On January 27, 2020, the Federal Trade Commission (“FTC”) announced annual increases to the notification thresholds for premerger filings required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). The HSR Act generally requires parties to transactions—e.g., mergers, joint ventures, acquisitions of assets or voting securities—that meet certain thresholds to file premerger notifications with both the FTC and the United States Department of Justice (“DOJ”), and observe a statutory waiting period prior to closing. The annual increases will apply to transactions consummated on or after February 27, 2020.
For 2020, the size-of-transaction notification thresholds will increase as indicated below. Importantly, unless otherwise exempted, acquisitions that will result in the acquiring person holding more than $94 million of the acquired person’s voting securities, assets, or non-corporate interests, will require an HSR filing (assuming the size-of-person thresholds are also met). As detailed further below, required filing fees will vary between $45,000 and $280,000 depending on the size of the transaction.
The size-of-transaction test will be met if, as a result of the transaction, the acquiring party’s aggregate holdings in the acquired party (as calculated under the HSR Act) will exceed any one of the notification thresholds. A proposed transaction that satisfies the size-of-transaction test may require an HSR notification if the size-of-person test (discussed below) is also met and no exemptions apply.
For 2020, the size-of-person notification thresholds will increase as follows:
The size-of-person test will be met if one party to the proposed transaction has assets or annual net sales totaling $188 million or more and the other party to the proposed transaction has assets or annual net sales totaling $18.8 million or more. The size-of-person test need not be met, however, if the total value of the proposed transaction exceeds $376 million (this is an increase from the 2019 threshold of $359.9 million).
Filing Fees and Penalties
The filing fees required in connection with an HSR notification will not change in 2020, and will remain set at $45,000 for transactions valued above $94 million but less than $188 million; $125,000 for transactions valued at $188 million or more but less than $940.1 million; and $280,000 for transactions valued at or above $940.1 million. However, the FTC has announced that the maximum civil penalties for failure to comply with the notification and waiting period requirements of the HSR Act will increase from $42,530 to $43,280 per each day of non-compliance. These new penalties took effect on January 14, 2020.
Determining whether an HSR notification is required in connection with a transaction can be complicated, and requires an in-depth understanding of the HSR Act, the implementing regulations, and the applicable exemptions.