Amendments To Hart-Scott-Rodino Require Additional Reporting And Documentation

On July 7, 2011, the U.S. Federal Trade Commission published final rules amending the Hart-Scott-Rodino (HSR) Premerger Notification Rules, the Premerger Notification and Report Form and the instructions to the Form.1

Before certain mergers and acquisitions are permitted to close, the parties must file the Form and observe a waiting period to allow the FTC and Department of Justice (DOJ) time to consider the competitive effects of the proposed transaction and, if appropriate, to challenge and seek to prevent its consummation. The Form provides the FTC and DOJ with the information and documents needed to initially review a transaction for anticompetitive effects during the waiting period. The amendments streamline the Form and capture new information that will help the FTC and DOJ review a proposed merger or acquisition.

The new Rules and Form will go into effect 30 days from their publication in the Federal Registrar (expected in the next few days) and must be used for all transactions notified on or after that date. The most substantive changes are discussed below.

Increased Reporting for Private Equity and Other Investment Funds

An acquiring person must provide on its Form information about all entities included within it at the time of filing. The FTC and DOJ were concerned that not all entities that are commonly managed by the acquiring person are currently included on the Form because these associated entities are not controlled by the acquiring Ultimate Parent Entity (UPE). This is particularly the case with families of investment funds, such as private equity funds and master limited partnerships common in the energy industry. "Control" for HSR purposes means (i) for a corporation, holding 50% or more of the outstanding voting securities or currently having the contractual power to designate 50% or more of the directors; or (ii) for an unincorporated entity, having the right to 50% or more of the profits or the right to 50% or more of the assets upon dissolution. On the basis of this definition, under current HSR Rules, a general partner is typically not deemed to control a limited partnership.

The amendments add a new concept of "associate" of a fund or other limited partnership to pick up reporting of these entities by the acquiring person only.

"Associate" 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)...