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Senate Passes Bill to Substantially Increase HSR Merger Filing Fees for Deals Greater Than $5 Billion

On June 6, 2021, the US Senate passed the Merger Filing Fee Modernization Act of 2021. The bill is co-sponsored by Senator Amy Klobuchar (D-MN), the Chairwoman of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights; and Senator Chuck Grassley (R-IA).

The bill amends the premerger notification provisions of 15 U.S.C. § 18a and substantially increases the Hart-Scott-Rodino Act (HSR) filing fees for large mergers, while also effectuating a slight decrease in HSR filing fees for smaller mergers. The text of the bill can be found here.

The adjusted HSR filing fees are as follows:

The proposed HSR filing fees are subject to annual increases based on the Consumer Price Index (CPI), unless the CPI increase is less than 1%. Any changes must be published by the Federal Trade Commission (FTC) each year (no later than January 31). The HSR filing fee thresholds themselves will remain correlated to Gross National Product (GNP).

The competition agencies also stand to directly gain from the passage of this bill. Section 3 of the bill authorizes the appropriation of increased funds for both the Department of Justice Antitrust Division (DOJ) and the FTC. The bill appropriates $252 million to the DOJ and $418 million to the FTC, substantially increasing the resources at the disposal of the regulatory agencies and even exceeding the FTC’s requested budget for FY 2022.

The bill is still subject to approval in the House of Representatives and by President Biden. But given the bipartisan support for this bill, its passage appears likely, and it raises the potential for additional bipartisan antitrust legislation in the future.




Proposed Bill to Substantially Increase HSR Merger Filing Fees for Deals Greater Than $5 Billion Advances Out of Committee

On Thursday, May 13, the US Senate Judiciary Committee voice-vote approved and advanced Senator Amy Klobuchar’s (D-MN) Merger Filing Fee Modernization Act of 2021. This bill seeks to increase HSR filing fees required for mergers and acquisitions, altering fees for all transactions, and substantially increasing HSR filing fees for deals greater than $5 billion to $2.25 million. HSR filing fees have not been updated since 2001.

The proposed bill would further increase the fees each year in accordance with the Consumer Price Index. In an effort to gain bipartisan support, the bill would decrease filing fees for smaller transactions, while increasing fees significantly for all deals over $500 million. Below are tables showing the proposed HSR filing fees versus the current HSR filing fees based on transaction size.

Although no changes are imminent, the advancement of this bill indicates politicians’ continued focus on increasing the burden on mid-size and larger companies seeking to merge, while slightly reducing fees for smaller transactions.Senator Klobuchar has argued that the substantial increase in fees for larger deals is needed because of the government cost required to investigate larger deals. Further, she said she believes the affected parties, such as major technology companies, could easily handle the cost because it is a small expense compared to the amount these companies often spend on legal and professional support in effectuating the deals.




Enforcement Agencies Announce Moratorium on Early Termination Program for Merger Reviews

The US Federal Trade Commission (FTC) released a joint statement with the Department of Justice (DOJ) on February 4, 2021, signaling comprehensive changes to the merger review process. In a significant development, the agencies declared a moratorium on the early termination program for merger reviews. This policy shift signals a potential sea change in antitrust enforcement under the Biden administration.

The Hart-Scott-Rodino (HSR) Premerger Notification program imposes an initial 30-day waiting period, prior to merger consummation, during which the enforcement agencies have an opportunity to evaluate the likely effects of the proposed merger and decide whether to investigate further by issuing a Second Request or ending the HSR review by letting the initial 30-day waiting period expire.

A third potential outcome of the initial 30-day waiting period is early termination. The early termination program under the HSR Act was originally established as an exception to an HSR review if the relevant parties demonstrated a “special business reason.” This policy was reversed after Heublein v. FTC (1982) and since that time early termination of the initial 30-day waiting period has become commonplace if the merger does not merit further review (in 2019 early termination was requested in 74.2% of transactions and granted in 73.5% of those instances). Further review would be merited, if the enforcement agencies determined the transaction posed a risk of a substantial lessening of competition under the Clayton Act.

Pursuant to the moratorium on early terminations, merging parties must now refrain from consummating any proposed transaction for the full initial 30-day waiting period—early termination is not a potential outcome.

