[Federal Register Volume 66, Number 22 (Thursday, February 1, 2001)]
[Rules and Regulations]
[Pages 8679-8721]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-2605]



[[Page 8679]]

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Part V





Federal Trade Commission





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16 CFR Parts 2, 801, 802, and 803



Premerger Notification; Reporting and Waiting Period Requirements and 
Rules of Practice; Final Rules

16 CFR Parts 801 and 802



Premerger Notification; Reporting and Waiting Period Requirements; 
Proposed Rule

Federal Register / Vol. 66, No. 22 / Thursday, February 1, 2001 / 
Rules and Regulations

[[Page 8680]]


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FEDERAL TRADE COMMISSION

16 CFR Parts 801, 802 and 803


Premerger Notification; Reporting and Waiting Period Requirements

AGENCY: Federal Trade Commission.

ACTION: Interim rules with request for comment.

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SUMMARY: The Federal Trade Commission is amending the premerger 
notification rules, which require the parties to certain mergers or 
acquisitions to file reports with the Commission and with the Assistant 
Attorney General in charge of the Antitrust Division of the Department 
of Justice and to wait a specified period of time before consummating 
such transactions, pursuant to Section 7A of the Clayton Act. The 
filing and waiting period requirements enable these enforcement 
agencies to determine whether a proposed merger or acquisition may 
violate the antitrust laws if consummated and, when appropriate, to 
seek a preliminary injunction in federal court to prevent consummation. 
The rule amendments are necessary to implement recent amendments to the 
Clayton Act, and will increase the clarity and improve the 
effectiveness of the rules and the Notification and Report Form.

DATES: These interim rules are effective February 1, 2001. Comments 
should be filed no later than March 19, 2001.

ADDRESSES: Address comments concerning these interim rules to the 
Secretary, Federal Trade Commission, Room 159, 600 Pennsylvania Avenue, 
NW, Washington, DC 20580, or by e-mail to [email protected]. With 
regard to the Paperwork Reduction Act, send a copy of any comments 
concerning the burden estimate, or any other aspect of the information 
collection, including suggestions for reducing the burden, to the 
Office of Information and Regulatory Affairs, Office of Management and 
Budget, New Executive Office Building, Room 10202, Washington, DC 20503 
(ATTN.: Edward Clarke, Desk Officer for the Federal Trade Commission).

FOR FURTHER INFORMATION CONTACT: Marian R. Bruno, Assistant Director, 
or Karen E. Berg, Attorney, Premerger Notification Office, Bureau of 
Competition, Room 303, Federal Trade Commission, 600 Pennsylvania 
Avenue, NW, Washington, DC 20580. Telephone: (202) 326-3100.

SUPPLEMENTARY INFORMATION:

Background

    Section 7A of the Clayton Act, 15 U.S.C. 18a (``the act''), as 
added by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 
(``HSR Act''), Pub. L. 94-435, 90 Stat. 1390, requires all persons 
contemplating certain mergers or acquisitions to file notification with 
the Federal Trade Commission (``FTC'' or ``Commission'') and the 
Assistant Attorney General in charge of the Antitrust Division of the 
Department of Justice (``Assistant Attorney General'') and to wait a 
designated period of time before consummating such transactions. 
Congress empowered the Commission, with the concurrence of the 
Assistant Attorney General, to require ``that the notification * * * be 
in such form and contain such documentary material and information * * 
* as is necessary and appropriate'' to enable the agencies ``to 
determine whether such acquisitions may, if consummated, violate the 
antitrust laws.'' Congress similarly granted rulemaking authority to, 
inter alia, ``prescribe such other rules as may be necessary and 
appropriate to carry out the purposes of this section.'' See 15 U.S.C. 
18a(d).
    Pursuant to that authority, the Commission, with the concurrence of 
the Assistant Attorney General, developed the Antitrust Improvements 
Act Rules (``the rules''), which are codified in 16 CFR parts 801, 802 
and 803, and the Notification and Report Form for Certain Mergers and 
Acquisitions (``the Form''), which appears at part 803--Appendix. The 
Commission has amended or revised the rules and Form on fourteen prior 
occasions since they were first introduced.
    On December 21, 2000, the President signed into law certain 
amendments to Section 7A(a) of the Clayton Act, 15 U.S.C. 18a(a). See 
Pub. L. 106-553, 114 Stat. 2762 (``2000 Amendments''). These amendments 
are effective on February 1, 2001. The 2000 Amendments are the first 
significant changes to Section 7A since the passage of the HSR Act in 
1976. These changes include:
     An increase in the size-of-transaction threshold to $50 
million (in place of the previous $15 million threshold).
     Elimination of the 15 percent size-of-transaction 
threshold.
     Reportability of transactions valued at greater than $200 
million without regard to ``size-of-person.'' The current size-of-
person test will continue in place for transactions valued between $50 
million and $200 million.
     Adjustment to the size-of-transaction threshold each 
fiscal year, beginning with FY 2005, for changes in GNP during the 
previous year.
     Implementation of a tiered fee structure. The fee that the 
acquiring person must pay will be based on the value of the voting 
securities or assets held as a result of the transaction:


------------------------------------------------------------------------
                 Size (value) of transaction                    Fee ($)
------------------------------------------------------------------------
 $100 million...............................................      45,000
$100 million to  $500 million...............................     125,000
$500 million or more........................................     280,000
------------------------------------------------------------------------


    The filing fee tiers will be adjusted annually, beginning with FY 
2005, for changes in GNP during the previous year.
     Extension of the waiting period that follows substantial 
compliance with requests for additional information and documentary 
material to 30 days for most transactions. The 10-day post-compliance 
period for cash tender offers (and bankruptcy transactions) is not 
changed.
     The end of any waiting period that would be on a Saturday, 
Sunday or legal public holiday shall be the next regular business day.

Statement of Basis and Purpose of the Amendments to the Rules and 
Form

    To implement these statutory changes, the Commission, with the 
concurrence of the Assistant Attorney General, is promulgating 
additional amendments and revisions to the rules and Form, as described 
below. Generally, all references to Section 7A(a)(3) of the Clayton Act 
and all examples have been modified where necessary to reflect the 
higher $50 million size-of-transaction threshold and elimination of the 
15 percent size-of-transaction threshold. In addition, the Commission 
has taken this opportunity to make minor ministerial changes to update 
the rules and Form. In a separate Federal Register document, the 
Commission is amending Part 2 of its Rules of Practice to incorporate 
procedures, as required by the 2000 Amendments, for internal agency 
review, upon petition, of requests for additional or documentary 
material (``second requests'') regarding the transaction at issue.

Part 801--Coverage Rules

Section 801.1(h): Notification Threshold

    Section 801.1(h) of the rules defines the term ``notification 
threshold.'' This term does not appear in the act, and its principal 
appearance in the rules is in connection with Section 802.21, an 
exemption for certain incremental acquisitions. In general, the 
notification thresholds specify the levels of ownership of the assets 
or voting

[[Page 8681]]

securities of an acquired person that cannot be attained or exceeded 
without observing the filing and waiting period requirements of the 
Clayton Act.
    Section 801.1(h), as originally promulgated in 1978 (43 FR 33450, 
July 31, 1978), contained four notification thresholds: $15 million; 15 
percent; 25 percent; and 50 percent. Several of the changes Congress 
made in the act have, however, necessitated a complete revision of this 
rule. In particular, the elimination of the 15 percent size-of-
transaction test, the increase of the monetary size of transaction test 
to $50 million, and the introduction of a three-tiered filing fee 
structure have all affected this provision. The 2001 thresholds are: 
Assets and voting securities valued at greater than $50 million but 
less than $100 million; assets and voting securities valued at $100 
million or greater but less than $500 million; assets and voting 
securities valued at $500 million or greater; 25 percent of the voting 
securities of an issuer if valued at greater than $1 billion; and 50 
percent of the voting securities of an issuer if valued at greater than 
$50 million.
    To understand the function of the notification thresholds in the 
rules, it is necessary to look closely at the requirements of the act. 
Under the act as amended, one must file notification and observe a 
waiting period if at least one of the parties is engaged in commerce or 
in any activity affecting commerce, in certain transactions if the 
size-of-person test is met, and if ``as a result of such acquisition, 
the acquiring person would hold an aggregate total amount of voting 
securities and assets of the acquired person'' in excess of $50 million 
(emphasis added). The rules interpret this provision to mean that all 
prior acquisitions of voting securities of an issuer are held as a 
result of any subsequent acquisition of voting securities from that 
issuer. See Section 801.13(a). This means that once the $50 million 
level is reached, every acquisition of voting securities is potentially 
reportable, not just the one that first exceeds this amount.
    This result is overly burdensome and serves no law enforcement 
purpose. To avoid this consequence, the drafters of the 1978 rules 
added the concept of notification thresholds and Section 802.21. The 
thresholds establish certain levels of acquisition likely to be of 
competitive significance. Section 802.21 exempts all acquisitions 
between these levels not meeting or exceeding the next threshold for a 
period of five years after expiration or termination of the waiting 
period for the transaction which initially crossed the prior threshold. 
(For more regarding the function of the notification thresholds, see 
the discussion of Section 802.21 below.) The thresholds, in conjunction 
with Section 802.21, thus operate to inform the agencies that if a 
reported transaction is not challenged, the acquiring person can 
acquire up to the next highest threshold without having to file again.
    Enactment of the new legislation has required some amendments to 
the Section 801.1(h) thresholds and has led the Commission to make 
other changes as well. Raising the statutory size-of-transaction 
threshold from $15 million to $50 million has required changing the 
lowest dollar threshold in Section 801.1(h) in the same fashion. At the 
same time, it appears logical that for voting securities, 50 percent 
(as long as valued in excess of the act's $50 million threshold) should 
continue to be the highest reporting threshold. Transactions resulting 
in an acquiring person holding at least 50 percent of the voting 
securities of an issuer transfer control of the issuer within the 
meaning of the rules and can have greater antitrust significance than 
acquisitions between the same parties resulting in minority interests. 
Any additional acquisitions by an acquiring person that already holds 
50 percent of the voting securities of an issuer are exempted by 
Section 7A(c)(3) of the act.
    The Commission thus began its consideration of appropriate Section 
801.1(h) thresholds recognizing that $50 million should be the lowest 
reporting threshold and 50 percent (if greater than $50 million) the 
highest. The Commission then addressed what thresholds--if any--to have 
in addition to them. As with the 1976 statute, it was readily apparent 
that intermediate thresholds are desirable. Absent additional 
thresholds, a person intending to acquire 1 percent of an issuer for 
$51 million would be able to acquire any amount up to (but not 
including) 50 percent without another reporting obligation. The 
agencies would thus have to regard the one percent/$51 million 
acquisition as a much more significant acquisition than may have been 
contemplated by the parties.
    While the original 1978 rules interposed two intermediate 
percentage thresholds for voting securities transactions--15 percent 
and 25 percent--the Commission has determined that the 2001 rules, with 
one exception noted below, should instead interpose intermediate dollar 
thresholds ($100 million and $500 million).
    There are several reasons for this change. First, in enacting the 
new legislation, Congress eliminated the alternative 15 percent size-
of-transaction test, leaving the size-of-transaction test based solely 
on the dollar value of the transaction. Second, in the 2000 Amendments, 
Congress established a tiered filing fee based on the dollar value of 
the transaction. In so doing, Congress appears to have concluded that 
there is a positive correlation between dollar value of transactions 
and agency resources devoted to investigating them. The tiered fee 
structure thus appears to reflect the view that larger dollar value 
transactions are more likely to require more antitrust review than 
smaller ones. These statutory changes led the Commission to conclude 
that there was no longer any special significance to be attached to the 
15 percent level and that there is some significance to the $100 
million and $500 million levels.
    In addition to these reasons for adopting intermediate dollar 
thresholds in Section 801.1(h), the Commission believes this change 
will avoid certain administrative difficulties for the parties and the 
agencies. The existence of two different sets of thresholds, one for 
fees and another for notification requirements, would create difficult 
administrative problems. For example, suppose that the 15 percent and 
25 percent thresholds were retained, and that A plans to acquire 26 
percent of the voting securities of B in year 1 for $85 million. Under 
Section 802.21, A's filing would enable A to acquire up to 50 percent 
of B up through year 5, which would put A well above $100 million. In 
such a scenario, should A be required to pay a $125,000 filing fee at 
the time of its filing? Or should A be allowed to pay a $45,000 filing 
fee and to proceed up to 50 percent without paying any additional fee 
even though it would hold in excess of $100 million of the voting 
securities of B? Or should A be allowed to proceed up to 50 percent 
without filing but be required to pay an additional $125,000 fee for 
crossing the higher fee threshold (or, perhaps, be required to pay 
$80,000, crediting A for the $45,000 fee it had already paid)? Using 
the fee thresholds as Section 801.1(h) thresholds avoids these 
problems. In addition, as described above, doing so appears consistent 
with congressional intent and with encouraging efficient antitrust 
review.
    The 25-percent-if-valued-at-greater-than-$1-billion threshold is 
intended to apply to progressive acquisitions of the stock of very 
large issuers. For such companies, even $500 million may represent a 
relatively small percentage

[[Page 8682]]

of the stock and therefore an additional threshold between $500 million 
and 50 percent is necessary. In the case of smaller issuers where just 
under 50 percent of the issuer's stock is valued less than $1 billion, 
the 25 percent threshold would be inapplicable.
    Although these new thresholds are fairly self-explanatory, two 
features of the new thresholds deserve mention. First, the three 
monetary thresholds apply to acquisitions of voting securities or of 
assets but the percentage thresholds apply only to acquisitions of 
voting securities (as is indicated by the use of the word ``issuer''). 
These new thresholds thus do not introduce percentage notification 
thresholds for asset transactions. Second, the 50 percent threshold is 
the highest threshold regardless of the corresponding dollar value. 
That is, depending on the size of the issuer whose voting securities 
are being acquired, the 50 percent threshold may come after any of the 
monetary thresholds. If, however, 50 percent of the stock of an issuer 
is valued at $480 million, for example, there is no higher threshold 
at, say, $500 million because Section 7A(c)(3) of the act exempts 
acquisitions above the 50 percent level. Two examples have been added 
to illustrate the operation of the new thresholds.

Section 801.1(j): Engaged in Manufacturing

    As a housekeeping matter, the definition of ``engaged in 
manufacturing'' has been amended to reference the current 1987 edition 
of the Standard Industrial Classification Manual.

Section 801.1(m): The Act

    The definition of ``The act'' has been amended to include reference 
to the 2000 Amendments.

Section 801.10: Value of Voting Securities and Assets To Be Acquired

    The last sentence in the example to Section 801.10 has been 
deleted, together with corresponding language in the Instructions that 
requests ``approximate value ``or ``estimated total value'' of assets 
in Item 2(d) of the Form. The Commission removed this language because 
a filing person must make as precise a valuation as it can under the 
new filing fee structure.

Section 801.11: Annual Net Sales and Total Assets

    In Section 801.11(e)(2)(ii) the reference to Section 801.40(c) has 
been changed to Section 801.40(d) to reflect the renumbering of that 
section.

Section 801.12: Calculating Percentage of Voting Securities or Assets

    Paragraphs (c) and (d) of Section 801.12, and the examples that 
follow have been removed because they are relevant only to a 
determination whether the percentage of assets being held or acquired 
meets the 15 percent size-of-transaction test. Because this test has 
been eliminated in the 2000 Amendments, these paragraphs and the 
corresponding examples are no longer applicable. The title of the 
section has also been changed by dropping ``or assets.''

