[Federal Register Volume 68, Number 12 (Friday, January 17, 2003)]
[Rules and Regulations]
[Pages 2425-2446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1078]


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FEDERAL TRADE COMMISSION

16 CFR Parts 801 and 803


Premerger Notification; Reporting and Waiting Period Requirements

AGENCY: Federal Trade Commission.

ACTION: Final rules.

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SUMMARY: The Federal Trade Commission is amending the premerger 
notification rules, which require the parties to certain mergers or 
acquisitions

[[Page 2426]]

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 address public comments regarding the 
Interim Rules published February 1, 2001, and will increase the clarity 
and improve the effectiveness of the rules and the Notification and 
Report Form.

DATES: These final rules are effective January 17, 2003.

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

SUPPLEMENTARY INFORMATION: On February 1, 2001, the Commission 
published Interim and Proposed Rules amending the Hart-Scott-Rodino 
rules (``HSR rules'') contained in 16 CFR parts 801, 802 and 803. The 
Interim Rules took effect upon publication and implemented amendments 
to section 7A of the Clayton Act enacted on December 21, 2000 (``2000 
Amendments''). The Proposed Rules set forth other changes improving and 
updating the HSR rules and were revised and made final effective April 
17, 2002 (67 FR 11898). Interim Rule 802.21 was revised and made final 
in a separate rulemaking effective February 2, 2002 (67 FR 11904).
    Both sets of rules invited public comments. The Commission received 
seventeen public comments addressing the Interim Rules (66 FR 8679) and 
the Proposed Rules (66 FR 8723). Some comments addressed both sets of 
rules, others addressed only one or the other. Eight of the public 
comments pertained to the Interim Rules and are listed below. In 
response to these eight comments, the Commission, with the concurrence 
of the Assistant Attorney General, is promulgating additional 
amendments and revisions to the Interim Rules and Form, as described 
below. The Commission also received a number of comments that were not 
relevant to the changes promulgated by either set of rules. These 
additional comments remain under consideration and may be addressed by 
future rulemaking.
    The following provided public comments on the Interim Rules to the 
Commission:

1. Baker & McKenzie (Clanton, David A., et al.) (3/19/01)
3. Ford Motor Company (Bolerjack, Stephen D.) (3/19/01)
8. National Association of Manufacturers (``NAM'') (3/29/01)
9. O'Melveny and Myers (Beddow, David T.) (3/19/01)
12. Gibson, Dunn & Crutcher (Pfunder, Malcolm R.) (3/19/01)
13. Section of Antitrust Law of the American Bar Association (3/19/01)
15. Skadden, Arps, Slate, Meagher & Flom, LLP (Stoll, Neal R. Esq., et 
al.) (3/19/01)
16. Kirkland & Ellis (Sonda, James and Jachino, Dani) (3/19/01)

Part 801--Coverage Rules

Section 801.1(h): Notification Threshold

    The Commission is adopting the Interim Rule as final with an edit 
for clarification purposes, as described in the following discussion.

Background Information to Sec.  801.1(h)

