The U.S. Chamber of Commerce sued the Federal Trade Commission on Jan. 13, arguing its changes to premerger notification rules under the Hart-Scott-Rodino Act are "unnecessary and unlawful." The FTC finalized changes to premerger notifications in October.
Six things to know:
1. The HSR changes would help the FTC and the Justice Department's antitrust division more effectively screen mergers and acquisitions for potential competition issues within the waiting period, which is generally 30 days. The FTC said that this competition review is important to identify deals that require in-depth investigations to determine whether they would violate antitrust laws and, if so, to seek to block the proposed transaction.
2. The HSR Act and its implementing rules related to M&As involve completing HSR Forms and waiting a specified period of time before completing the transaction. Key changes include:
- Detailing transaction rationale and corporate relationships.
- Providing information on horizontal and non-horizontal business relationships, including supply agreements.
- Requiring projected revenues, market analyses and structure of entities involved, such as private equity firms.
- Disclosing details of previous acquisitions.
- Disclosing information that screens for labor market issues by classifying employees based on the Bureau of Labor Statistics' Standard Occupational Classification System categories.
3. The Chamber of Commerce complaint argues that the FTC lacks the authority to unilaterally impose new premerger notification requirements under the HSR Act without proper rulemaking procedures. The lawsuit alleges the FTC bypassed the Administrative Procedure Act, which requires notice-and-comment rulemaking for such significant changes.
4. The changes to the HSR for M&As would impose a significant burden on filing parties, "yet are largely unnecessary to screen transactions for closer review," the American Hospital Association wrote in a Sept. 5 letter to FTC Chair Lina Khan. "The amended rules would require filing parties to submit more information than the agencies could feasibly review in 30 days."
"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," the AHA wrote.
5. The FTC pushed back, arguing that in the 45 years since the HSR Act was passed, deal volume has surged. "The House Report for the HSR Act estimated that the statute would 'require advance notice' for approximately 'the largest 150 mergers annually,'" FTC Chair Lina Khan said in a June 27 statement on the proposed changes. "Today, the agencies often receive more than 150 filings each month. Transactions are increasingly complex, in both deal structure and potential competitive impact. Investment vehicles have also changed, alongside major transformations in how firms do business."
6. The Chamber of Commerce seeks judicial intervention to invalidate the new rules and prevent the FTC from enforcing them without adhering to lawful rulemaking procedures.
The FTC declined to comment on the lawsuit.