Changes to Filing Thresholds Under Hart-Scott-Rodino Premerger Notification Rules effective as of March 2, 2005
February 18, 2005
In keeping with amendments passed by the U.S. Congress in 2000, the first annual inflation adjustment to filing thresholds for pre-merger notifications under the Hart-Scott-Rodino Antitrust Improvements Act (HSR) will take effect on March 2, 2005. The HSR reporting obligations for all transactions completed after that date will be governed by these new thresholds.
As a result of these inflation adjustments, the filing thresholds will increase by 6.13 percent, reflecting the increase in gross national product for the fiscal year ending September 30, 2004. Most notably, the base filing threshold of $50 million, the metric that most frequently defines reportable transactions, will increase to $53.1 million. The changes also will affect other dollar-linked thresholds, including:
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The size-of-transaction test, which captures all transactions valued above $200 million, will be adjusted to $212.3 million.
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The size-of-person thresholds (applicable to transactions now valued at $212.3 million or less) will be adjusted upwards from $10 million to $10.7 million, and from $100 million, to $106.2 million.
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The threshold for the “foreign issuer”/“foreign asset” exemptions will be adjusted from $50 million to $53.1 million.
Congress amended the HSR Act in 2000 to increase the base filing threshold from $15 million to $50 million. The 2000 amendments also required the application of inflation index adjustments to various other HSR dollar-based thresholds, to commence this year. Following almost two decades of inflation, the previous $15 million base threshold required parties to file close to 5,000 pre-merger notifications annually from 1998 to 2000. In 2002, the first full year that the $50 million dollar threshold was in place, HSR notifications fell dramatically, to just short of 1,200. The annual increases in filing thresholds will prevent smaller transactions from becoming subject to the HSR reporting rules due solely to inflation. Assuming gross national product continues to rise annually by 6 percent, for example, the inflation-adjusted base filing threshold would surpass $70 million by 2010.
Pursuant to the amendments, the U.S. Federal Trade Commission approved the first annual adjustment of the filing thresholds on January 25, 2005. The new thresholds were published in the Federal Register on January 31, and will take effect 30 days later, on March 2, 2005. Each year the Commission will approve new adjustments to the filing thresholds, tied to the annual increase or decrease in gross national product as of September 30 in the previous year.
The adjustments will affect parties contemplating HSR filings in various ways, including:
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Parties may be relieved from the obligation to file notification for transactions that fall below the adjusted base threshold. For example, a transaction valued at $52 million, scheduled to close after March 2, 2005, would not be reportable.
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Parties may also realize a benefit in terms of lower notification filing fees for transactions that just cross current thresholds. While filing fees for the HSR-reportable transactions will remain divided into three levels, as of March 2, 2005, those levels will shift upward, in keeping with the inflation indexing adjustments.
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For transactions valued between $53.1 million and $106.2 million, parties will have to pay a $45,000 filing fee.
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For transactions valued between $106.2 million and $530.7 million, parties will have to pay a $125,000 filing fee.
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For transactions valued above $530.7 million, parties will have to pay a $280,000 filing fee.
The filing fees themselves are not subject to adjustment under the 2000 HSR amendments.
