Key Takeaways
- Following a robust growth in GNP, the HSR filings thresholds increased by about 10.3 percent.
- The new minimum size-of-transaction threshold increased from US$101.0 million to US$111.4 million.
- Annual adjustments to dollar-based HSR reporting thresholds expected to go into effect on or about February 23, 2023, around the same time as recently enacted changes to HSR filing fees.
- Similar upward adjustments to thresholds for director interlocks to take effect imminently, and new maximum civil penalties for HSR violations already in effect.
On January 23, 2023, the U.S. Federal Trade Commission (“FTC”) announced that the dollar-based thresholds applicable to the Hart-Scott-Rodino (“HSR”) premerger notification program will be raised about 10.3% percent from the 2022 levels. As a result, the HSR minimum size-of-transaction threshold will be raised to US$111.4 million from US$101.0 million. Transactions valued below the new US$111.4 million threshold will not require an HSR filing.
The HSR changes will become effective on or about February 23, 2023 (30 days after the expected official publication date in the Federal Register). The new HSR thresholds will apply to transactions that close on or after that date.
The FTC also increased the dollar thresholds under Section 8 of the Clayton Act, which prohibits any person from holding positions as an officer or director of competing corporations engaged in commerce if the corporations meet certain size thresholds. The new Section 8 thresholds will become effective on or about January 24, 2023 (the expected official publication date in the Federal Register).
HSR Thresholds Raised
As a result of this most recent indexing, the HSR Act now provides that transactions resulting in holdings valued in excess of US$445.5 million among parties engaged in commerce are subject to premerger notification regardless of the size of the parties. Transactions that result in holdings valued in excess of US$111.4 million, but not exceeding US$445.5 million, are reportable only if the acquiring and acquired “persons” meet the “size-of-person” test — meaning either the acquiring or acquired party (together with such party’s affiliates that are under common control for HSR purposes) must have annual net sales or total assets of US$222.7 million or more and the other party (together with such other party’s affiliates that are under common control for HSR purposes) must have annual net sales or total assets of US$22.3 million or more. Acquired “persons” not engaged in manufacturing must meet the US$22.3 million test on the basis of the value of their assets alone, if their annual net sales are less than US$222.7 million. (Of course, certain transactions meeting these size thresholds may nevertheless be exempt under the HSR Act.)
The maximum civil penalties for violations of the HSR Act are similarly indexed and have increased from US$46,517 per day to US$50,120 per day, effective as of January 11, 2023.
HSR Filing Fee Structure Updated
As discussed in a previous OnPoint, the structure for HSR filing fees has been recently overhauled through the passage of the Merger Filing Fee Modernization Act. The new filing fee tiers, which are also expected to go into effect on or about February 23, 2023 (30 days after the expected official publication date in the Federal Register), are as follows:
Revised Rules for Officer and Director Interlocks
Section 8 of the Clayton Act generally prohibits a person from serving simultaneously as a director or officer of two sizable competing corporations engaged in commerce, unless their “competitive sales” — the gross revenues for all products and services sold by one corporation in competition with the other — are minimal. As with the HSR Act, the dollar thresholds defining “sizable” and “minimal” are indexed to changes in the gross national product. As a result of the most recent indexing, the Section 8 prohibition on officer and director interlocks now applies only if each competing corporation has capital, surplus, and undivided profits aggregating more than US$45.257 million. The interlocking officer and director prohibition does not apply, however, if either corporation’s “competitive sales” are less than US$4.5257 million. Other “safe harbors” exist that are based on calculating the competitive sales as a percentage of the corporation’s total sales.
