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FTC and DOJ expand scope of information and documents required for HSR notification

Leah Brannon, David I. Gelfand, Mark Leddy, CGSH Alert Memo, July 11, 2011

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On July 7, 2011, the FTC and DOJ jointly published changes to the Hart-Scott- Rodino Act premerger notification form. The agencies originally noticed the proposed changes in August 2010 and accepted comments through October 2010. The new rules will become effective thirty days after publication in the Federal Register, which is anticipated shortly. The final changes for the most part track the original proposal, with certain clarifications that should reduce the burden of compliance somewhat.

The most significant changes:

- broaden the scope of documents that must be submitted with the notification to include deal books and similar documents even where the documents do not address competition and third-party competitive analyses of the target business;

- require additional information about so-called “associates,” which are certain entities under common management but not common control for HSR purposes; and

- expand the revenue reporting obligations to include information about non-U.S. manufacturing activities for products sold into the United States.

In addition, the new rules will reduce certain categories of information required to be submitted and make minor changes that will apply to certain unusual circumstances.

Additional documents required. While Item 4(c) of the notification form remains the same, new Item 4(d) requires submission of additional documents, including (i) the offering memorandum or similar materials relating to the acquired entity or assets, (ii) documents prepared by investment bankers, consultants, or other third-party advisors that “specifically relate to the sale of the acquired entity(s) or assets” and have competitive content, and (iii) documents analyzing or evaluating the synergies or efficiencies of the proposed transaction.

Additional information regarding “associate” companies (likely to affect investment funds and private equity firms). The new rules will require acquiring persons to disclose any entities that have the right to manage or are under common management with the acquiring person, but which are not under common “control” for HSR purposes. This revision may be of particular interest to investment funds and private equity firms, which often utilize such structures. The new rules also impose substantial new information reporting requirements regarding such associates, including the provision of 6-digit NAICS code revenue data and geographic sales information.

Non-U.S. manufacturing revenues. The new rules will require firms to report revenues for products manufactured outside the United States that are exported to the United States at the same level of detail currently required for U.S. manufacturing revenue.

The requirement that revenue from wholesaling or retailing from a separate establishment than the associated manufacturing be reported in both the manufacturing and wholesaling or retailing code will, however, be eliminated. Such revenue will only be reported in the appropriate manufacturing code.

The full text of the FTC’s announcement can be found here. The new notification and report form is available here.

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