On October 10, 2023, the Federal Trade Commission (FTC) unanimously approved sweeping changes to the Hart-Scott-Rodino (HSR) Act premerger notification rules—the first major update in over four decades. Backed by the Antitrust Division of the Department of Justice (DOJ), the new rules, known as the Final Rule, aim to enhance antitrust scrutiny while reducing the burden of third-party information requests. However, these changes significantly increase the complexity, preparation time, and costs for reporting parties.

Set to take effect in January 2025, the Final Rule introduces nuanced transaction tiers, reinstates early termination for low-risk deals, and mandates detailed disclosures regarding strategic rationales, competitive overlaps, and prior acquisitions.

KEY CHANGES UNDER THE FINAL RULE

1. Transaction Tiers and Tailored Disclosures

The Final Rule introduces three categories of transactions, each with specific filing requirements:

• Select 801.30 Transactions: Cover low-risk deals like certain executive compensation agreements, exempting parties from many new requirements.
• Non-Overlap Transactions: Transactions without horizontal or vertical competitive overlaps are subject to fewer disclosure requirements.
• Overlap Transactions: Deals with competitive or supply overlaps must meet the most stringent disclosure requirements, with buyers shouldering the heaviest burden.

2. Early Termination and Filing Standards

• Early Termination Returns: The Agencies may now grant early termination of the 30-day statutory review period for low-risk transactions.
• Stricter Filing Criteria: Filings based on incomplete agreements are no longer accepted. Parties must provide detailed letters of intent or term sheets.

3. Enhanced Disclosure Requirements

The Final Rule mandates disclosure of:

• Strategic Rationales: Parties must outline the deal’s purpose and submit supporting documents.
• Product and Supply Details: Filers must describe overlapping products, services, and supply relationships, along with customer categories and top customers.
• Prior Acquisitions: Both parties must report acquisitions from the last five years for overlap transactions.
• Government Contracts: Buyers must disclose contracts worth $100 million or more with the Department of Defense or Intelligence Community.
• Subsidies: Filers must report foreign government subsidies linked to strategic threats to the U.S.

4. Additional Documentation

• Comprehensive transaction agreements, exhibits, and side letters.
• Competitive analyses from deal team supervisors and business plans related to overlapping sectors.
• Translations of foreign-language documents into English.

IMPLICATIONS FOR MERGERS AND ACQUISITIONS

The updated rules necessitate earlier preparation and extended timelines for HSR filings. Reporting parties must carefully evaluate potential overlaps and begin assembling the required disclosures well in advance. Transaction agreements should include flexible filing deadlines to accommodate these changes.

While the added complexity may strain businesses, the FTC and DOJ assert that the new requirements will streamline antitrust reviews and reduce reliance on third-party data requests.

Stay Ahead of the Curve
Navigating the complexities of the revised HSR Act rules requires strategic planning and legal expertise. For tailored guidance on compliance and reporting, contact The Law Offices Of Destiny Aigbe PLLC.