The Hart-Scott-Rodino Act and Premerger Notifications: An Overview
December 12, 2023 by Josh Hrala
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Mergers and acquisitions have a lot of moving parts that HR and leadership teams need to be aware of. One of the most important, especially for companies of larger sizes, is the Hart-Scott-Rodino Act, which dictates which companies have to make premerger notifications to the government.
So what is the Hart-Scott-Rodino Act, and how do you know if you need to follow the guidelines set forth by it? This is what we’ll be covering today to give you a foundational understanding of the law, including:
- What the Hart-Scott-Rodino Act is
- The HSR Act filing requirements and thresholds
- Who is responsible for HSR filing and filing fees
- Repercussions for not complying with the HSR Act
- HR’s role in HSR notifications
A note before we start: This guide is a great way to get familiarized with a high-level view of the Hart-Scott-Rodino Act and premerger notifications as a whole. That said, in order to ensure you are complying with all local, state, and federal laws, it’s important that you work closely with your legal counsel, who should already be a part of your M&A deal team.
What Is the Hart-Scott-Rodino Act?
The Hart-Scott-Rodino Antitrust Improvements Act of 1976—also known as the HSR Act—is a set of amendments to US antitrust laws, which dictate that certain mergers, acquisitions, and transfers of securities and assets must be reviewed by the Federal Trade Commission (FTC) and the Department of Justice (DOJ) before they are enacted to ensure that any such deals do not compromise US commerce under antitrust laws.
The Act was named after senators Philip A. Hart, Hugh D. Scott, and Representative Peter W. Rodino. It was signed into law by President Gerald R. Ford in September 1976.
What Does the Hart-Scott-Rodino Act Require?
To understand more about the Hart-Scott-Rodino Act, let’s go straight to the source, the FTC, who states:
“The Hart-Scott-Rodino Act established the federal premerger notification program, which provides the FTC and the Department of Justice with information about large mergers and acquisitions before they occur. The parties to certain proposed transactions must submit a premerger notification to the FTC and DOJ.”
“Premerger notification involves completing an HSR Form, also called a ‘Notification and Report Form for Certain Mergers and Acquisitions,’ with information about each company’s business. The parties may not close their deal until the waiting period outlined in the HSR Act has passed, or the government has granted early termination of the waiting period.”
In short, the Act states that if companies meet a certain threshold, they must send a premerger notification to both the FTC and DOJ for review. During this review time, the deal cannot be finalized, though due diligence can still occur.
What Is the Threshold for Hart-Scott-Rodino Filing?
To keep things simple, the Hart-Scott-Rodino Act sets a threshold to determine which deals need to be reviewed by the FTC and DOJ.
“The most significant threshold in determining reportability is the minimum size of transaction threshold. This is often referred to as the ‘$50 million (as adjusted)’ threshold because it started at $50 million and is now adjusted annually,” reports the FTC.
What Is the Hart-Scott-Rodino Threshold for 2023?
As the FTC continues, “For 2023, that threshold will be $111.4 million. To determine reportability for a deal that will close around the time that the new threshold becomes effective, look to what the $50 million (as adjusted) threshold will be at the time of closing. For example, a deal valued at $107 million, which will close on or after March 1, is not reportable because it is below the new minimum size of transaction threshold, even though it exceeds the current threshold of $101 million.”
To give you more context, below are the jurisdictional Hart-Scott-Rodino Act thresholds as of February 27, 2023. Again, remember that this is regularly updated by the FTC, so make sure to check the latest guidelines directly on the FTC website at the time of your deal.
| ORIGINAL THRESHOLD | ADJUSTED THRESHOLD |
| $10 million | $22.3 million |
| $50 million | $111.4 million |
| $100 million | $222.7 million |
| $110 million | $245 million |
| $200 million | $445.5 million |
| $500 million | $1.1137 billion |
| $1 billion | $2.2274 billion |
How Much Does an HSR Filing Cost?
If your deal meets or exceeds this HSR Act threshold, you are required to file a Premerger Notification letter, which is often referred to as a ‘HSR Form.’ These forms come with filing fees that are determined based on how large the deal is and when you are filing.
These HSR filing fees are likewise adjusted annually along with the thresholds we covered above, so you’ll want to check the latest updates on the FTC website before proceeding with your HSR filing and associated fees.
What Is the HSR Filing Fee for 2023?
Here’s the FTC again:“If you determine that a transaction is reportable, the filing fee should be based on the filing fee threshold that is in effect at the time of filing. Here are the new filing fee thresholds, revised in accordance with the 2023 Consolidated Appropriations Act and effective on February 27, 2023:”
| SIZE OF TRANSACTION | FILING FEE |
| Greater than $111.4 million to $161.4 million | $30,000 |
| $161.5 million to $499.9 million | $100,000 |
| $500 million to $999.9 million | $250,000 |
| $1 billion to $1.9 billion | $400,000 |
| $2 billion to $4.9 billion | $800,000 |
| $5 billion or more | $2.25 million |
Who Typically Pays the HSR Filing Fee?
