ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
Federal Trade Commission (FTC)
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Merger Notification Thresholds and Filing Fees to Increase

By , and on Jan 24, 2023
Posted In , , ,

The Federal Trade Commission (FTC) announced on January 23, 2023, the implementation of increased thresholds for merger notifications under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) as well as increased filing fees for reportable transactions.

Notification Threshold Increases

Pursuant to the HSR Act, all transactions which meet or exceed the jurisdictional thresholds, and which do not satisfy an exemption, must be notified to the FTC and US Department of Justice (DOJ) through an HSR filing. The newly announced thresholds will apply to all transactions that close on or after the effective date. The effective date is 30 days after the notice is published in the Federal Register; the notice is currently scheduled to be published on January 26, 2023, making the effective date February 27, 2023.

The threshold changes are tied to changes in the gross national product (GNP).

  • The base statutory size-of-transaction threshold, the lowest threshold requiring notification, will increase to $111.4 million.
  • The upper statutory size-of-transaction test, encompassing all transactions valued above a certain size (regardless of the size-of-person test being met), will increase to $445.5 million.
  • The statutory size-of-person lower and upper thresholds (which apply to deals valued above $111.4 million but not above $445.5) will increase to $22.3 million and $222.7 million, respectively.

Merger Filing Fee Increases

The passage of the Merger Filing Fee Modernization Act on December 29, 2022, altered the filing fee thresholds as well as significantly increased the fees imposed on transacting parties when making an HSR filing in excess of $1 billion. Like the notification threshold increase, these filing fee adjustments will also take effect 30 days after publication in the Federal Register, meaning the increased fees will also go into effect on February 27, 2023.

The new transaction thresholds and accompanying fees are provided in the table below:

As with the notification thresholds, the filing fee thresholds and fee amounts will now be subject to annual adjustment at the start of each year based on GNP for thresholds and consumer price index (CPI) for fee amounts.



2023 Regulatory Forecast: Antitrust & Competition

By , and on Jan 10, 2023
Posted In , , ,

The Federal Trade Commission (FTC) and the US Department of Justice (DOJ) pursued aggressive antitrust and competition enforcement agendas this past year and show no signs of slowing down in 2023. Prepare for the year ahead by reviewing our 2023 Regulatory Forecast for the antitrust and competition space.

Click the links below to download a one-pager of takeaways for each area.

Antitrust & Competition | Merger Control: The Biden administration prioritized aggressive antitrust merger enforcement in 2022, especially in the healthcare, labor, consumer and technology sectors. Learn how this trend will continue in 2023 as the FTC and DOJ expand their toolbox to challenge transactions.

Antitrust Litigation: In 2022, the DOJ and FTC took boundary-shifting antitrust enforcement positions and proved they are not afraid to pursue novel legal theories. The DOJ alone has more open grand jury investigations and charged more cases in 2022 than it has in decades. The DOJ and the FTC also requested historic budget increases to support their aggressive agendas. Additional resources mean more regulators are available to investigate and litigate alleged anticompetitive conduct. Find out more about the aggressive enforcement by the antitrust agencies and private plaintiffs that is expected to continue in 2023.

Consumer Protection: Enforcement by the FTC, among other consumer protection regulators, was particularly vigorous in 2022 and the trend is expected to continue in 2023. In light of the increased regulatory focus on social media, marketing and advertising, businesses should be aware of the ever-evolving guidance in this realm. Read about the proposed rulemaking and revisions on the horizon this year.



FTC Proposes Rule Banning Noncompete Agreements

By , and on Jan 6, 2023
Posted In

On January 5, 2023, the Federal Trade Commission (FTC) issued a proposed rule that would prohibit employers from using noncompete agreements with their employees or independent contractors. This proposal arises from a preliminary finding by the FTC that noncompetes constitute an unfair method of competition in violation of Section 5 of the Federal Trade Commission Act (FTC Act). It comes on the heels of the FTC’s November policy statement asserting its intention to rigorously enforce and expand the scope of Section 5 of the FTC Act’s ban on unfair methods of competition.

If adopted, this rule would make it illegal for an employer to enter into a noncompete agreement with a worker, maintain a noncompete with a worker or represent to a worker that the worker is subject to a noncompete. Employers would also be required to rescind existing noncompetes and inform workers that they are no longer enforceable.

The proposed rule would apply to noncompetes with either employees or independent contractors. Other restrictive covenants such as non-disclosure agreements would not be affected by the FTC’s proposed rule unless they are so broad in scope that they essentially function as a noncompete agreement.

