Minimum HSR Reporting Threshold Reaches All-Time High of US$119.5 Million

On January 22, 2024, the U.S. Federal Trade Commission (“FTC”) announced that the dollar-based thresholds applicable to the Hart-Scott-Rodino (“HSR”) premerger notification program will be raised about 7.3 percent from the 2023 levels. As a result, the HSR minimum size-of-transaction threshold will be raised to US$119.5 million from US$111.4 million. Transactions valued below the new US$119.5 million threshold will not require an HSR filing.

The HSR changes will become effective on or about March 6, 2024 (30 days after the expected official publication date in the Federal Register). The new HSR thresholds will apply to transactions that close on or after that date.

The FTC also increased the dollar thresholds under Section 8 of the Clayton Act, which prohibits any person from holding positions as an officer or director of competing corporations engaged in commerce, if the corporations meet certain size thresholds. The new Section 8 thresholds went into effect on January 22, 2024 (the official publication date in the Federal Register).

HSR Thresholds Raised

As a result of this most recent indexing, the HSR Act now provides that transactions resulting in holdings valued in excess of US$478.0 million among parties engaged in commerce are subject to premerger notification regardless of the size of the parties. Transactions that result in holdings valued in excess of US$119.5 million, but not exceeding US$478.0 million, are reportable only if the acquiring and acquired “persons” meet the “size-of-person” test. The “size-of-person” test is satisfied when the acquiring or acquired party (together with such party’s affiliates that are under common control for HSR purposes) has annual net sales or total assets of US$239.0 million or more, and the other party (together with such other party’s affiliates that are under common control for HSR purposes) has annual net sales or total assets of US$23.9 million or more. Acquired “persons” not engaged in manufacturing must meet the US$23.9 million test on the basis of the value of their assets alone, if their annual net sales are less than US$239.0 million. (Of course, certain transactions meeting these size thresholds may nevertheless be exempt under the HSR Act.)

The maximum civil penalties for violations of the HSR Act are similarly indexed, and have increased from US$50,120 per day to US$51,744 per day, effective as of January 10, 2024.

HSR Filing Fee To Be Adjusted

Pursuant to the Merger Filing Fee Modernization Act enacted in late 2022, the following new HSR filing fees will go into effect on or about March 6, 2024 (30 days after the expected official publication date in the Federal Register):

Revised Rules for Officer and Director Interlocks

Section 8 of the Clayton Act generally prohibits a person from serving simultaneously as a director or officer of two sizable competing corporations engaged in commerce, unless their “competitive sales” — the gross revenues for all products and services sold by one corporation in competition with the other — are minimal. As with the HSR Act, the dollar thresholds defining “sizable” and “minimal” are indexed to changes in the gross national product. As a result of the most recent indexing, the Section 8 prohibition on officer and director interlocks now applies only if each competing corporation has capital, surplus, and undivided profits aggregating more than US$48.559 million. The interlocking officer and director prohibition does not apply, however, if either corporation’s “competitive sales” are less than US$4.8559 million. Other “safe harbors” exist that are based on calculating the competitive sales as a percentage of the corporation’s total sales.

Other HSR Rule Changes Expected in 2024

As discussed in a previous OnPoint, pursuant to a Notice of Proposed Rulemaking, the FTC is planning to implement sweeping changes to the disclosures required to be made in HSR filings. The public comment period for the rulemaking closed on September 27, 2023. It is expected that the FTC will announce the final rule in the near future, with the changes taking effect a short time thereafter.

The press releases announcing the aforementioned changes may be accessed by clicking on the links below.

FTC Publishes Inflation-Adjusted Civil Penalty Amounts for 2024

FTC Announces 2024 Jurisdictional Threshold Updates for Interlocking Directorates

FTC Announces 2024 Update of Size of Transaction Thresholds for Premerger Notification Filings

Revised as of February 2, 2024