Most commonly, the buyer in the deal is the one tasked with paying the HSR Form filing fee. However, the FTC does allow for some flexibility here, depending on the arrangement between the parties involved.
In the words of the FTC, “Although the parties must submit HSR filings to both the FTC and the DOJ, only one filing fee is required per transaction. The Acquiring Person is responsible for ensuring the payment of the filing fee and usually pays the entire amount, but any arrangement between the parties is acceptable.”
As you can see, this can all get rather complicated. That is why we must reiterate that you need to work with your legal team to make sure you understand whether or not the deal you are crafting falls within the current threshold. Remember, HSR requirements are updated annually, meaning you will need to ensure that you are following the most up-to-date requirements.
If you’d like more details and the most current information, check in with the FTC’s latest guidelines.
What Happens After You File a Premerger Notification?
Let’s say that you do, in fact, need to file a premerger notification based on the Hart-Scott-Rodino Act threshold. So, you file your HSR Form and corresponding filing fee for your deal’s transaction size. What now?
Well, now you simply have to wait to continue the deal. There is a required Hart-Scott-Rodino Act waiting period that all involved parties must adhere to while awaiting responses from the FTC and DOJ, during which time the deal cannot be closed.
How Long Is the HSR Waiting Period?
“For most transactions requiring a filing, both buyer and seller must file forms and provide data about the industry and their own businesses. Once the filing is complete, the parties must wait 30 days (15 days in the case of a cash tender offer or a bankruptcy) or until the agencies grant early termination of the waiting period before they can consummate the deal,” the FTC states.
After the 30 days, the deal may continue if the waiting period lapses or if the government reaches a conclusion before the waiting period is over and cancels it early. If, for whatever reason, these government agencies do find an issue with your deal and think that it may adversely affect US commerce under the antitrust laws, they will likely reach out and dig a little deeper into the deal. If and when they do, they will also extend the waiting period as needed.
If they ultimately conclude that the deal is no good, they will then seek an injunction to stop the deal from going through.
In many ways, the Hart-Scott-Rodino Act is much like the WARN Act. The companies to which the legislature applies both have to meet certain thresholds in order to comply.
What Happens If You Fail to Adhere to the Hart-Scott-Rodino Act?
Failing to comply with the Hart-Scott-Rodino Act comes with major financial penalties. Back in 1996, the rate for not adhering to the law was $10,000 per day until the company filed and the wait period was over. However, since this penalty increases over time, similar to the cost of living, the penalty for HSR Act violations was raised in January 2023 from $46,517 to $50,120 per day of the violation.
It goes without saying that that is a pretty large penalty. This is because the FTC takes antitrust law very seriously. They don’t mince words either.
According to George S. Cary, former Senior Deputy Director of the FTC Bureau of Competition, “The Commission will continue to seek maximum or near maximum penalties where there is evidence that parties relied on dubious interpretations of notification criteria because they wanted to realize tax, stock market, or other benefits that might be lost if consummation were delayed by the HSR waiting period.”
“We will be vigilant to ensure that the Act guarantees the antitrust agencies the opportunity to consider the competitive effects of acquisitions and mergers before they occur.”
Where Is HR’s Role in HSR Notifications?
In short, the role of HR in HSR premerger notifications really depends. The Hart-Scott-Rodino Act is mainly something that upper leadership, legal teams, and financial advisers will handle. However, that may vary depending on how large the organization is. This can get a bit confusing.
If a company is large enough that they have to comply with the HSR Act, then the company’s HR will likely not need to be involved. However, it is still important for all HR professionals to be aware of HSR Act requirements and their potential implications or challenges during a merger, acquisition, or similar deal—including in smaller companies. There are those rare cases where a startup could easily reach a valuation that triggers the Hart-Scott-Rodino Act to take effect.
This is why it is vital that you work with your legal team when dealing with any matters pertaining to the HSR Act and premerger notifications.
The Hart-Scott-Rodino Act and Premerger Notifications: The Recap
When dealing with larger mergers or acquisitions, it is always important to pay attention to what regulations are set forth by the government. In this case, the Hart-Scott-Rodino Act requires larger deals to be reviewed by the FTC and DOJ before completion to ensure that they are complying with US antitrust laws.
The specific Hart-Scott-Rodino Act filing requirements will depend on the size of the deal transaction and the time of the filing. So always make sure you are consulting the latest regulations and thresholds set forth by the FTC, as well as the advice of your legal counsel.
If you’d like to learn more about the Hart-Scott-Rodino Act and premerger notifications, the FTC has several helpful resources you can download here.
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