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US Antitrust Compliance for Listed Companies: HSR Filing for M&A Activities

The Federal Trade Commission (FTC) and the Department of Justice (DOJ) have materially tightened enforcement of the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 since the issuance of the 2023 Merger Guidelines. For Hong Kong-listed companies and PRC-incorporated issuers with a US-listed ADR programme, the window for completing a US target acquisition without triggering an HSR filing has narrowed significantly. The FTC’s 2024 fiscal year data shows a 12.4% year-on-year increase in HSR filings, reaching 1,823 transactions, while the agency issued 38 Second Requests—the highest single-year count since 2016. Any Hong Kong company with US$151.0 million or more in total assets or annual net sales—the 2025 inflation-adjusted threshold (FTC, 2024)—and a US target meeting the same size threshold must file. Failure to file carries a civil penalty of up to US$51,744 per day (16 C.F.R. § 803.20). This article details the mechanics of the HSR filing, the jurisdictional triggers, and the specific compliance obligations for Hong Kong-headquartered and PRC-incorporated issuers conducting M&A in the United States.

The HSR Act and Its Jurisdictional Triggers

The HSR Act requires parties to a merger or acquisition to file a notification with the FTC and the DOJ’s Antitrust Division before consummation if the transaction meets three statutory thresholds: the commerce test, the size-of-person test, and the size-of-transaction test. For a Hong Kong-listed company acquiring a US target, the size-of-person test is the most frequently overlooked hurdle.

The Size-of-Person Test for Non-US Persons

Under 15 U.S.C. § 18a(a)(2), a transaction is reportable if either the acquiring person or the acquired person is engaged in US commerce or in any activity affecting US commerce. The FTC’s 2023 Informal Interpretations clarify that a Hong Kong company with a US subsidiary, a US-based sales office, or even a contractual relationship with a US distributor satisfies this commerce test. The size-of-person test is met if one party has total assets or annual net sales of US$302.0 million or more and the other party has US$30.2 million or more (2025 thresholds, FTC). For a Hong Kong Main Board issuer with a market capitalisation exceeding HK$10.0 billion—typical for a mid-cap—the US$302.0 million threshold is easily crossed. The PRC-incorporated parent of a US-listed ADR programme will also meet this threshold if its PRC consolidated financial statements show total assets above that level.

The Size-of-Transaction Test and Inflation Adjustments

The FTC adjusts the HSR thresholds annually based on changes in gross national product. For 2025, the size-of-transaction threshold is US$119.5 million. Any acquisition of voting securities, assets, or non-corporate interests valued above that amount triggers a filing obligation unless an exemption applies. The FTC’s 2024 Annual Report notes that the median HSR filing involved a transaction value of US$215.0 million, well above the threshold. For a Hong Kong company acquiring a US-listed target via a tender offer or a scheme of arrangement, the transaction value includes the purchase price plus any assumed liabilities and contingent consideration (16 C.F.R. § 801.10). A common error among PRC-based acquirors is failing to include the value of convertible notes or earn-out provisions in the calculation.

Exemptions Relevant to Cross-Border Transactions

Several exemptions under the HSR Act are particularly relevant for Hong Kong issuers. The “foreign person” exemption (16 C.F.R. § 802.51) exempts acquisitions by a foreign person of assets located outside the US that do not generate US sales exceeding US$30.2 million in the most recent fiscal year. However, if the target is a US-incorporated entity or a Delaware LLC, this exemption does not apply. The “investment-only” exemption (15 U.S.C. § 18a(c)(11)) applies only if the acquiring person holds 10% or less of the voting securities and has no intention of participating in the management of the issuer. For a Hong Kong company acquiring a controlling stake—typically defined as more than 50% under HKEX Listing Rule 14.06B—this exemption is unavailable. The “ordinary course” exemption for acquisitions of goods or real estate in the ordinary course of business (16 C.F.R. § 802.1) is narrow and rarely applies to M&A transactions.

The Filing Process and the Waiting Period

Once a filing obligation is triggered, both the acquiring person and the acquired person must submit a Notification and Report Form (FTC Form C4) along with the filing fee. The FTC and DOJ then have a statutory waiting period—typically 30 days—to review the transaction.

The Notification and Report Form

The HSR form requires extensive disclosure of the acquiring person’s structure, including its ultimate parent entity (UPE). For a Hong Kong-listed company, the UPE is typically the Cayman Islands or Bermuda holding company that is the listed entity. The form demands a description of the transaction, the business of both parties, and any prior acquisitions in the same industry. The FTC’s 2023 Model Form requires the filing party to identify all entities within the UPE’s organisational structure—a significant burden for a PRC-incorporated parent with a complex VIE structure. The filing fee for 2025 is tiered: US$30,000 for transactions valued between US$119.5 million and US$173.3 million; US$105,000 for transactions between US$173.3 million and US$541.1 million; and US$280,000 for transactions valued above US$541.1 million (FTC, 2024).

