The Federal Trade Commission ("FTC") recently
announced the annual changes to the notification thresholds for
filings under the Hart-Scott-Rodino Antitrust Improvements Act
("HSR"), as well as certain other values under the HSR
rules. As background, 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 completed. 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." This year's values,
which are adjusted annually based on changes in the GNP, take
effect on February 27, 2012. The FTC also adjusted the safe harbor
thresholds that govern interlocking directorates in competing
The most important change is that the minimum
size-of-transaction threshold will increase from the current $66
million to $68.2 million. The size-of-person thresholds will also
increase as follows:
For transactions valued between $68.2 million and $272.8
million, one party to the transaction must have $13.6 million in
sales or assets and the other party must have $136.4 million in
sales or assets, as reported on the last regularly prepared balance
sheet or income statement.
For transactions valued at greater than $272.8 million, no
size-of-person threshold must be met to require an HSR filing.
The filing fee thresholds have similarly increased as
$68.2 to $136.4 million
$136.4 to $682.1 million
$682.1 million or greater
Underscoring the importance of compliance with the HSR Act, this
past December the Department of Justice, on behalf of the FTC,
signed a consent decree with the CEO of Comcast requiring him to
pay a $500,000 civil penalty for failing to file under the HSR Act.
The CEO exceeded the notification threshold through his acquisition
of common stock upon the vesting of outstanding restricted stock
unit awards and the reinvestment of dividends and short-term
interest through his 401(k) account. Violations of the HSR Act are
subject to a $16,000/day civil penalty, though most often an
inadvertent failure to file will not result in civil penalty. In
its complaint, the DOJ highlighted the fact that the CEO had missed
filing obligations in the past and therefore civil penalties for
this violation were warranted.
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 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 $27,784,000
are covered by Section 8, and a violation can be found only if the
competitive sales of each company are $2,778,400 or greater.
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With DOJ's Antitrust Division and the FTC ramping up antitrust enforcement, it is critical for companies to take a hard look at their compliance programs and update them on a regular basis to avoid potential antitrust violations and discover antitrust malfeasance early on so a company can have the option of self-reporting and applying for leniency under DOJ's leniency program.
Over the past ten years, criminal antitrust fines have increased dramatically: they totaled only $107 million in fiscal year ("FY") 2003, but increased to a high of $1.14 billion in FY-2012 and remained relatively steady at $1.02 billion in FY-2013.