DealLawyers.com Blog

In late July, the Uniform Law Commission approved model legislation for a standardized approach to require companies to submit HSR Filings to state AGs and to permit State AGs to share filings with each other. This Freshfields blog notes that the model legislation follows the adoption of baby HSR Acts by a number of states (at least 14) and that these acts will likely “lead to increased scrutiny by State AGs who could have divergent enforcement priorities from the FTC and DOJ.” It notes these key takeaways from the model legislation:

– The model legislation requires parties to submit their HSR Filings to a State AG if (1) a filing entity is principally located in a state or (2) a filing entity’s parent has sufficient sales in a state. The creation of a new state-level filing obligation would add another compliance element to be monitored to avoid a potential liability for failure to notify.
– States may be encouraged or incentivized to pass legislation with provisions that go beyond the template language of the model, with, for example, waiting periods or filing fee requirements.
– Giving State AGs up-front access to HSR Filings opens the door to more state-level review, particularly for those transactions that have an outsized local impact and/or that may not otherwise have attracted the attention of either the FTC or DOJ.

While the model legislation is intended “to alleviate potential information asymmetries between the federal and state merger review processes,” note that “states remain free to enact their own versions of the legislation, which could lead to divergence” and undermine the intent. For example:

One point of potential deviation for some states could be the lack of a pre-closing waiting period.   Many of the  “baby HSR Acts” already on the books include at least a 30-day (or longer) waiting period (and at least one, as long as 180 days). States investigating complicated health care transactions, for example, may want longer lead times to ensure they have time to review thoroughly all areas of potential concern, particularly where such states may not have the same resources as the FTC or DOJ.

A second issue on which states might diverge from the model legislation could be the lack of a filing fee.  States, such as California, have expressed concern that the model statute will not be “meaningful unless it is coupled with significant additional financial support for enforcement.” A recent report on state-level antitrust enforcement by the California Law Revision Commission, an independent state agency, argued that while the federal antitrust authorities receive thousands of filings per year, the cost of review is “defrayed” by filing fees. The fact that the model legislation has no filing fees creates an “unfunded burden” upon a State AG and “may in fact nullify legislative efforts to provide for filing fees” in other contexts.

– Meredith Ervine