FTC Increases HSR Act Reporting Thresholds
The Federal Trade Commission recently revised the reporting thresholds for the Hart Scott Rodino Antitrust Improvements Act of 1976, increasing the thresholds by approximately 3.3% over 2016. The FTC has also revised the monetary thresholds that trigger a prohibition preventing companies from having interlocking directorates under Section 8 of the Clayton Act.
Revised HSR Act
The HSR Act established the federal pre-merger notification program, which provides the FTC and the U.S. Department of Justice with information about large mergers and acquisitions before they occur. Parties are generally required to file notifications with the FTC and DOJ and observe the HSR Act’s waiting periods if the acquisition meets “size-of-person” and “size-of-transaction” thresholds. The FTC is required by law to revise the thresholds annually, based on a change in gross national product.
Under the 2017 revisions, the size-of-transaction filing threshold will increase to $80.8 million from $78.2 million. The “size-of-person” threshold has also been increased to require that one person have assets or sales of $161.5 million and the other person has at least $16.2 million. Currently, these thresholds are $156.3 million and $15.6 million.
(For purposes of applying the thresholds, a “person" is the parent entity of the party involved in the transaction.)
Transactions valued at more than $323 million will be subject to pre-merger notification regardless of the size of the parties involved. This threshold is currently at $312.6 million. The new HSR Act thresholds, published in the Federal Register on Jan. 26, 2017, will take effect on Feb. 27, 2017.
The thresholds that determine HSR filing fees have also been revised, although the filing fees have not changed. For transactions that are imminent or already underway, the applicable filing fee thresholds are those in effect at the time of notification. The revised fee schedule is as follows:
- $45,000 for transactions valued at more than $80.8 million but less than $161.5 million;
- $125,000 for transactions valued at $161.5 million but less than $807.5 million; and
- $280,000 for transactions valued at $807.5 million or more.
The announcement of the revised HSR reporting thresholds comes just days after the FTC’s increase to the daily penalty for HSR violations took effect on Jan. 24. Under the new adjustment, the penalty will be $40,654 per day, up from $40,000.
Revised Section 8
Section 8 of the Clayton Act prohibits one person from serving as a director or officer of two competing corporations in certain circumstances. Competitor corporations are covered by Section 8 if each one has capital, surplus and undivided profits aggregating more than $10 million (as adjusted) with an exception that no corporation is covered if the competitive sales of either corporation are less than $1 million (as adjusted). The FTC is also required to revise these thresholds annually. The new thresholds, which took effect on Jan. 26, 2017, are $32,914,000 and $3,291,400, respectively.