Hart Scott Rodino Act – Definition

Cite this article as:"Hart Scott Rodino Act – Definition," in The Business Professor, updated May 22, 2019, last accessed November 26, 2020, https://thebusinessprofessor.com/lesson/hart-scott-rodino-act-definition/.


Hart-Scott-Rodino Act (HSR Act) Definition

Hart-Scott-Rodino Act (HSR Act) is the same as the Hart–Scott–Rodino Antitrust Improvements Act of 1976. HSR Act was enacted to modify the United States antitrust laws, these are laws that oversee the conduct of business corporation in the United States in order to promote healthy competition among them that will benefit consumers.

A Little More on What is the Hart Scott Rodino Act

HSR Act was signed in September 1976 by resident Gerald R, this act was enacted principally to amend the Clayton Antitrust Act. According to the provisions of the HSR Act, acquisitions, transfers of securities, mergers and other related activities cannot take place until they are filed with the  U.S. Federal Trade Commission and Department of Justice who scrutinizes them before they can be permitted to occur.

Pre-merger notification and filing fee

The provisions of the HSR Act mandates that mergers, acquisitions and tender offers are not just filed by one of the parties involved but by both parties. Parties are required to file a notification and report form with FCT and the Assistant Attorney General in charge of the Antitrust Division of the Department of Justice.

Upon filing this, parties need to wait for 30 days, this is the period of assessment. It is when FCT and Department of Justice thoroughly check and inspect whether the transaction would not adversely affect U.S. commerce under the antitrust laws.

A penalty of up to $16,000 per day can be meted out to parties who do not file the form to the appropriate quarters.

Under the HSR Act, transactions of the above nature must not exceed the specified dollar thresholds and the required number of parties that must be involved. If violation in the sense occurs, a notification is required. Also, the general rule under the HSR Act is that notification or filing is required when;

  1. The transaction would adversely affect the U.S commerce.
  2. (i) When either of the parties has annual sales or total assets of $151.7 million or more (as of 2014) and

When party acquiring the stock is valued at $272.8 million or more (as of 2012).

  1. When he value of the securities belonging to the party which the acquirer would hold after the transaction is $68.2 million or more. (as of 2012).

The provision of the act also prohibits the  practice of interlocking directorates in a transaction.

Although, the above rules may seem somewhat complicated but a good understanding of the rules and compliance to the rules will aid an easier transaction. However, in a situation where either of the parties involved in the transaction is confused about the requirements for filing, a request can be made to the Justice Department with regard to this.

However, after filing and assessment by the FTC and Antitrust Division of the Department of Justice, if the transaction would impose certain consequences on the commerce industry, further information can be required of both parties.

Filing fees are charged based on the size of the transaction and the percentage of acquisition by the acquirer. A firm that wants to acquire a stock is required to pay a filing fee of $45,000 if the transactions is at least $78.2 million and not more than $156.3 million. A substantial filing fee of $125,000 is required for transactions of $156.3 million to $781.5 million. However, for transactions above $781.5 million, a filing fee of  $280,000 is required.

Furthermore, for filing fee based on the percentage of the acquisition, an acquisition worth  $1.36 billion attracts a 25% fee while the one worth $68.2 million attracts a 50% fee. However, if the acquisition was more than $682.1 million, no reporting is to be filed.

Parens patriae means parent of the fatherland. According to Title III of the HSR Act, attorneys general are permitted to sue erring companies on behalf of citizens. This title was added to the HSR Act when it was amended, it caters for the unavailability of means through which citizens can sue companies for anticompetitive activities that cause damages to them.

Unfortunately, the Court’s Illinois Brick decision which allows only direct purchasers to have access to damages relief reduced the potency of attorneys general who performed the role of parens patriae. This means that indirect purchasers are not allowed to sue companies for damages and therefore not entitled to any relief.

References for Hart Scott Rodino Act

Research articles for “Hart-Scott-Rodino Act (HSR Act)”

Antimerger policy under the HartScottRodino Act: A reexamination of the market power hypothesis, Eckbo, B. E., & Wier, P. (1985). The Journal of Law and Economics, 28(1), 119-149.

The Effect of Twenty Years of HartScottRodino on Merger Practice: A Case Study in the Law of Unintended Consequences Applied to Antitrust Legislation, Sims, J., & Herman, D. P. (1996). Antitrust LJ, 65, 865.

Reflections on Twenty Years of Merger Enforcement under the Hart-Scott-Rondino Act, Baer, W. J. (1996). Antitrust LJ, 65, 825.

The HartScott Rodino Act: Needing a Second Opinion about Second Requests, Bailey, M. S. (2006). Ohio St. LJ, 67, 433.

Some Reflections on, and Modest Proposals for Reform of, the HartScottRodino Premerger Notification Program, Pfunder, M. R. (1996). Antitrust lj, 65, 905.

HartScottRodino Merger Investigations: A Guide for Safeguarding Business Secrets, Schlossberg, R. S., & Robins, H. T. (2000). Bus. Law., 56, 943.

Shareholder Activism and the HartScottRodino Act Exemption for Acquisitions of Voting Securities Solely for the Purpose of Investment, Pfunder, M. R. (2005). Antitrust, 20, 74.

The Practical Effects of HartScottRodino Premerger Notification on Tactics in Tender Offers and Related Transactions, Volk, S. R. (1979). Antitrust LJ, 48, 1459.

Market imperfections and overenforcement in HartScottRodino second request negotiations, Blumenthal, W. (1991). The Antitrust Bulletin, 36(4), 745-820.

Regulatory, Legislative, and Administrative Changes Relating to HartScottRodino Premerger Notification, Prager, B. J., & Denis, P. T. (1987). Antitrust LJ, 56, 817.

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