Tucked into the Consolidated Appropriations Act that President Biden signed in late December was the Merger Filing Fee Modernization Act of 2022 (Filing Fee Modernization Act). The Filing Fee Modernization Act makes significant changes to the filing fee structure and disclosure requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act), and provides state attorneys general with an additional tool when they bring cases under federal antitrust law.
HSR Filing Fee Changes
The Filing Fee Modernization Act restructures the filing fee thresholds for premerger notifications under the HSR Act by lowering fees for smaller transactions and introducing three new tiers of fees for transactions larger than $1 billion. The new fee structure is expected to generate substantial new revenue for antitrust enforcement (more than $1.4 billion in the first five years), but the pain will be felt mainly by parties to the very largest deals before the agencies.
Once the Filing Fee Modernization Act goes into effect, there will be six tiers of HSR filing fees, as opposed to three (as a frame of reference, current filing fees range from $45,000 to $280,000). The new tiers will be as follows:
These figures are subject to annual adjustment. For each fiscal year beginning after September 30, 2023, the filing fees will be increased by an amount equal to the percentage increase, if any, in the Consumer Price Index for that year over the level established for the year ended September 30, 2022. Annual adjustments must be published by the Federal Trade Commission (FTC) by January 31 each year. These adjustments to the filing fees are different than the annual changes to the filing fee thresholds that the FTC currently publishes each year.
HSR Reporting of “Subsidies” From “Foreign Entities of Concern”
The Filing Fee Modernization Act also introduces a requirement for parties filing premerger notifications under the HSR Act to disclose information concerning subsidies they receive from “foreign entities of concern,” (i.e., countries or entities that are strategic or economic threats to the United States). Foreign entities of concern include specially designated nationals (SDNs); foreign terrorist organizations as designated by the U.S. Secretary of State; entities owned or controlled by or subject to the jurisdiction of a “covered nation” (defined below); or that are alleged by the U.S. attorney general to have been involved in activities for which a conviction was obtained under, among other things, the Espionage Act, Arms Export Control Act, Export Control Reform Act of 2018 or International Emergency Economic Powers Act. “Covered nation” is defined as China, Iran, North Korea and Russia (10 U.S.C. § 2533c(d), as renumbered 10 U.S.C. § 4872(d)(2)).
The definition of “subsidies” is broad. Foreign subsidies can take the form of direct subsidies, grants, loans, loan guarantees, tax concessions, preferential government procurement policies or government ownership of control.
This requirement aligns with the Biden administration’s increased attention to foreign investment transactions, including the September 15, 2022, Executive Order on Ensuring Robust Consideration of Evolving National Security Risks by the Committee on Foreign Investment in the United States (CFIUS) (the EO). The EO outlined key factors CFIUS should consider when reviewing foreign investment transactions and called out potential national security risks that may arise from foreign investments involving “a country of special concern,” noting that, “what may otherwise appear to be an economic transaction undertaken for commercial purposes may actually present an unacceptable risk to United States national security due to the legal environment, intentions, or capabilities of the foreign person, including foreign governments, involved in the transaction.” While the subsidies reporting requirements of the Filing Fee Modernization Act relate only to transactions that are subject to HSR notification, the information provided will be an important addition to the tools provided by the EO.
Parties reporting foreign subsidies in any premerger notification should consult with legal counsel to determine whether a CFIUS filing may be required for the transaction as well.
Good News for State Attorneys General
Under the Filing Fee Modernization Act, states that bring suit under federal antitrust law acquire new power to control where such cases will be tried. In conformity with the treatment of certain federal suits, states will be able to avoid consolidation into multidistrict litigation in a different venue from where the state originally brought the suit.
Watch This Space
The effective date of the new requirements has not yet been announced. We expect that the FTC will provide additional guidance by summer 2023.
