On Jan. 23, 2023, the Federal Trade Commission announced the 2023 adjusted thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”). The HSR Act notification requirements apply to transactions that satisfy the specified “size of transaction” and “size of person” dollar thresholds. These thresholds, however, change from year to year. The HSR Act requires an annual threshold adjustment based on changes in the U.S. gross national product for each fiscal year. The newly announced 2023 thresholds are expected to become effective 30 days following publication in the Federal Register and will be applicable to all transactions that close on or after such effective date until recalculated in early 2024.
The key HSR Act threshold adjustments are summarized in the following chart:
The “size of transaction” threshold is determined based on the value of voting securities, non-corporate interests and/or assets held as a result of the transaction. Under the new 2023 thresholds, there will be no HSR Act notification requirements for transactions valued at less than $111.4 million.
For deals with an acquisition price of $111.4 million or more but less than $403.9 million, the parties will need to consider the “size of person” test. Under the “size of person” test, for a deal in this range there must a larger party and a smaller party for the test to be satisfied. As adjusted for 2023, the larger party must have total assets or annual net sales of $222.7 million or more, and the smaller party must have (i) total assets or annual net sales of $22.3 million or more (if it is a manufacturer) or, alternatively, (ii) total assets of $22.3 million or annual net sales of $222.7 million (if it is not engaged in manufacturing).
If the ultimate parent entities of one or both parties to the transaction in this size range ($111.4 million but less than $403.9 million) do not satisfy the applicable “size of person” thresholds, no HSR Act notification is required. Conversely, transactions valued at more than $445.5 million (increased from $403.9 million in 2022) will be reportable in 2023 regardless of the size of the parties, unless an HSR Act exemption applies.
The most significant change being implemented this year is the shift from three levels of filing fees ($45,000, $125,000 and $280,000) to the six levels of filing fees set forth below, with significant percentage increases for transactions with acquisition prices in excess of $500 million.
Beginning in fiscal year 2024, the filing fees will be increased annually if the percentage increase in the consumer price index (“CPI”) for the prior year as compared to the CPI for the fiscal year ended on Sept. 30, 2022, is greater than 1%, with such fees being rounded to the nearest $5,000.
Penalties for violating the HSR Act remain significant, with the maximum civil penalty for HSR Act violations being $46,517 per day.
Finally, there has been increasing enforcement under Section 8 of the Clayton Act recently, which generally prohibits “interlocking directorates” between competing corporations.
As always, the value of a transaction is subject to certain exceptions and calculation adjustments that can affect either the obligation to make a notification filing or the amount of the filing fee required with the filing.
