FTC and DOJ Announce Final Changes to HSR Filing Form

July 7, 2011

On July 7, the Federal Trade Commission (“FTC” or “Commission”), with the concurrence of the Department of Justice (collectively, the “Agencies”), announced significant modifications to the Hart-Scott-Rodino (“HSR”) Act Notification and Report Form (“Form”).[1] These changes are designed to provide the Agencies with more information relevant to their antitrust analysis of notified transactions. However, the proposed changes will, in some cases, increase the burden on filers. The FTC's press release is available here.

These rules will become effective 30 days after the date of publication in the Federal Register. FTC Staff expects publication to occur the week of July 11.

Revisions to Items 1-3 (Identification of Parties and Description of Transaction)

The Commission has made a number of minor changes to Items 1 through 3 of the Form; generally, these changes eliminate duplicative questions and requests for non-relevant information (for example, the request that the filing person separately identify and describe the type and number of securities of the to-be acquired entity). There is one change of significance: the filing person must provide -- in addition to the main agreement between the parties -- a copy of any “Agreements Not To Compete.”

Revisions to Items 4(a) and 4(b) (Request for Financial Statements)

Several helpful changes streamline the provision of the financial information requested at Items 4(a) and 4(b).[2]

Item 4(a) now requires only that the filing person list all entities within it that file annual reports[3] with the Securities and Exchange Commission, and to provide the Central Index Key (“CIK”) number for each entity.[4] Item 4(b) has been amended to eliminate the requirement that the filing person provide its most recent balance sheets (whether consolidated or unconsolidated), but has been expanded to require the filing person to provide annual reports and/or audit reports of any unconsolidated non-corporate U.S. issuer (e.g., L.P., LLC, or LLP) within the filing person.

Proposed New Item 4(d) (Request for New Classes of Documents)

The Commission has made no changes to one of the most important aspects of the Form, Item 4(c), which calls for documents prepared in connection with the transaction that analyze or provide guidance on the competitive effect of the transaction.[5] But, in a significant change, the FTC is introducing a new Item 4(d). Filing parties are now required to provide: (i) all confidential information memoranda that specifically relate to the to-be acquired entity or assets; (ii) all studies, surveys, analyses, and reports prepared by investment bankers, consultants, or other third party advisors during an engagement or for the purpose of seeking an engagement for any officer(s) or director(s)[6] of the filing person that meet the competitive information prong of Item 4(c) and that specifically relate to the acquired entity or assets; and, (iii) all studies, surveys, analyses or reports evaluating or analyzing synergies or efficiencies, prepared by or for any officer(s) or director(s)[7] for the purpose of evaluating or analyzing the acquisition. Items 4(d)(i) and 4(d)(ii) require the filing person to provide responsive documents prepared within one year of the HSR filing date.

Proposed Revisions to and Expansions of Item 5 (Revenue Information)

Significant changes have been made to Item 5. Item 5 presently directs the filing person to provide U.S. revenue information by a 6-digit NAICS code for manufactured and non-manufactured products and, additionally, by a 10-digit NAICS code for manufactured products for a base year (presently 2002), as well as similar data (by either a 7-digit or a 6-digit NAICS Code) for the most current completed year.[8] Recognizing the limited value of base year data, the FTC has eliminated the request for this data.[9]

However, the FTC also has expanded the information requested for current year operations in two significant ways. First, a filing person is required to allocate manufacturing data by a 10-digit NAICS code, rather than by a 7-digit NAICS code. Second, the filing person is required to provide information on products manufactured outside the U.S. but sold in or exported into the United States by a 10-digit NAICS code.[10]

Revisions to Item 6 (Request for Information on Ownership Structure)

The Commission has made substantial and substantive changes to Item 6. This item identifies the entities within the filing person, any minority shareholders of corporate entities, and minority share-holdings of the filing person.

Changes to Item 6(b) would require the filing person to identify significant minority owners[11] of any non-corporate entity controlled by the filing party. (Recognizing the limited role that limited partners play in limited partnerships, the modified form would require identification of the general partner of non-corporate entities controlled by the filing party, but not any of the limited partners.) Item 6(c)(i) has been modified to allow a filing person to limit its response to the identification of minority-owned interests, in both corporate and non-corporate entities, to those from which the minority-held entity derived revenue in its most recent completed year within any 6-digit NAICS code in which the acquiring and acquired person also derived dollar revenues.[12] For Item 6(c), the person filing notification may rely on its regularly prepared financials, provided that they are no more than three months old. Moreover, this information may be provided based on knowledge or belief.

