The Federal Trade Commission (FTC) has revised the thresholds that govern pre-merger notification requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act), as well as the thresholds for interlocking directorates under Section 8 of the Clayton Act. The new HSR Act thresholds will become effective for all transactions closing on or after February 28, 2018.
HSR Act Thresholds
The HSR Act requires parties to transactions that meet the statutory thresholds to file notification with the FTC and Department of Justice, and abide by a waiting period before completing the transaction. The statutory thresholds are revised each year. On January 26, 2018, the FTC announced the revised thresholds for 2018.
Under the revised thresholds, parties to a transaction with a value of less than $84.4 million (increased from the 2017 threshold of $80.8 million) need not submit a notification or observe a waiting period. In contrast, parties must file notification with the federal antitrust agencies and observe the HSR Act waiting period, unless otherwise exempt, if the value of the transaction is greater than $337.6 million (increased from the 2017 threshold of $323 million). Further, parties to a transaction valued between $84.4 million and $337.6 million must file notification, unless otherwise exempt, if one party to the transaction has annual net sales or assets of $168.8 million and the other party to the transaction has annual net sales or assets of $16.9 million (increased from 2017 thresholds of $161.5 million and $16.2 million, respectively).
Clayton Act Section 8 Thresholds
Section 8 of the Clayton Act prohibits corporations that compete from having common directors if the companies have revenue that exceeds the statutory threshold, which is revised annually. Under the new thresholds for 2018, companies will have to abide by the prohibitions of Section 8 if each has capital, surplus, and undivided profits aggregating more than $34,395,000.
The statute provides an exemption if either of the corporations’ “competitive sales,” which is defined as revenue from products/services sold in competition with the other corporation, is below an annually adjusted threshold. Under the 2018 thresholds, corporations will be exempt from the requirements of Section 8 of the Clayton Act if either corporation has competitive sales less than $3,439,500. We also remind you that Section 8 does not apply if either corporation has competitive sales of less than 2 percent of its total revenue; or each corporation has competitive sales of less than 4 percent of total revenue. These percentage thresholds are not adjusted annually.