On Jan. 19, 2010, the U.S. Federal Trade Commission (“FTC”) announced revisions to the jurisdictional thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”), which will become effective on Feb. 22, 2010. The HSR Act requires notification to the FTC and the Department of Justice (“DOJ”) of mergers and acquisitions above a certain size before the merger or acquisition may occur. The parties to a qualifying transaction must submit a “Notification and Report Form for Certain Mergers and Acquisitions” to the FTC and DOJ with information about the companies’ businesses and the proposed merger. The parties must then wait for the waiting period prescribed in the statute (usually 30 days) to pass, or must obtain early termination of the waiting period from the government, before consummating the transaction.
Each year, the FTC revises the jurisdictional thresholds for notification based on the change in the gross national product, as required by the 2000 Amendments to Section 7A of the Clayton Act. The FTC has announced the revised HSR notification thresholds for 2010. The most significant changes are decreases in the “size of the transaction” and the “size of the person” tests under the HSR Act and Rules.
Under current law, an acquisition of voting securities or assets may be reportable to the government if the securities or assets have a value in excess of $65.2 million (“size of the transaction test”), and one of the acquired or the acquiring parties has yearly net sales or total assets of at least $13.0 million and the other party has yearly net sales or total assets of at least $130.3 million (“size of the person test”). If the size of the transaction is in excess of $260.7 million, then the size of the parties is immaterial.
The new thresholds reduce these dollar amounts, sweeping more transactions into the notification and review process. Under the new standards, the parties may have to report a transaction if the size of the transaction is in excess of $63.4 million and one of the parties has yearly net sales or assets of at least $12.7 million and $126.9 million, respectively. Further, the size of the person test does not apply if the value of the transaction is greater than $253.7 million.
The revised rules also lower the notification thresholds with respect to acquisitions of voting securities from the same party. Under the new rules, notification is required at each of the following thresholds: $63.4 million; $126.9 million; $634.4 million; 25 percent of the voting securities if their value exceeds $1,268.7 million; and 50 percent of the voting securities if their value exceeds $63.4 million.
The thresholds determining the amount of the filing fees are also being adjusted in accordance with the revised notification thresholds. Although the filing thresholds change, the amount of the filing fees themselves remain the same. For transactions valued at more than $63.4 million and up to $126.9 million, the acquiring person must pay a filing fee of $45,000. For transactions valued at $126.9 million and up to $634.4 million, there is a $125,000 filing fee. For transactions valued at or above $634.4 million, the filing fee is $280,000. In addition, the revised threshold dollar amounts also have been adjusted for certain HSR Act exemptions.
The FTC also has announced revised thresholds governing interlocking directorates under Section 8 of the Clayton Act. In certain cases, Section 8 prevents one person from serving as a director or officer of two competing corporations if both corporations have capital, surplus and undivided profits that total more than $10 million. There is an exception if the competitive sales of either of the companies are less than $1 million. The FTC revises these dollar thresholds each year. The new thresholds, which became effective on January 19, 2010, are $25,841,000 and $2,584,100, respectively.
Click here to read the text of the FTC announcement concerning the HSR notification thresholds.
Click here to read the text of the FTC announcement concerning Section 8 jurisdictional thresholds.
For more information, please contact any of the lawyers listed below:
William Berkowitz, Co-chair, Antitrust and Trade Regulation Group
bill.berkowitz@bingham.com, 617.951.8375
Thane Scott, Partner, Antitrust and Trade Regulation Group
thane.scott@bingham.com, 617.951.8040
This article was originally published by Bingham McCutchen LLP.