ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
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The Latest: Changes Coming to Revenue Reporting for HSR Filings

by | Jun 28, 2019 | , ,

What Happened:

  • The Federal Trade Commission (FTC), along with the Antitrust Division of the Department of Justice (DOJ), approved amendments to the Hart-Scott-Rodino (HSR) Rules and the instructions for completing the HSR Form.
  • After the amendments take effect on September 25, 2019, HSR filers will be required to use new 10-digit North American Product Classification System (NAPCS) codes in place of the current 10-digit North American Industry Classification System (NAICS) codes when reporting revenues in the HSR Form. The Form will continue to use 6-digit NAICS codes, but will switch from the 2012 codes to the latest version, released in 2017 by the Census Bureau.
  • Data on non-manufacturing revenue will be required to be reported using the updated 6-digit NAICS codes, while data on manufacturing revenue will be required to be reported using both the 6-digit NAICS industry code and the 10-digit NAPCS product codes.
  • The FTC intends to update the instructions for the HSR Form to reflect the changes made to the revenue reporting requirements.

What this Means:

  • Companies expecting to file an HSR after September 25 will need to familiarize themselves with the new 10-digit NAPCS codes and the updated 6-digit 2017 NAICS codes, and may want to update their databases to be in a position to file promptly when the new codes take effect on September 25.


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

by and | Feb 15, 2019 | ,

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.



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DOJ Announces Procedural Reforms Seeking to Resolve Merger Investigations within 6 Months of Filing

by , and | Sep 25, 2018 | , ,

Today, Assistant Attorney General Makan Delrahim announced a series of reforms with the express goal to resolve most merger investigations within six months of filing. The reforms seek to place the burden of faster reviews not only on the Antitrust Division of the Department of Justice (DOJ), but also on the merging parties.

The DOJ will require fewer custodians, take fewer depositions, and commit to shorter time-periods in exchange for merging parties providing detailed information to the DOJ early in the investigation in some cases before a Hart-Scott-Rodino (HSR) filing is made. AAG Delrahim believes that merging parties need to avoid “hid[ing] the eight ball” and work with the DOJ in good faith to remedy transactions that raise competitive concerns.

By announcing these reforms, the DOJ acknowledges that merger reviews are taking longer in recent years. AAG Delrahim cited a recent report noting that the length of merger reviews has increased 65 percent since 2013 and that the average length of a significant merger review is now roughly 11 months. AAG Delrahim believes an assortment of factors contribute to the increasing length of reviews including larger quantities of documents produced during a Second Request, increasing numbers of transactions with international implications, and the DOJ’s insistence on an upfront buyer for most consent orders. (more…)



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FTC Increases Notification Thresholds under the Hart-Scott-Rodino Act and Clayton Act Section 8

by and | Jan 29, 2018 | ,

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.

Continue Reading.



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Senate Democrats Push for Tougher Merger Enforcement

by , and | Sep 18, 2017 | , ,

On September 14, 2017, Senator Amy Klobuchar (D-MN), introduced new legislation to curtail market concentration and enhance antitrust scrutiny of mergers and acquisitions. As the Ranking Member of the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights, Klobuchar is the leading Senate Democrat for antitrust issues.

Two bills were submitted to the Senate: the Consolidation Prevention and Competition Promotion Act (CPCPA) and the Merger Enforcement Improvement Act (MEIA). The CPCPA is co-sponsored by Senators Kirsten Gillibrand (D-NY), Richard Blumenthal (D-CT) and Ed Markey (D-MA). The MEIA is co-sponsored by Senators Blumenthal, Markey and Gillibrand, along with Senators Patrick Leahy (D-VT), Al Franken (D-MN), Cory Booker (D-NJ), Dick Durbin (D-IL), Mazie Hirono (D-HI) and Tammy Baldwin (D-WI). Both bills propose amendments to the Clayton Act. Earlier this year, Senate democrats announced these legislative proposals as part of their “A Better Deal” antitrust agenda.

WHAT DO THE BILLS PROPOSE:
  • Notably, the CPCPA proposes to revise the Clayton Act so that in challenging an acquisition, the Federal Trade Commission (FTC) and Department of Justice (DOJ) would only have to show that the proposed transaction materially lessens competition rather than significantly lessens competition, which is the current standard. The legislation defines “materially lessens competition” to mean “more than a de minimis amount.” This change would reduce the burden of proof for the government in challenging an acquisition.

