The Federal Trade Commission ("FTC"), with the concurrence of the Antitrust Division of the U.S. Department of Justice ("DOJ"), has proposed dramatic changes to the premerger notification form and instructions, as well as related rules implementing the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"). These proposed changes if implemented will substantially increase the time required to prepare notifications under the HSR Act. The notice of proposed rulemaking1 proposes requirements to provide detailed information about filing parties' corporate structure, ordinary course documents that discuss strategy and competition, an explanation of the competitive dynamics of the proposed transaction, information about labor markets, and information about foreign subsidies received by either of the parties. Public comment on these proposed rules will be open until August 28, 2023.

The HSR Act2 requires all persons contemplating mergers or planning to acquire voting securities, noncorporate interests or assets that satisfy the size-of-transaction and size-of-person thresholds to notify the FTC and DOJ, pay a filing fee from $30,000 to $2.25 million (depending on the size of the transaction) and observe a waiting period before completing the transaction. Once the FTC and DOJ receive the required HSR forms and the filing fee, a 30-day waiting period commences (in most cases) and the transaction cannot close until the expiration or early termination of the waiting period or, in the event the waiting period is extended by issuance of a "Second Request" for additional materials because significant antitrust concerns exist, expiration of an additional 30-day waiting period or a negotiated schedule following substantial compliance with the Second Request.

The most significant proposed changes to the current HSR form include requiring:

  • Details about investment relationships, corporate relationships, and directors, officers and board observers of filing parties and their subsidiaries, including minority owners for limited partnerships;
  • Submission of documents beyond those related to the transaction, including ordinary course high-level strategic business documents;
  • A description of the competitive dynamics of the proposed transaction, including for those products and services that are in direct competition with each other, and other types of business relationships, such as companies that are at different levels of the production and distribution process;
  • Employee classifications based on current Standard Occupational Classification system categories; and
  • Information on subsidies received from certain foreign governments or entities that are deemed strategic or economic threats to the United States, as mandated by Congress.

The proposed changes to the HSR notification process will significantly impact the preparation of the HSR filings and the volume of information disclosed to the FTC and DOJ, even if the proposed rules are pared back before their final adoption. For complex transactions, preparation time may take two to three months. Even transactions that raise no substantive antitrust issues, including minority acquisitions, would still have to comply with a significantly more burdensome filing process. Entities that submit HSR filings in the ordinary course of their business, such as private equity funds, could mitigate this risk in part by preparing information ahead of time to be able to file more efficiently. For example, private equity funds can prepare lists of their limited partners for existing investment vehicles, and corporations can prepare list of minority shareholders of subsidiaries. Parties to a transaction will benefit from contacting antitrust counsel early on in the deal process to understand the documents and other materials required for preparation of the HSR form.

Footnotes

1. Premerger Notification; Reporting and Waiting Period Requirements, 88 Fed. Reg. 42178 (Jun. 29, 2023), available at https://www.govinfo.gov/content/pkg/FR-2023-06-29/pdf/2023-13511.pdf.

2. 15 U.S.C. § 18a.

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