FTC Increases 2023 Thresholds For HSR Filings And Interlocking Directorates – Securities

On Jan. 23, 2023, the Federal Trade Commission (“FTC”)
announced increased reporting thresholds under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR
Act”); the revised HSR thresholds apply to all transactions
closing on or after Feb. 27, 2023. The minimum size-of-transaction
threshold was increased from $101 million to $111.4 million.
Acquisitions below this threshold will not be reportable.

The FTC also raised the thresholds for interlocking directorates
under Section 8 of the Clayton Act, effective as of Jan. 20, 2023,
and the maximum civil penalty amounts for HSR violations were increased to $50,120 per day of noncompliance,
effective Jan. 11, 2023.

Revised HSR Act Thresholds

Generally, the HSR Act requires parties to acquisitions of
voting securities, assets or non-corporate interests meeting
certain thresholds to make a premerger notification to the FTC and
the Antitrust Division of the Department of Justice unless an
exemption applies. The HSR Act thresholds are adjusted annually in
accordance with changes in U.S. gross national product. The parties
to a reportable transaction must observe a waiting period
(generally 30 days) before closing.

Under the revised thresholds, transactions valued up to and
including $111.4 million are not reportable under the HSR
Act. Transactions valued at more than $111.4 million may be
reportable if they meet the following criteria and no exemption
applies:

*For the size-of-person test, a “party” includes its
ultimate parent entity (“UPE”) and the UPE’s
controlled subsidiaries.

HSR Notification Thresholds for Acquisitions of Voting
Securities. After an HSR filing has been made, and the
applicable waiting period has expired or been terminated, any
additional acquisitions by the same acquiring person of the same
issuer’s voting securities will be exempt from notification, so
long as:

• The acquiring person’s holdings crossed the notification
  threshold with respect to which the premerger notification was made
  within one year of the expiration or early termination of the HSR
  Act waiting period; and




• The subsequent acquisition is consummated within five years
  following the expiration or early termination of the HSR Act
  waiting period;

unless a higher notification level is met or exceeded.
The various notification levels are set forth below:

Any subsequent acquisition would be subject to the adjusted
thresholds in effect when such subsequent acquisition is
consummated.

HSR Filing Fees. The HSR filing fee structure recently was
overhauled, with a six-tier framework replacing the
three-tiered one in place for over two decades. The transaction
value ranges for each tier have been adjusted as follows for
filings beginning Feb. 27, 2023:

The filing fees will be adjusted annually based on the Consumer
Price Index as determined by the Department of Labor.

HSR Penalties. Any person (including the company and
any of its officers, directors or partners) failing to comply with
the HSR Act may be subject to a civil penalty for each day during
which such person is in violation of the Act. The maximum civil
penalty was increased from $46,517 per day to $50,120 per
day of noncompliance, effective as of Jan. 11, 2023. The civil
penalty amounts are adjusted by the FTC annually based on the
percentage change in the Consumer Price Index.

Revised Thresholds for Interlocking Directorates

Under certain circumstances, Section 8 of the Clayton Act
prohibits one person from simultaneously serving as a director or
officer of two competing corporations if each corporation has
capital, surplus and undivided profits aggregating more than
$45,257,000 (up from $41,034,000).

The Clayton Act does not prohibit the interlock if: (1) the
competitive sales of either corporation are less than $4,525,700
(up from $4,103,400); (2) the competitive sales of either
corporation are less than two percent of that corporation’s
total sales; or (3) the competitive sales of each corporation are
less than four percent of that corporation’s total sales.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.