Client Alert

“Modernized” HSR Filing Fees and Increased Filing Thresholds

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Takeaways

  • For the first time in more than two decades, HSR filing fees and fee tiers will be adjusted. The filing fees will range from $30,000 to $2.25 million and apply to HSR notifications filed on or after February 27, 2023.
  • The minimum HSR “Size of Transaction” filing threshold will increase to $111.4 million (from $101 million) and applies to transactions closing on or after February 27, 2023.
  • The maximum daily civil penalty for an HSR Act violation (including failure to file) has increased to $50,120.
  • Talk to HSR counsel early in the deal process to assess potential filing requirements.

On January 23, 2023, the U.S. Federal Trade Commission (“FTC”) announced revised filing thresholds, as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), based on an increase in the U.S. gross national product. The FTC also announced that the recently passed amendments to the HSR Act, which adjust the HSR filing fee tiers and amounts, will take effect at the same time as the new filing thresholds. Going forward, the filing thresholds, as well as the filing fee tiers and amounts, will adjust annually.

The HSR Act and related regulations (“HSR Rules”) require that parties to certain transactions submit an HSR filing and, generally, wait 30 days (or more, if additional information is formally requested) before closing, giving the agency time to review the transaction for potential antitrust concerns. The HSR Act applies to a wide variety of transactions, including those outside the usual M&A context. Potentially reportable transactions include mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

New Filing Fee Structure and Amounts

After more than two decades, a new HSR filing fee scale will become effective on February 27, 2023. The new fee scale – a result of amendments to the HSR Act included in the 2023 Consolidated Appropriations Act (H.R. 2617) signed into law in late December 2022 – significantly increases the filing fee required for many transactions. The increase for larger transactions is notable, with a fee increase of nearly $2 million for transactions valued at $5 billion or more. The fee scale changes increase the filing fee for some, yet not all, transactions valued at less than $500 million.

The buyer is obligated to pay the filing fee for a reportable acquisition (although parties may agree to share the fee or shift responsibility to the seller). The specific fee due depends on the transaction value, which is based on the aggregate total value of voting securities, assets, and/or non-corporate interests that will be held as a result of the transaction, as calculated under the HSR Rules (the “Size of Transaction”).

The new fee scale is set forth below. The fee tiers and filing fee amounts will be adjusted annually.

New HSR Filing Fees
Size of Transaction Filing Fee
Less than $161.5 million $ 30,000
$161.5 million or more but less than $500 million $ 100,000
$500 million or more but less than $1 billion $ 250,000
$1 billion or more but less than $2 billion $ 400,000
$2 billion or more but less than $5 billion $ 800,000
$5 billion or more $ 2,250,000

 

The filing fee changes are expected to contribute to a meaningful increase in collected fees, supporting increased budgets for the federal antitrust agencies’ active enforcement efforts.

Increased HSR Filing Thresholds

A higher minimum HSR “Size of Transaction” threshold will apply to transactions closing on or after February 27, 2023. As a result of this adjustment, a transaction will be potentially reportable under the HSR Act only if it is valued in excess of $111.4 million (approximately $10 million higher than the 2022 threshold of $101 million).

Determining HSR reportability: Does the transaction meet the Size of Transaction test?

An HSR filing may be required when, as a result of the transaction, the acquiring person will hold an aggregate amount of voting securities, assets, and/or non-corporate interests valued in excess of the minimum HSR Size of Transaction threshold in place at the time of closing. Because the HSR value considers what is held as a result of the transaction, the total Size of Transaction will include not only the value of what will be acquired in the present transaction but also the value of certain voting securities, non-corporate interests, and assets previously acquired.

Contingent payments, earnouts, liabilities, debt paid off or assumed, and other forms of consideration also can impact the Size of Transaction.

Size of Transaction Test
2022 Threshold

Closing before February 27, 2023

 2023 Threshold

Closing on or after February 27, 2023
>$101 million >$111.4 million

 

Determining HSR reportability: Do the parties to the transaction meet the Size of Person test?