Section 801.15: Aggregation of Voting Securities and Assets the 
Acquisition of Which Was Exempt

    The reference to ``A's'' acquisition of less than 15 percent of the 
voting common stock of X has been deleted from Example 1 following 
Section 801.15. The reference was originally included to make clear 
that ``A's'' acquisition of the common stock alone would meet neither 
the $15 million nor the 15 percent the size-of-transaction threshold. 
The elimination of the 15 percent size-of-transaction threshold in the 
2000 Amendments renders the reference meaningless, and it has been 
deleted.

Section 801.40: Exempt Formation of Joint Venture or Other Corporations

    Section 801.40 has been amended to eliminate the size-of-person 
test for transactions valued at greater than $200 million. 
Specifically, a new paragraph (b) has been added to the section which 
makes an acquiring person in a joint venture subject to the act if the 
commerce test is satisfied and the size of transaction is valued at 
greater than $200 million. The only other changes to this section are 
minor and follow from the addition of new paragraph (b). They are: 
Redesignating the paragraph that follow (b); the addition of ``and 
(c)'' to new paragraph (d) (old paragraph (c)), which discusses what 
assets of the joint venture are to be included; requisite amendments to 
the example following the rule to reflect section and paragraph changes 
in the rule itself; addition of a new example demonstrating the 
application of new paragraph (b); and dollar changes to reflect the 
general increase in the filing threshold.

Part 802--Exemption Rules

Section 802.4: Acquisitions of Voting Securities of Issuers Holding 
Certain Assets the Direct Acquisition of Which Is Exempt

    Section 802.4 exempts the acquisition of voting securities of 
issuers that hold certain assets the direct acquisition of which is 
exempt under the act or the rules. The rationale for this rule is that 
the applicability of an exemption should not depend on the form the 
acquisition takes, since the antitrust analysis would be the same 
whether voting securities or assets are being acquired. A change to the 
$15 million non-exempt assets threshold in this section is not mandated 
by the general increase in the size-of-transaction threshold from $15 
million to $50 million, since the acquisition still would be an 
acquisition of voting securities of an issuer valued in excess of $50 
million. However, since the threshold functions in the same manner as 
the size-of-transaction test in an asset acquisition, it appears 
consistent with Congressional intent to increase this threshold to the 
higher level as well. Accordingly, the Commission is amending the 
references from $15 million to $50 million in this rule and its 
Examples 1 and 2.

Section 802.20: Minimum Dollar Value

    The preamble to Section 802.20, the Minimum Dollar Value Exemption, 
states that this provision applies to ``acquisition[s] which would be 
subject to the requirements of the act and which satisf[y] section 
7A(a)(3)(A) [the 15 percent size-of-transaction test] but * * * not * * 
* section 7A(a)(3)(B) [the $15 million monetary size-of-transaction 
test].'' This rule exempts acquisitions of assets valued at less than 
$15 million regardless of the percentage of the assets of the acquired 
person they represent, and also exempts acquisitions of less than $15 
million of voting securities unless the acquisition would confer 
control of an issuer with sales or assets of $25 million or more.
    The need for Section 802.20 arose from the dual nature of the size-
of-transaction test which made reportable certain very small 
transactions between parties meeting the size-of-person test. Absent 
Section 802.20, transactions could meet the statutory size-of-
transaction test even though they fell below the monetary size-of-
transaction test--a situation, as described below, that cannot occur 
under the 2000 Amendments. The most extreme example is that of a $100 
million acquiring person acquiring 15 percent of the stock of a 
subsidiary of a $10 million acquired person for a price well below $15 
million. Without Section 802.20, this transaction would have been 
reportable no matter how small the acquisition price was. Similarly, 
the acquisition of 15 percent of the assets of a $10 million person 
would have been reportable despite its small dollar value.

[[Page 8683]]

    One of the 2000 Amendments eliminates the 15 percent size-of-
transaction test. The removal of this test does away with the primary 
cause of the reportability of very small transactions and eliminates 
any need for Section 802.20. In addition, Congress has also increased 
the monetary size-of-transaction test to $50 million. These two 
measures assure that very small transactions are never reportable under 
the new statutory scheme. The $50 million threshold will be an absolute 
floor, with no transaction resulting in an acquiring person holding 
less than that amount of assets or voting securities'' of an acquired 
person being reportable. Because the $50 million statutory size-of-
transaction threshold will be an absolute floor, the minimum dollar 
value exemption contained in Section 802.20 exempting transactions 
falling below that dollar threshold is no longer needed, and is 
removed.

Section 802.21: Acquisitions of Voting Securities Not Meeting or 
Exceeding Greater Notification Threshold

    Section 802.21 is amended by the addition of paragraph (b), which 
addresses acquisitions of voting securities up to the next notification 
threshold by ``transitional'' filers, i.e., acquiring persons who filed 
using the 1978 notification thresholds and who have met or crossed the 
threshold for which they filed within a year of the waiting period's 
expiration, but whose five-year period for making additional 
acquisitions under Section 802.21(a) has not expired as of February 1, 
2001 (the effective date of the 2000 Amendments). Section 802.21(b) is 
an effort to strike a balance between the interests of these filers in 
being able to rely on rules that were in effect when they filed, and 
the need of the Premerger Notification Office to minimize the burden of 
administering two different sets of notification thresholds after 
February 1, 2001. Thus, transitional filers have one year from the 
effective date of the amendments or until the end of the original 5-
year period for making additional acquisitions, whichever comes first, 
to acquire up to what was the next reporting threshold at the time that 
they filed, and they may do so without filing another notification, 
even though they might cross a new 2001 threshold. Thereafter, these 
acquiring persons, along with any other acquiring persons filing on or 
after February 1, 2001, must observe the 2001 thresholds contained in 
Section 801.1(h). The 1978 notification thresholds of $15 million, 15 
percent, and 25 percent (for transactions valued at $1 billion and 
under) will be inapplicable to new filings as of February 1, 2001. Four 
new examples illustrate the application of Section 802.21(b).

Section 802.31: Acquisitions of Convertible Voting Securities

    The reference to the acquisition of convertible voting securities 
being exempt ``even though they may be converted into 15 percent or 
more of the issuer's voting securities'' has been removed from the 
example to Section 802.31 in response to the elimination of the 15 
percent size-of-transaction threshold by the 2000 Amendments.

Section 802.64: Acquisitions of Voting Securities by Certain 
Institutional Investors

    Paragraphs (b)(4) and (b)(5)(ii) of Section 802.64 have been 
removed as unnecessary and example 1 has been revised to correct an 
inaccuracy. Paragraphs (b)(4) and (b)(5)(ii) made the acquisition of 
voting securities by an institutional investor exempt if the criteria 
in paragraphs (b)(1) through (b)(3) are satisfied and if, as a result 
of the acquisition, the institutional investor would not control the 
issuer and would hold voting securities of an issuer valued at $25 
million or less. Given the increase in the general filing threshold to 
$50 million, the acquisition described in (b)(5)(ii) would be 
nonreportable, so there is no need to retain this exemption. Since the 
control test in (b)(4) was included only to prevent the exemption from 
being applied to acquisitions of more than 50 percent of the stock of 
an issuer for $25 million or less, it is no longer required with the 
deletion of the $25 million alternative because acquisitions at that 
dollar amount are no longer covered by the act. Section 802.64 now 
exempts acquisitions by certain institutional investors which are 
greater than $50 million but 15 percent or less. Example 1 has been 
revised to remove in two places the inaccurate statement that aggregate 
holdings equal to 15 percent would not be exempt under this section.

Part 803--Transmittal Rules

Section 803.1: Notification and Report Form

    Section 803.1 has been revised to update the address for the 
Federal Trade Commission from 6th Street & Pennsylvania Avenue, N.W., 
to 600 Pennsylvania Avenue, NW, as now designated by the U.S. Postal 
Service. The Federal Trade Commission's Web site has also been added as 
a source for the Notification and Report Form.

Section 803.2: Instructions Applicable to Notification and Report Form

    Section 803.2 has been revised to change references to Item 9 of 
the Notification and Report Form to Item 8, reflecting the 
reorganization of the Notification and Report Form. Paragraph (b) was 
also reorganized to correct an original drafting error. There is no 
additional revision of the text of this paragraph.

Section 803.5: Affidavits Required

    Examples 2 and 3 to this section have been amended to reflect the 
new notification thresholds. A minor typographical error in example 2 
was also corrected.

Section 803.9: Filing Fee

    Section 803.9 is a new section on the payment of filing fees. 
Previously, the requirement of payment of a filing fee was not 
contained in the Clayton Act or in the HSR rules themselves, but was 
found at Pub. L. 103-317, amending Section 605 of Title VI of Pub. L. 
101-162, 103 Stat. 1031. The 2000 Amendments build a filing fee 
structure into the Clayton Act for the first time and base the filing 
fee on the aggregate total amount of voting securities and assets held 
as a result of the acquisition. Because ``aggregate total amount * * * 
held'' is a concept defined and developed in the rules, the Commission 
believes it is appropriate that the rules contain instructions for the 
application of this concept to the proper payment of fees required 
under the statute.
    Section 803.9 is very straightforward: paragraph (a) mandates that 
each acquiring person (except as provided in paragraphs (b) and (c), 
explained below) shall pay the filing fee required by the Clayton Act 
(as amended) to the Federal Trade Commission, and that no additional 
fee is due to the Department of Justice. Paragraph (a) is followed by a 
number of examples designed to illustrate how to apply the new 
graduated fee schedule to various types of transactions.
    Paragraphs (b) and (c) create exceptions, in the case of 
consolidations and in certain cases where an acquiring entity has two 
ultimate parent entities, to the rule that every acquiring person must 
pay a filing fee. Consolidations are transactions where both parties 
lose their pre-acquisition identities, and a new corporation is formed. 
Both parties are deemed ``acquiring persons'' under the rules and, 
absent these exceptions, each would have to pay a filing fee. 
Similarly, where an entity is owned 50/50 by two persons, each is 
deemed to control the entity and to be an

[[Page 8684]]

``acquiring person'' when that entity makes an acquisition. While the 
2000 Amendments do not mandate these changes, we believe they are 
appropriate in these limited circumstances. Consolidations are reviewed 
by the agencies in the same manner as mergers, which require only one 
filing fee. The absence of additional resource requirements to review 
consolidations argues against requiring two filing fees in such 
transactions. In transactions in which there are two acquiring persons 
that would have the same responses to items 5 through 8 of the 
Notification and Report Form, those two acquiring persons would have no 
significant business activities outside of the jointly controlled 
acquisition vehicle. Accordingly, the agencies are again essentially 
reviewing one transaction and a single filing fee seems appropriate for 
this type of transaction as well. Eliminating the double fee for these 
transactions is non-controversial and benefits potential filing 
parties; thus this change has been included with the interim amendments 
so it can take effect on February 1.
    Paragraph (d) of Section 803.9 contains specific instructions for 
payment of the filing fee and refers filers to the Instructions to the 
Form for more specific electronic wire transfer payment (``EWT'') 
information. The preferred method of payment is EWT; thus this method 
of payment is highlighted.
    Paragraph (e) provides that no filing fee or part of the filing fee 
shall be refunded, except where Commission staff determines the 
transaction was not reportable on its face under the rules. It is 
currently Commission practice to refund filing fees only in such 
instances, but paragraph (e) is added to codify that practice and give 
notice that acquiring persons will not receive partial reimbursement of 
their fee in the event they overvalue a transaction.

Section 803.10: Running of Time

    Section 803.10 has been amended to reflect the fact that under the 
2000 Amendments the waiting period for requests for additional 
information or documentary materials expires 30 days following 
substantial compliance. The section is also amended such that a waiting 
period that would expire on a Saturday, Sunday or legal public holiday, 
is extended to the end of the next regular business day. Section 803.10 
has also been amended to correct the addresses of the Commission and 
the Department of Justice for the delivery of premerger notifications. 
As a housekeeping matter, paragraph (b) now contains a reference to 11 
U.S.C. 363(b) to codify the current practice that bankruptcy matters 
are subject to the shortened waiting period afforded cash tender 
offers. Paragraph (c) was also reorganized to correct an original 
drafting error. There is no additional revision of the text of this 
paragraph.
    In addition, Example 1 following Section 803.10 has been removed. 
It originally illustrated the concept that the 20-day second request 
waiting period cannot cut short the original 30-day waiting period for 
a non-801.30 acquisition. The 2000 Amendments extend the second request 
waiting period for non-801.30 transactions from 20 to 30 days; thus, 
the hypothetical situation in Example 1 could no longer occur, and it 
is pointless to retain this example in the rules. Former example 2 has 
been amended to reflect the 30-day second request waiting period.

Section 803.20: Requests for Additional Information or Documentary 
Material

    Section 803.20(c)(2) and its example have been amended in response 
to the 2000 Amendments to change the request for additional information 
or documentary material waiting period from 20 to 30 days. As with 
Section 803.10 above, the rule now contains added references to 11 
U.S.C. 363(b) to codify that bankruptcy matters are subject to the 
shortened waiting periods afforded cash tender offers.
    This section has also been amended to reflect the fact that a 
second request to an acquired person in a bankruptcy transaction 
covered by 11 U.S.C. 363(b) does not extend the waiting period. That 
section of the Bankruptcy Code provides that subsection (e)(2) of 
Section 7A of the Clayton Act, which deals with how second requests 
affect the waiting period, shall apply to such bankruptcy transactions 
in the same manner as such subsection (e)(2) applies to a cash tender 
offer.

Part 803--Appendix: Premerger Notification and Report Form

    The first Premerger Notification and Report Form (the ``Form'') was 
published on July 31, 1978, and was subsequently amended in 1987, with 
additional minor changes made in 1990 and 1995. The Commission is 
altering the Form again to accommodate the 2000 Amendments, as well as 
to implement some administrative changes that were proposed and 
received public comment in 1994. See 59 FR 30545 (June 14, 1994), id. 
at 46365 (Sept. 8, 1994) (extending comment period). Not all of the 
changes proposed in 1994 have been implemented, since several of the 
proposed changes were controversial, and re-proposal and comment 
regarding those changes would be appropriate prior to implementation. 
Those proposed changes will be addressed again in subsequent 
rulemakings.
    Substantively, there is little change in the Form and the additions 
are relatively minor. The first page will now solicit information on 
the filing fee paid and method of payment. The first page of the Form 
will also ask for a voluntary listing of foreign competition 
authorities which the filing party believes will be notified of the 
proposed transaction. There will be boxes to check if the filing is a 
corrective filing for a transaction that has already been consummated 
or a filing subject to the special shortened waiting period afforded 
bankruptcy transactions under 11 U.S.C. 363(b). Former Items 10(a) and 
(b) are redesignated as Items 1(g) and (h), and Items 1-3 are 
reorganized with certain items redesignated for clarity and ease of 
completion and processing. The only amendment to Item 4 is a revision 
to reflect a change in Securities and Exchange Commission filing 
requirements. Items 5-7 are unchanged. Former Item 8 (Vendor-Vendee 
relationships) is removed. Former Item 9 is redesignated as Item 8. 
These changes are discussed in more detail below, in the order in which 
they appear on the Form.

