On October 10, the Federal Trade Commission (“FTC”) announced its final rules with respect to Premerger Notification under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (as amended) (“HSR”).  The final rules formalize what will be the largest change to premerger notification requirements since at least 2000.  The final rules follow from the draft rules that the FTC published in June 2023.[1]  The new rules largely follow the changes proposed in June 2023 – even though the FTC received over 20,000 comments on its proposed rulemaking during the notice and comment period – many of which were critical of the FTC increasing the filing burden on parties.

The changes to premerger notification requirements will require parties to spend significantly more time preparing filings for even non-complex transactions (i.e., with no competition concerns).  Indeed, the FTC itself has estimated that the average time to complete a non-complex filing would increase from an estimated 37 hours to 144 hours.  The increased burden would be even more pronounced for a complex transaction (i.e., involving potential competition concerns) rising to approximately 259 hours.  The final rule makes several significant changes to the HSR form and related filing requirements.

  1. Transaction Rationales – Previously in HSR filings, parties were required to provide a basic description of the transaction, including naming the parties and describing the high-level structure of the transaction. The FTC has retained these requirements in the final rule.  However, the FTC has added the extra requirement that parties provide a narrative description of the transaction rationale.  This requirement includes “identify[ing] and explain[ing] each strategic rationale for the transaction discussed or contemplated.” Additionally, it requires increased coordination between parties, as the FTC requires an explanation for any variance between the buyer’s and the target’s strategic rationale for the transaction. Lastly, parties are now also required to identify in the transaction description the documents that the parties provided that support the stated rationale(s).
  2. Disclosure of Agreements Between Parties – Parties have always been required to submit the relevant merger agreement, as well as any relevant non-competes or other competition related agreements. The FTC has now expanded this requirement to include all transaction-specific agreements.  In the past, documents such as side letters, extra exhibits, and other supporting agreements were not required to be submitted unless they were relevant to understanding the competitive issues of the transaction.  Submitting these extra agreements is now required, increasing the scope of transaction documents provided to the FTC.
  3. Competition Descriptions – In perhaps the most significant change, the FTC has dramatically increased the narrative requirements regarding potential competition. Previously, the FTC required that parties used NAICS/NAPCS codes to determine overlaps and provide certain pieces of information in the event of overlapping codes.  While this requirement is maintained in the new rules, the FTC has significantly broadened the scope of data required to satisfy the HSR requirements.  Parties will now need to provide descriptions of the “principal categories of products or services” and “current or known products or services that compete (or could compete) with the target” – essentially requiring parties to self-disclose potential competitive concerns, rather than relying solely on FTC staff’s review of the parties’ documents and NAICS/NAPCS overlaps.  Additionally, the FTC now requires customer details, including top 10 customers overall and by category, as well as overall sales by product for any overlap products.  The FTC further requires that any supply or purchase relationships between the acquiring person and the target must be disclosed along with sales to/from the target, sales to the target, top 10 competitors, as well as the description of any supply or purchase agreement between the parties –  regardless of whether the agreement relates to the specific transaction.
  4. Foreign Subsidies – Parties will now be required to list any subsidies received from foreign entities or “governments of concern”, including listing any countervailing duties that have been imposed.
  5. Greater Disclosures – The new rules require parties to disclose significant information related to their ownership. This information includes listing minority owners, including certain significant minority owners in LLCs and LPs, as well as listing positions in other companies for certain officers and board members. Additionally, for certain transactions (i.e., ones with competitive overlap), both the acquiring and the acquired person are now required to report related transactions in the overlapping businesses. This is a significant departure from prior practice, which only required the acquiring person to provide such information.
  6. Return of Early Termination – In a departure from the general trend of increased burden, the FTC has formally stated that it will begin granting Early Termination of the waiting period. This allows certain deals with minimal competitive concerns to receive clearance in an expedited fashion, shortening the waiting period from 30 to 15 days. This practice was suspended in February 2021, but will again be granted under the new rules.

Overall, these rules represent a significant increase in burden for parties contemplating transactions requiring notification.  These rules are set to go into force 90 days from the date of publishing.  Therefore, all filings made on or after January 9, 2025, will be required to comply with the new rules.  Although it is possible that the rules will be challenged in court, parties contemplating a filing in the interim may wish to consider expediting their filings to submit before the more onerous new rules come into force.

Wiggin and Dana routinely advises clients in connection with the full range of antitrust matters, including potential transactions and representation before the DOJ and FTC.

[1] https://www.ftc.gov/news-events/news/press-releases/2023/06/ftc-doj-propose-changes-hsr-form-more-effective-efficient-merger-review; https://www.wiggin.com/publication/ftc-proposes-dramatic-changes-to-hsr-premerger-filings-as-agencies-unveil-new-merger-guidelines/