    The Commission received six comments addressing the notification 
thresholds implemented by the Interim Rules. Comment 3 asserted that 
the dollar amount thresholds do not reflect levels of competitive 
significance of an acquisition and recommended their elimination. It 
also stated that the Statement of Basis and Purpose (``SBP'') 
accompanying the Interim Rules offered no reason why these dollar 
amounts might reflect levels of acquisition that deserve agency review. 
Comments 3 and 8 recommended elimination of the $100 million and $500 
million notification thresholds, with retention of the remaining three 
thresholds. Comments 13 and 15 advocated a return to the 1978 
notification thresholds with only a change from $15 million to $50 
million as the lowest threshold, citing as justification the same 
concerns indicated in Comments 3 and 8.
    As explained in the SBP accompanying the Interim Rules and below, 
the Commission believes that these dollar thresholds are an effective 
solution to administrative problems relating to filing fees that 
parties and the agencies would otherwise face, and also that these 
thresholds impose little burden on parties. Thus, the Commission 
believes that these thresholds are appropriate and should be retained.
    The HSR statute provides that an acquisition is reportable if, as a 
result of the acquisition, the acquirer will hold voting securities of 
the acquired person valued in excess of $50 million. Under the statute, 
once an acquirer holds voting securities valued at more than $50 
million, any additional purchase of even one voting share is 
reportable. As the antitrust agencies recognized in the original 
rulemaking proceeding in 1978, this provision would result in far more 
filings than are needed for effective antitrust review. At the same 
time, as the acquirer's holdings in the company continue to increase in 
size through subsequent transactions, the agencies must have some 
opportunities to review the later transactions. That is, there must be 
some points (thresholds) where these additional acquisitions become 
reportable.
    In 1978, the agencies adopted $15 million, 15 percent, 25 percent, 
and 50 percent as thresholds requiring reporting of acquisitions. The 
50 percent threshold is self-evident: it is the point where the 
acquirer attains control, as defined in the Rules, and at least veto 
power. The $15 million threshold reflected the basic statutory 
threshold for filing. The other thresholds were chosen as intermediate 
points representing substantial additional ownership and, often, 
additional practical control. At the same time, the agencies also 
promulgated Sec.  802.21 of the HSR rules to allow additional voting 
securities acquisitions between these thresholds to go unreported. 
Intermediate thresholds and Sec.  802.21 thus serve the interests of 
both the agencies and the parties, enabling the agencies to allow small 
minority acquisitions to proceed even where the transfer of a more 
significant minority interest between the parties might be of concern.
    In light of the 2000 Amendments, the Commission reconsidered the 
appropriate Sec.  801.1(h) thresholds, recognizing that $50 million 
should be the lowest reporting threshold and 50 percent (if valued at 
greater than $50 million) the highest. The Commission then addressed 
what additional thresholds, if any, to implement. As with the 1978 
Rules, it was readily apparent that intermediate thresholds are 
desirable. However, as outlined in the SBP that accompanied the Interim 
Rules, using only percentage notification thresholds would create 
administrative problems for both filers and the agencies. Section 
802.21 allows an acquiring person in a voting securities acquisition--
assuming it has crossed the notification threshold for which it filed 
within a year of the end

[[Page 2427]]

