On Jan. 24, 2022, the Federal Trade Commission (FTC) announced the annual changes to the notification thresholds for filings under the Hart-Scott-Rodino Antitrust Improvements Act (HSR), and certain other values under the HSR rules. The new thresholds will become effective Feb. 23, 2022. Companies should review the new changes to ensure they comply with the HSR Act for their 2022 transactions.
As background, the HSR Act requires that acquisitions of voting securities or assets that exceed certain thresholds be disclosed to U.S. antitrust authorities for review before they can be completed. The “size-of-transaction threshold” requires that the transaction exceeds a certain value. Under certain circumstances, the parties involved also have to exceed “size-of-person thresholds.” This year’s thresholds, which are adjusted annually based on changes in the gross national product (GNP), will increase from 2021 thresholds, reflecting the economy’s rebound from the previous year. The FTC also adjusted the safe harbor thresholds that govern interlocking directorates in competing companies.
HSR revisions
The most important change is that the minimum size-of-transaction threshold will increase from the current $92 million to $101 million. The size-of-person thresholds will decrease as follows:
- For transactions valued between $101 million and $403.9 million, one party to the transaction must have $20.2 million in sales or assets and the other party must have $202 million in sales or assets, as reported on the last regularly prepared balance sheet or income statement.
- For transactions valued at greater than $403.9 million, no size-of-person threshold must be met to require an HSR filing.
The filing fee thresholds similarly will decrease as follows. This marks the first time an HSR-related threshold has topped the billion-dollar mark:
Filing Fee | Transaction Value |
$45,000 | In excess of $101, but less than $202 million |
$125,000 | From $202, but less than $1.0098 billion |
$280,000 | $1.0098 billion or greater |
Interlocking directorates
Section 8 of the Clayton Act generally prohibits one person from serving as a director or officer of two competing corporations if two thresholds are met. One relates to the companies’ profitability, and one relates to the amount of competitive sales between the companies. The statute requires the FTC to revise these thresholds annually, also based on changes to the GNP. Effective immediately, only companies with capital, surplus and undivided profits aggregating more than $41,034,000 are covered by Section 8. A violation can be found only if the competitive sales of each company are $4,103,400 or greater.
Civil penalties
Earlier, the FTC also announced that the maximum civil penalty for violations of many of the provisions of the FTC Act, and for violations of the HSR Act, increased from $43,792 to $46,517.
Company leaders should consider a thorough review of the latest FTC changes to HSR and interlocking directorate thresholds, and discuss revisions with their legal counsel, to ensure they will not be in violation.