Nonreportable Transactions, Bankruptcy, and Hostile Transactions

• Pages: 139-157

139

CHAPTER IV

NONREPORTABLE TRANSACTIONS,

BANKRUPTCY, AND HOSTILE TRANSACTIONS

This chapter looks at the review process applicable to nonreportable

transactions, acquisitions of assets or companies that are in bankruptcy,

and hostile transactions, which are in some important aspects accorded

different treatment than other transactions.

A. Transactions Not Subject to Hart-Scott-Rodino Reporting

Requirements

Not all transactions are reportable under the HSR Antitrust

Improvements Act (HSR Act).463 A transaction is not reportable if it fails

the “in commerce” test, the “size-of-transaction” test,464 or the “size-of-

person” test.465 A transaction may also be nonreportable if it is exempt

pursuant to the HSR Act466 or to one of the exemptions set forth in the

rules promulgated under the HSR Act.467 Nonreportable transactions are

nonetheless subject to the antitrust jurisdiction of the Department of

Justice (DOJ or Antitrust Division) and the Federal Trade Commission

(FTC or Commission) and may be challenged as anticompetitive by these

enforcement agencies.468

463. See generally Robert Bell, Voluntary HSR Filings: A Modest Proposal,

ANTITRUST, Spring 2009, at 69-74.

464. As of January 2011, to satisfy the “size-of-transaction” test, a transaction

must be valued at more than $66 million. 15 U.S.C. § 18a(a)(2); Fed.

Trade Comm’n, Premerger Notification; Reporting and Waiting Period

Requirements, 76 Fed. Reg. 4,350 (Jan. 25, 2011) (2011 FTC Notice).

465. As of January 2011, the “size-of-person” test is applicable only to

transactions valued between $66 million and $263.8 million. 15 U.S.C.A.

§ 18a(a)(2); 2011 FTC Notice.

466. 15 U.S.C. § 18a(c).

467. 16 C.F.R. § 802.

468. See part A.2 of this chapter. State attorneys general and private parties

may also challenge nonreportable transactions.

140 The Merger Review Process

1.

Generally

Even though a transaction may satisfy the requirements for prima

facie reportability under the HSR Act, notification may still not be

required if the transaction falls into one of a number of statutory or

regulatory exemptions.469 Some of the most notable exemptions include:

(1) the “ordinary course of business” exemption;470 (2) the “investment-

only” exemption;471 (3) certain intrapersonal transactions such as mergers

of subsidiaries, repurchases of a corporation’s own stock, and creation of

wholly owned subsidiaries;472 and (4) exemptions addressing acquisitions

of foreign assets and foreign voting securities.473

2.

Dealing with the Agencies

Nonreportable transactions typically come to the attention of the

agencies through complaints from aggrieved parties or through news

reports, the financial press, or trade literature.474 In some cases, the

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

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

their own statutory review process. See 15 U.S.C. § 45(a)(2). See

discussion in Chapter III.B.

470. 15 U.S.C.A. § 18a(c)(1); 16 C.F.R. § 802.1.

471. 15 U.S.C.A. § 18a(c)(9); 16 C.F.R. § 802.9.

472. 15 U.S.C.A. § 18a(c)(3); 16 C.F.R. § 802.30.

473. 16 C.F.R. §§ 802.50 and 802.51.

474. Further, if a transaction is reportable in a jurisdiction outside the United

States and is likely to lead to an investigation in that jurisdiction, the U.S.

agencies may be more likely to learn of the transaction. Historically,

some transactions also came to the attention of the agencies due to “prior

notification provisions” contained in earlier consent decrees, but such

provisions are less common today. The DOJ uses these provisions only if

it anticipates that future transactions are likely to be anticompetitive and

nonreportable; since 1995, the FTC has taken the same approach. See

Fed. Trade Comm’n, Statement of Federal Trade Commission Policy

Concerning Prior Approval and Prior Notice Provisions in Merger Cases,

60 Fed. Reg. 39,745 (Aug. 3, 1995); see also Chapter X.D.7 (discussion

of prior approval provisions). Prior notification provisions typically

require the respondent to notify the agency at least thirty days prior to

consummating a transaction and, if the agency makes a written request

for additional information during that time, the respondent may not