New HSR Act Size-of-Transaction Increasing to $111.4 Million; New HSR Act Filing Fees Going Into Effect Next Month

On January 26, 2023, the Federal Trade Commission (FTC) published its adjusted reporting thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act). The FTC revises the HSR Act thresholds annually to track year-over-year changes in gross national product. Additionally, the FTC announced implementation of the revised filing fee structure mandated by the Merger Filing Fee Modernization Act of 2022.

The new thresholds and filing fee structure will become effective February 25, 2023.

The HSR Act requires parties to certain transactions valued at more than $111.4 million to make premerger notification with the FTC and Department of Justice (DOJ), and observe a statutory waiting period (usually 30 days) before consummation. Either the FTC or DOJ conduct a preliminary review of each transaction, and both agencies have concurrent jurisdiction to review any reportable transaction. If an agency opens an investigation into a proposed transaction’s competitive effects, or issues a request for additional information, the parties typically must cooperate if they want to close the transaction. Although historically rare, the agencies have been more aggressive over the past couple of years in bringing lawsuits against deal parties in federal court seeking to enjoin the closure of transactions that may have anticompetitive consequences.

Adjusted Threshold for Size-of-Transaction Test

The minimum size of transaction requiring an HSR Act filing has been increased from $101 million to $111.4 million. For most purposes, the size of the transaction is calculated as the greater of the purchase price or the fair market value of the assets, voting securities or noncorporate interests being acquired. If the purchase price or value of such acquired assets, voting securities or noncorporate interests is below $111.4 million, there is no requirement to make an HSR Act filing even if the parties meet the size-of-parties test described below.

Adjusted Thresholds for Size-of-Parties Test

Where the size-of-transaction test is met, generally one party to a transaction must also have assets or annual revenues of at least $222.7 million (up from $202 million), and the other party must have assets or annual revenues of at least $22.3 million (up from $20.2 million) to trigger an HSR Act filing. 

However, if the size of transaction is $445.5 million or more (up from $403.9 million), the size-of-parties test does not apply, and the parties will need to file an HSR Act filing regardless of the assets or annual revenues of the parties involved.

Implementation of Filing Fee Restructuring

The Merger Filing Fee Modernization Act restructures the filing fee thresholds for premerger notifications under the HSR Act by lowering fees for smaller transactions and introducing three new tiers of fees for transactions larger than $1 billion. The new tiers will be as follows:

Separately from the annual increase in size-of-transaction and size-of-party thresholds, the new filing fees will also be subject to annual adjustment. For each fiscal year beginning after September 30, 2023, the filing fees will be increased by an amount equal to the percentage increase, if any, in the Consumer Price Index for that year over the level established for the year ended September 30, 2022. Those annual adjustments must be published by the FTC by January 31 each year.

Adjusted Thresholds for Interlocking Directorates

Finally, the FTC also announced new thresholds for interlocking directorates under Section 8 of the Clayton Act. The statute prohibits an individual from simultaneously serving as an officer or director of two competing corporations if each corporation has capital, surplus, and undivided profits of more than $45,257,000 (up from $41,034,000). Section 8 provides for several exceptions where competitive overlaps are “too small to have competitive significance.” For example, the parties will not violate Section 8 where (1) the competing sales of either corporation are less than $4,525,700 (up from $4,103,400); (2) the competitive sales of either corporation are less than 2% of the corporation’s total sales; or (3) the competing sales of each corporation are less than 4% of the corporation’s total sales. 

The revised Section 8 thresholds are effective immediately upon publication in the Federal Register.

Conclusion

Failure to comply with the HSR Act and other antitrust laws may have serious consequences for businesses and individuals. Companies contemplating a merger, acquisition or other large transaction should review the new thresholds and consult with counsel to determine whether their transaction would require clearance from federal antitrust authorities before consummation.