Certain transactions that satisfy the Size of Transaction threshold must also satisfy the “Size of Person” test to be HSR reportable. The relevant Size of Person thresholds also will increase for transactions closing on or after February 27, 2023 and are reflected in the general Size of Person test set out below. The Size of Person test applies differently in certain situations—for example, the formation of joint ventures and where an Acquired Person is not engaged in manufacturing.

Size of Person Test
Size of Transaction >$111.4 million, but ≤$445.5 million One party (or its Ultimate Parent Entity) has ≥$222.7 million in total assets or annual net sales, and
The other party (or its Ultimate Parent Entity) has ≥$22.3 million in total assets or annual net sales
Size of Transaction >$445.5 million Reportable regardless of the Size of Person test

 

Determining HSR reportability: Does an exemption apply?

The HSR Act and Rules set out a number of exemptions. Even where a transaction satisfies the Size of Transaction and Size of Person thresholds, the application of an exemption may render the transaction non-reportable or impact the Size of Transaction calculation.

Failure to File Penalty

Where required, the failure to file can carry a significant financial penalty for each day of non-compliance. The maximum civil penalty for HSR violations also adjusts annually. The adjusted maximum civil penalty as of January 11, 2023 is set out below.

Failure to File Penalty
Up to $50,120 per day in violation

 

Consult HSR counsel early in the deal process to determine whether your transaction is HSR-reportable, especially before concluding that a filing is not required.

If you have questions regarding HSR Act reporting requirements or the new filing fees or thresholds, please contact the authors listed above or your usual Orrick contact.

Largest Ever Annual Adjustment to the HSR Premerger Notification Thresholds Announced

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Takeaways

  • The new minimum HSR “Size of Transaction” threshold is increasing from $92 million to $101 million.
  • New thresholds apply to transactions closing on or after February 23, 2022.
  • This $9 million increase is the largest ever annual adjustment to the minimum HSR “Size of Transaction” threshold.
  • Failure to file may result in a fine of up to $46,517 per day of non-compliance.
  • The HSR Act casts a wide net, catching mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

The Federal Trade Commission announced revised Hart-Scott-Rodino (“HSR”) filing thresholds on January 24, 2022, as required by the HSR Act, based on the change in the US gross national product. The new minimum HSR “Size of Transaction” threshold is increasing to $101 million from the prior threshold of $92 million. The increase of $9 million, or 9.8%, is the largest annual adjustment to the minimum HSR filing threshold since the adjustments began in 2005. The new threshold will apply to transactions closing on or after February 23, 2022. The HSR Act and Rules require that parties to certain transactions submit an HSR filing and wait up to 30 days (or more, if additional information is formally requested) before closing, which gives the government time to review the transaction for potential antitrust concerns. The HSR Act applies to a wide variety of transactions, including those outside the usual M&A context. Potentially reportable transactions include mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

Determining HSR reportability: Does the transaction meet the Size of Transaction test?

An HSR filing may be required when, as a result of the transaction, the acquiring person will hold an aggregate amount of voting securities, non-corporate interests, and/or assets valued in excess of the HSR “Size of Transaction” threshold in place at the time of closing. Calculating the Size of Transaction may require aggregating voting securities, non-corporate interests, and assets previously acquired, with what will be acquired in the contemplated transaction. The Size of Transaction may also include contingent payments, earnouts, liabilities, and certain debt retired as consideration for the transaction. Talk to HSR counsel to determine your Size of Transaction.

Size of Transaction Test
2021 Threshold

Closing before February 23, 2022

 2022 Threshold

Closing on or after February 23, 2022
>$92 million >$101 million

 

If the transaction will close before February 23, 2022, the $92 million threshold still applies; closings on or after February 23, 2022 will be subject to the higher $101 million threshold.

Determining HSR reportability: Do the parties to the transaction meet the Size of Person test?

