The Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ)—the U.S. agencies authorized to evaluate the anticompetitive effects of certain M&A transactions—have released proposed changes to the filing requirements for transacting parties. If adopted, this historic overhaul would increase the filing burden for parties to a transaction.
The HSR Act authorizes the FTC and DOJ to review certain mergers and acquisitions to determine whether they will have the effect of substantially lessening competition. Parties required to notify a transaction under the HSR Act have a 30-day waiting period before closing (and longer if the agencies request additional information).
The agencies have seen a tenfold increase in HSR filings since the Act came into force almost 50 years ago, and reportable deals have grown increasingly complex, but the HSR Act’s filing requirements largely have remained the same.
The proposed revisions would arguably be the most profound in the Act’s history, yet the agencies contend they are simply designed to achieve the goals Congress originally intended when it established the HSR Act, by updating requirements to meet a changed transactions landscape. According to the FTC and DOJ, the proposal aims to provide them with sufficient information to adequately assess the competitive effects of the rising volume of M&A transactions within the statutory constraints of the HSR Act.
The U.S. antitrust agencies observe that the new rules, if adopted, would be akin to the premerger filing requirements in several other jurisdictions, and they are similar in several respects to the components of what Canadian dealmakers already provide in a Competition Act filing.
The new rules, if substantially adopted as proposed, would notably require filing parties to supply:
According to the agencies’ estimate, the HSR filing would take four times as long to prepare under the new rules.
The proposed rules would also eliminate parties’ ability to submit HSR filings (thereby starting the waiting period) on the basis of a letter of intent. Instead, parties could only file upon a draft term sheet or agreement that contains “sufficient detail about the scope of the entire transaction”.
The proposed changes to HSR Act filings represent a further step by the FTC and DOJ under the Biden administration to proactively address concerns that they have not been sufficiently leveraging U.S. antitrust laws to preserve and promote competition. In conjunction with recently proposed revisions to the agencies’ merger guidelines, these changes have the potential to alter the U.S. antitrust premerger regime for many years to come.
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