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FTC Announces 2019 Thresholds for Merger Control Filings Under HSR Act and Interlocking Directorates Under the Clayton Act

The Federal Trade Commission (“FTC”) has announced its annual revisions to the dollar jurisdictional thresholds in the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”); the revised thresholds will become effective 30 days after the date of their publication in the Federal Register. These changes increase the dollar thresholds necessary to trigger the HSR Act’s premerger notification reporting requirements. The FTC also increased the thresholds for interlocking directorates under Section 8 of the Clayton Act.

Revised HSR Thresholds

Under the HSR Act, parties involved in proposed mergers, acquisitions of voting securities, unincorporated interests or assets, or other business combinations (e.g., joint ventures, exclusive license deals) that meet certain thresholds must report the contemplated transactions to the FTC and the Antitrust Division of the U.S. Department of Justice (“DOJ”), unless an exemption applies. The parties to a proposed transaction that requires notification under the HSR Act must observe a statutorily prescribed waiting period (generally 30 days) before closing. Under the revised thresholds, transactions valued at $90 million or less are not reportable under the HSR Act.

A transaction closing on or after the date the revised thresholds become effective may be reportable if it meets the following revised criteria:

Size of Transaction Test

The acquiring person will hold, as a result of the transaction, an aggregate total amount of voting securities, unincorporated interests, or assets of the acquired person valued in excess of $359.9 million;

or

The acquiring person will hold, as a result of the transaction, an aggregate total amount of voting securities, unincorporated interests, or assets of the acquired person valued in excess of $90 million but not more than $359.9 millionand the Size of Person thresholds below are met.

Size of Person
Test

One party (including the party’s ultimate parent entity and its controlled subsidiaries) has at least $180 million in total assets or annual sales, and the other party has at least $18 million in total assets or annual sales. If the acquired party is not “engaged in manufacturing,” and is not controlled by an entity that is, then the test applied to the acquired side is annual sales of $180 million or total assets of $18 million.

The full list of the revised thresholds is as follows:

Original Threshold

2018 Threshold

2019 Revised Threshold
(effective 30 days after publication in the Federal Register)

$10 million

$16.9 million

$18 million

$50 million

$84.4 million

$90 million

$100 million

$168.8 million

$180 million

$110 million

$185.7 million

$198 million

$200 million

$337.6 million

$359.9 million

$500 million

$843.9 million

$899.8 million

$1 billion

$1,687.8 million

$1,799.5 million

The filing fees for reportable transactions have not changed, but the transaction value ranges to which they apply have been adjusted as follows:

Filing Fee

Revised Size of Transaction Thresholds

$45,000

For transactions valued in excess of $90 million but less than $180 million

$125,000

For transactions valued at $180 million or greater but less than $899.8 million

$280,000

For transactions valued at $899.8 million or more

Note that the HSR dollar thresholds are only part of the analysis to determine whether a particular transaction must be reported to the FTC and DOJ. Failure to notify the FTC and DOJ under the HSR Act remains subject to a statutory penalty of up to $41,484 per day of noncompliance.

Revised Thresholds for Interlocking Directorates

After the revised thresholds take effect, Section 8 of the Clayton Act prohibits one person from simultaneously serving as an officer or director of two corporations if: (1) the “interlocked” corporations each have combined capital, surplus, and undivided profits of more than $36,564,000 (up from $34,395,000); (2) each corporation is engaged in whole or in part in commerce; and (3) the corporations are “by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws.”1

Section 8 provides several exemptions from the prohibition on interlocks for arrangements where the competitive overlaps “are too small to have competitive significance in the vast majority of situations.”After the revised thresholds take effect, a corporate interlock does not violate the statute if: (1) the competitive sales of either corporation are less than $3,656,400 (up from $3,439,500); (2) the competitive sales of either corporation are less than 2 percent of that corporation’s total sales; or (3) the competitive sales of each corporation are less than 4 percent of that corporation’s total sales.

The revised dollar thresholds for interlocking directorates of $36,564,000 and $3,656,400will be effective upon publication in the Federal Register; there is no 30-day delay as there is for the HSR thresholds.

1  U.S.C. § 19(a)(1)(B).

2  S. REP. NO. 101-286, at 5-6 (1990), reprinted in 1990 U.S.C.C.A.N. 4100, 4103-04.

© Copyright 2019 Cadwalader, Wickersham & Taft LLP

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About this Author

Joel Mitnick, Cadwalader Law Firm, New York, Finance and Litigation Law Attorney
Partner

Joel Mitnick is a partner in the Antitrust and Global Litigation groups. Joel’s practice focuses on antitrust matters on behalf of a wide array of financial market, life science, media, service industry and industrial clients. Joel represents clients in Federal and State antitrust investigations, antitrust class actions and merger clearance proceedings. He has tried merger cases to verdict and briefed antitrust class actions up to the United States Supreme Court. Joel also counsels some of the nation’s most prominent activist and passive hedge funds and private equity...

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Ngoc Pham Hulbig, Cadwalader, coordinated competition filing attorney, high stakes transactions lawyer
Counsel

Ngoc Pham Hulbig's practice focuses on counseling regarding U.S. and global premerger notification requirements. She has extensive experience in preparing filings under the Hart-Scott-Rodino Act and has coordinated competition filings around the world for complex and high-stakes transactions. She also counsels clients in the full range of antitrust matters, including mergers and acquisitions, joint ventures, and in connection with investigations by the U.S. Department of Justice and the U.S. Federal Trade Commission. Ngoc has experience representing clients in matters involving a wide variety of industries, including software, airlines, gaming, spirits, pharmaceuticals, chemicals, credit, financial services, and security.

Prior to joining Cadwalader, Ngoc was an associate at Fried, Frank, Harris, Shriver & Jacobson LLP in that firm's antitrust department. She served as a member of the Board of Directors of Ayuda, Inc., an organization dedicated to protecting the legal rights of low-income immigrants in the Washington D.C. metropolitan area. Ngoc's previous pro bono matters include guardian ad litem and political asylum cases.

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