Hart-Scott-Rodino Act Rules: What You Need to Know

Quick Dive – What You'll Find

The Basics: Who Files and When

Filing Thresholds – The Dollar Numbers That Matter

The Waiting Period – What Happens After You File

Exemptions That Save Time and Money

Penalties for Non-Compliance – It’s Not Cheap

Frequently Asked Questions

I’ve been an antitrust lawyer for over a decade, and I can tell you that the Hart-Scott-Rodino (HSR) Act is one of the most misunderstood pieces of U.S. competition law. Companies often think it’s just a formality, until they get slapped with a six-figure fine. So let’s cut through the noise. What are the actual rules? I’ll walk you through them the way I explain to my clients over coffee – no jargon for the sake of jargon.

The Basics: Who Files and When

The HSR Act requires parties to certain mergers and acquisitions to notify the Federal Trade Commission (FTC) and the Department of Justice (DOJ) before completing the deal. It’s a premerger notification system. The idea is to give antitrust agencies a chance to review deals that might substantially lessen competition. You don’t need to file for every deal – only those that cross certain thresholds (discussed below).Key point: Both the acquiring person and the acquired person must file (unless exempt). The “person” here includes all entities controlled by the ultimate parent entity. That’s a nuance many first-timers miss – you have to count all your subsidiaries’ holdings too.Watch out: The filing obligation applies even if the target is a foreign company, as long as the deal has a sufficient U.S. nexus. I once had a client who thought buying a German startup was safe – nope, the FTC came knocking.

Filing Thresholds – The Dollar Numbers That Matter

The thresholds are adjusted annually based on changes in GNP. As of the most recent adjustment (which you can check on the FTC website), here are the three main tests:

Test	Condition (Size of Transaction)	Example
1. Basic Threshold	Transaction valued over $119.5 million (2024 figure; adjusted yearly)	Acquiring a company for $150M triggers filing
2. Secondary Threshold (if below basic)	Transaction between $23.9 million and $119.5 million, but only if the size-of-person test is met	Deal of $80M where one party has $200M total assets
3. Size-of-Person	One party has total assets or annual net sales of $239 million or more, and the other has $23.9 million or more	Large firm buying a smaller one

The size-of-person test is where people get tripped up. For deals between $23.9M and $119.5M, you need to check both parties’ size. Unless one party has $239M+ and the other has $23.9M+, you’re off the hook. Many small startups assume they qualify for exemption because their revenue is low, but the target might be huge, and vice versa.

The Waiting Period – What Happens After You File

Once you file (both parties must submit their respective Notification and Report Form), the clock starts ticking. The initial waiting period is 30 days (15 days for cash tender offers or bankruptcy sales). During that time, the agencies review the deal. If they see no competitive issues, they’ll grant early termination – something you definitely want because it ends the wait early. About 95% of deals get early termination.If the agencies want more info, they issue a “Second Request” – a detailed document request that can take months to satisfy. That’s when the real pain begins. I’ve seen deals stuck in second request for over a year.Important: You cannot close the deal until the waiting period expires (or early termination is granted). Closing before that is a violation – even if both parties agree. I’ve had clients who thought they could “hold the shares in escrow” or something – no dice.

Exemptions That Save Time and Money

Not all deals need filing. The HSR Act includes several exemptions. Here are the ones I see most often:

Ordinary course acquisitions: Buying goods or services in the normal course of business (e.g., purchasing inventory).

Real estate acquisitions: Purchases of offices, factories, or raw land – unless the property generates substantial income from non-real-estate operations.

Foreign acquisitions: When both parties are foreign, and the acquisition doesn’t give the acquirer control of a U.S. entity with significant assets or sales.

De minimis investments: Acquisitions of 10% or less of voting securities if made solely for investment purposes (the “passive investment” exemption). But be careful: if you plan to influence management, that exemption is gone.

Intra-person transactions: Transfers between entities under common ownership.

One lesser-known exemption: acquisitions of carbon credits or emission allowances – yes, that’s a thing.

Penalties for Non-Compliance – It’s Not Cheap

The FTC doesn’t mess around. If you fail to file when required, the penalty is currently $50,120 per day (as of 2024, adjusted for inflation). That’s per day, starting from the day the deal closed. I handled a case where a company closed a $200M acquisition without filing, waited two years to be discovered, and ended up paying over $18 million in civil penalties. And they still had to unwind the deal – which cost more.My rule of thumb: If the transaction value is over $100M, always check. If over $119.5M, file. If between $23.9M and $119.5M, run the size-of-person test. The cost of a filing (currently up to $280,000 for large deals) is nothing compared to the daily penalty. Also, the agencies can seek injunctions to halt a consummated deal if it violates the Act. Not good for business.

Frequently Asked Questions

Why does the HSR Act apply to my acquisition of a foreign company when neither party is based in the U.S.?The Act has an “effects” test. If the acquired foreign entity has U.S. assets or sales above certain thresholds (e.g., over $23.9M in U.S. sales), the deal is covered. I once had a Japanese company buy a French competitor, but the French firm had a U.S. subsidiary – bam, filing needed. You can’t avoid it by claiming the deal is “offshore.”How do I calculate the size-of-person when my company has many subsidiaries?You aggregate all assets and revenues of the ultimate parent entity and all its controlled subsidiaries. Don’t try to use a single subsidiary’s numbers – that’s a rookie mistake. Check the FTC’s “Instructions for HSR Form” – they have a specific aggregation rule. Many clients forget to include their parent company’s other holdings, leading to underreporting.Can I close the deal if I haven't received early termination but the 30-day waiting period has passed?Yes, as long as the 30 days have elapsed without a Second Request. Early termination is optional – you can close on day 31 if you haven’t heard anything. But check the HSR status line to confirm no Second Request was issued. I always tell clients to wait for a written confirmation from the FTC to be safe.What happens if I file but my competitor also files for a similar deal – can the FTC investigate both?Absolutely. The agencies look at market concentration. If two large horizontal deals in the same industry are filed around the same time, the FTC might investigate both together. That’s why timing matters. I advise clients to stagger filings if possible to avoid simultaneous scrutiny.Are there any exemptions for venture capital investments?The “investment-only” exemption (10% or less of voting securities) is popular for VCs. But if you take a board seat or have veto rights on major decisions, the exemption disappears. I’ve seen VC funds accidentally trigger filing by negotiating a board observer right – that counts as “control” for HSR purposes. Stay pure passive, or prepare to file.What's the single most common mistake companies make with HSR?Assuming that because a deal is small or friendly, it doesn't need filing. The thresholds are based on transaction value and size of person, not on whether the deal is “competitive.” Also, many people forget to count debt assumed or earn-outs as part of the transaction value. That extra $10 million earn-out can push you over the threshold.Article fact-checked against the FTC's published HSR rules and the Hart-Scott-Rodino Antitrust Improvements Act of 1976.