[Federal Register Volume 63, Number 122 (Thursday, June 25, 1998)]
[Rules and Regulations]
[Pages 34592-34594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16954]
=======================================================================
-----------------------------------------------------------------------
FEDERAL TRADE COMMISSION
16 CFR Part 802
Premerger Notification; Reporting and Waiting Period Requirements
AGENCY: Federal Trade Commission.
ACTION: Final rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This final rule amends the premerger notification rules that
require the parties to certain mergers or acquisitions to file reports
with the Federal Trade Commission and 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.
The reporting and waiting period requirements are intended to 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. During the nineteen years the rules have been in
effect, the Federal Trade Commission, with the concurrence of the
Assistant Attorney General for Antitrust, has amended the premerger
notification rules several times to improve the program's effectiveness
and to lessen the burden of complying with the rules. This final rule
amends Rule 802.70, which exempts from the reporting requirements
acquisitions of stock or assets required to be divested by an order of
the Federal Trade Commission or of any Federal court in an action
brought by the Commission or the Department of Justice. As amended the
Rule will exempt as well divestitures pursuant to consent agreements
that have been accepted by the Commission for public comment or have
been filed with a court by the Commission or the Department of Justice
and are subject to public comment, but are not yet final orders. These
transactions are adequately reviewed for potential antitrust concerns
during the approval process under the consent agreement, in which the
antitrust agencies determine that the divestiture to that party does
not raise antitrust concerns. The Commission has thus made this change
to Section 802.70 because such acquisitions are unlikely to raise
antitrust concerns.
The Commission has made this final rule without notice and comment
because notice and comment would be unnecessary and the delay in
implementing the rule would be contrary to the public interest. Section
802.70 already exempts from the reporting requirements transactions
that satisfy divestiture requirements under Commission or Court orders
in cases brought by the Commission or the Department of Justice. The
amendment merely extends the exemption to transactions entered into
before the relevant order has been made final. Whatever delay and cost
result from the HSR reporting requirements are contrary to the public
interest where the antitrust agencies already have notice of the
transaction and have completed their review.
Notice and comment in this matter are unnecessary because the
Commission has already exempted acquisitions pursuant to a final
divestiture order, and there is no relevant difference between the two
situations. The agencies in each case already have all the notice and
information they would otherwise obtain under HSR. No other person has
access to or interest in the information provided under HSR, and
therefore no other person has an interest in ensuring a filing in these
circumstances.
DATES: This final rule is effective on June 25, 1998. The Commission
will, however, accept comments on the revised rule that are received on
or before July 27, 1998, and may reevaluate the rule in light of those
comments.
ADDRESSES: Written comments should be submitted to both (1) the
Secretary, Federal Trade Commission, Room 159, Washington, D.C. 20580,
and (2) the Assistant Attorney General, Antitrust Division, Department
of Justice, Room 3214, Washington DC 20530.
FOR FURTHER INFORMATION CONTACT: Roberta S. Baruch, Deputy Assistant
Director, Bureau of Competition, Room S-2115, Federal Trade Commission,
Washington, DC 20580. Telephone: (202) 326-2687.
SUPPLEMENTARY INFORMATION:
Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601-12, requires that the
agency conduct an analysis of the anticipated economic impact of the
proposed amendment on small businesses.
The purpose of a regulatory flexibility analysis is to ensure that
the agency considers impact on small entities and examines alternatives
that could achieve the regulatory purpose while minimizing burdens on
small entities. Section 605 provides, however, that such an analysis is
not required if the agency head certifies that the regulatory action
will not have a significant economic impact on a substantial number of
small entities. 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. Furthermore, the amendment
will merely exempt companies from Hart-Scott-Rodino reporting
requirements for certain transactions. Accordingly, pursuant to the
Regulatory Flexibility Act provisions of the Administrative Procedure
Act, 5 U.S.C. 605(b), the Federal Trade Commission has certified that
this rule will not have a significant economic impact on a substantial
number of small entities. Section 603 of the Administrative Procedure
Act, 5 U.S.C. 603, requiring a final regulatory flexibility analysis of
these rules; is therefore, inapplicable.
Paperwork Reduction Act
The premerger notification rules and report form contain
information collection requirements that have been reviewed and
approved by the Office of Management and Budget under OMB Control
Number 3084-0005. The Paperwork Reduction Act, 44 U.S.C. 3501 et seq.,
requires agencies to submit requirements for ``collections of
information'' to OMB and obtain
[[Page 34593]]
clearance prior to instituting them. Such collections of information
include reporting, recordkeeping, or disclosure requirements contained
in regulations. The proposed amendment does not impose any such
requirements beyond those that have already been approved by OMB. The
amendment will exempt reporting requirements for transactions that have
been made pursuant to consent agreements that have been accepted by the
Commission for public comment or that have been filed with a court by
the Commission or the Department of Justice for public comment, but
that are not yet final orders. This revision will eliminate an
unnecessary burden in connection with these acquisitions and will
generally provide some reduction of the Paperwork Reduction Act burden
currently associated with the Rule.
