On January 22, 2024, the Federal Trade Commission (FTC) issued its usual annual announcement to increase the Hart-Scott-Rodino (HSR) Act thresholds. The 2024 thresholds will take effect 30 days after publication in the Federal Register, which is expected soon, so the thresholds likely will be effective in late February.
HSR requires the parties to submit certain information and documents and then wait for approval before closing a transaction. The FTC and DOJ then have 30 days to determine if they will allow the merger to proceed or seek much more detail through a "second request" for information. The parties may also ask for "Early Termination" to shorten the 30-day waiting period, although for nearly two-years this option has been––and continues to be––suspended.
The HSR Act notification requirements apply to transactions that satisfy the specified "size of transaction" and "size of person" thresholds. These thresholds are adjusted annually to reflect changes in the U.S. gross national product.
Three thresholds determine the applicability of HSR filing requirements.
First, one of the parties to the transaction must be in commerce in the United States or otherwise affect U.S. commerce.
Second, the acquiring party must be acquiring securities, non-corporate interests, or assets of the target in excess of $119.5 million––the "size of transaction" threshold. A notification is thus not required when the value of the voting securities and assets is below this threshold.
Third, if the transaction exceeds $119.5 million but does not exceed $478 million, then the "size of the parties" threshold kicks in and at least one party involved in the transaction must have annual net sales or total assets of at least $239 million, and the other party must have annual net sales or total assets of at least $23.9 million.
Transactions valued at more than $478 million are reportable regardless of the size of the parties, unless an HSR Act exemption applies.
The FTC's notice also implemented a new filing fee structure from the new legislation. The new structure will be in place starting with filings made 30 days after publication in the Federal Register. Below we compare the old and new fee thresholds:
|
2023 |
|
|
Size of the Transaction $111.4 million – $161.5 million $161.5 million – $499.999 million $500 million – $999.999 million $1 billion – $1.999 billion $2 billion – $4.999 billion $5 billion or more |
Merger Fee $30,000 $100,000 $250,000 $400,000 $800,000 $2,250,000 |
|
2024 |
|
|
Size of the Transaction $111.4 million – $173.3 million $173.3 million – $499.999 million $500 million – $999.999 million $1 billion – $1.999 billion $2 billion – $4.999 billion $5 billion or more |
Merger Fee $30,000 $105,000 $260,000 $415,000 $830,000 $2,335,000 |
As a result of recent legislation, those fees will also be adjusted annually, based on changes to the consumer price index.
The FTC further published revised thresholds relating to Section 8 of the Clayton Act. Section 8 prohibits interlocking directorates in which one "person" serves simultaneously as an officer or director of competing corporations, subject to certain exceptions. Now, Section 8 of the Clayton Act applies when each of the competing corporations has capital, surplus, and undivided profits aggregating more than $48,559,000 and each corporation's competitive sales are at least $4,855,900, again with certain exceptions.
The FTC has also published that the maximum civil penalty amount for violations of the HSR Act has now increased from $50,120 to $51,744 per day.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
