Tag: HSR Act

FTC Announces 2024 Increase in HSR Notification Thresholds and Filing Fees

The Federal Trade Commission (FTC) has announced the annual revisions to the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) thresholds and HSR filing fees, which will become effective on March 6, 2024. The revised thresholds will apply to any merger or acquisition closing on or after the effective date.

The FTC is required to adjust the HSR thresholds annually based upon the change in gross national product. This year, the change in the “size of transaction” threshold has increased from $111.4 million to $119.5 million.

Under the HSR Act, when a deal satisfies the “size of person” and “size of transaction” thresholds, and no exemption from reporting is available, the deal must be reported to the FTC and the US Department of Justice, and the parties must wait for a designated period of time before closing the transaction.

Size of Person. The revised size of person thresholds will generally be met if one party involved in the deal has assets or annual sales totaling $239 million or more and one other party involved in the deal has assets or annual sales of at least $23.9 million. Satisfaction of the size of person thresholds is not required, however, if the transaction is valued at more than $478 million.

Size of Transaction. The revised size of transaction threshold will be met if the buyer will hold an aggregate amount of stock, non-corporate interests and/or assets of the seller valued at more than $119.5 million as a result of the deal.

The notification thresholds applicable to purchases of voting securities will increase as follows:

February 1, 2001 Thresholds (Original) Current Thresholds as of February 27, 2023 New Thresholds Effective March 6, 2024
$50 million $111.4 million $119.5 million
$100 million $222.7 million $239 million
$500 million $1.1137 billion $1.195 billion
25% if worth more than
$1 billion		 25% if worth more than $2.2274 billion 25% if worth more than $2.39 billion
50% if worth more than
$50 million		 50% if worth more than $111.4 million 50% if worth more than $119.5 million

The thresholds applicable to many exemptions, including those governing foreign acquisitions, also will increase. However, the $500 million threshold applicable to acquisitions of producing oil and gas reserves and associated assets will not change.

The civil penalty for failing to comply with the notification and waiting period requirements of the HSR Act has also increased to up to $51,744 per day for each day a party is in violation.

HSR Filing Fees. Additionally, the HSR filing fee thresholds and filing fee amounts have increased as follows:

Original Filing Fee Original Applicable Size of Transaction 2024 Adjusted Filing Fee 2024 Adjusted Applicable Size of Transaction
$30,000 Less than $161.5 million $30,000 Less than $173.3 million
$100,000 Not less than $161.5 million but less than $500 million $105,000 Not less than $173.3 million but less than $536.5 million
$250,000 Not less than $500 million but less than $1 billion $260,000 Not less than $536.5 million but less than $1.073 billion
$400,000 Not less than $1 billion but less than $2 billion $415,000 Not less than $1.073 billion but less than $2.146 billion
$800,000 Not less than $2 billion but less than $5 billion $830,000 Not less than $2.146 billion but less than $5.365 billion
$2,250,000 $5 billion or more $2,335,000 $5.365 billion or more

The new fees also will become effective on March 6, 2024.

© 2024 Bracewell LLP
For more news on FTC Merger and Acquisition Regulations, visit the NLR Antitrust & Trade Regulation section.

FTC Announces 2024 Thresholds for Merger Control Filings under HSR Act and Interlocking Directorates under the Clayton Act

The Federal Trade Commission (“FTC”) has increased the dollar jurisdictional thresholds necessary to trigger the reporting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), and the dollar value of each of the six filing fee thresholds; the revised thresholds will become effective 30 days after the date of publication in the Federal Register. The daily maximum civil penalty for being in violation of the HSR Act has increased, and is, as of January 10, 2024, $51,744.

The FTC also increased the thresholds for interlocking directorates under Section 8 of the Clayton Act; these revised thresholds are in effect as of January 22, 2024.