General Instructions

    Several minor changes have been made to update the general 
instructions. The address in the Information paragraph for the Federal 
Trade Commission has been updated from ``6th St. & Pa. Avenue, N.W.,'' 
to ``600 Pennsylvania Ave, NW,'' as now designated by the U.S. Postal 
Service. The Definition paragraph will include a reference to the 
Federal Register cite for these rules. The general instruction for 
Items 5 though 8 and the Appendix is expanded to clarify that the 
acquired person should limit its response to these items to the assets 
being sold or to the issuer(s) whose voting securities are being 
acquired as provided in Section 803.2(b). Acquired persons have often 
failed to limit their responses in this manner, and this clarification 
should remove any confusion. This expanded direction is also reiterated 
in the specific instructions for these items.
    The Filing section of the general instructions is updated to give 
the current addresses of the Commission and the Department of Justice. 
It has also been revised to limit the number of original affidavits and 
certification pages which must accompany premerger filings as provided 
by Formal Interpretation 16 (Nov. 24, 1999).

[[Page 8685]]

Formal Interpretation 16 changed the policy of the Premerger 
Notification Office to allow filing persons to submit only one original 
affidavit and certification with their filings instead of five 
originals as previously required. The notarized original and one copy 
(with one set of documentary materials) should be submitted to the 
Commission's Premerger Notification Office and three copies (with one 
set of documentary materials) should be submitted to the Department of 
Justice.

Item by Item

    Fee Information. With the new tiered fee schedule, a space has been 
added to the first page of the Form to elicit information regarding 
payment of the filing fee. The filing fee is based on the aggregate 
total amount of assets and voting securities to be held as a result of 
the acquisition.
    Amount paid. The payer should enter the amount of the fee paid in 
the space where indicated. Should the fee be based on an amount that 
differs from the acquisition price, or if the acquisition price is 
undetermined and may fall within a range that straddles two filing fee 
thresholds, an explanation of the value reported is required to be 
submitted with the Form. The explanation should include discussion of 
adjustments to the acquisition price, a description of any exempt 
assets and their value, and the valuation methods used. To assist 
parties in making a proper determination of the value of the assets or 
voting securities to be held, a separate Valuation Worksheet can be 
obtained from the Premerger Notification Office (``PNO''). Although the 
PNO initially considered making this Worksheet an appendix to the Form, 
the Commission chose to make this Worksheet optional in order to ease 
the burden on filing parties. However, use of the Worksheet or 
something similar is strongly encouraged and should facilitate an 
accurate valuation of the acquisition.
    Method of Payment. This section has been added to the Form to 
facilitate processing of fee payments with a minimal burden on the 
filing parties. Although instructions concerning the filing fee and the 
transmission of EWT payments have not previously appeared on the Form, 
these instructions closely track the filing fee information that 
historically has been available informally from the PNO. The acquiring 
person is responsible for ensuring full payment of the fee at the time 
of filing. Fees are payable in U.S. currency to the Federal Trade 
Commission by bank cashier's check, certified check or electronic wire 
transfer, although the preferred method of payment is by electronic 
wire transfer. Section 31001 of the Debt Collection Improvement Act of 
1996, Pub. L. 104-134, 110 Stat. 1321-358 (``DCIA''), provides that 
Federal agencies shall require each person doing business with those 
agencies to furnish the person's taxpayer identification number to that 
agency. The DCIA defines ``doing business with'' to include entities 
that have been assessed a fine, fee, royalty or penalty by an agency, 
which would appear to include persons required to pay HSR filing fees. 
Thus, this section requests the taxpayer identification number or 
social security number of the acquiring person, and the payer of the 
fee if different from the acquiring person. If the acquiring person or 
payer of the fee is a natural person, a social security number should 
be given instead of the taxpayer identification number. If the 
acquiring person or payer is a foreign person, an identifying number 
need not be provided.
    For EWTs, additional payment information is requested in this 
section of the Form. As the use of EWT for payment of the filing fee 
has increased, it has become apparent that additional information is 
needed for Commission staff to accurately pair each EWT with the HSR 
filing to which it pertains. Experience has shown that the EWT 
confirmation number, the name of the institution where the wire 
transfer originated, and the name of the payer if it differs from the 
person filing are all needed. The information received will ensure 
rapid and accurate identification of receipt of payment for payers 
utilizing EWT.

Notification for an Acquisition That Has Been Consummated in Violation 
of the HSR Act

    As proposed in 1994, a question has been added to the preamble of 
the Form that requires reporting persons to indicate if the filing is a 
corrective filing being made for an acquisition that has already been 
consummated in violation of the act. Several times each year, persons 
file premerger notifications for acquisitions that have been 
consummated without filing notification and observing the appropriate 
waiting period. Persons who have consummated acquisitions in violation 
of the act are advised to make a corrective filing as soon as possible.
    As explained in the 1994 Notice of Proposed Rulemaking, the PNO has 
established procedures for processing corrective filings and conducting 
a preliminary review to determine whether to refer the violation to the 
appropriate litigation office for further investigation and a possible 
civil penalty action. The PNO also monitors persons who have violated 
the act in order to identify repeat offenders. Responses to this 
question will enable the PNO to identify corrective filings promptly 
thereby assisting the PNO in its processing of these filings. 
Additional information and procedures for submission of corrective 
filings can be found on the PNO Web page at www.ftc.gov/bc/hsr/hsr.htm.
    If, after February 1, 2001, parties discover that there was an 
acquisition made prior to February 1, 2001, that was subject to the 
reporting requirements of the act but for which a filing was not made, 
the parties must file a corrective filing even though the transaction 
would not be reportable under the 2000 Amendments. The acquisition is 
governed by the law in effect at the time of closing. Note also that 
the corrective filing would be subject to the new filing fee structure 
(i.e., a violation valued in excess of $500MM would require a $280,000 
filing fee with the corrective filing).

Transactions Subject to Foreign Antitrust Reporting Requirements

    The Form is further amended to add a space for reporting persons to 
indicate if the filing is subject to foreign antitrust reporting 
requirements and requests the voluntary submission of the name(s) of 
any foreign antitrust or competition authority that, based upon the 
knowledge or belief of the filing person at the time of the filing, has 
been or will be notified of the proposed transaction and the date or 
anticipated date of such notification. This question on the Form was 
originally proposed in 1994 as mandatory but, based on the comments 
received, the Commission has decided to make providing this information 
voluntary. The filing person should respond based on its knowledge or 
belief ``at the time of the filing.'' The reasons for such amendments 
are discussed below.
    Since the implementation of the HSR premerger notification program 
on September 5, 1978, the potential for multiple jurisdiction 
notifications relating to a proposed merger or acquisition has grown 
substantially. This growth appears to be due to the significant 
increase in the number of foreign antitrust authorities with a wide 
variety of mandatory or voluntary pre-or post-acquisition notification 
requirements, as well as to an increase in companies that conduct a 
variety of businesses in different countries.
    Because of the development of merger notification programs in other 
countries, the U.S. antitrust enforcement agencies

[[Page 8686]]

have engaged in efforts to foster communication and cooperation among 
antitrust authorities. Providing premerger notification that a 
transaction is subject to review by other jurisdictions alerts the U.S. 
enforcement agencies to the presence of assets in those jurisdictions 
that may directly affect U.S. commerce. It may also facilitate 
identification of competitors in those jurisdictions that participate 
in a U.S. market identified in the subject transaction. The experience 
of the enforcement agencies has shown that cooperative efforts with 
foreign jurisdictions can enhance the enforcement of the antitrust laws 
against foreign mergers that may adversely affect U.S. commerce. 
Alerting the agencies at the time of filing that multiple jurisdiction 
filings will be made will enable the agencies to communicate with 
foreign counterparts only to the extent that statutorily protected 
information is not disclosed. However, early notice of multiple 
jurisdiction filings will also enable the agencies, where appropriate, 
to seek consent of the parties to enable more extensive cooperation 
between or among antitrust authorities in conducting their 
investigations. Because numerous foreign jurisdictions may be involved, 
some of which may not have been identified at the time the parties to a 
transaction are otherwise prepared to file their notification, the 
question has been modified from the 1994 proposal to provide that the 
response to this item should be made ``to the knowledge or belief of 
the filing person at the time of the filing of this notification.''

Transactions Subject to the Bankruptcy Code

    A new question in the preamble of the Form requires both the 
acquiring and the acquired persons to identify whether the acquired 
person's filing is being made by a trustee in bankruptcy or debtor-in-
possession subject to Section 363(b) of the Bankruptcy Code, 11 U.S.C. 
363(b). This information will provide immediate notice to the 
enforcement agencies that the transaction is subject to the special, 
truncated waiting period of Section 363(b), with an initial waiting 
period of 15 days.
    The rule as proposed in the 1994 Notice of Proposed Rulemaking 
required only the acquired person to respond. However, the agencies' 
goal of a more expeditious and efficient review of acquisitions subject 
to Section 363(b) of the Bankruptcy Code would be better achieved by 
requiring all filing persons to respond to this question. Parties to an 
acquisition do not always file simultaneously and in those instances 
when the acquiring person may file first, the agencies will be alerted 
immediately that the shortened waiting period is applicable and that 
expedited review is necessary.

Early Termination

    The first page of the Form provides a box for requesting early 
termination of the waiting period. The former instructions for this 
item noted that notification of each grant of early termination would 
be published in the Federal Register as required by Section 7A(b)(2) of 
the act. This instruction has been amended to include mention of the 
current PNO practice of publishing grants of early termination on the 
Commission's web site. As the use of electronic communications has 
grown enormously, it is often easier for parties to seek information on 
the World Wide Web rather than wait for publication of the Federal 
Register. The PNO has been posting grants of early termination on its 
Web page since 1998.

Items 1 Through 3

    These three items have been reorganized and some subsections are 
redesignated for ease of completion by the parties and efficiency of 
processing and review by the agencies. These items request the same 
basic information as before, with minor additions and deletions.
    Item 1, as before, seeks background information about the person 
making the filing. The primary change is that former Item 10 is now 
redesignated as Items 1(g) and 1(h). These items are updated to request 
the fax number and e-mail address of contact persons.
    Item 2 seeks information about the ultimate parent entities and the 
value of the assets or voting securities to be held, and reflects the 
new filing thresholds. This item has one new addition in Item 2(e) 
which requires the acquiring persons to provide the name of the 
person(s) who performed any fair market valuation used to determine the 
aggregate total value of the transaction. Now that the amount of the 
filing fee is based on the value of the acquired person's assets or 
voting securities to be held by the acquiring person, the determination 
of that value has increased in importance. Although the agencies would 
initially contact the person listed for that purpose in Items 1(g) and 
(h) should any questions arise regarding information supplied on the 
Form, this addition should help the parties and the agencies pinpoint 
who would be most knowledgeable on the issue of valuation.
    Item 3 focuses on the description of the acquisition and the 
details of the assets and voting securities being acquired. References 
to ``approximate'' or ``estimated'' values have been deleted as the new 
tiered fee structure requires valuation to be made with greater 
certainty. As a housekeeping matter, Item 3(b)(i), which requests 
information for acquisitions of assets, has been amended to remove the 
reference to Section 801.40. This reference has proven to be irrelevant 
to completion of this item. Item 3(c), requesting information about 
voting securities acquisitions, has been amended by deleting the last 
sentence referencing the 15 percent and $15 million size-of-transaction 
tests. Former Item 2(c)(vii), requesting the percentage of each class 
of securities which will be held by the acquiring person, has also been 
removed because this information has proven to be of minimal benefit in 
the agencies' premerger analysis.
    Item 4 The SEC eliminated Schedule 14D-1 effective January 24, 
2000, by combining the existing schedules for issuer and third-party 
tender offers into one schedule available for all tender offers, 
entitled ``Schedule TO.'' See 17 CFR 240.14D-100; www.sec.gov/rules/final/33-7760.htm. Consequently, Item 4(a) is now amended to require 
production of a Schedule TO instead of a Schedule 14d-1 if the 
acquisition is a tender offer.

Removal of Former Item 8: Vendor/Vendee Relationships

    Former Item 8 asked for information about any vendor-vendee 
relationship between reporting parties during the most recent year with 
respect to any manufactured product. Responses to this item were 
intended to alert the enforcement agencies to the potential risks of 
vertical foreclosure or increased vertical integration in a given 
industry. However, the agencies have found that they have not needed to 
rely on Item 8 to learn about transactions that present vertical 
concerns. In addition, the specific data provided in response to Item 8 
on manufactured product sales between filing persons are of limited use 
in determining whether the proposed acquisition will result in a 
vertical integration or foreclosure that will unreasonably restrain 
trade. In view of both the burden that Item 8 may place on vendees, 
particularly large diversified persons that may purchase from other 
filing persons a wide variety of manufactured products through numerous 
subsidiaries and divisions, and the record of the agencies' limited use 
of such vendor/vendee data, Item 8 is removed from the Form.

[[Page 8687]]

    Removal of Former Item 8 does not mean that vertical acquisitions 
present no potential competitive risks. The agencies simply have 
determined that the information provided in response to this item has 
not been particularly useful in identifying vertical relationships that 
may pose serious threats to competition.

Administrative Procedure Act

    The requirement to publish a notice of proposed rulemaking and 
afford an opportunity for public comment under the Administrative 
Procedure Act (``APA''), 5 U.S.C. 553(b), with respect to substantive 
rule amendments, if any, does not apply where an agency for good cause 
finds that such procedure would be ``impracticable, unnecessary, or 
contrary to the public interest.'' 5 U.S.C. 553(b)(A). To the extent 
the rule amendments described above are required by the 2000 Amendments 
to the Clayton Act, as explained earlier, the time period between the 
signing of 2000 Amendments into law and the legislation's effective 
date is extremely brief. These rule changes are basic and necessary to 
conform the rules to the 2000 Amendments, particularly the new $50 
million size-of-transaction threshold and the new tiered fee structure, 
so that the Hart-Scott-Rodino premerger notification program remains 
functional with minimal confusion to persons required to file. To delay 
implementation beyond the effective date of the 2000 Amendments in 
order to solicit and consider public comment would leave rules in place 
that do not reflect the statutory changes, thereby creating conflict 
between the statute and rules. Accordingly, the Commission has 
determined that prior notice of and comment on these rule amendments 
would be impracticable, unnecessary and contrary to the public 
interest.
    These rule amendments also include certain minor modifications to 
the Form not directly related to the 2000 Amendments, most of which 
were already published in proposed form for public comment, as 
previously noted. To the extent these Form modifications include 
certain additional housekeeping matters, they are simple clarifications 
or corrections, with respect to which the Commission finds that a 
separate notice-and-comment period would be unnecessary and not in the 
public interest. Nonetheless, the Commission invites comments on the 
amended rules and Forms, and reserves the right to make further 
modifications based on its experience and on any comments that may be 
received after the amendments have taken effect.

Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires that the 
agency conduct an initial and final regulatory analysis of the 
anticipated economic impact of the proposed amendments on small 
businesses, except where the agency head certifies that the regulatory 
action will not have a significant economic impact on a substantial 
number of small entities. 5 U.S.C. 605.
    Because of the size of the transactions necessary to invoke a Hart-
Scott-Rodino filing, the premerger notification rules rarely, if ever, 
affect small businesses. Indeed, the recent amendments to Section 7A of 
the Clayton Act, which these rule amendments implement, were intended 
to reduce the burden of the premerger notification program by exempting 
all transactions valued at less than $50 million. Further, none of the 
rule amendments expands the coverage of the premerger notification 
rules in a way that would affect small business. Accordingly, the 
Commission certifies that these rules will not have a significant 
economic impact on a substantial number of small entities. This 
document serves as the required notice of this certification to the 
Small Business Administration.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995, 44 U.S.C. 3501-3518, requires 
agencies to submit requirements for ``collections of information'' to 
the Office of Management and Budget (``OMB'') and obtain clearance 
prior to instituting them. Such collections of information include 
reporting, recordkeeping, or disclosure requirements contained in 
regulations. The HSR premerger notification rules and Form contain 
information collection requirements as defined by the Paperwork 
Reduction Act that have been reviewed and approved by the Office of 
Management and Budget under OMB Control No. 3084-0005 (preceding the 
latest HSR amendments). As noted earlier, the interim rules implement 
amendments to Section 7A of the Clayton Act, which reduce the burden of 
the premerger reporting program by exempting all transactions valued at 
less than $50 million. Because the interim rules would affect the 
information collection requirements of the premerger notification 
program, they are being submitted to OMB for review pursuant to the 
Paperwork Reduction Act. The Supporting Statement accompanying the 
Request for OMB Review states that the total burden imposed on the 
members of the public subject to the requirements of the Act, including 
the interim rules, is estimated to be 192,089 hours per year (based on 
fiscal year 2000 filings). This constitutes approximately a 47% 
reduction from what the burden estimate would be absent the interim 
rules and based on the number of fiscal year 2000 filings. As the 
public comment period extends beyond the interim rules' effective date, 
the Commission is seeking emergency paperwork clearance from OMB for 
the collections of information and burden estimates associated with the 
rules' amendments. The Commission will seek the ordinary 3-year 
clearance immediately thereafter with the requisite submissions to OMB.

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

    Antitrust, Reporting and recordkeeping requirements.
    Accordingly, for the reasons stated in the preamble, the Federal 
Trade Commission amends 16 CFR parts 801, 802, and 803 as follows:

PART 801--COVERAGE RULES

    1. Revise the authority citation for part 801 to read as follows:

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

    2. Amend Sec. 801.1 by revising paragraphs (h), (j), and (m) to 
read as follows:


Sec. 801.1  Definitions.

* * * * *
    (h) Notification threshold. The term ``notification threshold'' 
means:
    (1) An aggregate total amount of voting securities and assets of 
the acquired person valued at greater than $50 million but less than 
$100 million;
    (2) An aggregate total amount of voting securities and assets of 
the acquired person valued at $100 million or greater but less than 
$500 million;
    (3) An aggregate total amount of voting securities and assets of 
the acquired person valued at $500 million or greater;
    (4) Twenty-five percent of the outstanding voting securities of an 
issuer if valued at greater than $1 billion; or
    (5) Fifty percent of the outstanding voting securities of an issuer 
if valued at greater than $50 million.

    Examples:   
    1. Person ``A'' will acquire 10 percent of the voting securities 
of corporation ``B'' for $60 million. ``A'' would indicate the $50 
million notification threshold. ``A'' later will acquire all of the 
outstanding voting securities of ``B'' and will hold as a result 
voting securities of ``B'' valued at $600 million. ``A'' would 
indicate the 50 percent notification threshold for the later filing,

[[Page 8688]]

even though the $100 million and $500 million notification 
thresholds would also be crossed as a result of the acquisition.
    2. Person ``A'' will acquire 26 percent of the voting securities 
of corporation ``B'' for $550 million. ``A'' files for the $500 
million notification threshold. Later ``A'' will acquire an 
additional 20 percent of the voting securities of ``B'' and as a 
result will hold 46 percent of the voting securities of ``B'' valued 
at $1.1 billion. ``A'' is now required to file for the 25 percent 
notification threshold despite the fact that it already holds in 
excess of 25 percent of the voting securities of ``B'' prior to the 
current acquisition. The 25 percent threshold is crossed when as the 
result of an acquisition, 25 percent or more, but less than 50 
percent, of an issuer's voting securities are held and those 
securities are valued in excess of $1 billion.
* * * * *
    (j) Engaged in manufacturing. A person is ``engaged in 
manufacturing'' if it produces and derives annual sales or revenues in 
excess of $1 million from products within industries 2000-3999, as 
coded in the Standard Industrial Classification Manual (1987 edition) 
published by the Executive Office of the President, Office of 
Management and Budget.
* * * * *
    (m) The act. References to ``the act'' refer to Section 7A of the 
Clayton Act, 15 U.S.C. 18a, as added by section 201 of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, Pub. L. 94-435, 90 Stat. 
1390, and as amended by Pub. L. 106-553, 114 Stat. 2762. References to 
``Section 7A( )'' refer to subsections of Section 7A of the Clayton 
Act. References to ``this section'' refer to the section of these rules 
in which the term appears.

    3. Amend Sec. 801.2 by revising Examples 2 and 3 in paragraph (d) 
to read as follows:


Sec. 801.2  Acquiring and acquired persons.

* * * * *
    (d) * * *
    Examples: * * *
    2. In the above example, suppose the consideration for Y 
consists of $8 million worth of the voting securities of A. With 
regard to the transfer of this consideration, ``B'' is an acquiring 
person because it will hold voting securities it did not previously 
hold, and ``A'' is an acquired person because its voting securities 
will be held by B. Since these voting securities are worth less than 
$50 million, however, the acquisition of these securities is not 
reportable. ``A'' will therefore report as an acquiring person only 
and ``B'' as an acquired person only.
    3. In the above example, suppose that, as consideration for Y, A 
transfers to B a manufacturing plant valued at $51 million. ``B'' is 
thus an acquiring person and ``A'' an acquired person in a 
reportable acquisition of assets. ``A'' and ``B'' will each report 
as both an acquiring and an acquired person in this transaction 
because each occupies each role in a reportable acquisition.
* * * * *

    4. Amend Sec. 801.4 by revising Examples 1 and 5 in paragraph (b) 
to read as follows:


Sec. 801.4  Secondary acquisitions.

* * * * *
    (b) * * *
    Examples: 1. Assume that acquiring person ``A'' proposes to 
acquire all the voting securities of corporation B. This section 
provides that the acquisition of voting securities of issuers held 
but not controlled by B or by any entity which B controls are 
secondary acquisitions by ``A.'' Thus, if B holds more than $50 
million of the voting securities of corporation X (but does not 
control X), and ``A'' and ``X'' satisfy Sections 7A (a)(1) and 
(a)(2), ``A'' must file notification separately with respect to its 
secondary acquisition of voting securities of X. ``X'' must file 
notification within fifteen days (or in the case of a cash tender 
offer, 10 days) after ``A'' files, pursuant to Sec. 801.30.
    5. In example 4 above, suppose the consideration paid by A for 
the acquisition of B is $60 million worth of the voting securities 
of A. By virtue of Sec. 801.2(d)(2), ``A'' and ``B'' are each both 
acquiring and acquired persons. A will still be deemed to have 
acquired control of B, and therefore the resulting acquisition of 
the voting securities of X is a secondary acquisition. Although 
``B'' is now also an acquiring person, unless B gains control of A 
in the transaction, B still makes no secondary acquisitions of stock 
held by A. If the consideration paid by A is the voting securities 
of one of A's subsidiaries and B thereby gains control of that 
subsidiary, B will make secondary acquisitions of any minority 
holdings of that subsidiary.
* * * * *

    5. Amend Sec. 801.10 by revising its example to read as follows:


Sec. 801.10  Value of voting securities and assets to be acquired.

* * * * *
    Example: Corporation A, the ultimate parent entity in person 
``A,'' contracts to acquire assets of corporation B, and the 
contract provides that the acquisition price is not to be determined 
until after the acquisition is effected. Under paragraph (b) of this 
section, for purposes of the act, the value of the assets is to be 
the fair market value of the assets. Under paragraph (c)(3), the 
board of directors of corporation A must in good faith determine the 
fair market value. That determination will control for 60 days 
whether ``A'' and ``B'' must observe the requirements of the act; 
that is, ``A'' and ``B'' must either file notification or consummate 
the acquisition within that time. If ``A'' and ``B'' neither file 
nor consummate within 60 days, the parties would no longer be 
entitled to rely on the determination of fair market value, and, if 
in doubt about whether required to observe the requirements of the 
act, would have to make a second determination of fair market value.

    6. Amend Sec. 801.11 by revising the introductory text and the 
example to paragraph (b), paragraph (e)(2)(ii), and Examples 1 through 
4 to paragraph (e), to read as follows:


Sec. 801.11  Annual net sales and total assets.

* * * * *
    (b) Except for the total assets of a joint venture or other 
corporation at the time of its formation which shall be determined 
pursuant to Sec. 801.40(d) the annual net sales and total assets of a 
person shall be as stated on the financial statements specified in 
paragraph (c) of this section: Provided:
* * * * *
    Example: Person ``A'' is composed of entity A, subsidiaries B1 
and B2 which A controls, subsidiaries C1 and C2 which B1 controls, 
and subsidiary C3 which B2 controls. Suppose that A's most recent 
financial statement consolidates the annual net sales and total 
assets of B1, C1, and C2, but not B2 or C3. In order to determine 
whether person ``A'' meets the criteria of Section 7A(a)(2)(B), as 
either an acquiring or an acquired person, A must recompute its 
annual net sales and total assets to reflect consolidation of the 
nonduplicative annual net sales and nonduplicative total assets of 
B2 and C3.
* * * * *
    (e) * * *
    (2) * * *
    (ii) Where applicable, its assets as determined in accordance with 
Sec. 801.40(d).
    Examples:  For examples 1-4, assume that A is a newly-formed 
company which is not controlled by any other entity. Assume also 
that A has no sales and does not have the balance sheet described in 
paragraph (c)(2) of this section.
    1. A will borrow $105 million in cash and will purchase assets 
from B for $100 million. In order to establish whether A's 
acquisition of B's assets is reportable, A's total assets are 
determined by subtracting the $100 million that it will use to 
acquire B's assets from the $105 million that A will have at the 
time of the acquisition. Therefore, A has total assets of $5 million 
and does not meet any size-of-person test of Section 7A(a)(2).
    2. Assume that A will acquire assets from B and that, at the 
time it acquires B's assets, A will have $85 million in cash and a 
factory valued at $60 million. A will exchange the factory and $80 
million cash for B's assets. To determine A's total assets, A should 
subtract from the $85 million cash the $80 million that will be used 
to acquire assets from B and add the remainder to the value of the 
factory. Thus, A has total assets of $65 million. Even though A will 
use the factory as part of the consideration for the acquisition, 
the value of the factory must still be included in A's total assets. 
Note that A and B may also have to report the acquisition by B of 
A's non-cash assets (i.e., the factory). For that acquisition, the 
value of the cash A will use to buy B's assets is not excluded from 
A's total assets. Thus, in the acquisition by B, A's total assets 
are $145 million.

[[Page 8689]]

    3. Assume that company A will make a $150 million acquisition 
and that it must pay a loan origination fee of $5 million. A borrows 
$161 million. A does not meet the size-of-person test in Section 
7A(a)(2) because its total assets are less than $10 million. $150 
million is excluded because it will be consideration for the 
acquisition and $5 million is excluded because it is an expense 
incidental to the acquisition. Therefore, A is only a $6 million 
person. Note that if A were making an acquisition valued at over 
$200 million, the acquisition would be reportable without regard to 
the sizes of the persons involved.
    4. Assume that ``A'' borrows $165 million to acquire $100 
million of assets from ``B'' and $60 million of voting securities of 
``C.'' To determine its size for purposes of its acquisition from 
``B,'' ``A'' subtracts the $100 million that it will use for that 
acquisition. Therefore, A has total assets of $65 million for 
purposes of its acquisition from ``B.'' To determine its size with 
respect to its acquisition from ``C,'' ``A'' subtracts the $60 
million that will be paid for ``C's'' voting securities. Thus, for 
purposes of its acquisition from ``C'', ``A'' has total assets of 
$105 million. In the first acquisition ``A'' meets the $10 million 
size-of-person test and in the second acquisition ``A'' meets the 
$100 million size-of-person test of Section 7A(a)(2).


    7. Amend Sec. 801.12 as follows:
    a. Revise the heading of the section to read ``Calculating 
percentage of voting securities.'';
    b. Remove paragraphs (c) and (d), including the examples thereto.

    8. Amend Sec. 801.13 by revising Examples 1 and 4 to paragraph (a), 
and by revising paragraph (b)(2)(ii) and its example, to read as 
follows:


Sec. 801.13  Voting securities or assets to be held as a result of 
acquisition.

* * * * *
    (a) * * *
    Examples: 1. Assume that acquiring person ``A'' holds $52 
million of the voting securities of X, and is to acquire another $1 
million of the same voting securities. Since under paragraph (a) of 
this section all voting securities ``A'' will hold after the 
acquisition are held ``as a result of'' the acquisition, ``A'' will 
hold $53 million of the voting securities of X as a result of the 
acquisition. ``A'' must therefore observe the requirements of the 
act before making the acquisition, unless the present acquisition is 
exempt under Section 7A(c), Sec. 802.21 or any other rule.
* * * * *
    Examples: 4. On January 1, company A acquired $60 million of 
voting securities of company B. ``A'' and ``B'' filed notification 
and observed the waiting period for that acquisition. Company A 
plans to acquire $1 million of assets from company B on May 1 of the 
same year. Under Sec. 801.13(a)(3), ``A'' and ``B'' do not aggregate 
the value of the earlier acquired voting securities to determine 
whether the acquisition is subject to the act. Therefore, the value 
of the acquisition is $1 million and it is not reportable.
* * * * *
    (b) * * *
    (2) * * *
    (ii) Subject to the provisions of Sec. 801.15, if the acquiring 
person has acquired from the acquired person within the 180 calendar 
days preceding the signing of such agreement any assets which are 
presently held by the acquiring person, and the acquisition of which 
was not previously subject to the requirements of the act or the 
acquisition of which was subject to the requirements of the act but 
they were not observed, then for purposes of the size-of-transaction 
tests of Section 7A(a)(2) and for Sec. 801.1(h), both the acquiring and 
the acquired persons shall treat such assets as though they had not 
previously been acquired and are being acquired as part of the present 
acquisition. The value of any assets previously acquired which are 
subject to this paragraph shall be determined in accordance with 
Sec. 801.10(b) as of the time of their prior acquisition.
    Example: Acquiring person ``A'' proposes to make two 
acquisitions of assets from acquired person ``B,'' 90 days apart, 
and wishes to determine whether notification is necessary prior to 
the second acquisition. For purposes of the size-of-transaction 
tests in Section 7A(a)(2), ``A'' must aggregate both of its 
acquisitions and must value each as of the time of its occurrence.
* * * * *
    9. Amend Sec. 801.14 by revising the introductory text of the 
section and Examples 1 and 2 following paragraph (b), to read as 
follows:


Sec. 801.14  Aggregate total amount of voting securities and assets.

