The Federal Trade Commission (“FTC”) has announced revised monetary thresholds for determining whether companies are required to notify federal antitrust authorities about a transaction under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). The new thresholds take effect February 25, 2016. The HSR Act requires the FTC to revise the thresholds annually based on changes in the gross national product. The FTC also revised the interlocking directorate thresholds under Section 8 of the Clayton Act, which became effective upon publication in the Federal Register on January 26, 2016. 15 U.S.C. § 19.
HSR Pre-Merger Notification Threshold Revisions
The HSR Act requires parties to certain business combinations (including mergers; acquisition of stock, assets or unincorporated interests; and joint ventures) to provide advance notification to the FTC and Department of Justice, and observe a waiting period before consummating the transaction if the value of the transaction and size of the parties at issue exceeds the filing thresholds, absent an applicable exemption.
Effective February 25, 2016, the “size of transaction” threshold for reporting proposed mergers and acquisitions subject to enforcement under Section 7A of the Clayton Act will increase from $76.3 million to $78.2 million.
Transactions valued in excess of $78.2 million but at or below $312.6 million will not be reportable unless the “size of person” threshold is met which requires one side of the transaction to have sales or assets in excess of $156.3 million (increased from $152.5 million) and the other $15.6 million (increased from $15.3 million), as of February 25, 2016. For transactions valued at greater than $312.6 million, no “size of person” threshold must be met to require an HSR filing.
The filing fees have similarly increased. Beginning February 25, 2016, a $45,000 filing fee will be required for transactions valued between $78.2 and $156.3 million. Transactions valued between $156.3 and $781.5 million will require a $125,000 fee. Transactions valued at $781.5 million or greater will require a $280,000 fee.
Interlocking Directorates Threshold Revisions
Effective January 26, 2016, the FTC adjusted the monetary thresholds governing interlocking directorates in competing companies. 81 Fed. Reg. 4300 (Jan. 26, 2016). Under these new thresholds, a person is prohibited from simultaneously serving as a director or officer in any two competing corporations where each of the corporations has capital, surplus, and undivided profits aggregating more than $31.841 million. 15 U.S.C. § 19(a)(1). However, the prohibition will not apply where the competitive sales of either corporation is less than $3,184,100 or less than 2% of its total sales or where the competitive sales of each corporation are less than 4% of its total sales. Id. at §19(a)(2)(A).
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Failure to comply with the above HSR notification requirements is subject to a statutory penalty of up to $16,000 per day for every day of noncompliance.
Due to the complexities inherent in determining HSR reporting obligations, companies should consult with counsel when contemplating any transaction that may be subject to HSR notification requirements or may trigger other antitrust implications.
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