Filing fees under the Hart-Scott-Rodino (HSR) Act have not been altered for 20 years, but that is about to change, and dramatically in 2023. President Biden is expected to sign into law the Consolidated Appropriations Act, 2023, which includes the Merger Filing Fee Modernization Act of 2022 ("Merger Filing Fee Modernization Act"). The Merger Filing Fee Modernization Act, among other changes, will increase HSR filing fees for many transactions, with US filing fees reaching $2.25 million for any transaction with a value of $5 billion or more.1 This is a substantial bump over the highest merger filing fee now ($280,000) and will increase resources for the US antitrust agencies to pursue their aggressive enforcement agendas.
US Filing Fees for Largest Deals Increase Nearly Ten-Fold
While some transactions will see a drop in US filing fees, the largest deals (any deal with a total value of $5 billion or more) will see a nearly ten-fold increase, to $2.25 million. According to Senator Amy Klobuchar's statement,2 the change in filing fees will take effect in 2023. The FTC's Premerger Notification Office (PNO), which administers the HSR Act, is expected to post the updated filing fees as well as related changes to reporting or payment requirements shortly. Parties should proceed as they normally would until the PNO posts the notice of change and those contemplating large transactions may benefit by filing before the new fee schedule goes into effect.
The new US merger filing fees will be as follows:
|Transaction Value||New HSR Merger Filing Fees|
|Greater than $101 million but less than $161.5 million||$30,000|
|At least $161.5 million but less than $500 million||$100,000|
|At least $500 million but less than $1 billion||$250,000|
|At least $1 billion but less than $2 billion||$400,000|
|At least $2 billion but less than $5 billion||$800,000|
|$5 billion or more||$2,250,000|
Fees will be adjusted each year to reflect changes in the Consumer Price Index.
What Does this Mean for my Next Deal?
The changes to U.S. merger filing fees will have an immediate and practical effect on transactions. While parties have always needed to take into account the expense of merger filing fees when assessing costs and strategy around a transaction, the merger filing fee will now take a larger bite out of budgets for the biggest transactions, and parties need to plan accordingly.
While the fee changes may reduce filing fee costs for parties contemplating the smallest reportable transactions, companies pursuing larger transactions should consider commercial solutions, particularly for the highest level fees.
Some considerations include:
- Is my transaction actually reportable in the U.S.? Whether a transaction is HSR-reportable can be a nuanced analysis, so examine reportability and potential exemptions extra carefully to determine if the transaction actually requires a filing. Even if the transaction is clearly above the minimum threshold, accurate valuation under the HSR rules can now make a substantial difference on the applicable fee.
- Should we file on a Letter of Intent (LOI)? Under the HSR Act, parties can file on either a definitive agreement or on a signed term sheet/LOI. When the FTC suspended grants of early termination in February 2021,3 many parties chose to start their HSR waiting period by filing on an LOI while they continued to negotiate a definitive agreement. With the new higher fees for large transactions, parties may reconsider whether to file on an LOI, or instead to wait until the deal is more certain.
- Should we split the HSR filing fee? Under the HSR Act, the buyer is responsible for the filing fee – but parties often agree to a different arrangement, such as splitting the filing fee or the seller paying the filing fee. Parties should pay particularly close attention to the HSR filing fee provisions in merger agreements and understand the magnitude of the fee early in the process.
- How much scrutiny will my deal get? The increase in funding made possible by the new budget and fees will mean more attorneys, more investigations, and greater resources generally for the FTC and DOJ to pursue their enforcement agendas.
Early planning and coordination will continue to be key to navigate deal considerations with the filing fee changes and to obtain timely clearance for transactions.
Entities Controlled by China, Iran, North Korea, and Russia. Note that the Merger Filing Fee Modernization Act makes other changes, including adding a requirement that parties identify information concerning subsidies received from "foreign entities of concern." This includes entities controlled by China, Iran, North Korea, and Russia, and entities included on the Specially Designated Nationals (SDNs) list.
1 Current U.S. merger filing fees are as follows: greater than $101 million but less than $202 million, $45,000; $202 million or greater but less than $1,009.8 million, $125,000; $1,009.8 million and above, $280,000. Thus for a $5 billion transaction value, the HSR filing fee jumps from $280,000 to $2,250,000. For the smallest transaction threshold, the HSR filing fee for a transaction greater than $101 million but less than $161.5 million drops from $45,000 to $30,000.
2 Senator Amy Klobuchar, Klobuchar Bipartisan Legislation to Restructure Merger Fees, Strengthen Antitrust Enforcement Passes Congress, (Dec. 23, 2022), https://www.klobuchar.senate.gov/public/index.cfm/news-releases?ID=D059DD97-DDB5-4C89-90DA-CFF3E203ACDA ("The new fees will take effect in 2023.").
3 Rebecca Farrington, J. Mark Gidley and George L. Paul, Grants of early termination of HSR waiting period temporarily suspended by DOJ and FTC – merging parties should expect to wait the full 30 days until further announcement, (Feb. 4, 2021), https://www.whitecase.com/insight-alert/grants-early-termination-hsr-waiting-period-temporarily-suspended-doj-and-ftc-merging.
Tejaswini Gupta (White & Case, Law Clerk, Washington DC) contributed to the development of this publication.
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