The 30-Day Waiting Period and Early Termination

The waiting period begins on the date the FTC receives a complete filing from both parties. The FTC may grant early termination if the transaction raises no competitive concerns. In fiscal year 2024, the FTC granted early termination for 74.8% of all filings, with an average processing time of 14.2 days (FTC, 2024). However, for transactions involving a PRC-based acquiror, the FTC has increasingly requested additional information under the “Second Request” process. The DOJ’s 2024 Merger Enforcement Report notes that Second Requests were issued in 8.3% of all reportable transactions, but the rate for cross-border transactions involving PRC entities was 14.7%. A Second Request extends the waiting period by an additional 30 days after the parties certify substantial compliance with the request.

Penalties for Non-Compliance

The penalty for failing to file or for closing before the waiting period expires is a civil penalty of up to US$51,744 per day (16 C.F.R. § 803.20). The FTC’s 2024 enforcement actions include a US$4.2 million penalty against a Singapore-based conglomerate for closing a US$180.0 million acquisition without filing (FTC, Matter of ST Engineering, 2024). For a Hong Kong company, the risk is amplified by the SFC’s Code on Takeovers and Mergers (SFC Takeovers Code), which requires disclosure of any material regulatory impediment to a transaction. A failure to disclose a pending HSR investigation to the SFC could constitute a breach of General Principle 2 of the SFC Takeovers Code, which mandates that all parties provide equality of information and treatment.

Compliance Strategies for Hong Kong and PRC Issuers

Given the heightened enforcement environment, Hong Kong-listed companies and PRC-incorporated issuers with US-listed ADR programmes must adopt a structured compliance framework for US M&A.

Pre-Deal Structuring and Jurisdictional Analysis

The first step is a jurisdictional analysis conducted at least 60 days before signing a definitive agreement. The analysis should determine whether the acquiring person meets the size-of-person threshold. For a Hong Kong Main Board issuer, the analysis must include the consolidated financial statements of the listed group, including any PRC operating subsidiaries held through a VIE structure. The FTC’s 2023 Informal Interpretation No. 17 confirms that the assets and sales of a VIE-controlled entity must be included in the UPE’s financials for HSR purposes. If the size-of-person test is met, the transaction value must be calculated precisely, including any deferred consideration and earn-out provisions.

Coordinating with the SFC and HKEX

Under HKEX Listing Rule 14.06B, a transaction classified as a “very substantial acquisition” (VSA) requires shareholder approval and a circular. The circular must disclose any material regulatory approvals required, including HSR clearance. The SFC’s 2023 Guidance Note on Cross-Border M&A explicitly states that a failure to obtain HSR clearance before closing a VSA could result in the SFC requiring the transaction to be unwound. The HKEX will also require a statement from the sponsor confirming that the transaction does not violate any US antitrust laws. The sponsor’s due diligence should include a review of the HSR analysis and the status of any Second Request.

Post-Filing Monitoring and Second Request Response

If a Second Request is issued, the parties must prepare a substantial response within 30 days. The FTC’s 2024 Model Second Request requires production of documents, data, and communications related to the transaction and the industry. For a PRC-incorporated issuer, this may involve producing documents located in mainland China. The PRC’s Anti-Monopoly Law (AML) does not prohibit the production of documents to a foreign antitrust authority, but the State Administration for Market Regulation (SAMR) may require a notification under the PRC’s Security Review Law if the transaction involves a “critical infrastructure” sector. The Hong Kong company should engage US antitrust counsel with experience in Second Request responses and coordinate with PRC counsel to ensure compliance with SAMR requirements.

Key Takeaways

  • Conduct a jurisdictional analysis under 15 U.S.C. § 18a(a)(2) at least 60 days before signing any definitive agreement for a US target with a transaction value exceeding US$119.5 million.
  • Include the consolidated financials of all VIE-controlled entities in the size-of-person calculation, as confirmed by FTC Informal Interpretation No. 17 (2023).
  • Budget for the HSR filing fee—US$280,000 for transactions above US$541.1 million—and a potential Second Request response that can cost US$500,000 to US$2.0 million in legal and consulting fees.
  • Disclose the HSR filing requirement in the HKEX circular for any transaction classified as a VSA under Listing Rule 14.06B, and obtain the sponsor’s confirmation of compliance.
  • If a Second Request is issued, engage US antitrust counsel within seven days and prepare for a 30-day response timeline, coordinating with PRC counsel on any SAMR notification requirements.