FTC Announces Annual HSR Premerger Notification Threshold and Clayton Act Interlocking Directorate Thresholds Adjustments
The Federal Trade Commission (FTC) has announced that the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) thresholds will be increased. The FTC also announced that it has revised the thresholds that trigger prohibitions on certain interlocking directorates under Section 8 of the Clayton Act.
HSR Act Threshold Update
The FTC revises the HSR Act thresholds annually based on changes in the gross national product. The size-of-transaction filing threshold will increase from the current $78.2 million threshold to $80.8 million. The adjustments will become effective February 27, 2017, 30 days after the thresholds are published in the Federal Register. Transactions closing on or after the effective date will be subject to the revised thresholds.
Under the new thresholds, the parties to an acquisition or merger will, absent an applicable exemption, need to file pre-merger notifications with the Department of Justice and the FTC and observe the HSR Act's waiting periods if the transaction will result in either of the following:
- The acquiring person will hold more than $80.8 million (up from $78.2 million) worth of voting securities and assets of the acquired person and the parties meet the "size-of-person" requirements (set forth below); or
- Regardless of the size of the parties, the acquiring person will hold more than $323.0 million (up from $312.6 million) worth of voting securities and assets of the acquired person.
Meeting any one of the following subtests satisfies the "size-of-person" test:
- A person with $161.5 million (up from $156.3 million) or more of total assets (on its most recent regularly-prepared balance sheet) or annual net sales (from its most recently completed fiscal year) proposes to acquire voting securities or assets of a person with $16.2 million (up from $15.6 million) or more of annual net sales or total assets; or
- A person with $16.2 million or more of total assets or annual net sales proposes to acquire voting securities or assets of a person with $161.5 million or more of annual net sales or total assets.
For the purposes of applying the thresholds, the term "person" means the ultimate parent entity of the party engaged in the transaction. Certain exemptions may apply depending on the nature of the transaction and the location and nature of the assets and entities involved. As a result, additional analysis is often required before making a final determination regarding the need for a filing.
The filing fees for reportable transactions will be as follows:
- $45,000 for transactions in excess of $80.8 million but below $161.5 million
- $125,000 for transactions of $161.5 million or more but below $807.5 million
- $280,000 for transactions of $807.5 million or more
Clayton Act Threshold Update
The Clayton Act requires the FTC to revise the thresholds that trigger a prohibition preventing companies from having interlocking memberships on their corporate boards of directors under Section 8.
The thresholds are adjusted annually, based on the change in gross national product. The new 2017 thresholds for the Clayton Act’s prohibition on interlocking directorates are $32,914,000 for Section 8(a)(l) and $3,291,400 for Section 8(a)(2)(A). The new thresholds became effective upon publication in the Federal Register on January 26, 2017.