On Dec. 29, 2022, President Joe Biden signed a $1.7 trillion omnibus spending package, which includes two important changes to antitrust law. It revises merger filing fees, raising fees for some transactions and lowering fees for others, and it bars defendants from transferring lawsuits brought by state attorneys general to venues potentially more favorable to defendants.
New Merger Filing Fees
Rolled into the omnibus package is the Merger Filing Fee Modernization Act of 2022, a law that reworks the filing fees under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act).
The HSR Act requires notification of mergers clearing certain thresholds to the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice, including that the size of the transaction must be at or above $101 million. Parties to the merger must file this notification premerger and refrain from closing the transaction until a waiting period expires. The parties also must pay a filing fee — one per transaction — responsibility for which can be allocated between the parties in the transaction agreement. For 2022, there were three filing fees depending on the deal size:
- $45,000 for transactions valued at or above $101 million and less than $202 million.
- $125,000 for transactions valued at or above $202 million and less than $1.0098 billion.
- $280,000 for transactions valued at or above $1.0098 billion.
Under the current HSR Act, the values of the transaction sizes are adjusted each year based on reported changes to the gross national product. But the amounts of the filing fees themselves do not increase.
The Merger Filing Fee Modernization Act expands on and adds more nuance to this filing-fee regime. It requires that, moving forward, merging parties pay:
- $30,000 for transactions valued at or above $101 million and less than $161.5 million.
- $100,000 for transactions valued at or above $161.5 million and less than $500 million.
- $250,000 for transactions valued at or above $500 million and less than $1 billion.
- $400,000 for transactions valued at or above $1 billion and less than $2 billion.
- $800,000 for transactions valued at or above $2 billion and less than $5 billion.
- $2.25 million for transactions valued at or above $5 billion.
Notably, the law provides for the annual adjustment of fee amounts according to the percentage increase in the consumer price index, adjusted to the nearest $5,000.
Transfer Bar on State Attorneys General Antitrust Suits
The new spending package also makes procedural changes to suits brought by state attorneys general under federal antitrust laws. Currently, prevailing law allows that if multiple similar suits exist in different jurisdictions, they can be transferred to a single federal district for coordination or consolidation of pretrial proceedings. There, they may also be joined with private plaintiff actions.
The omnibus package adopts the State Antitrust Enforcement Venue Act of 2021, which exempts antitrust actions brought by state attorneys general from this type of transfer. This would make such suits consistent with those brought by the federal antitrust agencies, which also are not subject to being transferred for coordination or consolidation of pretrial proceedings. The omnibus package makes this change retroactively. This means the new transfer bar applies to any matter currently pending, in addition to new actions.
Impact for Businesses
The impact of the filing fee revisions depends on the size of the transaction that is the subject of the HSR filing. Most transactions valued at or under $500 million will see their filing fees reduced compared to the current levels. But transactions of $500 million or more will see increased filing fees, in many instances doubled or more. Particularly for larger transactions, the subject of which party pays the HSR filing fee, or how to split the fee between the two parties, could become more heavily negotiated in merger negotiations, given its larger financial impact.
One motivation for the filing fee changes is to raise more money for the federal antitrust agencies. Additional funds collected by the agencies may lead to increases in the antitrust agencies’ budgets in future years. Current agency leadership has told Congress that higher funding levels will allow more aggressive antitrust enforcement.
The State Antitrust Enforcement Act of 2021 may present challenges for defendants responding to antitrust actions by state attorneys general. It increases the possibility that a defendant will need to litigate the same or similar antitrust claims in multiple jurisdictions across the country. It also allows a state attorney general bringing federal antitrust claims to ensure that those claims are fought on the state AG’s home turf, which may provide a strategic advantage to the AG.
Conclusion
McGuireWoods’ Antitrust, Trade & Commercial Litigation Department has substantial experience in premerger filings and antitrust enforcement actions, and it stands ready to advise on how the new law will affect your business.