On January 21, 2022, the U.S. Federal Trade Commission (FTC) announced the annual changes to the thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). The official publication is expected to be released in the Federal Register on January 24, 2022. The new size of transaction threshold is $101 million. The new HSR Act thresholds will go into effect 30 days after the official publication and will apply to all transactions closing on or after that date.
The HSR Act requires parties to transactions exceeding certain thresholds to file premerger notification reports to the FTC and the Antitrust Division of the U.S. Department of Justice (unless an exemption applies) and then observe statutorily prescribed waiting periods (usually 30 days) prior to closing the transaction.
Revised HSR Act Thresholds
Generally, HSR notifications are required for an acquisition of voting securities, non-corporate interests or assets when the transaction reaches a certain threshold (the “size of transaction” test) and the parties are of sufficient size (the “size of parties” test). The size of transaction test is adjusted annually based on changes in the gross national product for the preceding year. The new size of transaction threshold will be $101 million, an approximate 10 percent increase from the previous threshold of $92 million.
Under the new thresholds that will be in effect next month:
- Transactions valued up to and including $101 million are not reportable;
- Transactions valued at more than $101 million but not more than $403.9 million are reportable only if one party has assets or annual net sales of at least $20.2 million and the other party has assets or annual net sales of at least $202 million (unless an exemption applies); and
- Transactions valued at more than $403.9 million are reportable, regardless of the parties’ size (unless an exemption applies).
The revisions also increase notification thresholds for acquisitions of additional voting securities from the same party. As a result, notifications may be required at each of the following thresholds: $101 million, $202 million, $1.0098 billion, 25% of the voting securities if their value exceeds $2.0196 billion; and 50% of the voting securities if their value exceeds $101 million.
The new thresholds are also used to determine the applicability of certain exemptions under the HSR Act and Rules.
The HSR filing fees will remain the same, but the thresholds that determine the fees have been revised. The filing fees, to be paid by the acquiring person in the transaction (unless the parties otherwise agree), will be as follows:
- $45,000 for transactions valued above $101 million but less than $202 million;
- $125,000 for transactions valued at or above $202 million but less than $1.0098 billion; and
- $280,000 for transactions valued at or above $1.0098 billion.
Revised Thresholds for Interlocking Directorates
The FTC also revised the dollar thresholds for evaluating interlocking directorates under Section 8 of the Clayton Act. Under certain circumstances, Section 8 prohibits one person from serving as a director or officer of two competing corporations if each corporation has capital, surplus and undivided profits aggregating more than $41,034,000, with an exception that an interlock is not covered if the competitive sales of either corporation are less than a de minimis threshold of $4,103,400. The aggregate capital, surplus and undivided profits of each corporation at the end of its last full fiscal year controls for Section 8 purposes. These new thresholds will be effective immediately after the official publication.
Revised Fines for HSR Act Violations
The HSR Act provides that any person (including any officer, director or partner thereof) who fails to comply with any provision of the Act, such as by consummating a reportable transaction without observing the notification and waiting period requirements of the Act, may be subject to a civil penalty for each day during which such person is in violation of the Act. The maximum civil penalty for violations of the HSR Act was increased to $46,517 per day, effective as of January 10, 2022.