\i:ire te\"iew .
The CoC".::i1ssion p~c.poaes in11ead to
create a new uem!)tion for em!)loye~
trus:s based on the I.ind of scqum1ion
and the :nixr-.ire of o .... ne~sh1p r.g."m
between e:uployers. e~pic.~·tts and
trustees. The ;iro ..·is1C':'I hr:i11.s l.'ie
exer::pti.on to !:-usts lhar ire par1 of
quat:fiec stock bonull. pe.n11on or proflt
sha::.,g ?I.ans as defi::ed in the ln te::ial
Re ..·enue Code in orde~ uplic.itJ~ ro
acc:orn:lo.:late I.hose pla:-:s that are most
lilueiy lo make acqwsitiona larse enough
to be reportable. It exemptl acqu1S!tions
of an emplc; er"s voting sec.l.lt'it.itlons
which are lik!!ly to les!en c:>:t:;:euuon
v.;lt remain subj.e!r.j:)t.
there i1 no n~d to agg:ega!e !uch
acqu1llitions pl.Ll"Sua~t to i ac:.:J. Sucb
agg:ega!ion i' avoided !:iy lis:ir:g l 80:.:?S
in § 801.lS;a)(2). The propo.ed IUf of

t 801.15 below al.ao c:ootaina
amezk!me.DU desaibed in pr:>posai S.
H. The Commiaaron propo1a to add
new I 802.3S and revi.ae t mll.15 (a)(2)
and (bl .et forth bdow. New l.aquage i1
indicated by arror.s: (•New
~~lo Oeietrd la~•!!! ia
indicated by bradtets [deleted
lanpage].
,
• f~

A.cqw6sttlona by ~,_

tNata.

. An 1cqu.i1ition o{ votitli 'ecunhes
. ahall be exempt m>1n the notification
requ.irl!mentl o( the act if:
(al The 1l!OU'ities ue acquired by i
trust the t meets the qualifications oi
section 401 of the Internal Revenue
Code:
(b) The truat is controlled by a person
that employs the beneficatie' of t.rie
trust and.
(c) The voting se:urihe"S acquire-d are
.thoM of that person or an ennty wtttun
that peraon. •

f IC1.15 AW *911"°" of .a~ ...:i.irru.s
and ~ tl'M ~ Of WftlC'I - e:a9'1'nQl.

(a) • • •

(2) Sec!ion.s •802..2(bl.~ SC:::.5(01(1).
802.8. 80:?.31. •802..35. ~aa:..so(a H~ ;.
80Ul(a l(l ). 802..SJ and aa.:..:-o.
(bj A.uet.s or voting securllles :he

acqu1sirion1 of whid1 wu exempt ar the
ti::e of acquisiuon (or wowd ha,·e be-:n
exempt. had the Act and t.hesi ruin
been in efiec:). or the preaent
acc;u1,11ion of which i1 exempt. ur:tier
section :"A(cl(91 Vld H •O:U!aJ.
ao:.J. '4 ao:.s.:>(a)(:J. SY:.sv(b i. 80:.51 '. :i1
and 802.5-\ .inlus the lim1:ation'
contau:ec! :r: sectior: 7A(cl(9J or t.l\ose
1ec:1o::s do not ap;;iy or u a ruwt ol
tile acquiJition ....-ould be exceecieci. in
wh1c..'i c.ue ~':e ust :s or vo11n3
sec-.w.ties so acquirtd will be heici. and

a. Section 802.~(bl

Acquisitions
S1.1bject to Prior ..t,,pproval

The Commis~ion propcs"' to deiP.•.paragraph (bi of l 80:.'."IJ. ?arae:api': (bJ
u.em;;rs from the noufi~tion a!'ld
waillt!i requirements of the ac: ce~ai:-:
1cqi:is1tions that require ;i:1vr ap~ro'. I
by the Feciu1I Trade CAmc!,s:on or~:•
a fecieral court. Although the ;ir:nc1p!e of
-this rule is 'ound-to eli:::i;n111os":
to infer.:". tht issuer of its obligation to
file the notif:c.a 11on required by the act
ar:d to pro,·ide the issuer and the
anti!.-.:st age:'lc:es w;L~ evidence that the
acqi.:inng person se:ioual

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Aftc%3A8176469cadcc6f2b. Public record. Not legal advice.