    For purposes of Section 7A(a)(2) and Sec. 801.1(h), the aggregate 
total amount of voting securities and assets shall be the sum of:
* * * * *
    (b) * * *
    Examples: 1. Acquiring person ``A'' previously acquired $36 
million of the voting securities (not convertible voting securities) 
of corporation X. ``A'' now intends to acquire $8 million of X's 
assets. Under paragraph (a) of this section, ``A'' looks to 
Sec. 801.13(a) and determines that the voting securities are to be 
held ``as a result of'' the acquisition. Section 801.13(a) also 
provides that ``A'' must determine the present value of the 
previously acquired securities. Under paragraph (b) of this section, 
``A'' looks to Sec. 801.13(b)(1) and determines that the assets to 
be acquired will be held ``as a result of'' the acquisition, and are 
valued under Sec. 801.10(b) at $8 million. Therefore, if the voting 
securities have a present value of more than $42 million, the asset 
acquisition is subject to the requirements of the act since, as a 
result of it, ``A'' would hold an aggregate total amount of the 
voting securities and assets of ``X'' in excess of $50 million.
    2. In the previous example, assume that the assets acquisition 
occurred first, and that the acquisition of the voting securities is 
to occur within 180 days of the first acquisition. ``A'' now looks 
to Sec. 801.13(b)(2) and determines that because the second 
acquisition is of voting securities and not assets, the asset and 
voting securities acquisitions are not treated as one transaction. 
Therefore, the second acquisition would not be subject to the 
requirements of the act since the value of the securities to be 
acquired does not exceed the $50 million size-of-transaction test.


    10. Amend Sec. 801.15 by revising the introductory text of the 
section by revising the Examples 1, 2, 4, 6 and 7 following paragraph 
(c), to read as follows:


Sec. 801.15  Aggregation of voting securities and assets the 
acquisition of which was exempt.

    Notwithstanding Sec. 801.13, for purposes of determining the 
aggregate total amount of voting securities and assets of the acquired 
person held by the acquiring person under Section 7A(a)(2) and 
Sec. 801.1(h), none of the following will be held as a result of an 
acquisition:
* * * * *
    (c) * * *
    Examples: 1. Assume that acquiring person ``A'' is 
simultaneously to acquire $51 million of the convertible voting 
securities of X and $12 million of the voting common stock of X. 
Although the acquisition of the convertible voting securities is 
exempt under Sec. 802.31, since the overall value of the securities 
to be acquired is greater than $50 million, ``A'' must determine 
whether it is obliged to file notification and observe a waiting 
period before acquiring the securities. Because Sec. 802.31 is one 
of the exemptions listed in paragraph (a)(2) of this rule, ``A'' 
would not hold the convertible voting securities as a result of the 
acquisition. Therefore, since as a result of the acquisition ``A'' 
would hold only the common stock, the size-of-transaction tests of 
Section 7A(a)(2) would not be satisfied, and ``A'' need not observe 
the requirements of the act before acquiring the common stock. 
(Note, however, that the $51 million of convertible voting 
securities would be reflected in ``A's'' next regularly prepared 
balance sheet, for purposes of Sec. 801.11.)
    2. In the previous example, the rule was applied to voting 
securities the present acquisition of which is exempt. Assume 
instead that ``A'' had acquired the convertible voting securities 
prior to its acquisition of the common stock. ``A'' still would not 
hold the convertible voting securities as a result of the 
acquisition of the common stock, because the rule states that voting 
securities the previous acquisition of which was exempt also fall 
within the rule. Thus, the size-of-transaction tests of Section 
7A(a)(2) would again not be satisfied, and ``A'' need not observe 
the requirements of the act before acquiring the common stock.
* * * * *

[[Page 8690]]

    4. Assume that acquiring person ``B,'' a United States person, 
acquired from corporation ``X'' two manufacturing plants located 
abroad, and assume that the acquisition price was $60 million. In 
the most recent year, sales into the United States attributable to 
the plants were $15 million, and thus the acquisition was exempt 
under Sec. 802.50(a)(2). Within 180 days of that acquisition, ``B'' 
seeks to acquire a third plant from ``X,'' to which United States 
sales of $12 million were attributable in the most recent year. 
Since under Sec. 801.13(b)(2), as a result of the acquisition, ``B'' 
would hold all three plants of ``X,'' and the $25 million limitation 
in Sec. 802.50(a)(2) would be exceeded, under paragraph (b) of this 
rule, ``B'' would hold the previously acquired assets for purposes 
of the second acquisition. Therefore, as a result of the second 
acquisition, ``B'' would hold assets of ``X'' exceeding $50 million 
in value, would not qualify for the exemption in Sec. 802.50(a)(2), 
and must observe the requirements of the act and file notification 
for the acquisition of all three plants before acquiring the third 
plant.
* * * * *
    6. ``X'' acquired 55 percent of the voting securities of M, an 
entity controlled by ``Z,'' six months ago and now proposes to 
acquire 50 percent of the voting stock of N, another entity 
controlled by ``Z.'' M's assets consist of $150 million worth of 
producing coal reserves plus $47 million worth of non-exempt assets 
and N's assets consist of a producing coal mine worth $100 million 
together with non-exempt assets with a fair market value of $36 
million. ``X's'' acquisition of the voting securities of M was 
exempt under Sec. 802.4(a) because M held exempt assets pursuant to 
Sec. 802.3(b) and less than $50 million of non-exempt assets. 
Because ``X'' acquired control of M in the earlier transaction, M is 
now within the person of ``X,'' and the assets of M need not be 
aggregated with those of N to determine if the subsequent 
acquisition of N will exceed the limitation for coal reserves or for 
non-exempt assets. Since the assets of N alone do not exceed these 
limitations, ``X's'' acquisition of N also is not reportable.
    7. In Example 6, above, assume that ``X'' acquired 30 percent of 
the voting securities of M and proposes to acquire 40 percent of the 
voting securities of N, another entity controlled by ``Z.'' Assume 
also that M's assets at the time of ``X's'' acquisition of M's 
voting securities consisted of $90 million worth of producing coal 
reserves and non-exempt assets with a fair market value of $39 
million, and that N's assets currently consist of $60 million worth 
of producing coal reserves and non-exempt assets with a fair market 
value of $28 million. Since ``X'' acquired a minority interest in M 
and intends to acquire a minority interest in N, and since M and N 
are controlled by ``Z,'' the assets of M and N must be aggregated, 
pursuant to Secs. 801.15(b) and 801.13, to determine whether the 
acquisition of N's voting securities is exempt. ``X'' is required to 
determine the current fair market value of M's assets. If the fair 
market value of M's coal reserves is unchanged, the aggregated 
exempt assets do not exceed the limitation for coal reserves. 
However, if the present fair market value of N's non-exempt assets 
also is unchanged, the present fair market value of the non-exempt 
assets of M and N when aggregated is greater than $50 million. Thus 
the acquisition of the voting securities of N is not exempt. If 
``X'' proposed to acquire 50 percent or more of the voting 
securities of both M and N in the same acquisition, the assets of M 
and N must be aggregated to determine if the acquisition of the 
voting securities of both issuers is exempt. Since the fair market 
value of the aggregated non-exempt assets exceeds $50 million, the 
acquisition would not be exempt.
* * * * *

    11. Amend Sec. 801.20 by revising its Examples 1 and 2 to read as 
follows:


Sec. 801.20  Acquisitions subsequent to exceeding threshold.

* * * * *
    Examples: 1. Person ``A'' acquires $10 million of the voting 
securities of person ``B'' before the effective date of these rules. 
If ``A'' wishes to acquire an additional $41 million of the voting 
securities of ``B'' after the effective date of the rules, 
notification will be required by reason of Section 7A(a)(2).
    2. In example 1, assume that the value of the voting securities 
of ``B'' originally acquired by ``A'' has reached a present value 
exceeding $50 million. If ``A'' wishes to acquire any additional 
voting securities or assets of ``B,'' notification will be required. 
See Sec. 801.13(a).

    12. Amend Sec. 801.21 by revising the introductory text to read as 
follows:


Sec. 801.21  Securities and cash not considered assets when acquired.

    For purposes of determining the aggregate total amount of assets 
under Section 7A(a)(2) and Secs. 801.1(h)(1) and 801.13(b):
* * * * *

    13. Amend Sec. 801.30 by revising paragraph (b)(2) and Example 2 to 
read as follows:


Sec. 801.30  Tender offers and acquisitions of voting securities from 
third parties.

* * * * *
    (b) * * *
    (2) The acquired person shall file the notification required by the 
act, in accordance with these rules, no later than 5 p.m. Eastern Time 
on the 15th (or, in the case of cash tender offers, the 10th) calendar 
day following the date of receipt, as defined by Sec. 803.10(a), by the 
Federal Trade Commission and Assistant Attorney General of the 
notification filed by the acquiring person. Should the 15th (or, in the 
case of cash tender offers, the 10th) calendar day fall on a weekend 
day or federal holiday, the notification shall be filed no later than 5 
p.m. Eastern Time on the next following business day.
* * * * *
    Examples: * * *
    2. Acquiring person ``A'' proposes to acquire $60 million of the 
voting securities of corporation X on a securities exchange. The 
waiting period begins when ``A'' files notification. ``X'' must file 
notification within 15 calendar days thereafter. The seller of the X 
shares is not subject to any obligations under the act.
* * * * *

    14. Amend Sec. 801.31 by revising the example to read as follows:


Sec. 801.31  Acquisitions of voting securities by offerees in tender 
offers.

* * * * *
    Example: Assume that ``A,'' which has annual net sales exceeding 
$100 million, makes a tender offer for voting securities of 
corporation X. The consideration for the tender offer is to be 
voting securities of A. ``S,'' a shareholder of X with total assets 
exceeding $10 million, wishes to tender its holdings of X and in 
exchange would receive shares of A valued at $56 million. Under this 
section, ``S's'' acquisition of the shares of A would be an 
acquisition separately subject to the requirements of the act. 
Before ``S'' may acquire the voting securities of A, ``S'' must 
first file notification and observe a waiting period--which is 
separate from any waiting period that may apply with respect to 
``A'' and ``X.'' Since Sec. 801.30 applies, the waiting period 
applicable to ``A'' and ``S'' begins upon filing by ``S,'' and ``A'' 
must file with respect to ``S's'' acquisition within 15 days 
pursuant to Sec. 801.30(b). Should the waiting period with respect 
to ``A'' and ``X'' expire or be terminated prior to the waiting 
period with respect to ``S'' and ``A,'' ``S'' may wish to tender its 
X-shares and place the A-shares into a nonvoting escrow until the 
expiration or termination of the latter waiting period.

    15. Amend Sec. 801.32 by revising the example to read as follows:


Sec. 801.32  Conversion an acquisition.

* * * * *
    Example: Assume that acquiring person ``A'' wishes to convert 
convertible voting securities of issuer X, and is to receive common 
stock of X valued at $80 million. If ``A'' and ``X'' satisfy the 
criteria of Section 7A(a)(1) and Section 7A(a)(2)(B)(ii), then ``A'' 
and ``X'' must file notification and observe the waiting period 
before ``A'' completes the acquisition of the X common stock, unless 
exempted by Section 7A(c) or these rules. Since Sec. 801.30 applies, 
the waiting period begins upon notification by ``A,'' and ``X'' must 
file notification within 15 days.

    16. Amend Sec. 801.40 by revising paragraphs (b), (c) and (d), by 
adding paragraph (e), by revising the example at the end of the section 
and redesignating it as Example 1, and by adding an Example 2, to read 
as follows:


Sec. 801.40  Formation of joint venture or other corporations.

* * * * *
    (b) Unless exempted by the act or any of these rules, upon the 
formation of a joint venture or other corporation, in a

[[Page 8691]]

transaction meeting the criteria of Section 7A(a)(1) and 7A(a)(2)(A) 
(other than in connection with a merger or consolidation), an acquiring 
person shall be subject to the requirements of the act.
    (c) Unless exempted by the act or any of these rules, upon the 
formation of a joint venture or other corporation, in a transaction 
meeting the criteria of Section 7A(a)(1) and the criteria of Section 
7A(a)(2)(B)(i) (other than in connection with a merger or 
consolidation), an acquiring person shall be subject to the 
requirements of the act if:
    (1)(i) The acquiring person has annual net sales or total assets of 
$100 million or more;
    (ii) The joint venture or other corporation will have total assets 
of $10 million or more; and
    (iii) At least one other acquiring person has annual net sales or 
total assets of $10 million or more; or
    (2)(i) The acquiring person has annual net sales or total assets of 
$10 million or more;
    (ii) The joint venture or other corporation will have total assets 
of $100 million or more; and
    (iii) At least one other acquiring person has annual net sales or 
total assets of $10 million or more.
    (d) For purposes of paragraphs (b) and (c) of this section and 
determining whether any exemptions provided by the act and these rules 
apply to its formation, the assets of the joint venture or other 
corporation shall include:
    (1) All assets which any person contributing to the formation of 
the joint venture or other corporation has agreed to transfer or for 
which agreements have been secured for the joint venture or other 
corporation to obtain at any time, whether or not such person is 
subject to the requirements of the act; and
    (2) Any amount of credit or any obligations of the joint venture or 
other corporation which any person contributing to the formation has 
agreed to extend or guarantee, at any time.
    (e) The commerce criterion of Section 7A(a)(1) is satisfied if 
either the activities of any acquiring person are in or affect 
commerce, or the person filing notification should reasonably believe 
that the activities of the joint venture or other corporation will be 
in or will affect commerce.

    Examples: 1. Persons ``A,'' ``B,'' and ``C'' agree to create new 
corporation ``N,'' a joint venture. ``A,'' ``B,'' and ``C'' will 
each hold one third of the shares of ``N.'' ``A'' has more than $100 
million in annual net sales. ``B'' has more than $10 million in 
total assets but less than $100 million in annual net sales and 
total assets. Both ``C''s total assets and its annual net sales are 
less than $10 million. ``A,'' ``B,'' and ``C'' are each engaged in 
commerce. ``A,'' ``B,'' and ``C'' have agreed to make an aggregate 
initial contribution to the new entity of $18 million in assets and 
each to make additional contributions of $21 million in each of the 
next three years. Under paragraph (d), the assets of the new 
corporation are $207 million. Under paragraph (c), ``A'' and ``B'' 
must file notification. Note that ``A'' and ``B'' also meet the 
criterion of Section 7A(a)(2)(B)(i) since they will be acquiring one 
third of the voting securities of the new entity for $69 million. N 
need not file notification; see Sec. 802.41.
    2. In the preceding example ``A'' has over $10 million but less 
than $100 million in sales and assets, ``B'' and ``C'' have less 
than $10 million in sales and assets. ``N'' has total assets of $500 
million. Assume that ``A'' will acquire 50 percent of the voting 
securities of ``N'' and ``B'' and ``C'' will each acquire 25 
percent. Since ``A'' will acquire in excess of $200 million in 
voting securities of ``N'', the size-of-person test in 
Sec. 801.40(c) is inapplicable and ``A'' is required to file 
notification.

    17. Amend Sec. 801.90 by revising Examples 1 and 2 to read as 
follows:


Sec. 801.90  Transactions or devices for avoidance.

