New HSR Thresholds to Take Effect Soon

The basic size-of-transaction threshold will now be $94 million.

The new HSR threshold amounts will become effective on February 28. The revisions are made pursuant to an amendment to the 1976 HSR Act, which requires the FTC to adjust HSR jurisdictional threshold tests annually. The changes are based on the U.S. gross national product for the most recent fiscal year compared to the gross national product for the fiscal year ending September 30, 2003.

Size-of-Transaction Test

When the change is effective, premerger notification will be required if the purchaser will acquire and hold certain assets, corporate voting securities, or interests in non-corporate entities valued at more than $94 million. The original size-of-transaction threshold was $50 million; the 2019 amount was $90 million.

Size-of-Person Test

When the change is effective, the size-of-person threshold (the other major component of the HSR test) will be met if one of the parties to the transaction has total assets or annual net sales valued at $188 million or more, and the other party has at least $18.8 million in total assets or annual net sales. The original size-of-person thresholds were $100 million and $10 million respectively; in 2019, they were $180 million and $18 million.

Note that, under the HSR Act, acquisitions with a very high size-of-transaction value are not subject to the size-of-person threshold test and are therefore reportable unless otherwise exempt. When effective, the new threshold will be $376 million or more. The original number was $200 million; the 2017 threshold was $359.9 million.

Filing Fees

The amounts of HSR filing fees remain unchanged.

The filing fee of $45,000 is required for transactions where the acquiring person will hold an aggregate total amount of assets, voting securities, or controlling non-corporate interests valued at more than $94 million but less than $188 million.

A filing fee of $125,000 is required for transactions where the acquiring person will hold an aggregate total amount of assets, voting securities, or controlling non-corporate interests valued at $188 million or more but less than $940.1 million.

A filing fee of $280,000 is required for transactions where the acquiring person will hold an aggregate total amount of assets, voting securities, or controlling non-corporate interests valued in excess of $940.1 million.

Interlocking Directorates

In a related announcement, the FTC has also revised upwards the thresholds for the so-called “interlocking directorates” provisions of Section 8 of the Clayton Act, which prohibits a person from serving as a director or officer in two competing corporations. Based on these adjustments, Section 8’s ban will apply to corporations with capital, surplus, and undivided profits aggregating more than $38,204,000, unless one of the exceptions set forth in the statute apply.

Higher Civil Penalties

The FTC has also separately published inflation adjustments to the dollar amounts of potential civil penalties for the 16 provisions of law enforced by the FTC, including violations of the HSR Act. Effective January 14, 2020, the maximum civil penalty amount for violations of the HSR Act is increased to $43,280 per day. Under the adjusted civil penalties, companies failing to submit a required HSR filing for a full year could be subjected to civil penalties of up to $15.8 million.

To discuss the potential HSR reportability of your M&A transaction or other antitrust issues, contact Bill Hannay or any member of Schiff Hardin’s Antitrust and Trade Regulation Group.