U.S. Merger Changes Will Increase Timelines, Costs for Companies

The U.S. Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) have recently unveiled a Notice of Proposed Rulemaking aimed at revising the Hart-Scott-Rodino (HSR) Premerger Notification Form and associated instructions. 

The proposed changes seek to modernize the information collection process and increase the effectiveness and efficiency of the merger review process. If implemented, these revisions will significantly impact the burden and time required for HSR filings. 

“The information currently collected by the HSR form is insufficient for our teams to determine, in the initial 30 days, whether a proposed deal may violate the antitrust laws,” FTC Chair Lina Khan said in a statement.

The proposed rulemaking introduces several notable additions to the HSR filing requirements. Some of the significant changes include:

Transaction Rationale and Investment Details: 

Parties to a merger will be required to provide comprehensive details regarding the transaction rationale, including information on investment vehicles, corporate relationships, and previous acquisitions. These additions aim to enhance the agencies’ understanding of the underlying motivations and strategic considerations behind the proposed merger.

Horizontal and Non-Horizontal Business Relationships: 

The proposed changes mandate the disclosure of relevant overlapping products or services, as well as non-horizontal business relationships such as supply agreements. This expansion in scope allows for a more thorough assessment of potential competition issues.

Projected Revenue Streams and Market Analysis: 

Merger parties will need to provide data on projected revenue streams, transactional analyses, and internal documents addressing market conditions. These additional insights into market dynamics will assist the agencies in evaluating the potential impact of the proposed transaction on competition.

Labor Market Impact: 

The proposed rulemaking requires information related to the proposed transaction’s impact on labor markets. The classification of employees based on the Standard Occupational Classification system categories will help identify any potential labor market issues arising from the merger.

Foreign Subsidies: 

To address concerns regarding foreign subsidies that could distort competition or impact business strategies post-acquisition, the proposed changes incorporate requirements to disclose information on subsidies received from certain foreign governments or entities. This provision aligns with the Merger Filing Fee Modernization Act of 2022.

Implications and Challenges: 

The proposed revisions to the HSR Form signal a significant increase in the amount of information required from merging parties. These changes bring the HSR filing process closer to the merger control requirements of other jurisdictions, such as the European Union. As a result, the burden of gathering and maintaining the necessary information for HSR filings is expected to substantially escalate.

Moreover, the expanded disclosure requirements are likely to extend the preparation time for HSR filers, consequently prolonging transaction timelines. Companies should be prepared for increased scrutiny during the initial 30-day waiting period, as the proposed changes aim to enable more effective screening of potential competition issues within this timeframe.

However, concerns have been raised that the additional requirements may disproportionately affect companies, particularly those engaged in transactions that do not raise significant antitrust concerns. The proposed changes could impose substantial costs on parties involved in mergers that pose no antitrust issues.