News/Blogs

Hart-Scott-Rodino Reporting Thresholds and
Civil Penalty to Increase

Update
01.22.2009

The Federal Trade Commission (the "FTC") recently announced that the reporting thresholds under Section 7 of the Clayton Act, known as the Hart‑Scott-Rodino Antitrust Improvements Act of 1976 (the "Act"), and the civil penalty for failure to comply with the Act, will be increased.  The Act requires all parties to certain transactions, including mergers and acquisitions, to notify the FTC and the Antitrust Division of the Department of Justice and wait a designated period of time before consummating those transactions that meet or exceed the Act's jurisdictional thresholds.  The 2000 amendments to the Act require the FTC to revise the Act's jurisdictional and filing fee thresholds annually, based on the change in gross national product.  Certain related thresholds and limitation values in the Hart-Scott-Rodino ("H-S-R") rules will also be adjusted.  The increased thresholds will apply to all transactions that close on or after February 12, 2009.

Failure to file notification and observe the required waiting period under the Act before consummating the transaction subjects the parties to the transaction, or any individual responsible for noncompliance, to liability for a civil penalty for each day of noncompliance.  The civil penalty amount for premerger notification violations will be adjusted for inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 effective February 9, 2009.

This Update summarizes the key elements of the revised thresholds and the adjusted civil penalty.

Reporting Thresholds

Current Reporting Thresholds.  Certain transactions, including acquisitions of voting securities or assets, acquisitions of non-corporate interests, or the formation of joint venture corporations or other entities, are subject to the reporting requirements of the Act if the transaction meets a two-part test based on the size of the transaction and the size of the parties.  The size-of-transaction test is met if the transaction is valued at more than $63.1 million.  The size-of-parties test is met if the ultimate parent entity of one of the parties to the transaction has $12.6 million in total assets or annual net sales and the ultimate parent entity of another party to the transaction has $126.2 million in total assets or annual net sales.  However, the size-of-parties test does not apply to transactions valued at more than $252.3 million.

Increased Reporting Thresholds.  Under the new thresholds, the size-of-transaction test is met if the transaction is valued at more than $65.2 million.  The size-of-parties test is met if the ultimate parent entity of one of the parties to the transaction has $13 million in total assets or annual net sales and the ultimate parent entity of another party to the transaction has $130.3 million in total assets or annual net sales.  The threshold at which the size-of-parties test does not apply is increased to transactions valued in excess of $260.7 million.

Filing Fees

The transaction values on which the tiered H-S-R filing fee schedule is based will also be revised as shown in the chart below.

Filing Fee

Transaction Value
(existing)

Transaction Value
(revised)

    $45,000

   Less than $126.2 million

   Less than $130.3 million

   $125,000

   $126.2 to < $630.8 million

   $130.3 to < $651.7 million

   $280,000

   $630.8 million or more

   $651.7 million or more


Civil Penalty

Currently, the civil penalty for failure to file the required notification and observe the required waiting period under the Act prior to consummating the transaction is $11,000 per day for each day of noncompliance.  This amount will increase to $16,000 based on the increase in the Consumer Price Index between 1996, when the penalty amount was last adjusted, and June 2007.  The increased civil penalty amount will apply to violations occurring after February 9, 2009.

Additional Information

Discussion of other recent laws, regulations and rule proposals of interest to public companies is available on our website.

This Update is intended for general guidance.  Parties contemplating a transaction should consult antitrust counsel to determine whether any particular transaction is reportable under the Act and evaluate any antitrust concerns raised by the transaction.  Parties should also keep in mind that a transaction that is not reportable because it does not meet the Act's reporting thresholds is not exempt from agency scrutiny of the potential anticompetitive effects of the transaction.  Both the FTC and the Department of Justice may challenge a transaction as anticompetitive even when no H-S-R filing was required for the transaction.  Therefore, all transactions should be reviewed for compliance with Section 7 of the Clayton Act prior to closing.