Key Antitrust Jurisdictional Thresholds Increase in February

February 2011

As lawyers, bankers and their clients applaud the widespread predictions of increased M&A activity in 2011, they should be aware that key jurisdictional thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 will increase as of February 24, 2011 — 30 days after the Federal Trade Commission's publication of the new thresholds in the Federal Register. Meeting one or more of the jurisdictional thresholds means that certain acquisitions of assets and/or voting securities are subject to pre-closing antitrust scrutiny by the FTC and/or the US Department of Justice. The FTC adjusts the HSR thresholds annually based on changes in the US gross national product over the base fiscal year ended September 30, 2003.

Based on those changes, the “size of the transaction” threshold, originally set at $50 million, will increase from $63.4 million to $66.0 million; and the “size of the person” threshold, originally met if one party to the transaction has assets or annual sales of $10.0 million and another party has assets or annual sales of $100.0 million, will increase to from $12.7 million to $13.2 million, and from $126.9 million to$131.9 million, respectively. Both jurisdictional thresholds must be met in order to subject the transaction to the pre-merger filing requirements of HSR. However, if the size of the transaction exceeds $263.8 million, the transaction will be subject to HSR regardless of the size of the persons.

The filing fees payable under HSR have not increased, but the fees are now payable only when the new thresholds are reached: the fee will be $45,000 for transactions valued at more than $66.0 million but less than $131.9 million; $125,000 for transactions valued at $131.9 million but less than $659.5 million; and $280,000 for transactions valued at $649.5 million or more.

Is your transaction too small to worry? Maybe not. The FTC and the Department of Justice have — and regularly use — authority to investigate transactions that did not meet the jurisdictional requirements for pre-merger scrutiny. Remedies available to the government include forcing parties to unwind closed transactions or to divest of certain companies or product lines, civil fines and possibly criminal penalties. Practitioners should, therefore, always think twice about whether a given transaction might be viewed as anticompetitive, even if HSR's jurisdictional thresholds are not met.

In related news, the thresholds for interlocking directorates will increase as of February 25, 2011, 30 days after the publication of the new thresholds in the Federal Register. Section 8 of the Clayton Antitrust Act generally prohibits one person from serving as a director or officer of two competing corporations if two thresholds are met. Effective February 25, competitive corporations will be covered by the law if each one has capital, surplus and undivided profits aggregating more than $26,867,000 (increased from $25,841,000), unless the competitive sales of either corporation are less than $2,686,700 (increased from $2,584,100).

For more information on merger and acquisition news, please contact Carl Barnes.

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