In 2000, Congress amended the Hart-Scott-Rodino Act (HSR Act) to raise the thresholds that triggered reporting obligations under the Act. As a result of the amendments, acquisitions that resulted in holding less than $50 million of an issuer’s voting securities were not reportable; acquisitions resulting in holdings of $200 million or more were reportable without regard to the size of the parties’ ultimate parents; and the reportability of acquisitions between those two numbers depended on the size of the ultimate parents. The 2000 amendments also provided that the thresholds would be indexed and adjusted yearly, starting with 2005.

On January 10, 2013, the Federal Trade Commission announced the ninth annual adjustment to the thresholds. Like seven of the past eight annual adjustments, this one is an increase. The new thresholds will take effect on February 11, 2013. The previous thresholds apply to transactions that close before that date.

Basic Size Tests. The most significant effect of the indexing is to increase the “size of transaction”1 and “size of persons”2 tests:

  • Transactions resulting in holdings valued at or below $70.9 million are not reportable. 
  • Transactions resulting in holdings valued at $283.6 million or more are reportable without regard to the size of persons (unless an exemption applies).
  • Transactions resulting in holdings valued between those two numbers are reportable if the “size of persons” test is met:
    • A person with $141.8 million in total assets or annual net sales acquires (or acquires from) a manufacturing person with $14.2 million in total assets or annual net sales; or
    • A person with $141.8 million in total assets or annual net sales acquires (or acquires from) a non-manufacturing person with $14.2 million in total assets; or 
    • A person with $14.2 million in total assets or annual net sales acquires (or acquires from) a person with $141.8 million in total assets or annual net sales

Notification Thresholds. In addition to these basic tests, the HSR Act provides five separate “notification thresholds,” with a new report required before completing an acquisition that would result in crossing the next threshold. With the indexing, the notification thresholds will now be:

  • An aggregate total amount of voting securities of the acquired person valued at greater than $70.9 million but less than $141.8 million; 
  • An aggregate total amount of voting securities of the acquired person valued at $141.8 million or greater but less than $709.1 million; 
  • An aggregate total amount of voting securities of the acquired person valued at $709.1 million or greater; 
  • Twenty-five percent of the outstanding voting securities of an issuer if valued at greater than $1.4181 billion; or 
  • Fifty percent of the outstanding voting securities of an issuer if valued at greater than $70.9 million.

Exemptions. The increases also affect some of the exemptions from reporting requirements. For example, 16 C.F.R. § 802.50 exempts the acquisition of assets located outside the United States “unless the foreign assets the acquiring person would hold as a result of the acquisition generated sales in or into the U.S. exceeding $50 million (as adjusted) during the acquired person's most recent fiscal year” (emphasis added). As adjusted, the relevant test will now be whether the assets generated sales in or into the U.S. of more than $70.9 million.

Filing Fees. Filing fee amounts are unchanged, but the levels at which the next-higher fee kicks in are increased:

  • Transactions resulting in holdings of less than $141.8 million: $45,000 
  • Transactions resulting in holdings of more than $141.8 million but less than $709.1 million: $125,000 
  • Transactions resulting in holdings of more than $709.1 million: $280,000

Interlocking Directorates. The FTC also updated the thresholds for the Clayton Act’s prohibition on interlocking directorates. The Act prohibits one person from serving as an officer or director of two competing companies when each company has capital, surplus and undivided profits of more than $28,883,000 (Section 8(a)(1)) and competitive sales of more than $2,888,300 (Section 8(a)(2)(A)).

1 This phrase is somewhat misleading. Under the aggregation rules, the test includes the value of the voting securities (and certain assets of the acquired person that the acquiring person will hold after the transaction is complete).

2 A “person” is the ultimate parent of the actual party to the transaction, together with all included entities.