This update is being provided in light of the FTC’s March 1, 2019 announcement of the new penalty amounts.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR), established under Section 7A of the Clayton Act, requires certain merging entities to submit to premerger notification and waiting period requirements. Parties to a merger or acquisition must file notification with the Federal Trade Commission (the “FTC”) and the Assistant Attorney General, pay a fee ranging from $45,000 to $280,000, and wait a designated period of time (usually 30 calendar days) before consummating the transaction, if the transaction meets certain criteria:
- Commerce: Either of the merging entities must be engaged in commerce or an activity affecting commerce.
- Size-of-Parties: The two entities involved must have total assets or annual net sales that meet FTC-defined levels (unless the transaction is large enough to waive this requirement).
- Size-of-Transaction: The “acquiring person” must end up holding more than an FTC-defined amount of the assets and/or voting securities of the “acquired person.”
On February 15, 2019, the FTC announced new minimum HSR thresholds for 2019:
- The size-of-parties thresholds will be $180 million or more for one party and $18 million or more for the other party.
- The size-of-transaction threshold will be $90 million, and transactions of $359.9 million or more are not subject to the size-of-party thresholds.
The new thresholds will take effect 30 days after publication in the Federal Register.
The FTC simultaneously announced an increase to the interlocking directorate thresholds under Clayton Act Section 8(a). Competitor corporations are subject to these rules, which limit the ability for a single director to serve concurrently on the boards of competing companies, if each corporation meets an FTC-defined threshold for capital, surplus, and undivided profits, except that corporations must also meet a minimum threshold of competing sales to be subject to the rules. For 2019, corporations with capital, surplus, and undivided profits aggregating more than $36,564,000 will be subject to these requirements with respect to corporations with which they share $3,656,400 in competitive sales.
The new thresholds will take effect immediately upon publication.
The FTC also annually adjusts the HSR civil penalty maximum that could be imposed for HSR violations. Once adjusted, the maximum civil penalty applies to all penalties assessed after that, even if relating to violations which preceded the date of the adjustment. The new maximum civil penalty, effective February 14, 2019, is $42,530 per day in violation. The adjustments normally occur in January, but the 2019 adjustment was delayed due to the backlog at the FTC resulting from the recent government shutdown.