The Hart-Scott-Rodino Act (“HSR”) requires that transactions over a certain value be reported at least 30 days prior to closing to the Federal Trade Commission (“FTC”) and U.S. Department of Justice Antitrust Division (“DOJ,” collectively, the “Agencies”). The FTC adjusts the HSR reporting thresholds annually based on the change in gross national product. The new threshold to keep in mind for transactions is $119.5 million (which is up from $111.4 million in 2023). There are additional considerations when acquiring or selling voting securities, non-corporate interests in a business (such as interests in an LLC or partnership), or assets valued over $119.5 million.

When determining whether an HSR filing is necessary, the following questions must be considered:

What is the value of the transaction and the size of the parties?

The HSR rules are complex, and whether the size-of-the-transaction threshold is met depends on a number of details, such as the transaction’s structure and whether any HSR exemptions apply. Additionally, one important preliminary question is: if the transaction exceeds the $119.5 million threshold, are the parties large enough to warrant further assessment of the HSR filing? If the transaction is valued at or above $119.5 million but less than $478 million, then the size of the parties must be considered. If one party to the deal (and all of that party’s parents, affiliates, and subsidiaries) has sales or assets over $239 million, and if the other party has sales or assets over $23.9 million, then the transaction might be reportable, and the HSR filing analysis should continue. All non-exempt transactions valued over $478 million are reportable, regardless of the size of the parties. The new thresholds will take effect 30 days after they are published in the Federal Register, which is forthcoming.

Do any exemptions apply?

The HSR rules contain several exemptions that can reduce the transaction value or eliminate the obligation to make a filing altogether. For example, the HSR rules do not apply to certain acquisitions of non-U.S. entities or assets, acquisitions made solely for the purpose of investment, or certain real estate acquisitions.

What will the FTC or DOJ do after the filing is made?

During the 30-day waiting period, the parties cannot close the transaction, which allows the Agencies to review whether the transaction could adversely impact competition in the market for any particular product or service. In light of the new Merger Guidelines, if the parties compete in the same market or industry and/or the deal will add to a portfolio of assets in the same market or industry, it is critical that antitrust counsel be engaged early in the process to determine how the transaction might affect competition and the likelihood that the Agencies may oppose or challenge the transaction.

Finally, ignoring the HSR threshold can lead to reputational and financial harm. As of January 10, 2024, failure to submit a required HSR filing can draw penalties of $51,744 for each day of noncompliance.