FTC finalizes major overhaul of US merger control regime, increasing burden for merging parties

The Federal Trade Commission announced on October 10, 2024 that, in collaboration with the Department of Justice (DOJ), it had finalized rules proposed in June 2023 that will significantly change the reporting of mergers and acquisitions under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act).

The final rule and new HSR form will go into effect 90 days after publication in the Federal Register, which should occur in the coming days. Notably, the vote to adopt the new HSR Form and rules was unanimous despite the recent partisan divide at the agency. Democratic Commissioners, Chair Lina Khan and Commissioners Slaughter and Bedoya issued a statement and Republican Commissioners Holyoak and Ferguson each issued separate statements regarding the final rule. According to Federal Trade Commission (FTC) Chair Lina M. Khan, the final rule will ensure that the agencies have the information necessary to determine whether a proposed deal risks violating the antitrust laws.  

At the same time, the FTC also announced that it would lift its 2021 suspension of grants of early termination. Historically, filing parties had the option to request early termination of the initial 30-day HSR waiting period and close the transaction immediately upon such request being granted. The DOJ and FTC grant such requests in transactions unlikely to reduce competition.

Although scaled back from the agency’s 2023 proposal, the final rules will materially increase the burden on merging parties because it requires significantly more information than is currently reported on the HSR form. Indeed, the FTC’s updated estimate is that the number of hours required to prepare an HSR filing under the final rule will increase from the current amount of time required by an average of 68 hours. The key changes to the HSR form necessitating these additional hours include:

• The production of additional transaction documents from the supervisor of each merging party’s deal team.
• The production of certain high-level ordinary course business plans and reports shared with senior management.
• A narrative description of the business lines of each party, as reflected in the parties’ ordinary course business documents, to reveal any existing competition between the parties, including for pipeline products.
• A narrative description of any supply relationships between the parties.
• Increased disclosure about the buyer’s officers, directors, and  investors, including those with management rights.
• Requiring both parties to report information regarding past acquisitions, which the FTC states will help to identify so-called “roll-up strategies.”
• In the event of filing on an LOI or Term Sheet, greater detail regarding the deal terms, including: the structure of the transaction, the scope of what is being acquired, the calculation of the purchase price, an estimated closing timeline, employee retention policies, transaction expenses and other key terms.
• Translations of foreign-language documents.
• As required by Congress, the final rule also requires merging parties to disclose information on subsidies received from certain foreign governments that are strategic or economic threats to the United States.

According to Assistant Attorney General of the DOJ’s Antitrust Division, the additional information provided under the new rule will ensure the agencies can devote resources to the most important issues and will reduce burden on third parties and other market participants from whom the agencies have historically sought information about proposed transactions.

Although the changes are significant, they exclude several of the requirements in the FTC’s initial proposal, which was announced on June 27, 2023. According to Commissioner Ferguson the June 2023 proposed rules would have imposed “onerous, unlawful requirements that could not have survived judicial review.” Although both Ferguson and Holyoak indicated that the final rule did necessarily match their preferences, Ferguson called the final rule a “lawful improvement over the status quo.”

Unlike the FTC's initial proposal, the final rule poses different requirements on acquiring persons and acquired persons. To accommodate those differences, for the first time, there will be a unique form required for an acquiring person and for an acquired person. 

Read the full text of the 460-page Federal Register notice.

Key takeaways

• The new rules will go into effect in approximately 90 days (following publication in the Federal Register).
• Although significantly less burdensome than the FTC’s June 2023 proposal, the final rule will greatly increase the burden on filing parties, particularly buyers.
• The estimated average increase of 68 additional hours that will be required to prepare a filing will likely significantly lengthen the time and expense associated with preparing an HSR filing.
• For transactions reportable under the new regime, it will be critical to ensure that sufficient time is available to prepare the filing. 
• Companies planning an HSR reportable transaction that will file after the rules go into effect should consider whether their deal documents provide for sufficient time necessary to prepare a filing under the new regime.
• Parties that wish to file on an LOI or Term Sheet will need to have a level of certainty regarding deal structure and price that is currently not required.
• Subject to the agencies’ future practice for granting early termination, the return of early termination should provide some relief to parties that file for open market purchases of stock or conversion of stock options, acquisitions of non-controlling stakes or other transactions where the parties do not have a competitive overlap or existing business relationships. 

Norton Rose Fulbright's antitrust team regularly assists clients in all aspects of merger control in the US and around the world, including analyzing the reportability of transactions under the HSR Act and steering transactions through the US merger control review process.