Merger Controls First Edition - J Sagar Associates

White & Case LLP USA
Second Requests
In 2010, the agencies issued Second Requests in connection with 46 transactions – the DOJ issued 26 and the FTC issued
20. See Hart-Scott-Rodino Annual Report, Fiscal Year 2010, available at http://www.ftc.gov/bc/hsr/introguides/guide1.pdf;
US Department of Justice, Antitrust Division Workload Statistics FY 2001 - 2010, available at
http://www.justice.gov/atr/public/workload-statistics.html#N_5_. Second Requests were only issued in 3.9% of all notified
transactions. Overall, the percentage of transactions where Second Requests were issued decreased slightly in 2010 as
compared to 2009. In 2009, the agencies issued Second Requests in 31 transactions (the DOJ issued 16; the FTC issued
15), or 4.3% of notified transactions. Id. In 2008, the DOJ and FTC issued Second Requests in 41 transactions out of a
total 1,726 notifications. This represents 2.4% of all transactions. See Hart-Scott-Rodino Annual Report, Fiscal Year
2008, available at http://www.ftc.gov/os/2009/07/hsrreport.pdf; US Department of Justice, Antitrust Division Workload
Statistics FY 2001 - 2010, available at http://www.justice.gov/atr/public/workload-statistics.html#N_5_.
Challenged Transactions
The number of challenged transactions increased in 2010. The agencies challenged 41 transactions, compared with 31 in
2009. As an overall percentage of transactions reported, however, the challenge rate was lower in 2010 (3.5%) than in
2009 (4.35%). In 2010, the DOJ challenged 19 transactions, leading to 10 consent decrees, and eight abandoned or
restructured transactions. See Hart-Scott-Rodino Annual Report, Fiscal Year 2010, available at
http://www.ftc.gov/bc/hsr/introguides/guide1.pdf; US Department of Justice, Antitrust Division Workload Statistics FY
2001 - 2010, available at http://www.justice.gov/atr/public/workload-statistics.html#N_5_. The FTC challenged 22
transactions, leading to 19 consent orders, and three transactions that were abandoned after the parties learned of the
Commission’s concerns. See Hart-Scott-Rodino Annual Report, Fiscal Year 2010, available at
http://www.ftc.gov/bc/hsr/introguides/guide1.pdf.
By comparison, in 2009, the DOJ challenged 12 transactions, leading to seven consent decrees and five abandoned or
restructured transactions. See Hart-Scott-Rodino Annual Report, Fiscal Year 2009, available at
http://www.ftc.gov/os/2010/10/101001hsrreport.pdf. The FTC challenged 19 transactions, leading to ten consent orders
and eight withdrawn transactions (after the FTC authorised administrative complaints for five cases). See Hart-Scott-
Rodino Annual Report, Fiscal Year 2009, available at http://www.ftc.gov/os/2010/10/101001hsrreport.pdf.
New developments in jurisdictional assessment or procedure
The HSR Act requires that the parties involved in an acquisition of voting securities or assets that meets certain thresholds
and that does not qualify for an exemption must make a pre-transaction notification filing with the Premerger Notification
Office (“PNO”) of the FTC. (A copy of the form is available from the FTC website at
http://www.ftc.gov/bc/hsr/hsrform.shtm.) The PNO then distributes the HSR filings to the DOJ and FTC for review,
although only one of the agencies will conduct a substantive review of a proposed transaction.
In July 2011, the FTC announced significant changes to the HSR premerger notification form, which will go into effect
30 days from publication in the Federal Register. Antitrust practitioners anticipate that, on balance, the new rules will
result in an increased burden on merging parties. The newly updated HSR form includes the following key changes:
• A new HSR Item 4(d) expands the scope of business plans and other documents required to be filed. Item 4(d)
documents include: confidential information memoranda (“CIM”) or similar documents (even if the CIM does not
contain a competitive analysis); third party advisor studies, surveys, analyses and reports (e.g., third party
documents containing competitive analysis); and synergy/efficiency documents (documents discussing cost-cutting
synergies may be responsive).
• HSR Item 5 will no longer require filers to report revenues for the 2002 “base year”. Filing parties must report nonmanufacturing
revenues by a 6-digit NAICS code and manufacturing revenues by a 10-digit NAICS code for the
most recent financial year only. The rules also modify how revenues from goods manufactured in foreign facilities
and imported into the US must be listed.
• Items 6(c) and 7 now require submission of additional information on the holdings of “associates” that overlap
between the buyer or its assets. Now, an acquiring company must report whether its associates own at least a 5%
share in either the target company or any of its industry rivals. The associate reporting requirement will likely have
its greatest impact on private equity firms and other investment companies. Parties will need to identify any
associates if they operate in the target industry, and provide geographic information about them in Item 7.
Each year, the FTC announces changes to the HSR notification thresholds, based on the change in gross national product.
The thresholds for 2011 increased slightly over last year, in contrast to 2010 when the thresholds actually decreased from
those in effect in 2009.
• The size-of-transaction threshold is currently US$66.0 million.
• The size-of-parties threshold is currently US$13.2 million and US$131.9 million.
• The size-of-parties valuation “cap” is US$263.8 million.
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