On February 15, 2019, the Federal Trade Commission (FTC) published adjusted reporting thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act). Companies contemplating a merger should review the new thresholds to determine whether their transaction is reportable.
The new thresholds represent an approximate 6.6 percent increase over last year’s thresholds. They are expected to be published in the Federal Register during the week of February 18, 2019, and they will become effective 30 days after the date of their publication. This year’s revised thresholds were delayed due to the government shutdown in January.
Under the HSR Act, parties to mergers, acquisitions and other transactions must file premerger notification with the FTC and the Department of Justice Antitrust Division (DOJ), and then observe a 30-day statutory waiting period before consummating the transaction, if their transaction meets or exceeds certain monetary thresholds. While both the FTC and the DOJ have jurisdiction to review any reportable transaction, one of the two agencies typically will take primary responsibility for each deal. If necessary, parties also must cooperate with the agency’s investigation of their proposed transaction’s competitive effects. A small percentage of transactions for which HSR filings are submitted will be subjected to so-called “second requests” for additional information or a formal merger challenge by one of the agencies.
Adjusted Threshold for Size of Transaction Test
The minimum size of transaction requiring an HSR filing has been increased from $84.4 million to $90 million. For most purposes, the size of the transaction is calculated as the greater of the purchase price or the fair market value of the assets being acquired. If the purchase price or value of the acquired assets is below $90 million, there is no requirement to make an HSR filing even if the parties meet the size of parties test described below.
Adjusted Threshold for Size of Parties Test
Where the size of transaction test is met, generally one party to a transaction also must have assets or annual revenues of at least $180 million (up from $168.8 million) and the other must have assets or annual revenues of at least $18 million (up from $16.9 million) to trigger an HSR filing. The only exceptions are:
- If the size of the transaction is $359.9 million or more (up from $337.6 million), there is no size of parties test and the parties will need to file regardless of the assets or annual revenues of the parties involved.
- If the buyer meets the $180 million size of parties test and the target is a non-manufacturer, the target’s annual sales are disregarded so that the target will meet the test only if its assets exceed $18 million.
Adjusted Filing Fees
The HSR filing fees remain the same, but the thresholds used to determine the fees have been adjusted upward.
- For transactions valued between $90 million and $180 million (up from between $84.4 million and $168.8 million), the filing fee is $45,000.
- For transactions valued between $180 million and $899.8 million (up from between $168.8 million and $843.9 million), the filing fee is $125,000.
- For transactions valued at greater than $899.8 million (up from $843.9 million), the filing fee is $280,000.
Adjusted Civil Penalties
Businesses and persons who violate the HSR Act are subject to monetary penalties. For example, consummating a reportable merger without filing the required HSR submissions and observing the statutory waiting period may subject a party to a civil penalty for each day during which the party is in violation of the HSR Act. Gun jumping, in which parties share competitively sensitive information or otherwise act as though they were a merged entity before consummation takes place, also is a violation of the HSR Act (as well as a violation of Section 1 of the Sherman Act).
This year, the maximum penalty for an HSR Act violation will increase from $41,484 to $42,530 per day. The higher penalty amount will apply to any civil penalties adjudicated after the effective date of the adjusted thresholds, and it will apply to violations that predate the effective date.
Failure to comply with the HSR Act may have serious consequences for businesses and individuals. Businesses should consult with HSR counsel before proceeding with potentially reportable transactions.