The Federal Trade Commission (FTC) announced on January 23 that it will increase the Hart-Scott-Rodino Act (HSR Act) jurisdictional filing thresholds, which, along with the new HSR Act filing fee thresholds contemplated by the Merger Filing Fee Modernization Act of 2022, will go into effect 30 days after the pending publication in the Federal Register, which is expected in the upcoming days.
The new rules include an increase in the “size of transaction” test from transactions valued at more than $101 million to transactions valued at more than $111.4 million—which means that, under the new threshold, acquisitions valued for HSR Act purposes at more than $111.4 million may require preclosing filing and approval.
As a general rule, the HSR Act requires both “Acquiring Persons” and “Acquired Persons” (as defined in the HSR Act) to file notifications if the following post-adjustment jurisdictional thresholds are met:
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.
The figures below represent the new “as adjusted” size of transaction thresholds. The table illustrates the year over year changes.
|
Current Threshold |
“As Adjusted” Threshold |
|
$20.2 million |
$22.3 million |
|
$101 million |
$111.4 million |
|
$202 million |
$222.7 million |
|
$403.9 million |
$445.5 million |
|
$1.0098 billion |
$1.1137 billion |
The size of person and size of transaction threshold changes are being implemented pursuant to the 2000 amendments to Section 7A of the Clayton Antitrust Act. Section 7A(a)(2) of the Clayton Antitrust 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 of the notice (30 days after the pending publication in the Federal Register).
For the first time, following passage of the Merger Filing Fee Modernization Act of 2022 (the Merger Filing Fee Modernization Act) in December 2022, filing fees no longer track the HSR size of transaction thresholds. The Merger Filing Fee Modernization Act introduces six filing fee tiers—instead of the prior three tiers— which will reduce filing fees for smaller transactions and substantially increase fees for deals valued at or above $500 million:
|
Valuation of Transaction |
Filing Fee |
|
In excess of $111.4 million, but less than $161.5 million |
$30,000 |
|
$161.5 million or more, but less than $500 billion |
$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 |
$2.25 million |
The figures above represent the new base filing fee tiers under the Merger Filing Fee Modernization Act. For each fiscal year beginning after September 30, 2023, these fees will increase based on the percentage increase, if any, in the Consumer Price Index as judged by the Department of Labor.[1] These new filing fee thresholds will apply to all filings made on or after the effective date of the notice (30 days after the pending publication in the Federal Register).
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[1] Filing fees will only be adjusted upward annually based on changes to the Consumer Pricing Index, whereas jurisdictional filing thresholds may be adjusted upwards or downwards annually.