On January 24, 2022, the Federal Trade Commission (FTC) announced it would raise 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.
The HSR Act requires the FTC to revise the filing thresholds annually based on the change in gross domestic product. The HSR Act further requires companies of a certain size involved in a transaction exceeding reportability thresholds to file a pre-merger notification with the FTC and Department of Justice (DOJ) and observe a 30-day waiting period unless an exemption applies.
2022 Threshold Increases
In 2021, the FTC decreased the HSR filing thresholds due to the economic recession caused by the COVID-19 pandemic. In 2022, the FTC will increase the size-of-transaction threshold by 9.8 percent from $92 million to $101 million. The new threshold applies to all transactions closing on or after February 23, 2022; the $92 million threshold remains in effect for any transaction closing before that date.
The revised $101 million "size of transaction" threshold applies to transactions in which the acquiring party will hold voting securities, non-corporate interests, or assets valued at or above $101 million (as measured using the HSR Act's rules and regulations). Such transactions 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" threshold generally requires that one party to the transaction have annual net sales or total assets of $202 million or more (up from $184 million in 2021), and that the other party have annual net sales or total assets of $20.2 million (up from $18.4 million).
For transactions valued at more than $101 million but $403.9 million or less, no pre-merger notification is required if the "ultimate parent entities" of one or both parties to the transaction do not satisfy the "size of parties" threshold. Transactions valued at more than $403.9 million (up from $368 million) will be subject to pre-merger notification requirements regardless of the size of the parties, unless an HSR Act exemption applies.
No Change in Filing Fees
The filing fees owed under the HSR Act will not change, though they will be subject to the new thresholds:
|Greater than $101 million but less than $202 million
|$202 million or greater but less than $1.0098 billion
|$1.0098 billion or greater||$280,000|
The maximum daily civil penalty for violating the HSR Act will increase from $43,792 to $46,517.
FTC Commissioner Slaughter and Chair Khan also expressed their support for legislation to increase HSR filing fees for large transactions and to extend the 30-day window to determine whether transactions require additional scrutiny.
New Year, New Enforcement Strategies: Regulators to Revise Merger Enforcement Guidelines and Increase Use of Injunctions to Block Mergers
In recent months, the FTC and DOJ have signaled a more aggressive enforcement strategy. In a speech to the New York State Bar Association on January 24, 2022, Assistant Attorney General Jonathan Kanter stated that the DOJ should seek an injunction to block a merger that it finds is likely to decrease competition "in most cases" instead of negotiating directly with the parties.
Kanter's comments dovetailed with the DOJ and FTC's joint press conference on January 18, 2022, to announce that they would solicit public comment on modernizing the Merger Guidelines through a Request for Information. The comment period for the RFI closes on March 21, 2022. Following the public comment period, the agencies are expected to propose Guidelines revisions in the coming months.
Supreme Court to Hear Constitutional Challenge to FTC's Structure
The U.S. Supreme Court agreed to hear argument in Axon Enterprise, Inc. v. FTC, a case concerning whether federal courts have jurisdiction to hear constitutional challenges against the FTC's structure and procedures before a petitioner exhausts their claims before the agency in administrative proceedings. A ruling against the FTC could make it easier and faster for regulated entities to challenge FTC enforcement actions in federal court.
The FTC has not fared well in recent cases before the high court. In last year's landmark antitrust enforcement ruling, AMG Capital Management, LLC v. FTC, the Court held that Section 13(b) of the Federal Trade Commission Act did not authorize the FTC to obtain equitable monetary relief, ending the agency's 50-year practice of obtaining larger awards through restitution or disgorgement than would be available through statutory penalties alone.
Oral argument in Axon is set for the October 2022 Term. The Court is expected to issue an opinion in late spring or early summer 2023.