The joint statement regarding the early termination moratorium provided the following justifications:

  • The early termination review was precipitated because of the transition to a new presidential administration as well as an “unprecedented volume” of HSR filings;
  • The above factors warrant the use of the full 30-day window to allow the agencies to do “right by competition and consumers;”
  • The suspension of the early termination program “will be brief.”

Past pauses in early terminations coincided with extraordinary circumstances such as the move to an e-filing system at the Premerger Notification Office (PNO) at the outset of the COVID-19 pandemic (paused from March 13, 2020, until March 30, 2020) or during periods of government shutdown. However, this current pause appears likely to endure longer than these past instances, given that this pause is driven by the confluence of a number of factors, beyond what was indicated in the joint statement, such as:

  • A longstanding agency funding drought resulting in understaffing
  • Transitioning to a new presidential administration
  • A desire to engage in more expansive investigations under the new Biden administration
  • A large influx in HSR filings in recent months (on pace for a 60% increase in 2021)

From the agencies’ point of view, these changes are necessary to meet their mandate of preventing unfair competition and anticompetitive practices. With agency resources stretched thin due to budget constraints, in addition to an increased [...]

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COVID-19’s Impact on HSR Filing Timelines (UPDATED)

With COVID-19-related closures rolling in daily, you may have questions about the operating status of the federal government’s antitrust enforcement agencies. Currently, the HSR review process does not seem to be significantly impacted,  although the agencies will not grant a request for early termination during this period (as noted in our recent update, the FTC will again process early termination requests as of March 30, though on a more limited basis and later in the process than historically provided). Unlike the government shutdowns in 2013 and 2018, all FTC and DOJ staff are working full time. In addition, the agencies have implemented a mandatory e-filing system for all HSRs.

Given that the agencies will continue to work full-time and that an e-filing system is in place, we think it is unlikely that there will be significant impact on timing for the vast majority of transactions, particularly where there is no competitive overlap between the transacting companies.

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Notification Threshold Under the Hart-Scott-Rodino Act Increased to $94 Million

The US Federal Trade Commission today announced increased thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and for determining whether parties trigger the prohibition against interlocking directors under Section 8 of the Clayton Act.

Notification Threshold Adjustments

The US Federal Trade Commission (FTC) announced revised thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) pre-merger notifications on January 28, 2020. These increased thresholds will become effective on February 27, 2020. These new thresholds apply to any transaction that closes on or after the effective date.

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The Latest: Changes Coming to Revenue Reporting for HSR Filings

What Happened:

  • The Federal Trade Commission (FTC), along with the Antitrust Division of the Department of Justice (DOJ), approved amendments to the Hart-Scott-Rodino (HSR) Rules and the instructions for completing the HSR Form.
  • After the amendments take effect on September 25, 2019, HSR filers will be required to use new 10-digit North American Product Classification System (NAPCS) codes in place of the current 10-digit North American Industry Classification System (NAICS) codes when reporting revenues in the HSR Form. The Form will continue to use 6-digit NAICS codes, but will switch from the 2012 codes to the latest version, released in 2017 by the Census Bureau.
  • Data on non-manufacturing revenue will be required to be reported using the updated 6-digit NAICS codes, while data on manufacturing revenue will be required to be reported using both the 6-digit NAICS industry code and the 10-digit NAPCS product codes.
  • The FTC intends to update the instructions for the HSR Form to reflect the changes made to the revenue reporting requirements.

What this Means:

  • Companies expecting to file an HSR after September 25 will need to familiarize themselves with the new 10-digit NAPCS codes and the updated 6-digit 2017 NAICS codes, and may want to update their databases to be in a position to file promptly when the new codes take effect on September 25.



Notification Threshold Under the Hart-Scott-Rodino Act Increased to $90 Million

The US Federal Trade Commission recently announced increased thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and for determining whether parties trigger the prohibition against interlocking directors under Section 8 of the Clayton Act.

Notification Threshold Adjustments

The US Federal Trade Commission (FTC) announced revised thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) pre-merger notifications on February 15, 2019. These increased thresholds will become effective mid-to-late March. These new thresholds apply to any transaction that closes on or after the effective date.

  • The base filing threshold, which frequently determines whether a transaction requires filing of an HSR notification, will increase to $90 million.
  • The alternative statutory size-of-transaction test, which captures all transactions valued above a certain size (even if the “size-of-person” threshold is not met), will be adjusted to $359.9 million.
  • The statutory size-of-person thresholds will increase slightly to $18 million and $180 million.

