Formal Intrepretation No. 5

FORMAL INTERPRETATION UNDER 16 C.F.R. § 803.30
CONCERNING EARLY TERMINATION
UNDER § 7A(b)(2) AND § 803.11

Commission staff have received several requests for interpretation of § 803.11 of the premerger notification rules ("the rules"), promulgated pursuant to § 7A of the Clayton Act, 15 U.S.C. § 18a (the "Act"). These requests concern the standards applied by the Commission and the Assistant Attorney General in charge of the Antitrust Division ("Assistant Attorney General") in granting or denying requests for early termination of the waiting period specified in § 7A(b)(l) of the Act.

Section 7A(b)(2)of the Act provides:

The Federal Trade Commission and the Assistant Attorney General may, in individual cases, terminate the waiting period specified in paragraph (1) and allow any person to proceed with any acquisition subject to this section, and promptly shall cause to be published in the Federal Register a notice that neither intends to take any action within such period with respect to such acquisition.

Section 803.11 of the rules, which implements § 7A(b)(2), specifies the conditions and procedures under which a waiting period may be terminated prior to its normal expiration. However, neither that section nor § 7A(b)(2) sets forth any general criteria to be applied by the Commission and the Assistant Attorney General in deciding whether or not requests for early termination should be granted. This formal interpretation states the position of the staff in this respect.

The staff interprets the early termination provision of § 7A(b)(2) and § 803.11 as a mandate to both agencies to consider each request for early termination on an individual basis and to exercise discretion in making such decisions. No specific criteria can be identified that will be applied invariably in each case; however, the following general principles will be applied by the agency staffs in exercising their discretion.

First, early termination will not be granted unless the staff of the agencies have concluded that neither will take any further action within the waiting period. Second, early termination will usually not be granted unless the requesting party or parties can demonstrate some special business reason that warrants early termination of the waiting period. In other words, the requesting party should explain the need to complete the transaction before the waiting period would normally expire; it may also be helpful to indicate why an earlier expiration date could not have been obtained simply by filing the original notification earlier. Some examples of reasons that may be considered sufficient are the existence of a financing contingency that might fail during the waiting period, the need to infuse cash quickly into a financially weak firm, or the importance of preserving existing contractual relationships that might be placed in jeopardy because of uncertainty generated during a full waiting period. Such reasons are relevant to the early termination decision, of course, only when both agencies have determined that no further action will be taken during the waiting period.

The language of § 7A(b)(2) that permits termination "in individual cases" supports the interpretation that a determination based on the specific facts of the acquisition is contemplated, and that early termination should not be granted as a matter of course. Additionally, the staff notes that the Commission has an advisory opinion procedure (16 C.F.R. § 1.1) and the Antitrust Division has a business review procedure (28 C.F.R. § 50.6) under which prior antitrust agency review of a proposed acquisition may be obtained. The early termination provision is not intended to duplicate or replace such other procedures.

The Assistant Attorney General has concurred in this interpretation.

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Malcolm R. Pfunder
Assistant Director for Evaluation
Bureau of Competition

Date: April 10, 1979