Increase in HSR Reporting Thresholds Announced for 2022

The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) requires parties to transactions meeting certain size thresholds to make notification filings with the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice and to observe a waiting period before closing. On January 21, 2022, the Federal Trade Commission announced increases in the reporting thresholds under HSR. Adjustments to the HSR reporting and exemption thresholds are made each year based on annual changes in the Gross National Product. This year’s notification thresholds reflect a significant increase in contrast to last year’s unusual decrease in notification thresholds.

The revised thresholds will be effective on and after February 23, 2022, (30 days after publication in the Federal Register) and will apply to any transaction that will close on or after that date.

HSR applies to acquisitions of assets, voting securities and non-corporate interests (such as LLC membership interests) and also may apply to the formation of joint ventures, corporations and non-corporate entities (such as LLCs or limited partnerships). The Federal Trade Commission views certain grants of an exclusive license under intellectual property rights as an acquisition of assets that would be subject to the HSR filing requirements.

REVISED HSR REPORTING THRESHOLDS

Under the new thresholds:

• The basic HSR threshold applicable to most acquisitions is $101 million (up from $92 million).
• Transactions valued in excess of $101 million but not in excess of $403.9 million (up from $368 million) are reportable if the ultimate parent entity of one party to the transaction, together with all entities it controls, has sales or assets of at least $20.2 million (up from $18.4 million) and the ultimate parent entity of the other party, together with all entities it controls, has sales or assets of at least $202 million (up from $184 million). If the acquired person is not “engaged in manufacturing,” the threshold is not met unless that person has at least $20.2 million in total assets or $202 million in annual net sales.
• Transactions valued in excess of $403.9 million (up from $368 million) are reportable without regard to the size of the parties.

Even if a transaction is reportable based on these thresholds, it may qualify for an exemption from the HSR filing requirements. Certain dollar thresholds relevant to HSR exemptions, including the exemptions available for certain acquisitions of non-US assets and voting securities, will also increase effective February 23, 2022.

HSR FILING FEES

Effective February 23, 2022, HSR filing fees will be as follows:

• $45,000 for transactions valued in excess of $101 million but less than $202 million.
• $125,000 for transactions valued at or above $202 million but less than $1.0098 billion.
• $280,000 for transactions valued at or above $1.0098 billion.

PENALTY FOR FAILURE TO MAKE AN HSR FILING

Companies and individuals considering transactions should seek legal advice to determine if an HSR filing will be required. Complex rules govern transaction valuation and the availability of exemptions under HSR. Failure to make a required HSR filing before closing is a violation of federal law and can subject parties to civil penalties that may be up to $46,517 (up from $43,792) per day for each day of noncompliance (penalties are adjusted for inflation in January of each year). Penalties can also be imposed on parties who submit incomplete filings (even if the filing was timely made). The new penalty amounts went into effect on January 10, 2022.

If you have questions about the new HSR thresholds or how to apply HSR to a specific transaction, please contact Miranda Miller or the Smith Anderson lawyer with whom you currently work.