On January 26, 2018, the Federal Trade Commission announced upward revisions to the jurisdictional thresholds for premerger notification filings under the Hart-Scott-Rodino (HSR) Act. The previous thresholds are being increased by 4.4 percent. The size of transaction threshold will now be $84.4 million USD.
The new HSR threshold amounts will become effective in late February or early March (30 days after publication of the official notice in the Federal Register). The revisions are made pursuant to an amendment to the 1976 HSR Act, which requires the FTC to adjust HSR jurisdictional threshold tests annually, based on changes to the U.S. gross national product for the most recent fiscal year compared to the gross national product for the fiscal year ending September 30, 2003.
Size of Transaction Test
When the change is effective, premerger notification will be required if the purchaser will acquire and hold certain assets, corporate voting securities, or interests in non-corporate entities valued at more than $84.4 million USD. (The original size-of-transaction threshold was $50.0 million; the 2017 amount was $80.8 million.)
Size of Person Test
When the change is effective, the size-of-person threshold is met if one of the parties to the transaction has total assets or annual net sales valued at $168.8 million or more, and the other party has at least $16.9 million in total assets or annual net sales. (The original size-of-person thresholds were $100.0 million and $10.0 million respectively; in 2017, they were $161.5 million and $16.2 million.)
Note that, under the HSR Act, acquisitions with a high size-of-transaction value are not subject to the size-of-person threshold test and are therefore reportable unless otherwise exempt. When effective, the new threshold will be $337.6 million or more. (The original number was $200.0 million; the 2017 threshold was $323.0 million.)
The amounts of HSR filing fees remain unchanged.
The filing fee of $45,000 is required for transactions where the acquiring person will hold an aggregate total amount of assets, voting securities, or controlling non-corporate interests valued at more than $84.4 million but less than $168.8 million.
A filing fee of $125,000 is required for transactions where the acquiring person will hold an aggregate total amount of assets, voting securities, or controlling non-corporate interests valued at $168.8 million or more but less than $843.9 million.
A filing fee of $280,000 is required for transactions where the acquiring person will hold an aggregate total amount of assets, voting securities, or controlling non-corporate interests valued in excess of $843.9 million.
In a related announcement, the FTC has also revised upwards the thresholds for the so-called “interlocking directorates” provisions of Section 8 of the Clayton Act, which prohibits a person from serving as a director or officer in two competing corporations. Based on these adjustments, Section 8’s ban will apply to corporations with capital, surplus, and undivided profits aggregating more than $34,395,000 USD, unless one of the exceptions set forth in the statute apply.
Higher Civil Penalties
The FTC has also published inflation adjustments to the dollar amounts of potential civil penalties for the 16 provisions of law enforced by the FTC, including violations of the HSR Act. For 2018, the maximum civil penalty amount for violations of the HSR Act has been increased from $40,654 to $41,484 per day. Under the adjusted civil penalties, companies failing to submit a required HSR filing for a full year could be subjected to civil penalties of up to $15 million.