* * * * *
    Examples: 1. Suppose corporations A and B wish to form a joint 
venture. A and B contemplate a total investment of over $100 million 
in the joint venture; persons ``A'' and ``B'' each have total assets 
in excess of $100 million. Instead of filing notification pursuant 
to Sec. 801.40, A creates a new subsidiary, A1, which issues half of 
its authorized shares to A. Assume that A1 has total assets of 
$3000. ``A'' then sells 50 percent of its A1 stock to ``B'' for 
$1500. Thereafter, ``A'' and ``B'' each contribute $53 million to A1 
in exchange for the remaining authorized A1 stock (one-fourth each 
to ``A'' and ``B''). A's creation of A1 was exempt under Sec. 
802.30; its $1500 sale of A1 stock to ``B'' did not meet the size-
of-transaction filing threshold in Section 7A(a)(2)(B); and the 
second acquisition of stock in A1 by ``A'' and ``B'' was exempt 
under Sec. 802.30 and Sections 7A(c)(3) and (10). Since this scheme 
appears to be for the purpose of avoiding the requirements of the 
act, the sequence of transactions will be disregarded. The 
transactions will be viewed as the formation of a joint venture 
corporation by ``A'' and ``B'' having over $10 million in assets. 
Such a transaction would be covered by Sec. 801.40 and ``A'' and 
``B'' must file notification and observe the waiting period.
    2. Suppose ``A'' wholly owns and operates a chain of twenty 
retail hardware stores, each of which is separately incorporated and 
has assets of less than $10 million. The aggregate fair market value 
of the assets of the twenty store corporations is $60 million. ``A'' 
proposes to sell the stores to ``B'' for $60 million. For various 
reasons it is decided that ``B'' will buy the stock of each of the 
store corporations from ``A.'' Instead of filing notification and 
observing the waiting period as contemplated by the act, ``A'' and 
``B'' enter into a series of five stock purchase-sale agreements for 
$12 million each. Under the terms of each contract, the stock of 
four stores will pass from ``A'' to ``B''. The five agreements are 
to be consummated on five successive days. Because after each of 
these transactions the store corporations are no longer part of the 
acquired person (Sec. 801.13(a) does not apply because control has 
passed, see Sec. 801.2), and because $12 million is below the size-
of-transaction filing threshold of Section 7A(a)(2)(B), none of the 
contemplated acquisitions would be subject to the requirements of 
the act. However, if the stock of all of the store corporations were 
to be purchased in one transaction, no exemption would be 
applicable, and the act's requirements would have to be met. Because 
it appears that the purpose of making five separate contracts is to 
avoid the requirements of the act, this section would ignore the 
form of the separate transactions and consider the substance to be 
one transaction requiring compliance with the act.

PART 802--EXEMPTION RULES

    18. Revise the authority citation for part 802 to read as follows:

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

    19. Amend Sec. 802.1 by revising Examples 1 through 7 and 9 through 
10 to read as follows:


Sec. 802.1  Acquisitions of goods and realty in the ordinary course of 
business.

* * * * *
    Examples: 1. Greengrocer Inc. intends to sell to ``A'' all of 
the assets of one of the 12 grocery stores that it owns and operates 
throughout the metropolitan area of City X. Each of Greengrocer's 
stores constitutes an operating unit, i.e., a business undertaking 
in a particular location. Thus ``A's'' acquisition is not exempt as 
an acquisition in the ordinary course of business. However, the 
acquisition will not be subject to the notification requirements if 
the acquisition price or fair market value of the store's assets 
does not exceed $50 million.
    2. ``A,'' a manufacturer of airplane engines, agrees to pay $52 
million to ``B,'' a manufacturer of airplane parts, for certain new 
engine components to be used in the manufacture of airplane engines. 
The acquisition is exempt under Sec. 802.1(b) as new goods as well 
as under Sec. 802.1(c)(3) as current supplies.
    3. ``A,'' a power generation company, proposes to purchase from 
``B,'' a coal company, $75 million of coal under a long-term 
contract for use in its facilities to supply electric power to a 
regional public utility and steam to several industrial sites. This 
transaction is exempt under Sec. 802.1(c)(2) as an acquisition of 
current supplies. However, if ``A'' proposed to purchase coal 
reserves rather than enter into a contract to acquire output of a 
coal mine, the acquisition would not be exempt as an acquisition of 
goods in the ordinary course of business. The acquisition may still 
be exempt pursuant to Sec. 802.3(b) as an acquisition of reserves of 
coal if the requirements of that section are met.
    4. ``A,'' a national producer of canned fruit, preserves, jams 
and jellies, agrees to purchase

[[Page 8692]]

from ``B'' for $60 million a total of 20,000 acres of orchards and 
vineyards in several locations throughout the U.S. ``A'' plans to 
harvest the fruit from the acreage for use in its canning 
operations. The acquisition is not exempt under Sec. 802.1 because 
orchards and vineyards are real property, not ``goods.'' If, on the 
other hand, ``A'' had contracted to acquire from ``B'' the fruit and 
grapes harvested from the orchards and vineyards, the acquisition 
would qualify for the exemption as an acquisition of current 
supplies under Sec. 802.1(c)(3). Although the transfer of orchards 
and vineyards is not exempt under Sec. 802.1, the acquisition would 
be exempt under Sec. 802.2(g) as an acquisition of agricultural 
property.
    5. ``A,'' a railcar leasing company, will purchase $55 million 
of new railcars from a railcar manufacturer in order to expand its 
existing fleet of cars available for lease. The transaction is 
exempt under Sec. 802.1(b) as an acquisition of new goods and 
Sec. 802.1(c), as an acquisition of current supplies. If ``A'' 
subsequently sells the railcars to ``C,'' a commercial railroad 
company, that acquisition would be exempt under Sec. 802.1(d)(2), 
provided that ``A'' acquired and held the railcars solely for resale 
or leasing to an entity not within itself.
    6. ``A,'' a major oil company, proposes to sell two of its used 
oil tankers for $75 million to ``B,'' a dealer who purchases oil 
tankers from the major U.S. oil companies. ``B's'' acquisition of 
the used oil tankers is exempt under Sec. 802.1(d)(1) provided that 
``B'' is actually acquiring beneficial ownership of the used tankers 
and is not acting as an agent of the seller or purchaser.
    7. ``A,'' a cruise ship operator, plans to sell for $58 million 
one of its cruise ships to ``B,'' another cruise ship operator. 
``A'' has, in good faith, executed a contract to acquire a new 
cruise ship with substantially the same capacity from a 
manufacturer. The contract specifies that ``A'' will receive the new 
cruise ship within one month after the scheduled date of the sale of 
its used cruise ship to ``B.'' Since ``B'' is acquiring a used 
durable good that ``A'' has contracted to replace within six months 
of the sale, the acquisition is exempt under Sec. 802.1(d)(3).
* * * * *
    9. Three months ago ``A,'' a manufacturing company, acquired 
several new machines that will replace equipment on one of its 
production lines. ``A's'' capacity to produce the same products 
increased modestly when the integration of the new equipment was 
completed. ``B,'' a manufacturing company that produces products 
similar to those produced by ``A,'' has entered into a contract to 
acquire for $66 million the machinery that ``A'' replaced. Delivery 
of the equipment by ``A'' to ``B'' is scheduled to occur within 
thirty days. Since ``A'' purchased new machinery to replace the 
productive capacity of the used equipment, which it sold within six 
months of the purchase of the new equipment, the acquisition by 
``B'' is exempt under Sec. 802.1(d)(3).
    10. ``A'' will sell to ``B'' for $56 million all of the 
equipment ``A'' uses exclusively to perform its billing 
requirements. ``B'' will use the equipment to provide ``A's'' 
billing needs pursuant to a contract which ``A'' and ``B'' executed 
30 days ago in conjunction with the equipment purchase agreement. 
Although the assets ``B'' will acquire make up essentially all of 
the assets of one of ``A's'' management and administrative support 
services divisions, the acquisition qualifies for the exemption 
under Sec. 802.1(d)(4) because a company's internal management and 
administrative support services, however organized, are not an 
operating unit as defined by Sec. 802.1(a). Management and 
administrative support services are not a ``business undertaking'' 
as that term is used in Sec. 802.1(a). Rather, they provide support 
and benefit to the company's operating units and support the 
company's business operations. However, if the assets being sold 
also derived revenues from providing billing services for third 
parties, then the transfer of these assets would not be exempt under 
Sec. 802.1(d)(4), since the equipment is not being used solely to 
provide management and administrative support services to ``A''.
* * * * *

    20. Amend Sec. 802.2 by revising examples 3 through 5, 7, 9, 10, 
and 12 to read as follows:


Sec. 802.2  Certain acquisitions of real property assets.

* * * * *
    Examples: * * *
    3. ``A'' proposes to acquire a $200 million tract of wilderness 
land from ``B.'' Copper deposits valued at $57 million and timber 
reserves valued at $60 million are situated on the land and will be 
conveyed as part of this transaction. During the last three fiscal 
years preceding the sale, the property generated $50,000 from the 
sale of a small amount of timber cut from the reserves two years 
ago. ``A's'' acquisition of the wilderness land from ``B'' is exempt 
as an acquisition of unproductive real property because the property 
did not generate revenues exceeding $5 million during the thirty-six 
months preceding the acquisition. The copper deposits and timber 
reserves are by definition unproductive real property and, thus, are 
not separately subject to the notification requirements.
    4. ``A'' proposes to purchase from ``B'' for $140 million an old 
steel mill that is not currently operating to add to ``A's'' 
existing steel production capacity. The mill has not generated 
revenues during the 36 months preceding the acquisition but contains 
equipment valued at $56 million that ``A'' plans to refurbish for 
use in its operations. ``A's'' acquisition of the mill and the land 
on which it is located is exempt as unproductive real property. 
However, the transfer of the equipment and any assets other than the 
unproductive property is not exempt and is separately subject to the 
notification requirements of the act.
    5. ``A'' proposes to purchase two downtown lots, Parcels 1 and 
2, from ``B'' for $70 million. Parcel 1, located in the southwest 
section, contains no structures or improvements. A hotel is located 
in the northeast section on Parcel 2, and it has generated $9 
million in revenues during the past three years. The purchase of 
Parcel 1 is exempt if it qualifies as unproductive real property, 
i.e., it has not generated annual revenues in excess of $5 million 
in the three fiscal years prior to the acquisition. Parcel 2 is not 
unproductive real property, but its acquisition is exempt under 
Sec. 802.2(e) as the acquisition of a hotel.
* * * * *
    7. ``A'' proposes to purchase from ``B,'' for $60 million, a 100 
acre parcel of land that includes a currently operating factory 
occupying 10 acres. The other 90 adjoining acres are vacant and 
unimproved and are used by ``B'' for storage of supplies and 
equipment. The factory and the unimproved acreage have fair market 
values of $32 million and $28 million, respectively. The transaction 
is not exempt under Sec. 802.2(c) because the vacant property is 
adjacent to property occupied by the operating factory. Moreover, if 
the 90 acres were not adjacent to the 10 acres occupied by the 
factory, the transaction would not be exempt because the 90 acres 
are being used in conjunction with the factory being acquired and 
thus are not unproductive property.
* * * * *
    9. ``A'' intends to acquire three shopping centers from ``B'' 
for a total of $180 million. The anchor stores in two of the 
shopping centers are department stores, the businesses of which 
``A'' is buying from ``B'' as part of the overall transaction. The 
acquisition of the shopping centers is an acquisition of retail 
rental space that is exempt under Sec. 802.2(h). However, ``A's'' 
acquisition of the department store businesses, including the 
portion of the shopping centers that the two department stores being 
purchased occupy, are separately subject to the notification 
requirements. If the value of these assets exceeds $50 million, 
``A'' must comply with the requirements of the act for this part of 
the transaction.
    10. ``A'' wishes to purchase from ``B'' a parcel of land for $67 
million. The parcel contains a race track and a golf course. The 
golf course qualifies as recreational land pursuant to 
Sec. 802.2(f), but the race track is not included in the exemption. 
Therefore, if the value of the race track is more than $50 million, 
``A'' will have to file notification for the purchase of the race 
track.
* * * * *
    12. ``A'' proposes to purchase the prescription drug wholesale 
distribution business of ``B'' for $80 million. The business 
includes six regional warehouses used for ``B's'' national wholesale 
drug distribution business. Since ``A'' is acquiring the warehouses 
in connection with the acquisition of ``B's'' prescription drug 
wholesale distribution business, the acquisition of the warehouses 
is not exempt.
* * * * *

    21. Amend Sec. 802.3 by revising Examples 2 and 3 to read as 
follows:


Sec. 802.3  Acquisitions of carbon-based mineral reserves.

* * * * *
    Examples: * * *
    2. ``A,'' an oil company, proposes to acquire for $180 million 
oil reserves currently in production along with field

[[Page 8693]]

pipelines and treating and metering facilities which serve such 
reserves exclusively. The acquisition of the reserves and the 
associated assets are exempt. ``A'' will also acquire from ``B'' for 
$51 million a natural gas processing plant and its associated 
gathering pipeline system. This acquisition is not exempt since 
Sec. 802.3(c) excludes these assets from the exemption in Sec. 802.3 
for transfers of associated exploration or production assets.
    3. ``A,'' an oil company, proposes to acquire a coal mine 
currently in operation and associated production assets for $90 
million from ``B,'' an oil company. ``A'' will also purchase from 
``B'' producing oil reserves valued at $100 million and an oil 
refinery valued at $13 million. The acquisition of the coal mine and 
the oil reserves is exempt pursuant to Sec. 802.3. Although 
Sec. 802.3(c) excludes the refinery from the exemption in Sec. 802.3 
for transfers of associated exploration and production assets, 
``A's'' acquisition of the refinery is not subject to the 
notification requirements of the act because its value does not 
exceed $50 million.
* * * * *

    22. Amend Sec. 802.4 by revising paragraph (a) and Examples 1 and 2 
following paragraph (c) to read as follows:


Sec. 802.4  Acquisitions of voting securities of issuers holding 
certain assets the direct acquisition of which is exempt.

    (a) An acquisition of voting securities of an issuer whose assets 
together with those of all entities it controls consist or will consist 
of assets whose purchase would be exempt from the requirements of the 
act pursuant to Section 7A(c)(2) of the act, Sec. 802.2, Sec. 802.3 or 
Sec. 802.5 of these rules is exempt from the reporting requirements if 
the acquired issuer and all entities it controls do not hold other non-
exempt assets with an aggregate fair market value of more than $50 
million.
* * * * *
    (c) * * *

    Examples: 1. ``A,'' a real estate investment company, proposes 
to purchase 100 percent of the voting securities of C, a wholly-
owned subsidiary of ``B,'' a construction company. C's assets are a 
newly constructed, never occupied hotel, including fixtures, 
furnishings and insurance policies. The acquisition of the hotel 
would be exempt under Sec. 802.2(a) as a new facility and under 
Sec. 802.2(d). Therefore, the acquisition of the voting securities 
of C is exempt pursuant to Sec. 802.4(a) since C holds assets whose 
direct purchase would be exempt under Sec. 802.2 and does not hold 
non-exempt assets exceeding $50 million in value.
    2. ``A'' proposes to acquire 60 percent of the voting securities 
of C from ``B.'' C's assets consist of a portfolio of mortgages 
valued at $55 million and a small manufacturing plant valued at $26 
million. The manufacturing plant is an operating unit for purposes 
of Sec. 802.1(a). Since the acquisition of the mortgages would be 
exempt pursuant to Section 7A(c)(2) of the act and since the value 
of the non-exempt manufacturing plant is less than $50 million, this 
acquisition is exempt under Sec. 802.4(a).

* * * * *

    23. Amend Sec. 802.5 by revising Example 2 to read as follows:


Sec. 802.5  Acquisitions of investment rental property assets.

