Client Alert

Revised HSR Jurisdictional Thresholds for Pre-merger Notifications Under Section 7A

January 30, 2008

On January 18, 2008, the Federal Trade Commission (FTC) announced revised jurisdictional thresholds for pre-merger reporting pursuant to the Hart-Scott-Rodino Act ("HSR Act"). Section 7A of the Clayton Act, 15 U.S.C. 18a, requires parties to file pre-merger notification with the Bureau of Competition of the FTC and the United States Department of Justice, Antitrust Division (DOJ) prior to closing a merger or acquisition that meets the HSR Act thresholds. The FTC also announced revised thresholds for interlocking directorates under Section 8. The new jurisdictional thresholds will become effective on February 28, 2008 and will apply to all transactions that close on or after that date.

Revised HSR Premerger Notification Thresholds

The Size-of-Transaction Threshold

For transactions closing on or after February 28, 2008, a transaction value of greater than $63.1 million will trigger the reporting requirements of the HSR Act, an increase from the prior threshold transaction value of greater than $59.8 million. The revised threshold establishes an absolute floor of $63.1 million, meaning that there is no HSR Act reporting requirement for any transaction valued at $63.1 million or less, regardless of the percentage of assets or voting securities to be acquired.

The Size-of-Person Threshold

The size-of-person test applies only when the transaction value exceeds $63.1 million but is less than $252.3 million. When the transaction value falls within this range, the transaction must be reported under the HSR Act if one person to the transaction has total assets or net sales of $126.2 million or more and the other has total assets or net sales of $12.6 million or more.

This adjustment reflects an increase from the previous total assets/net sales thresholds of $119.6 million and $12 million, respectively. If the transaction value falls within the prescribed range, but one of the parties does not meet the size-of-person threshold, the transaction will not be subject to pre-merger notification. Any transaction that is valued at more than $252.3 million will be reportable under the HSR Act without application of the size-of-person test.

Adjustment to HSR Filing Fees

The FTC has also adjusted the tiered filing fee structure to accord with the adjustments to the jurisdictional thresholds. The new filing fees are as follows:

Value of Transaction	Filing Fee
Less than $126.2 million	$45,000
$126.2 million to less than $630.8 million	$125,000
$630.8 million or more	$280,000

Parties contemplating merger or acquisition activity are strongly encouraged to consult antitrust counsel prior to closing transactions to determine whether pre-merger notification is required. The rules governing the calculation of the relevant thresholds and the applicability of particular exemptions to all or part of the transaction are complex. More important, under certain circumstances, parties can face penalties of up to $11,000 per day for failure to comply with pre-merger filing obligations under the HSR Act.

Revised Interlocking Directorate Thresholds

Section 8(a)(1) of the Clayton Act prohibits an individual from serving on the directorship of two or more corporations, other than banks, banking associations, and trust companies, if the corporations are engaged in commerce, are competitors, and meet the undivided profits threshold. Section 8(a)(2) exempts an individual from the Section 8(a)(1) restriction when the competitive sales of either corporation are less than two percent of that corporation’s sales, the competitive sales of each corporation are less than four percent of that corporation’s total sales, or the competitive sales of either corporation are less than a threshold amount (adjusted annually).

The FTC has increased the undivided profits threshold for Section 8(a)(1) to $25,319,000 and the competitive sales threshold for exemption under Section 8(a)(2)(a) to $2,531,900.