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FTC Cautions Against Improper Reliance on “Investment-Only” Exemption

Investment manager Third Point LLC and three of its affiliated funds have entered into a proposed settlement agreement with the federal antitrust authorities for violations of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, arising from improper reliance on the “investment-only” exemption. According to the Federal Trade Commission, Third Point failed to obtain HSR clearance in 2011 prior to acquiring voting securities of Yahoo! Inc. in excess of the then-applicable $66 million threshold of the act, relying on the investment-only exemption despite taking action deemed to be inconsistent with passive investment intent.

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FTC Announces Increased HSR Thresholds

Practices: Antitrust

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The Federal Trade Commission has announced revised jurisdictional and filing fee thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“the Act”), as amended. The new thresholds under the Act represent an approximately 6.5% increase from last year, when the thresholds were increased over 2012 thresholds based on changes in the gross national product.

Transactions closing on or after February 24, 2014 will be subject to the following revised thresholds:

  • Size-of-Transaction Test: The $50 million (as adjusted) threshold used in the size-of-transaction test will increase from $70.9 million to $75.9 million.
  • Size-of-Persons Test: The $10 million (as adjusted) and $100 million (as adjusted) sales and assets thresholds used in the size-of-persons test will increase from $14.2 million to $15.2 million and from $141.8 million to $151.7 million, respectively. The $200 million (as adjusted) threshold, below which the size-of-persons test applies, will increase from $283.6 million to $303.4 million.
  • Filing Fees: The filing fees under the Act are not revised under these changes, but the filing thresholds based upon the value of assets or voting securities which trigger each fee will be revised as follows:

    Value of Transaction Filing Fee
    In excess of $75.9 million but less than $151.7 million
    (previously $70.9 million to $141.8 million)
    $45,000
    $151.7 million or greater but less than $758.6 million
    (previously $141.8 million to $709.1 million)
    $125,000
    $758.6 million or more
    (previously $709.1 million or more)
    $280,000

Other value limitations contained in the HSR coverage and exemption rules have also been adjusted.

The revised jurisdictional thresholds will remain in effect until the next adjustment issued by the FTC, which is expected in the first quarter of 2015.

For additional information regarding HSR jurisdictional thresholds and reporting requirements, please feel free to contact any member of Ropes & Gray’s antitrust practice group.
 

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