Premerger Notification; Reporting and Waiting Period Requirements

Page 37

BILLING CODE 4910-13-M FEDERAL TRADE COMMISSION 16 CFR Part 803 Premerger Notification; Reporting and Waiting Period Requirements AGENCY: Federal Trade Commission. a c t io n : Interim Rule with Request for Comments.

s u m m a r y : This interim rule amends the premerger notification rules that require the parties to certain mergers or acquisitions to file reports with the Federal Trade Commission (“the Commission”) and die Assistant Attorney General in charge of the Antitrust Division of the Department of Justice (“the Assistant Attorney General”), 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. This interim rule codifies the practices of the Federal Trade Commission that make public administrative grants of early termination of die waiting period through means other than publication in the Federal Register.

DATE: The interim rule is effective on June 19,1989. The Commission will, however, accept comments on the revised rule that are received on or before June 19,1989, 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, DC 20580, and (2) the Assistant Attorney General, Antitrust Division, Department of Justice, Room 3214, Washington, DC 20530. FOR FURTHER INFORMATION CONTACT: Thomas F. Hancock, Attorney, Premerger Notification Office, Bureau of Competition, Room 303, Federal Trade Commission, Washington, DC 20580. Telephone: (202) 326-3100. SUPPLEMENTARY INFORMATION: Regulatory Flexibility Act This amendment to the Hart-Scott- Rodino premerger notification rules is purely technical relating to the procedures the Commission and the Assistant Attorney General will use to make public information about their decisions not to take enforcement acdon during the waiting period provided in section 7A(b) of the Clayton Act. This amendment does not affect the substantive obligations of persons subject to the act’s notification requirement This amendment is not subject to notice and comment under the Administrative Procedure Act, 5 ILS.C. 553{b)(A). The requirements of the Regulatory Flexibility Act also do not apply. 5 U.S.C. 601(2). Paperwork Reduction Act The Hart-Scott-Rodino Premerger Notification rules and report form contain information collection requirements as defined by the Paperwork Reduction Act, 44 U.S.C. 3501-3518. These requirements were reviewed and approved by the Office of Management and Budget (OMB Control No. 3084-0005). Because this amendment would not affect the information collection requirement of the premerger notification program, the amendment has not been submitted to OMB for review under setion 3504(h) of the Paperwork Reduction Act. Background Section 7A of the Clayton Act (“the act”), 15 U.S.C. 18a, as added by sections 201 and 202 of the Hart-Scott- Rodino Antitrust Improvements Act of 1976, requires persons contemplating

Page 38

21426 Federal Register / Vol. 54, No. 95 / Thursday, May 18, 1989 / Rules and Regulations certain acquisitions of assets or voting securities to give advance notice to the Commission and 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 section 7 A. Subsection 7A(d)(l) of the act, 15 U.S.C. 18a(d)(l), directs the Commission, with the concurrence of the Assistant Attorney General, in accordance with 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 (A) to define the terms used in the act, (B) to exempt additional persons or transactions from the act’s notification and waiting period requirements, and (C) to prescribe such other rules as may be necessary and appropriate to carry out the purposes of section 7A.

On July 31,1978, the Commission, with the concurrence of the Assistant Attorney General, promulgated final premerger notification rules pursuant to subsections 7A(d)(l) and (2). See 43 FR 33451. The rules have been modified several times since they were first promulgated. 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 ^ct 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. Statement of basis and Purpose for the Commission’s Revision of Its Premerger Notification Rules The Commission has long had a practice of making public the enforcement agencies’ decisions to grant early termination of the Hart-Scott- Rodino waiting period both formally in the Federal Register and informally over the phone and through the Commission’s Public Reference Section. Recently, it came to the Commission’s attention that persons could profit because of their knowledge and use of these practices to obtain information about early terminations to the detriment of other investors who were not aware that the information was available. This revision of § 803.11(c) of the premerger notification rules, 16 CFR 803.11(c), codifies the Commission’s informal procedure and provides notice to the public that the procedure exists. Section 7A(a) of the act provides that persons of a specified size contemplating acquisitions of a specified size must file notification with the antitrust enforcement agencies and wait a designated period of time before consummating. The waiting period, designated in section 7A(b)(l) of the act, generally begins when both parties to the transaction file notification and ends thirty days later. Section 7A(b)(2) of the act empowers the Commission and the Assistant Attorney General to terminate the waiting period provided by section 7A(b)(l) of the act in particular transactions before it would otherwise expire. 15 U.S.C. 18a(b)(2). The act further specifies that when parties receive early termination of the waiting period the Commission and the Assistant Attorney General “promptly shall cause to be published in the Federal Register a notice that neither intends to take any action within such period with respect to such acquisition.” Id. When the Commission promulgated the premerger notification rules it acknowledged this requirement. In § 803.11(c), the Commission stated that early termination would be effective upon notice to any requesting person by phone, that this communication would be confirmed in writing, and that “notice thereof shall be published in the Federal Register in accordance with section 7A(b)(2).” 16 CFR 803.11(c). The statutory requirement that the Commission publish notice of grants of early termination indicates Congress’ intent that this information should be made public promptly. This provision is one of the few exceptions to the broad grant of confidentiality accorded information filed with the enforcement agencies in connection with a premerger notification filing. See section 7A(h) of the act, 15 U.S.C. 18a(h). The legislative history does not reveal why Congress included this provision or what Congress intended to achieve by its inclusion. But the fact that it was included evidences Congress’ willingness to depart from its policy of strict confidentiality to assure that information concerning the agencies’ decisions not to take any action to prevent consummation of particular transactions be made public. The present revision in § 803.11(c) reflects the Commission’s practices administering the premerger notification program. Over the last six years, the Commission’s Premerger Notification Office has sent a Notice to the Federal Register every two weeks listing early terminations granted during thé preceding two-week period. This practice was adopted after the Commission issued its Formal Interpretation in August of 1982 eliminating the requirement that parties provide a business reason to qualify for early termination. As a result of the Formal Interpretation, requests for and grants of early termination increased significantly. (In FY 82 early termination was requested in 222 transactions and granted in 142, in FY 83 it was requested in 606 transactions and granted in 495, and in FY 88 it was requested in 2433 transactions and granted in 1880.) This change in procedure was adopted because of the time and expense to continue the prior practice of daily publication and a separate notice for each transaction.