Certain transactions that satisfy the Size of Transaction threshold must also satisfy the “Size of Person” thresholds to be HSR-reportable. These adjusted thresholds are also effective for all closings on or after February 23, 2022. While the general Size of Person test is set out below, an alternative test may apply to transactions where the Acquired Person is not engaged in manufacturing. Talk to HSR counsel to determine which entity’s sales and assets must be evaluated and which test applies.

Size of Person Test
Size of Transaction >$101 million, but ≤$403.9 million One party (or its Ultimate Parent Entity) has ≥$202 million in total assets or annual net sales, and
The other party (or its Ultimate Parent Entity) has ≥$20.2 million in total assets or annual net sales
Size of Transaction >$403.9 million Reportable regardless of the Size of Person test

 

Filing Fee

For all HSR filings, one filing fee is required per acquisition. The amount of the filing fee is based on the Size of Transaction. Below are the adjusted fee ranges for 2022.

Size of Transaction Filing Fee
More than $101 million, but less than $202 million $45,000
$202 million or greater, but less than $1.0098 billion $125,000
$1.0098 billion or greater $280,000

 

Failure to File Penalty

Failing to submit an HSR filing can carry a significant financial penalty for each day of non-compliance. The maximum civil penalty for HSR violations also adjusts annually and the adjusted maximum civil penalty as of January 10, 2022 is set out below.

Failure to File Penalty
Up to $46,517 per day in violation

 

Always consult HSR counsel to determine whether your transaction is HSR-reportable, especially before concluding that a filing is not required. Even if the Size of Transaction and Size of Person tests are met, the transaction may be exempt from the filing requirements. If you have any questions regarding HSR Act reporting requirements or the new thresholds, please contact the authors listed above or your usual Orrick contact.

DECREASING HSR Premerger Notification Thresholds in 2021

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Takeaways

  • The new minimum HSR threshold is DECREASING from $94 million to $92 million.
  • New thresholds apply to any transaction closing on or after March 4, 2021.
  • Failure to file may result in a fine of up to $43,792 per day of non-compliance.
  • The HSR Act casts a wide net, catching mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

The Federal Trade Commission has announced new HSR thresholds for 2021, which are lower than the existing thresholds. The thresholds typically increase year-over-year, but are decreasing in 2021 from $94 million to $92 million, potentially requiring HSR premerger notification filings to the U.S. antitrust agencies for smaller transactions. The new threshold will begin to apply to transactions closing on March 4, 2021. The HSR Act and Rules require that parties to certain transactions submit an HSR filing and wait up to 30 days (or more, if additional information is formally requested) before closing, which gives the government time to review the transaction for potential antitrust concerns. The HSR Act applies to a wide variety of transactions, including those outside the usual M&A context. Potentially reportable transactions include mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

Determining reportability: Does the transaction meet the Size of Transaction test?

The potential need for an HSR filing requires determining whether the acquiring person will hold an aggregate amount of voting securities, non-corporate interests, and/or assets valued in excess of the HSR “Size of Transaction” threshold that is in place at the time of closing. Calculating the Size of Transaction may require aggregating voting securities, non-corporate interests, and assets previously acquired, with what will be acquired in the contemplated transaction. It may also include more than the purchase price, such as earnouts and liabilities. Talk to your HSR counsel to determine what must be included in determining your Size of Transaction.

If the transaction will close before March 4, 2021, the $94 million threshold still applies; closings as of March 4, 2021 will be subject to the lower $92 million threshold.

Determining reportability: Do the parties to the transaction have to meet the Size of Person test?

Transactions that satisfy the Size of Transaction threshold may also have to satisfy the “Size of Person” thresholds to be HSR-reportable. These new thresholds are also effective for all closings on or after March 4, 2021. Talk to your HSR counsel to determine which entity’s sales and assets must be evaluated.

Filing Fee

For all HSR filings, one filing fee is required per transaction. The amount of the filing fee is based on the Size of Transaction.

Failure to File Penalty

Failing to submit an HSR filing can carry a significant financial penalty for each day of non-compliance.

