Hart-Scott-Rodino

State Attorneys General Ramping up Merger Enforcement

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Last month, Colorado Governor Jared Polis signed a law repealing a provision of the Colorado Antitrust Act that prohibited challenging a merger under state law where the federal antitrust agencies did not also challenge the merger. This action is another sign that state Attorneys General are prepared to more aggressively enforce state antitrust laws, increasing the likelihood of divergent federal and state merger enforcement priorities and outcomes.

There are two complementary merger enforcement regimes. The federal regime, enforced by the Department of Justice (DOJ) and Federal Trade Commission (FTC), and the state regime which the state Attorneys General enforce. The Hart-Scott-Rodino Act’s pre-merger notification and waiting period requirements apply to the federal merger enforcement regime but do not apply to a state merger challenge. Generally, states may investigate a merger at any time, even after it has been consummated.

Historically, federal and state antitrust authorities have taken a cooperative approach to merger enforcement, working together to investigate and litigate proposed mergers. Playing more of a supporting role, the states typically deferred to the federal agencies’ enforcement decisions. For example, the DOJ and various states jointly investigated and successfully litigated the Anthem/Cigna merger. More recently, however, federal and state merger enforcement has diverged, most notably when several states filed an action challenging the T-Mobile/Sprint merger before the DOJ had completed its investigation. Anecdotally, line attorneys in state antitrust units have reported rising tensions with DOJ.

This recent divergence has been driven in part by a perception among many state AGs that DOJ and FTC have been under-enforcing federal antitrust law, particularly in the high-tech sector. Colorado and other states that have a record of more aggressive antitrust enforcement include New York, California, Texas and Washington. They and other states may be more willing to fill the void when they believe federal agencies have failed to act.

Given the increasing independence and assertiveness of state Attorneys General, merging parties cannot ignore their concerns. The strategic and practical considerations of state antitrust review should be on every checklist for a merger or major acquisition.

M&A HSR Premerger Notification Thresholds Increase in 2020

Takeaways

  • The new minimum HSR threshold is $94 million and applies to transactions closing on or after February 27, 2020.
  • The current threshold of $90 million is in effect for all transactions that will close through February 26, 2020.
  • Failure to file may result in a fine of up to $43,280 per day of non-compliance.
  • The HSR Act casts a wide net, catching mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

The Federal Trade Commission has announced new HSR thresholds for 2020. Transactions closing on or after February 27, 2020 that are valued in excess of $94 million potentially require an HSR premerger notification filing to the U.S. antitrust agencies. The HSR Act and Rules require that parties to certain transactions submit an HSR filing and wait up to 30 days (or more, if additional information is formally requested) before closing, which gives the government time to review the transaction for potential antitrust concerns. The HSR Act applies to a wide variety of transactions, including those outside the usual M&A context. Potentially reportable transactions include mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

Determining reportability: Does the transaction meet the Size of Transaction test?

The potential need for an HSR filing requires determining whether the acquiring person will hold an aggregate amount of voting securities, non-corporate interests, and/or assets valued in excess of the HSR “Size of Transaction” threshold that is in place at the time of closing. Calculating the Size of Transaction may require aggregating voting securities, non-corporate interests, and assets previously acquired, with what will be acquired in the contemplated transaction. It may also include more than the purchase price, such as earnouts and liabilities. Talk to your HSR counsel to determine what must be included in determining your Size of Transaction.

If the transaction will close before February 27, 2020, the $90 million threshold still applies; closings as of February 27, 2020 will be subject to the new $94 million threshold.

Determining reportability: Do the parties to the transaction have to meet the Size of Person test?

Transactions that satisfy the Size of Transaction threshold may also have to satisfy the “Size of Person” thresholds to be HSR-reportable. These new thresholds are also effective for all closings on or after February 27, 2020. Talk to your HSR counsel to determine which entity’s sales and assets must be evaluated.

Filing Fee

For all HSR filings, one filing fee is required per transaction. The amount of the filing fee is based on the Size of Transaction.

Failure to File Penalty

Failing to submit an HSR filing can carry a significant financial penalty for each day of non-compliance.

Always consult with HSR counsel to determine if your transaction is HSR-reportable, especially before concluding that a filing is not required. Even if the Size of Transaction and Size of Person tests are met, the transaction may be exempt from the filing requirements.

