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The U.S. Federal Trade Commission (“FTC”) announced on January 15, 2015 that the dollar-based thresholds applicable to the Hart-Scott-Rodino (“HSR”) premerger notification program will be raised less than one percent from the 2014 levels. As a result, the HSR minimum size of transaction threshold will be raised to $76.3 million from $75.9 million. Transactions valued above the old threshold of $75.9 million but below the new $76.3 million threshold will no longer require an HSR filing. The dollar thresholds that determine the applicable filing fee will also be revised accordingly.
Simultaneously, 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 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 new HSR thresholds have generally become effective in late February.
HSR Thresholds Raised
The HSR premerger notification program applies to large transactions involving large parties engaged in commerce. Dollar thresholds defining “large” were set in 2000 but were indexed to changes in the gross national product. As a result of this most recent indexing, the HSR Act now provides that transactions resulting in holdings valued in excess of $305.1 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 $76.3 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 $152.5 million or more and the other party must have annual net sales or total assets of $15.3 million or more. Acquired persons not engaged in manufacturing must meet the $15.3 million test on the basis of the value of their assets alone. Certain transactions meeting these size thresholds may nevertheless be exempt under the HSR Act; these exemptions are not affected by indexing.
Revised Rules for Interlocking Directorates
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 interlocking directorates now applies only if each competing corporation has capital, surplus, and undivided profits aggregating more than $31.08 million. The interlocking directorate prohibition does not apply, however, if either corporation’s “competitive sales” are less than $3.1 million. Other “safe harbors” exist that are based on calculating the competitive sales as a percentage of the corporation's total sales.
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The FTC’s press release announcing the indexing changes to the HSR thresholds and the interlocking directorates thresholds may be accessed by clicking on the link below. The press release contains links to the FTC’s official announcements.