The Federal Trade Commission (FTC) revised thresholds to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act), take effect today, Monday, February 27, 2023.
The HSR Act governs federal reporting requirements for transactions that are based upon certain dollar thresholds. Adjustments to such thresholds are made annually based on changes to the U.S. gross domestic product.
There are three tests to determine reporting, and the changes referenced below are effective for transactions closing on or after February 27, 2023:
- The minimum “size-of-transaction” threshold will increase from $101 million to $111.4 million.
- The “size-of-person” thresholds will increase from $20.2 million to $22.3 million and from $202 million to $222.7 million. The “size-of-person” is measured by the total assets or annual net sales of the ultimate parent entities of the acquiring and acquired parties. To be reportable, the parent entity of one party must reach the higher threshold while the other party must reach the lower.
- The larger “size-of-transaction” threshold will increase from $403.9 million to $445.5 million. Under this test, if the “size-of-person” threshold is not satisfied, but the acquisition is more than $445.5 million, the transaction is reportable.
If a transaction satisfies the threshold and doesn’t fall within an exemption, the HSR Act requires federal reporting and a 30-day waiting period before the closing of the transaction to allow for review of antitrust concerns. Failure to file as required can result in daily civil penalties (maximum of $50,120 per day).
In the event a transaction is reportable, there is a filing fee based upon transaction value. For the first time in over 20 years, pursuant to the Merger Filing Fee Modernization Act, which was contained in the 2023 funding bill, Congress amended the filing fee tier structure by increasing the number of tiers to 6.
The fee will be adjusted annually based on changes to the consumer price index. The new fee structure, which is effective as of February 27, 2023, is below:
|Transaction Value||Filing Fee|
|$111.4 million to < $161.5 million||$30,000|
|$161.5 million to < $500 million||$100,000|
|$500 million to < $1 billion||$250,000|
|$1 billion to < $2 billion||$400,000|
|$2 billion to < $5 billion||$800,000|
|$5 billion or more||$2,250,000|
The acquiring party is obligated to pay the filing fee, although the parties may agree to share the fee or shift the responsibility. Because of this obligation, acquiring party’s counsel should carefully consider applicable exemptions to reduce or eliminate the filing fee.