I’d been meaning to get back into the swing of blogging, so why not use the occasion of the announcement of the new HSR thresholds to get back to the very, very basics?
Okay, so if you’re reading this, you probably already know this stuff, but maybe you need a refresher? (Or maybe I’m not feeling any more creative than this at the moment?)
So, anyway, there is this thing called the Hart-Scott-Rodino Act from back in 1976 (a good year, if you ask some like me that’s still barely clinging to his 30s). I’m told there was concern at the time that mergers and acquisitions were reducing competition by combining competititors, but it was difficult for the Department of Justice and the Federal Trade Commission to do much about it because they wouldn’t learn about deals until they were completed, or much later. To use the typical cliche, how do you unscramble the competitive eggs after the companies have already been combined?
Then someone (likely not Senators Hart and Scott or Representative Rodino) got the bright idea to amend the Clayton Act so that parties to certain transactions would have to give notice to DOJ and the FTC before the deals could close. And a new legal industry was born.
To state the glaringly obviously, the idea was to give the agencies the opportunity to investigate whether the proposed transaction would substantially lessen competition.
But lots of deals happen every day (or they do now and I assume they did back then), almost none of which really have any effect on competition. When St. Paul Pete’s World of Tires acquires Minneapolis Moe’s Tire Emporium, there is not a lot for the curious antitrust regulator to sink her teeth into.
So they needed some sort of screen to identify which transactions needed a pre-closing review. They could have, as some countries do, required notification for transactions that combine competitors or create a firm with a market share over some arbitrary threshold, which arguably would have brought agency attention only to those transactions that actually matter for competition. But if you do that, how do you define the market and how do you prevent parties from being influenced in doing so by their desire not to file?
They decided to determine which transactions require notice by looking at their value, presumably reasoning that larger transactions are more likely to raise issues. Or maybe just assuming that really small transactions aren’t very likely to substantially lessen competition. Either way, I’m not sure the assumption is warranted, and the not-infrequent agency challenges to transactions that fall below the threshold might suggest they agree.
But nobody asked me and I’m not sure I have a better idea anyway, so thresholds it is.
Which means we finally get the news portion of this post. The FTC is doing it’s annual thing again, announcing latest and greatest new threshold dollar amounts.
If you’ve been reading this blog (yeah, I know, who am I kidding), you know there are various thresholds you need to keep an eye on if you’re going to be able to tell whether a transaction requires a notification. I’ll avoid rehashing them here, but feel free to click the upcoming links for further reading.
The new lowest size of transaction threshold will $76.3 million. The size of person thresholds will be $15.3 million and $152.5 million. The threshold over which the size of person test does not apply will be $305.1 million.
The new thresholds will take effect 30 days after they are published in the Federal Register. I’ll try to keep you posted.
The FTC also maintains thresholds that are applicable to Section 8 of the Clayton Act. Those thresholds will also be going up, but maybe that’s a topic for another day.