While the practice of publishing notice every two weeks (rather than daily) is preferable administratively, it can result in delays. For example, there is a four-day delay between the time a Notice is sent to the Federal Register and the time it actually appears in print. Thus, publication occurs anywhere between four days and three weeks after the grant of early termination. Under this procedure, parties to a transaction may be informed of early termination several weeks before the public has access to this information through the Federal Register. In part because of this delay, but primarily because this information was to be published soon in the Federal Register, it was determined early in the program’s history that it was desirable and appropriate to make information about early terminations public in other ways as soon as the parties had been informed that early termination had been granted. As a result, the Premerger Notification Office has provided information about early terminations in response to telephone inquiries. The Premerger Notification Office also made available, in the Commission’s Public Reference Section, a list of early terminations granted.

These dissemination procedures were discontinued this past summer. It appears that some investors could have profited from their knowledge and use of access to this information to the detriment of other investors who were unaware that the information was available. Upon learning of this

Page 39

Federal Register / Vol. 54, No. 95 / Thursday, May 18, 1989 / Rules and Regulations 21427 disparity of information, the Commission suspended these dissemination procedures until it could establish procedures to make the public at large aware of how the early terminations would be available, and the Commission could consider whether it was appropriate to release the information by methods other than the Federal Register.

The Commission has determined that sections 7A(b}(2) and 7A(h) do not preclude the use of means other than the Federal Register to make information about early terminations public. The reference in the act to publication in the Federal Register does not limit the release of this information exclusively to this means. This reference merely assures that the information will promptly be made public in some manner. So long as the information is published in the Federal Register the Commission is free also to make it public in other ways which are more efficient and less costly. The Commission has determined that there is no reason why the public should not be informed of grants of early termination as soon as practicable. This is particularly true for transactions involving companies whose stock is publicly traded. One solution might be to publish more frequent notices in the Federal Register. But this would be very costly and would still result in delays of four days or more. The Commission has determined that making this information public through its Public Reference section is a less costly and more efficient alternative.

The present change in § 803.11(c) makes clear that the Commission may use other means to make public grants of early termination. The new language will put the public on notice that other procedures may be used to make this information public. The effective date of the new provision is delayed for 30 days so that persons filing notification will know that this information may be made public in ways in addition to the Federal Register before they request early termination.

The Commission will provide in the Public Reference Section of the Commission’s headquarters each work day a list of transactions in which early termination was granted the previous work day. This information will also be made available through the Public Reference Section’s telephone information system which can be reached using a touch tone phone by calling (202) 328-2222. The information will be available on a prerecorded message. These procedures will give the public access to this information without imposing an undue administrative burden on the Commission. Release of this information will supplement the current schedule of publication in the Federal Register. This information will not be available through the Premerger Notification Office. We note that several commercial reporting services have expressed interest in obtaining this information. Thus we expect that the information will be made available expeditiously by wire to their subscribers nationwide. The Commission will make information about early terminations available through additional means as they become available. In addition, the Commission may revise its public notice procedures in response to comments. The Commission specifically invites comments on the procedures it plans to adopt. We hope to receive comments as to how best to implement the procedures so that all members of the public are placed on equal footing. Future modifications will be publicly announced through the Public Reference Section and through press releases. List of Subjects in 16 CFR Part 803 Antitrust.

Interim Rule The Commission amends Title 16 Chapter I. Subpart H. The Code of Federal Regulations as follows: PART 803—[AMENDED] 1. Authority. The authority citation for Part 803 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. 94-435,. 90 Stat. 1390. 2. The Commission amends the rules by revising § 803.11(c) to read as follows:

§803.11 [Amended] * * * * * (c) The Federal Trade Commission and thé Assistant Attorney General may in their discretion terminate a waiting period upon the written request of any person filing notification or, notwithstanding paragraph (a) of this section, sua sponte. A request for termination of the waiting period shall be sent to the offices designated in § 803.10(c). Termination shall be effective upon notice to any requesting person by telephone, and such notice shall be given as soon as possible. Such notice shall also be confirmed in writing to each person which has filed notification, and notice thereof shall be published in the Federal Register in accordance with section 7A(b)(2). The Federal Trade Commission and the Assistant Attorney General also may use other means to make the termination public, prior to publication in the Federal Register in a manner that will make the information equally accessible to all members of the public.

* * * * ★ Donald S. Clark, Secretary.

[FR Doc. 89-11958 Filed 5-17-89; 8:45 am]