Question
November 19, 2003
ByFax (202) 326-2624 and Post
Mr.B. Michael Verne
Federal Trade Commission
Premerger Notification Office
Room 303
6th and Pennsylvania Avenue, N. W.
Washington, D.C. 20580
Re:Premerger Reverting Obligations; Ordinary Course Exemption
Dear Mike:
Thisletter is a follow-up to our telephone conversation last week during which wediscussed in broad terms the transaction described below and your view thatpending receipt of additional information, the transaction would likely not besubject to the reporting requirements of the Hart-Scott-Rodino AntitrustImprovements Act of 1976, as amended (the "Act').
In ourdiscussion, we assumed that in connection with an assets transaction, the so-called"size-of-person" test and the so-called"size-of-transaction" test were met.
Specifically,the assets to be sold in this transaction are so-called merchant processingcontracts and agent bank merchant contracts. A merchant processing contract isa contract pursuant to which a third party agrees to provide transactionprocessing services to a merchant (such as a grocery store, gasoline station orother retailer). An agent bank merchant contract is a contract pursuant towhich a bank either: (a) refers merchants to a third party transactionprocessing services provider (a "Processor") in exchange for which theagent bank receives a fee for the referral; or (b) acquires so-called"wholesale" transaction processing services from a Processor and thebank resells these services to merchants. In the case of an agent bank merchantcontract under which a bank refers merchants to a Processor, the Processorenters into an agreement with each referred merchant to provide transactionprocessing services. In the case of an agent bank merchant contract under whichthe bank acquires so-called "wholesale" transaction processingservices from a Processor, the bank enters into an agreement with each merchantto provide transaction processing services.
In thiscase, the group of merchant processing contracts to be sold by Sellerconstitutes approximately 2% of the merchant processing contracts held bySeller and its affiliates, and the group of agent hank merchant contractsconstitutes approximately 89% of the agent bank merchant contracts held bySeller and its affiliates.
The Buyeris an entity that is either: (a) an entity that is already engaged in the businessof agent bank merchant contracts and merchant processing contracts; or (b) anentity that is already engaged in the business of merchant processingcontracts.
Basedupon these facts, we believe that the so-called ordinary course of businessexemption should be applicable to this transaction and that no filing under theHSR Act would be required even though the so-called "size-of-person"test and so-called "size-of-transaction" test are met.
Indeed,we note that even if one were to posit that the Seller was exiting the businessof agent bank merchant contracts (and hence, the ordinary course of businessexemption would not be applicable to the sale of those assets), the so-calledordinary course of business exemption should still be applicable to theremainder of the transaction. If the value of the agent bank merchant contractsbeing acquired was less than $50 million, the so-called "size oftransaction" test would not be met and as a result, the entire transactionstill would not be subject to the reporting requirements of the HSR Act.
Asalways, we thank you for your prompt attention to our inquiry. If the foregoingdoes not conform to your understanding, please contact us. My direct number islisted above.