of its waiting period--five years to acquire up to the next 
notification threshold, without another filing obligation. Thus, under 
Sec.  802.21, an acquiring person could file, indicate the 25 percent 
threshold, and as long as it crossed that threshold no more than a year 
after the end of its waiting period, take up to five years to acquire 
up to 49.9 percent \1\ of the same issuer's voting stock without 
refiling, possibly crossing another post-February 1, 2001 filing fee 
threshold in the process.
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    \1\ For simplicity, decimal percentages are expressed herein in 
tenths. In reality, by indicating the 25 percent notification 
threshold, any number of shares representing up to, but not meeting 
or exceeding 50 percent, could be acquired.
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    The HSR Act, as amended, requires that an acquiring person pay a 
certain fee based on the value of the assets and voting securities it 
holds as a result of an acquisition. This means that, if the prior 
thresholds were retained, the acquiring person who filed to acquire 25 
percent of an issuer's voting securities and paid the fee that 
corresponds to the value of 25 percent of those securities, could 
acquire the 25 percent, and acquire up to an additional 24.9 percent 
within five years, without filing or paying any additional fee. In this 
example, when acquiring person A plans to acquire 25 percent in year 
one, but may acquire up to 49 percent, what fee should it pay? 
Similarly, if, as several comments suggest, the notification thresholds 
were $50 million, 25 percent, and 50 percent, what fee should A pay if 
filing for the $50 million threshold where that filing would enable it 
to buy 24.9 percent, worth well over $500 million? Should the 
determination turn on A's intent? How would that intent be ascertained? 
What if its intent later changes?
    The following scenario illustrates how retaining the percentage 
thresholds would lead to inequitable treatment for similarly situated 
filers. If a person filed notification at the 25 percent notification 
threshold to make open market purchases but did not know precisely how 
many shares above that threshold it intended to acquire, its fee would 
be based on the value of 25 percent of the issuer's voting stock. If 
that percentage were valued at $90 million, the fee paid would be 
$45,000, even if ultimately 30 percent, valued at $108 million, were 
acquired. On the other hand, if a person filed notification based on an 
agreement to acquire 30 percent of the same issuer's voting stock, 
valued at $108 million, a filing fee of $125,000 would be required. The 
substance of the acquisitions is exactly the same, but the structure 
penalizes the filer that is able to report with greater specificity the 
amount of voting securities it will hold.
    The approach the Commission is adopting in these Final Rules 
retains Sec.  802.21 and the concept of allowing subsequent 
acquisitions without repeated filings up to the next threshold. It 
adopts thresholds that provide for additional review from time to time 
as the acquirer obtains a substantially larger investment in the 
acquired company, while exempting smaller additional acquisitions. It 
assures that notification of all reportable acquisitions and the 
Congressionally-mandated fee are simultaneously received, without 
requiring the firms or the agency to examine fine or elusive 
distinctions in the intent of the acquiring person. A number of 
informal comments received from affected parties during preparation of 
the Interim Rules suggested that the approach adopted here would be the 
most practical and sensible means of providing for intermediate 
thresholds. While a number of formal comments criticized the dollar 
thresholds, it is of note that none of them suggested an alternative 
approach that would also solve the administrative/filing fee questions 
raised in the SBP to the Interim Rules.
    Several of the comments noted that if voting securities already 
held increase in value to an amount greater than the next dollar 
notification threshold, even a very small (and presumably insignificant 
from an antitrust perspective) acquisition of additional shares would 
trigger a new filing. The Commission carefully considered these 
comments and it believes, based on its own experience with filings 
received over the last several fiscal years as well as extensive input 
from the private bar prior to implementing the new thresholds, that 
occurrence of such filing scenarios will be rare. Multiple filings 
would not be required for mergers and consolidations (where 100 percent 
of the issuer's voting securities are acquired at once), nor for asset 
acquisitions (where notification thresholds are inapplicable). The only 
situation in which multiple filings potentially may be required is 
where an acquiring person makes multiple acquisitions of voting stock 
of a large issuer and that acquiring person is unable accurately to 
estimate what the value of its holdings in that issuer ultimately will 
be. Some filers may prefer in such circumstances to indicate a higher 
threshold than that which will be exceeded with the initial acquisition 
and thereby avoid the trouble and expense of preparing another filing. 
For example, a party making an $80 million acquisition of a small 
percentage of an issuer's stock but contemplating a subsequent 
acquisition may opt to file for the $100 million or $500 million 
threshold and avoid multiple filings. Another party contemplating an 
$80 million acquisition of a small percentage of an issuer's stock but 
not expecting to make additional acquisitions would likely opt to file 
for the $50 million threshold and pay the lowest filing fee.
    Comment 16 asserted in addition that the complexity of valuing a 
transaction to determine which threshold will be crossed creates a 
significant burden on the parties to the transactions. The acquiring 
person has always been confronted with accurately determining the value 
of assets and/or voting securities to be held as a result of an 
acquisition. This requirement has not changed, although its 
significance has increased with the creation of a tiered filing fee 
system based on size of transaction. The comment also noted that while 
some administrative problems have been solved by using the fee 
thresholds as filing thresholds, other problems have been created. 
However, the comment did not outline specific problems other than the 
multiple filing problem concerning an increase in value of voting 
securities followed by a small additional purchase--a situation that 
the agencies believe is both rare and avoidable.
    As to the initial reportable transaction itself, where a 
transaction is determined to be reportable, the acquiring person can 
make a valuation at the time of filing, using the appropriate 
methodology specified in the rules, and ``lock in'' the value of assets 
or voting securities that will be held as a result of the acquisition. 
This value, as long as it has been determined in good faith, may be 
relied on for purposes of determining the appropriate filing fee and 
notification threshold for this acquisition, even if events such as a 
sharp increase in market price or post-closing adjustments subsequently 
cause the final acquisition price to exceed a threshold higher than 
that indicated in the filing. Accordingly, the retention of the 
multiple dollar thresholds should not impose a substantial additional 
burden on a significant number of persons filing notification.
    Comment 9 asserted that multiple dollar thresholds for asset 
acquisitions are unnecessary. Notification thresholds are inapplicable 
to asset acquisitions, and, in order to make that clear, one change is 
being made to Sec.  801.1(h) of the Interim Rules. The change removes 
the reference to assets in connection with notification thresholds. The 
Sec.  801.1(h) notification thresholds, unlike the

