On January 22, 2024, the Federal Trade Commission (FTC) announced its annual adjustments to the filing thresholds and fees under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). Because of this year's adjustments, transactions valued at more than $119.5 million may trigger an HSR filing. The new thresholds and filing fees will take effect 30 days after they are published in the Federal Register, which is expected in the coming days. For a particular transaction, the expected closing date—not the date of agreement—determines whether the new thresholds will apply.[1] Failure to file an HSR Notification and Report Form is subject to a statutory penalty of up to $51,744 per day of noncompliance.
The HSR Act generally requires parties to file notifications, including a filing fee, with the FTC and Department of Justice when a proposed transaction—such as a merger, joint venture, stock or asset acquisition, or exclusive license—meets specified dollar thresholds and no exemptions apply. If a notification is required, the transaction cannot close while the statutory waiting period runs (generally 30 days) and the federal antitrust agencies review the transaction. Most commonly, a filing is required if the parties meet both the "size-of-person" and "size-of-transaction" tests, which will be modified by the adjusted thresholds as follows:
- 2024 Size-of-Transaction Test: Met if, as a result of the transaction, the buyer will acquire or hold voting securities, non-corporate interests, or assets of the seller valued in excess of $119.5 million. Furthermore, if the value of the transaction exceeds a significantly higher level—now set at $478 million—a filing may be required even if the size-of-person test below is not satisfied.
- 2024 Size-of-Person Test: Met if one party to the transaction has $239 million or more in annual net sales or total assets and the other has $23.9 million or more in annual net sales or total assets.
In addition to the revised thresholds, the HSR filing fees will be increased slightly for most transactions as shown below:
2023 Size of Transaction |
2023 Filing Fees |
2024 Size of Transaction |
2024 Filing Fees |
|
Greater than $111.4 million but less than $161.5 million |
$30,000 |
Greater than $119.5 million but less than $173.3 million |
$30,000 |
|
$161.5 million or more but less than $500 million |
$100,000 |
$173.3 million or more but less than $536.5 million |
$105,000 |
|
$500 million or more but less than $1 billion |
$250,000 |
$536.5 million or more but less than $1.073 billion |
$260,000 |
|
$1 billion or more but less than $2 billion |
$400,000 |
$1.073 billion or more but less than $2.146 billion |
$415,000 |
|
$2 billion or more but less than $5 billion |
$800,000 |
$2.146 billion or more but less than $5.365 billion |
$830,000 |
|
$5 billion or more |
$2,250,000 |
$5.365 billion or more |
$2,335,000 |
The HSR thresholds are only one part of the analysis used to determine whether an HSR filing is required for a given transaction. Even though thresholds are met, certain types of transactions may be exempt from the HSR notification requirements (e.g., ordinary course of business acquisitions, certain acquisitions of real property, passive investments). Moreover, an HSR filing obligation may arise in situations beyond the traditional stock purchase or company merger—including, notably, investor acquisitions of a minority interest in a company. Because application of the HSR rules and exemptions can be highly technical, it is important to seek guidance from experienced HSR counsel in connection with any transaction where it appears the HSR thresholds might be met.
FTC and DOJ's Proposed Changes to HSR Filings Remain Pending
In its announcement of the 2024 thresholds, the FTC was notably silent with respect to the status of its June 2023 proposed rule—issued in collaboration with the Department of Justice—which would significantly expand the scope of HSR filings. As drafted, the proposed rule would significantly increase the time and expense associated with preparing an HSR filing, as parties to the transaction would be required to, among other notable changes, collect and submit a broader range of documents from a wider range of individuals and include detailed narratives about the competitive landscape. By the FTC's own estimate, the average time required to prepare an HSR filing would increase by nearly fourfold, from 37 to 144 hours. See here for a more detailed discussion of the proposed rule's new requirements.
Although the public comment period closed in September 2023 with more than 700 comments submitted, the FTC has not yet provided an update on the substance or timing of any final rule. Accordingly, it remains to be seen whether the FTC will finalize the rule as is or make changes in response to the comments that it received. Although the precise timing for finalization is uncertain, merging parties should expect the new rule to take effect during 2024 and thus be sure to allot sufficient time to prepare what may be significantly expanded HSR filings. To that end, it is advisable to engage HSR counsel as early in the process as possible to ensure that the HSR process does not unduly delay the transaction closing.
For more information and assistance, contact Lisa Jose Fales or Paul Feinstein in Venable's Antitrust Practice Group.
[1] For transactions closing before the effective date, the 2023 filing thresholds still apply. The 2023 size-of-transaction threshold is $111.4 million.