Featured Expert Contributor, Antitrust & Competition Policy – Federal Trade Commission

Gerald A. Stein
Amanda Wait
Andrew Eklund

Gerald A. Stein, a former attorney at the Federal Trade Commission, currently is a partner at Norton Rose Fulbright US LLC, and is a member of the firm’s Litigation and Disputes Group Antitrust and Competition Group. Amanda Wait is the firm’s Head of Antitrust, United States. Andrew Eklund is Senior Counsel with the firm. Norton Rose Fulbright originally published this post as a firm Insight and it is published here with permission.

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On June 27, 2023, the Federal Trade Commission and Antitrust Division of the US Department of Justice announced proposed changes to the Hart-Scott-Rodino Notification and Report Form (commonly called the HSR Form) that must be submitted for transactions that meet certain jurisdictional thresholds. These proposed changes represent the first wholesale revision to the HSR Form in 45 years.

The proposed changes, if adopted as final, would impose significant burdens on all merging parties to provide additional documents and information, including detailed narratives, as part of the initial HSR filing. The FTC and DOJ identified the following “key proposals” that would require parties to submit information about:

  • The rationale for the transaction;
  • Details about the specific investment vehicles and corporate relationships;
  • Products or services in which the merging parties compete, including the identity of customers;
  • Non-horizontal business relationships, such as supply agreements;
  • Projected revenue streams for the to-be-acquired business;
  • Transactional documents, including all non-privileged drafts;
  • Internal documents describing market conditions (going beyond the historical limitation to those materials provided to “officers and directors” under Item 4 of the HSR form);
  • The structure of entities involved, including specifically private equity structures;
  • Details regarding prior acquisitions for the past 10 years (going beyond the current 5-year requirement); and
  • Information about labor markets, including employee classifications and commuting zones.

If the proposed new HSR Form is adopted, this additional information would be required for all transactions—large or small, and regardless of whether the parties have a competitive overlap. While this is some of the same types of information that FTC or DOJ may request post-filing during the initial waiting period, requests for this level of detail are typically reserved only for transactions likely to raise antitrust concerns. Requiring this in the initial HSR filing for all transactions would impose a significant burden on all mergers, the vast majority of which are unlikely to raise any competitive concerns—effectively a “merger tax”. For example, in Fiscal Year 2021, the FTC and DOJ challenged fewer than one percent of the more than 3,400 adjusted reported transactions notified pursuant to the HSR Act.

The FTC and DOJ estimate that preparation of this additional information would more than triple the amount of time that would be required to prepare the average HSR filing—from 37 hours to more than 144 hours. As a practical matter, parties currently can typically prepare an HSR filing in a few weeks. If the proposed HSR Form changes go into effect, merging parties will need to budget several more weeks, and possibly months, to gather and prepare these additional materials for submission.

Under the proposed rules, parties could still submit HSR filings on the basis of a “Letter of Intent” or similar preliminary agreement among the parties, but parties taking that route would need to include a detailed term sheet or draft agreement that provides detail about the proposed transaction. This would appear to require parties to negotiate significantly more deal terms prior to filing than they must currently.

The proposed HSR Form also imposes additional burdens on parties to (1) certify that they have taken steps to prevent the destruction of relevant information, and (2) identify “all communications systems or messaging applications on any device used by the acquiring or acquired person (as appropriate) that could be used to store or transmit information or documents related to its business operations.”

The proposed rule is subject to public notice and comment. Comment instructions can be found in the Federal Register notice. Interested parties seeking to submit comments may do so within 60 days of the rule’s publication in the Federal Register.