Annually, the Federal Trade Commission (FTC) reviews and adjusts the premerger notification reporting thresholds for reporting acquisitions of voting securities, assets, or noncorporate interests (each a Transaction) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act) if the Consumer Price Index (CPI) increase since the last fiscal year is greater than 1 percent. The size-of-transaction thresholds are also adjusted annually based on the gross national product.

On January 22, 2024, to be effective 30 days after publication in the Federal Register, the FTC announced increased reporting thresholds for Transactions. If a Transaction meets the revised thresholds set forth below, then the parties involved must file a premerger notification with the FTC and the Antitrust Division of the Department of Justice (DOJ) (unless an exemption applies, or the parties do not meet the size-of-person test, as applicable).

Revised Size-of-Person Test

The revised size-of-person threshold generally requires a Transaction to be reported if either party has total assets or annual net sales of $239 million or more (up from $222.7 million in 2023) and the other party has total assets or annual net sales of $23.9 million or more (up from $22.3 million in 2023). “Party” includes the ultimate parent entity (UPE) and such UPE’s controlled subsidiaries. If the parties involved do not meet these thresholds, and the Transaction does not meet the size-of-transaction test, then the Transaction will not be reportable. If the Transaction size is more than $478 million (up from $445.5 million in 2023), then the size-of-person test does not apply and the Transaction is reportable.

Revised Size-of-Transaction Thresholds

Filing Fees

The fee for filing a premerger notification also increased based on the CPI as follows:

When must a company file?

As there are a number of exceptions and exemptions, counsel should be consulted to further discuss and determine whether a Transaction may require a filing. Generally, however, the following guidelines apply:

1. No Premerger Notification – When a Transaction is valued at or less than $119.5 million, the acquiring person and acquired person will not be required to file a premerger notification under the HSR Act.
2. Potential Premerger Notification – Unless otherwise exempt, and depending on the assets and revenues of the parties involved (the size-of-person test detailed above), when a Transaction is valued at over $119.5 million but less than $478 million, a premerger notification filing may be required.
3. Required Premerger Notification – Unless otherwise exempt, when a Transaction is valued at more than $478 million, a premerger notification filing will be required.

Relatedly, the FTC also increased the interlocking directorates thresholds and civil penalties amounts.

Civil Penalties (Failure to Comply with HSR Act):

Any person failing to comply with the HSR Act may be subject to a civil penalty for each day of such noncompliance. Effective January 10, 2024, the maximum civil penalty is $51,744 (up from $50,120) per day of noncompliance. The FTC annually adjusts the civil penalty based on CPI increases. Person, for purposes of the civil penalties, includes the parties that should have reported, as well as any of their respective officers, directors, or partners.

Interlocking Directorates Thresholds: Effective January 22, 2024, generally one person is prohibited from simultaneously serving as an officer or director of two competing corporations, if each corporation has capital, surplus, and undivided profits aggregating more than $48,559,000 (up from $45,257,000) under Section 8 of the Clayton Act. However, the “interlock” is not prohibited if: (1) the competitive sales of either corporation are less than $4,855,900 (up from $4,525,700); (2) the competitive sales of either corporation are less than 2 percent of that corporation’s total sales; or (3) the competitive sales of each corporation are less than 4 percent of that corporation’s total sales. Note that although statutorily this prohibition is applied against corporations, the FTC and DOJ positions are that the same concept may be enforced against limited liability companies, partnerships, and other noncorporate entities.

Resources

FTC’s HSR announcement

Text for the Federal Register

FTC’s interlocking directorates announcement

Text for the Federal Register

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