[Code of Federal Regulations]
[Title 16, Volume 1]
[Revised as of January 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 16CFR801.40]

[Page 596-597]
 
                     TITLE 16--COMMERCIAL PRACTICES
 
                   CHAPTER I--FEDERAL TRADE COMMISSION
 
PART 801_COVERAGE RULES--Table of Contents
 
Sec. 801.40  Formation of joint venture or other corporations.

    (a) In the formation of a joint venture or other corporation (other 
than in connection with a merger or consolidation), even though the 
persons contributing to the formation of a joint venture or other 
corporation and the joint venture or other corporation itself may, in 
the formation transaction, be both acquiring and acquired persons within 
the meaning of Sec. 801.2, the contributors shall be deemed acquiring 
persons only, and the joint venture or other corporation shall be deemed 
the acquired person only.
    (b) Unless exempted by the act or any of these rules, upon the 
formation of a joint venture or other corporation, in a transaction 
meeting the criteria of Section 7A(a)(1) and 7A(a)(2)(A) (other than in 
connection with a merger or consolidation), an acquiring person shall be 
subject to the requirements of the act.
    (c) Unless exempted by the act or any of these rules, upon the 
formation of a joint venture or other corporation, in a transaction 
meeting the criteria of Section 7A(a)(1) and the criteria of Section 
7A(a)(2)(B)(i) (other than in connection with a merger or 
consolidation), an acquiring person shall be subject to the requirements 
of the act if:
    (1)(i) The acquiring person has annual net sales or total assets of 
$100 million or more;
    (ii) The joint venture or other corporation will have total assets 
of $10 million or more; and

[[Page 597]]

    (iii) At least one other acquiring person has annual net sales or 
total assets of $10 million or more; or
    (2)(i) The acquiring person has annual net sales or total assets of 
$10 million or more;
    (ii) The joint venture or other corporation will have total assets 
of $100 million or more; and
    (iii) At least one other acquiring person has annual net sales or 
total assets of $10 million or more.
    (d) For purposes of paragraphs (b) and (c) of this section and 
determining whether any exemptions provided by the act and these rules 
apply to its formation, the assets of the joint venture or other 
corporation shall include:
    (1) All assets which any person contributing to the formation of the 
joint venture or other corporation has agreed to transfer or for which 
agreements have been secured for the joint venture or other corporation 
to obtain at any time, whether or not such person is subject to the 
requirements of the act; and
    (2) Any amount of credit or any obligations of the joint venture or 
other corporation which any person contributing to the formation has 
agreed to extend or guarantee, at any time.
    (e) The commerce criterion of Section 7A(a)(1) is satisfied if 
either the activities of any acquiring person are in or affect commerce, 
or the person filing notification should reasonably believe that the 
activities of the joint venture or other corporation will be in or will 
affect commerce.

    Examples: 1. Persons ``A,'' ``B,'' and ``C'' agree to create new 
corporation ``N,'' a joint venture. ``A,'' ``B,'' and ``C'' will each 
hold one third of the shares of ``N.'' ``A'' has more than $100 million 
in annual net sales. ``B'' has more than $10 million in total assets but 
less than $100 million in annual net sales and total assets. Both ``C''s 
total assets and its annual net sales are less than $10 million. ``A,'' 
``B,'' and ``C'' are each engaged in commerce. ``A,'' ``B,'' and ``C'' 
have agreed to make an aggregate initial contribution to the new entity 
of $18 million in assets and each to make additional contributions of 
$21 million in each of the next three years. Under paragraph (d), the 
assets of the new corporation are $207 million. Under paragraph (c), 
``A'' and ``B'' must file notification. Note that ``A'' and ``B'' also 
meet the criterion of Section 7A(a)(2)(B)(i) since they will be 
acquiring one third of the voting securities of the new entity for $69 
million. N need not file notification; see Sec. 802.41.
    2. In the preceding example ``A'' has over $10 million but less than 
$100 million in sales and assets, ``B'' and ``C'' have less than $10 
million in sales and assets. ``N'' has total assets of $500 million. 
Assume that ``A'' will acquire 50 percent of the voting securities of 
``N'' and ``B'' and ``C'' will each acquire 25 percent. Since ``A'' will 
acquire in excess of $200 million in voting securities of ``N'', the 
size-of-person test in Sec. 801.40(c) is inapplicable and ``A'' is 
required to file notification.

[43 FR 33537, July 31, 1978, as amended at 48 FR 34434, July 29, 1983; 
52 FR 7082, Mar. 6, 1987; 66 FR 8690, Feb. 1, 2001]