Background
Section 7A of the Clayton Act, 15 U.S.C. 18a, as added by Secs. 201
and 202 of the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(``the act'' or ``HSR''), requires persons contemplating certain
acquisitions of assets or voting securities to give advance notice to
the Federal Trade Commission (hereafter referred to as ``the
Commission'') and the Assistant Attorney General in charge of the
Antitrust Division of the Department of Justice (hereafter referred to
as ``the Assistant Attorney General''), and to wait certain designated
periods before the consummation of such acquisitions. The transactions
to which the advance notice requirement is applicable and the length of
the waiting period required are set out respectively in subsections (a)
and (b) of Sec. 7A. This amendment to the Clayton Act did not change
the standards used in determining the legality of mergers and
acquisitions under the antitrust laws.
The legislative history suggests several purposes underlying the
act. Congress wanted to assure that large acquisitions were subjected
to meaningful scrutiny under the antitrust laws prior to consummation.
To this end, Congress expressly intended to eliminate the large
``midnight merger,'' which is negotiated in secret and announced just
before, or sometimes only after, the closing takes place. Congress also
provided an opportunity for the Commission or the Assistant Attorney
General (who are sometimes hereafter referred to collectively as the
``antitrust agencies'' or the ``enforcement agencies'') to seek a court
order enjoining the completion of those transactions that the agencies
deem to present significant antitrust problems. Finally, Congress
sought to facilitate an effective remedy when a challenge by one of the
enforcement agencies proved successful.
Thus, the act requires that the antitrust agencies receive prior
notification of certain acquisitions; provides certain tools to
facilitate a prompt, thorough investigation of the competitive
implications of those acquisitions; and assures the enforcement
agencies an opportunity to seek a preliminary injunction before the
parties to an acquisition are legally free to consummate it, reducing
the problem of unscrambling the assets after the transaction has taken
place.
Subsection 7A(d)(1) of the act, 15 U.S.C. 18a(d)(1), directs the
Commission, with the concurrence of the Assistant Attorney General, in
accordance with the Administrative Procedure Act, 5 U.S.C. 553, to
require that the notification be in such form and contain such
information and documentary material as may be necessary and
appropriate to determine whether the proposed transaction may, if
consummated, violate the antitrust laws. Subsection 7A(d)(2) of the
act, 15 U.S.C. 18a(d)(2), grants the Commission, with the concurrence
of the Assistant Attorney General, in accordance with 5 U.S.C. 553, the
authority to: (a) define the terms used in the act; (b) exempt
additional classes of persons or transactions which are not likely to
violate the antitrust laws from the act's notification and waiting
period requirements; and (c) prescribe such other rules as may be
necessary and appropriate to carry out the purposes of Sec. 7A.
The rules are divided into three parts, which appear at 16 CFR
Parts 801, 802, and 803. Part 801 defines a number of the terms used in
the act and rules, and explains which acquisitions are subject to the
reporting and waiting period requirements. Part 802 contains a number
of exemptions from these requirements. Part 803 explains the procedures
for complying with the act. The Notification and Report Form, which is
completed by persons required to file notification, is an appendix to
Part 803 of the rules. Changes of a substantive nature have been made
in the premerger notification rules or Form on nine occasions since
they were first promulgated.
The Commission recognizes that the premerger notification
obligations can create delay and impose the cost of the filing fee even
for acquisitions that do not raise competitive concerns, and that this
delay and cost can impose burdens on buyers and sellers. The delay that
occurs is the necessary consequence of preventing consummation while
the antitrust agencies assess the likelihood that proposed transactions
will violate the antitrust laws. The special treatment of cash tender
offers in section 7A(b)(1)(b) of the Act illustrates congressional
concern to avoid unnecessary disruption of the operation of the market
for corporate control. See 122 Cong. Rec. H. 10,293 (daily ed. Sept.
16, 1976). In addition, the Commission has tried to minimize any
unnecessary disruptive effect of premerger review by the design of its
procedures and the speed with which it reviews proposed transactions
and in a majority of transactions grants early termination of the
waiting period. Moreover, whenever the Commission can determine that a
class of transactions is unlikely to violate the antitrust laws, it has
sought, with the concurrence of the Assistant Attorney General for
Antitrust, to exempt such transactions from all notification
obligations and the delay and cost inherent in premerger review.
Statement of Basis and Purpose for the Commission's Revised Premerger
Notification Rules
The Commission, with the concurrence of the Assistant Attorney
General, promulgates this amendment pursuant to 15 U.S.C. 18a(d).
Section 802.70 of the Rules exempts from the reporting requirements
acquisitions of assets or voting securities from an entity required to
divest such assets by order of the Federal Trade Commission or of any
Federal Court in an action brought by the Federal Trade Commission or
the Department of Justice. The agencies have recognized that there is
no need for filing under HSR in these circumstances. Under existing
procedures the agencies already review divestitures required by final
orders. This review gives the agencies the full opportunity to weigh
the competitive impact of the proposed transaction prior to
consummation and to prevent the transaction if appropriate, the same
goal that HSR was designed to accomplish.