* * * * *
    Examples:  * * *
    2. ``X'' intends to buy from ``Y'' a development commonly 
referred to as an industrial park. The industrial park contains a 
warehouse/distribution center, a retail tire and automobile parts 
store, an office building, and a small factory. The industrial park 
also contains several parcels of vacant land. If ``X'' intends to 
acquire this industrial park as investment rental property, the 
acquisition will be exempt pursuant to Sec. 802.5. If, however, 
``X'' intends to use the factory for its own manufacturing 
operations, this exemption would be unavailable. The exemptions in 
Sec. 802.2 for warehouses, rental retail space, office buildings, 
and undeveloped land may still apply and, if the value of the 
factory is $50 million or less, the entire transaction may be 
exempted by that section.

    24. Amend Sec. 802.6 by revising paragraph (b)(2)(ii) and its 
example as set forth below.


Sec. 802.6  Federal agency approval.

* * * * *
    (b) * * *
    (2) * * *
    (ii) If the transaction is an acquisition of voting securities, or 
is treated under the rules as an acquisition of voting securities, and 
the acquiring person will, as a result of the acquisition, hold voting 
securities of the acquired person valued in excess of $50 million, the 
business or businesses of the acquired issuer (and all entities which 
it controls) which are not engaged in aeronautics or air transportation 
as defined in section 101 of the Federal Aviation Act, 49 U.S.C. 1301.

    Example: Assume that A (an entity included within person ``A'') 
proposes to acquire voting securities of B (an entity included 
within person ``B'') for $100 million. A and B are both air carriers 
who meet the size-of-person test, but B also owns a commercial data 
processing business located in the United States with a value of $60 
million. Assume that this transaction requires CAB approval under 49 
U.S.C. 1378. Since the acquired person has a business other than 
aeronautics or air transportation, the parties must report under 
Sec. 802.6(b)(2) because the parties meet the size-of-person test, 
no other exemption applies to the acquisition of the data processing 
business, and the acquisition of the non-aeronautic business is 
deemed to be an acquisition of assets valued at $60 million.


    25. Amend Sec. 802.9 by revising Example 1 to read as follows:


Sec. 802.9  Acquisition solely for the purpose of investment.

* * * * *
    Examples: 1. Suppose that acquiring person ``A'' acquires 6 
percent of the voting securities of issuer X, valued at $52 million. 
If the acquisition is solely for the purpose of investment, it is 
exempt under Section 7A(c)(9).
* * * * *

    26. Remove and reserve Sec. 802.20.

    27. Amend Sec. 802.21 as follows:
    a. Remove the introductory text;
    b. Revise paragraph (a) and add Examples 1 through 4 thereto to 
read as set forth below;
    c. Revise paragraph (b) and add Examples 1 through 4 thereto to 
read as set forth below; and
    d. Remove Examples 1 through 5 following paragraph (c):


Sec. 802.21  Acquisitions of voting securities not meeting or exceeding 
greater notification threshold.

    (a) An acquisition of voting securities shall be exempt from the 
requirements of the act if:
    (1) The acquiring person and all other persons required by the act 
and these rules to file notification filed notification with respect to 
an earlier acquisition of voting securities of the same issuer;
    (2) The waiting period with respect to the earlier acquisition has 
expired, or been terminated pursuant to Sec. 803.11, and the 
acquisition will be consummated within 5 years of such expiration or 
termination; and
    (3) The acquisition will not increase the holdings of the acquiring 
person to meet or exceed a notification threshold greater than the 
greatest notification threshold met or exceeded in the earlier 
acquisition.

    Examples: 1. Corporation A acquires $53 million of the voting 
securities of corporation B and both ``A'' and ``B'' file 
notification as required, indicating the $50 million threshold. 
Within five years of the expiration of the original waiting period, 
``A'' acquires additional voting securities of B but not in an 
amount sufficient to meet or exceed $100 million or 50 percent of 
the voting securities of B. No additional notification is required.
    2. In Example 1, ``A'' continues to acquire B's securities. 
Before ``A's'' holdings meet or exceed $100 million or 50 percent of 
B's outstanding voting securities, ``A'' and ``B'' must file 
notification and wait the prescribed period, regardless of whether 
the acquisition occurs within five years after the expiration of the 
earlier waiting period.
    3. In Example 2, suppose that ``A'' and ``B'' file notification 
at the $500 million level and that, within 5 years after expiration 
of the waiting period, ``A'' continues to acquire voting securities 
of B. No further notification is required until ``A'' plans to make 
the acquisition that will give it 25 percent of B's

[[Page 8694]]

voting securities valued at over $1 billion; or 50 percent ownership 
of B. (Once ``A'' holds 50 percent, further acquisitions of voting 
securities are exempt under Section 7A(c)(3)).
    4. This section also allows a person to recross any of the 
threshold notification levels--$50 million, $100 million, $500 
million, 25 percent (if valued over $1 billion) and 50 percent--any 
number of times within 5 years of the expiration of the waiting 
period following notification for that level. Thus, if in Example 1, 
``A'' had disposed of some voting securities so that it held less 
than $50 million of the voting securities of B, and thereafter had 
increased its holdings to more than $50 million but less than $100 
million or 50 percent of B, notification would not be required if 
the increase occurred within 5 years of the expiration of the 
original waiting period. Similarly, in Examples 2 and 3, ``A'' could 
decrease its holdings below, and then increase its holdings above, 
$50 million and $500 million, respectively without filing 
notification, if done within 5 years of the expiration of those 
respective waiting periods.

    (b) Year 2001 Transition. For transactions filed using the 1978 
thresholds where the waiting period expired after February 1, 1996, an 
acquiring person may acquire up to what was the next percentage 
threshold at the time it made its filing without filing another 
notification, even if in doing so it crosses a 2001 notification 
threshold in Sec. 801.1(h). However, it has only one year from February 
1, 2001, or until the end of the original 5-year period following 
expiration of the waiting period, whichever comes first, to acquire 
additional securities up to the previous next threshold. Any 
acquisition thereafter must be the subject of a new notification if it 
meets or exceeds a 2001 threshold in Sec. 801.1(h).

    Examples: 1. Corporation A filed to acquire 20 percent of the 
voting securities of corporation B and indicated the 15 percent 
threshold. The waiting period expired on October 3, 1999. ``A'' 
acquired the 20 percent within the year following expiration of the 
waiting period. ``A'' has until February 1, 2002 to acquire 
additional securities up to 25 percent of ``B''s voting securities, 
and need not make another filing before doing so, even though such 
acquisition by ``A'' may cross the $50 million, $100 million or $500 
million notification threshold in Sec. 801.1(h). After February 1, 
2002, ``A'' and ``B'' must observe the 2001 notification thresholds 
set out in Sec. 801.1(h).
    2. Same facts as in Example 1 above, except that the waiting 
period on corporation A's filing expired on October 3, 1996. ``A'' 
has until October 3, 2001 to make additional acquisitions up to the 
25 percent threshold. The one year transition period in 
Sec. 802.21(b) cannot be used to extend the 5-year period for 
additional acquisitions provided for in Sec. 802.21(a).
    3. Prior to February 1, 2001, ``A'' filed to acquire 12 percent 
of the voting securities of corporation B and indicated the $15 
million notification threshold. In March, 2001, ``A'' determines 
that it will make an additional acquisition which will result in it 
holding 16 percent of the voting securities of B, valued at $60 
million. ``A'' is required to file notification at the $50 million 
notification threshold prior to making the acquisition.
    4. Prior to February 1, 2001, ``A'' filed to acquire 26 percent 
of the voting securities of ``B'' and indicated the 25 percent 
notification threshold. After February 1, 2002, ``A'' will acquire 
additional shares of ``B'' which will result in it holding 30 
percent of the voting securities of ``B'', valued at $125 million. 
``A'' is required to file notification at the $100 million 
notification threshold prior to making the acquisition. ``A'' could, 
however, have reached this level (30 percent valued at $125 million) 
prior to February 1, 2002 without making an additional filing. If 
``A'' had done this, and then wanted to acquire any additional 
voting securities of ``B'' after February 1, 2002, ``A'' would have 
to file for the $100 million notification threshold.
* * * * *

    28. Amend Sec. 802.23 by revising Example 2 to read as follows:


Sec. 802.23  Amended or renewed tender offers.

* * * * *
    Examples: * * *
    2. In the previous example, assume that A makes an amended 
tender offer for 27 percent of the voting securities of B, valued at 
greater than $1 billion. Since a new notification threshold will be 
crossed, this section requires that ``A'' must again file 
notification and observe a new waiting period. Paragraph (a) of this 
section, however, provides that ``B'' need not file notification 
again.
* * * * *

    29. Amend Sec. 802.31 by revising its example to read as follows:


Sec. 802.31  Acquisitions of convertible voting securities.

* * * * *
    Example: This section applies regardless of the dollar value of 
the convertible voting securities held or to be acquired. Note, 
however, that subsequent conversions of convertible voting 
securities may be subject to the requirements of the act. See 
Sec. 801.32.


    30. Amend Sec. 802.35 by revising Examples 1 and 2 to read as 
follows:


Sec. 802.35  Acquisitions by employee trusts.

* * * * *
    Examples: 1. Company A establishes a trust for its employees 
that meets the qualifications of section 401 of the Internal Revenue 
Code. Company A has the power to designate the trustee of the trust. 
That trust then acquires 30% of the voting securities of Company A 
for $120 million. Later, the trust acquires 20% of the stock of 
Company B, a wholly-owned subsidiary of Company A, for $58 million. 
Neither acquisition is reportable.
    2. Assume that in the example above, ``A'' has total assets of 
$100 million. ``C'' also has total assets of $100 million and is not 
controlled by Company A. The trust controlled by Company A plans to 
acquire 40 percent of the voting securities of Company C for $80 
million. Since Company C is not included within ``A,'' ``A'' must 
observe the requirements of the act before the trust makes the 
acquisition of Company C's shares.

* * * * *

    31. Amend Sec. 802.41 by revising Examples 1 and 2 to read as 
follows:


Sec. 802.41  Joint venture or other corporations at time of formation.

* * * * *
    Examples: 1. Corporations A and B, each having sales of $200 
million, each propose to contribute $80 million in cash in exchange 
for 50 percent of the voting securities of a new corporation, N. 
Under this section, the new corporation need not file notification, 
although both ``A'' and ``B'' must do so and observe the waiting 
period prior to receiving any voting securities of N.
    2. In addition to the facts in example 1 above, A and B have 
agreed that upon creation N will purchase 100 percent of the voting 
securities of corporation C for $55 million. Because N's purchase of 
C is not a transaction in connection with N's formation, and because 
in any event C is not a contributor to the formation of N, ``A,'' 
``B'' and ``C'' must file with respect to the proposed acquisition 
of C and must observe the waiting period.


    32. Amend Sec. 802.64 by revising paragraphs (b)(3) and (b)(4), by 
removing paragraph (b)(5), and by revising Example 1 following 
paragraph (c), to read as follows:


Sec. 802.64  Acquisitions of voting securities by certain institutional 
investors.

* * * * *
    (b) * * *
    (3) Made solely for the purpose of investment; and
    (4) As a result of the acquisition the acquiring person would hold 
fifteen percent or less of the outstanding voting securities of the 
issuer.
    (c) * * *

    Examples: 1. Assume that A and its subsidiary, B, are both 
institutional investors as defined in paragraph (a) of this section, 
that X is not, and that the conditions set forth in paragraphs 
(b)(2), (3) and (4) of this section are satisfied. Either A or B may 
acquire voting securities of X worth in excess of $50 million as 
long as the aggregate amount held by person ``A'' as a result of the 
acquisition does not exceed 15 percent of X's outstanding voting 
securities. If the aggregate holdings would exceed 15 percent, ``A'' 
may acquire no more than $50 million worth of voting securities 
without being subject to the requirements of the act.
* * * * *

PART 803--TRANSMITTAL RULES

    33. Revise the authority citation for part 803 to read as follows:


[[Page 8695]]


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

    34. Revise Sec. 803.1(a) to read as follows:


Sec. 803.1  Notification and Report Form.

    (a) The notification required by the act shall be the Notification 
and Report Form set forth in the appendix to this part (803), as 
amended from time to time. All acquiring and acquired persons required 
to file notification by the act and these rules shall do so by 
completing and filing the Notification and Report Form, or a 
photostatic or other equivalent reproduction thereof, in accordance 
with the instructions thereon and these rules. Copies of the 
Notification and Report Form may be obtained in person from the Public 
Reference Branch, Room 130, Federal Trade Commission, 600 Pennsylvania 
Avenue, NW, Washington, DC, 20580, or by writing to the Premerger 
Notification Office, Room 303, Federal Trade Commission, 600 
Pennsylvania Avenue, NW, Washington, DC 20580. The Notification and 
Report Form also can be downloaded from the Federal Trade Commission's 
web site at www.ftc.gov.
* * * * *

    35. Amend Sec. 803.2 by adding introductory text to paragraph (b), 
by revising paragraphs (b)(1) introductory text and (b)(2) and the 
example thereto, and by revising the introductory text to paragraph 
(c), as set forth below.


Sec. 803.2  Instructions applicable to Notification and Report Form.

* * * * *
    (b) Except as provided in paragraph (b)(2) of this section and 
paragraph (c) of this section:
    (1) Items 5-8 and the appendix to the Notification and Report Form 
must be completed--
* * * * *
    (2) For purposes of items 7 and 8 of the Notification and Report 
Form, the acquiring person shall regard the acquired person in the 
manner described in paragraphs (b)(1) (ii) and (iii) of this section.

    Example: Person ``A'' is comprised of entities separately 
engaged in grocery retailing, auto rental, and coal mining. Person 
``B'' is comprised of entities separately engaged in wholesale 
magazine distribution, auto rental and book publishing. ``A'' 
proposes to purchase 100 percent of the voting securities of ``B''s 
book publishing subsidiary. For purposes of item 5, under clause 
(b)(1)(i), ``A'' reports the activities of all its entities; under 
clause (b)(1)(iii), ``B'' reports only the operations of its book 
publishing subsidiary. For purposes of items 7 and 8, under 
paragraph (b)(2) of this section, ``A'' must regard ``B'' as 
consisting only of its book publishing subsidiary and must disregard 
the fact that ``A'' and ``B'' are both engaged in the auto rental 
business.

    (c) In response to items 5, 7, and 8 and the appendix to the 
Notification and Report Form--
* * * * *

    36. Amend Sec. 803.5 by revising Examples 2 and 3 to paragraph 
(a)(2), to read as follows:


Sec. 803.5  Affidavits required.

    (a) * * *
    (2) * * *

    Examples: * * *
    2. ``A'' holds 100,000 shares of the voting securities of 
Company B. ``A'' has a good faith intention to acquire an additional 
900,000 shares of Company B's voting securities. ``A'' states in its 
notice to B, inter alia, that as a result of the acquisition it will 
hold 1,000,000 shares. If 1,000,000 shares of Company B represent 20 
percent of Company B's outstanding voting securities, the statement 
will be deemed by the enforcement agencies a notification for the 
$100 million threshold.
    3. Company A intends to acquire voting securities of Company B. 
``A'' does not know exactly how many shares it will acquire, but it 
knows it will definitely acquire $51 million worth and may acquire 
50 percent of Company B's shares. ``A''s notice to the acquired 
person would meet the requirements of Sec. 803.5(a)(1)(iii) if it 
states, inter alia, either: ``Company A has a present good faith 
intention to acquire $51 million of the outstanding voting 
securities of Company B, and depending on market conditions, may 
acquire more of the voting securities of Company B and thus 
designates the 50 percent threshold,'' or ``Company A has a present 
good faith intention to acquire $51 million of the outstanding 
voting securities of Company B, and depending on market conditions 
may acquire 50 percent or more of the voting securities of Company 
B.'' The Commission would deem either of these statements as 
intending to give notice for the 50 percent threshold.
* * * * *

    37. Amend Sec. 803.7 by revising its example to read as follows:


Sec. 803.7  Expiration of notification.

