Originally published January.26.2024
5 minute read | February.05.2024
The U.S. Federal Trade Commission (“FTC”) has announced revised filing thresholds as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), along with adjusted HSR filing fee tiers and amounts.
Companies should consult with HSR counsel early in the deal process to assess potential filing requirements.
The HSR Act and related regulations (“HSR Rules”) require parties to certain transactions to 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.
A higher minimum HSR “Size of Transaction” threshold will apply to transactions closing on or after March 6, 2024. As a result, a transaction will be potentially reportable under the HSR Act only if it is valued in excess of $119.5 million (approximately $8 million higher than the 2023 threshold of $111.4 million).
Determining HSR reportability: Does the transaction meet the Size of Transaction test?
An HSR filing may be required when, as a result of the transaction, the acquiring person will hold voting securities, assets, and/or non-corporate interests valued in excess of the minimum HSR Size of Transaction threshold at the time of closing, as calculated under the HSR Rules (the “Size of Transaction”). 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 can also impact the Size of Transaction.
| Size of Transaction Test | |
| 2023 Threshold | 2024 Threshold |
| > $111.4 million | > $119.5 million |
Determining HSR reportability: Do the parties to the transaction meet the Size of Person test?
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 will also increase and are reflected in the general Size of Person test set out below. The HSR Act and Rules apply the Size of Person test differently in certain situations – for example, the formation of joint ventures and where an Acquired Person is not engaged in manufacturing.
| Size of a Person Test | |
| Size of Transaction > $119.5 million, but ≤ $478 million | One party (or its Ultimate Parent Entity) has ≥ $239 million in total assets or annual net sales, and |
| The other party (or its Ultimate Parent Entity) has ≥ $23.9 million in total assets or annual net sales | |
| Size of Transaction > $478 million | Reportable regardless of the Size of Person |
Determining HSR reportability: Does an exemption apply?
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.
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 Size of Transaction, as calculated under the HSR Rules.
Last year, major amendments to the HSR filing fee scale were introduced along with a requirement that such fees and amounts be adjusted annually. This year’s adjustment results in no change to the filing fee for the lowest fee tier (transactions valued at less than $173.3 million), yet apply an upward shift for higher fee tiers, as set forth below.
| New HSR Filing Fees | |
| Size of Transaction | Filing Fee |
| Less than $173.3 million | $30,000 |
| $173.3 million or more but less than $536.5 million | $105,000 |
| $536.5 million or more but less than $1.073 billion | $260,000 |
| $1.073 billion or more but less than $2.146 billion | $415,000 |
| $2.146 billion or more but less than $5.365 billion | $830,000 |
| $5.365 billion or more | $2,335,000 |
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 10, 2024, is set out below.
| Failure to File Penalty |
| Up to $51,744 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.