The U.S. antitrust agencies—the Federal Trade Commission (FTC) and Department of Justice Antitrust Division (DOJ)— have made two important announcements for dealmakers. These include:
- Setting the 2022 filing thresholds under the Hart-Scott-Rodino Act (HSR Act)
- Requesting comments to both the Vertical Merger Guidelines and Horizontal Merger Guidelines
2022 HSR filing thresholds
The HSR Act requires that parties to certain mergers, acquisitions and other transactions notify the FTC and DOJ of the deal and then wait a specified period before closing (usually 30 days) so that the agencies can evaluate whether the transaction may substantially lessen competition. On January 24, 2022, the FTC, the agency tasked with administering pre-merger notification requirements under the HSR Act, announced increased notification thresholds for 2022. The FTC is required by law to revise the jurisdictional thresholds annually, based on the change in gross national product. A recovering U.S. economy has led to a relatively large increase of the thresholds from 2021 to 2022. These new monetary thresholds for will take effect on February 24, 2022.
Transactions resulting in aggregate holdings of voting securities, non-corporate interests or assets exceeding the size-of-transaction and size-of-person thresholds set forth below may be reportable to the U.S. antitrust authorities, unless otherwise exempt.
| |
2021 Threshold |
New 2022 Threshold |
| Size-of-transaction threshold where size-of-person thresholds met |
$92 million |
$101 million |
| Size-of-transaction where size-of-person thresholds not required |
$368 million |
$403.9 million |
| Size-of-person thresholds |
$18.4 million
$184 million |
$20.2 million
$202 million |
The HSR Act filing fees have not changed. The applicable fees will be based on the new thresholds, as follows:Transactions valued at more than $101 million but $403.9 million or less must also meet the “size of person” test. Transactions valued at more than $403.9 million will be reportable regardless of the size of person, unless an exemption applies. The size of person test will be satisfied where the ultimate parent entity (UPE) of one party to the transaction has total assets or annual net sales of $202 million or more and the UPE of the other party has total assets or annual net sales of $20.2 million or more.
| Transaction Value |
Filing Fee |
| $101 million and higher but less than $202 million |
$45,000 |
| $202 million and higher but less than $1.0098 billion |
$125,000 |
| $1.0098 billion and higher |
$280,000
|
Noncompliance with the HSR Act can result in significant penalties. Any person, including any officer, director or principal thereof who fails to comply with any provision of the HSR Act may be subject to a civil penalty of up to $46,517 for each day in violation.
Request for comments to the merger guidelines
On January 18, 2022, the FTC and DOJ held a joint press conference announcing a request for public comment on changes to both the 2010 Horizontal Merger Guidelines and the 2020 Vertical Merger Guidelines. These guidelines, which were published jointly by the two agencies, provide guidance to parties on how the agencies approach review of horizontal and vertical mergers. Notably, the FTC, chaired by newly appointed Commissioner Lina Khan, already withdrew the FTC’s approval of the 2020 Vertical Merger Guidelines last year, and both agencies have made statements regarding the need for changes to the Vertical and Horizontal Merger Guidelines.
The agencies are seeking comments on topics such as defining markets for free products, deal effects on labor markets, and acquisitions of potential or nascent competitors. Commissioner Khan also discussed the effects of the current merger guidelines on private equity firms and believes that such firms may have avoided scrutiny through fund structuring and add-on acquisitions of nascent competitors that fell below the reporting thresholds. The agencies intend “to ensure that [their] merger guidelines accurately reflect modern market realities and equip [them] to forcefully enforce the laws against unlawful deals.”
The agencies are accepting comments through March 21, 2022. The agencies will then publish proposed guidelines and allow for more public input. The agencies currently are aiming to have both guidelines revised by the end of 2022.
For more information on the HSR Act or to learn how Godfrey & Kahn can help, contact a member of our Antitrust Practice Group.