Recent Hart-Scott-Rodino Developments & Coming AttractionsMarch 18, 2021
- The FTC slightly lowered the HSR thresholds for M&A and other transactions closing on or after March 4, 2021.
- The FTC/DOJ has suspended the ability of HSR filers to request early termination of the statutory HSR waiting period.
- Senator Klobuchar recently introduced an antitrust reform bill designed, among other things, to strengthen enforcement against leading digital platforms and other large companies.
Revised HSR Thresholds
On February 2, 2021, the Federal Trade Commission (the “FTC”) published revised statutory thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “Hart-Scott-Rodino Act” or “HSR”) in the Federal Register (available here). These thresholds, which are revised annually based on the change in gross national product, notably decreased, and apply to transactions closing on or after March 4, 2021.
Mergers and Acquisitions: Unless otherwise exempted, parties to a merger or acquisition are required to make HSR filings if the size-of-transaction test is satisfied. As of March 4, this test is satisfied if a transaction (i) is valued over $368.0 million (previously $376.0 million) or (ii) is valued over $92.0 million (previously $94.0 million) and the size-of-person test is also satisfied. The size-of-person test is satisfied if one of the parties has sales or assets of at least $184.0 million (previously $188.0 million) and the other party has sales or assets of at least $18.4 million (previously $18.8 million). Certain monetary thresholds relating to HSR notification exemptions have also decreased.
Acquisitions of Voting Securities: Similarly, the notification thresholds relating to acquisitions of voting securities have decreased. As of March 4, HSR filings are required in connection with acquisitions (and subsequent acquisitions) of voting securities that result in an acquirer holding voting securities of a company: (i) valued over $92.0 million (previously $94.0 million), (ii) valued at or over $184.0 million (previously $188.0 million), (iii) valued at or over $919.9 million (previously $940.1 million), (iv) comprising 25% or more of such company’s voting securities, if valued over $1,839.8 million (previously $1,880.2 million) or (v) comprising 50% of such company’s voting securities, if valued over $92.0 million (previously $94.0 million). Once an acquirer holds 50% or more of a company’s voting securities, no further notification to the FTC and the Department of Justice (“DOJ”) is required in connection with subsequent acquisitions of such company’s securities.
HSR Filing Fees: Filing fee thresholds have also been adjusted for 2021, though HSR filing fees remain unchanged. Effective March 4, the revised filing fee thresholds and related filing fees are as follows:
|Transaction Value*||Filing Fee|
|Above $92.0 million, but less than $184.0 million||$45,000|
|At or above $184.0 million, but less than $919.9 million||$125,000|
|At or above $919.9 million||$280,000|
* At the time of filing.
Interlocking Directorates Thresholds: In addition, the FTC recently announced lower thresholds relating to interlocking directorate restrictions under Section 8 of the Clayton Antitrust Act of 1914 (the “Clayton Act”). The new thresholds are $37,382,000 and $3,738,200 for Sections 8(a)(1) and 8(a)(2)(A) of the Clayton Act, respectively (down from $38,204,000 and $3,820,400 in 2020). Such thresholds became effective upon their publication in the Federal Register on January 21, 2021 (available here).
Civil Penalty Amounts: On January 11, 2021, the FTC announced adjusted civil penalty amounts for certain violations of the Hart-Scott-Rodino Act, which became effective upon their publication in the Federal Register on January 13, 2021 (available here). Civil penalty amounts are revised annually to account for inflation, and the maximum civil penalty amount in 2021 for such violations is $43,792 per day (up from $43,280 in 2020).
Early Termination Suspension
On February 4, 2021, the FTC and the DOJ announced a temporary suspension of early termination grants under the HSR Premerger Notification Program.
Under the Premerger Notification Program, parties are required to provide prior notice to the FTC and the DOJ of reportable transactions, and cannot consummate such transactions until expiration of the 30-calendar day statutory waiting period (or 15 calendar days in the case of cash tender offers or bankruptcy transactions). When submitting such notice, parties can request early termination of the applicable statutory waiting period. Notification of reportable transactions facilitates the federal government’s identification of proposed anticompetitive transactions and aids subsequent challenges, while early termination allows parties to reportable transactions that do not present risks to competition to satisfy their notification obligations and proceed with consummation before expiration of the statutory waiting period. Grants of early termination are discretionary and depend on a variety of factors; if early termination is not affirmatively granted, the statutory notice period remains in effect. The most recent HSR annual report published by the FTC and the DOJ (for fiscal year 2019) indicated that early termination had been requested in approximately 75% of reportable transactions and that approximately 75% of those requests were granted.
During the current suspension period, the FTC and the DOJ’s Antitrust Division will review the processes and procedures for granting early termination. This review was spurred by the presidential transition, as well as the unprecedented volume of recent HSR filings and the impact of the COVID-19 pandemic. During this review period, no early terminations will be granted, except in certain circumstances following second requests.
Both federal agencies anticipate that this suspension will be brief. The most recent suspension of early termination grants under the Premerger Notification Program was in March 2020, during the transition to an e-filing notification program that was implemented in response to the COVID-19 pandemic.
Proposed Antitrust Reform Bill
Also on February 4, 2021, Senator Amy Klobuchar, the lead Democratic Senator on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, introduced an antitrust reform bill designed to overhaul and modernize the federal antitrust laws. This bill, the Competition and Antitrust Law Enforcement Reform Act of 2021 (available here), boosts antitrust enforcement, introduces stronger prohibitions against transactions and other exclusionary conduct harmful to competition, and enhances whistleblower protections and incentives, among other things. Notably, this bill would amend the Clayton Act to prohibit mergers and acquisitions that “create an appreciable risk of materially lessening competition” or that create a monopoly or monopsony (i.e., a market situation in which there is only one buyer), whereas the current statutory regime prohibits mergers and acquisitions that may “substantially lessen competition” or that create a monopoly.
A major focus of this reform effort is on strengthening antitrust enforcement against leading digital platforms and other large companies. In fact, this bill would require parties to certain transactions to demonstrate that such transactions do not “create an appreciable risk of materially lessening competition” (i.e., more than a de minimis amount) or otherwise create a monopoly or monopsony. This includes transactions that would significantly increase market concentration, that are valued over $5.0 billion, or that involve the acquisition of a competitor or emerging competitor by an acquirer with a majority market share or significant market power, a practice that has been used by large digital platforms and other companies to achieve and maintain market dominance. The bill also prohibits exclusionary conduct that “presents an appreciable risk of harming competition,” and introduces a rebuttable presumption that conduct by a person with a majority market share or significant market power that materially disadvantages or limits the ability of a competitor or potential competitor presents such a risk.
America’s prominent technology companies, among other businesses, are expected to push back on this proposed legislation, while Republicans in Congress are unlikely to support such sweeping antitrust reform. Some Republicans, however, have signaled support for smaller and more targeted changes to the federal antitrust laws, and incremental reform efforts may garner bipartisan support during the next four years of the Biden administration.
We will continue to monitor legislative efforts to reform the federal antitrust laws and expect to address any significant developments in future blog posts.