FTC Lowers Reporting Thresholds for Mergers & Acquisitions
Two commissioners raise budgetary and resource concerns.
Following a unanimous vote, the Federal Trade Commission lowered by $2 million the size of mergers and acquisitions that require the parties to report the deals to the Commission, meaning more deals will be subject to Hart-Scott-Rodino (HSR) reporting rules.
“For 2021, the size-of-transaction threshold for reporting proposed mergers and acquisitions under Section 7A of the Clayton Act will adjust from $94 million to $92 million. Also, the 2021 thresholds under Section 8 of the Act that trigger prohibitions on certain interlocking memberships on corporate boards of directors are $37,382,000 for Section 8(a)(l ) and $3,738,200 for Section 8(a)(2)(A),” the FTC said in its Feb. 5, 2021, statement. The FTC revises the thresholds each year as the gross national product changes.
The revised thresholds under Section 7A of the Clayton Act will apply to all transactions that close on or after the effective date of the notice, which is 30 days after its publication in the Federal Register. The thresholds under Section 8 of the Clayton Act became effective upon publication in the Federal Register. A complete listing of current thresholds can be found on the FTC’s website.
The votes to approve the Federal Register notices announcing the change were 5-0.
Acting Chairwoman Rebecca Kelly Slaughter issued a concurring statement, joined by Commissioner Rohit Chopra, in which they urge Congress to increase funding for the Commission to do its work and keep pace with the U.S. economy.
Slaughter expressed support for efforts by Senators Amy Klobuchar and Chuck Grassley to increase merger-filing fees for large transaction. They point out that this is done for other federal agencies and should be adjusted annually as the reporting thresholds are adjusted.
The Hart-Scott-Rodino filings have doubled during the last 10 years, but the FTC staff has remained nearly flat, Slaughter wrote. “Not only have our filings doubled,” she continued, “the size and complexity of mergers have substantially increased.” In 2019 there were 476 HSR submissions to the FTC and Department of Justice where the transactions were valued at between $500 million and $1 billion. “The large deals require more resources and more staff,” as well as “costly experts” to participate in investigations and litigation.
Slaughter pointed to recent to a number of complex, high-profile merger litigation challenges pending in December alone, including Jefferson Health and Albert Einstein Health Network; Axon Enterprises and VieVu LLC; Altria Group, Inc. and JUUL Labs, Proctor. Gamble and Billie Inc.; and others.
Earlier this month, the FTC and Antitrust Division of the Department of Justice announced agency review of business deals will now take at least the permissible full 30 days while they examine the review process. The agencies said the review and suspension are necessary in light of the confluence of three significant circumstances: 1) an “unprecedented volume” of filings required by the pre-merger notification program of the Hart-Scott-Rodino Act (HSR); 2) the transition to the Biden administration; and 3) challenges posed by the COVID-19 pandemic. “For this period, the agency will not grant early terminations. We anticipate that this temporary suspension will be brief,” according to the FTC.