Hart-Scott-Rodino annual adjustments announced for 2022; significant increase brings minimum threshold over US$100 million

Dechert LLP

Dechert LLP

Key Takeaways

  • Following a pandemic-induced decline in 2021, higher dollar thresholds in 2022 reflect renewed growth in economic activity during the past year.
  • Annual adjustments to dollar-based HSR reporting thresholds expected to go into effect on or about February 23, 2022.
  • Similar upward adjustments to thresholds for director interlocks and maximum civil penalties for HSR violations already in effect.
HSR Act or Rule Provision 2022 Indexed Value
US$50 million size-of-transaction test US$101.0 million
US$200 million size-of-transaction test US$403.9 million
US$100 million size-of-person test US$202.0 million
US$10 million size-of-person test US$20.2 million
US$50 million notification threshold US$101.0 million
US$100 million notification threshold US$202.0 million
US$500 million notification threshold US$1,009.8 million
25% of voting securities valued atUS$1 billion notification threshold US$2,019.6 million
US$110 million foreign exemption threshold US$222.2 million
Filing fees US$45,000 for transactions valued at greater than US$101.0 million but less than US$202.0 million
  US$125,000 for transactions valued at US$202.0 million or greater but less than US$1,009.8 million
  US$280,000 for transactions valued at or in excess of US$1,009.8 million

On January 21, 2022, 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 9.7% percent from the 2021 levels. As a result, the HSR minimum size-of-transaction threshold will be raised to US$101.0 million from US$92.0 million. Transactions valued below the new US$101.0 million threshold will not require an HSR filing. The dollar thresholds that determine the applicable filing fee will also be revised accordingly.

The HSR changes will become effective on or about February 23, 2022 (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 recently 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, 2022 (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$403.9 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$101.0 million, but not exceeding US$403.9 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 other party's affiliates that are under common control for HSR purposes) must have annual net sales or total assets of US$202.0 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$20.2 million or more. Acquired "persons" not engaged in manufacturing must meet the US$20.2 million test on the basis of the value of their assets alone, if their annual net sales are less than US$202.0 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$43,792 per day to US$46,517 per day, effective as of January 10, 2022.

The HSR premerger notification program applies to large transactions involving large parties engaged in commerce. Dollar thresholds defining “large” were increased in 2000 from US$15 million to US$50 million and, since 2005, have been indexed to reflect changes in the gross national product (GNP). The following graph illustrates the changes in the HSR minimum size-of-transaction thresholds, as compared to changes in the GNP since 1978, when regulations implementing the HSR Act first went into effect. If the US$15 million minimum size-of-transaction threshold in 1978 had been indexed to changes in the GNP, it would be at approximately US$157 million rather than US$101.0 million.


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$41,034,000 million. The interlocking officer and director prohibition does not apply, however, if either corporation’s “competitive sales” are less than US$4,103,400 million. Other “safe harbors” exist that are based on calculating the competitive sales as a percentage of the corporation’s total sales.

Provision under Section 8 of the Clayton Act 2022 Indexed Value
Capital, surplus and undivided profits aggregating more than US$10,000,000, under Section 8(a)(1) US$41,034,000
Competitive sales of either corporation are less than US$1,000,000 under Section 8(a)(2)(A) US$4,103,400

The Federal Register notices announcing the aforementioned changes may be accessed by clicking on the links below.

Revised Jurisdictional Thresholds for Section 7A of the Clayton Act

Revised Jurisdictional Thresholds for Section 8 of the Clayton Act

Adjustments to Civil Penalty Amounts

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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