The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) requires parties to transactions meeting certain size thresholds to make notification filings with the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice and to observe a waiting period before closing. On February 15, 2019, the Federal Trade Commission announced increases in the reporting thresholds under HSR. Changes to the HSR reporting and exemption thresholds are made each year based on annual changes in the Gross National Product. The revised thresholds were published in the Federal Register on March 4, 2019 and will be effective on and after April 3, 2019.  The announcement of this year’s revised thresholds was delayed due to the recent federal government shutdown.

HSR applies to acquisitions of assets, voting securities and non-corporate interests (such as LLC membership interests) and also may apply to the formation of joint ventures, corporations and non-corporate entities (such as LLCs or limited partnerships). The Federal Trade Commission views certain grants of an exclusive license under intellectual property rights as an acquisition of assets that would be subject to the HSR filing requirements. 

REVISED HSR REPORTING THRESHOLDS

Under the new thresholds:

• The basic HSR threshold applicable to most acquisitions is $90 million(up from $84.4 million).
• Transactions valued at or above $90 million but less than $9 million (up from $337.6 million) are reportable if the ultimate parent entity of one party to the transaction, together with all entities it controls, has sales or assets of at least $18 million (up from $16.9 million), and the ultimate parent entity of the other party, together with all entities it controls, has sales or assets of at least $180 million (up from $168.8 million).
• Transactions valued at or above $9 million (up from $337.6 million) are reportable without regard to the size of the parties.

Even if a transaction is reportable based on these thresholds, it may qualify for an exemption from the HSR filing requirements. For example, exemptions are available for certain acquisitions of non-U.S. assets and voting securities. 

HSR FILING FEES

Effective April 3, 2019, HSR filing fees will be as follows:

• $45,000 for transactions valued at more than $90 million but less than $180 million. 
• $125,000 for transactions valued at or above $180 million but less than $8 million. 
• $280,000 for transactions valued at or above $8 million.

PENALTY FOR FAILURE TO MAKE AN HSR FILING

Companies considering transactions should seek legal advice to determine if an HSR filing will be required. Complex rules govern transaction valuation and the availability of exemptions under HSR. Failure to make a required HSR filing before closing is a violation of federal law and can subject parties to civil penalties which may be up to $42,530 (up from $41,484) per day for each day of noncompliance, which penalties are adjusted for inflation in January of each year (the announcement of the increase in penalties was delayed for 2019 due to the recent government shutdown).   Penalties can also be imposed on parties who submit incomplete filings (even if the filing was timely made).  The new penalty amounts went into effect on February 14, 2019.