The Federal Trade Commission ("FTC") recently announced revised jurisdictional thresholds for reporting transactions pursuant to the Hart Scott Rodino Antitrust Improvements Act of 1976 ("HSR"), and for interlocking directorates, which are governed by Section 8 of the Clayton Act.
Changes to the Hart Scott Rodino Process
Section 7A of the Clayton Act, which is more commonly known as the HSR Act, requires all persons contemplating certain mergers, acquisitions, joint ventures and corporate and non-corporate formations (e.g., LLCs and LPs), which meet or exceed the jurisdictional thresholds in the HSR Act, to notify the FTC Bureau of Competition and the Department of Justice Antitrust Division and to wait the statutory 30-day period before consummating the transaction (unless early termination is granted). Pursuant to the 2000 Amendments to Section 7A, the FTC is required to revise the jurisdictional thresholds annually based on the change in gross national product. These revised thresholds will take effect on February 28, 2008 and apply to all transactions that are filed on or after this date.
Not Reportable: No transaction resulting in an acquiring person holding less than $63.1 million of assets or voting securities of an acquired person will need to be reported under the rules.
Always Reportable: All acquisitions that result in an acquirer holding an aggregate total amount of the voting securities or assets of the acquired party in excess of $252.3 million will be reportable, unless otherwise exempted.
"Size of the Person" Test: Acquisitions valued between $63.1 million and $252.3 million are reportable based on the size of the acquiring person and the size of the acquired person (i.e., "size of the person test"). Generally, the "size of the person test" will require that one side of the transaction have sales or assets of at least $12.6 million and the other side have sales or assets of at least $126.2 million.
The filing fees will remain the same. As of February 28, 2008, the filing fees will apply to the revised thresholds as follows:.
Section 8 of the Clayton Act prohibits a person from serving as a director or an officer of two competing organizations if two thresholds are met -- capital, surplus and profits of a certain value; and sales of a certain level. The thinking is that if competing organizations share officers or directors, there is a high likelihood that the organizations will not compete with one another, or not compete aggressively.
Pursuant to the 1990 Amendment to Section 8, the FTC is required to revise the Section 8 jurisdictional thresholds annually based on the change in gross national product. Effective immediately, no person can serve as a director or officer of two competing organizations if each competitor has capital, surplus, and undivided profits aggregating more than $25,319,000, except that neither corporation is covered if the competitive sales of either corporation are less than $2,531,900. Failure to comply with these thresholds could result in liability under the antitrust laws.