The Federal Trade Commission ("FTC") announced its annual revision to the thresholds for premerger reporting of proposed acquisitions to the United States antitrust authorities under the Hart-ScottRodino Antitrust Improvements Act of 1976, as amended (the "HSR Act").1 Effective February 27, 2023, the minimum size-of-transaction threshold will increase from $101 million to $111.4 million.2 The FTC also announced the new HSR filing fees, which become effective on February 27, 2023. The FTC and the U.S. Department of Justice ("DOJ" and, together with the FTC, the "agencies") have not yet reinstated their practice of granting early termination of the initial 30-day waiting period under the HSR Act.
The HSR Act thresholds are adjusted annually, based on the change in gross national product. This year the thresholds increased substantially. Under the new thresholds, transactions that will result in one person holding more than $111.4 million (originally $50 million) of another person's assets, voting securities or non-corporate interests may be subject to the HSR Act's premerger reporting requirements.3
The HSR Act requires all persons contemplating mergers or planning to acquire voting securities, noncorporate interests or assets that satisfy the size-of-transaction and size-of-person thresholds to notify the FTC and DOJ, pay a filing fee (depending on the size of the transaction) and observe a waiting period before completing the transaction. Once the agencies receive the required HSR Act forms and the filing fee, a 30-day waiting period commences (in most cases) and the transaction cannot close until the expiration or early termination of the waiting period or, in the event the waiting period is extended by issuance of a "Second Request" for additional materials because significant antitrust concerns exist, expiration of an additional 30-day waiting period or a negotiated schedule following substantial compliance with the Second Request.
The new HSR filing fees range from $30,000 to $2.25 million, depending on the size-of-transaction.4 Congress authorized these new fees at the end of last year.5 The new fees reflect an increase for larger transactions and a decrease for medium to smaller transactions. The FTC will revise these fees yearly, based on the Consumer Price Index.
The HSR Act and rules are complex. They include many exemptions and exceptions and at times require the aggregation of pre-acquisition holdings and reporting of various transactions many of which do not involve mergers or acqusitions of control, including (i) acquisitions of minority holdings of voting securities, (ii) subsequent acquisitions when a secondary threshold is crossed, and (iii) acquisitions of additional voting securities from the same issuer after more than five years, among other scenarios. The antitrust agencies may impose fines for failure to make required notifications, and the rules should be carefully reviewed with respect to any particular transaction.6
The FTC also revised thresholds for restrictions on interlocking directorates under Section 8 of the Clayton Antitrust Act of 1914, as amended, which prohibits the same person from serving as a director or officer of two competing corporations whose combined sales exceed certain thresholds. Competing corporations are covered if each one has capital, surplus, and undivided profits in aggregate of more than $45,257,000 (originally $10,000,000), with the exception that no corporation is covered if the competitive sales of either corporation are less than $4,525,700 (originally $1,000,000).7 The DOJ has stated that enforcement of Section 8 is a priority for the agency. We recommend that companies review their officers' and directors' positions on other boards, followed by an annual compliance check, to confirm that there are no problematic interlocking directorates.