The FTC is inviting public comment on its proposed rule. The full text of the proposed rule and information on the public comment period is available here. In particular, the FTC seeks comment on whether senior executives or franchisees should be covered by the rule, as well as whether low- and high-wage workers should be treated differently under the rule. Comments are due 60 days after the Federal Register publishes this proposed rule, after which the FTC is likely to issue a final rule. Should the rule become final, companies should be prepared for it to go into effect 180 days after the date of publication.

The proposed rule arrives with the FTC’s concurrent announcement of settlements in complaints it issued against three employers’ use of noncompetes. These settlements ban those employers from enforcing, threatening to enforce or imposing noncompetes against specified groups of employees and require that the companies notify all affected employees.

Historically, noncompetes were a matter of state law. With this new involvement from the FTC attempting to set a national ban on noncompetes, employers need to be aware of this latest attempt to regulate the use of noncompete agreements and restrictive covenants.

Whether the FTC will succeed remains an open question. Republican Commissioner Christine S. Wilson, in a dissenting statement, cautioned that the proposed rule is open to meritorious challenges that (1) the Commission lacks authority to engage in “unfair methods of competition” rulemaking and (2) the Supreme Court of the United States’ “major questions” doctrine suggests that the federal courts may preclude the FTC from venturing into this novel area of regulation absent legislative amendments to its enabling statute. Plus, interested parties may persuade the FTC to scale back its proposed regulation.

Entities interested in submitting such [...]

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Congress Overhauls Merger Filing Fees and Thresholds

By , , and on Dec 23, 2022
Posted In , , ,

Congress has passed—and President Biden is expected to sign into law today—the Merger Filing Fee Modernization Act, which will significantly change antitrust merger notification regulations under the Hart-Scott-Rodino Act (HSR Act), 15 U.S.C. § 18a.

Included in the changes is language substantially altering the framework for the filing fee amounts and the deal value thresholds triggering those HSR filing fees.

Per a press release from Senator Amy Klobuchar (D-MN), the changes will go into effect in 2023. We will update when we have more clarity on timing.

In addition to the filing fee changes, the legislation imposes a new obligation to report with an HSR filing information on foreign subsidies from certain foreign governments, noted as “adversaries.” We will have to see how the Federal Trade Commission (FTC) and the US Department of Justice implement this requirement in a revision to the HSR form and instructions.

Notably and perhaps more significantly, while not part of this legislation, FTC Chair Lina Khan has indicated that the agencies also are working on revisions to the HSR rules that will require more substantive disclosures of information to assist in the agency review process. Overall, the legislation and expected proposed changes to the HSR form, as well as the anticipated new Merger Guidelines, likely will significantly change HSR practice moving forward.

DETAILS REGARDING FILING FEES AND THRESHOLDS

The new deal value thresholds and filing fee amounts are as follows:

The new thresholds and fees will be adjusted annually at the beginning of each year.

For an understanding of how this legislation changes the prior threshold and fee framework, the following table shows the impact of the legislation on prior HSR filing fees:

 



DOJ Publishing Win May Mean More Labor, Salary Challenges

By and on Nov 30, 2022
Posted In , ,

US District Judge Florence Pan’s decision to block Penguin Random House LLC’s planned $2.2 billion acquisition of Simon & Schuster represented the US Department of Justice (DOJ) Antitrust Division’s first major merger win following a string of losses this fall. Judge Pan’s decision is significant because she accepted the DOJ’s theory that the merger would lead to lower compensation for best-selling authors. This decision may embolden the DOJ and Federal Trade Commission (FTC) to challenge more transactions based on the impact on labor and salaries rather than the impact on consumer prices.

In this Law360 article, McDermott’s Alexandra Lewis, Glenna Siegel and Joel Grosberg discuss the implications of the ruling and what it might mean for other industries.

Access the article.



DOJ to Merging Parties: The Time of “Underenforcement” is Over; Fix-It-First or Risk Being Challenged

By , and on Sep 20, 2022
Posted In , ,

WHAT HAPPENED

During a conference last week, Ryan Danks, Director of Civil Enforcement at the US Department of Justice’s Antitrust Division (DOJ), suggested that merging parties—not the antitrust enforcement agencies—should devise fixes for allegedly anticompetitive transactions.

Danks stated “that something is broken about the way that the antitrust community talks about remedies in the context of mergers, where parties will bring in a three-to-two or four-to-three or even a two-to-one [transactions] and say ‘now we want you, government, to work with us to figure out how to fix this’ . . . that’s not our job. Our job is to maintain competition.”

