In January, the Federal Trade Commission (“FTC”) announced annual increases to the notification thresholds for premerger filings required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). The HSR Act generally requires parties to transactions–e.g., mergers, joint ventures, acquisitions of assets or voting securities–that meet certain thresholds to file premerger notifications with both the FTC and the United States Department of Justice (“DOJ”), and observe a statutory waiting period prior to closing. The increased notification thresholds will become effective on February 27, 2017, and will apply to all transactions that close on or after the effective date.

Size-of-Transaction Thresholds

Effective February 27, 2017, the size-of-transaction notification thresholds will increase as follows:

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The size-of-transaction test will be met if, as a result of the transaction, the acquiring party’s aggregate holdings in the acquired party (as calculated under the HSR Act) will exceed any one of the notification thresholds. A proposed transaction that satisfies the size-of-transaction test may require an HSR notification if the size-of-person test (discussed below) is also met and no exemptions apply.

Size-of-Person Thresholds

Effective February 27, 2017, the size-of-person notification thresholds will increase as follows:

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The size-of-person test will be met if one party to the proposed transaction has assets or annual sales totaling $161.5 million or more and the other party to the proposed transaction has assets or annual sales totaling $16.2 million or more. The size-of-person test need not be met, however, if the total value of the proposed transaction exceeds $323 million (this is an increase from the 2016 threshold of $312.6 million).

Filing Fees & Penalties

While the filing fees required in connection with an HSR notification will not change in 2017, the corresponding thresholds upon which the required fees are determined have been revised, as discussed above. Transactions that exceed the new size-of-transaction thresholds of $80.8 million, $161.5 million, and $807.5 million, require filing fees of $45,000, $125,000, and $280,000, respectively.

In addition to the increased notification thresholds, the FTC announced on January 12, 2017 that the maximum civil penalties for failure to comply with the notification and waiting period requirements of the HSR Act will increase from $40,000 to $40,654 per day for each day of non-compliance.

Conclusion

Determining whether an HSR notification is required in connection with a transaction can be complicated, and requires an in-depth understanding of the HSR Act and the applicable exemptions.