Each year, the Federal Trade Commission (FTC) revises the thresholds that determine whether companies are required to notify the FTC and the Antitrust Division of the Department of Justice (DOJ) about the terms of a transaction (merger or acquisition of stock or assets) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR). The annual revisions are intended to accommodate changes to the gross national product. The HSR notification process is intended to highlight those transactions that are likely to have the most significant commercial impact, and thus, affords the government time to consider the potential competitive (adverse) effects of the transaction prior to its closing. If a transaction is reportable, the parties to the transaction are required to report the transaction and strictly observe a waiting period before consummating the transaction.
New HSR thresholds will go into effect on February 27, 2017 and apply to applicable transactions which close on or after that date but before the next year's adjustments. All specific adjustments for 2017 can be found at Federal Register, Vol. 82, No. 16, January 26, 2017, or by clicking here.
Two key HSR reporting thresholds pertain to the size-of-transaction and size-of-person tests. With very limited exceptions, transactions valued less than $80.8 million are not reportable. Unless otherwise exempt, transactions valued more than $323 million are reportable. If the transaction is valued between $80.8 million and $323 million, the size-of-person test is used to determine reportability. Under the size-of-person test, a transaction is reportable if one party has annual net sales or total assets of at least $161.5 million and the other party has annual net sales or total assets of at least $16.2 million. Note that the size of the person test looks to the "ultimate parent entity" who may or may not be the party to the transaction itself. See 16 C.F.R. part 801.1.
Importantly, the FTC separately announced that the maximum civil penalty amount for violations of HSR will increase from $40,000 to $40,654 per day, effective January 26, 2017. The new penalty levels apply to civil penalties assessed after the effective date of the adjustment, including civil penalties whose associated violation predated the effective date.
Premerger notification rules can be found at 16 C.F.R. parts 801, 802, and 803, 15 U.S.C. § 18a, Clayton Act Section 7A.
Note, the FTC and DOJ have the authority under Section 7 of the Clayton Act and Section 5 of the FTC Act to challenge transactions whose effect "may be substantially to lessen competition, or tend to create a monopoly." Importantly, that authority applies to all transactions, whether or not the transaction is reportable under HSR. See, e.g., St. Alphonsus Med. Ctr.-Nampa Inc. v. St. Luke's Health Sys., Ltd., 778 F.3d 775 (9th Cir. 2015) (affirming divesture of a consummated $28 million merger that was not reportable under HSR).
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