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The Takeaway

The size of transaction threshold increases to $119.5 million; the largest filing fee increases to $2.335 million. The fines for non-compliance with HSR increase to $51,744 per day for each day of non-compliance effective January 10, 2024.

Introduction

The smoke signaling change has emerged from the chimney! On January 22, 2024, the Federal Trade Commission (“FTC”) announced the antitrust agencies’ annual adjustments to the filing fees for premerger review of sizable transactions and reporting thresholds for review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”). The adjusted HSR Act thresholds are based on annual changes in the U.S. GNP (Gross National Product. The FTC also 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, published in the Federal Register on February 5, 2024, are effective March 6, 2024.

Currently, the HSR Act requires parties to certain mergers, acquisitions of assets or voting securities, or joint ventures valued at more than $111.4 million to complete premerger notification with the FTC and the Antitrust Division of the Department of Justice (“DOJ”) and to observe a statutory waiting period (normally 30 days) before closing the deal. Both agencies have concurrent jurisdiction to review any reportable transaction, and either the FTC or DOJ may conduct a preliminary review of each HSR filing. If an agency opens an investigation into a proposed transaction’s competitive effects or issues a second request (formal request for extensive data), the parties typically must cooperate if they want to consummate the transaction.

In recent years, the agencies have been more aggressive in challenging transactions in federal court by seeking to enjoin the closure of transactions that may have anticompetitive consequences. Further, the agencies have also demonstrated a willingness to challenge non-reportable transactions.

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, a 7.3% increase. While there are nuances under the rules, 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 $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

If the value of the proposed transaction is greater than $119.5 million but not greater than $478 million, the transaction will not be reportable unless the “ultimate parents” of the acquiring and the acquired entities also meet a certain minimum “size-of-person” test—in most instances, where one ultimate parent (including all entities it controls) has net sales or total assets of at least $23.9 million and the other has net sales or total assets of at least $239 million (previously $222.7 million). When the jurisdictional tests are met, the transactions are reportable unless an exemption applies. When 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 (previously $202 million), while the other party must have assets or annual revenues of at least $22.3 million (previously $20.2 million) to trigger an HSR Act filing. 

However, if the size of transaction is $478 million or more (previously $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 value of the assets or annual revenues of the transaction parties.

The following chart tracks the changes:

Implementation of Filing Fee Restructuring

The filing fee tiers for premerger notifications under the HSR Act in 2024 will be as follows:

The revised filing fees are also effective March 6, 2024. Note that the filing fee amounts and tiers both change. The fee amounts will increase 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.

Adjusted Thresholds for Interlocking Directorates

Section 8 of the Clayton Act 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 (previously $45,257,000). Section 8 provides for several exceptions when 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 $4,855,900 (previously $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. 

The FTC announces these annual revised Section 8 thresholds in the Federal Register each January, and they are effective immediately upon publication.

Conclusion

Corporations should stay informed on premerger clearance requirements. Failure to comply with the HSR Act premerger notification requirements (and other antitrust laws) risks serious consequences for businesses and individuals. The fines for non-compliance with HSR requirements also increased substantially: from $50,120 to $51,744 per day for each day of non-compliance effective January 10, 2024.

Determination of premerger notification obligations is a fact-intensive process that requires experience and a thorough understanding of the HSR Act and accompanying regulations. Companies contemplating a merger, acquisition, or other large transaction should review the new thresholds and consult with antitrust counsel to determine if a proposed deal requires clearance from federal antitrust authorities before consummation.