HSR Notice Thresholds Have Increased. On January 26, 2023, the Federal Trade Commission (FTC) announced its revised annual threshold that determines whether companies may be required to notify federal antitrust authorities about a proposed merger or acquisition due to the size and value of the transaction.
The Hart-Scott-Rodino (HSR) Antitrust Improvements Act (Section 7A of the Clayton Act) requires parties to certain mergers and acquisitions to notify the FTC and U.S. Department of Justice (DOJ) in advance of transactions that could create antitrust issues due to the size of the transaction and the parties involved. The FTC is required to update the HSR thresholds annually to reflect changes in the gross national product. The new thresholds will apply to all transactions that close on or after the effective date of February 27, 2023.
For 2023, the minimum threshold for reporting proposed mergers and acquisitions will increase from $101 million to $111.4 million. If the value of the transaction meets or exceeds $111.4 million (“size of the transaction test”) and the parties involved are large enough (“size of the person test”), both parties may be obligated to file Premerger Notification with the FTC and DOJ unless an exemption applies. Further, under the revised thresholds, if the transaction is valued at $445.5 million or more, HSR notice filing may be required regardless of the size of the parties involved.
HSR Test (New 2023 Thresholds effective February 27, 2023)
An HSR Premerger Notification may be necessary if no exemptions apply and:
As a result of the proposed transaction, the buyer will hold in the aggregate (including from previous recent transactions between the parties) securities, non-corporate interests, and/or assets of a seller valued between $111.4 million and up to and including $445.5 million;
One of the parties to the transaction has $222.7 million or more in annual sales or total assets and the other has $22.3 million or more in annual sales or total assets;
As a result of the proposed transaction, the buyer will acquire (in the aggregate) securities, non-corporate interests, and/or assets from a seller valued at more than $445.5 million and regardless of the size of the parties.
The HSR thresholds are only one part of the analysis to determine whether an HSR filing is required, and the rules are complex. Consult with an experienced HSR attorney early when contemplating any transaction that may be subject to HSR notification requirements, especially given that the parties need to wait the full statutory 30-day waiting period.
Interlocking Directorates Threshold Increased. Section 8 of the Clayton Act prohibits, with certain exceptions, one person from serving as a director or officer of two competing corporations if two thresholds are met. Under the recently announced 2023 thresholds, Competitor corporations are covered by Section 8 if each has capital, surplus, and undivided profits aggregating more than $42,257,000, with the exception that no corporation is covered if the competitive sales of either corporation are less than $4,525,700 (up from $41,034,000 and $4,103,400, respectively).
“Early Termination” is still suspended. The standard waiting period for most Premerger Notifications is 30 days after filing unless the acquisition involves federal bankruptcy or a cash tender, in which case the waiting period is normally 15 days. Prior to the COVID-19 pandemic, it was possible to request expedited review and early termination of the waiting period if the FTC and DOJ agreed that no remedial or enforcement action was necessary. However, since February 4, 2021, the FTC has suspended its discretionary practice of granting early termination. The FTC will continue the temporary suspension until further notice. Parties to planned transactions should therefore plan accordingly.
HSR Filing Fee Increase. As a result of Division GG of the 2023 Consolidated Appropriations Act, Public Law 117-328, 136 Stat. 4459, the fee to file an HSR Notice is increasing significantly for many transactions, effective February 27, 2023:
|Size of Transaction as Determined Under Section 7A(a)(2) of the Act||New Filing Fee|
|Transaction valued at less than $161.5 million||$30,000|
|Not less than $161.5 million but less than $500 million||$100,000|
|Not less than $500 million but less than $1 billion||$250,000|
|Not less than $1 billion but less than $2 billion||$400,000|
|Not less than $2 billion but less than $5 billion||$800,000|
|$5 billion or more||$2.25 million|
The fee for filing a Premerger Notification and Report Form until February 27, 2023, remains:
|Fee||Size of Transaction|
|$45,000||valued in excess of $101 million but less than $202 million|
|$125,000||valued at $202 million or greater but less than $1.01 billion|
|$280,000||valued at $1.01 billion or greater|
Under the new schedule, the filing fee for transactions valued at less than $161.5 million will be reduced from $45,000 to $30,000, but the fee for transactions valued between $161.5 million and $202 million will more than double, increasing from $45,000 to $100,000.
Maximum civil penalties for violation of the HSR requirements is increased significantly. Violations of the Clayton Act, including failure to file a required HSR Premerger Notification, can result in serious penalties of up to $50,120 per day of noncompliance (up from $46,517). The FTC also has the ability to unwind a completed transaction if it discovers after the fact that a non-reported transaction violates antitrust laws.
This article summarizes aspects of the law and does not constitute legal advice. For legal advice on your situation, you should contact an attorney.
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