New Hart-Scott-Rodino Thresholds
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The dollar thresholds at which acquisitions must be reported to the Federal
Trade Commission and the Department of Justice pursuant to the Hart-Scott-Rodino
Act (HSR) will increase on March 1, 20051.
Legislation passed in 2001 requires that the thresholds be adjusted annually
beginning in 2005 based on changes in the gross national product.
|"The dollar thresholds at which
acquisitions must be reported to the Federal Trade Commission and
the Department of Justice pursuant to the Hart-Scott-Rodino Act
(HSR) will increase on March 1, 2005."
Some transactions that would have been reportable before March 1, 2005,
will not have to be reported if the filing takes place after that date.
The new, higher dollar thresholds affect (1) the “size-of-transaction” and
“size-of-person” tests for determining whether a transaction requires HSR
notification; (2) filing fees; and (3) certain specific rules relating to
the thresholds for reporting formations of joint ventures and other corporations,
and acquisitions of foreign assets and voting securities.
Under the new thresholds, an HSR filing may be required for any transaction
valued at more than $53.1 million; the prior threshold was $50 million.
As before, acquisitions of assets made within 180 days prior to signing
a purchase agreement, and involving the same ultimate parent entities (or
any of their subsidiaries) must be aggregated to determine the transaction
size. In stock deals, the current value of all prior acquisitions of stock
must be aggregated.
Transactions valued at more than $53.1 million, but not greater than
$212.3 million (formerly $200 million), also must satisfy a size-of-person
test to determine whether an HSR filing is required. All transactions valued
at greater than $212.3 million must be reported regardless of the size of
the parties to the transaction.
The size-of-person test is based on the revenues and assets of the ultimate
parent entities, including all subsidiaries, of the parties to a transaction.
Where a manufacturer is acquired, one ultimate parent entity must have assets
or revenues of $10.7 million (formerly $10 million); the other must have
assets or revenues of $106.2 million (formerly $100 million).
If the acquired party is not engaged in manufacturing, the test is different.
One party must meet the $10.7 million test; the other party must meet the
$106.2 million test. In addition, the acquired company must have $10.7 million
of assets or $106.2 million of revenues. The reason for the different treatment
of manufacturing and non-manufacturing companies is that the government
only wants to review transactions that are likely to affect competition.
It is believed that acquisitions involving service companies with less than
$106.2 million in revenue or $10.9 million in assets are less likely to
impede competition. However, the government has authority to investigate
and seek injunctions against all acquisitions regardless of size – whether
or not they make an HSR filing. Also, in some instances the government has
challenged acquisitions several years after consummation.
The HSR filing fees continue to be graduated depending on the size of
|Old Transaction Value
||New Transaction Value
|>$50 million to $99.99 million
||> $53.1 million to $106.19 million
|$100 million to $499.99 million
||$106.2 million to $ 530.69 million
|$500 million or more
||$530.7 million or more
Joint Ventures and Foreign Acquisitions
The thresholds for the formation of joint ventures and certain other
new corporations, and for certain exemptions from HSR notification for acquisitions
of foreign assets or of voting securities of a foreign issuer, also have
been increased. The applicable $10 million, $50 million, $100 million, $110
million and $200 million thresholds have been adjusted upward to $10.7 million,
$53.1 million, $106.2 million, $116.8 million and $212.3 million, respectively.
The purpose of an HSR premerger filing is to give the Federal Trade Commission
and the Antitrust Division of the Department of Justice 30 days’ notice
of substantial mergers. This permits either agency to seek an injunction
before consummation of a transaction. The agencies coordinate their investigations
so that both of them do not investigate the same transaction. Prior to the
HSR law, the agencies had found it was difficult to unscramble companies
after a transaction was closed.
The notification thresholds will continue to be adjusted annually by
the percentage change in the gross national product during the previous
year. The new thresholds will be published each January in the Federal Register
and on the FTC’s website, to be effective 30 days after publication in the
Federal Register. All adjustments will be rounded up to the next highest
The application of the HSR rules, including the valuation of the parties’
size and a transaction’s value, are complex. The penalties for failing to
file can be as much as $11,000 per day for each day a filing should have
Should a transaction fall close to the thresholds, it will need to be
carefully evaluated to determine whether a filing should be made.
This Alert was written by
Shirley Z. Johnson, National Chair of Greenberg Traurig's Antitrust and Trade Regulation Practice. Please contact Ms. Johnson
at (202) 331-3100 or your Greenberg Traurig liaison if you have any questions
regarding the subject matter of this Alert.
1 The 2000 amendments to the Hart-Scott-Rodino
Antitrust Improvements Act (“HSR Act”), which became effective on February
1, 2001, require the FTC to revise the HSR Act’s jurisdictional and filing
fee thresholds each fiscal year beginning after September 30, 2004. This
is the first such adjustment. A GT Alert discussing the changes implemented
in the 2000 amendments to the HSR Act is
© 2005 Greenberg Traurig
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