Both the Commission's Rules of Practice and the Antitrust
Procedures and Penalties Act require a proposed settlement to be
published in the Federal Register for a 60-day public comment period.
Proposed orders thus do not become final until at least 60 days
following their acceptance by the parties and the antitrust agencies,
and therefore the exemption created by section 802.70 of the Rules does
not apply to any divestiture that might be made during the period
between acceptance of a settlement and issuance of a final order, even
if such divestiture were to an acquirer and according to a
[[Page 34594]]
contract that is specified in the proposed settlement.
Recently, the Commission has been shortening the time period in
which divestiture is to take place and has more frequently included
specific approved acquirers and reference specific divestiture
agreements in proposed orders when the Commission accepts proposed
orders for public comment. This trend has increased the likelihood that
the divestiture transaction will occur before there is a final order
requiring divestiture. In these circumstances, Rule 802.70 as written,
because it applies only to final orders, does not provide an exemption.
Nevertheless, the same reasons to exclude from the HSR filing
requirements divestitures after the order is entered also apply in
cases where the proposed order identifies the acquirer and the
divestiture contract. The agencies have already had an opportunity
comparable to that which HSR provides to weigh the competitive impact
of proposed transaction and to approve or disapprove the transaction.
There is therefore no need for a separate HSR filing.
The Federal Trade Commission believes that an acquisition of assets
or voting securities pursuant to the terms of a proposed order of
divestiture is unlikely to violate the antitrust laws and that
exempting such acquisitions is necessary and appropriate to carry out
the purposes of the act. Accordingly, the Commission has amended
Sec. 802.70 of its premerger notification rules to exempt such
acquisitions from premerger reporting requirements.
The following section outlines briefly the rationale for this
rulemaking. Subsequent sections discuss certain key issues concerning
the Commission's authority to promulgate Sec. 802.70, and the nature of
the new rule.
Statement of the Underlying Problem
The purpose of section 7A of the Clayton Act is clear: to give the
antitrust agencies an opportunity to determine whether a proposed
acquisition might violate the antitrust laws and an opportunity to
challenge any such transaction prior to consummation. At the same time,
the program is not without cost, including the cost of filling out the
form, filing fees, delaying transactions and otherwise. For
transactions that do not rise significant issues under the antitrust
laws these costs can be particularly burdensome. The Commission has
continually reviewed the premerger notification program in an effort to
increase its efficiency and decrease the burden on filing parties. This
rulemaking proceeding is part of this effort.
Analysis of Proposed Revised Rule 802.70
Revised rule 802.70 exempts completely from HSR premerger
notification requirements acquisitions pursuant to a divestiture order
once the order is accepted by the Commission for public comment or is
filed with the Federal court for public comment. It does so because the
Commission believes that such transactions, having received a full
review and been accepted by the Commission or the Antitrust Division,
are not likely to violate the antitrust laws and because exempting such
acquisitions is necessary and appropriate to carry out the purposes of
the act.
In deciding to revise rule 802.70, the Commission relied upon its
own extensive merger enforcement experience, as well as that of the
Antitrust Division of the Department of Justice.
Congress expressly has authorized the Commission, with the
concurrence of the Assistant Attorney General, to ``exempt from
requirements of [the act], classes of * * * transactions which are not
likely to violate the antitrust laws.'' Section 7A(d)(2)(B) of the Act.
The finding required by the statute can be demonstrated in different
ways. The Commission can exempt a class of transactions because that
class of transactions is inherently unlikely to be anticompetitive.
Acquisitions pursuant to divestiture orders are inherently unlikely to
be anticompetitive. Such transactions are already subject to the
approval of the agencies and such approval would not be granted if the
transaction would be anticompetitive. This is true whether or not the
divestiture order is final. Accordingly, there is no need for a
separate HSR filing.
List of Subjects in 16 CFR Part 802
Antitrust.
Final Rule
The Commission amends Title 16b Chapter I, Subpart H, The Code of
Federal Regulations as follows:
PART 802--EXEMPTION RULES
1. Authority. The authority citation for Part 802 continues to read
as follows:
Authority: Sec. 7A(d) of the Clayton Act, 15 U.S.C. 18a(d), as
added by sec. 201 of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, Pub. L. No. 94-435, 90 Stat. 1390.
2. Section 802.70 is revised to read as follows:
Sec. 802.70 Acquisitions subject to order.
An acquisition shall be exempt from the requirements of the act if
the voting securities or assets are to be acquired from an entity
pursuant to and in accordance with:
(a) An order of the Federal Trade Commission or of any Federal
court in an action brought by the Federal Trade Commission or the
Department of Justice;
(b) An Agreement Containing Consent Order that has been accepted by
the Commission for public comment, pursuant to the Commission's Rules
of Practice; or
(c) A proposal for a consent judgment that has been submitted to a
Federal court by the Federal Trade Commission or the Department of
Justice and that is subject to public comment.
Donald S. Clark,
Secretary.
[FR Doc. 98-16954 Filed 6-24-98; 8:45 am]
BILLING CODE 6750-01-M
