On February 1, 2021, the Federal Trade Commission (FTC) announced—for the first time since 2010—a decrease in the thresholds determining whether companies must notify federal antitrust authorities under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and its rules and regulations (HSR Act) before consummating a transaction. Under the HSR Act, companies of a certain size involved in a transaction exceeding reportability thresholds are required to file a pre-merger notification with the FTC and Department of Justice, and observe a waiting period unless an exemption applies.
The HSR Act requires the FTC to revise these jurisdictional thresholds annually based upon the change in U.S. gross national product. The FTC's announcement of lower revised thresholds under the HSR Act reflects a decrease in the gross national product for 2020 due to COVID-19.
The revised thresholds will apply to transactions closing on or after the effective date, which is likely to be March 4, 2021 (or 30 days after publication of the revised thresholds in the Federal Register). Note that for transactions closing before March 4, 2021, the current $94 million threshold is still in effect.
Decreased Thresholds for 2021
For 2021, the "size of transaction" threshold under the HSR Act will decrease from $94 million to $92 million (an approximate decrease of 2.1 percent). Transactions in which the acquiring party will hold voting securities, non-corporate interests, or assets valued at or above $92 million (as determined under the HSR Act's rules and regulations) may require a pre-merger notification if the "size of parties" test is also satisfied and no HSR Act exemptions are applicable.
The HSR "size of parties" thresholds will also decrease for 2021. The "size of parties" test generally requires that one party to the transaction have annual net sales or total assets of $184 million or more (down from $188 million in 2020), and that the other party have annual net sales or total assets of $18.4 million or more (down from $18.8 million).
For transactions valued at more than $92 million but less than $368 million, no HSR Act pre-merger notification will be required if the "ultimate parent entities" of one or both parties to the transaction do not satisfy these "size of parties" thresholds.
Transactions valued at $368 million or more (down from $376 million in 2020) will be subject to pre-merger notification requirements under the HSR Act without regard to any "size of parties" thresholds, unless an HSR Act exemption applies. Certain thresholds relevant to exemptions under the HSR Act will similarly decrease.
Applicable Transaction Filing Fees
While the new reportability thresholds do not impact the amount of the HSR Act filing fees, the applicable filing fee for a transaction will be based on the new and decreased thresholds and are as follows:
- a $45,000 filing fee for transactions valued at $92 million or more but less than $184 million;
- a $125,000 filing fee for transactions valued at $184 million or more but less than $919.9 million; and
- a $280,000 filing fee for transactions valued at $919.9 million or more.