Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, corporations considering certain mergers or acquisitions must notify both the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ).
This notification is crucial, as it prompts an evaluation of the potential competitive ramifications of the proposed transaction.
Additionally, a waiting period ensues, providing the FTC and DOJ time to review the deal for any anticompetitive concerns.
Typically, whether a transaction requires notification depends on both the size of the deal and the financial profiles of the involved companies.
Conditions for Notification
The Act specifies that companies need to file a notification and observe a waiting period under these particular conditions:
- The acquiring company will gain voting securities, non-corporate interests, or assets from the target company valued at over $200 million (adjusted annually).
- The acquisition involves holdings worth more than $50 million but less than $200 million (also adjusted), provided that at least one party has sales or assets of at least $100 million (with adjustments), while the other party has sales or assets of at least $10 million (with adjustments).
It’s important to note that these thresholds are tagged as “as adjusted,” meaning they undergo annual modification by the FTC, based on changes in the gross national product.
Here’s a simplified overview of the thresholds, including historical data and future projections:
Thresholds Overview
Here’s how the increments look:
- $10 million:
- Previous: $22.3 million
- Upcoming: $23.9 million
- Current: $25.3 million
- $50 million:
- Previous: $111.4 million
- Upcoming: $119.5 million
- Current: $126.4 million
- $100 million:
- Previous: $222.7 million
- Upcoming: $239.0 million
- Current: $252.9 million
- $110 million:
- Previous: $245.0 million
- Upcoming: $262.9 million
- Current: $278.2 million
- $200 million:
- Previous: $445.5 million
- Upcoming: $478.0 million
- Current: $505.8 million
- $500 million:
- Previous: $1.1137 billion
- Upcoming: $1.195 billion
- Current: $1.264 billion
- $1 billion:
- Previous: $2.2274 billion
- Upcoming: $2.39 billion
- Current: $2.529 billion
Initially, the threshold for transaction reporting was set at $200 million.
Presently, companies must report transactions where the acquired assets are valued at over $505.8 million.
Filing Fees and Penalties
In considering both transaction size and financial metrics of the parties involved, keep in mind the original thresholds of $50 million and $200 million, which still hold relevance alongside the size-of-person benchmarks—$100 million and $10 million.
As it stands, companies need to file a notification if:
- The acquiring entity intends to gain voting securities, non-corporate interests, or assets valued between $126.4 million and $505.8 million.
- At least one party boasts sales or assets amounting to no less than $252.9 million.
- The other party retains sales or assets of at least $25.3 million.
In compliance with the Act, submitting a notification includes a filing fee that varies based on the transaction’s size.
Effective February 21, 2025, the modified fee structure is as follows:
- For transactions exceeding $126.4 million but under $179.4 million: $30,000.
- For transactions from $179.4 million to under $555.5 million: $105,000.
- For transactions in the range of $555.5 million to under $1.111 billion: $265,000.
- For transactions from $1.111 billion to under $2.222 billion: $425,000.
- For transactions ranging from $2.222 billion to under $5.555 billion: $850,000.
- For deals of $5.555 billion or more: $2.39 million.
Violating the provisions of the Act may result in civil penalties.
As of January 10, 2024, the maximum daily civil penalty rose from $51,744 to $53,088.
Earlier this year, the FTC, in partnership with the DOJ, made significant updates to the pre-merger notification process, introducing a revised HSR Form.
These changes were formally announced in the Federal Register on November 12, 2024, with an effective date of February 10, 2025.
Consequently, any notifications filed after that date must utilize the new HSR Form.
It’s also noteworthy that the FTC will resume the option of early termination of the 30-day waiting period, which had been paused since February 2021.
Source: Natlawreview