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On January 26, 2023, the FTC published a Notice in the Federal Register announcing the
latest annual adjustments to the statutory thresholds under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (15 U.S.C.
§ 18a) (HSR). These annual adjustments are pegged to changes
in gross national product. This year’s adjustment is the
largest ever since the thresholds first became annually adjusted,
breaking last year’s record increase.
Once the new thresholds come into effect, the HSR
size-of-transaction threshold will increase from $101 million to
$111.4 million. The revised HSR thresholds will apply for
transactions that close on or after February 27, 2023.
On January 20, 2023, the FTC also published a Notice in the Federal Register with the latest
annual adjustments to the statutory thresholds under Section 8 of
the Clayton Act (15 U.S.C. § 19). The revised Section 8
thresholds are effective immediately.
Size-of-Transaction Test (Original: $50 Million; New as of
February 27, 2023: $111.4 Million)
The 2000 HSR amendments raised the size-of-transaction test to
$50 million. This figure is currently $101 million, based upon the
2022 annual adjustment. On February 27, 2023, however, this
threshold will increase to $111.4 million. Accordingly, for
transactions that close on or after February 27, 2023, no HSR
filing will be required unless the acquisition will result in the
acquiring person holding an aggregate total amount of voting
securities, non-corporate interests, and/or assets of the acquired
person in excess of $111.4 million.
Size-of-Person Test (Original: $10 Million/$100 Million; New as
of February 27, 2023: $22.3 Million/$222.7 Million)
Under the new adjustments, acquisitions valued above $445.5
million will be reportable regardless of the size of the parties.
Acquisitions valued at greater than $111.4 million, but less than
or equal to $445.5 million, will be reportable only if the
size-of-person test is separately met. The revised thresholds
adjust the size-of-person test so that it will be met if (i) either
the acquiring or acquired person has total assets or annual net
sales of $222.7 million or more and (ii) the other person has total
assets or, in certain situations, annual net sales of $22.3 million
or more.
Notification Thresholds for Acquisitions of Voting
Securities
For acquisitions of voting securities, an acquiring person files
for the highest applicable notification threshold among five
choices. Acquiring 50 percent or greater of an issuer’s voting
securities is the highest threshold, but below that level there are
four different tiers for reporting acquisitions of minority
interests in voting securities. The notification threshold may
determine, for example, whether a subsequent acquisition of
additional voting securities in the same issuer will require
another HSR filing. The new notification thresholds will be, in
ascending order:
- An aggregate total amount of voting securities valued at
greater than $111.4 million but less than $222.7 million - An aggregate total amount of voting securities valued at $222.7
million or greater but less than $1.1137 billion - An aggregate total amount of voting securities valued at
$1.1137 billion or greater - Twenty-five percent of an issuer’s outstanding voting
securities, if valued at greater than $2.2274 billion - Fifty percent of an issuer’s outstanding voting securities,
if valued at greater than $111.4 million
Filing Fee Thresholds
On December 29, 2022, President Biden signed into law the 2023
Consolidated Appropriations Act, which includes the Merger Filing
Fee Modernization Act of 2022. The new law significantly changes
the filing fees for notifications under the HSR Act. The FTC’s
January 26, 2023 Federal Register Notice announcing the latest
annual adjustments to the HSR statutory thresholds also announces
the new HSR filing fees required by the Merger Filing Fee
Modernization Act of 2022. The new filing fees take effect on
February 27, 2023.
Under the new filing fee structure, some fees will be lower and
some will be higher than under the prior filing fee structure. As
with the prior filing fee structure, the new structure has filing
fees associated with acquisition valuation ranges, with higher
filing fees associated with higher acquisition valuation ranges.
Both the filing fees and the valuation ranges have changed under
the new structure: The lowest filing fee has gone down, from
$45,000 to $30,000, and the highest filing fee has substantially
increased, from $280,000 to $2.25 million.
The new filing fees as of February 27, 2023, based on the Size
of Transaction, are:
|
Size of Transaction
|
New Filing Fee as of Feb. 27
|
|
More than $111.4 million, but less than $161.5 million
|
$30,000
|
|
$161.5 million or more, but less than $500 million
|
$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
|
$2,250,000
|
The new filing fees are subject to an annual increase each
fiscal year – beginning after September 30, 2023 – based on the
percentage increase, if any, in the consumer price index if the
percentage increase is one percent or more. Further, the new
thresholds are subject to annual adjustment each fiscal year -
beginning after September 30, 2023 – based on changes in gross
national product.
The filing fee changes may impact parties’ decisions in some
transactions on whether to seek a split of the filing fee or on
when to make an HSR filing based on a letter of intent as opposed
to a definitive agreement.
Additional Considerations
Most, although not all, of the dollar amounts in the HSR rules
will be adjusted upward based upon the threshold indexing discussed
above. For purposes of disclosing past asset acquisitions for Item
8 of the HSR form, and for analyzing a potential past failure to
file under HSR, it still is necessary to look at the thresholds
that were in place at the time of the prior acquisition. It remains
important for parties to be careful in determining if a threshold
is met given that the process can be complex, the rules are highly
technical, and failure to comply with HSR can result in significant
civil penalties. Incidentally, the maximum civil penalty was recently increased to up to $50,120 for each
day of noncompliance.
Another HSR filing change under the Merger Filing Fee
Modernization Act of 2022 is a requirement that persons filing
under the HSR Act that receive a subsidy from a “foreign
entity of concern” must include in their HSR filing
information regarding that subsidy. The new law calls for
rulemaking to implement this requirement. Accordingly, this
provision will not immediately impact the information required for
HSR filings. Foley plans to monitor the rulemaking process.
Interlocking Directorates Thresholds (Original: $10 Million;
New as of January 20, 2023: $45,257,000)
Finally, in a separate Federal Register notice, the FTC updated
the jurisdictional threshold for interlocking directorates under Section 8 of the Clayton Act. Section 8
prohibits, subject to certain exceptions, persons from serving as
an officer or director of two competing corporations (a practice
known as “interlocking”), provided that each corporation
has “capital, surplus, and undivided profits” above the
statutory threshold. The 1990 amendments to Section 8 set this
threshold at $10 million, but based on the latest annual
adjustment, the threshold has changed to $45,257,000.
Section 8 also has three safe harbor exceptions. One exception
states that Section 8 does not apply if the competitive sales of
either interlocked corporation are less than $1 million in 1989
dollars, as adjusted annually. This safe harbor has adjusted to
$4,525,700 based on the new thresholds.
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.
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