On February 2, 2021, the Federal Trade Commission (FTC) announced revised thresholds for merger notifications under the Hart-Scott-Rodino (HSR) Act. Effective March 4, 2021, the lowest size-of-transaction filing threshold (also known as the “$50 million threshold”) will decrease from the current $94 million to $92 million. Parties to transactions that close on or after the effective date are subject to the revised thresholds.
The “$10 million” and “$100 million” size-of-person thresholds will decrease to $18.4 million and $184 million, respectively. The size-of-person test applies to transactions valued at less than $200 million (as adjusted, $368 million) and is based on the total assets and annual net sales of the ultimate parent entities (UPEs) of the acquiring and acquired persons. In general, to be reportable, the UPE of one party to the transaction must have annual net sales or total assets of $10 million or more (as adjusted, $18.4 million) and the UPE of the other party must have annual net sales or total assets of $100 million or more (as adjusted, $184 million). There are, however, several nuances and exceptions to the size-of-person test that must be examined separately for each transaction.
The decreased thresholds arise from amendments to the HSR Act in 2000 that require the FTC to adjust the thresholds annually for change in the gross national product. This year, the thresholds went down to reflect the decrease in 2020 GNP. All the notification and exemption dollar thresholds in the HSR statute, regulations and reporting instructions that are subject to annual adjustments will also be adjusted downward. The new HSR dollar thresholds will be as follows:
The FTC has also announced that it will be adjusting both dollar thresholds for Section 8 of the Clayton Act to account for changes in the GNP. Section 8, in many circumstances, forbids a person from serving as an officer or director of two competing corporations if two thresholds are met. Under the revised thresholds, effective when published in the Federal Register, Section 8 may apply when each of the competing corporations has capital, surplus and undivided profits aggregating more than $37,382,000 and each corporation’s competitive sales (e.g., sales derived from product(s) for which the two companies compete) are at least $3,738,200.