Chapter VI. Differences in the Process for Nonreportable Transactions

• Pages: 259-272

The Merger Review Process 259

CHAPTER VI

DIFFERENCES IN THE PROCESS FOR

NONREPORTABLE TRANSACTIONS

A. Introduction

Not all transactions are reportable under the HSR Act. For example,

a transaction may not satisfy one of the three criteria for prima facie

reportability: the “in commerce” test; the “size of parties” test;1 and the

“size of the transaction” test. Additionally, transactions that satisfy the

requirements for prima facie reportability may not be reported if they fall

into one of a number of statutory or regulatory exemptions.2 Some of the

most important exemptions include: (1) the “ordinary course of

business” exemption;3 (2) the “investment” exemption;4 (3) certain

intraperson transactions such as mergers of subsidiaries, repurchases of a

corporation’s own stock, and creation of wholly-owned subsidiaries;5 and

(4) exemptions addressing acquisitions of foreign assets and foreign

voting securities.6 Nonreportable transactions are nonetheless subject to

1. As noted in Chapter I, this test is applicable only to transactions valued at

less than $200 million. 15 U.S.C. § 18a(2); 70 Fed. Reg. 5,020 (Jan. 31,

2005).

2. Bank mergers, railroad mergers, motor carrier mergers, and federal credit

union mergers are not generally reportable under the Act and have their

own statutory review process. See 15 U.S.C. § 45(a)(2). For instance, the

Bank Merger Act of 1986 specifically establishes a review process for

bank mergers. Under that Act, the Department of Justice provides an

independent antitrust evaluation to the bank regulators. This evaluation is

transmitted in the so-called “competitive factors” letter. If the regulatory

agency approves the deal, the merger or acquisition cannot be

consummated for 30 days to permit a challenge by the Department of

Justice. 12 U.S.C. § 1828(c)(7)(c). If the Department files suit, then it is

entitled to an “automatic stay,” enjoining consummation of the deal until

after a trial on the merits. Needless to say, this process affects the

timetable significantly.

3. 15 U.S.C. § 18a(c)(1); 16 C.F.R. § 802.1 (2004).

4. 15 U.S.C. § 18a(c)(9); 16 C.F.R. § 802.9 (2004).

5. 15 U.S.C. § 18a(c)(3); 16 C.F.R. § 802.30 (2004).

6. 16 C.F.R. §§ 802.50 and 802.51.