Always consult with HSR counsel to determine if your transaction is HSR-reportable, especially before concluding that a filing is not required. Even if the Size of Transaction and Size of Person tests are met, the transaction may be exempt from the filing requirements.

M&A HSR Premerger Notification Thresholds Increase in 2019

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Takeaways

  • The new minimum HSR threshold is $90 million and applies to transactions closing on or after April 3, 2019.
  • The current threshold of $84.4 million is in effect for all transactions that will close through April 2, 2019.
  • Failure to file may result in a fine of up to $42,530 per day of non-compliance.
  • The HSR Act casts a wide net, catching mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

The Federal Trade Commission has announced new HSR thresholds for 2019. The thresholds are adjusted annually, and were delayed this year by the government shutdown. Transactions closing on or after April 3, 2019 that are valued in excess of $90 million potentially require an HSR premerger notification filing to the U.S. antitrust agencies. The HSR Act and Rules require that parties to certain transactions submit an HSR filing and wait up to 30 days (or more, if additional information is formally requested) before closing, which gives the government time to review the transaction for potential antitrust concerns. The HSR Act applies to a wide variety of transactions, including those outside the usual M&A context. Potentially reportable transactions include mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

Determining reportability: Does the transaction meet the Size of Transaction test?

The potential need for an HSR filing requires determining whether the acquiring person will hold an aggregate amount of voting securities, non-corporate interests, and/or assets valued in excess of the HSR “Size of Transaction” threshold that is in place at the time of closing. Calculating the Size of Transaction may require aggregating voting securities, non-corporate interests, and assets previously acquired, with what will be acquired in the contemplated transaction. It may also include more than the purchase price, such as earnouts and liabilities. Talk to your HSR counsel to determine what must be included in determining your Size of Transaction.

If the transaction will close before April 3, 2019, the $84.4 million threshold still applies; closings as of April 3, 2019 will be subject to the new $90 million threshold.

Determining reportability: Do the parties to the transaction have to meet the Size of Person test?

Transactions that satisfy the Size of Transaction threshold may also have to satisfy the “Size of Person” thresholds to be HSR-reportable. These new thresholds are also effective for all closings on or after April 3, 2019. Talk to your HSR counsel to determine which entity’s sales and assets must be evaluated.

Filing Fee

For all HSR filings, one filing fee is required per transaction. The amount of the filing fee is based on the Size of Transaction.

Failure to File Penalty

Failing to submit an HSR filing can carry a significant financial penalty for each day of non-compliance.

Always consult with HSR counsel to determine if your transaction is HSR-reportable. Even if the Size of Transaction and Size of Person tests are met, the transaction may be exempt from the filing requirements.

European Crackdown on Violations of Merger Control Procedural Rules Continues

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Last year on this Blog we wrote about the uptick in enforcement action by European competition authorities against violations of merger control procedure (see here).

Yesterday, the UK Competition and Markets Authority (“CMA”) indicated that this trend is set to continue, issuing a fine of £100,000 for a breach of an Interim Order imposed on Electro Rent in its acquisition of Microlease. This is the first time the CMA has fined a company for such a procedural breach.

On the face of it, the fine seems harsh given that the relevant action – serving notice of termination of a lease without the CMA’s prior consent – was discussed with the appointed Monitoring Trustee prior to coming into effect.[1] Indeed, the European Court of Justice (“ECJ”) recently confirmed that parties may take certain actions without violating the standstill obligation imposed under the EU Merger Regulation – including terminating agreements – where such actions do not contribute to the implementation of a transaction.[2] In doing so, the ECJ’s ruling confirmed the commonly held view that merging parties are permitted to take certain steps allowing them to prepare for implementation of a transaction without violating merger control procedural rules.

Given the developing case law on standstill obligations, companies involved in M&A will need to revisit pre-completion protocols, noting that the EU approach seems to be diverging from the CMA’s somewhat more rigid approach to merger control. READ MORE →

Out of Sync? : DOJ’s Policy Reversal Towards SEPs Lacks Legal Support

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Jay Jurata and Emily Luken co-authored an article for Global Competition Review about the troubling policy shift by the DOJ’s Antitrust Division regarding the application of competition law to the assertion of standard-essential patents.

