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Annual adjustments to the HSR filing thresholds take effect February 28, 2018

Effective February 28, 2018, the minimum dollar thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and its rules and regulations (the HSR Act) will increase. The thresholds determine, among other things, whether companies are required to notify federal antitrust authorities before consummating a transaction.

The HSR Act “size of transaction” threshold will increase from $80.8 million to $84.4 million. Transactions in which the acquiring party will hold voting securities, non-corporate interests, or assets valued above $84.4 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. For the acquisition of voting securities, if the threshold is satisfied, filing is required whether or not the acquirer ends up with a controlling interest.  The closing date of the transaction determines which threshold applies.

For transactions valued at more than $84.4 million but less than $337.6 million, the “size of parties” thresholds will also increase. Generally, the ultimate parent entity of one party to the transaction must have annual net sales or total assets of at least $168.8 million (up from $161.5 million) and the ultimate parent entity of the other party must have annual net sales or total assets of at least $16.9 million (up from $16.2 million). Transactions valued at $337.6 million (up from $323 million) or more must be reported regardless of the size of parties involved in the transaction, unless an exemption applies.

The Federal Trade Commission (FTC) is required by law to revise these jurisdictional HSR Act thresholds annually based upon the change in gross national product. The HSR Act requires companies of a certain size involved in a transaction that exceeds the filing thresholds to file a pre-merger notification with the FTC and Department of Justice and observe a waiting period unless an HSR Act exemption applies.

The applicable HSR Act filing fees will not increase, although the new thresholds described above apply: a $45,000 filing fee for transactions valued at $84.4 million up to $168.8 million; a $125,000 filing fee for transactions valued at $168.8 million up to $843.9 million; and a $280,000 filing fee for transactions valued at $843.9 million or more.

Finally, effective January 22, the FTC increased the maximum daily civil penalties for noncompliance with HSR requirements to up to $41,484 for each day of violation.

Category: Capital Markets, Mergers & Acquisitions, Private Equity, Shareholder Activism/Engagement