Revised HSR Thresholds

Under the HSR Act, parties involved in proposed mergers, acquisitions of voting securities, unincorporated interests or assets, or other business combinations (e.g., joint ventures, exclusive license deals) that meet certain thresholds must report the proposed transaction to the FTC and the Antitrust Division of the U.S. Department of Justice (“DOJ”) unless an exemption applies. The parties to a proposed transaction that requires notification under the HSR Act must observe a statutorily prescribed waiting period (generally 30 days) before closing. Under the revised thresholds, transactions valued at $119.5 million or less are not reportable under the HSR Act.

A transaction closing on or after the date the revised thresholds become effective may be reportable if it meets the following revised criteria:

Size-of-Transaction Test The acquiring person will hold, as a result of the transaction, an aggregate total amount of voting securities, unincorporated interests, or assets of the acquired person valued in excess of $478 million;

or

The acquiring person will hold, as a result of the transaction, an aggregate total amount of voting securities, unincorporated interests, or assets of the acquired person valued in excess of $119.5 million but not more than $478 million, and the Size-of-Person thresholds below are met.
Size-of-Person
Test		 One party (including the party’s ultimate parent entity and its controlled subsidiaries) has at least $239 million in total assets or annual sales, and the other has at least $23.9 million in total assets or annual sales.

The full list of the revised thresholds is as follows:

Original Threshold 2023 Threshold 2024 Revised Threshold
$10 million $22.3 million $23.9 million
$50 million $111.4 million $119.5 million
$100 million $222.7 million $239 million
$110 million $245 million $262.9 million
$200 million $445.5 million $478 million
$500 million $1,113.7 million $1,195 million
$1 billion $2,227.4 million $2,390 million

The filing fees for reportable transactions and the six filing fee tiers also have been updated, as follows:

Filing Fee Size of Transaction under the Act
$30,000 For transactions valued in excess of $119.5 million but less than $173.3 million
$105,000 For transactions valued at $173.3 million or greater but less than $536.5 million
$260,000 For transactions valued at $536.5 million or greater but less than $1,073 million
$415,000 For transactions valued at $1,073 million or greater but less than $2,146 million
$830,000 For transactions valued at $2,146 million or greater but less than $5,365 million
$2.335 million For transactions valued at $5,365 million or more

The filing fee tiers, introduced in 2023, are adjusted annually to reflect changes in the GNP for the previous year.

The HSR Act’s dollar thresholds are only part of the analysis to determine whether a particular transaction must be reported to the FTC and DOJ; a full analysis requires consideration of exemptions to the filing requirements that may be available to an acquiror. Failure to notify the FTC and DOJ under the HSR Act remains subject to a statutory penalty of up to $51,744 per day of noncompliance.

Revised Thresholds for Interlocking Directorates

Section 8 of the Clayton Act prohibits one person from simultaneously serving as an officer or director of two corporations if: (1) each of the “interlocked” corporations has combined capital, surplus, and undivided profits of more than $48,559,000 (up from $45,257,000); (2) each corporation is engaged in whole or in part in commerce; and (3) the corporations are “by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws.”1

Section 8 provides several exemptions from the prohibition on interlocks for arrangements where the competitive overlaps “are too small to have competitive significance in the vast majority of situations.”2 A corporate interlock does not violate the statute if (1) the competitive 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 percent of that corporation’s total sales; or (3) the competitive sales of each corporation are less than 4 percent of that corporation’s total sales. The DOJ has been active recently in identifying and achieving remediation of interlocks that may violate Section 8.3

1 15 U.S.C. § 19(a)(1)(B).

2 S. Rep. No. 101-286, at 5-6 (1990), reprinted in 1990 U.S.C.C.A.N. 4100, 4103-04.

3 Department of Justice, Two Pinterest Directors Resign from Nextdoor Board of Directors in Response to Justice Department’s Ongoing Enforcement Efforts Against Interlocking Directorates (Aug. 16, 2023); Department of Justice, Justice Department’s Ongoing Section 8 Enforcement Prevents More Potentially Illegal Interlocking Directorates (Mar. 9, 2023); Department of Justice, Directors Resign from the Boards of Five Companies in Response to Justice Department Concerns about Potentially Illegal Interlocking Directorates (Oct. 19, 2022).