(more…)



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THE LATEST: Losing Bidder for Pharmaceutical Triggers FTC Investigation, Fix, and $100 Million Fine in Non-HSR-Reportable Transaction

by and | Mar 13, 2017 | , , ,

A private lawsuit filed by Retrophin Inc. (Retrophin), under then-CEO Martin Shkreli, likely triggered an investigation by the FTC into a consummated transaction.  Both the private lawsuit and the FTC complaint resulted in settlement.  In addition, the FTC levied a $100 million penalty.

WHAT HAPPENED:
  • In 2013, Questcor Pharmaceuticals, Inc. (Questcor) acquired the U.S. rights to Synacthen Depot (Synacthen) from Novartis (Mallinckrodt later acquired Questcor).
  • Questcor’s $135 million deal with Novartis out-bid several companies seeking to acquire Synacthen, including biopharmaceutical company Retrophin, who bid $16 million for the Synacthen license.
  • In 2014, Retrophin (under then-CEO Martin Shkreli) filed suit against Questcor, alleging that the purpose of the transaction between Questcor and Novartis was to eliminate competition for Achthar, Novartis’ ACTH drug used to treat infantile spasms and nephrotic syndrome, by shutting down Synacthen.
  • Retrophin’s case was settled in 2015 with Mallinckrodt (who acquired Questcor in the interim) paying Retrophin $15.5 million.
  • There are reports that the FTC challenged the consummated transaction of Questcor/Novartis following Retophin’s lawsuit. The FTC’s challenge recently resulted in a $100 million monetary payment and licensing of Synacthen for treatment of infantile spasms and nephrotic syndrome to an FTC approved licensee.
WHAT THIS MEANS:
  • Even if a transaction is non-reportable under the Hart-Scott-Rodino (HSR) Act, the FTC or DOJ may open an investigation into the transaction. The Questcor/Novartis transaction was not reported under the then-existing HSR rules because Novartis, the licensor, retained some manufacturing rights to Synacthen.
  • The FTC and DOJ may learn about potentially anticompetitive transactions in numerous ways, including HSR filings, news reports, complaints from disgruntled customers or competitors, private litigation involving the transaction, and as shown here, from the losing bidder.
  • HSR clearance or a determination that a transaction is not HSR reportable does not mean that the transaction is free and clear of government antitrust investigations or private litigation.


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Notification Threshold Under the Hart-Scott-Rodino Act Increased to $76.3 Million

by and | Jan 21, 2015 |

The U.S. Federal Trade Commission (FTC) recently announced increased thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) and 2015 thresholds for determining whether parties trigger the prohibition against interlocking directors under Section 8 of the Clayton Act.

Notification Threshold Adjustments

Pursuant to the amendments passed by the U.S. Congress in 2000, the FTC published revised thresholds for HSR pre-merger notifications in the Federal Register on January 21, 2015.  These increased thresholds will become effective on February 20, 2015.  These new thresholds apply to any transaction completed and any HSR pre-merger notifications filed on or after February 20, 2015.

As required, the FTC adjusted the notification thresholds based on the change in the gross national product (GNP) for the fiscal year ending September 30, 2014.  Most notably, the base filing threshold of $50 million, which frequently determines whether a transaction requires filing of an HSR notification, will increase from $75.9 million to $76.3 million.  The changes also will affect other dollar-amount thresholds:

  • The alternative statutory size-of-transaction test, which captures all transactions valued above $200 million regardless of the “size-of-persons,” will be adjusted to $305.1 million.
  • The statutory size-of-person thresholds (applicable to transactions valued at more than $76.3 million, but less than $305.1 million) will increase slightly from $15.2 million to $15.3 million and from $151.7 million to $152.5 million.

The adjustments will affect parties contemplating HSR notifications in various ways.  Parties may be relieved from the obligation to file a notification for transactions closed on or after February 20, 2015, that result in holdings below the adjusted base threshold.  For example, a transaction resulting in the acquiring person holding voting securities, a controlling interest in a non-corporate entity, or assets valued at less than $76.3 million would not be reportable on or after the effective date.  The adjustments will also affect various exemptions under the HSR rules.  For example, acquisitions by U.S. persons of foreign assets and voting securities of foreign issuers will now be exempt unless they generated U.S. sales in excess of $76.3 million or, in the case of foreign voting securities, the issuer has assets in the United States valued in excess of $76.3 million.

