Hart-Scott-Rodino Notification Thresholds to Increase
Beginning on 23 February 2022, transactions valued at more than US$101 million may require the filing with the antitrust agencies of a Premerger Notification and Report under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act). This is about a 9.8% increase from the current filing threshold of US$92 million.
Legislation adopted in 2000 requires an annual adjustment of the dollar values in the tests used to determine which mergers and acquisitions must be reported to the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ), based on the annual change in the gross national product. The same adjustment factors are also applied to the transaction-size criteria that determine the amount of the filing fee to be paid in transactions for which a filing under the HSR Act is required.
The New Filing Thresholds
The HSR Act requires certain persons making acquisitions of assets, voting securities, and noncorporate interests (i.e., interests in partnerships and limited liability companies) to (a) file premerger notifications with the FTC and the DOJ, and (b) wait until the expiration or termination of a waiting period (usually 30 days) before consummating the acquisition.1
Beginning on 23 February 2022, the following transactions will generally be subject to the HSR Act’s notification and waiting period requirements:
- Transactions between parties of any size in which the acquirer will acquire or hold voting securities, assets, and noncorporate interests of the target company that have an aggregate value in excess of US$403.9 million.2
- Transactions in which the acquirer will acquire or hold voting securities, assets, and noncorporate interests of the target company with an aggregate value in excess of US$101 million but not more than US$403.9 million, provided that either the acquiring or the acquired person has net sales or total assets of US$202 million or more and the other person in the transaction has net sales or total assets (total assets only for the acquired person if not a manufacturer) in excess of US$20.2 million.
Any transaction valued at US$101 million or less is not reportable under the HSR Act. However, in determining the “value” of a transaction, the acquiring person must include the value of certain voting securities, assets, or noncorporate interests of the target company that the acquiring person may have acquired in one or more prior transactions. Conversely, acquisitions at a price above US$101 million will typically require a filing; however, there are many exemptions under HSR regulations, and parties are strongly encouraged to seek the advice of HSR counsel to determine whether a filing will be required in any individual transaction.
Although a premerger notification may be required prior to the acquisition in excess of US$101 million in assets, noncorporate interests, or voting securities, a person who files a notification for an acquisition at that base level may have to file another notification for additional acquisitions that, when aggregated with the first acquisition, result in crossing any of the following higher thresholds: (a) US$202 million, (b) US$1.0098 billion, (c) 25% or more of the voting securities if the entity is worth US$2.0196 billion or more, and (d) 50% or more of the voting securities of the entity.
The New Fee Thresholds
The thresholds for the various levels of filing fees will also change beginning on 23 February 2022:
| Fee | Size of Transaction |
|---|---|
| US$45,000 | If the size of transaction is valued at more than US$101 million but less than US$202 million. |
| US$125,000 | If the size of transaction is valued at US$202 million or more but less than US$1.0098 billion. |
| US$280,000 | If the size of transaction is valued at US$1.0098 billion or more |
The thresholds discussed in this alert will apply for about one year and be recalculated in early 2023 based upon the annual change in gross national product during 2022.
Penalties for Failure to File When Required
Anyone who fails to submit an HSR filing and to observe the required waiting period for a reportable acquisition may be subject to civil fines in an amount adjusted annually by the FTC. Effective 10 January 2022, the penalty for failure to comply with the HSR Act is US$46,517 per day.
For more information, please contact the authors or any other member of the K&L Gates antitrust team.
This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer. Any views expressed herein are those of the author(s) and not necessarily those of the law firm's clients.
