FTC Increases HSR Act Thresholds: "Size of Transaction" Test Raised to $70.9 Million
The Federal Trade Commission has revised the filing and other dollar-denominated thresholds contained in the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”). These adjustments are made annually based on changes in the U.S. gross national product for the fiscal year ending September 30. The revisions were published in the Federal Register on January 11, 2013 and take effect on February 11, 2013. The new thresholds will remain in effect until the next annual adjustment, expected in early 2014.
General Threshold to Determine Initial HSR Filing Obligation. Effective February 11, 2013, the minimum notification threshold under the HSR Act will increase from $68.2 million to $70.9 million. Thus, an acquisition will potentially trigger an HSR filing only if, as a result of the acquisition, the acquirer will hold assets, voting securities or non-corporate interests of the acquired person valued in excess of $70.9 million. The complete revised 2013 initial thresholds are as follows:
||2013 Threshold (Effective for transactions closing on or after February 11, 2013)
|Minimum "Size-of-Transaction" test
"Size-of-Person" Test (applicable only to transactions valued at less than the "Alternative Size-of-Transaction" test below)
Person #1: $13.6 million
Person #2: $136.4 million
Person #1: $14.2 million
Person #2: $141.8 million
Alternative "Size-of-Transaction" test (requiring HSR filing regardless of "Size-of-Person" test above)
To summarize, applying these new thresholds results in the following reporting obligations:
||HSR Reporting Obligation
|$70.9 million or less
|Greater than $70.9 million and less than $283.6 million
||Yes, but only if one person's net sales or total assets exceed $141.8 million and the other person's net sales or total assets exceed $14.2 million
|$283.6 million or more
Filing Fees. Although the amounts of the three filing fees under the HSR Act have not changed, as a result of the GNP-indexing adjustments outlined above, new break points will be used in calculating the three-tiered filing fee schedule as follows:
||Filing Fees (Effective for filings made on or after February 11, 2013)
|$70,900,000 to less than $141,800,000
|$141,800,000 to $709,100,000
|Transactions in Excess of $709,100,000
Note that while the new thresholds for determining the requirement to file under the HSR Act are effective for all transactions closing on or after February 11, 2013, the new thresholds for determining the applicable filing fee are effective for all filings first made on or after February 11, 2013.
Additional Notification Thresholds. As stated above, effective February 11, 2013, an acquisition that results in an acquirer holding more than $70.9 million worth of the assets, stock or non-corporate interests of an acquired person will cross the first of five staggered “notification thresholds.” The rules identify four additional thresholds that determine whether a subsequent acquisition of voting securities from the same acquired person will require additional HSR filings. These additional notification thresholds have been revised as follows:
|Original Additional Notifications Thresholds
||2012 Additional Notifications Thresholds
||2013 Additional Notifications Thresholds
|25% of the Voting Securities of an issuer
||(if the 25% stake is valued at greater than $1.3641 billion)
||(if the 25% stake is valued at greater than $1,418.1 billion)
|50% of the Voting Securities of an issuer
||(if the 50% stake is valued at greater than $68.2 million)
||(if the 50% stake is valued at greater than 70.9 million)
In effect, these staggered thresholds are designed to act as exemptions to relieve parties of the burden of making additional filings each time additional shares of the same person are acquired. Once a filing is made, the acquiring person is allowed one year from the end of the waiting period to cross the threshold stated in the filing; if it reaches the stated threshold within that period, it may continue acquiring shares up to the next threshold for five years from the end of the waiting period. These additional notification thresholds apply only to acquisitions of voting securities.
“Interlocking Directorate” Thresholds Also Adjusted
On January 14, 2013 the FTC announced revised dollar thresholds that trigger a prohibition preventing companies from having interlocking memberships on their corporate boards of directors for interlocking directorates. Section 8 of the Clayton Act prohibits, with certain exceptions, a person from serving as a director or officer of two competing companies if certain dollar thresholds are met. As revised, the prohibition against interlocking directors applies if each company has more than $28,883,000 (up from $27,784,000 for 2012) in capital, surplus and undivided profits; however, the prohibition does not apply if either company has less than $2,888,300 (up from $2,778,400 for 2012) in competitive sales. The revised dollar thresholds became effective immediately upon publication in the Federal Register on January 14, 2013.
What to Do?
Companies should be mindful of the increased dollar thresholds in assessing HSR Act filing obligations -- particularly for deals with either a filing date or closing date that straddles February 11, 2013. First, parties may be relieved from the obligation to make an HSR Act filing for a transaction closing on or after February 11, 2013 that falls just under the revised $70.9 million initial filing threshold. In addition, for HSR Act filings made on or after February 11, 2013, parties may realize the benefit of a lower filing fee for a transaction that just crosses over one of the current thresholds.
The FTC’s announcement of the above HSR Act and interlocking directorate changes is located on the FTC’s website at http://www.ftc.gov/os/2013/01/130110claytonact7afrn.pdf.