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Earlier this week, the FTC and DOJ announced significant proposed changes to the Hart-Scott-Rodino (HSR) Premerger Notification and Report Form. As noted in Chair Lina Khan’s statement, this is the first time the agencies have undertaken a comprehensive review of this form in its almost 45-year history. The FTC also posted this FAQ on the Federal Register Notice page, which explains why these changes are being proposed as follows:

The proposed changes stem from a top-to-bottom review of the information collected in the HSR Form by the federal antitrust enforcers at the FTC and the DOJ’s Antitrust Division (the Agencies) to update the information and improve the efficiency and efficacy of premerger review. Additionally, the proposed changes implement mandates as required by the Merger Filing Fee Modernization Act of 2022

The Agencies use information on the form to deploy their limited resources to those transactions most likely to require in-depth review through the issuance of Second Requests. Insufficient information on the HSR Form burdens both the merging parties and the Agencies to collect and confirm basic information not on the form and conduct a rudimentary competition analysis in the initial waiting period, which is typically 30 days.

Over the past several decades, transactions (subject to HSR filing requirements) have become increasingly complex, with the rise of new investment vehicles and changes in corporate acquisition strategies, along with increasing concerns that antitrust review has not sufficiently addressed concerns about transactions between firms that compete in non-horizontal ways, the impact of corporate consolidation on American workers, and growth in the technology and digital platform economies. When the Agencies experienced a surge in HSR filings that more than doubled filings from 2020 to 2021, it became impossible to ignore the changes to the transaction landscape and how much more complicated it has become for agency staff to conduct an initial review of a transaction’s competitive impact.  The volume of filings at that time also highlighted the significant limitations of the current HSR Form in understanding a transaction’s competitive impact.

This Covington alert summarizes the notable proposed changes, which include expanded document production requirements, narrative responses, identification of officers, directors, or board observers, information relating to prior acquisitions and a diagram of the deal structure, among other things. What does this mean for HSR filers? As John previewed last year, if adopted, these changes could substantially increase the time and cost of HSR filings, even for reportable transactions that don’t raise competition concerns. The alert quantifies that impact as follows:

In particular, the FTC estimates that, if the proposed changes take effect, the average HSR filing would require 144 hours to prepare—nearly 4x the 37 hours that the FTC estimates it takes under the current system. The FTC also estimates that for parties with more complex transactions/filings—which it says constitute 45% of all filings—the proposed changes would result in an HSR filing taking 259 hours to prepare, which is 7x the current average. Assuming that the FTC’s estimates are correct, parties to HSR-reportable transactions will require significantly more time to prepare their filings than the typical 10 business days that many merger agreements contemplate.

In the meantime, as noted in the FTC’s press release, the next step is the publication of the Notice in the Federal Register, which will start the clock on the 60-day comment period.

– Meredith Ervine