The adjustments will affect parties contemplating HSR notifications in various ways. Transactions that meet the current “size-of-transaction” threshold, but will not meet the adjusted $90 million threshold, will only need to be filed if they will close before the new thresholds take effect mid-to-late March.

Parties may also realize a benefit of lower notification filing fees for certain transactions. Under the rules, the acquiring person must pay a filing fee, although the parties may allocate that fee amongst themselves. Filing fees for HSR-reportable transactions will remain unchanged; however, the size of transactions subject to the filing fee tiers will shift upward as a result of the gross national product (GNP)-indexing adjustments:

Filing Fee Size-of-Transaction $45,000 $90 million, but less than $180 million $125,000 $180 million, but less than $899.8 million $280,000 $899.8 million or more Interlocking Directorate Thresholds Adjustment

The FTC also announced revised thresholds for interlocking directorates. The FTC revises these thresholds annually based on the change in the level of GNP. Section 8 of the Clayton Act prohibits a person from serving as a director or officer of two competing corporations if certain thresholds are met. Pursuant to the recently revised thresholds, Section 8 of the Clayton Act applies to corporations with more than $36,564,000 in capital, surplus and undivided profits, but it does not apply where either interlocked corporation has less than $3,656,400 in competitive sales. These new thresholds are effective immediately upon publication in the Federal Register, expected within the week.




DOJ Announces Procedural Reforms Seeking to Resolve Merger Investigations within 6 Months of Filing

Today, Assistant Attorney General Makan Delrahim announced a series of reforms with the express goal to resolve most merger investigations within six months of filing. The reforms seek to place the burden of faster reviews not only on the Antitrust Division of the Department of Justice (DOJ), but also on the merging parties.

The DOJ will require fewer custodians, take fewer depositions, and commit to shorter time-periods in exchange for merging parties providing detailed information to the DOJ early in the investigation in some cases before a Hart-Scott-Rodino (HSR) filing is made. AAG Delrahim believes that merging parties need to avoid “hid[ing] the eight ball” and work with the DOJ in good faith to remedy transactions that raise competitive concerns.

By announcing these reforms, the DOJ acknowledges that merger reviews are taking longer in recent years. AAG Delrahim cited a recent report noting that the length of merger reviews has increased 65 percent since 2013 and that the average length of a significant merger review is now roughly 11 months. AAG Delrahim believes an assortment of factors contribute to the increasing length of reviews including larger quantities of documents produced during a Second Request, increasing numbers of transactions with international implications, and the DOJ’s insistence on an upfront buyer for most consent orders. (more…)




FTC Increases Notification Thresholds under the Hart-Scott-Rodino Act and Clayton Act Section 8

The US Federal Trade Commission recently announced increased thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and for determining whether parties trigger the prohibition against interlocking directors under Section 8 of the Clayton Act.

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Senate Democrats Push for Tougher Merger Enforcement

On September 14, 2017, Senator Amy Klobuchar (D-MN), introduced new legislation to curtail market concentration and enhance antitrust scrutiny of mergers and acquisitions. As the Ranking Member of the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights, Klobuchar is the leading Senate Democrat for antitrust issues.

Two bills were submitted to the Senate: the Consolidation Prevention and Competition Promotion Act (CPCPA) and the Merger Enforcement Improvement Act (MEIA). The CPCPA is co-sponsored by Senators Kirsten Gillibrand (D-NY), Richard Blumenthal (D-CT) and Ed Markey (D-MA). The MEIA is co-sponsored by Senators Blumenthal, Markey and Gillibrand, along with Senators Patrick Leahy (D-VT), Al Franken (D-MN), Cory Booker (D-NJ), Dick Durbin (D-IL), Mazie Hirono (D-HI) and Tammy Baldwin (D-WI). Both bills propose amendments to the Clayton Act. Earlier this year, Senate democrats announced these legislative proposals as part of their “A Better Deal” antitrust agenda.

WHAT DO THE BILLS PROPOSE:
  • Notably, the CPCPA proposes to revise the Clayton Act so that in challenging an acquisition, the Federal Trade Commission (FTC) and Department of Justice (DOJ) would only have to show that the proposed transaction materially lessens competition rather than significantly lessens competition, which is the current standard. The legislation defines “materially lessens competition” to mean “more than a de minimis amount.” This change would reduce the burden of proof for the government in challenging an acquisition.

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