On January 6, 2009, the Federal Trade Commission announced its updated dollar thresholds to the Hart-Scott-Rodino Antitrust Improvements Act (“HSR”). These thresholds will become effective 30 days after publication in the Federal Register.

The HSR Act established various criteria for determining whether asset acquisitions and merger transactions must be reported to the FTC and the Department of Justice prior to consummation.  Generally, whether a transaction is subject to HSR reporting requirements generally depends on three tests:  (1) the In Commerce Test; (2) the Size-of-Transaction Test; and (3) the Size-of-Persons Test.  Parties to a transaction that meets the threshold criteria under these tests must report the transaction to the federal antitrust enforcement agencies and then observe a waiting period to enable the government to analyze the deal’s competitive effects. On an annual basis, the FTC makes an inflation adjustment to two of the criteria – the size-of-transaction test and the size-of-persons test. 

Reporting Thresholds

Size-of-Transaction Test. A transaction satisfies the reporting threshold under the size-of-transaction test if,  through the transaction, the acquiring party would obtain voting securities or assets of another party having a value that exceeds the threshold amount.  The recent adjustment to the reporting threshold raised the minimum amount of the deal value from $63.1 million to $65.2 million.  Once the new thresholds become effective, parties to a transaction valued at more than $65.2 million but at or below $260.7 million must report the transaction under HSR if the other reporting tests are satisfied (i.e., the in-commerce and size-of-persons tests).  Transactions with values below the new minimum threshold amount, i.e., $65.2 million, would not be reportable under any circumstances.  And any deal valued at over $260.7 and meeting the in-commerce test would be reportable even if the parties do not satisfy the size-of-persons test.  In evaluating the value of the deal for purposes of the size-of-transaction test, the relevant amount is the purchase price or the fair market value of the assets, whichever is greater. 

Size-of-Persons Test. Under the new thresholds, the size-of-persons test will apply to any transaction the value of which ranges between over $65.2 million and $260.7 million. A transaction will satisfy the size-of-persons test if one party to the transaction has annual net sales or total assets equal to or exceeding $13.0 million, and the other party to the transaction has annual net sales or total assets equal to or exceeding $130.3 million. In calculating whether a transaction must be reported under this test, the annual net sales and total sales will be based on a party’s most recent regularly prepared balance sheet. The size-of-persons test does not apply to a transaction with a value exceeding $260.7 million.  

HSR Filing Fees

Once the revised HSR thresholds take effect, a transaction with a value exceeding $65.2 million but below $130.3 million will require a $45,000 filing fee; a transaction with a value at or above $130.3 million but below $651.7 million will require a $125,000 filing fee; and a transaction valued at $651.7 million or greater will require a $280,000 filing fee.

Revised Interlocking Directorates Thresholds

The FTC also announced revised dollar thresholds for evaluating interlocking directorates under section 8 of the Clayton Act. Section 8 generally prohibits a person from serving as an officer or director for competing corporations other than banks, banking associations and trust companies.  Section 8 applies only if profits and sales exceed certain thresholds.  Under the revised thresholds, Section 8 will generally apply if both corporations have capital, surplus, and undivided profits aggregating more than $26,161,000 and competitive sales of at least $2,616,100, with certain exceptions.  These new thresholds will take effect on the date of publication in the Federal Register.

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