1605005 Informal Interpretation

Date

May 18, 2016

Tags:

Competition

Rule

801.1(b)(1)(ii)

Staff

Diana Gillis

Response/Comments

UPDATE August 3, 2016: This no longer represents the position of the PNO.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.

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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,

1605005 Informal Interpretation

Question

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