FTC Updates HSR Filing Requirements: What Businesses Need to Know Now
The U.S. Federal Trade Commission (FTC) has recently approved significant updates to the premerger notification thresholds and filing fees under the Hart-Scott-Rodino (HSR) Act. These changes, driven by economic factors like the Gross National Product and Consumer Price Index, will impact companies involved in mergers, acquisitions, and certain investments. Understanding these revisions is crucial for ensuring compliance and avoiding potential penalties.
What’s Changing with the HSR Thresholds?
The HSR Act requires companies to notify the FTC and the Department of Justice (DOJ) before completing transactions that meet certain size thresholds. These thresholds are adjusted annually. The key changes for 2026, effective shortly after February 13th, involve increases across the board.
The “Size of Transaction” threshold – the minimum value of an acquisition triggering HSR review – is rising from $126.4 million to $133.9 million. This means smaller deals, previously requiring scrutiny, may now fall below the reporting requirement. However, it’s not that simple. Several other thresholds come into play, particularly concerning acquisitions of voting securities.
Here’s a breakdown of the updated reportability thresholds for voting securities:
- Greater than $133.9 million but less than $267.8 million: Requires filing.
- $267.8 million or greater but less than $1.339 billion: Requires filing.
- $1.339 billion or greater: Requires filing.
- 25% of outstanding voting securities valued at over $2.678 billion: Requires filing.
- 50% of outstanding voting securities valued at over $133.9 million: Requires filing.
Pro Tip: Don’t rely solely on the “Size of Transaction” threshold. Carefully analyze your acquisition of voting securities against these percentage-based thresholds as well.
The “Size of Person” Thresholds: A Closer Look
The “Size of Person” thresholds determine whether a transaction requires HSR notification even if it falls below the general “Size of Transaction” limit. These thresholds consider the size of the parties involved. The thresholds have also increased.
Acquisitions valued between $133.9 million (up from $126.4 million) and $535.5 million (up from $505.8 million) are potentially reportable *only* if both parties meet the “Size of Person” criteria. This means one party must have annual net sales or total assets of at least $267.8 million (up from $252.9 million), and the other must have at least $26.8 million (up from $25.3 million).
Did you know? The “Size of Person” thresholds are often overlooked, leading to inadvertent HSR violations. A thorough assessment of both parties’ financial data is essential.
Increased HSR Filing Fees: Budget Accordingly
The FTC has also significantly increased HSR filing fees, reflecting the rising cost of antitrust reviews. These fees can represent a substantial expense, particularly for larger transactions. Here’s the new fee structure:
- $133.9 million – $189.6 million: $35,000
- $189.6 million – $586.9 million: $110,000
- $586.9 million – $1.174 billion: $275,000
- $1.174 billion – $2.347 billion: $440,000
- $2.347 billion – $5.869 billion: $875,000
- $5.869 billion or greater: $2,460,000
Real-Life Example: A $600 million acquisition will now incur a filing fee of $275,000, a significant increase from the previous fee structure. Companies need to factor these costs into their deal budgets.
Interlocking Directorates: New Thresholds for Board Representation
Section 8 of the Clayton Act prohibits individuals from serving as directors of competing companies under certain conditions. The FTC has updated the thresholds for determining when this prohibition applies. The new thresholds are $54,402,000 for capital, surplus, and undivided profits, and $5,440,200 for competitive sales. These revisions aim to keep pace with economic growth and ensure effective enforcement against potential anti-competitive behavior.
Future Trends and What to Expect
These HSR updates are part of a broader trend of increased antitrust scrutiny. The FTC and DOJ are actively pursuing enforcement actions against companies engaging in potentially anti-competitive practices. Several factors suggest this trend will continue:
- Political Pressure: There’s growing political pressure to address concerns about market concentration and the power of large corporations.
- Increased Enforcement Budgets: Both the FTC and DOJ have received increased funding for antitrust enforcement.
- Focus on Digital Markets: Antitrust regulators are particularly focused on the digital economy, investigating the practices of tech giants.
- Shifting Economic Landscape: Changes in the global economy, such as supply chain disruptions and inflation, are prompting regulators to re-evaluate competition policies.
We can anticipate further refinements to the HSR thresholds and filing fees in the coming years, as well as more aggressive enforcement of antitrust laws. Companies need to stay informed about these developments and proactively assess their compliance risks.
FAQ
Q: When do these new thresholds take effect?
A: The new thresholds are expected to take effect shortly after February 13, 2026, following publication in the Federal Register.
Q: What is the HSR Act?
A: The Hart-Scott-Rodino Act requires companies to notify the FTC and DOJ before completing certain mergers and acquisitions.
Q: Who needs to comply with the HSR Act?
A: Companies involved in transactions that meet the specified size thresholds.
Q: Where can I find more information about the HSR Act?
A: You can find more information on the FTC’s website: https://www.ftc.gov/enforcement/competition-policy/hart-scott-rodino
Reader Question: “We’re a small company considering an acquisition. Should we still consult with legal counsel even if the transaction falls below the new thresholds?”
A: Absolutely. While the HSR Act may not apply, other antitrust considerations might. Consulting with legal counsel can help you identify and mitigate potential risks.
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