2023 Hart-Scott-Rodino update: new antitrust premerger fees and reporting requirements

President Biden recently signed the Merger Filing Fee Modernization Act of 2022 (the HSR Fee Modernization Act) into law, which amends—for the first time in over 20 years—the filing fees payable when notifying a merger or acquisition subject to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act). The law also imposes reporting requirements of subsidies received from certain foreign entities that are “strategic or economic threats to the United States.”

What you need to know

• The HSR Act is an antitrust statute that authorizes the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) to evaluate potential anticompetitive effects of certain merger and acquisition transactions.
• The HSR Act requires the parties contemplating mergers or acquisitions that meet or exceed jurisdictional thresholds to (i) provide information to the FTC and DOJ regarding the acquisition and the parties’ business operations, and (ii) await the expiration of a statutory waiting period before completing the proposed transaction.

New HSR filing fees

Since 2000, the fees payable for filings required by the HSR Act were organized into three tiers. Although the thresholds separating the tiers, measured by transaction value (the HSR Act “size of transaction”), were adjusted annually, the fee amounts remained the same during this time, namely $45,000, $125,000 and $280,000.

The HSR Fee Modernization Act introduces three more tiers for a total of six. Notably, the fee due for the smallest transactions will be lower than the current structure, but the law substantially increases the fees for higher-value transactions. Additionally, the fee amounts will be adjusted each year, beginning September 30, 2023, to reflect changes in the Consumer Price Index. The new thresholds and fee amounts are shown below:

A sponsor of the legislation, Senator Amy Klobuchar, recently stated that the new fees will take effect in 2023, with specifics yet to be announced by the FTC. Additional revenues from increased fees will be appropriated to the FTC and DOJ.

Disclosure of subsidies from “foreign adversaries”

The HSR Fee Modernization Act will require parties submitting HSR Act filings to provide information concerning subsidies received from countries or entities that are strategic or economic threats to the United States, specifically “Foreign Entities of Concern” under section 40207 of the Infrastructure Investment and Jobs Act (42 U.S.C. § 18741(a)). Such entities include:

• Entities owned by, controlled by, or subject to the jurisdiction or direction of China, Iran, North Korea, or Russia;
• Entities on the Office of Foreign Assets Control’s list of specially designated nationals and blocked persons, also known as the SDN List; and
• Entities alleged by the DOJ to have been involved in activities for which a conviction was obtained under the Espionage Act, Economic Espionage Act of 1996, the Arms Export Control Act, the Atomic Energy Act, the Export Control Reform Act, or the International Emergency Economic Powers Act.

The HSR Fee Modernization Act defines a “subsidy” broadly to include direct subsidies, grants, loans, loan guarantees, tax concessions, preferential government procurement policies, and government ownership or control. Details of the required disclosures will be provided in rules to be provided by the FTC.

The subsidy reporting requirement is similar to foreign subsidy disclosures added to merger control regimes in other countries, including the European Union (EU). The EU’s Foreign Subsidies Regulation (FSR), set to take effect by mid-2023, will capture information about companies that have received any form of direct or indirect financial contribution from a non-EU country, particularly those that engage in M&A transactions or public tender offers in the EU. The subsidy disclosures mandated by the FSR and HSR Fee Modernization Act underscore a mounting concern that subsidies can distort the competitive process.