On February 2, 2021, the Federal Trade Commission (FTC), the agency charged with administering premerger notification requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), announced decreased notification thresholds for 2021. Under the new thresholds, the minimum “size of transaction” threshold will decrease from $94 million to $92 million. Transactions resulting in aggregate holdings of voting securities, assets, or non-corporate interests exceeding this threshold will be reportable to the U.S. antitrust authorities, unless otherwise exempt. The new thresholds will go into effect on March 4, 2021, and are summarized in the following tables:
Size of Transaction
Transactions valued at more than $92 million but $368 million or less must also meet the “size of person” test.
Size of Person
$1 billion (if acquiring 25%)
The new thresholds will not affect the amount of filing fees due under the HSR Act. However, applicable fees will be based on the new thresholds, as follows:
HSR Filing Fees
Transactions valued at less than $184 million
Transactions valued at $184 million or more but less than $919.9 million
Transactions valued at $919.9 million or more
The HSR Act requires premerger notification of transactions that satisfy the “size of transaction” and “size of person” tests and are not otherwise exempt. The thresholds are adjusted annually to reflect changes in the U.S. gross national product. A contracting U.S. economy has led to the unusual downward adjustment of the thresholds for 2021. The new thresholds will become effective on March 4, 2021, through the next annual adjustment expected in Q1 2022.
Under the new thresholds, the “size of transaction” test will be met if, as a result of a transaction, the acquiring person at the UPE level will hold aggregate voting securities, assets, or non-corporate interests of the acquired person valued at more than $92 million. For transactions valued more than $92 million but $368 million or less, the parties must also meet the “size of person” test. Transactions valued at more than $368 million will be reportable regardless of the size of the parties, unless an exemption applies.
Under the new thresholds, where it applies, the “size of person” test will be satisfied where one party to the transaction at the UPE level has total assets or annual net sales of $184 million or more and the UPE of the other party has total assets or annual net sales of $18.4 million or more.
The FTC also announced revised thresholds relating to Section 8 of the Clayton Act. Section 8 prohibits interlocking directorates in which one “person” serves simultaneously as an officer or director of two or more competing corporations, subject to certain exceptions. Under the revised thresholds, 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 are at least $3,738,200.
Noncompliance with the HSR Act can result in significant penalties. Specifically, any person (including any officer, director, or partner thereof) who fails to comply with any provision of the HSR Act may be subject to a civil penalty of up to $43,792 (effective January 13, 2021) for each day during which such person is in violation.