[[Page 2428]]

statutory filing fee thresholds, exist solely for the purpose of 
exempting subsequent acquisitions of voting securities that do not 
result in the acquiring person holding voting securities meeting or 
exceeding a higher notification threshold than that met or exceeded in 
a previous acquisition of voting securities, as provided in Rule 
802.21.
    The mention of ``assets'' in Interim Rule 801.1(h) could cause some 
confusion in the application of Sec.  802.21 to acquisitions of voting 
securities when a previous acquisition of both assets and voting 
securities has been made and reported. Consider the following example: 
A acquires voting securities of B valued at $60 million and assets of B 
valued at $60 million. A would file indicating the $50 million 
notification threshold since it would hold less than $100 million in B 
voting securities, but would pay a $125,000 filing fee because it would 
hold in excess of $100 million in voting securities and assets of B as 
a result of the acquisition. A now wishes to make an additional 
acquisition of B voting securities. The Sec.  802.21 exemption, which 
applies only to voting securities, exempts a subsequent acquisition of 
voting securities only when a prior notification threshold has been 
exceeded by an earlier acquisition of voting securities and the 
subsequent acquisition will not cause the acquiring person to meet or 
exceed a greater notification threshold. Thus, it is incorrect to 
conclude that A earlier crossed the $100 million notification 
threshold; rather, it only crossed the $50 million notification 
threshold, and whether it must file a new notification depends on 
whether the additional acquisition results in A holding $100 million or 
more of B's voting securities. The removal of the reference to assets 
in Sec.  801.1(h) should clarify this point.
    The Notification and Report Form is also being amended to note that 
Item 2(c), requiring the acquiring person to report the notification 
threshold which is being filed for, is applicable only to acquisitions 
of voting securities. Filing persons should be aware that the 
determination of the appropriate filing fee remains unchanged. The 
filing fee is still calculated based on the total aggregate value of 
voting securities and assets that will be held as a result of the 
acquisition. Additionally, the reference to Sec.  801.1(h)(1) in Sec.  
801.21 (securities and cash not considered assets when acquired) is 
removed as it is no longer applicable.
    After careful consideration of the options and of the comments 
regarding notification thresholds, the Commission has determined that 
the notification thresholds promulgated by the Interim Rules are 
appropriate and the Final Rule will be implemented with those 
thresholds.

