New HSR Thresholds Announced
The Federal Trade Commission (the FTC) recently announced that the reporting thresholds under Section 7 of the Clayton Act, known as the Hart‑Scott-Rodino Antitrust Improvements Act of 1976 (the Act), will be decreased.
The Act requires all parties to certain transactions, including mergers and acquisitions that meet or exceed the Act's jurisdictional thresholds, to notify the FTC and the Antitrust Division of the Department of Justice and wait a designated period of time before consummating those transactions. The 2000 amendments to the Act require the FTC to revise the Act's jurisdictional and filing fee thresholds annually, based on the change in gross national product. Certain related thresholds and limitation values in the Hart-Scott-Rodino (H‑S‑R) rules will also be adjusted. The decreased thresholds will apply to all transactions that close on or after February 22, 2010.
Reporting Thresholds
Current Reporting Thresholds. Certain transactions, including acquisitions of voting securities or assets, acquisitions of non-corporate interests, or the formation of joint venture corporations or other entities, are subject to the reporting requirements of the Act if the transaction meets a two-part test based on the size of the transaction and the size of the parties.
The size-of-transaction test is met if the transaction is valued at more than $65.2 million.
The size-of-parties test is met if the ultimate parent entity of one of the parties to the transaction has $13 million in total assets or annual net sales and the ultimate parent entity of another party to the transaction has $130.3 million in total assets or annual net sales. However, the size-of-parties test does not apply to transactions valued at more than $260.7 million.
Decreased Reporting Thresholds. Under the new thresholds:
- The size-of-transaction test is met if the transaction is valued at more than $63.4 million.
- The size-of-parties test is met if the ultimate parent entity of one of the parties to the transaction has $12.7 million in total assets or annual net sales and the ultimate parent entity of another party to the transaction has $126.9 million in total assets or annual net sales.
- The threshold at which the size-of-parties test does not apply is decreased to transactions valued in excess of $253.7 million.
Additional Information
Discussions of other recent laws, regulations and rule proposals of interest to public companies are available on our Web site.
This post is intended for general guidance. Parties contemplating a transaction should consult antitrust counsel to determine whether any particular transaction is reportable under the Act and evaluate any antitrust concerns raised by the transaction. Parties should also keep in mind that a transaction that is not reportable because it does not meet the Act's reporting thresholds is not exempt from agency scrutiny of the potential anticompetitive effects of the transaction. The FTC, the Department of Justice and State Attorneys General (as well as private parties) may challenge a transaction as anticompetitive even when no H-S-R filing was required for the transaction. Therefore, all transactions should be reviewed for compliance with Section 7 of the Clayton Act prior to closing.