Danks added that merging parties bear the responsibility for remedying their anticompetitive transactions and have more information on the businesses, allowing them to formulate strong solutions. Such “fix-it-first” approaches may allow merging parties to complete their transactions quicker, avoiding lengthy merger reviews and consent decree negotiations.

Danks also suggested that “the simplest remedy . . . is to just stop an anticompetitive transaction from occurring,” strongly hinting that today’s DOJ would rather challenge an entire transaction than work with the parties on devising a remedy to address specific competitive concerns in limited product or geographic markets.

Jonathan Kanter, Assistant Attorney General for the Antitrust Division, conveyed similar views in two speeches last week, making it clear that merger enforcement at the DOJ will become even more vigorous.

On September 13, 2022, Kanter:

  • Warned that “[c]ompanies considering mergers that may harm competition should know that the Antitrust Division will not back down from a fight so long as that threat remains.”
  • Emphasized that the Clayton Act’s “expansive definition of antitrust liability” requires the government only to prove that a transaction’s effect “may be substantially to lessen competition.” According to Kanter, antitrust agencies have, for too long, “underenforced a statute that was meant to be prophylactic” by focusing on concrete evidence of a merger’s effect on prices.

On September 16, 2022, Kanter said that antitrust enforcers “can no longer be so cautious to avoid overenforcement that [they] intentionally underenforce the law.”

Moving away from negotiating settlements that allow transactions to proceed while resolving anticompetitive issues is part of a trend of dramatic policy and procedural changes at both the DOJ and Federal Trade Commission (FTC) designed to discourage mergers and acquisitions (M&A), such as:

  • Suspending early termination of the Hart-Scott-Rodino Act (HSR) waiting period for transactions that do not raise competitive issues
  • Sending merging parties “close at your own risk” letters, informing the parties that antitrust investigations are ongoing despite expiration of the HSR waiting period
  • Insisting on inclusion of prior approval/prior notice provisions in all merger settlements
  • Including new topics, such as the impact on labor and environment, in Second Requests and adding additional hurdles to modifying Second Requests.

WHAT THIS MEANS FOR MERGING PARTIES

Merging parties should increasingly consider resolving likely competitive issues with their transaction before the antitrust [...]

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DOJ Antitrust Head Signals Aggressive Enforcement against Private Equity Transactions

By and on May 31, 2022
Posted In , ,

US antitrust enforcers have signaled that private equity firms are the prime targets for upcoming aggressive antitrust merger enforcement. In a recent interview, US Assistant Attorney General Jonathan Kanter stated that the motive of a private equity firm may be “designed to hollow out or roll up an industry and essentially cash out,” which “is often very much at odds with the law, and very much at odds with the competition we’re trying to protect.”[1] His comment comes after Lina Khan, the current Federal Trade Commission (FTC) Chairwoman, stated that private equity roll-ups would be a focal point for the FTC.[2] It is not entirely unsurprising that progressive antitrust enforcers are focusing on private equity after the industry announced a record 14,730 deals last year globally worth $1.2 trillion, which was nearly double the previous high in 2007.[3] The above comments provide several key takeaways for stakeholders going forward:

  • As a general matter, these statements further solidify the notion that antitrust merger enforcement is going to continue to be extremely aggressive and indicate that the US Department of Justice (DOJ) and the FTC may closely scrutinize private equity transactions even if there is no obvious horizontal or vertical issue. For example, the DOJ and the FTC have already started investigating less traditional theories of harm, such as the impact on labor and the environment.
  • Private equity firms should expect the potential for heightened scrutiny in instances where a private equity firm has engaged in serial acquisitions within the same industry (known as roll-up transactions), especially in healthcare-related fields. It will be important for stakeholders to not only evaluate the current acquisition for competitive issues, but to also consider the impact of a long-term “roll-up” plan and its influence on pricing, service, and quality.
  • Watch for agencies to bring more Clayton Act Section 8 cases, which prohibits interlocking directorates (aka a single firm appointing officers and directors at multiple competitors).[4] Private equity firms often will appoint personnel to the boards of the firm’s portfolio companies, which may consist of horizontal competitors. Going forward, these appointments will require additional attention to avoid running afoul of Section 8.
  • The DOJ and the FTC will also have an enhanced focus on the impact of private equity firms acting as divestiture buyers when the agency orders merging parties to divest assets to preserve competition. Assistant Attorney General Kanter stated, “[I]n many instances, divestitures that were supposed to address a competitive problem have ended up fueling additional competitive problems.”[5]

While the degree to which agencies will more closely scrutinize private equity transactions remains unclear, it is crucial for private equity firms to engage antitrust counsel early in the transaction process both to evaluate the transaction at hand, as well as any future transactions that may, together, bring about enhanced regulatory scrutiny.

