New HSR Act Size-of-Transaction Increasing to $119.5 Million; Filing Fee Increases Going Into Effect Soon

At a Glance

• The minimum size of transaction requiring an HSR Act filing has been increased from $111.4 million to $119.5 million.
• Generally one party to a transaction must also have assets or annual revenues of at least $239 million (up from $222.7 million), and the other must have assets or annual revenues of at least $23.9 million (up from $22.3 million). However, if the size of transaction is $478 million or more (up from $445.5 million), the size-of-parties test does not apply.
• The five highest filing fees have been slightly increased.
• For interlocking directorates under Section 8 of the Clayton Act, an individual is prohibited from simultaneously serving as an officer or director of two competing corporations if each corporation has capital, surplus and undivided profits of more than $48,559,000 (up from $45,257,000).
• Following the December issuance of the final version of the new Merger Guidelines, the DOJ and FTC are expected to publish a notice of final rulemaking sometime this year.

On January 22, 2024, 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.

The new thresholds will become effective 30 days from the date of publication in the Federal Register, which we expect to occur in the coming days.

The HSR Act requires parties to certain transactions valued at more than $119.5 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 conducts 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. The agencies have been increasingly active over the last several years in requesting additional information from transaction parties, and bringing lawsuits against transaction 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 $111.4 million to $119.5 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 to be held as the result of the transaction. The size of transaction also includes the present value of any voting securities or noncorporate interests of the target entity already held by the buyer. If the purchase price or value of such acquired assets, voting securities, or noncorporate interests is below $119.5 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 $239 million (up from $222.7 million), and the other party must have assets or annual revenues of at least $23.9 million (up from $22.3 million) to trigger an HSR Act filing.

However, if the size of transaction is $478 million or more (up from $445.5 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.

Adjusted Filing Fee Thresholds

The five highest filing fees have been slightly increased. The new filing fee thresholds are as follows:

Adjusted Thresholds for Interlocking Directorates

On January 12, 2024, the FTC also announced new 2024 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 $48,559,000 (up from $45,257,000). Section 8 provides for several exceptions where competitive overlaps are “too small to have competitive significance.” For examples, the parties will not violate Section 8 where (1) the competing sales of either corporation are less than $4,855,900 (up from $4,525,700); (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.

In recent years, the federal enforcement agencies have made good on their promise to use “vibrant Section 8 enforcement” as part of a strategy to combat perceived overconcentration in the entertainment, software, education, transportation, space, energy and insurance markets. Most recently, the FTC resolved its first Section 8 case in 40 years when it finalized a consent decree with merging parties Quantum Energy Partners and EQT Corporation that required the parties to amend their purchase agreement to prohibit a Quantum-affiliated person from serving on EQT’s board for a period of 10 years.

In addition, potential upcoming changes to the HSR rules would facilitate broader Section 8 analysis, including by requiring parties to disclose details about their existing and prospective officers, directors and board observers.

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

Issuance of Final Version of New Merger Guidelines; New HSR Rules Forthcoming

Finally, on December 18, 2023, the DOJ and FTC jointly announced the issuance of the final version of the new Merger Guidelines, after publishing a draft in July 2023. See our summary of the key takeaways.

Following the agencies’ proposed changes to the HSR rules in June and expiration of the comment period in late September, the agencies are expected to publish a notice of final rulemaking sometime this year. Our summary highlights some of the potential changes that could go into effect.

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.