On December 29, President Biden signed into law the Consolidated Appropriations Act, 2023 (CAA-23) — a $1.7 trillion omnibus spending package that includes notable changes to current antitrust laws and policies. This legislation significantly modifies the calculation of filing fees under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), and requires disclosure of foreign subsidies in HSR filings.
Merger Filing Fee Modernization Act
One portion of CAA-23, the Merger Filing Fee Modernization Act (the “MFFMA”), reduces HSR filing fees for small and medium sized transactions while significantly increasing filing fees for larger deals. Many HSR-reportable deals will be subject to higher fees under the new schedule. The MFFMA also requires yearly adjustment of filing fees according to the Consumer Price Index, making the fees subject to inflation. Under the existing regime, fees have been adjusted annually based on gross national product. The MFFMA does not establish an effective date for the new filing fee regime, but additional guidance from the Federal Trade Commission (FTC) Premerger Notification Office is expected shortly. Until such guidance is provided, the existing HSR filing fee regime remains in place.
The revised thresholds are as follows:
Foreign Merger Subsidy Disclosures
In addition to incorporation of the MFFMA, the foreign merger subsidy disclosure provisions in CAA-23 will require disclosures of foreign loans, grants, and other financial support or ownership relating to entities engaged in HSR-reportable transactions. The bill cites several findings to support this measure, including the 2020 US-China Economic and Security Review Commission Annual Report, which determined that foreign governments are increasingly subsidizing merger and acquisition activity as a means to “surpass and supplant” global market leaders. With the goal of enabling regulators to evaluate such subsidies, the FTC and US Department of Justice (DOJ) will now require filing parties to disclose any direct subsidies, grants, loans, or other relationships with “foreign entities of concern” as defined in US Export Administration Regulations. The extent of this disclosure requirement will be established by the FTC and DOJ, in consultation with the Committee on Foreign Investment in the United States (CFIUS) and other relevant agencies.
Like the MFFMA, the new foreign subsidies requirements for HSR filings do not contain a clear effective date, and will require further guidance from the FTC.
Outlook
- While the amendments to the HSR filing fee structure will benefit parties to smaller transactions, larger deals will soon see significant increases in filing fees. Parties undertaking such transactions should be prepared for renewed focus on allocation of filing fees in transaction agreements, which are generally the responsibility of the buyer, but may be allocated by the parties if desired.
- The addition of foreign subsidy disclosures to the HSR rules could present an additional administrative burden for filing parties, though the specific disclosures are yet to be finalized. It is also unclear how foreign subsidy disclosures in HSR filings would be evaluated by the FTC and DOJ, which have not historically focused on foreign support or ownership in their review of reportable transactions.
- Beyond this spending bill, we anticipate a continued focus on amending the nation’s antitrust laws in the coming year, as two other notable antitrust bills — the American Innovation and Choice Online Act and the Open App Markets Act — have been proposed in the Senate. Goodwin’s antitrust practice will continue to monitor future developments and the implications for mergers and acquisitions.
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