© Copyright 2024 Cadwalader, Wickersham & Taft LLP
For more on Merger Control Filings, visit the NLR Antitrust & Trade Regulation section.

FTC and DOJ Propose Significant Changes to US Merger Review Process

On 27 June 2023, the Federal Trade Commission (FTC) and the Department of Justice–Antitrust Division (DOJ) (collectively, the Agencies) announced sweeping proposed changes to the US-premerger notification filing process. The proposed changes mark the first significant overhaul of the federal premerger notification form since its original release in 1978 and would require parties to report

On 27 June 2023, the Federal Trade Commission (FTC) and the Department of Justice–Antitrust Division (DOJ) (collectively, the Agencies) announced sweeping proposed changes to the US-premerger notification filing process. The proposed changes mark the first significant overhaul of the federal premerger notification form since its original release in 1978 and would require parties to reportable transactions to collect and submit significantly more information and documentation as part of the premerger review process. If finalized, the proposed rule changes would likely delay deal timelines by months, requiring significantly more time and effort by the parties and their counsel in advance of submitting the required notification form.

In this alert, we:

  • Provide an overview of the current merger review process in the United States;
  • Describe the proposed new rules announced by the Agencies;
  • Explain the Agencies’ rationale for the new proposed rules;
  • Predict how the proposed new rules could impact parties’ premerger filing obligations, including deal timelines; and
  • Explain what companies should expect over the next several months.

BACKGROUND ON THE HSR MERGER REVIEW PROCESS

The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act or “HSR”) requires certain persons making acquisitions of assets, voting securities, and non-corporate interests (i.e., interests in partnerships and limited liability companies) to:

(a)    File premerger notifications with the FTC and DOJ; and

(b)    Wait until the expiration or termination of a waiting period (usually 30 days) before consummating the acquisition.

Most mergers and acquisitions valued in excess of USD$111.4 million fall under the HSR Act subject to size-of-party thresholds in certain cases. Additionally, there are several exemptions that may apply to an otherwise reportable transaction.

The FTC or the DOJ reviews the parties’ HSR filings during the waiting period to determine whether the transaction may substantially lessen competition in violation of the antitrust laws. If, at the end of the waiting period any concerns have not been placated, the reviewing agency may issue a Request for Additional Documents and Information (commonly referred to as a Second Request), a very broad subpoena-like document seeking documents, data, and interrogatory responses from the filers. This tolls the waiting period until both parties substantially comply with the Second Request. The reviewing agency then has an additional 30-day period to decide whether to challenge the transaction in court.

WHAT ARE THE PROPOSED CHANGES?

On 27 June 2023, the FTC and DOJ announced a number of significant changes to the HSR notification form and filing process, the first such overhaul in almost 45 years. The Agencies released the proposed changes and rationale for the same in a 133-page Notice of Proposed Rulemaking (Notice) that will be published in the Federal Register later this week. While antitrust practitioners are still digesting the full extent of all of the proposed changes, it is clear that they would require parties to submit significantly more information and documentation to the Agencies as part of their HSR notification form. The most notable additional information and documentation includes:

  • Submission of additional deal documents, including draft agreements or term sheets (as opposed to just the preliminary agreement), where a definitive transaction agreement has not yet been executed; draft versions of all deal documents (as opposed to just the final versions); documents created by or for the deal team lead(s) (as opposed to just officers and directors); and verbatim translations of all foreign language documents.
  • Details about acquisitions during the previous 10 years.
  • Identification of and information about all officers, directors, and board observers of all entities within the acquiring person, including the identification of other entities these individuals currently serve, or within the two years prior to filing had served, as an officer, director, or board observer.
  • Identification of and information about all creditors and entities that hold non-voting securities, options, or warrants totaling 10% or more.
  • Disclosure of subsidies (e.g., grants and loans), by certain foreign governments, including North Korea, China, Russia, and Iran.
  • Narrative description of the strategic rationale for the transaction (including projected revenue streams), a diagram of the deal structure, and a timeline and narrative of the conditions for closing.
  • Identification and narrative describing horizontal overlaps, both current and planned.
  • Identification and narrative describing supply agreements/relationships.
  • Identification and narrative describing labor markets, as well as submission of certain data on the firms’ workforce, including workforce categories, geographic information on employees, and details on labor and workplace safety violations.
  • Identification of certain defense or intelligence contracts.
  • Identification of foreign jurisdictions reviewing the deal.

