FTC Revises Thresholds for HSR Filings and Interlocking Directorates

Revised HSR Notification Thresholds

The Federal Trade Commission (FTC) has recently announced higher thresholds for premerger notification filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act).  The new thresholds, which by law are adjusted annually, take effect on February 20, 2015, applying to all transactions that are consummated on or after the effective date.[1]

Under the HSR Act, parties to certain mergers or acquisitions that meet the “size of transaction” and the “size of person” thresholds are required to notify the FTC and Department of Justice before consummating the transaction.  The enforcement agencies then have 30 days to decide whether to seek additional information about the proposed merger or acquisition (a shorter, 15 day waiting period applies to cash tender offers and bankruptcy acquisitions).  The key adjustments to the reporting thresholds are:

• The “size of transaction” threshold is increased to $76.3 million (previously $75.9 million in 2014), meaning that only transactions resulting in the holding of voting securities, assets, and/or interests in non-corporate entities in excess of $76.3 million are subject to premerger notification

• The “size of person” threshold is increased to $15.3 million (previously $15.2 million in 2014) and $152.5 million (previously $151.7 million in 2014), respectively. 

Thus, only transactions that involve at least one party (or ultimate parent entity) with assets or annual sales of $15.3 million or more, and at least one remaining party (or ultimate parent entity) with annual sales or total assets of $152.5 million or more are subject to premerger notification; unless the size of the transaction exceeds $305.1 million (previously $303.4 million in 2014), in which case the transaction is reportable regardless of whether the size of the person test is met.

Premerger notification filing fee amounts remain unchanged, but will be based on the new thresholds as follows:

Revised Interlocking Directorate Thresholds Under Clayton Act § 8

The FTC also announced revised thresholds for interlocking directorates under Section 8 of the Clayton Act.  Section 8 of the Clayton Act prohibits a person, which includes a corporation and its representatives, from simultaneously serving as a director or officer of two competing corporations (Interlocking Directorates).  

According to the new thresholds, Interlocking Directorates are prohibited if:

•  Each corporation has capital, surplus and undivided profits in excess of $31,084,000 (previously $29,945,000)
• Competitive sales of both corporations equal or exceed $3,108,400 (increased from $2,994,500)

Section 8 of the Clayton Act provides exceptions, however, and even if the two above thresholds are met, Interlocking Directorates will not be deemed to violate the law if: (i) the competitive sales of either corporation are less than 2 percent of its total sales; or (ii) the competitive sales of each corporation are less than 4 percent of its total sales.

The new thresholds for Interlocking Directorates took immediate effect upon publication in the Federal Register on January 21, 2015.

[1] Transactions that are not subject to the reporting requirements of the HSR Act are still subject to the substantive antitrust laws (principally, Section 7 of the Clayton Act) and may still be investigated by the Department of Justice and the Federal Trade Commission, or state attorneys general.  The federal antitrust agencies have been particularly active in investigating and seeking antitrust enforcement actions relating to non-reportable transactions raising antitrust concerns, including consummated transactions.