* * * * *
    Example: A files notification that $125 million of the voting 
securities of corporation B are to be acquired. One year after the 
expiration of the waiting period, A has acquired only $95 million of 
B's voting securities. Although Sec. 802.21 will permit ``A'' to 
purchase any amount of B's voting securities short of $100 million 
within 5 years from the expiration of the waiting period, A's 
holdings may not meet or exceed the $100 million notification 
threshold without ``A'' and ``B'' again filing notification and 
observing a waiting period.


    38. Add Sec. 803.9 to read as follows:


Sec. 803.9  Filing fee.

    (a) Each acquiring person shall pay the filing fee required by the 
act to the Federal Trade Commission, except as provided in paragraphs 
(b) and (c) of this section. No additional fee is to be submitted to 
the Antitrust Division of the Department of Justice.

    Examples: 1. ``A'' wishes to acquire voting securities issued by 
B, where the greater of the acquisition price and the market price 
is $64 million, pursuant to Sec. 801.10. When ``A'' files 
notification for the transaction, it must indicate the $50 million 
threshold and pay a filing fee of $45,000 because the aggregate 
total amount of the acquisition is less than $100 million, but 
greater than $50 million.
    2. ``A'' acquires $40 million of assets from ``B.'' The parties 
meet the size of person criteria of Section 7A(a)(2)(B), but the 
transaction is not reportable because it does not exceed the $50 
million size of transaction threshold of that provision. Two months 
later ``A'' acquires additional assets from ``B'' valued at $90 
million. Pursuant to the aggregation requirements of 
Sec. 801.13(b)(2)(ii), the aggregate total amount of ``B's'' assets 
that ``A'' will hold as a result of the second acquisition is $130 
million. Accordingly, when ``A'' files notification for the second 
transaction, ``A'' must indicate the $100 million threshold and pay 
a filing fee of $125,000 because the aggregate total amount of the 
acquisition is less than $500 million, but not less than $100 
million.
    3. ``A'' acquires $60 million of voting securities issued by B 
after submitting its notification and $45,000 filing fee and 
indicates the $50 million threshold. Two years later, ``A'' files to 
acquire additional voting securities issued by B valued at $50 
million because it will exceed the next higher reporting threshold 
(see Sec. 801.1(h)). Assuming the second transaction is reportable 
and the value of its initial holdings is unchanged (see 
Sec. 801.13(a)(2) and 801.10(c)), the provisions of 
Sec. 801.13(a)(1) require that ``A'' report that the value of the 
second transaction is $110 million because ``A'' must aggregate 
previously acquired securities in calculating the value of B's 
voting securities that it will hold as a result of the second 
acquisition. ``A'' should pay a filing fee of $125,000.
    4. ``A'' signs a contract with a stated purchase price of $110 
million, subject to adjustments, to acquire all of the assets of 
``B.'' If the amount of adjustments can be reasonably estimated, the 
acquisition price--as adjusted to reflect that estimate--is 
determined. If the amount of adjustments cannot be reasonably 
estimated, the acquisition price is undetermined. In either case the 
board or its delegee must also determine in good faith the fair 
market value. (Sec. 801.10(b) states that the value of an asset 
acquisition is to be the fair market value or the acquisition price, 
if determined and greater than fair market value.) ``A'' files 
notification and submits a $45,000 filing fee. ``A''s decision to 
pay that fee may be justified on either of two bases, and ``A'' 
should submit an attachment to the Notification and Report Form 
explaining the valuation. First, ``A'' may have concluded that the 
acquisition

[[Page 8696]]

price can be reasonably estimated to be $98 million, because of 
anticipated adjustments--e.g., based on due diligence by ``A's'' 
accounting firm indicating that one third of the inventory is not 
saleable. If fair market value is also determined in good faith to 
be less than $100 million, the $45,000 fee is appropriate. 
Alternatively, ``A'' may conclude that because the adjustments 
cannot reasonably be estimated, acquisition price is undetermined. 
If so, ``A'' would base the valuation on the good faith 
determination of fair market value. The acquiring party's execution 
of the Certification also attests to the good faith valuation of the 
value of the transaction.
    5. ``A'' contracts to acquire all of the assets of ``B'' for $1 
billion. The assets include hotels, office buildings, and rental 
retail property with a total value of $850 million, all of which are 
exempted by Sec. 802.2. Section 802.2 directs that these assets are 
exempt from the requirements of the act and that reporting 
requirements for the transaction should be determined by analyzing 
the remainder of the acquisition as if it were a separate 
transaction. Furthermore, Sec. 801.15(a)(2) states that those exempt 
assets are never held as a result of the acquisition. Accordingly, 
the aggregate amount of the transaction is $150 million. ``A'' will 
be liable for a filing fee of $125,000, rather than $280,000, 
because the value of the transaction is not less than $100 million 
but less than $500 million. Note, however, that ``A'' must include 
an attachment in its Notification and Report Form setting out both 
the $1 billion total purchase price and the basis for its 
determination that the aggregate total amount of the acquisition 
under the rules is $150 million rather than $1 billion, in 
accordance with the Instructions to the Form.
    6. ``A'' acquires coal reserves from ``B'' valued at $150 
million. No notification or filing fee is required because the 
acquisition is exempted by Sec. 802.3(b). Three months later, A 
proposes to acquire additional coal reserves from ``B'' valued at 
$450 million. This transaction is subject to the notification 
requirements of the act because the value of the acquisition exceeds 
the $200 million limitation on the exemption in Sec. 802.3(b). As a 
result of Sec. 801.13(b)(2)(ii), the prior $150 million acquisition 
must be added because the additional $450 million of coal reserves 
were acquired from the same person within 180 days of the initial 
acquisition. Because aggregating the two acquisitions exceeds the 
$200 million exemption threshold, Sec. 801.15(b) directs that ``A'' 
will also hold the previously exempt $150 million acquisition; thus, 
the aggregate amount held as a result of the $450 million 
acquisition is $600 million. Accordingly, ``A'' must file 
notification to acquire the coal reserves valued at $600 million and 
pay a filing fee of $280,000.

    (b) For a transaction described by Sec. 801.2(d)(2)(iii), the 
parties shall pay only one filing fee. In accordance with 
Sec. 801.2(d)(2)(iii), both parties to a consolidation are acquiring 
and acquired persons and must submit a Notification and Report Form 
where the transaction meets the reporting requirements of that act; 
however, only one filing fee is required in connection with such a 
transaction, and is payable by either party to the transaction. The 
filing fee is based on the greater of the two sizes of transaction in 
the consolidation.
    (c) For a reportable transaction in which the acquiring entity has 
two ultimate parent entities, both ultimate parent entities are 
acquiring persons; however, if the responses for both ultimate parent 
entities would be the same for items 5 through 8 of the Notification 
and Report Form, only one filing fee is required in connection with the 
transaction.
    (d) Manner of payment. Fees may be paid by United States postal 
money order, bank money order, bank cashier's check, certified check or 
by electronic wire transfer (EWT). The fee must be paid in U.S. 
currency.
    (1) Fees paid by money order or check shall be made payable to the 
``Federal Trade Commission,'' omitting the name or title of any 
official of the Commission, and shall be submitted to the Premerger 
Notification Office of the Federal Trade Commission along with the 
Notification and Report Form.
    (2) Fees paid by EWT shall be deposited to the Treasury's account 
at the New York Federal Reserve Bank. Specific instructions for making 
EWT payments are contained in the Instructions to the Notification and 
Report Form.
    (e) Refunds. Except as provided in this paragraph, no filing fee 
received by the Commission will be returned to the payer and no part of 
the filing fee shall be refunded. The filing fee shall be refunded only 
if the Commission's staff determines, based on the information and 
representations contained in the filing person's notification, that 
premerger notification was not required by the act. Once the 
Commission's staff has determined that the notification was required, 
the filing fee shall not be refunded even if it appears at the time of 
consummation that the transaction does not meet the reporting 
requirements established in the act.

    39. Amend Sec. 803.10 by:
    a. Revising paragraphs (b)(1) and (b)(2),
    b. Adding a new paragraph (b)(3),
    c. Revising paragraph (c)(1),
    d. Removing the first example, and
    e. Revising the second example thereto.
    The addition and revisions read as follows:


Sec. 803.10  Running of time.

* * * * *
    (b) Expiration of waiting period. (1) Subject to paragraph (b)(3) 
of this section, for purposes of Section 7A(b)(1)(B), the waiting 
period shall expire at 11:59 p.m. Eastern Time on the 30th (or in the 
case of a cash tender offer or of an acquisition covered by 11 U.S.C. 
363(b), the 15th) calendar day (or if Sec. 802.23 applies, such other 
day as that section may provide) following the beginning of the waiting 
period as determined under paragraph (a) of this section, unless 
extended pursuant to Section 7A(e) and Sec. 803.20, or Section 
7A(g)(2), or unless terminated pursuant to Section 7A(b)(2) and 
Sec. 803.11.
    (2) Unless further extended pursuant to Section 7A(g)(2), or 
terminated pursuant to Section 7A(b)(2) and Sec. 803.11, any waiting 
period which has been extended pursuant to Section 7A(e)(2) and 
Sec. 803.20 shall, subject to paragraph (b)(3) of this section, expire 
at 11:59 p.m. Eastern Time--
    (i) On the 30th (or, in the case of a cash tender offer or of an 
acquisition covered by 11 U.S.C. 363(b), the 10th) day following the 
date of receipt of all additional information or documentary material 
requested from all persons to whom such requests have been directed 
(or, if a request is not fully complied with, the information and 
documentary material submitted and a statement of the reasons for such 
noncompliance in accordance with Sec. 803.3), by the Federal Trade 
Commission or Assistant Attorney General, whichever requested 
additional information or documentary material, at the office 
designated in paragraph (c) of this section, or
    (ii) As provided in paragraph (b)(1) of this section, whichever is 
later.
    (3) If any waiting period would expire on a Saturday, Sunday, or 
legal public holiday (as defined in 5 U.S.C. 6103(a)) the waiting 
period shall be extended to 11:59 p.m. Eastern Time of the next regular 
business day.
    (c) Date of receipt and means of delivery. (1) For purposes of this 
section, the date of receipt shall be the date on which delivery is 
effected to the designated offices (Premerger Notification Office, Room 
303, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, 
DC 20580, and Director of Operations and Merger Enforcement, Antitrust 
Division, Department of Justice, Patrick Henry Building, 601 D Street, 
NW, Room #10013, Washington, DC 20530) during normal business hours. 
Delivery effected after 5:00 p.m. Eastern Time on a regular business 
day, or at any time on any day other than a regular business day, shall 
be deemed effected on the next following regular business day. Delivery 
should be effected directly to

[[Page 8697]]

the designated offices, either by hand or by certified or registered 
mail. If delivery of all required filings to all offices required to 
receive such filings is not effected on the same date, the date of 
receipt shall be the latest of the dates on which delivery is effected.

    Example: In an acquisition other than a tender offer, assume 
that requests for additional information are issued to both the 
acquiring and acquired persons on the 26th day of the waiting 
period. One person submits the additional information on the 35th 
day, while the other responds on the 44th day. Under this section, 
the waiting period expires thirty days following the last receipt of 
additional information, that is, it expires on the 74th day (unless 
that day is a Saturday, Sunday or legal public holiday).
* * * * *

    40. Amend Sec. 803.20 by revising paragraphs (b)(2)(i) and (ii), 
and by revising paragraph (c)(2) and the example thereto, to read as 
follows:


Sec. 803.20  Requests for additional information or documentary 
material.

* * * * *
    (b) * * *
    (2) * * *
    (i) In the case of a written request, upon receipt of the request 
by the ultimate parent entity of the person to which the request is 
directed (or, if another entity included within the person filed 
notification pursuant to Sec. 803.2(a), then by such entity), within 
the original 30-day (or, in the case of a cash tender offer or of an 
acquisition covered by 11 U.S.C. 363(b), 15-day) waiting period (or, if 
Sec. 802.23 applies, such other period as that section provides); or
    (ii) In the case of a written request, upon notice of the issuance 
of such request to the person to which it is directed within the 
original 30-day (or, in the case of a cash tender offer or of an 
acquisition covered by 11 U.S.C. 363(b), 15-day) waiting period (or, if 
Sec. 802.23 applies, such other period as that section provides), 
provided that written confirmation of the request is mailed to the 
person to which the request is directed within the original 30-day (or, 
in the case of a cash tender offer or of an acquisition covered by 11 
U.S.C. 363(b), 15-day) waiting period (or, if Sec. 802.23 applies, such 
other period as that section provides). Notice to the person to which 
the request is directed may be given by telephone or in person. The 
person filing notification shall keep a designated individual 
reasonably available during normal business hours throughout the 
waiting period at the telephone number supplied in the Notification and 
Report Form. Notice of a request for additional information or 
documentary material need be given by telephone only to that individual 
or to the individual designated in accordance with paragraph 
(b)(2)(iii) of this section. Upon the request of the individual 
receiving notice of the issuance of such a request, the full text of 
the request will be read. The written confirmation of the request shall 
be mailed to the ultimate parent entity of the person filing 
notification, or if another entity within the person filed notification 
pursuant to Sec. 803.2(a), then to such entity.
* * * * *
    (c) * * *
    (2) A request for additional information or documentary material to 
any person other than, in the case of a tender offer, the person whose 
voting securities are being acquired pursuant to the tender offer (or 
any officer, director, partner, agent or employee thereof), shall in 
every instance extend the waiting period for a period of 30 (or, in the 
case of a cash tender offer or of an acquisition covered by 11 U.S.C. 
363(b), 10) calendar days from the date of receipt (as determined under 
Sec. 803.10) of the additional information or documentary material 
requested.

    Example: Acquiring person ``A'' desires to acquire voting 
securities of corporation X on a securities exchange, and files 
notification. Under Sec. 801.30, the waiting period begins upon 
filing by ``A,'' and ``X'' must file within 15 days thereafter. 
Assume that before the end of the waiting period, the Assistant 
Attorney General issues a request for additional information to 
``X.'' Since the transaction is not a tender offer, under paragraph 
(c)(1) the waiting period is extended until ``X'' supplies the 
requested information; under paragraph (c)(2), the waiting period is 
extended for 30 days beyond the date on which ``X'' responds. Note 
that under Sec. 803.21 ``X'' is obliged to respond to the request 
within a reasonable time; nevertheless, the Federal Trade Commission 
and Assistant Attorney General could, notwithstanding the pendency 
of the request for additional information, terminate the waiting 
period sua sponte pursuant to Sec. 803.11(c).
* * * * *
    41. Revise the Appendix to part 803 to read as follows:

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BILLING CODE 6750-01-P


[[Page 8721]]


    By direction of the Commission.

    Dated: January 24, 2001.
Donald S. Clark,
Secretary.
[FR Doc. 01-2605 Filed 1-31-01; 8:45 am]
BILLING CODE 6750-01-C