As of February 22, 2010, the reporting thresholds under Section 7 of the Clayton Act, known as the Hart‑Scott-Rodino Antitrust Improvements Act of 1976 (the Act), decreased.  The Act requires all parties to certain transactions, including mergers and acquisitions that meet or exceed the Act's jurisdictional thresholds, to notify the FTC and the Antitrust Division of the Department of Justice and wait a designated period of time before consummating those transactions.  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.

New Premerger Notification 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. 

Under the new thresholds, the size-of-transaction test is met if the transaction is valued at more than $63.4 million.  The size-of-parties test is met if the ultimate parent entity of one of the parties to the transaction has $12.7 million in total assets or annual net sales and the ultimate parent entity of another party to the transaction has $126.9 million in total assets or annual net sales.  The threshold at which the size-of-parties test does not apply is decreased to transactions valued in excess of $253.7 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.

New Clayton Act Section 8 Thresholds

Under Section 8 of the Clayton Act, a person is barred from serving as a director or officer of two competing corporations if two thresholds are met.  As enacted, the statute applies if each competitor corporation has capital, surplus, and undivided profits of more than $10,000,000, except that no prohibition against interlocking directorates or officers applies if the competitive sales of either corporation are less than $1,000,000.  There is also an exception for interlocking directorates in which the competitive sales of either corporation are less than 2 percent of that corporation's total sales, or the competitive sales of each corporation are less than 4 percent of that corporation's total sales.

The monetary thresholds are subject to annual revision.  The thresholds now in effect are $25,841,000 and $2,584,100, respectively.  Thus, if each of the competing companies has capital, surplus, and undivided profits of over $25,841,000, the interlock is unlawful unless (a) the competitive sales of either firm are under $2,584,100 or represent less than 2 percent of that firm's total sales, or (b) the competitive sales of each firm are less that 4 percent of that firm's total sales.

Additional Information

Discussions of other recent laws, regulations and rule proposals of interest to public companies are 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 Hart-Scott-Rodino 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.  The FTC, the Department of Justice and State Attorneys General (as well as private parties) 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.