Important Changes Made to Premerger Notification Requirements
On July 7, 2011, the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) announced changes to the Premerger Notification and Report Form that parties must file when seeking antitrust clearance of proposed mergers and acquisitions that meet the requisite thresholds and are not exempt under the Hart-Scott-Rodino Antitrust Improvements Act (HSR). The changes to the HSR form and companion rules will become effective 30 days after notice is published in the Federal Register.
One key change is that acquirers will be required to provide information about associated entities–those commonly managed (but not “controlled”) by the same business as the acquirer–under Items 6(c) and 7 of the revised HSR form. New Item 6(c)(iii) requests information about the holdings of associates of the acquirer. New Item 7 requests information about associates of the acquirer that derive revenues in the same NAICS industry code as the acquired entity. This change will likely have a significant impact on private equity companies.
Item 4(d), newly added to the HSR form, builds on the existing Item 4(c) document requirements, and requires filing parties to submit the following categories of documents:
- Item 4(d)(i) requests all confidential information memoranda prepared by or for any officer or director that specifically relate to the sale of the acquired entity or assets. Documents responsive to this item are limited to those produced up to one year before the date of filing.
- Item 4(d)(ii) requests all studies, surveys, analyses and reports prepared by third party advisors for any officer or director for the purpose of evaluating or analyzing market shares, competition, competitors, markets, potential for sales growth or expansion into product or geographic markets that specifically relate to the sale of the acquired entity or assets. This item requires only materials developed by third party advisors during an engagement. Documents responsive to this item are limited to those produced up to one year before the date of filing.
- Item 4(d)(iii) requests all studies, surveys, analyses and reports evaluating or analyzing synergies and/or efficiencies prepared by or for any officer or director for the purpose of evaluating or analyzing the acquisition.
Another change to the HSR form is how revenues from goods manufactured in a company-owned foreign facility and imported into the United States for sale will be reported under Item 5(a). Such information will now be listed as manufacturing revenues rather than as wholesale revenues.
The revised HSR form also eliminates several categories of information that over time have proven unnecessary in a preliminary merger review–such as documents filed with the Securities and Exchange Commission, economic code “base year” data, and a detailed breakdown of all the voting securities to be acquired.
EU Law Permits Third-Party Access to Leniency Documents
A recent judgment from the European Court of Justice (ECJ), the EU’s highest court, has made it more likely that third parties claiming damages against companies for breaches of EU or national competition law will be able to use leniency applications as part of their evidence. Documents submitted under a national leniency program will not be protected from third-party access as a matter of EU law. Individual member states, however, have the ability to determine the exact conditions under which a third party will be allowed or refused access to leniency documents. Additional information is available in our July 2011 EU/UK Competition Law Newsletter.