Part 803--Transmittal Rules

Section 803.9 Filing Fee

    The Commission received three comments concerning Sec.  803.9. 
Comment 1 objected to the fact that the filing fee for an acquisition 
of voting securities of a foreign issuer is based on the entire value 
of the transaction and may reach $280,000, despite the fact that the 
U.S. portion of the transaction may be relatively small and the 
issuer's U.S. presence may measure only slightly over $50 million. The 
comment proposed an amendment to the rule that would limit filing fees 
for all acquisitions of foreign assets or voting securities to $45,000 
unless more than 50 percent of the transaction's value is attributable 
to either assets located in the U.S. or to sales in or into the U.S.
    Amending Sec.  803.9 in this fashion would be in direct conflict 
with the language of the 2000 Amendments, which clearly specifies that 
the filing fee is based on the aggregate total value of voting 
securities and assets held as a result of the acquisition.
    Comment 13 suggested that examples 4 and 5 to the rule would be 
more appropriately paired with other rules; however, the Commission 
believes that the examples explain how the appropriate filing fee is 
determined and sees no need to remove them from this rule.
    Comment 8 claimed that the language of the rule is unclear. It 
contended that nowhere does the rule state that filing persons must pay 
a filing fee each time a threshold is crossed. It further stated that 
only by extremely careful reading and parsing of sentences can one 
conclude that the agencies apparently want the full fees for crossing 
each threshold. As the comment does not specify what language is 
confusing or unclear, it is difficult for the Commission to determine 
what portion of the rule might need clarification. The language of the 
rule in its current form unambiguously lays out the filing fee 
requirements, and since no other comment indicated that the rule is 
unclear, the Final Rule will be implemented without change except as 
noted in the following paragraph. Two additional examples are added to 
further illustrate the application of the rule.
    Section 803.9 is amended in the following way: 803.9(c) provides 
that 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. The intent of this paragraph was to require only one 
filing fee for those transactions where the two acquiring persons would 
have no significant business activities outside of the jointly-
controlled acquisition vehicle. Although no comments were received on 
this point, we have discovered that in some instances such persons may 
respond differently to Item 6, i.e., the two ultimate parent entities 
may have different shareholders. To ensure that the intent of this 
section is implemented, Sec.  803.9(c) is amended to require only that 
the response to Item 5 be the same for both acquiring persons in order 
for the transaction to qualify for one filing fee.
    It should also be noted that the SBP accompanying the Interim Rules 
contained a typographical error which omitted the word ``not'' in the 
last sentence discussing Sec.  803.9. The sentence should have read: 
``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 803.20 Requests for Additional Information or Documentary 
Material

    Comments 12 and 13 correctly pointed out a discrepancy between the 
SBP and the Interim Rule. The intent was to amend this section 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 subsection (e)(2) applies 
to a cash tender offer. This was correctly described in the SBP; 
however, a drafting error in the Interim Rule effected a different 
result. The Final Rule has been revised to correspond to the intent 
stated in the SBP. In addition, the example has been revised to more 
clearly illustrate the application of the rule in the case of a tender 
offer.

[[Page 2429]]

Part 803--Appendix: Premerger Notification and Report Form

Transactions Subject to Foreign Antitrust Reporting Requirements

    The Form was amended by the Interim Rules to include a space for 
reporting persons to indicate whether 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.
    Three comments were received regarding this change. Comment 3 
stated that the determination of the countries requiring a premerger 
report is a substantial burden, frequently completed after HSR filings 
are made. It further argued that the list would be unnecessary in the 
great majority of filings, which do not receive more substantive 
review. Comment 8 argued that the listing is unnecessary, and will 
likely be incomplete, since the exact identity of countries to be 
notified is not always known at the time of filing.
    Comment 13 also indicated that the burden associated with 
responding to this item may outweigh the probative value to the 
agencies. It recommended that the voluntary nature of the item be 
disclosed on the Form so infrequent filers will know without reference 
to the Instructions that their response is not mandatory. The comment 
further remarked that despite the fact that a response to the item is 
voluntary, the risk is raised that the parties may inadvertently err in 
their reporting, and that the Commission has given no explanation of 
the steps that a party must undertake to ensure that the voluntary 
answer is accurate.
    The Commission, as it stated in the SBP accompanying the Interim 
Rules, believes that early notice of multiple jurisdiction filings will 
allow the agencies to communicate with foreign counterparts only to the 
extent that statutorily protected information is not disclosed and, 
where appropriate, to seek consent of the parties to allow more 
extensive cooperation between or among antitrust authorities in 
conducting their investigations. This approach could in many instances 
reduce the burden that would be placed on the parties in providing 
duplicative responses to multiple jurisdictions.
    The Commission recognizes that 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, and accordingly requests that the filing person 
voluntarily respond to this item based on its knowledge or belief ``at 
the time of the filing.'' If a filing person chooses to respond, the 
obligation to provide accurate information is the same as that for any 
other item on the Form. If the parties answer to the best of their 
knowledge at the time of filing, it is highly unlikely that any penalty 
would result if the response later proves to be inaccurate.
    Given the voluntary nature of the item, and the instruction that 
the person filing respond only based on its knowledge at the time of 
filing, the Commission believes that the potential benefit to the 
agencies outweighs what would be a very limited burden to the parties. 
This item will remain on the Form; however, the word ``voluntary'' in 
parentheses will be added to the item on the Form itself to ensure that 
the voluntary nature of the response to this item is clear without 
reference to the Instructions.

