What Is the Hart-Scott-Rodino Antitrust Improvements Act of 1976?
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires large companies to file a report before completing a merger, acquisition or tender offer. Enacted by President Ford as a set of amendments to existing U.S. antitrust laws, such as the Clayton Antitrust Act, the Hart-Scott-Rodino Act requires parties to notify the Federal Trade Commission and Department of Justice of large mergers and acquisitions before they occur with the filing of an HSR Form, also called a "Notification and Report Form for Certain Mergers and Acquisitions," and generally known as a "premerger notification report." The report is meant to alert regulators to the intent of companies to merge so they may perform a review of the action based on antitrust laws.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 is also known as the "HSR Act" or Public Law 94-435.
- An amendment of the Clayton Act, Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires companies to file premerger notifications with the Federal Trade Commission and the Justice Department for certain acquisitions.
- The necessity of premerger notifications depends on three factors: the nature of the commerce, the size of the parties involved, and the size of the transaction—the amount of assets or securities involved.
- In 2019, the size of the transaction threshold became $90 million.
Understanding the Hart-Scott-Rodino Antitrust Improvements Act of 1976
Once the companies have filed the required PNR forms, a waiting period begins. The waiting period is usually 30 days, but for cash tender offers or an acquisition in bankruptcy it is 15 days. The transaction can proceed if the waiting period ends or if the government terminates the waiting period early. If regulators see a potential anticompetitive problem with the proposed transaction, they will request additional information from the companies involved and extend the waiting period or seek an injunction to prevent the transaction.
Under the HSR Act, the following premerger tests must be met to require a premerger filing:
- The commerce test: Any party to a proposed transaction must be engaged in commerce of be involved in any activity that affects commerce. This requirement is so broad that it will be met in nearly all cases.
- The size-of-person test: Refers to whether either the acquiring or acquired person has total assets or annual net sales of a certain sum (which is regularly adjusted). As of 2019, either the acquiring or acquired person must have total assets or annual net sales of $180 million or more, and the other party must have total assets or annual net sales of $18 million or more.
- The size-of-transaction test: This test is met if a certain amount of assets or voting securities (at least $90 million as of 2019) is being acquired, or if 15% or more of voting securities are acquired and as a result the acquiring party gains control of an entity with annual net sales or total assets of $90 million or more.
Thresholds and Fees
As of 2019, the base filing threshold for the HSR Act which determines whether a transaction requires a Premerger Notification is $90 million. The statutory size-of-person threshold is between $18 million and $180 million. Alternatively, the statutory transaction size test that applies to all transactions even if the "size-of-person" threshold is not met is $359.9 million.
Filing fees for an HSR Form depend on the size of a transaction. For example, transactions worth $90 million or above but under $180 million require a filing fee of $45,000. Transactions valued at over $180 million but under $899.8 million come with at $125,000 filing fee. And transactions valued at over $899.8 million have a HSR Form filing fee of $280,000.