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 1, 2021, the Federal Trade Commission announced decreases in the reporting thresholds under HSR. Adjustments to the HSR reporting and exemption thresholds are made each year based on annual changes in the Gross National Product. This is only the second year since 2004, when the thresholds began to be adjusted annually, that the adjustments have been to decrease the HSR reporting thresholds (with the first decrease being in 2010).
The revised thresholds will be effective on and after March 4, 2021 (30 days after publication in the Federal Register) and will apply to any transaction that will close on or after that date.
Additionally, because the Federal Trade Commission is an independent administrative agency, the effectiveness of the revised HSR thresholds is not impacted by President Biden’s temporary freeze on pending regulations.
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 $92 million (down from $94 million).
- Transactions valued in excess of $92 million but not in excess of $368 million (down from $376 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 $18.4 million (down from $18.8 million), and the ultimate parent entity of the other party, together with all entities it controls, has sales or assets of at least $184 million (down from $188 million).
- Transactions valued in excess of $368 million (down from $376 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. Certain dollar thresholds relevant to HSR exemptions, including the exemptions available for certain acquisitions of non-US assets and voting securities, will also decrease effective March 4, 2021.
HSR FILING FEES
Effective March 4, 2021, HSR filing fees will be as follows:
- $45,000 for transactions valued in excess of $92 million but less than $184 million.
- $125,000 for transactions valued at or above $184 million but less than $919.9 million.
- $280,000 for transactions valued at or above $919.9 million.
PENALTY FOR FAILURE TO MAKE AN HSR FILING
Companies and individuals 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 that may be up to $43,792 (up from $43,280) per day for each day of noncompliance (penalties are adjusted for inflation in January of each year). 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 January 13, 2021.