9103014 Informal Interpretation

(redacted)

March 26, 1991

Patrick Sharpe
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
6th & Pennsylvania Avenue, NW
Room 303
Washington, D.C. 20580

Dear Pat:

This letter confirms our conversation this morning concerning the FTCs interpretation of the phrase [h]aving the contractual power presently to designate 50% or more of the directors of a corporation which is part of the definition of control. Rule 801.1(b).

I asked you to assume a situation in which Entity A and Entity B have a joint contractual right to designate 50% of the board of directors of Entity C. I asked you to further assume that Entity B had been passive so that Entity A had in fact designate 50% of the directors of Entity C for a number of years. However, Entity B retained the right to jointly designate 50% of the board of Entity C. The issue presented is whether Entity A controls Entity C.

You confirmed my conclusion that Entity A did not control Entity C, reasoning that both Entity A and Entity B had the contractual power presently to designate 50 percent of the board. Accordingly, neither Entity A nor Entity B controls Entity C as a result of the contract.

Thank you for your cooperation on this matter.

Sincerely,

(redacted)

(redacted)