Friday, January 28, 2011

FTC Revises Thresholds for Merger Filings, Interlocking Directorates

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The FTC has announced its annual revisions to the thresholds for notifying the antitrust agencies of a proposed acquisition and merger pursuant to the report-and-wait requirements of the Hart-Scott-Rodino (HSR) Act.

The thresholds, which were increased based on the change in the Gross National Product (GNP), will become effective February 24, 2011.

Disclosure Requirements

Pursuant to the HSR Act, plans for large acquisitions and mergers must be disclosed to the Department of Justice and the FTC to enable the federal antitrust enforcement authorities to examine their competitive effects and have an opportunity to challenge them under the antitrust laws prior to consummation. Only the transactions that exceed the jurisdictional thresholds need to be reported on the Notification and Report Form.

However, in light of the recent increase in the number of federal enforcement actions challenging consummated mergers, it must be understood that the antitrust agencies can challenge a merger or acquisition that does not meet the HSR thresholds.

Under the revised thresholds, acquisitions that result in an acquirer holding an aggregate total amount of the voting securities and assets of the acquired party meeting or exceeding $263.8 million will be reportable (up from the current $253.7 million), unless otherwise exempted.

“Size of Person” Test

No transaction resulting in an acquiring person holding $66 million or less (up from $63.4 million or less) of assets or voting securities of an acquired person will need to be reported. The reportability of transactions falling between these boundaries is based on the “size of person” test.

Under the “size of person” test, transactions valued at $66 million or more but less than $263.8 million will be reportable if one party has sales or assets in excess of $131.9 million and the other $13.2 million (up from $126.9 million and $12.7 million, respectively).

Filing Fees

Along with notifying the agencies, parties must pay premerger filing fees. The fees are based on the size of the transaction. Under the revised thresholds, a $45,000 filing fee will be required for reportable transactions valued at less than $131.9 million (up from $126.9 million); a $125,000 filing fee will be required for reportable transactions valued at least $131.9 million but less than $659.5 million (up from $634.4 million); and a $280,000 filing fee will be assessed on the largest transactions.

Interlocking Directorates

The FTC has also released its annual recalculation of profits and sales thresholds applicable in determining whether an individual can serve as an officer or director of two or more competing corporations. Under Sec. 8 of the Clayton Act, the FTC is required to recalculate the figures annually based on changes in the GNP.

Under the new threshold amounts, effective January 25, 2011, interlocking management is prohibited if each of the companies has capital, surplus, and undivided profits in excess of $26,867,000 and the competitive sales of each corporation exceed $2,686,700. These figures are up from last year’s thresholds—$25,841,000 for Clayton Act, Section 8(a)(1), and $2,584,100 for Clayton Act, Section 8(a)(2)(A).

The FTC notice appears here at 76 Federal Register 4349, January 25, 2011.

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