On February 2, 2021, the Federal Trade Commission (FTC) announced that in 2021 the threshold for applying the size-of-parties test of the Hart-Scott-Rodino (HSR) Act will decrease from $94 million to $92 million. Deals that exceed this $92 million threshold may need to be reported to the FTC and U.S. Department of Justice (DOJ) depending on the size of the parties to the transaction as measured by the volume of their sales or the value of their assets.
Generally, transactions in 2021 with a value greater than $368 million will be reportable under the HSR Act, regardless of the volume of sales or value of assets of the parties. Parties reporting transactions under the HSR Act must observe a 30 day waiting period after reporting the transaction before closing the deal. The HSR Act imposes these notification and waiting period requirements so that the FTC and DOJ can assess the potential competitive effects of proposed transactions before the deal is consummated. The new thresholds will apply to all transactions that close on or after March 4, 2021.
HSR compliance continues to be a trap for the unwary. For example, in August 2019, Third Point LLC agreed to pay $609,810 in civil penalties to settle FTC charges that the company and funds it managed had violated the HSR Act. In that case, three funds managed by Third Point were existing shareholders of two major chemical companies prior to the 2017 merger of those two companies. As a result of the merger, the three Third Point funds in August 2017 received shares of the merged entity with a value in excess of the then-existing HSR threshold of $80.8 million, but Third Point did not file the required notification and observe the 30 day waiting period imposed by the HSR Act prior to the funds acquiring those shares.
When in doubt as to whether a transaction is reportable under the HSR Act, consult with antitrust counsel to be sure.