WHY ARE THESE CHANGES BEING PROPOSED?

In its press release announcing the proposed new rules, the FTC stated that “[t]he proposed changes to the HSR Form and instructions would enable the Agencies to more effectively and efficiently screen transactions for potential competition issues within the initial waiting period, which is typically 30 days.”1 The FTC further explained:

Over the past several decades, transactions (subject to HSR filing requirements) have become increasingly complex, with the rise of new investment vehicles and changes in corporate acquisition strategies, along with increasing concerns that antitrust review has not sufficiently addressed concerns about transactions between firms that compete in non-horizontal ways, the impact of corporate consolidation on American workers, and growth in the technology and digital platform economies. When the Agencies experienced a surge in HSR filings that more than doubled filings from 2020 to 2021, it became impossible to ignore the changes to the transaction landscape and how much more complicated it has become for agency staff to conduct an initial review of a transaction’s competitive impact. The volume of filings at that time also highlighted the significant limitations of the current HSR Form in understanding a transaction’s competitive impact.2

Finally, the FTC also cited certain Congressional concerns and the Merger Fee Filing Modernization Act of 2022, stating that the “proposed changes also address Congressional concerns that subsidies from foreign entities of concern can distort the competitive process or otherwise change the business strategies of a subsidized firm in ways that undermine competition following an acquisition. Under the Merger Filing Fee Modernization Act of 2022, the agencies are required to collect information on subsidies received from certain foreign governments or entities that are strategic or economic threats to the United States.”

HOW WILL THESE CHANGES POTENTIALLY IMPACT PARTIES’ HSR FILINGS?

The proposed changes, as currently drafted, would require significantly more time and effort by the parties and their counsel to prepare the parties’ respective HSR notification forms. For example, the proposed new rules require the identification, collection, and submission of more deal documents and strategic documents; significantly more information about the parties, their officers, directors and board observers, minority investments, and financial interests; and narrative analyses and descriptions of horizontal and non-horizontal relationships, markets, and competition. Gathering, analyzing, and synthesizing this information into narrative form will require significantly more time and resources from both the parties and their counsel to comply.

Under the current filing rules, it typically takes the merging parties about seven to ten days to collect the information needed for and to complete the HSR notification form. Under the proposed new rules, the time to gather such information and complete an HSR notification form could be expanded by multiple months.

WHAT IS NEXT?

The Notice will be published in the Federal Register later this week. The public will then have 60 days from the date of publication to submit comments. Following the comment period, the Agencies will review and consider the comments and then publish a final version of the new rules. The new rules will not go into effect until after the Agencies publish the final version of the new rules. This process will likely take several months to complete, and the new rules–or some variation of them–will not come into effect until that time.

While the final form of the proposed rules are not likely to take effect for several months, the Agencies’ sweeping proposed changes to the notification form and filing process are in line with the type of information that the Agencies have been increasingly requesting from parties during the merger review process. Accordingly, parties required to submit HSR filings over the next several months should be prepared to receive similar requests from the Agencies, either on a voluntary basis (e.g., during the initial 30-day waiting period) or through issuance of a Second Request, and they should build into their deal timeline (either pre- or post-signing) sufficient time to comply with these requests.

 

1 “FTC and DOJ Propose Changes to HSR Form for More Effective, Efficient Merger Review,” FTC Press Release, June 27, 2023, available at FTC and DOJ Propose Changes to HSR Form for More Effective, Efficient Merger Review | Federal Trade Commission.  

