HSR Filing Threshold Increases Announced; Tops $90MM for the First Time

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HSR Act or Rule Provision

2019 Indexed Value

US$50 million size-of-transaction test

US$90.0 million

US$200 million size-of-transaction test

US$359.9 million

US$100 million size-of-person test

US$180.0 million

US$10 million size-of-person test

US$18.0 million

US$50 million notification threshold

US$90.0 million

US$100 million notification threshold

US$180.0 million

US$500 million notification threshold

US$899.8 million

25% of voting securities valued at 
US$1 billion notification threshold

US$1,799.5 million

US$110 million foreign exemption
threshold

US$198.0 million

Filing fees

US$45,000 for transactions valued at greater than US$90.0 million but less than US$180.0 million

 

US$125,000 for transactions valued at US$180.0 million or greater but less than US$899.8 million

 

US$280,000 for transactions valued at or in excess of US$899.8 million

The U.S. Federal Trade Commission (“FTC”) announced on February 15, 2019, that the dollar-based thresholds applicable to the Hart-Scott-Rodino (“HSR”) premerger notification program will be raised about 6.6 percent from the 2018 levels. As a result, the HSR minimum size-of-transaction threshold will be raised to US$90.0 million from US$84.4 million. Transactions valued above the old threshold of US$84.4 million, but below the new US$90.0 million threshold will no longer require an HSR filing. The dollar thresholds that determine the applicable filing fee will also be revised accordingly.

The HSR changes will become effective 30 days after publication of the new thresholds in the Federal Register. The new HSR thresholds will apply to transactions that close on or after that date. In previous years, the revised HSR thresholds have generally become effective in late February but, due to the government shutdown, the 2019 thresholds will not go into effect until mid- to late-March.

The FTC also increased the dollar thresholds under Section 8 of the Clayton Act, which prohibits any person from holding positions as an officer or director of competing corporations engaged in commerce, if the corporations meet certain size thresholds. The new Section 8 thresholds will take effect immediately upon publication in the Federal Register.

HSR Thresholds Raised

As a result of this most recent indexing, the HSR Act now provides that transactions resulting in holdings valued in excess of US$359.9 million among parties engaged in commerce are subject to premerger notification regardless of the size of the parties. Transactions that result in holdings valued in excess of US$90.0 million, but not exceeding US$359.9 million, are reportable only if the acquiring and acquired persons meet the “size-of-person” test — either the acquiring or acquired person must have annual net sales or total assets of US$180.0 million or more and the other party must have annual net sales or total assets of US$18.0 million or more. Acquired persons not engaged in manufacturing must meet the US$18.0 million test on the basis of the value of their assets alone, if their annual net sales are less than US$180.0 million. (Of course, certain transactions meeting these size thresholds may nevertheless be exempt under the HSR Act.)

The maximum civil penalties for violations of the HSR Act are similarly indexed, and are currently US$41,484 per day. The 2019 adjustments are expected to be announced soon, and will become effective upon publication in the Federal Register.

The HSR premerger notification program applies to large transactions involving large parties engaged in commerce. Dollar thresholds defining “large” were increased in 2000 from US$15 million to US$50 million and, since 2005, have been indexed to reflect changes in the gross national product (GNP). The following graph illustrates the changes in the HSR minimum size-of-transaction thresholds, as compared to changes in the GNP since 1978, when regulations implementing the HSR Act first went into effect. If the US$15 million minimum size-of-transaction threshold in 1978 had been indexed to changes in the GNP, it would be at approximately US$145.89 million rather than US$90.0 million. However, this year’s increase of $5.6 million over the previous year’s threshold represents the highest dollar increase in a single year since the annual adjustments were instituted in 2005.

Comparison of Minimum Size-of-Transaction Threshold to Annual GNP Adjusted Rate 1978-2018

Revised Rules for Officer and Director Interlocks

Section 8 of the Clayton Act generally prohibits a person from serving simultaneously as a director or officer of two sizable competing corporations engaged in commerce, unless their “competitive sales” — the gross revenues for all products and services sold by one corporation in competition with the other — are minimal. As with the HSR Act, the dollar thresholds defining “sizable” and “minimal” are indexed to changes in the gross national product. As a result of the most recent indexing, the Section 8 prohibition on officer and director interlocks now applies only if each competing corporation has capital, surplus, and undivided profits aggregating more than US$36.564 million. The interlocking officer and director prohibition does not apply, however, if either corporation’s “competitive sales” are less than US$3.6564 million. Other “safe harbors” exist that are based on calculating the competitive sales as a percentage of the corporation’s total sales.

Provision under Section 8 of
the Clayton Act

2019 Indexed Value

Capital, surplus and undivided profits aggregating more than US$10,000,000, under Section 8(a)(1)

US$36,564,000

Competitive sales of either corporation are less than US$1,000,000 under Section 8(a)(2)(A)

US$3,656,400

The FTC’s press release announcing the indexing changes to the HSR thresholds and the Section 8 thresholds may be accessed by clicking on the link below. The press release contains links to the FTC’s official announcements.

FTC Announces Annual Update of Size of Transaction Thresholds for Premerger Notification Filings and Interlocking Directorates

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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