us-ftc-hsr-informal-interpretations-eab6d9442ea247033fbfeaf0ef623317•1605005 Informal Interpretation
1605005 Informal Interpretation
us-ftc-hsr-informal-interpretations-eab6d9442ea247033fbfeaf0ef6233171605005 Informal InterpretationGuidance
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UPDATE August 3, 2016: This no longer represents the position of the PNO. For purposes of determining control of a non-corporate entity, do not include indirect profits/assets via a non-controlled entity.
For purposes of determining control and the right to profits of a non-corporate entity, include indirect profits of non-controlled entities.
Question
[REDACTED],
We have advised in the past that the indirect profits should be included in the calculation.
-Diana
From: [REDACTED]
Sent: Tuesday, May 17, 2016 1:15 PM
To: Walsh, Kathryn E.
Cc: [REDACTED]
Subject: Aggregating profits in accordance with Section 801.1(b)(1)(ii)
Kate,
Can you please confirm that we do not aggregate “profits” earned through non-controlled entities with profits earned directly in a partnership to determine if there is control of a partnership in accordance with Section 801.1(b)(1)(ii)?
Please assume that one company (Company A) is entitled to the profits of a partnership (Partnership B) through 1) its direct holdings of shares in Partnership B and 2) its non-controlling interest in another company (Company C) that holds shares in Partnership B and therefore has a right to profits from Partnership B. Thus, A has rights directly in Partnership B and indirectly (though Company C) in Partnership B. For the purpose of determining control of Partnership B as outlined in Section 801.1(b)(1)(ii), should we aggregate Company A’s direct profits from Partnership B with the profits it earns from Partnership B through its non-controlling interest in Company C? We believe we can ignore Company A’s indirect profits it earns from Partnership B through Company C because Company A does not control Company C. While we believe this is the case, we have not found authority supporting this proposition.
Thank you in advance for your time,
[REDACTED]
From: Sent: Wednesday, May 18, 2016 9:38 AM To: Gillis, Diana L. Cc: Walsh, Kathryn E.; Whitehead, Nora Subject: RE: Aggregating profits in accordance with Section 801.1(b)(1)(ii) Thank you, Diana! From: Gillis, Diana L. [mailto:dgillis@ftc.gov] Sent: Wednesday, May 18, 2016 8:55 AM To: Cc: Walsh, Kathryn E.; Whitehead, Nora Subject: RE: Aggregating profits in accordance with Section 801.1(b)(1)(ii) We have advised in the past that the indirect profits should be included in the calculation. -Diana From: Sent: Tuesday, May 17, 2016 1:15 PM To: Walsh, Kathryn E. Cc: . Subject: Aggregating profits in accordance with Section 801.1(b)(1)(ii) Kate, Can you please confirm that we do not aggregate “profits” earned through non-controlled entities with profits earned directly in a partnership to determine if there is control of a partnership in accordance with Section 801.1(b)(1)(ii)? Please assume that one company (Company A) is entitled to the profits of a partnership (Partnership B) through 1) its direct holdings of shares in Partnership B and 2) its non-controlling interest in another company (Company C) that holds shares in Partnership B and therefore has a right to profits from Partnership B. Thus, A has rights directly in Partnership B and indirectly (though Company C) in Partnership B. For the purpose of determining control of Partnership B as outlined in Section 801.1(b)(1)(ii), should we aggregate Company A’s direct profits from Partnership B with the profits it earns from Partnership B through its non-controlling interest in Company C? We believe we can ignore Company A’s indirect profits it earns from Partnership B through Company C because Company A does not control Company C. While we believe this is the case, we have not found authority supporting this proposition.
Thank you in advance for your time,
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