Question
Nancy M. Ovuka
B. Michael Verne
Federal Trade Commission
Premerger Notification Office
601 Pennsylvania Avenue, NW
Room 303
Washington, D.C. 20580
September 29, 2005
Sales in or into the United States
Dear Nancy and Mike:
I am writing to confirm theconclusions reached during our recent telephone conversations regarding the applicationof the 802.51 exemption, focusing on what constitutes sales in or into the United States. During our conversations, we discussedthree hypotheticals, including a variation on one hypothetical that I discussedonly with Mike. Each of the hypotheticals and your conclusions are set forthbelow.
Hypothetical One
A United States-located consumerorders a pair of shoes via the Internet from an Italian shoe manufacturer thathas no US presence except via the Internet. TheItalian shoe manufacturer accepts the US-located consumer's order using thecustomer's US-bank credit card for payment, and ships the shoes to theconsumer's US address.
Conclusion: Revenues derived from the sale of theshoes in this hypothetical are sales in or into the United States for the purposes of the application ofthe HSR Act exemptions.
Hypothetical Two
A non-US company having nopresence in the United States operates an onlineauction site. Although the company's servers are not located in the US, it advertises its service in the United States. The company earns revenues by collecting from sellers acommission for each auction that occurs at its website. The company alsoprovides buyers and sellers access to payment processing services that areprovided by third parties. A number of the auction site's buyers are located inthe United States.
Conlusion: The commissions earned by the onlineauction site are not sales in or into the United Statesfor the purposes of applying the HSR Actexemptions. You stated that in the non-online world, the site where a serviceis provided determines whether or not there is a sale in or into the United States. Extending this rationale toHypothetical Two, you stated that the PNO would notview the commissions earned as sales in or into the United States, because the service provided, i.e., theonline market, is being provided on the company's servers located outside the United States.
Hypothetical Two (variation discussed only with Mike Verne)
The same facts as HypotheticalTwo above, but now focusing on US-located sellers using the site.
Conclusion: Again, the commissions paid by thoseUS-located sellers are not sales in or into the United States for the purposes of applying the HSR Actexemptions. The same analysis as applied to the Hypothetical Two applies tothis variation, i.e., if the service is rendered outside the UnitedStates, there are no sales in or into the United States regardless of thelocation of the company's customers.
Hypothetical Three
A UKcompany operates an online psychiatric counseling service with patientsaccessing the service from the United States.The UK company has no US assets. This service is interactive and operates in real-time viathe Internet. To use this service, a patient/customer must download software tohis/her computer allowing for real-time interaction (similar to instantmessaging) between the psychiatrist, who is in the UK and licensed to practice medicine in the UK, and the patient/customer.
Conclusion: The counseling service revenues are notsales in or into the United States for the purposes of applying the HSR Act exemptions, because the location where the service is beingrendered is, for HSR Act purposes, outside the US.
As my client intends to rely onthe foregoing, please let me know if I have misstated or otherwisemisinterpreted any of our discussions or your conclusions.