United States: Hart-Scott-Rodino Revised Dollar Thresholds

The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "Act") requires parties to certain mergers or acquisitions (based on the size of the parties, the size of the transaction, and nature of assets or voting securities to be acquired) to notify the Federal Trade Commission and the Department of Justice before consummating the proposed acquisition. This "Pre-merger Notification Program" allows the FTC and DOJ to review potentially anticompetitive acquisitions prior to their occurrence. With pre-merger/acquisition approval, the government can avoid the need to unwind anticompetitive transactions, which is often very costly and difficult to undertake, and rarely restores the affected market to the pre-transaction status.

In general, the Act requires that certain proposed acquisitions of voting stock or assets must be reported to the FTC and DOJ prior to consummation. Each party to the transaction complies with the Act by filing its own Notification and Report Form with both agencies, which contains most of the information needed for the agencies to analyze the transaction. The parties then must wait a specified period, usually 30 days (15 days in the case of a cash tender offer or bankruptcy sale), after which they are free to complete the transaction.

During the waiting period, either of the agencies may determine that more information is needed and request additional documentary materials from the parties. This is known as a second request. A second request extends the waiting period, usually for 30 days (ten days in the case of a cash tender offer or bankruptcy sale), after all parties have complied with the request.

Whether a particular acquisition is subject to the Act generally depends on two factors: the size of the transaction and the size of the parties, as measured by their sales and assets in their most recent financial statements. Pre-merger/acquisition notification under the Act is required for transactions that meet either (a) the higher specified transaction size threshold amount or (b) the lower size transaction threshold amount and the minimum size of parties amount. The FTC is required to annually adjust dollar thresholds found in the Act based on changes in the gross national product. Effective February 17, 2006, pre-merger/acquisition notification is required for all acquisitions of voting stock and assets in excess of $226.8 million or acquisitions of voting stock and assets in excess of $56.7 million if one person to the transaction has sales or assets of at least $113.4 million and the other person to the transaction has sales or assets of at least $11.3 million.

Some transactions are exempted from the reporting requirements of the Act. For example, certain acquisitions of real property, certain acquisitions of assets in the regular course of business or acquisitions of foreign assets where the sales in or into the United States attributable to those assets are $56.7 million or less are not subject to the Act.

s of February 17, the filing fee thresholds under the Act will also increase as follows:

Most often, this fee is paid by the acquiring person, but is subject to negotiation and division between the parties. Although the filing fee thresholds are increasing, the filing fees themselves are unchanged.

© 2006 Sutherland Asbill & Brennan LLP. All Rights Reserved.

This article is for informational purposes and is not intended to constitute legal advice.