On January 7, 2009 the Federal Trade Commission announced revised thresholds for Hart-Scott-Rodino ("HSR") Premerger Notification filings and for the jurisdictional thresholds that trigger the prohibition on interlocking directorates under Section 8 of the Clayton Act. These thresholds are revised annually to reflect changes in the gross national product.
The revised HSR thresholds will apply to all transactions that close on or after the effective date, which is 30 calendar days following publication of the changes in the Federal Register. This effective date is expected to be in late February. The Interlocking Directorates threshold revisions will be published in the Federal Register shortly and will be effective upon publication.
Section 8 of the Clayton Act prohibits the same person from serving as an officer or director of competing corporations if certain thresholds are met. Based on the revised thresholds, competitor corporations are covered by Section 8 if each one has capital, surplus, and undivided profits aggregating more than $26,161,000 (Section 8(a)(1)), except that no corporation is covered if the competitive sales of either are less than $2,161,100 (Section 8(a)(2)(A)).
Title II of the Hart-Scott-Rodino Antitrust Improvement Act of 1976 ("HSR Act"), codified in Section 7A of the Clayton Act, 15 U.S.C. § 18a, requires parties to certain mergers or acquisitions to report these transactions to both the Federal Trade Commission ("FTC") and the Antitrust Division of the United States Department of Justice ("DOJ") prior to consummating the transaction. The acquiring firm also must pay a filing fee, which is calculated based on the value of the transaction. 16 C.F.R. § 803.9(a). The HSR Act applies to acquisitions of voting securities, assets, and non-corporate interests, and also may apply to the formation of joint ventures, corporations, or non-corporate entities. The adjusted HSR threshold applicable to most acquisitions of voting securities or assets will be $65.2 million. The FTC monitors compliance with the HSR Act, violation of which carries a maximum penalty of $11,000 per day, and has imposed substantial civil penalties for violations, as it did most recently in a case filed in December 2008. See, e.g., United States v. ESL Partners, L.P., and ZAM Holdings, L.P., 1:08-cv-02175 (D.D.C.) (complaint filed Dec. 15, 2008).
Section 7A of the Clayton Act applies to acquisitions that meet the following tests reflecting the revised thresholds:
Commerce Test. Either the acquiring or acquired person must be "engaged in commerce or in any activity affecting commerce";
Size-of-Transaction Test. The acquiring person must hold, as a result of the transaction, voting securities or assets of the acquired person in excess of $65.2 million, and the Size-of-Person test must be met, unless the value of the securities or assets exceeds $260.7 million, in which case the parties must report the transaction notwithstanding the size of the parties;
Size-of-Person Test. If the value of the securities and assets held as a result of the transaction is between $65.2 million and $260.7 million, the transaction must be reported if either the acquired or acquiring person has annual net sales or total assets of at least $130.3 million and the other party to the transaction has at least $13 million in annual net sales or total assets. However, if the acquired person is engaged in manufacturing, and its total sales are less than $130.3 million, only its total assets are considered in determining its size. The size-of-person is determined as to the ultimate parent entity, which is the entity which is not controlled by any other entity, together with all entities it controls.
The acquiring firm also must pay a filing fee, which is calculated based on the value of the transaction. 16 C.F.R. § 803.9(a).
- If the value of the assets or securities to be held as a result of the transaction is greater than $65.2 million but less than $130.3 million, the filing fee is $45,000.
- If greater than $130.3 million but less than $651.7 million, the fee is $125,000.
- If $651.7 million or greater, the fee is $280,000.
The thresholds described are as adjusted annually and will be effective for all deals closing on or after the effective date through January 2010 as described herein.
Federal Register Notices: