FTC Announces Revised Hart-Scott-Rodino Thresholds Effective Feb. 27, 2017
The Federal Trade Commission (FTC) has announced its annual revisions to the thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR), which will apply to all transactions closing on or after Feb. 27, 2017. The FTC is required under the Clayton Act to revise the HSR thresholds annually based on changes in the gross national product, and this year's changes, like last year's, represent an approximately 1 percent increase over the current thresholds. In addition, adjusted civil penalties for noncompliance with HSR requirements took effect on Jan. 24, 2017, and are now up to $40,654 for each day of violation.
HSR requires parties intending to merge, purchase or sell voting securities, non-corporate interests or assets, or engage in certain other acquisition transactions to provide both the FTC and the Antitrust Division of the Department of Justice (DOJ) with information regarding their operations and the proposed transaction if certain minimum jurisdictional thresholds are met. HSR stays the consummation of a covered transaction for the waiting period specified by law based on HSR's purpose to allow the FTC and DOJ time to detect and potentially address any perceived anti-competitive effects of a transaction.
HSR filings are required if both the size-of-transaction and size-of-person jurisdictional thresholds are met and no exemption is available under the HSR regulations. As of Feb. 27, 2017, the size-of-transaction threshold will be met if, as a result of the transaction, the buyer will hold voting securities, assets and/or non-corporate interests of the seller valued in excess of $80.8 million, an increase from the current threshold of $78.2 million.
The size-of-person threshold will generally be met as of Feb. 27, 2017, if one party to the transaction has total assets or net sales of $161.5 million or more and the other party to the transaction has total assets or net sales of $16.2 million or more – provided that this threshold will not apply to transactions valued at $323 million or more. The size-of-person threshold is measured at the ultimate parent entity level of each party and includes all entities controlled by each such ultimate parent entity.
HSR Filing Fee
Each buyer is required to pay a filing fee in connection with any required filing under HSR. While the filing fee thresholds are revised annually, the filing fee amounts are not indexed and have not been adjusted in well over a decade. The applicable filing fee varies based on the value of the voting securities, assets and/or non-corporate interests to be held as a result of the transaction. As of Feb. 27, 2017, the filing fee schedule will be as follows:
> $80.8 million but < $161.5 million
$161.5 million or more but < $807.5 million
$807.5 million or more
Increased Penalties for Noncompliance
In addition to changes to the HSR thresholds, the FTC also recently announced adjustments to the civil penalty amounts for certain laws enforced by the FTC, including HSR. Under the new adjustment, which became effective on Jan. 24, 2017, noncompliance with any requirements under HSR may subject a person, or any officer, director or partner of such person, to civil penalties of up to $40,654 for each day of violation. These penalties increased substantially from up to $16,000 per day to up to $40,000 per day in a "catch-up" adjustment made by the FTC in June 2016 to address inflation since such penalties were first enacted. Beginning with the January 2017 increase, such penalties will also now be adjusted for inflation in January of each year.
In addition to any monetary penalties, courts may also order compliance with HSR requirements and an extension of the HSR waiting period until substantial compliance has occurred. Courts may also grant certain other equitable relief for any failure by a person to substantially comply with either the HSR premerger notification requirements or with a request by the regulators for additional information once an HSR filing has been made.
For more information regarding the revised HSR thresholds and the increased penalties for noncompliance, contact Holland & Knight Partner John Dierking.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.