The Federal Trade Commission (FTC) announced the annual changes to the thresholds contained in Sections 7A (Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act)) and 8 of the Clayton Act (15 USC 18a and 19) (Interlocking Directors). The thresholds applicable under both these statutes is adjusted annually.

The highlights are:

Hart-Scott-Rodino

Section 7 prohibits mergers and other acquisitions of "stock or other share capital ... or part of the assets of another person ... where ... the effect of such acquisition may be substantially to lessen competition, or tend to create a monopoly." 15 U.S.C. § 18. The HSR Act is designed to permit the U.S. antitrust enforcement agencies to evaluate the potential competitive effects of and challenge, if appropriate, a transaction before it is consummated.

Under Section 7A, the new size-of-transaction threshold (the $50 million threshold) increased from $68.2 million to $70.9 million; the size-of-person thresholds (the $10 and $100 million thresholds) will be $14.2 million and $141.8 million respectively; and the former $200 million threshold will be $283.6 million.

As to Section 7A, the new size-of-transaction thresholds ($70.9 million and $283.6 million) refer to the purchase price or the fair market value of the voting securities, assets or non-corporate interests acquired. The size-of-transaction threshold can also be triggered by the formation of a new entity or the conversion of a non-voting security into a voting security (including as a result of executive compensation in the form of equity grants, etc.).

Unless an exemption applies, transactions in excess of $283.6 million are reportable regardless of the size of the parties. For all other transactions in excess of $70.9 million, one party must have assets or revenues in excess of $14.2 million and the other party must have assets or revenues in excess of $141.8 million. The new $14.2 million and $141.8 million size-of-person thresholds refer to the total current assets or total annual revenues of each of the acquiring and acquired parties.

The revised HSR thresholds will apply to all transactions closing on or after February 11, 2013.

Interlocking Directors

Section 8 of the Clayton Act prohibits, with certain exceptions, one person from serving as a director or officer of two competing corporations if certain thresholds are met: (1) if each corporation has capital, surplus, and undivided profits aggregating more than $10 million and (2) each corporation has sales of $1 million or more. The statute requires the FTC revise the thresholds annually, based on the change in gross national product.

The "$10 million" threshold in the statute will be $28,883,000 and the "$1 million" threshold will be $2,888,300. For Section 8's prohibition on interlocking directors to apply, the competing corporations must have capital, surplus and undivided profits in the aggregate of more than $28,883,000 AND the extent of competitive overlap between the two corporations must satisfy one of three tests: (a) each company has competitive sales of at least $2,888,300; or (b) each company has competitive sales of at least 2 percent of its respective total sales; or (c) the competitive sales of either of the two companies is at least 4 percent of its total sales.

The thresholds for Section 8 became effective upon publication in the Federal Register.

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