2 “Q and A on the Notice of Proposed Rulemaking for the HSR Filing Process,” FTC Proposed Text of Federal Register Publication, available at 16 CFR Parts 801 and 803: Premerger Notification; Reporting and Waiting Period Requirements | Federal Trade Commission (ftc.gov).

Copyright 2023 K & L Gates

FTC Announces 2020 Thresholds for Merger Control Filings Under HSR Act and Interlocking Directorates Under the Clayton Act

The Federal Trade Commission (“FTC”) has announced its annual revisions to the dollar jurisdictional thresholds in the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”); the revised thresholds will become effective 30 days after the date of their publication in the Federal Register.  These changes increase the dollar thresholds necessary to trigger the HSR Act’s premerger notification reporting requirements.  The FTC also increased the thresholds for interlocking directorates under Section 8 of the Clayton Act, effective as of January 21, 2020.

Revised HSR Thresholds

Under the HSR Act, parties involved in proposed mergers, acquisitions of voting securities, unincorporated interests or assets, or other business combinations (e.g., joint ventures, exclusive license deals) that meet certain thresholds must report the contemplated transactions to the FTC and the Antitrust Division of the U.S. Department of Justice (“DOJ”) unless an exemption applies.  The parties to a proposed transaction that requires notification under the HSR Act must observe a statutorily prescribed waiting period (generally 30 days) before closing.  Under the revised thresholds, transactions valued at $94 million or less are not reportable under the HSR Act.

A transaction closing on or after the date the revised thresholds become effective may be reportable if it meets the following revised criteria:

Size of Transaction Test

The acquiring person will hold, as a result of the transaction, an aggregate total amount of voting securities, unincorporated interests, or assets of the acquired person valued in excess of $376 million;

or

The acquiring person will hold, as a result of the transaction, an aggregate total amount of voting securities, unincorporated interests, or assets of the acquired person valued in excess of $94million but not more than $376 million, and the Size of Person thresholds below are met.

Size of Person Test

One party (including the party’s ultimate parent entity and its controlled subsidiaries) has at least $188 million in total assets or annual sales, and the other has at least $18.8 million in total assets or annual sales. If the acquired party is not “engaged in manufacturing,” and is not controlled by an entity that is, the test applied to the acquired side is annual sales of $188 million or total assets of $18.8 million.

 The full list of the revised thresholds is as follows:

Original Threshold

2019 Threshold

2020 Revised Threshold
(Effective 30 days after publication in the Federal Register)

$10 million

$18 million

$18.8 million

$50 million

$90 million

$94 million

$100 million

$180 million

$188 million

$110 million

$198  million

$206.8 million

$200 million

$359.9 million

$376 million

$500 million

$899.8 million

$940.1 million

$1 billion

$1,799.5 million

$1,880.2 million

The filing fees for reportable transactions have not changed, but the transaction value ranges to which they apply have been adjusted as follows:

Filing Fee

Revised Size of Transaction Thresholds

$45,000

For transactions valued in excess of $94 million but less than $188 million

$125,000

For transactions valued at $188 million or greater but less than $940.1 million

$280,000

For transactions valued at $940.1 million or more

Note that the HSR dollar thresholds are only part of the analysis to determine whether a particular transaction must be reported to the FTC and DOJ.  Failure to notify the FTC and DOJ under the HSR Act remains subject to a statutory penalty of up to $43,280 per day of noncompliance.

Revised Thresholds for Interlocking Directorates

Section 8 of the Clayton Act prohibits one person from simultaneously serving as an officer or director of two corporations if: (1) the “interlocked” corporations each have combined capital, surplus, and undivided profits of more than $38,204,000 (up from $36,564,000); (2) each corporation is engaged in whole or in part in commerce; and (3) the corporations are “by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws.”1

Section 8 provides several exemptions from the prohibition on interlocks for arrangements where the competitive overlaps “are too small to have competitive significance in the vast majority of situations.”2  After the revised thresholds take effect, a corporate interlock does not violate the statute if: (1) the competitive sales of either corporation are less than $3,820,400 (up from $3,656,400); (2) the competitive sales of either corporation are less than 2 percent of that corporation’s total sales; or (3) the competitive sales of each corporation are less than 4 percent of that corporation’s total sales.

