HSR Thresholds Revised (and Lowered) and Early Terminations Suspended Pending Review

Manatt, Phelps & Phillips, LLP

Manatt, Phelps & Phillips, LLP

Revised February 9, 2021

On February 1, 2021, the Federal Trade Commission (FTC) announced revised notification thresholds for determining whether companies or other entities are required to provide notice to the federal antitrust agencies about a proposed transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act). If a proposed merger; acquisition of stock, assets or unincorporated interests; joint venture; exclusive licensing arrangement; or other type of business transaction meets certain thresholds, the parties must notify the FTC and the Department of Justice (DOJ) and observe a waiting period (usually 30 days) before consummating the transaction. The FTC is required by statute to revise all the HSR Act notification thresholds annually, based on changes in the gross national product, and these revisions specifically affect two of the HSR Act’s three jurisdictional tests—the “size-of-person” and the “size-of-transaction” tests. (The third jurisdictional test—the “commerce test”—is satisfied in virtually all cases where one of the parties to the transaction operates in U.S. commerce.)

The Size-of-Transaction Test

The new minimum notification filing threshold for purposes of the “size-of-transaction” test will be $92 million, a decrease from the current $94 million threshold, likely because of the economic effects of the pandemic. Indeed, all the revised thresholds have been reduced for the first time since 2010, as shown in the chart below.

Original Threshold 2020-2021 Threshold 2021-2022 Threshold
$50 million $94 million $92 million
$100 million $188 million $184 million
$500 million $940.1 million $919.9 million

These revised thresholds will affect the size-of-transaction jurisdictional requirements and certain exemptions under the HSR Act, as well as the HSR Act’s filing fee schedule. Thus, for example, a transaction valued below the revised minimum notification threshold of $92 million will generally never need to be reported, but any deal over that amount likely will need to be reported, absent an applicable exemption.

The new HSR Act notification thresholds were published in the Federal Register on February 2, 2021, and will become effective 30 days thereafter.

The Size-of-Person Test

The size-of-person jurisdictional test, as shown in the chart below, generally requires the acquired or acquiring person to have had most recent year annual net sales or total assets of at least $184 million and the other party to the transaction to have had at least $18.4 million in such sales or assets. An acquired person not “engaged in manufacturing” will satisfy the size-of-person test only if it has had in its most recent year $18.4 million in total assets or $184 million in annual net sales.

Original Threshold 2020-2021 Threshold 2021-2022 Threshold
$10 million $18.8 million $18.4 million
$100 million $188 million $184 million
$200 million $376 million $368 million

Significantly, the size-of-person test will not apply to a transaction valued above $368 million.

Filing Fees

While notification thresholds have been reduced, the filing fees tied to those thresholds have not changed and will be as follows:

  • $45,000 for transactions valued at $92 million or more, but less than $184 million
  • $125,000 for transactions valued at $184 million or more, but less than $919.9 million
  • $280,000 for transactions valued at $919.9 million or more

Early Terminations Suspended

In other HSR Act news, the FTC and DOJ announced on February 4, 2021, that early terminations of the HSR Act’s waiting period will no longer be granted for the foreseeable future, while enforcement management at the FTC and DOJ review the process, rationales and protocols for such grants, a review process that the agencies thought would be brief. Early terminations of the HSR Act’s usual 30-day waiting period were commonly granted in the past by the FTC in the ordinary course—sometimes in as little as a week or ten days after filings were made—when requested to do so by one or both parties to a transaction that presented few, if any, competitive concerns or issues. Clients and deal counsel calculating timelines and expected dates of closing will now have to factor in the full HSR Act waiting period for all transactions that require notification.

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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Manatt, Phelps & Phillips, LLP

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