iOn 22 January 2024, the Federal Trade Commission (FTC) announced new, increased thresholds and filing fees for transactions requiring premerger notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act). Under the adjustments, the minimum “size of transaction” threshold will increase to US$119.5 million from US$111.4 million in 2023. The increase is not expected to materially impact the number of filings that will be made this year. The agency has also raised the thresholds that apply to interlocking directorates under Section 8 of the Clayton Act for 2024.
The FTC updates HSR thresholds annually based on changes in gross national product and the consumer price index. The new thresholds will likely take effect in late February or early March, 30 days after they are published in the Federal Register.
NEW HSR FILING THRESHOLDS
The HSR Act requires premerger notification of transactions that meet the size of transaction and size of person tests to the FTC and the Antitrust Division of the US Department of Justice, unless an exemption applies. HSR filings trigger a 30-calendar-day initial waiting period that the parties must observe before closing, during which the reviewing agency conducts its preliminary antitrust review of the transaction.1
SIZE OF TRANSACTION TEST
Under the new thresholds, the size of transaction test is met if, as a result of a transaction, the acquiring “person” at the ultimate-parent-entity (UPE) level will hold voting securities, assets, or non-corporate interests of the acquired “person”:2
- With an aggregate value of more than US$478 million; or
- With an aggregate value of more than US$119.5 million but US$478 million or less if the size of person test is also met.
Transactions valued at US$119.5 million or less are not reportable. For HSR purposes, transaction value includes the value of voting securities or non-corporate interests of the acquired person that the acquiring person already holds (for instance, through one or more prior acquisitions).
SIZE OF PERSON TEST
Under the new thresholds, the size of person test is met if one party (at the UPE level) has annual net sales or total assets of US$239 million or more and the other party (at the UPE level) has annual net sales or total assets of US$23.9 million or more.3
Even if these tests are satisfied, a transaction may qualify for one or more exemptions under the HSR Act. Parties are strongly encouraged to consult HSR counsel to determine whether a filing is required for a particular transaction.
SIZE OF TRANSACTION
| Base Threshold4 | 2023 | 2024 |
| US$50 million | US$111.4 million | US$119.5 million |
| US$200 million | US$445.5 million | US$478 million |
SIZE OF PERSON
| Base Threshold | 2023 | 2024 |
| US$10 million | US$22.3 million | US$23.9 million |
| US$100 million | US$222.7 million | US$239 million |
NEW HSR FILING FEE SCHEDULE
In 2023, pursuant to new legislation passed by Congress, the FTC implemented a new filing fee framework, which substantially increased fees for certain large transactions. The updated filing fee schedule for 2024 is as follows:
| Transaction Value | Fee |
| More than US$119.5 million but less than US$173.3 million | US$30,000 |
| At least US$173.3 million but less than US$536.5 million | US$105,000 |
| At least US$536.5 million but less than US$1.073 billion | US$260,000 |
| At least US$1.073 billion but less than US$2.146 billion | US$415,000 |
| At least US$2.146 billion but less than US$5.365 billion | US$830,000 |
| US$5.365 billion or more | US$2,335,000 |
NEW THRESHOLDS FOR INTERLOCKING DIRECTORATES
The FTC also announced revised thresholds under Section 8 of the Clayton Act, which prohibits interlocking directorates in which one “person” serves simultaneously as an officer or director of two or more competing corporations, subject to certain exceptions. Interlocking directorates are currently a significant area of focus for US antitrust enforcers. Under the increased thresholds, Section 8 may apply when each of the competing corporations has capital, surplus, and undivided profits aggregating more than US$48,559,000 and each corporation’s competitive sales are at least US$4,855,900.
PENALTIES FOR FAILURE TO FILE
Failure to submit an HSR filing and observe the waiting period for a reportable acquisition may result in significant civil penalties. As of 10 January 2024, the penalty for failure to comply with the HSR Act is US$51,744 for each day of non-compliance.
1 Parties submitting HSR filings may request early termination of the waiting period. Historically, early termination was often granted for transactions that did not raise significant antitrust concerns. However, on 4 February 2021, the FTC Premerger Notification Office announced the indefinite suspension of early termination, and this suspension remains in place.
2 Non-corporate interests include interests in partnerships or limited-liability companies. Under the HSR regulations, “person” means the UPE, which is the topmost entity in the chain of control that is not controlled by any other entity. For corporations, control means holding 50% or more of the outstanding voting securities of an issuer or having the contractual power to appoint 50% or more of its directors. For unincorporated entities, control means having the right to 50% or more of the profits of an entity or 50% or more of its assets upon dissolution.
3 Only total assets are considered where the acquired person is not a manufacturer.
4 Base thresholds are the original thresholds specified in the HSR Act, which are updated each year.
