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 19, 2017, the Federal Trade Commission announced increases in the reporting thresholds under HSR. Changes to the HSR reporting and exemption thresholds are made each year based on annual changes in the Gross National Product. The revised thresholds were published in the Federal Register on January 26, 2017 and will be effective on and after February 27, 2017.
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).
REVISED HSR REPORTING THRESHOLDS
Under the new thresholds:
- The basic HSR threshold applicable to most acquisitions is $80.8 million (up from $78.2 million).
- Transactionsvalued at or above $80.8 million but less than $323 million (up from $312.6 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 $161.5 million (up from $156.3 million), and the ultimate parent entity of the other party, together with all entities it controls, has sales or assets of at least $16.2 million (up from $15.6 million).
- Transactionsvalued at or above $323 million (up from $312.6 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. For example, exemptions are available for certain acquisitions of non-U.S. assets and voting securities.
HSR FILING FEES
Effective February 27, 2017, HSR filing fees will be as follows:
- $45,000 for transactions valued at more than $80.8 million but less than $161.5 million.
- $125,000 for transactions valued at or above $161.5 million but less than $807.5 million.
- $280,000 for transactions valued at or above $807.5 million.
PENALTY FOR FAILURE TO MAKE AN HSR FILING
Companies 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 which may be up to $40,654 per day for each day of noncompliance. These penalties increased substantially from up to $16,000 per day to up to $40,000 per day in a "catch-up" adjustment made by the FTC in June 2016 to address inflation since such penalties were first enacted. Beginning with the January 2017 increase, such penalties will also now be 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).
If you have questions about the new HSR thresholds or how to apply HSR to a specific transaction, please contact Miranda Miller, Dave Clement or Martin Brinkley or the Smith Anderson lawyer with whom you currently work.