Introduction of New Item 6(c)(ii) (Identification of Associates of Filing Party)
Importantly, new item 6(c)(ii) would require the acquiring person to identify any “associates” with significant minority ownership[13] of any corporate or non-corporate entity that derived dollar revenues, in its most recent completed year, within any 6-digit NAICS code in which the acquired entity also derived dollar revenues.

Associates, a new term, is defined as an entity that:

  • (A) has the right, directly, or indirectly, to manage the operations or investment decisions of an acquiring entity (a “managing entity”); or
  • (B) has its operations or investment decisions, directly or indirectly, managed by the acquiring person; or
  • (C) directly or indirectly, controls, is controlled by, or is under common control with a managing entity; or
  • (D) directly or indirectly, manages is managed by or is under common operational or investment management with a managing entity.

The addition of the concept of an associate to the HSR filing process is a significant change and reflects the Agencies’ increasing concern over the competitive effects of minority shareholdings in or among competitors or common persons.

Revisions to and Clarification of Item 7

The FTC has expanded Item 7 in a number of ways. The main change is to require filing parties to identify any NAICS code overlaps between the acquired entity and associates of the acquiring person.

The Commission clarified the instructions to Item 7 to state that the item is applicable to an overlap of operations generating any amount of revenue. Previously, the million dollar minimum applicable to reporting revenue in Item 5 sometimes was misconstrued as a minimum for the reporting of overlaps in Item 7.


[1] In addition, the FTC has announced some corrective changes to the HSR Regulations (available at 16 C.F.R. 801.1 et. seq.).

[2] Item 4(a) requires the filing person to provide copies of, or links to, certain of its filings and the filings of the entities within it with the United States Securities and Exchange Commission. Item 4(b) requires the filing person to provide its most recent consolidated annual financial statements and audit report, and similar reports for any unconsolidated U.S. corporation within it. Item 4(b) also requires the filing person to provide its most recent regularly-prepared consolidated balance sheet and the balance sheet of any unconsolidated U.S. issuer.

[3] Form 10-Ks and 20-Fs.

[4] The CIK is a number given to an individual or company by the SEC to identify the filings of a company, person, or entity in online databases, including the EDGAR database.

[5] Specifically, Item 4(c) of the HSR Notification and Report Form requires that filing parties include with the form “all studies, surveys, analyses and reports which were prepared by or for any officer(s) or director(s) (or, in the case of unincorporated entities, individuals exercising similar functions) for the purpose of evaluating or analyzing the acquisition with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into product or geographic markets.”

[6] In the case of unincorporated entities, this requirement includes individuals exercising similar functions.

[7] In the case of unincorporated entities, this requirement includes individuals exercising similar functions.

[8] Currently, a filing party is also required to identify products added or deleted between 2002 and the most current completed year.

[9] This also eliminates the requirement that the filing party identify products added or deleted between the base year and the current year.

[10] The proposed instructions would have required that products manufactured outside the United States and sold through a U.S. wholesale operation be identified twice, as both manufactured products (sold at their transfer price) and as products sold at wholesale (and/or retail). To avoid this double-counting, the Commission revised the instructions to require that any manufacturer, whether foreign or domestic, report revenues from the sale of its manufactured products only under 10-digit manufacturing product codes. Products not manufactured by the parties but only sold by them would continue to be reported under 6-digit wholesaling or retailing codes. The FTC also has made slight modifications to Item 5(d) – applicable if the parties are filing for the formation of a joint venture – to eliminate some sections (the name and the address of the joint venture and the description of any credit guarantees) and to require the parties to provide information on the expected source of the joint venture’s dollar revenues by a 6-digit (non-manufacturing) or a 10-digit (manufacturing) NAICS code.

[11] Interests of 5% or more, but less than 50%.

[12] If NAICS codes are unavailable, the filing person may limit its response to holdings in entities that have operations in the same industry. It is permissible for a filing person to list all minority interests, without regard for overlaps, though the FTC notes that review of the filing could be delayed and the parties may be more likely to receive follow up requests from the staff to obtain the information.

[13] Significant minority ownership is considered more than 5% but less than 50% of outstanding interests (or voting securities).