In a previous article, we discussed the different Antitrust Laws, how they came to effect, and their purposes. In today’s article, we will continue with the discussion of the Antitrust Laws and the filing requirements. Check them out below.
Size Requirements for Filing
The law has established size thresholds for filing because there are instances where small mergers and acquisitions are less likely to have anticompetitive effects. And so, these thresholds are divided into different levels.
Namely, those levels are size-of-transaction levels and size-of-person levels, both of these will be discussed in detail below. Those who fail to file will be subjected to monetary penalties of $16,000 for each day that the filing is late.
Size-of-Transaction Threshold
First, we have the size-of-transaction threshold. This is applicable if the buyer is in the process of acquiring voting securities or assets of $80.8 million or more. Any deal above that level will require a filing. However, there is no HSR filing requirement for smaller deals. Next, we will move on to the size-of-person threshold.
Size-of-Person Threshold
Aside from the size-of-transaction threshold, there is also the size-of-person threshold. This one is a test that is only met if one party to a transaction has $161.5 million, or more in sales and assets and the other has $16.2 million or more in sales and assets.
However, regardless of the size-of-person test, any deal that can be valued at $32 million or more has to be reported. At this point, it is a crucial thing to remember that the Justice Department and the Federal Trade Commission still have the authority to challenge any merger and acquisition on antitrust grounds. This is true even if a filing is not required under the HSR. All of this is possible under the Sherman Act and the Federal Trade Commission Act which we discussed in a previous article.
Deadlines for Filing
Now, you must also be informed of the deadlines of filing. As soon as a bidder announces a tender offer or any other kind of offer, it is required that the bidder must also ile under the Hart-Scott-Rodino Act.
After this, the target is required to respond, the said response comes in the form of the target’s filing. The target must file 15 days after the bidder has filed.
Different Types of Information to Be Filed
The form that needs to be filed can be downloaded from the Federal Trade Commission website. It is 15 pages long and is required by the law.
According to the NorthAmerican Industrial Classification System or NAICS codes, it is also a requirement to submit or provide business data. Describing the business activities and revenues of the acquiring and target firms’ operations. This should be easy enough because most firms already have this information. It is a requirement to submit this business data to the U.S. Bureau of the Census.
Additionally, in order to analyze the competitive effects of the transaction, the acquiring firm must attach certain reports that it may have compiled. Now, as you may have imagined, an interesting conflict arises from this.
When a transaction is first proposed within the acquiring firm, it is not unlikely for the proponent to exaggerate the deal or transactions’ benefits. Now, if this exaggeration comes in the form of presenting a higher market share than what might be more realistic.
As you can see, this affects the firm’s ability to attain antitrust approval, and it may be hindered. It is for reasons like this that the firm must keep the antitrust approval in mind when it is preparing for its premerger reports.
Moreover, there is no need to make the filing public. Although there are agencies who may choose to disclose some information if the deal has already been announced publicly. Certain fees must also be paid along with the submission of the necessary data. The greater the size of the transaction, the greater the fees.
Filing Time Requirements
The filings also have a time limit, there is a 30-day waiting period provided by the HSR. However, if the deal is a cash tender offer or a bankruptcy sale, the waiting period shortens to just 15 days.
Now, if it is determined that a closer inquiry is necessary, either the Justice Department or the Federal Trade Commission may put forward a second request for information. The second request will extend the waiting period of 30 days. This is true except for 10 days in the case of a cash tender offer for bankruptcy sales.
Additionally, most filling companies also request early termination of the waiting period. This can be done on the grounds that there are clearly no anticompetitive effects. Most of the time, the majority of these requests are granted. However, there are some exceptions, and these investigations can take a lengthy amount of time.
Disclosure of HSR Filing
Technically speaking, any HSR filing is considered as confidential filing with the government. This means that it is not meant for public disclosure. However, there are instances where target companies receive a notice and are required to respond to the government. This is one of those instances where the target is made aware of the bidder’s intentions.
This is significantly different from the disclosures that are required for tender offers where it is designed to notify both the target company and the market of the bidder’s intentions. Additionally, the antitrust authorities will publish the early termination decision if the target applies for early termination of the HSR review process and is approved. In return, the market is right away made aware of the offer.
Significance of Notice of Government Opposition
The Justice Department can also choose to file a suit to block a proposed acquisition. This is usually done at the end of the deal. Legal battles with the government can most likely last for years. This is why it may not be in either company’s best interest to go toe to toe against the government even if either company believes they may ultimately prevail in the lawsuit.
© Image credits to Anni Roenkae