Explanation of Amount Paid/Name of Person Responsible for Fair Market 
Valuation

    The Interim Rules introduced a new item on the Form in which the 
acquiring person indicates the amount of the fee paid. The acquiring 
person is further advised that 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 method(s) used. In connection 
with the valuation of the transaction, Item 2(e) was also added, 
requiring that if the value of the transaction is based in whole or in 
part on a fair market valuation, the name of the person responsible for 
that valuation should be provided. The Commission received three 
comments regarding the attachment of the valuation explanation and the 
identification of the person responsible for any fair market valuation.
    Comment 3 stated that the addition of these items adds additional 
burden for the parties and asserted that if the agencies have questions 
about the valuation method, they can always raise them with the 
reporting person. The comment suggested that there is no need to name 
the person performing the valuation since an officer of the filing 
party certifies the accuracy of all of the information in the filing. 
Comment 8 also noted that the information regarding the method of 
valuation can be obtained by calling the contact person listed in Item 
1(g) of the Form.
    Comment 13 asserted that although the agencies might reasonably 
request an explanation of the valuation to ensure that the proper 
filing fees are being paid, it is not clear when such disclosure must 
be provided and how its requirements can be satisfied. It also noted 
that it is unclear under what circumstances a transaction value might 
straddle two filing fee thresholds. For example, the comment noted that 
it is uncertain whether a person filing for a cash tender offer for a 
minimum condition (i.e., 66\2/3\ percent) should be able to file based 
upon a valuation for the minimum condition being satisfied, or based on 
the assumption that 100 percent of the shares will be tendered 
(presumably valued at a higher filing fee threshold). The comment also 
observed that if the agencies are looking for a responsible person to 
hold accountable for any errors in the valuation, they can look to the 
officer who signed the certification and do not need an additional 
person to be identified as accountable on the Form itself.
    The Commission recognizes that with the new fee schedule the 
valuation of transactions must be more precise than was required in the 
past. It does not, however, believe that the new items on the Form 
impose any significant burden beyond that already required to calculate 
the value of the transaction. When it is not apparent from the purchase 
agreement why a lower filing fee threshold is being indicated, the 
required explanation need not be lengthy or highly detailed, but merely 
a concise description of how the acquiring person arrived at the value 
it is reporting on the Form. In most cases, this explanation will 
quickly resolve any valuation issues staff may have identified and will 
eliminate the need to contact the parties for any further discussion.
    The issues surrounding valuation are, and have always been, 
complex. How the rules governing valuation should be applied to 
determine the appropriate filing fee has been the subject of individual 
informal interpretations and widely attended public question and answer 
sessions. Additionally, several examples were included in Sec.  803.9 
to illustrate commonly encountered scenarios. More examples are added 
to the final version of this rule to address other situations which 
have been identified as problematic.

