What Is the Hart-Scott-Rodino Antitrust Improvements Act of 1976?
Let me explain the Hart-Scott-Rodino Antitrust Improvements Act of 1976 directly to you: it requires large companies to file notifications with the Federal Trade Commission and the antitrust division of the Department of Justice before proceeding with certain mergers, acquisitions, or tender offers.
If you're a company planning to merge, you must submit an HSR Form, which is formally known as the Notification and Report Form for Certain Mergers and Acquisitions, often just called a premerger notification report. This step allows regulators to examine the deal under antitrust laws.
President Gerald Ford signed this act into law as amendments to existing antitrust statutes, including the Clayton Antitrust Act. You might hear it referred to as the HSR Act or Public Law 94-435.
Key Takeaways
Here's what you need to know: the Hart-Scott-Rodino Antitrust Improvements Act of 1976 mandates that companies file premerger notifications with the Federal Trade Commission and the Justice Department for specific acquisitions.
Whether you have to file depends on three key factors: the nature of the commerce involved, the size of the parties, and the size of the transaction itself.
If regulators identify potential anti-competitive problems, they might negotiate concessions from the companies or move to preliminarily enjoin the transaction.
How the Hart-Scott-Rodino Antitrust Improvements Act of 1976 Works
Once you file the required forms, a waiting period starts. This is typically 30 days, but it drops to 15 days for cash tender offers or acquisitions in bankruptcy.
You can complete the transaction after the waiting period ends or if the government ends it early. But if regulators spot potential anti-competitive issues, they'll ask for more information from the involved companies and extend the waiting period; they might negotiate an agreement to restore competition; or they'll seek to halt the deal by filing a preliminary injunction in court.
Premerger Tests
Under the HSR Act, you must meet specific tests for a pre-merger filing to be required. First, the commerce test: any party to the proposed transaction must be engaged in commerce or involved in activities affecting commerce—this is so broad that it applies in almost every case.
Next, the size-of-person test: as of 2020, either the acquiring or acquired party needs total assets or annual net sales of $188 million or more, while the other must have at least $18.8 million in assets or sales.
Then, the size-of-transaction test: this is satisfied if you're acquiring assets or voting securities worth at least $94 million as of 2020. It also applies if you acquire 15% or more of voting securities, gaining control of an entity with $94 million or more in annual net sales or total assets.
For 2020, the base filing threshold for the HSR Act is $904 million to determine if a transaction requires notification. The statutory size-of-person threshold ranges from $18.8 million to $188 million, and there's a statutory transaction size test of $376 million that applies to all deals, even if the size-of-person threshold isn't met.
Special Considerations
You should note that HSR forms come with a filing fee that depends on the transaction's size. For instance, deals worth more than $94 million but less than $188 million require a $45,000 fee. If the value is over $188 million but under $940.1 million, the fee is $125,000. For transactions exceeding $940.1 million, you pay $280,000.
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