M&A HSR Premerger Notification Thresholds Increase in 2019

Takeaways

  • The new minimum HSR threshold is $90 million and applies to transactions closing on or after April 3, 2019.
  • The current threshold of $84.4 million is in effect for all transactions that will close through April 2, 2019.
  • Failure to file may result in a fine of up to $42,530 per day of non-compliance.
  • The HSR Act casts a wide net, catching mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

The Federal Trade Commission has announced new HSR thresholds for 2019. The thresholds are adjusted annually, and were delayed this year by the government shutdown. Transactions closing on or after April 3, 2019 that are valued in excess of $90 million potentially require an HSR premerger notification filing to the U.S. antitrust agencies. The HSR Act and Rules require that parties to certain transactions submit an HSR filing and wait up to 30 days (or more, if additional information is formally requested) before closing, which gives the government time to review the transaction for potential antitrust concerns. The HSR Act applies to a wide variety of transactions, including those outside the usual M&A context. Potentially reportable transactions include mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

Determining reportability: Does the transaction meet the Size of Transaction test?

The potential need for an HSR filing requires determining whether the acquiring person will hold an aggregate amount of voting securities, non-corporate interests, and/or assets valued in excess of the HSR “Size of Transaction” threshold that is in place at the time of closing. Calculating the Size of Transaction may require aggregating voting securities, non-corporate interests, and assets previously acquired, with what will be acquired in the contemplated transaction. It may also include more than the purchase price, such as earnouts and liabilities. Talk to your HSR counsel to determine what must be included in determining your Size of Transaction.

If the transaction will close before April 3, 2019, the $84.4 million threshold still applies; closings as of April 3, 2019 will be subject to the new $90 million threshold.

Determining reportability: Do the parties to the transaction have to meet the Size of Person test?

Transactions that satisfy the Size of Transaction threshold may also have to satisfy the “Size of Person” thresholds to be HSR-reportable. These new thresholds are also effective for all closings on or after April 3, 2019. Talk to your HSR counsel to determine which entity’s sales and assets must be evaluated.

Filing Fee

For all HSR filings, one filing fee is required per transaction. The amount of the filing fee is based on the Size of Transaction.

Failure to File Penalty

Failing to submit an HSR filing can carry a significant financial penalty for each day of non-compliance.

Always consult with HSR counsel to determine if your transaction is HSR-reportable. Even if the Size of Transaction and Size of Person tests are met, the transaction may be exempt from the filing requirements.

Don’t Hold Back: FTC Offers New Guidance on HSR Filing Obligations

As discussed previously on this blog, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires parties to certain proposed transactions to submit detailed premerger notification filings and wait for clearance before consummating the deal. To facilitate the antitrust review, merging companies that meet the HSR thresholds are required to submit a wealth of information about their businesses and the proposed transaction, including annual reports, market analyses, and agreements and other documents bearing on the deal. Despite these broad requirements, the FTC found that some merging companies were withholding side agreements relevant to the antitrust review process on the theory that they were ancillary to the main agreement and/or protected by a common interest privilege or joint defense agreement. READ MORE

2017 HSR Filing Thresholds Announced

The Federal Trade Commission announced new 2017 premerger notification thresholds under the Hart-Scott-Rodino Act Image of word Mergers above abstract digital information to represent Business&Financial as concept.

The Federal Trade Commission has announced new (2017) premerger notification thresholds under the Hart-Scott-Rodino Act as follows:

Any acquisition of voting securities and/or assets requires premerger notification to the Federal Trade Commission and the Department of Justice under the HSR Act and the regulations promulgated thereunder (16 C.F.R. Sections 801 – 803) if the following tests are satisfied and if no exemption applies (15 U.S.C. Section 18a(a)(2)).  Where a premerger notification is required, both parties must file, the acquiring person must pay a filing fee ((i) $45,000 for transactions below $161.5 million, (ii) $125,000 for transactions of $161.5 million or more but less than $807.5 million, and (iii) $280,000 for transactions of $807.5 million or more) and the parties must observe a 30 day waiting period prior to closing.

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FTC Increases Maximum Civil Penalties for Violations of Competition Statutes

On June 30, 2016, the Federal Trade Commission (“FTC”) announced increases to the maximum civil penalties issuable for violations of several key competition statutes.  The agency made these changes to comply with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which required the agency adjust penalty amounts for laws it enforces based on a methodology provided for by Congress.

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FTC Provides New Guidance on Classifying Foreign Entities Under the HSR Pre-Merger Notification Program

On May 19, 2016, the Federal Trade Commission (“FTC)” issued an important clarification regarding how the agency will determine whether a foreign entity is classified as corporate or non-corporate for the purpose of the agency’s premerger notification program.[1]  Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976[2] (also referred to as the “HSR Act”), parties to certain mergers or acquisitions must notify both the Federal Trade Commission and the U.S. Department of Justice prior to consummating the transaction.  Under this program, whether a party to the transaction is a corporate or non-corporate entity (e.g., an LLC, partnership) can have significant implications for determining whether a filing is required and whether an exemption might apply.[3]  While evaluating party status has historically been straightforward for U.S. entities, foreign entities pose a number of challenges.

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