The Federal Trade Commission voted 5-0 to finalize changes to premerger notifications under the Hart-Scott-Rodino Act, which requires organizations to report large transactions to the FTC and Justice Department for antitrust review.
"Premerger review is a critical task for the antitrust agencies and to do it well, we need information about each deal's potential antitrust risk," Shaoul Sussman, associate director for litigation of the FTC's bureau of competition, said in an Oct. 10 news release. "This rulemaking is a much needed update to address changes in the marketplace that have undermined the agencies' ability to detect and prevent illegal mergers, while at the same time creating a more efficient review process."
Nine things to know:
1. The move aims to help the FTC and Justice Department's antitrust division detect illegal mergers and acquisitions prior to consummation.
2. The American Hospital Association pushed back against the proposed changes in a letter to FTC Chair Lina Khan, arguing that the changes will impose a significant burden on filing parties, "yet are largely unnecessary to screen transactions for closer review."
3. The updated rules require filing parties to "submit more information than the agencies could feasibly review in 30 days," the AHA said in a Sept. 5, 2023, letter. "At best, this is an improvident use of staff and taxpayer dollars; at worst, it is an arbitrary and capricious regulation for which the costs vastly outweigh the benefits."
4. The FTC took the opposing view, arguing that much has changed in the 48 years since the HSR Act was passed, including changes in the economy, corporate structure and investment strategies have reshaped how businesses compete. The number of transactions has soared in recent years, as well as the valuations of these deals.
5. In 2019, only 13.3% of transactions reported to the agencies exceeded $1 billion, according to the FTC. Those high-value transactions now represent 24% of all transactions that come before the agencies. "Transactions have also become increasingly complex in both structure and potential competitive impact," Ms. Khan said.
6. Key reforms included in the final rule require:
- Additional details from the supervisor of each merging party's deal team as well as a small set of high-level business plans related to competition.
- A description of the business lines of each filer to reveal existing areas of competition between the merging parties (including for products or services that are in development) and supply relationships.
- Disclosure of investors in the buyer, including those with management rights.
7. The FTC is also introducing a new online portal for market participants, stakeholders and the general public to directly submit comments on proposed transactions that may be under review. The FTC welcomes information on specific transactions and how they may affect competition from consumers, workers, suppliers, rivals and business partners, among other entities.
8. After the final rule takes effect, the FTC will lift its temporary suspension on early termination of filings made under the HSR Act. Because the final rule will provide the agencies with additional information necessary to conduct antitrust assessments, the rule will help inform the processes and procedures used to grant early terminations.
9. The final rule will take effect 90 days after it is published in the Federal Register.
Click here to read the 460-page rule in full.