Higher Filing Thresholds for HSR Act Premerger Notifications and Interlocking Directorates Announced- Update

Sheppard Mullin Richter & Hampton LLP

Higher Thresholds For HSR Filings

On January 28, 2020, the Federal Trade Commission announced revised, higher thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The filing thresholds are revised annually, based on the change in Gross National Product (GNP).

The new thresholds will become effective on February 27, 2020. Acquisitions that have not closed by the effective date will be subject to the new thresholds.

The HSR Act notification requirements apply to transactions that satisfy the specified “size of transaction” and “size of person” thresholds. Parties to mergers and acquisitions meeting the thresholds must report their transactions to the Federal Trade Commission and Department of Justice and must observe a waiting period before closing. The key adjusted thresholds are summarized in the following chart:
Size of Transaction Test Notification is required if

 

  • the acquiring person will hold certain assets, voting securities, and/or non-corporate interests valued at more than $94 million AND the parties meet the Size of Person test; OR
  • the acquiring person will hold certain assets, voting securities, and/ornon-corporate interests valued at more than $376 million – such transactions are not subject to the Size of Person test.
Size of Person Test Generally, one “person” to the transaction must have at least $188 million in total assets or annual net sales, and the other must have at least $18.8 million in total assets or annual net sales.

While the filing thresholds have changed, the filing fees have not, but will be based on the new thresholds as follows: $45,000 for transactions valued at more than $94 million but less than $188 million; $125,000 for transactions valued at $188 million or more, but less than $940.1 million; and $280,000 for transactions valued at $940.1 million or more. The above rules are general guidelines only and their application may vary depending on the particular transaction.

Higher Thresholds For the Prohibition Against Interlocking Directorates

Higher thresholds for the prohibition in Section 8 of the Clayton Act against interlocking directorates became effective on January 28, 2020. Section 8 prohibits, with certain exceptions, one person from serving as a director or officer of two competing corporations if two thresholds are met. Applying the new thresholds, competitor corporations are covered by Section 8 if each one has capital, surplus and undivided profits aggregating to more than $38,204,000, with the exception that the interlock is not prohibited if the competitive sales of either corporation are less than $3,820,400. As with HSR Act thresholds, the FTC is required to revise Section 8 thresholds annually based on the change in the GNP.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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