[[Page 2430]]

    To address the specific questions raised by Comment 13, an example 
of when the value of a transaction may straddle two filing fee 
thresholds is when the agreed price for an acquisition of non-publicly 
traded voting securities is $99 million, subject to post-closing 
adjustments of up to plus or minus $2 million. In this situation, if 
the acquiring person has a reasonable basis for estimating that the 
adjustments will be minus $1 million, then the acquisition price is 
determined and the appropriate filing fee threshold is $50 million. 
However, since the potential acquisition price, subject to adjustments, 
could have exceeded the $100 million threshold, an explanation of why 
the lower threshold was indicated should be attached (see Sec.  803.9, 
example 7).
    In the case of tender offers, if the offer is for a minimum 
percentage of the issuer's voting securities, but there is no cap on 
the offer, the transaction must be valued at the maximum that could be 
tendered (i.e., 100 percent). If, however, the offer is capped at a 
fixed amount (i.e., 50 percent plus one share), after which no further 
shares can be tendered, the value will be that fixed amount, even if 
the tender offer will be followed by a merger, which will not be 
reportable under section 7A(c)(3) (see Sec.  803.9, example 8).
    The requirement to provide the name of an individual responsible 
for any fair market valuation is not intended to circumvent the contact 
person identified in Item 1(g) of the Form. It is intended, rather, to 
ensure that the contact person can quickly and easily locate the 
appropriate person in the event a question is raised by the agencies 
concerning the valuation. In the Commission staff's experience, the 
contact person often is not involved in the detailed compilation of the 
information on the Form, and may require an extended period of time to 
determine who within the acquiring person is knowledgeable about the 
information contained in any particular item. Providing the name of the 
person responsible for this item will ensure that review of the 
notification is not unduly delayed by valuation issues.
    In summary, the Commission does not believe that any new 
significant burden has been introduced by the addition of these two 
items and they will remain on the Form submitted with the Final Rules. 
The agencies will continue to provide assistance in resolving the 
complex issues surrounding valuation through informal, and, if 
appropriate, formal interpretation.

Item 2(c) Notification Threshold

    As noted in the SBP for Sec.  801.1(h), the Notification and Report 
Form is also being amended to clarify that Item 2(c), requiring the 
acquiring person to report the notification threshold that is being 
filed for, is applicable only to acquisitions of voting securities.

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 $50 million or less. 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 (``PRA''), 44 U.S.C. 3501-3520, 
requires agencies to seek and obtain Office of Management and Budget 
(``OMB'') approval before undertaking a ``collection of information'' 
directed to ten or more persons. 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 PRA that have 
been reviewed and approved by OMB (preceding these latest HSR rule 
amendments) \2\ under OMB Control No. 3084-0005. The Final 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 $50 million or less. Because the Final Rules do not affect 
the information collection requirements of the premerger notification 
program as implemented by the Interim Rules, they have not been 
resubmitted to OMB for review. The Supporting Statement that 
accompanied 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 Final Rules, is estimated to be 192,089 hours per 
year (based on fiscal year 2000 filings). This constitutes an 
approximate 47 percent reduction from what the burden estimate would be 
absent the final rules and based on the number of fiscal year 2000 
filings.
---------------------------------------------------------------------------

    \2\ OMB clearance was received on May 14, 2001 and extends 
through May 31, 2004.
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List of Subjects in 16 CFR Parts 801 and 803

    Antitrust, Reporting and recordkeeping requirements.

    Accordingly, for the reasons stated in the preamble, the Federal 
Trade Commission amends 16 CFR parts 801 and 803 as follows:

PART 801--COVERAGE RULES

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

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

    2. Amend Sec.  801.1 by revising paragraph (h) to read as follows:


Sec.  801.1  Definitions.

* * * * *
    (h) Notification threshold. The term ``notification threshold'' 
means:
    (1) An aggregate total amount of voting securities of the acquired 
person valued at greater than $50 million but less than $100 million;
    (2) An aggregate total amount of voting securities of the acquired 
person valued at $100 million or greater but less than $500 million;
    (3) An aggregate total amount of voting securities 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.
* * * * *

    3. 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 Sec.  801.13(b):
* * * * *

[[Page 2431]]

PART 803--TRANSMITTAL RULES

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

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


    5. Amend Sec.  803.9 by adding examples 7 and 8 to paragraph (a) 
and by revising paragraph (c) to read as follows:


Sec.  803.9  Filing fee.