The revised dollar thresholds for interlocking directorates of $38,204,000 and $3,820,400 will be effective upon publication in the Federal Register; there is no 30-day delay as there is for the HSR thresholds.

1   15 U.S.C. § 19(a)(1)(B).

2   S. Rep. No. 101-286, at 5-6 (1990), reprinted in 1990 U.S.C.C.A.N. 4100, 4103-04.

© Copyright 2020 Cadwalader, Wickersham & Taft LLP

ARTICLE BY Joel Mitnick and Ngoc Pham Hulbig of Cadwalader, Wickersham & Taft LLP.
For more on Hart-Scott-Rodino thresholds, see the National Law Review Antitrust Law and Trade Regulation section.

FTC Raises Hart-Scott-Rodino Thresholds

An article about the FTC was recently published in The National Law Review and was written by the Antitrust Practice of Morgan, Lewis & Bockius LLP:

 

As of the effective date (on or about February 23, 2012) transactions must be valued in excess of $68.2 million to be subject to the preclosing notification requirements of the Hart­Scott­Rodino Act.

The Federal Trade Commission (FTC) has announced that it will raise the Hart­Scott­Rodino Act (HSR Act) jurisdictional and filing fee thresholds. Any transaction closing as of February 23, 2012 (or, if different, the effective date, which may be a few days after February 23, 2012) will be subject to the revised thresholds. The new rules include an increase in the “size of transaction” test from greater than $66 million to greater than $68.2 million-which means that under the new threshold, acquisitions valued for HSR Act purposes at $68.2 million or less will not require preclosing filing and approval.

New Jurisdictional Thresholds

As a general rule, the HSR Act requires both Acquiring and Acquired Persons (as defined in the HSR Act) to file notifications if the following post-adjustmentjurisdictional thresholds are met:

1.         One person has net sales or total assets of at least $13.6 million.

2.         The other person has net sales or total assets of at least $136.4 million.

3.         As a result of the transaction, the Acquiring Person will hold an aggregate amount of stock and assets of the Acquired Person valued at more than $68.2 million.

-OR-

4.         As a result of the transaction, the Acquiring Person will hold an aggregate amount of stock and assets of the Acquired Person valued at more than $272.8 million, regardless of the sales or assets of the Acquiring and Acquired Persons.

Conditions 1 and 2 are generally referred to as the “size of person” test, while conditions 3 and 4 are commonly described as the “size of transaction” test.

The HSR Act rules relating to acquisitions of partnership interests and membership interests in a limited liability company (LLC) remain the same. Only acquisitions of economic control in an LLC or partnership may be reportable. “Control” is defined as having a right to 50% or more of the profits of a partnership or LLC or 50% or more of the assets upon the dissolution of such entity.

New Filing Fee Thresholds

Filing fees are also determined by a threshold test relating to the size of the transaction. While the valuation thresholds have changed, the fees themselves have not been adjusted:

 

Valuation of Transaction Filing Fee
in excess of $68.2 million or greater, but less than $136.4 million $45,000
$136.4 million or greater, but less than $682.1 million $125,000
$682.1 million and greater $280,000

The figures above represent the new “as adjusted” threshold figures. The table below illustrates the changes.

 

Current Threshold
(in millions)		 “As Adjusted”
Threshold
(in millions)
$13.2 $13.6
$66 $68.2
$131.9 $136.4
$263.8 $272.8
$659.5 $682.1

These changes are being implemented pursuant to the 2000 amendments to Section 7A of the Clayton Act. Section 7A(a)(2) of the Clayton Act requires the FTC to revise the jurisdictional thresholds annually, based on the change in gross national product, in accordance with Section 8(a)(5). The revised thresholds will apply to all transactions that close on or after the effective date.

Copyright © 2012 by Morgan, Lewis & Bockius LLP.