Parties may also realize a benefit of lower notification filing fees for transactions that just cross current thresholds.  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 applicable filing fee tiers will shift upward as a result of the GNP-indexing adjustments:

  • Transactions valued at or in excess of $76.3 million, but less than $152.5 million, require a $45,000 filing fee.
  • Transactions valued at or in excess of $152.5 million, but less than $762.7 million, require a $125,000 filing fee.
  • Transactions valued at or above $762.7 million require a $280,000 filing fee.

Interlocking Directorate Thresholds Adjustment

On January 21, 2015, the FTC also published revised thresholds for interlocking directorates that are effective immediately.  The FTC revises these [...]

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FTC’s Reporting Rule for Pharmaceutical Patent Transfers Upheld

by | Jun 4, 2014 | ,

On May 30, 2014, the U.S. District Court for the District of Columbia ruled in favor of the Federal Trade Commission (FTC) in a dispute with the Pharmaceutical Research and Manufacturers of America (PhRMA) regarding the Commission’s authority to require the pharmaceutical industry to report certain transfers of exclusive patent rights under the Hart-Scott-Rodino (HSR) Act.

The dispute centered on a Final Rule promulgated by the FTC in November 2013.  Patents are considered assets by the FTC and their transfer may be reportable.  Some transactions provide for the transfer of certain exclusive patent rights without implicating the transfer of the patent in its entirety.  The FTC maintains that the exclusive right to commercially use all or part of a patent is, in substance, identical to a full acquisition of the patent.  The challenged rule was intended to clarify the circumstances when a transfer of exclusive rights to a pharmaceutical patent is considered a potentially reportable acquisition of an asset under the HSR Act.

PhRMA sued to have the new rule set aside.  PhRMA contended in its complaint that the FTC lacked the statutory authority to issue rules that target a single industry, as opposed to rules of general effect.  The trade organization also contended that the FTC failed to establish a rational basis for an industry-specific rule and that it failed to comply with legally required procedures in instituting the rule. PhRMA and the FTC both filed motions for summary judgment.

In granting summary judgment to the FTC, Judge Beryl Howell agreed that Congress had never spoken in the HSR Act to the specific issue of whether the FTC was authorized to issue industry-specific rules: “Nothing in this text restricts the FTC to generating only general rules rather than industry specific rules.”  Given the congressional silence on this specific question, the court next considered whether the FTC’s interpretation of the statue was a permissible one.  Under the applicable legal standard, an agency’s rule is entitled to deference “as long as it is a permissible construction of the statute.”  The FTC contended that the Final Rule did not expand “‘HSR requirements to parties or transactions not covered by the Act,’  but ‘simply clarif[ied] the types of transactions that constitute asset transfers for which the Act requires prior notification.’”  The court concluded this was a permissible construction of the authority granted to the FTC under the HSR Act.



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FTC and DOJ Release FY 2013 HSR Annual Report

by | May 27, 2014 | ,

On May 21, 2014, the Federal Trade Commission (FTC) and Department of Justice (DOJ) released the Hart-Scott-Rodino Annual Report covering Fiscal Year (FY) 2013 (October 1, 2012 – September 30, 2013).  The report describes key merger enforcement actions over the past year and provides interesting data regarding the agencies’ antitrust enforcement activity.

Specifically, the report indicates that in FY 2013, 1,326 transactions were reported under the Hart-Scott-Rodino (HSR) Act, representing an approximate 7 percent decline in reported transactions from FY 2012.  The FTC was granted clearance to investigate 145 of these transactions, while the DOJ was granted clearance to investigate 72 transactions.  Of the 145 transactions the FTC investigated in FY 2013, it only issued 25 second requests.  In other words, the FTC only issued second requests in 17.2 percent of its investigations in FY 2013.  The DOJ’s Antitrust Division, on the other hand, issued second requests in 22 of the 72 transactions it was granted clearance to investigate (i.e., 30.6 percent of its investigations).

However, of the FTC’s 25 second requests in FY 2013, it brought 23 merger enforcement actions.  That is, the FTC brought enforcement actions in more than 90 percent of the transactions for which it issued a second request in FY 2013.  The DOJ’s Antitrust Division brought only 15 merger enforcement actions in FY 2013, or just under 70 percent of the transactions for which it issued a second request (15 out of 22).

This information can be a helpful tool to assist clients in evaluating their chances before the merger enforcement agencies at various stages of the HSR notification process.  While the FTC and DOJ together only investigated 217 transactions in FY 2013, most of those investigations were brought by the FTC.  Furthermore, the agencies’ decisions to issue second requests made it increasingly likely that they would bring enforcement actions to block or unwind the transactions, particularly with respect to the FTC.



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