Increase in HSR Thresholds Makes More Room for Larger Communications Transactions
While the FCC gets to have a say in nearly every sale or merger in the communications industry, no matter how small, the Department of Justice and the Federal Trade Commission will also be called upon if a transaction is large enough. The test for when a transaction is large enough to require a filing with the DOJ or the FTC is whether it exceeds the minimum financial thresholds of the Hart-Scott-Rodino (“HSR”) Act.
Because of inflation and other factors, however, the HSR thresholds must be annually adjusted to accurately separate small deals from big deals. This separation is critical because the DOJ and the FTC have limited resources to investigate transactions, and therefore only require advance notification of transactions that involve companies or transactions above a certain minimum size. Transactions that fall below the HSR reporting thresholds, however, are not immune from antitrust scrutiny even after they are consummated if they are likely to have an anticompetitive effect in any relevant market.
On February 27, 2012, the HSR thresholds will increase significantly, with the “minimum size-of-transaction test” threshold increasing from $50 million to $68.2 million. If the value of the proposed transaction is above $68.2 million but below $272.8 million (up from $200 million), reporting is required only if the ultimate parents of the acquiring and acquired entities meet certain “size-of-person” tests, the thresholds for which will also increase on February 27, 2012. Subject to a myriad of exemptions, transactions valued at over $272.8 million under the HSR regulations must generally be reported. If that sounds complicated (and it can be), Pillsbury’s Antitrust lawyers recently published an Advisory with more details on these changes.
While transactions that meet these thresholds must be reported whether or not they are communications-related, the thresholds can be particularly relevant to large broadcasters, since broadcasters that enter into a transaction requiring an HSR filing need to be aware that they may not be able to implement a local marketing agreement or similar cooperative arrangement in conjunction with an anticipated acquisition until the HSR filing has been made and the mandatory post-filing waiting period has either passed without action by the DOJ/FTC, or the DOJ/FTC have agreed to terminate the HSR waiting period early.
With communications transactions starting to heat up again, the increase in the HSR thresholds is welcome, and may simplify transactions that fall above the current HSR thresholds, but below the new ones.