The Federal Trade Commission (FTC) has announced this year's revisions to the thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR), which will be applicable to transactions closing on or after Feb. 28, 2018. The FTC is required to revise the HSR thresholds annually based on changes in the gross national product. In addition, adjusted civil penalties for noncompliance with HSR requirements took effect on Jan. 22, 2018, and are now up to $41,484 per day for each day of violation.
HSR requires parties intending to merge, purchase or sell voting securities, non-corporate interests or assets, or engage in certain other types of acquisition transactions to provide both the FTC and the Antitrust Division of the Department of Justice (DOJ) with information regarding their operations and the proposed transaction if certain minimum jurisdictional thresholds are met. HSR filings stay the consummation of a covered transaction for the waiting period specified by law based on HSR's purpose to allow the FTC and DOJ time to detect and potentially address any perceived anti-competitive effects of a transaction.
HSR filings are required if both the size-of-transaction and size-of-person jurisdictional thresholds are met and no exemption is available under the HSR regulations. For transactions closing on or after Feb. 28, 2018, the size-of-transaction threshold will be met if, as a result of the transaction, the buyer will hold voting securities, assets and/or non-corporate interests of the seller valued in excess of $84.4 million, an increase of approximately 4.45 percent from the current threshold of $80.8 million.
The size-of-person threshold will generally be met as of Feb. 28, 2018, if one party to the transaction has total assets or net sales of $168.8 million or more and the other party to the transaction has total assets or net sales of $16.9 million or more – provided that this threshold will not apply to transactions valued at $337.6 million or more. The size-of-person threshold is measured at the ultimate parent entity level of each party and includes all entities controlled by each such ultimate parent entity.
Each buyer is required to pay a filing fee in connection with any required filing under HSR. Although the filing fee thresholds are revised annually, the filing fee amounts are not indexed and have not been adjusted in well more than a decade. The applicable filing fee varies based on the value of the voting securities, assets and/or non-corporate interests to be held as a result of the transaction. As of Feb. 28, 2018, the HSR filing fee schedule will be as follows:
> $84.4 million but < $168.8 million
$168.8 million or more but < $843.9 million
$843.9 million or more
In addition to increases in the HSR threshold amounts, the FTC also recently announced adjustments to the civil penalty amounts for certain laws enforced by the FTC, including HSR. Noncompliance with any requirements under HSR may subject a person, or any officer, director or partner of such person, to civil penalties of up to $41,484 for each day of violation under the new adjustment, which became effective on Jan. 22, 2018.
Courts may order compliance with HSR requirements and an extension of the HSR waiting period until substantial compliance has occurred in addition to any monetary penalties. Courts may also grant certain other equitable relief for any failure by a person to substantially comply with either the HSR premerger notification requirements or with a request by regulators for additional information once an HSR filing has been made.