The Federal Trade Commission (FTC) has announced the annual revisions to the monetary thresholds that determine whether companies are required to notify federal antitrust authorities about a transaction under Section 7A of the Clayton Act (the Hart-Scott-Rodino Antitrust Improvements Act [HSR]) and the monetary thresholds that trigger prohibitions on certain interlocking directorates under Section 8 of the Clayton Act. The values are adjusted annually based on changes in the GNP. The FTC announced the revisions on January 19, 2017, and they will be published shortly in the Federal Register. The new thresholds become effective 30 days after publication in the Federal Register, most likely in late February 2017.

HSR Revisions

The FTC’s announcement impacts the notification thresholds for filings under the HSR Act, as well as certain other values under the HSR rules. 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 consummated. 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.”

The most important change is that the minimum size-of-transaction threshold will increase from the current $78.2 million to $80.8 million. The size-of-person thresholds will also increase as follows:

• For transactions valued between $80.8 million and $323 million, one party to the transaction must have $16.2 million in sales or assets and the other party must have $161.5 million in sales or assets, as reported on the last regularly prepared balance sheet or income statement.
• For transactions valued at greater than $323 million, no size-of-person threshold must be met to require an HSR filing.

The filing fees have not changed, but the monetary thresholds that dictate the required filing fee have similarly increased as follows:

In the past year, the FTC and DOJ have aggressively enforced the HSR Act. In fact, 2016 was a record year for civil penalties. Part of the increase can be attributed to a mid-year increase in the maximum fine for violations of the HSR Act. Effective August 1, 2016, the maximum daily fine increased 150 percent from $16,000 per day to $40,000 per day. Underscoring the importance of compliance with the HSR Act, this past August, Caledonia Investments PLC, an investment firm, agreed to pay $480,000 in civil penalties to resolve FTC allegations that it violated HSR reporting requirements by failing to make an HSR filing when it obtained voting securities of helicopter operator Bristow Group. Caledonia self-reported its violation, but the DOJ brought an action because it was Caledonia’s second HSR violation—despite the fact that the earlier violation was over 20 years earlier. Agencies consistently seek monetary penalties for repeat offenders. However, because Caledonia self-reported and settled with the DOJ, it was fined only a small fraction of the potential maximum penalty.

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 threshold 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 $32,914,000 are covered by Section 8(a)(1), and a violation can be found only if the competitive sales of each company are $32,914,000 or greater under Section 8(a)(2)(A).