Hart-Scott-Rodino Notification Thresholds to Increase and Filing Fees to Change
Beginning on 27 February 2023, the minimum value for transactions potentially requiring the filing of a Premerger Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR” Act) will rise to US$111.4 million. This represents about a 10.3% increase from the current filing threshold of US$101 million.
Legislation adopted in 2000 requires an annual adjustment of the dollar values in the tests used to determine which mergers and acquisitions may be reportable to the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ), based on the annual change in the gross national product. The same adjustment factors are also applied to the transaction-size criteria that determine the amount of the filing fee to be paid in transactions for which a filing under the HSR Act is required.
THE NEW FILING THRESHOLDS
The HSR Act requires certain persons making acquisitions of assets, voting securities, or non-corporate interests (e.g., interests in partnerships and limited liability companies) to (a) file premerger notifications with the FTC and the DOJ and (b) wait until the expiration or termination of a waiting period (usually 30 days) before consummating the acquisition.1
Beginning on 27 February 2023, the following transactions will generally be subject to the HSR Act’s notification and waiting period requirements:
Transactions between parties of any size in which the acquirer will acquire or hold voting securities, assets, or non-corporate interests of the target company that have an aggregate value in excess of US$445.5 million.2
Transactions in which the acquirer will acquire or hold voting securities, assets, or non-corporate interests of the target company with an aggregate value in excess of US$111.4 million but not more than US$445.5 million, provided that either the acquiring or the acquired person has net sales or total assets of US$222.7 million or more and the other person in the transaction has net sales or total assets (total assets only where the acquired person is not a manufacturer) in excess of US$22.3 million.
Any transaction valued at US$111.4 million or less is not reportable under the HSR Act. However, in determining the “value” of a transaction, the acquiring person may be required to include the value of certain voting securities, assets, or non-corporate interests of the target company that the acquiring person acquired in one or more prior transactions. Conversely, acquisitions at a price above US$111.4 million will typically require a filing; however, there are many exemptions under HSR regulations, and parties are strongly encouraged to seek the advice of HSR counsel to determine whether a filing will be required in any individual transaction.
Although a premerger notification may be required prior to the acquisition of assets, non-corporate interests, or voting securities valued in excess of US$111.4 million, a person who files a notification for an acquisition at that base level may have to file another notification for additional acquisitions that, when aggregated with the previous acquisition, result in crossing certain higher thresholds.
THE NEW FEE THRESHOLDS
This year the FTC combined its annual notice adjusting thresholds with the implementation of an entirely new threshold paradigm recently passed by Congress and signed into law.3 The new thresholds and associated filing fees, beginning on 27 February 2023, will be as follows:
Both the thresholds and fees discussed in this alert will apply for approximately one year and be recalculated in early 2024 based upon the annual change in gross national product and consumer price index, respectively.
PENALTIES FOR FAILURE TO FILE WHEN REQUIRED
Anyone who fails to submit an HSR filing and to observe the required waiting period for a reportable acquisition may be subject to civil fines in an amount adjusted annually by the FTC. Effective 11 January 2023, the penalty for failure to comply with the HSR Act is $50,120 per day.
1 The parties may request early termination of the waiting period, which was typically granted in transactions that presented no substantive antitrust issues. However, on 4 February 2021, the FTC’s Premerger Notification Office announced the suspension of early termination and has not indicated any intent to reverse this policy since then.
2 For a premerger notification filing under the HSR Act to be required for the acquisition of non-corporate interests, an acquiring person must hold, as a result of the acquisition, the right to 50% or more of the profits of the non-corporate entity or the right in the event of its dissolution to 50% or more of its assets after the payment of its debts.
3 H.R. 2617, 117th Cong. (2021–2022). See our recent Alert on this topic here.