The Federal Trade Commission (FTC), with concurrence from the Antitrust Division of the U.S. Department of Justice (DOJ), finalized a new rule that significantly changes the form and accompanying instructions for premerger filings under the Hart-Scott-Rodino (HSR) Act. This new rule substantially increases the volume of information and the types of documents and data that must be submitted with the HSR form and, accordingly, the time and resources required to complete premerger filings.
Spurred by the Merger Modernization Act and what the FTC characterized as significant changes in the transactions that it is called on to review, the agency has spent over a year considering public comments and other input since publishing a draft rule in June 2023. In the final rule, revealed on Oct. 10, 2024, the FTC adopted many, but not all, of the changes that had been suggested in the proposed rule. The contours of the final rule were likely influenced by the two recently appointed commissioners Andrew N. Ferguson and Melissa Holyoak, who issued their own statements outlining portions of the proposed rule that were rejected.
The final rule takes effect 90 days after publication in the Federal Register, likely mid-January 2025, subject to any litigation challenges. Notably, the final rule does not affect whether parties are required to file HSR notification forms.
Why Is the FTC Making These Changes?
According to the FTC, the changes to the HSR form and instructions were required due to “significant information gaps and asymmetries that have grown over time and undermined the Agencies’ ability to conduct premerger review” and assess the likely competitive effects of transactions. As pointed out by the FTC in the analysis underlying the new rule, receiving more information from the parties in the first instance will lessen the need to rely on customers and competitors of the merging parties to provide information regarding competitive conditions.
What New Categories of Information Must Be Provided?
The new HSR form and instructions will require several new and expanded categories of information. Although the scope of the final rule is narrower than the proposed rule in this respect, what follows are some examples of information required by the final rule:
- Narrative responses concerning (1) the rationale for the transaction (with citation to submitted documents supporting the responses), (2) any product or service markets in which the parties compete (including planned products or services), (3) any supply relationships between the two parties and (4) the ownership structure of the acquiring entity, among other topics
- Documents prepared by or for a “supervisory deal team lead … who has primary responsibility for supervising the strategic assessment of the deal, and who would not otherwise qualify as a director or officer” that otherwise meet the current criteria of Items 4(c) or 4(d)
- Information about certain officers and directors of the acquiring person
- Additional information about prior transactions in areas in which the parties generate revenue in overlapping North American Industry Classification System codes
- Information about sales amounts and top 10 customers in product or service markets in which the parties compete
- Information related to sales between the parties and the parties’ competitors
- Information related to any foreign competition filings that must be made
- Information related to any agreements between the parties, including licensing agreements and noncompete agreements
Are There Other Significant Changes to the HSR Process?
The FTC is making other changes to the HSR process concurrently with its changes to the HSR form and instructions.
One notable change — which may be helpful to merging parties — is that the FTC will once again grant early termination of the initial HSR waiting period in certain transactions. Accordingly, transactions with minimal or no risk of negatively impacting competition may be able to obtain HSR clearance in less than 30 days.
The FTC has launched a website that will allow the public — including customers and competitors of merging parties — to provide the FTC with information about pending transactions. This portal will allow the public to answer pre-set questions and submit comments. FTC Chair Lina Khan celebrated this change and stated, “You shouldn’t need a lawyer to provide enforcers with information on a merger.”
What Does This Mean for Parties Engaging in HSR-Reportable Transactions?
As noted, the new HSR form and instructions likely will take effect in mid-January 2025, 90 days after the rule is published in the Federal Register. In light of these impending changes, it is more critical than ever for parties contemplating HSR-reportable transactions to engage with antitrust counsel early in the transaction process to understand the impact that the new requirements may have on timeline and cost. The FTC estimates that preparation of the new HSR filing will take filers approximately three times as many hours as under the current rules, though the amount will vary significantly based on the details of the transaction. Parties and counsel will need to take these increased burdens into account when, for example, negotiating the amount of time after signing in which both parties will be required to submit HSR filings.
Parties also will need to spend additional effort and time collecting the information required for the HSR filing. Companies that expect to enter into regular or multiple HSR-reportable transactions may wish to explore implementing information retention and indexing protocols to make this process more streamlined. Additionally, the breadth of information required by the new HSR form will require involvement from a larger group of employees and in-house counsel than under the prior form. Outside and in-house counsel will need to communicate those expanded responsibilities early and often to their clients.
McGuireWoods will continue to publish targeted guidance in the coming days and weeks on the finalized rule and its effect on transactions. McGuireWoods antitrust lawyers are ready to answer specific questions or engage in discussions about how the rule may impact particular businesses.