On January 10, 2025, the Federal Trade Commission (FTC) announced the annual adjustment of the jurisdictional thresholds for pre-merger notification filings under the Hart–Scott–Rodino Antitrust Improvements Act of 1976 (HSR Act), just as expanded reporting requirements are slated to take effect next month. The revisions account for changes in the U.S. gross national product and constitute an increase of approximately 5.8%. The FTC also published annual inflation adjustments for civil penalties for failure to file an HSR Act filing, as well as thresholds for Section 8 of the Clayton Act. Both the FTC and the U.S. Department of Justice (DOJ) remain willing to impose these penalties on companies and individuals who violate the pre-merger notification requirements, as evidenced by recent enforcement actions.
HSR Act Pre-Merger Notification Thresholds Revised
The HSR Act requires companies contemplating mergers or acquisitions of voting securities or assets that meet or exceed certain monetary thresholds to file notification forms with the FTC and DOJ and to wait a designated period (generally 30 days) before consummating the contemplated transaction. The new thresholds were published in the Federal Register on January 22, 2025 and will go into effect for transactions closing on or after February 21, 2025. For those transactions, companies will generally need to comply with the HSR Act pre-merger notification and waiting period requirements if either of the following is true:
- The size of the transaction is more than $126.4 million (up from $119.5 million) and the parties to the deal meet minimum “size of person” criteria (generally one party to the transaction must have total assets or annual net sales of $252.9 million or more and the other party must have total assets or net sales of at least $25.3 million); or
- The size of the transaction (as defined by the HSR Act and applicable regulations) is more than $505.8 million (up from $478 million) regardless of the size-of-person criteria.
The FTC has also announced changes to the various thresholds that determine the amount of the required filing fees submitted with an HSR filing, a system that was expanded under legislation effective in 2023 and is indexed to the percentage increase in the Consumer Price Index. The new schedule effective February 21, 2025 is:
|
Size of the Transaction |
Filing Fee |
|
More than $126.4 million, but less than $179.4 million |
$30,000 |
|
$179.4 million or more, but less than $555.5 million |
$105,000 |
|
$555.5 million or more, but less than $1.111 billion |
$265,000 |
|
$1.111 billion or more, but less than $2.222 billion |
$425,000 |
|
$2.222 billion or more, but less than $5.555 billion |
$850,000 |
|
$5.555 billion or more |
$2,390,000 |
These requirements are subject to various exemptions and exceptions, and it is important to consult with experienced antitrust counsel to determine whether an HSR filing is required.
“Interlocking Directorates” Thresholds
Section 8 of the Clayton Act prohibits, with certain exceptions, one person from serving as a director or officer of two competing corporations. Under the FTC’s revised Section 8 thresholds, which became effective upon publication in the Federal Register on January 22, 2025, and increased by approximately 5.8%, a person may not serve as a director or officer of two competing corporations if each corporation has capital, surplus, and undivided profits aggregating more than $51,380,000, unless one or more of the corporations has competitive sales under $5,138,000 or other exceptions apply.
Inflation-Adjusted Civil Penalty Amounts
On January 17, 2025, the FTC also announced adjustments to various maximum civil penalty levels for certain laws it enforces. The action was required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which significantly increased penalty levels in 2016 and required annual indexing of those levels for inflation.
Of most interest, the maximum civil monetary penalty for violations of the HSR Act and Section 5 of the FTC Act (concerning unfair methods of competition and unfair or deceptive acts or practices) increased by approximately 2.6% from $51,744 to $53,088 per day of noncompliance. The new maximum civil penalties became effective upon publication in the Federal Register on January 17, 2025.
Recent Enforcement Actions
Recent enforcement actions by the FTC and DOJ underscore the importance of HSR compliance.
On January 7, 2025, the FTC announced that two oil companies agreed to pay a record $5.6 million civil penalty to settle gun-jumping allegations. According to the FTC, Verdun Oil Company II LLC, which was under common management with XCL Resources Holdings LLC, agreed to acquire EP Energy LLC. The FTC asserts, however, that before the closing of the transaction and during the HSR waiting period, EP Energy allowed XCL and Verdun to assume control over significant aspects of EP Energy’s day-to-day business.
On January 14, 2025, the DOJ sued private equity firm KKR for HSR Act violations in 16 separate transactions. The DOJ alleged that KKR altered documents submitted with HSR filings, omitted documents that should have been produced, and in some cases neglected to file an HSR filing before consummating the transaction. The maximum penalty for these violations exceeds $650 million. This case is extremely unusual – typically, parties settle with the government when there are allegations of a deficient filing that lead to the filing of an HSR compliance lawsuit. Here, the DOJ instead sued after a nearly three-year investigation. Additionally, KKR filed a countersuit against the DOJ and FTC seeking judgment that KKR did not violate the HSR Act and that the DOJ and FTC’s interpretations of the HSR Act are “unconstitutionally vague.” KKR’s countersuit also claims that the fines the DOJ seeks are excessive and violate the Fifth and Eighth Amendments. The DOJ’s action against KKR, with its unusually aggressive penalties, serves as a reminder that failure to comply with the HSR Act can lead to significant penalties.
Status of New HSR Rules
The new HSR rules and form that the FTC acknowledges will more than triple compliance burdens for many filings are scheduled to go into effect on February 10, 2025.
On January 10, 2025, however, the U.S. Chamber of Commerce filed suit against the FTC to prevent the rules from taking effect, claiming that the new HSR regulations impose burdens not authorized by the HSR Act, do not survive cost-benefit analysis, lack justifiable explanation, and are arbitrary and capricious. Though the lawsuit is in its early stages, it could potentially delay the implementation of the new HSR rules.
On January 20, 2025, in one of the first official acts of the new Administration, President Trump issued a regulatory freeze memorandum requesting that all agency heads consider postponing for 60 days any rule that was already published in the Federal Register but was not yet in effect. The new HSR rules and form fall into this category, but it is unclear whether the new FTC chair, Andrew N. Ferguson, has either the authority or inclination to delay or modify the revised regulation, which he previously voted to support.
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If you have any questions, or would like additional information, please contact one of the attorneys on our Antitrust team or one of the attorneys on our Mergers & Acquisitions team.