[1] Stefania Palma and James Fontanella-Khan, “Crackdown on buyout deals coming, warns [...]

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Notification Threshold Under the Hart-Scott-Rodino Act Increased to $90 Million

By and on Feb 15, 2019
Posted In ,

The US Federal Trade Commission recently announced increased thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and for determining whether parties trigger the prohibition against interlocking directors under Section 8 of the Clayton Act.

Notification Threshold Adjustments

The US Federal Trade Commission (FTC) announced revised thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) pre-merger notifications on February 15, 2019. These increased thresholds will become effective mid-to-late March. These new thresholds apply to any transaction that closes on or after the effective date.

  • The base filing threshold, which frequently determines whether a transaction requires filing of an HSR notification, will increase to $90 million.
  • The alternative statutory size-of-transaction test, which captures all transactions valued above a certain size (even if the “size-of-person” threshold is not met), will be adjusted to $359.9 million.
  • The statutory size-of-person thresholds will increase slightly to $18 million and $180 million.

The adjustments will affect parties contemplating HSR notifications in various ways. Transactions that meet the current “size-of-transaction” threshold, but will not meet the adjusted $90 million threshold, will only need to be filed if they will close before the new thresholds take effect mid-to-late March.

Parties may also realize a benefit of lower notification filing fees for certain transactions. Under the rules, the acquiring person must pay a filing fee, although the parties may allocate that fee amongst themselves. Filing fees for HSR-reportable transactions will remain unchanged; however, the size of transactions subject to the filing fee tiers will shift upward as a result of the gross national product (GNP)-indexing adjustments:

Filing Fee Size-of-Transaction $45,000 $90 million, but less than $180 million $125,000 $180 million, but less than $899.8 million $280,000 $899.8 million or more Interlocking Directorate Thresholds Adjustment

The FTC also announced revised thresholds for interlocking directorates. The FTC revises these thresholds annually based on the change in the level of GNP. Section 8 of the Clayton Act prohibits a person from serving as a director or officer of two competing corporations if certain thresholds are met. Pursuant to the recently revised thresholds, Section 8 of the Clayton Act applies to corporations with more than $36,564,000 in capital, surplus and undivided profits, but it does not apply where either interlocked corporation has less than $3,656,400 in competitive sales. These new thresholds are effective immediately upon publication in the Federal Register, expected within the week.



Healthcare and Antitrust Enforcement: Continuity through the Administrations

By on Oct 26, 2018
Posted In , ,

Antitrust laws protect competition and consumers. Antitrust enforcement is prevalent in actions concerning manufacturing and consumer goods, among other things. However, recent enforcement activity by the Federal Trade Commission (FTC) and Department of Justice’s Antitrust Division (DOJ) serves as a reminder that the services industry, particularly healthcare services, is not immune to antitrust scrutiny as well.

Antitrust enforcement and healthcare policy were two priorities under President Obama. So, too, was antitrust enforcement within healthcare markets. The current administration prompted speculation on whether it would change its emphasis in any of these respects. We examine in this article whether the Trump Administration, now a year and a half into its term, has shifted focus or instead has stayed in the hunt for antitrust violations in the healthcare industry. As discussed below, the record of healthcare antitrust enforcement actions over the last five years, spanning both administrations, demonstrates that healthcare has been and remains a priority for civil and criminal antitrust enforcement by the US antitrust agencies and state Attorneys General. (more…)



Change in LBO Valuation for HSR Purposes

By on Oct 13, 2016
Posted In ,

The Federal Trade Commission (FTC) recently reversed its position on how to calculate the size-of-transaction for HSR purposes in connection with leveraged buyouts (LBOs). This change in position may result in more reportable transactions.

As detailed here, the FTC’s position, effective immediately, is that any new debt used to finance an LBO transaction, counts toward the size of transaction. Previously, whether or not new debt used to finance an LBO transaction was included in the size of transaction turned on whether the buyer or the target company incurred, provided, or guaranteed the debt.

This does not change the treatment of payment of third-party debt out of transaction consideration:

  • In equity transactions, payment of third-party debt that is deducted from the consideration ultimately paid by the buyer to seller is not included in the size of transaction (e.g., $100 million purchase price of which $30 million goes to pay off third party debt = $70 million transaction for HSR purposes).
  • In asset acquisitions, assumption of liabilities continues to be additive to the purchase price (e.g., $50 purchase price plus $30 million in assumed liabilities = $80 million transaction for HSR purposes).


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