Hart-Scott-Rodino Reforms Announced

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

1. in excess of $200 million, or
2. 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:

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.