On December 29, 2022, President Biden signed a package of legislation containing the first significant changes to filing fees under the Hart-Scott-Rodino Act (the “HSR Act”) in more than 20 years. The Merger Filing Fee Modernization Act of 2022 will dramatically increase filing fees for larger M&A transactions. Other bills included in the package require disclosure of certain subsidies from countries like China and Russia in HSR filings and restrict the transfer or consolidation of federal antitrust cases brought by state attorneys general. 

Merger Filing Fee Modernization Act of 2022

Under the HSR Act, parties to M&A transactions that exceed certain size thresholds must report the transaction to the Federal Trade Commission (“FTC”) and U.S. Department of Justice (“DOJ”) in advance of closing. In connection with the reporting to FTC and DOJ, the HSR Act requires that the parties submit a filing fee, which varies based on the size of the transaction. The parties are only permitted to close the transaction after the expiration or termination of a statutory waiting period, which is 30 days for most deals. 

The Merger Filing Fee Modernization Act will dramatically increase filing fees for larger M&A transactions:     

• Transactions valued at between $500 million and just under $1 billion will see fees increase from $125,000 to $250,000.

• Transactions valued at between $1 billion and just under $1.0098 billion will see fees increase from $125,000 to $400,000.

• Transactions valued at between $1.0098 billion and just under $2 billion will see fees increase from $280,000 to $400,000.

• Transactions valued at between $2 billion and just under $5 billion will see fees increase from $280,000 to $800,000.

• Finally, transactions valued $5 billion or more will see fees increase from $280,000 to $2.25 million.

Smaller deals will see both upward and downward changes to HSR Filing fees:

• Transactions valued at between $101 million and just under $161.5 million will see fees decrease from $45,000 to $30,000.

• Transactions valued at between $161.5 million and just under $202 million will see fees increase from $45,000 to $100,000.

• Transactions valued at between $202 million and just under $500 million will see fees decrease from $125,000 to $100,000.

The new filing fees are expected to go into effect in 2023, although the exact timing has yet to be announced. The new fee levels will be subject to annual adjustments based on changes in the U.S. Consumer Price Index.

The HSR fee increases are part of an effort by lawmakers to increase the financial resources available to U.S. antitrust enforcers. According to the sponsor of the bill, Senator Amy Klobuchar, the bipartisan legislation will “enable Congress to get much-needed resources to our antitrust enforcers so they can protect competition.” A recent estimate by the Congressional Budget Office suggests that the revised HSR filing fees will “increase filing fees by $1.4 billion over the 2023-2027 period.”

Foreign Merger Subsidy Disclosure Act

President Biden also signed the Foreign Merger Subsidy Disclosure Act into law, which contains a reporting requirement related to subsidies received from a “foreign entity of concern.” While the exact scope of the reporting obligation has yet to be announced, it will include an obligation to report subsidies received from entities owned, controlled, or subject to the jurisdiction or direction of China, Russia, Iran, or North Korea, as well as entities subject to various U.S. sanctions.

State Antitrust Enforcement Venue Act

Finally, the State Antitrust Enforcement Venue Act will prevent the consolidation into multidistrict litigation of federal antitrust lawsuits brought by state attorneys general. As a result, the new law will give states greater influence over the venue for antitrust cases brought under federal law.

Takeaways

• The Fee Revision Will Facilitate Heightened Antitrust Scrutiny at FTC and DOJ – Federal antitrust enforcers have struggled to keep up with the pace of merger filings in recent years. At the same time, the Biden Administration has promised in a recent executive order to increase antitrust scrutiny in many sectors of the economy, including health care, prescription drugs, agriculture and internet platform markets. The revised filing fees will provide additional resources to enforcers to facilitate the heightened antitrust scrutiny that the Biden Administration has promised. Expect more attorneys and more investigations by FTC and DOJ as the revised filing fees go into effect.

• Pay Close Attention to Valuation Issues for Deals Near Thresholds – The HSR Act contains complex valuation rules and exemptions, many of which are industry-specific.  Working with outside counsel, parties should pay close attention to these valuation issues, particularly for deals at or near the new thresholds, since accurate valuation could make a big difference in the applicable fee.

• Consider New Foreign Disclosures That Will Soon Be Required in HSR Filings – The Foreign Merger Subsidy Disclosure Act will soon require merging parties to disclose relationships they may have with countries like China and Russia. Parties should consider these disclosures when assessing risk and timing issues.