On January 22, 2024, the Federal Trade Commission (FTC) published new, higher notification thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). The HSR Act requires the FTC to adjust the thresholds annually to reflect changes in U.S. gross national product. The new reporting thresholds are expected to go into effect in late February, thirty days after their publication in the Federal Register. This announcement comes in advance of the expected Q2 release of the new HSR Merger Notification Form. If adopted as proposed in June 2023, the changes would transform the process of preparing the HSR Form, dramatically increasing the time and cost of notifying a merger, adding weeks (and potentially months) to the front end of the process.
Under the new thresholds, the minimum “size of transaction” threshold will become $119.5 million, up from $111.4 million, representing an increase of 7.27% over 2023. Transactions resulting in aggregate holdings of voting securities, assets, or non-corporate interests exceeding this threshold will be reportable to the U.S. antitrust authorities, unless otherwise exempt. The new thresholds are as follows:
Size of Transaction | ||
Base | Current | New |
$50 million | $111.4 million | $119.5 million |
$200 million | $445.5 million | $478 million |
Transactions valued at more than $119.5 million but $478 million or less must also meet the “size of person” test. |
Size of Person | ||
Base | Current | New |
$10 million | $22.3 million | $23.9 million |
$100 million | $222.7 million | $239 million |
Voting Securities | ||
Base | Current | New |
$50 million | $111.4 million | $119.5 million |
$100 million | $222.7 million | $239 million |
$500 million | $1.1137 billion | $1.195 billion |
$1 billion (if acquiring 25%) | $2.2274 billion | $2.39 billion |
The changes to the filing fee structure, signed into law on December 29, 2022 (as further explored in this client alert), are also updated annually (both the fee amount and the fee filing threshold), in accordance with the consumer price index as determined by the Department of Labor. The filing fee structure for 2024 is as follows:
HSR Filing Fees | |
Transactions valued at less than $173.3 million | $30,000 |
Transactions valued at not less than $173.3 million but less than $536.5 million | $105,000 |
Transactions valued at not less than $536.5 million but less than $1.073 billion | $260,000 |
Transactions valued at not less than $1.073 billion but less than $2.146 billion | $415,000 |
Transactions valued at not less than $2.149 billion but less than $5.365 billion | $830,000 |
Transactions valued at $5.365 billion or more | $2,335,000 |
The HSR Act requires premerger notification of transactions that satisfy the “size of transaction” and “size of person” tests and are not otherwise exempt. The thresholds are adjusted annually to reflect changes in U.S. gross national product. The new thresholds will be applicable through the next annual adjustment expected in Q1 2025.
Under the new thresholds, the size of transaction test will be met if, as a result of a transaction, the acquiring person at the ultimate parent entity (UPE) level will hold aggregate voting securities, assets, or non-corporate interests of the acquired person valued at more than $119.5 million. For transactions valued at more than $119.5 million but $478 million or less, the parties must also meet the size of person test. Transactions valued at more than $478 million will be reportable regardless of the size of the parties unless an exemption applies.
Under the new thresholds, where it applies, the size of person test will generally be satisfied where one party to the transaction at the UPE level has total assets or annual net sales of $239 million or more and the UPE of the other party has total assets or annual net sales of $23.9 million or more.
The FTC also announced 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 two or more competing corporations, subject to certain exceptions. Under the revised thresholds, Section 8 may apply 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.