On January 19, 2017, the Federal Trade Commission (FTC) announced revised notification thresholds pursuant to the Hart-Scott Rodino Act (HSR). Section 7A of the Clayton Act, 15 U.S.C. § 18a, requires parties to file a pre-merger notification with the FTC and the US Department of Justice, Antitrust Division (DOJ) prior to closing a merger or acquisition that meets the HSR’s size-of-transaction and size-of-person thresholds.
The FTC is required to revise the HSR thresholds annually based on changes in the gross national product. The following adjusted thresholds for 2017 will go into effect for transactions that close on or after the effective date, which will be 30 days after the date when the new thresholds are published in the Federal Register (which has not yet happened but is expected soon):
Size of Transaction
Transactions now valued greater than US$80.8 million will trigger the HSR reporting requirements. The adjusted threshold establishes an absolute floor of US$80.8 million, meaning that there is no HSR reporting requirement for any transaction valued at US$80.8 million or less, regardless of the percentage of assets or voting securities to be acquired.
Size of Person
Under the size-of-person test, when the value of a proposed transaction exceeds US$80.8 million, but is less than US$323 million, the transaction must be reported if (1) one person to the transaction has total assets or net sales of US$161.5 million or more and (2) the other has total assets or net sales of US$16.2 million or more.
All transactions valued in excess of US$323 million will be reportable without regard to the size-of-person test.
Parties contemplating merger or acquisition activity are strongly encouraged to consult antitrust counsel prior to closing to determine whether premerger notification is required. The rules governing the calculation of the relevant thresholds and the applicability of particular exemptions to all or part of the transaction are complex. More importantly, under certain circumstances, parties can face significant penalties for failure to comply with these filing obligations. These penalties were substantially increased this past summer and can now reach as high as US$40,000 per day.
Note that, even if an acquisition or merger does not meet the dollar threshold, and thus is not reportable under HSR, there may be competitive issues that should be addressed before consummation of the transaction. The FTC and the Department of Justice have the authority under Section 7 of the Clayton Act and Section 5 of the FTC Act to challenge transactions likely to substantially lessen competition.