* * * * *
    (a) * * *

    Examples:
* * * * *
    7. ``A'' intends to acquire 20 percent of the voting securities 
of B, a non-publicly traded issuer. The agreed upon acquisition 
price is $99 million subject to post-closing adjustments of up to 
plus or minus $2 million. ``A'' estimates that the adjustments will 
be minus $1 million. In this example, since ``A'' is able in good 
faith to reasonably estimate the adjustments to the agreed-on price, 
the acquisition price is deemed to be determined and the appropriate 
filing fee threshold is $50 million. Even if the post-closing 
adjustments cause the final price actually paid to exceed $100 
million, ``A'' would be deemed to hold $98 million in B voting 
securities as a result of this acquisition. Note, however, since the 
potential acquisition price subject to adjustments could have 
exceeded the $100 million threshold (e.g., ``straddles two filing 
fee thresholds''), an explanation of why the lower threshold was 
indicated should be attached. Also note that any additional 
acquisition by ``A'' of B voting stock (if the value of the stock 
currently held by ``A'' is $100 million or more) will cause ``A'' to 
cross the $100 million threshold and another filing and the 
appropriate fee will be required.
    8. ``A'' intends to make a cash tender offer for a minimum of 50 
percent plus one share of the voting securities of B, a non-publicly 
traded issuer, but will accept up to 100 percent of the shares if 
they are tendered. There are 12 million shares of B voting stock 
outstanding and the tender offer price is $10 per share. In this 
instance, since there is no cap on the number of shares that can be 
tendered, the value of the transaction will be the value of 100 
percent of B's voting securities, and ``A'' must pay the $125,000 
fee for the $100 million filing fee threshold. Note that if the 
tender offer had been for a maximum of 50 percent plus one share the 
value of the transaction would be $60 million, and the appropriate 
fee would be $45,000, based on the $50 million filing fee threshold. 
This would be true even if the tender offer were to be followed by a 
merger which would be exempt under Section 7A(c)(3),
* * * * *
    (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 item 5 of the Notification and Report 
Form, only one filing fee is required in connection with the 
transaction.
* * * * *

    6. Amend Sec.  803.20 by revising paragraph (c) and the example 
thereto, to read as follows:


Sec.  803.20  Requests for additional information or documentary 
material.

* * * * *
    (c) Waiting period extended. (1) During the time period when a 
request for additional information or documentary material remains 
outstanding to any person other than either:
    (i) In the case of a tender offer, the person whose voting 
securities are sought to be acquired by the tender offeror (or any 
officer, director, partner, agent or employee thereof), or
    (ii) In the case of an acquisition covered by 11 U.S.C. 363(b), the 
acquired person, the waiting period shall remain in effect, even though 
the waiting period would have expired (see Sec.  803.10(b)) if no such 
request had been made.
    (2) A request for additional information or documentary material to 
any person other than either:
    (i) 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), or
    (ii) In the case of an acquisition covered by 11 U.S.C. 363(b), the 
acquired person, 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'' makes a non-cash tender offer 
for voting securities of corporation ``X'', and files notification. 
Under Sec.  801.30, the waiting period begins upon filing by ``A,'' 
and ``X'' must file within 15 days thereafter (10 days if it were a 
cash tender offer). Assume that before the end of the waiting 
period, the Assistant Attorney General issues a request for 
additional information to ``A'' and ``X.'' Since the transaction is 
a non-cash tender offer, the waiting period is extended for 30 days 
(10 days if it were a cash tender offer) beyond the date on which 
``A'' responds. Note that under Sec.  803.21, even though the 
waiting period is not affected by the second request to ``X'' or by 
``X'' supplying the requested information, ``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).
* * * * *

    7. Revise the Appendix to part 803 to read as follows:

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    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 03-1078 Filed 1-16-03; 8:45 am]
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