Please click here to read the full article.

Stock Compensation May Trigger HSR Filing

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The requirements of the Hart-Scott-Rodino (“HSR”) Act and Rules are well known to companies that engage in significant M&A transactions. But less well known is their applicability to acquisitions of stock by individuals as part of compensation practices. Especially where relatively young and successful companies are involved, HSR obligations may unexpectedly arise where equity compensation is given to founders, board members, executives, and other employees (whom we will group together and call “Insiders”). Companies and individuals potentially caught in the HSR process for this reason should ensure they are aware of the trigger rules, as a failure to file can result in significant fines.
READ MORE →

European Competition Authorities Crack Down on Violations of Merger Control Procedural Rules

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Is a wind of change blowing through the European merger control enforcement landscape?

The response is yes, certainly.

Very recent cases or investigations launched by the European Commission alleging potential violations of merger control procedural rules by notifying parties have sent a clear signal to companies: you’d now better think twice before breaking the merger control procedural rules.

It is even truer when one considers that this may well be a trend throughout Europe. These cases have echoed back to recent similar cases, pending or closed, at the member state level (the Altice case in France, the CEE Holding Group limited/ Olympic International Holdings Limited case in Hungary, the AB Kauno Grudai / AB Vievio Paukstynas case in Lithuania, and a very recent bakery case in Slovakia). READ MORE →

Antitrust Issues on Collection and Use of Big Data in Japan

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On June 6, 2017, a committee within Japan’s Fair Trade Commission published a report on competition policy and big data. The report is based on a concern that dominance of big data by certain major technology companies could impede competition and innovation, and addresses how Japan’s Antitrust Act (Act) could be applied in this context.

A main focus of the report is how certain cases of “collection of data” and “use of data” could trigger antitrust issues. READ MORE →

Quo Vadis FTC: What Does the Commission’s Complaint Against Endo Pharmaceuticals and Others Say About the Future of Post-Actavis Hatch-Waxman Litigation and Reverse Payment Settlements?

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This alert, the title of which is adapted from a March 30, 2016 FTC Staff Attorney blog post[1], considers the FTC’s first lawsuit challenging a so-called “no-AG” agreement.  No-AG agreements are components of Hatch-Waxman patent infringement litigation settlements in which the brand manufacturer agrees, expressly or through exclusive licenses, not to launch an “Authorized Generic” for a period of time after the generic manufacturer’s entry.  The FTC’s complaint attacks two such settlements that Endo Pharmaceuticals Inc. and the Japan-based patent holder for one of the relevant patents reached with generic manufacturers Watson Laboratories (and Watson’s current owner, Allergan plc) and Impax Laboratories, to settle Hatch-Waxman litigation involving Endo’s two most important products—the pain relievers Opana ER® and Lidoderm®.[2]  The FTC’s complaint, and its simultaneous settlement with the Japanese patent holder and its U.S. subsidiary (collectively, “Teikoku”), are less a window into the FTC’s thinking, which at this point is hardly unpredictable, than they are into its litigation strategy and what drug manufacturers need to consider regarding potential FTC and private actions as they continue to wrestle with the many issues that remain unresolved post-Actavis[3].

READ MORE →

1st Circ. Charts Conservative Post-Actavis Course In Loestrin

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Members of Orrick’s Life Sciences practice with experience addressing pharmaceutical industry antitrust and IP issues recently published an article analyzing the recent decision of the U.S. Court of Appeals for the Federal Circuit in In re Loestrin, No. 14-2071 (1st Cir. Feb. 22, 2016).  In that decision—only the second appellate decision applying the Supreme Court’s seminal 2013 decision in FTC v. Actavis , the First Circuit addresses a few of the antitrust issues surrounding so-called “reverse-payment” settlements of patent infringement litigation between branded and generic drug manufacturers.  To read the published article, please click here.