Congress’s Year-end Spending Bill Significantly Increases US Merger Control Filing Fees for Large M&A Transactions

On December 23, 2022, Congress passed the Consolidated Appropriations Act of 2023 (the “Act”) with bipartisan support. In addition to numerous spending provisions totaling $1.7 trillion, the Act includes antitrust-related legislation, the most significant of which is the Merger Filing Fee Modernization Act (the “Filing Fee Act”). This provision significantly increases fees for many filings made pursuant to the Hart-Scott-Rodino Improvements Act (the “HSR Act”), which governs requirements for filing preclosing notifications of certain merger and acquisition transactions with the federal antitrust agencies, the Federal Trade Commission (FTC) and the Department of Justice Antitrust Division (DOJ). While filing fees for most transactions that are subject to HSR Act requirements (those valued at under $500 million) will decrease, for larger transactions valued in excess of $5 billion, the Filing Fee Act provides for an eightfold increase in fees. Once the new fee structure becomes effective, the fee increase promises to have a significant effect on how parties to the largest M&A transactions negotiate the allocation of filing fee costs, which are the responsibility of the buyer unless the parties agree otherwise.

The Act also includes certain additional antitrust reform provisions as well as increased budgets for the FTC and DOJ to provide the agencies greater resources to pursue their antitrust investigation and enforcement activities.

The Merger Filing Fee Modernization Act

The HSR Act sets forth thresholds to determine which M&A transactions must be reported to the U.S. federal antitrust agencies for review prior to consummation. These thresholds are updated annually to adjust for inflation. Transactions notifiable under the HSR Act require payment of the assessed filing fee and each of the merging parties to submit a filing. The parties must then observe a 30-calendar-day statutory waiting period before closing their transaction. Currently, transactions valued at or below $101 million are not subject to the HSR Act’s requirements.

The Filing Fee Act substantially increases the filing fees required for larger transactions and adds new transaction value thresholds to the existing fee structure. Currently, the largest filing fee is $280,000 and applies to all transactions valued in excess of $1.0098 billion. After the new fee structure takes effect, the largest filing fee will increase to $2.25 million and will apply to all transactions valued in excess of $5 billion. Revenues collected from filing fees will help to fund the antitrust investigation and enforcement activities of the FTC and DOJ. The filing fee structure is determined based solely upon transaction value (i.e., regardless of whether a given transaction is likely to present any substantive antitrust issues that require agency staff engagement).

While the filing fee thresholds are adjusted annually for inflation, until this latest legislation, the fees themselves had not been adjusted for more than a decade. The Filing Fee Act requires the FTC henceforth to adjust the filing fees annually to account for inflation (using the Consumer Price Index), as it already does for the filing fee thresholds. The chart below compares the existing filing fee structure to the one provided for in the Filing Fee Act.

Current HSR Filing Fee Structure

Filing Fee Act Filing Fee Structure

There currently is no indication of when the new fee structure will become effective. The FTC Premerger Notification Office has informally indicated that the existing fee structure will remain in place until the FTC publishes guidance regarding the new fee structure established by the Act. Fenwick will provide a follow-up alert once an effectiveness date is made available.

Additional Antitrust Legislation

The Act includes two additional antitrust-related measures: (1) the State Antitrust Enforcement Venue Act and (2) the Foreign Merger Subsidy Disclosure Act. The first provision limits the transfer and consolidation of antitrust cases brought by states in federal court, granting state attorneys general greater influence over venue for antitrust cases brought under federal law. This will only apply to matters filed after enactment of the Act and does not apply retroactively to matters currently pending before courts. The second provision addresses the potential for “foreign adversaries” to distort the competitive process via targeted subsidies to entities they may own or be able to influence. Thus, the provision requires merging parties to disclose any economic support they receive from such “foreign entit[ies] of concern” in their HSR Act filings. The Act requires the FTC and DOJ, in consultation with several other federal agencies related to commerce, trade and foreign investment, to promulgate rules requiring the disclosure of relevant information in parties’ HSR Act filings regarding such foreign subsidies. Therefore, this provision will not take effect until the agencies promulgate such rules.

Further, the Act also increased the antitrust agencies’ budgets for 2023, with an additional $48 million allocated to the FTC and $35 million to the DOJ.

Key Takeaways

• Any parties contemplating transactions that will meet or exceed the HSR Act’s reportable thresholds should be aware that HSR Act filing fees may soon change. Parties to deals valued at or greater than $1 billion (in particular, those valued at or greater than $5 billion) should be prepared for dramatic increases and greater attention to fee allocation between the parties. As such, the Fenwick antitrust team should be consulted early in the process.
• While the passage of the Act is significant, it nonetheless represents much less sweeping reform when compared to other substantive changes this Congress had considered. For example, the American Innovation and Choice Online Act provides for rules designed to prevent “digital platforms” from exploiting their online market power, including, among other things, prohibiting platforms from preferencing their own products on the platform, limiting a competitor’s use of or access to the platform, or discriminating in the application or enforcement of a platform’s terms of service among similarly situated users. Similarly, the Open App Markets Act would impose regulations on certain large app stores to create more favorable competition conditions for payment systems and developers using these app stores. Both of these bills have received significant bipartisan support, and their absence from the Act is conspicuous. These and other bills aiming to reform federal antitrust laws are expected to again be a focus of the new Congress starting next year.
• The budget increases for the antitrust agencies will provide room for the FTC and DOJ to continue aggressive expansion of their enforcement efforts into the foreseeable future.