Notification Threshold Adjustments
The US Federal Trade Commission (FTC) announced revised thresholds for Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) pre-merger notifications on January 26, 2018. These increased thresholds will become effective in late February or early March. These new thresholds apply to any transaction that closes on or after the effective date.
- The base filing threshold, which frequently determines whether a transaction requires filing of an HSR notification, will increase to $84.4 million.
- The alternative statutory size-of-transaction test, which captures all transactions valued above a certain size (even if the “size-of-person” threshold is not met), will be adjusted to $337.6 million.
- The statutory size-of-person thresholds will increase slightly to $16.9 million and $168.8 million.
The adjustments will affect parties contemplating HSR notifications in various ways. Transactions that meet the current “size-of-transaction” threshold but will not meet the adjusted $84.4 million threshold will only need to be filed if they will close before the new thresholds take effect in late February or early March. The adjustments will also affect various exemptions under the HSR rules. For example, acquisitions by US persons of foreign assets and voting securities of foreign issuers will be exempt unless they generated US sales in excess of $84.4 million or, in the case of foreign voting securities, the issuer has assets in the United States valued in excess of $84.4 million.
Parties may also realize a benefit of lower notification filing fees for certain transactions. Under the rules, the acquiring person must pay a filing fee, although the parties may allocate that fee amongst themselves. Filing fees for HSR-reportable transactions will remain unchanged; however, the size of transactions subject to the filing fee tiers will shift upward as a result of the gross national product (GNP)-indexing adjustments:
- Transactions valued at or in excess of $84.4 million, but less than $168.8 million, require a $45,000 filing fee.
- Transactions valued at or in excess of $168.8 million, but less than $843.9 million, require a $125,000 filing fee.
- Transactions valued at or in excess of $843.9 million require a $280,000 filing fee.
Interlocking Directorate Thresholds Adjustment
The FTC also announced revised thresholds for interlocking directorates. The FTC revises these thresholds annually based on the change in the level of GNP. Section 8 of the Clayton Act prohibits a person from serving as a director or officer of two competing corporations if certain thresholds are met. Pursuant to the recently revised thresholds, Section 8 of the Clayton Act applies to corporations with more than $34,395,000 in capital, surplus and undivided profits, while it does not apply where either interlocked corporation has less than $3,439,500 in competitive sales. These new thresholds are effective immediately upon publication in the Federal Register, expected within the week.