The Federal Trade Commission (FTC) has now announced the adjusted Hart-Scott-Rodino (HSR) thresholds, filing fees and thresholds, and civil monetary penalties for the new year. The HSR Act requires parties to certain mergers, acquisitions, joint ventures, consolidations, and other transactions to file premerger notification and report forms with the FTC and the Antitrust Division of the U.S. Department of Justice and wait a specified time period (typically 30 days) before the transaction can close. The purpose of HSR reporting is to give the federal antitrust authorities time to review transactions for potential antitrust concerns before they close, and if necessary, sue to stop potentially anticompetitive deals before they happen. HSR filing requirements are triggered by jurisdictional thresholds known as size of person (SOP) and size of transaction (SOT).
With the notable exception of 2021’s decrease due to a decline in the gross national product, the HSR thresholds for SOP and SOT typically increase every year. 2024 continues the upward trend. In this post, we tell dealmakers what they need to know for 2024.
New Thresholds
For 2024, the new minimum SOT threshold is $119.5 million, increasing from the 2023 threshold of $111.4 million. The new minimum SOP threshold is $23.9 million, increasing from the 2023 threshold of $22.3 million. The new larger SOP threshold is $239 million, increasing from $222.7 million in 2023. This means that for example, if a seller either has assets or, if engaged in manufacturing, annual net sales greater than $23.9 million and proposes to sell its business for $120 million to a buyer with assets or annual net sales greater than $239 million, the parties may be required to file HSR and wait the required waiting period, unless the HSR Act or its rules exempt the transaction.
For transactions valued at $478 million and above, the SOP test does not apply. This is an increase from 2023’s threshold of $445.5 million. Regardless of the SOP, transactions valued at $478 million and above may be required to file HSR, unless an exemption applies.
The FTC announced the adjusted 2024 thresholds on January 22, 2024. The thresholds will go into effect 30 days after publication of a notice of the adjusted thresholds (along with the updated filing fees and thresholds) in the Federal Register. We expect that the notice will be published in the Federal Register this week and thus that the effective date will be at the end of February. We will update this post to include the effective date once the notice is published. It is important to note that the applicable SOP and SOT are the ones in effect at the time a deal closes, not at the time the deal is signed.
Dealmakers should also be aware that the adjustments to the thresholds impact the analysis of not only whether the SOT and SOP (if applicable) are met but also whether certain exemptions from HSR reporting requirements apply. For example, 16 C.F.R. § 802.50 provides the “foreign assets” exemption for “the acquisition of assets located outside the United States … unless the foreign assets the acquiring person would hold as a result of the acquisition generated sales in or into the U.S. exceeding $50 million (as adjusted) during the acquired person's most recent fiscal year.” Under the adjusted thresholds, whether the foreign assets exemption applies now depends upon whether the assets generated sales in or into the U.S. exceeding $119.5 million.
New Filing Fees
In accordance with the Merger Filing Fee Modernization Act, the FTC has also adjusted the HSR filing fees and thresholds for those fees. The FTC incrementally increased all but the lowest of the HSR filing fees. The new filing fees and their thresholds, which will also take effect 30 days after the publication of the notice in the Federal Register, are as follows:
Updated Civil Monetary Penalties for Failure to File HSR
The FTC previously announced the increased maximum daily civil penalty for violations of the HSR Act for 2024. The FTC adjusts the penalty annually for inflation. The maximum penalty increased this year from $50,120 to $51,744 per day, and the new maximum amount went into effect on January 10, 2024. This new maximum penalty will apply to civil penalties assessed after January 10, 2024, even if the violations occurred before that date.
Conclusion
HSR requirements are complex and require a thorough understanding of the Act, its regulations and their nuances.
