Final Adoption of One of the Interim Rules
Adoption of the Proposed Rules
On March 15 2002 the Federal Trade Commission announced the adoption of certain modifications, originally published by the commission on February 1 2001, to the Hart-Scott-Rodino rules. At that time, the commission had announced two new sets of rules: (i) proposed interim rules to implement changes necessitated by the 2000 amendments to the Hart-Scott-Rodino Act that raised certain filing thresholds and implemented new filing fee structures, and (ii) proposed changes to several other existing rules.
Final Adoption of One of the Interim Rules
The commission announced that it is amending Interim Rule 802.21(b) to restore the full five-year exemption period for acquisitions of voting securities that follow a pre-February 1 2001 notification filing and that do not meet or exceed a greater notification threshold. As originally published, Interim Rule 802.21(b) created a transitional rule for persons who filed notifications prior to February 1 2001, the effective date of the new filing thresholds, and subsequently acquired voting securities not meeting or exceeding the next notification threshold in place at the time they filed. Under the original rule, such subsequent transactions did not require an additional Hart-Scott-Rodino filing as long as (i) the person filing crossed the notification threshold it filed for within one year of the expiration or termination of the applicable Hart-Scott-Rodino waiting period, and (ii) the additional acquisitions were made within five years of the expiration of the waiting period on the original filing. Since the amendments to the Hart-Scott-Rodino Act and other interim rules changed the filing thresholds, the interim rule had limited this exemption to subsequent purchases made within one year of the adoption of the new notification periods.
Now the commission has restored the full five-year exemption for parties who filed notifications prior to February 1 2001. This change took effect on March 18 2002, but will be applied retroactively from February 2 2002. Thus, parties who filed notifications prior to February 1 2001 to report their acquisition of voting securities of an issuer may acquire additional voting securities of that issuer up to (but not crossing) the next notification threshold in effect when they originally filed without filing an additional notification, provided that (i) they crossed the notification threshold for which they filed within one year of the expiration or termination of the Hart-Scott-Rodino waiting period, and (ii) such additional acquisitions are completed within five years of the expiration of the waiting period on the original filing.
The commission has not made the rest of the interim rules final, specifically the rules creating certain dollar-based filing thresholds. The commission announced that it needs more time to consider whether the dollar-based reporting thresholds introduced in February 2001 should become final due to the significant public comments received by the FTC in opposition to these changes.
Adoption of the Proposed Rules
The commission has made final, effective April 17 2002, many of the proposed rule changes, with certain modifications, including the following:
- Section 802.2(g) has been modified to narrow the agricultural property exemption. Currently, acquisitions of agricultural property, assets incidental to the ownership of such property and associated agricultural assets are exempt. 'Associated agricultural assets' are defined to include inventory, structures that house livestock raised on the real property, and fertilizer and animal feed. The commission has removed 'associated agricultural assets' from the real property exemption. The commission acknowledged public comments that this may increase filing requirements, but suggested that the increased filing thresholds would probably result in most of these transactions falling below the filing thresholds and outside of the reporting requirements.
- Section 802.50 applies to the acquisition of assets located outside the United States. Under the final rule, the acquisition of foreign assets is exempt unless the foreign assets the acquiring person would hold as a result of the acquisition generated sales in or into the United States exceeding $50 million during the acquired person's most recent fiscal year.
Even if the foreign assets being acquired exceed this threshold amount, the acquisition of such assets would still be exempt if (i) both the acquiring and acquired persons are foreign, (ii) the aggregate sales of the acquiring and acquired persons in or into the United States are less than $110 million in their respective most recent fiscal years, (iii) the aggregate value of the total assets of the acquiring and acquired persons located in the United States is less than $110 million, and (iv) the transaction is valued at less than $200 million.
- Section 802.51 applies to the acquisition of voting securities of foreign issuers. Under this section, the acquisition of voting securities of a foreign issuer by a US person is exempt unless the issuer (including all entities controlled by the issuer) either (i) holds assets located in the United States having an aggregate fair market value of over $50 million, or (ii) made aggregate sales in or into the United States of over $50 million in its most recent fiscal year.
The acquisition of voting securities of a foreign issuer by a foreign person is exempt unless the acquisition will confer control of the issuer and the issuer (including all entities controlled by the issuer) either (i) holds assets located in the United States having an aggregate fair market value of over $50 million, or (ii) made aggregate sales in or into the United States of over $50 million in its most recent fiscal year. If interests in multiple foreign issuers are being acquired from the same acquired person, it is necessary to aggregate the assets located in the United States, and the sales in or into the United States, of all the issuers if the $50 million threshold is reached.
Even if the foreign issuer exceeds the thresholds just described, the acquisition would still be exempt if (i) both acquiring and acquired persons are foreign, (ii) the aggregate sales of the acquiring and acquired persons in or into the United States are less than $110 million in their respective most recent fiscal years, (iii) the aggregate total assets of the acquiring and acquired persons located in the United States have a value of less than $110 million, and (iv) the transaction is valued at less than $200 million.
For further information on this topic please contact Michele S Harrington or Joseph G Krauss at Hogan & Hartson LLP by telephone (+1 202 637 5600) or by fax (+1 202 637 5910) or by email ([email protected] or [email protected]).