Hart-Scott-Rodino Reforms Announced
February 7, 2001
John R. Dierking- Orlando
Long-awaited changes to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the Act), were signed into law
on December 21, 2000, including revisions significantly impacting the size of
transactions requiring a filing and, in some cases, the amount of the filing
fee. Interim rules enabling the changes were published January 25, 2001.
The Act requires certain parties intending to merge, purchase or sell voting
securities or assets or engage in other acquisition transactions to provide
the Federal Trade Commission and U.S. Department of Justice with information
about their operations and the transaction for review prior to consummation of
the transaction. These changes, which are the first major revisions to
the Act since its initial passage in 1976, are effective as of February 1,
2001.
Primary Changes To Filing Thresholds
The primary changes to the filing thresholds
under the Act are:
- The size of the transaction jurisdictional
threshold (which is measured by the amount of assets or voting securities the
acquiring person will hold as a result of the transaction) has increased to
$50 million from $15 million and the 15% size of the transaction threshold has
been eliminated. The net effect of these changes is that transactions
resulting in an acquiring person holding $50 million or less of assets or
voting securities of the acquired person will not be reportable under the Act.
- Transactions valued in excess of $200
million are now reportable under the Act without regard to the size of person
jurisdictional threshold (which generally requires one party to the
transaction to have sales or assets of $100 million or more and the other to
have sales or assets of $10 million or more). The size of person
jurisdictional threshold still applies to transactions valued between $50
million and $200 million.
Revised Filing Thresholds
Following the revisions to the Act, and unless
a specific exemption is applicable, a filing is now generally required if both
of the following jurisdictional thresholds are met:
- either the acquiring person, or the person
whose voting securities or assets are being acquired, is engaged in commerce
or in any activity affecting commerce
- as a result of such acquisition, the
acquiring person would hold an aggregate total amount of voting securities and
assets of the acquired person
in excess of $200 million, or
in excess of $50 million but not in
excess of $200 million, and
(a) voting securities or assets of a
person engaged in manufacturing which has annual net sales or total assets of
$10 million or more are being acquired by any person which has total assets or
annual net sales of $100 million or more,
(b) voting securities or assets of a
person not engaged in manufacturing which has total assets of $10 million or
more are being acquired by any person which has total assets or annual net
sales of $100 million or more, or
(c) voting securities or assets of a
person with annual net sales or total assets of $100 million or more are being
acquired by any person which has total assets or annual net sales of $10
million or more
Total assets are as shown on a person’s most
recent regularly prepared balance sheet. Annual net sales are as shown
on a person’s most recent annual income statement.
Exemptions
Even if the jurisdictional thresholds are met,
exemptions from the filing requirements under the Act are available for
certain transactions which the government has determined do not pose serious
antitrust concerns or where such transaction is subject to advance antitrust
review. Transactions for which exemptions may be available include: (i)
acquisitions of goods and realty transferred in the ordinary course of
business; (ii) certain acquisitions of new facilities constructed solely for
resale; (iii) certain used facilities acquired from a lessor of such
facilities; (iv) certain acquisitions of unproductive real property, office
and residential property, hotels and motels, recreational land, agricultural
property, retail rental space and warehouses; (v) certain acquisitions of
carbon-based mineral reserves; (vi) certain acquisitions of investment rental
property assets; (vii) acquisitions of obligations which are not voting
securities; (viii) intra-person transactions; (ix) transfers to or from a
federal agency, a state or political subdivision thereof, or a foreign
government or agency thereof; and (x) certain transactions which require prior
federal agency approval. The requirements for each exemption are
specific and should always be thoroughly reviewed to ensure the exemption
applies to a transaction.
Increases In Filing Fee
The filing fee under the Act, which is payable
by each acquiring person, has been adjusted from $45,000 to a three-tier
structure based on the value of the voting securities or assets held as a
result of the transaction as follows:
|
SIZE (VALUE) OF
the transaction |
Filing Fee
|
|
<$100 million |
$45,000
|
|
$100 million - <$500 million |
$125,000 |
|
$500 million or more |
$280,000 |
In addition, both the dollar thresholds and
filing fees will now be adjusted annually beginning with fiscal year 2005 to
reflect changes in the GNP during the previous year.
Waiting Period Under The Act
Once a filing under the Act is made by both
parties, an initial 30-day waiting period applies to most transactions.
In the event a request for additional information is issued in connection with
the filing, an additional 30-day waiting period from the date of substantial
compliance with such request now applies. This waiting period was
previously 20 days from the date of substantial compliance. In addition,
if the end of any waiting period falls on a Saturday, Sunday or legal public
holiday, such period is now extended to the end of the next day that is not a
Saturday, Sunday, or legal public holiday.
Penalties For Failure To File
The Act provides for a civil penalty of
$11,000 per day for failure to comply with any of its provisions and such
penalty may be imposed on any person, or any officer, director or partner of
such person. In addition, a court may order substantive compliance with
the provisions of the Act or grant equitable relief, such as rescission of the
transaction.
For additional information or questions
regarding the Act, please contact John Dierking at 1-888-688-8500, Ext. 25215.