5 minute read | January.27.2023
On January 23, 2023, the U.S. Federal Trade Commission (“FTC”) announced revised filing thresholds, as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), based on an increase in the U.S. gross national product. The FTC also announced that the recently passed amendments to the HSR Act, which adjust the HSR filing fee tiers and amounts, will take effect at the same time as the new filing thresholds. Going forward, the filing thresholds, as well as the filing fee tiers and amounts, will adjust annually.
The HSR Act and related regulations (“HSR Rules”) require that parties to certain transactions submit an HSR filing and, generally, wait 30 days (or more, if additional information is formally requested) before closing, giving the agency time to review the transaction for potential antitrust concerns. The HSR Act applies to a wide variety of transactions, including those outside the usual M&A context. Potentially reportable transactions include mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.
After more than two decades, a new HSR filing fee scale will become effective on February 27, 2023. The new fee scale - a result of amendments to the HSR Act included in the 2023 Consolidated Appropriations Act (H.R. 2617) signed into law in late December 2022 - significantly increases the filing fee required for many transactions. The increase for larger transactions is notable, with a fee increase of nearly $2 million for transactions valued at $5 billion or more. The fee scale changes increase the filing fee for some, yet not all, transactions valued at less than $500 million.
The buyer is obligated to pay the filing fee for a reportable acquisition (although parties may agree to share the fee or shift responsibility to the seller). The specific fee due depends on the transaction value, which is based on the aggregate total value of voting securities, assets, and/or non-corporate interests that will be held as a result of the transaction, as calculated under the HSR Rules (the “Size of Transaction”).
The new fee scale is set forth below. The fee tiers and filing fee amounts will be adjusted annually.
| New HSR Filing Fees | |
| Size of Transaction | Filing Fee |
| Less than $161.5 million | $ 30,000 |
| $161.5 million or more but less than $500 million | $ 100,000 |
| $500 million or more but less than $1 billion | $ 250,000 |
| $1 billion or more but less than $2 billion | $ 400,000 |
| $2 billion or more but less than $5 billion | $ 800,000 |
| $5 billion or more | $ 2,250,000 |
The filing fee changes are expected to contribute to a meaningful increase in collected fees, supporting increased budgets for the federal antitrust agencies’ active enforcement efforts.
A higher minimum HSR “Size of Transaction” threshold will apply to transactions closing on or after February 27, 2023. As a result of this adjustment, a transaction will be potentially reportable under the HSR Act only if it is valued in excess of $111.4 million (approximately $10 million higher than the 2022 threshold of $101 million).
An HSR filing may be required when, as a result of the transaction, the acquiring person will hold an aggregate amount of voting securities, assets, and/or non-corporate interests valued in excess of the minimum HSR Size of Transaction threshold in place at the time of closing. Because the HSR value considers what is held as a result of the transaction, the total Size of Transaction will include not only the value of what will be acquired in the present transaction but also the value of certain voting securities, non-corporate interests, and assets previously acquired.
Contingent payments, earnouts, liabilities, debt paid off or assumed, and other forms of consideration also can impact the Size of Transaction.
| Size of Transaction Test | |
| 2022 Threshold Closing before February 27, 2023 |
2023 Threshold Closing on or after February 27, 2023 |
| >$101 million | >$111.4 million |
Certain transactions that satisfy the Size of Transaction threshold must also satisfy the “Size of Person” test to be HSR reportable. The relevant Size of Person thresholds also will increase for transactions closing on or after February 27, 2023 and are reflected in the general Size of Person test set out below. The Size of Person test applies differently in certain situations—for example, the formation of joint ventures and where an Acquired Person is not engaged in manufacturing.
| Size of Person Test | |
| Size of Transaction >$111.4 million, but ≤$445.5 million | One party (or its Ultimate Parent Entity) has ≥$222.7 million in total assets or annual net sales, and |
| The other party (or its Ultimate Parent Entity) has ≥$22.3 million in total assets or annual net sales | |
| Size of Transaction >$445.5 million | Reportable regardless of the Size of Person test |
The HSR Act and Rules set out a number of exemptions. Even where a transaction satisfies the Size of Transaction and Size of Person thresholds, the application of an exemption may render the transaction non-reportable or impact the Size of Transaction calculation.
Where required, the failure to file can carry a significant financial penalty for each day of non-compliance. The maximum civil penalty for HSR violations also adjusts annually. The adjusted maximum civil penalty as of January 11, 2023 is set out below.
| Failure to File Penalty |
| Up to $50,120 per day in violation |
Consult HSR counsel early in the deal process to determine whether your transaction is HSR-reportable, especially before concluding that a filing is not required.
If you have questions regarding HSR Act reporting requirements or the new filing fees or thresholds, please contact the authors listed or your usual Orrick contact.