3 minute read | October.04.2023
The Federal Trade Commission and Department of Justice Antitrust Division recently took two significant steps to overhaul merger reviews.
Proposed changes to the Merger Guidelines that would push the envelope in certain areas have attracted much attention but largely reflect how the agencies already analyze transactions under the current administration.
By contrast, proposed changes to Hart-Scott-Rodino (HSR) Act notifications would have a dramatic impact on process and timing for all notified deals. These proposals could take effect in 2024.
The public comment period on the new HSR rules has now expired, and while the exact form of the final HSR rules is unknown, parties should take steps now to prepare given the potentially monumental impact on filing burdens and scope of scrutiny.
The agencies investigate only 8-10% of HSR filings. The proposed HSR rules, however, would require parties to submit a Competition Analysis narrative in every notified deal. This narrative would require the parties to detail deal rationale and identify actual and potential competitive overlaps and relationships (or the lack thereof) that might raise antitrust issues.
Today, affirmative advocacy explaining why the transaction will benefit – not harm – competition is necessary only for the few deals that warrant an investigation. This proposed Competition Analysis effectively would require such advocacy for all notified transactions.
Today, the agencies use HSR filings to screen for antitrust issues with a reported deal. The proposed HSR rules, however, are likely to lead to antitrust scrutiny of the parties’ businesses beyond the immediate deal. In particular, filers will need to:
Expect agencies to use these enhanced disclosures to scrutinize for interlocking directorates, entanglements with competitors, roll-up strategies and anticompetitive business practices.
Under the current rules, most parties can be ready to file HSR 5-10 days after signing. The new notification requirements could take weeks to months to prepare, especially for deals that are complex or carry elevated risk. The expanded requirements also give the agencies more opportunities to “bounce” a filing for deficiency, causing the initial HSR waiting period to restart.