This week, the US Congress is expected to raise premerger filing fees, add new disclosure requirements for companies with ties to certain foreign entities, and make it easier for state antitrust enforcers to keep their cases at home.
The provisions of the Merger Filing Fee Modernization Act of 2022 (the “Merger Modernization Act”) are part of the 2023 Omnibus Appropriations bill that Congress released on Monday, December 19, 2022. The bill is expected to pass later this week.
Some members of Congress had hoped to use the omnibus appropriations package to attach tech-focused antitrust legislation, including the American Innovation and Choice Online Act and the Open App Markets Act, which had over the past year garnered substantial bipartisan and bicameral support. Those bills, which generated media attention as well as significant opposition from the large tech platforms, did not ultimately get attached to the end-of-year spending package, likely marking the end of the road for those bills, at least for the foreseeable future. House Republican leaders—including Kevin McCarthy and Jim Jordan, the likely incoming Speaker of the House and House Judiciary Chair, respectively—have expressed skepticism, if not outright opposition, to these bills, rendering any forward movement for the legislation a near impossibility in the upcoming Congress.
Many companies should expect to pay higher premerger filing fees after 2024.
The Merger Modernization Act updates premerger filing fees, which have not changed since 2001. The biggest deals today pay filing fees of $280,000; under this new law, they will pay a $2.25 million filing fee. The fee changes don’t go into effect for two years.
Transactions of less than $1 billion will be subject to lower fees, while transactions above that level will pay higher fees ranging from $400,000 to $2.25 million. For transactions between $1 and $2 billion, parties will pay a $400,000 fee; for transactions between $2 and $5 billion, parties will pay an $800,000 fee; and for transactions over $5 billion, parties will pay a $2.25 million fee. The new fee schedule will take effect in October 2024. Thereafter, the fees will be adjusted each year based on the Consumer Price Index.
Companies should expect more resourced antitrust enforcers.
The increased filing fees may eventually make their way to the Federal Trade Commission (“FTC”) and Department of Justice (“DOJ”). Estimates from the Congressional Budget Office suggest that once the hike takes effect, it would raise an additional $1.4 billion that could be made available to the FTC and DOJ over five years.
Although the FTC will have to wait until 2024 to see any increase in income from the raised fees, it will still have about $50 million more in funding in FY 2023 than it did in FY 2022. The DOJ Antitrust Division will see approximately $30 million in additional funding in FY 2023.
Companies will have to report contributions from certain foreign entities.
The Merger Modernization Act also requires parties making pre-merger notifications to disclose information about any subsidies they receive from “foreign entities of concern,” which include entities controlled by the governments of China, Russia, Iran, and North Korea as well as entities associated with specifically designated nationals (SDNs) and involved in unauthorized conduct determined to be detrimental to the national security or the foreign policy of the United States. The act cites concerns about the impact of foreign-subsidized companies on United States businesses and on national security, as well as statements made by (now former) FTC Commissioner Noah Phillips in 2020 suggesting that antitrust law could play a role in overseeing foreign-subsidized entities.
This change will bring the United States more in line with a similar approach recently adopted by the European Union. Beginning in early 2023, the European Union’s Regulation on Foreign Subsidies Distorting the Internal Market will require that transactions that may benefit from a foreign subsidy be notified to the European Commission when the parties meet certain monetary thresholds. Similarly, the United Kingdom’s 2021 National Security and Investment Act requires parties notify the UK’s Investment Security Unit of mergers that would result in an increase in foreign control over certain United Kingdom entities.
Companies should expect to litigate suits by state attorneys general in their home jurisdictions.
The act will limit removal of antitrust cases brought by state attorneys general. Historically, federal law exempted antitrust actions brought by the United States from being subject to multidistrict litigation. The Merger Modernization Act expands this limitation to antitrust actions brought by states, making it more likely that state antitrust enforcers will be able to keep their antitrust cases in their home states. This limitation will apply to any matter pending on or filed after the date of the act’s enactment.
Additional author: Leo Nuovo