On February 2, 2021, the Federal Register published an FTC notice announcing the latest annual adjustments to the statutory thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (15 U.S.C. § 18a) (HSR). These annual adjustments are pegged to changes in gross national product. Because the overall economy declined in 2020, the HSR thresholds are declining year-over-year for just the second time ever. (The first time was during the Great Recession in 2010.)
Once the new thresholds come into effect, the HSR size-of-the-transaction threshold will decrease from $94 million to $92 million. The revised HSR thresholds will apply for transactions that close on or after March 4, 2021.
On January 21, 2021, the Federal Register also published an FTC notice with the latest annual adjustments to the statutory thresholds under Section 8 of the Clayton Act (15 U.S.C. § 19). The revised Section 8 thresholds are effective immediately.
(Original: $50 Million; New as of March 4, 2021: $92 Million)
The 2000 HSR amendments raised the size-of-the-transaction test to $50 million. This figure is currently $94 million, based upon the 2020 annual adjustment. On March 4, 2021, however, this threshold will decline to $92 million. Accordingly, for transactions that close on or after March 4, 2021, no HSR filing will be required unless the acquisition will result in the acquiring person holding an aggregate total amount of voting securities, non-corporate interests, and/or assets of the acquired person in excess of $92 million.
(Original: $10 Million/$100 Million; New as of March 4, 2021: $18.4 Million/$184 Million)
Under the new adjustments, acquisitions valued above $368 million will be reportable regardless of the size of the parties, and acquisitions valued at greater than $92 million, but less than or equal to $368 million, will only be reportable if the size-of-the-parties test is met. The revised thresholds adjust the size-of-the-parties test so that it (typically) will be met if either the acquiring or acquired person has annual net sales or total assets of $184 million or more, and the other person has annual net sales or total assets of $18.4 million or more.
Notification Thresholds for Acquisitions of Voting Securities
For acquisitions of voting securities, an acquiring person files for the highest applicable notification threshold among five choices. Acquiring 50 percent or greater of an issuer’s voting securities is the highest threshold, but below that level there are four different tiers for reporting acquisitions of minority interests in voting securities. The notification threshold may determine, for example, whether a subsequent acquisition of additional voting securities in the same issuer will require another HSR filing. The new notification thresholds will be, in ascending order:
- An aggregate total amount of voting securities valued at greater than $92 million, but less than $184 million
- An aggregate total amount of voting securities valued at $184 million or greater, but less than $919.9 million
- An aggregate total amount of voting securities valued at $919.9 million or greater
- Twenty-five percent of an issuer’s outstanding voting securities, if valued at greater than $1,839.8 million
- Fifty percent of an issuer’s outstanding voting securities, if valued at greater than $92 million
Filing Fee Thresholds
The filing fee amounts are not changing; in fact, the HSR filing fee amounts have not changed in more than a decade. However, because the thresholds for the application of the fees are decreasing, for transactions on the margin the cost of making an HSR filing is effectively going up.
- For transactions where the aggregate amount of assets, non-corporate interests, and voting securities to be held as a result of the acquisition will be more than $92 million, but less than $184 million, the filing fee will be $45,000.
- For transactions where the aggregate amount of assets, non-corporate interests, and voting securities to be held as a result of the acquisition will be $184 million or more, but less than $919.9 million, the filing fee will be $125,000.
- For transactions where the aggregate amount of assets, non-corporate interests, and voting securities to be held as a result of the acquisition will be $919.9 million or more, the filing fee will be $280,000.
Previous Size-of-the-Transaction Thresholds
For purposes of disclosing past asset acquisitions for Item 8 of the HSR form, and for analyzing a potential past failure to file under HSR, it remains necessary to look at the thresholds that were in place at the time of the prior acquisition. The size-of-the-transaction thresholds since the 2000 HSR amendments have been:
- $50 million as of February 1, 2001
- $53.1 million as of March 2, 2005
- $56.7 million as of February 17, 2006
- $59.8 million as of February 21, 2007
- $63.1 million as of February 28, 2008
- $65.2 million as of February 12, 2009
- $63.4 million as of February 22, 2010
- $66.0 million as of February 24, 2011
- $68.2 million as of February 27, 2012
- $70.9 million as of February 11, 2013
- $75.9 million as of February 24, 2014
- $76.3 million as of February 20, 2015
- $78.2 million as of February 25, 2016
- $80.8 million as of February 27, 2017
- $84.4 million as of February 28, 2018
- $90.0 million as of April 3, 2019
- $94.0 million as of February 27, 2020
- $92.0 million as of March 4, 2021
Most, although not all, of the dollar amounts in the HSR rules will be adjusted downward based upon the threshold indexing discussed above. It remains important for parties to be very careful in determining if a threshold is met given that the process can be very complex, the rules are highly technical, and failure to comply with HSR can result in significant civil penalties. Incidentally, the maximum civil penalty was recently increased to up to $43,792 for each day of noncompliance. Because this civil penalty is pegged to inflation rather than changes in gross national product, the civil penalty increased even though the HSR thresholds themselves declined.
Interlocking Directorates Thresholds
(Original: $10 Million; New as of January 21, 2021: $37,382,000)
Finally, in a separate Federal Register notice, the Federal Trade Commission updated the jurisdictional threshold for interlocking directorates under Section 8 of the Clayton Act. Section 8 prohibits, subject to certain exceptions, persons from serving as an officer or director of two competing corporations (a practice known as “interlocking”), provided that each corporation has “capital, surplus, and undivided profits” above the statutory threshold. The 1990 amendments to Section 8 set this threshold at $10 million, but based on the latest annual adjustment, the threshold has changed to $37,382,000.
Section 8 also has three safe harbor exceptions. One exception states that Section 8 does not apply if the competitive sales of either interlocked corporation are less than $1 million in 1989 dollars, as adjusted annually. This safe harbor has adjusted to $3,738,200 based on the new thresholds.