Christopher M. Brown, Associate

On October 10, 2024, the Federal Trade Commission (“FTC”) unanimously approved the long-awaited changes to the pre-merger reporting requirements under the Hart-Scott-Rodino (“HSR”) Antitrust Improvements Act of 1976. Barring a successful legal challenge, the new reporting requirements are expected to take effect in early 2025. The new changes will significantly increase the cost and burden to prepare an HSR filing for most transactions. The FTC estimates that the time required to prepare an HSR filing under the new requirements will increase by an average of 68 hours, and, for more complicated transactions, up to 120 hours. Parties contemplating transactions that require reporting under the HSR Act should start preparing for these changes now, before deals are finalized, and should account for the additional time required.

Background

The FTC first announced its plan to overhaul the HSR reporting requirements in June 2023, stating at the time that the proposed changes would allow it to more effectively and efficiently review transactions for anticompetitive effects. The Final Rule announced follows a lengthy public comment period and includes substantial modifications to the FTC’s original proposed changes. In its public announcement, the FTC stated that the Final Rule attempts to address “critical gaps in the information provided in the [HSR] form that, over time, have impeded the detection of mergers that may violate the antitrust laws.” The FTC stated that additional guidance for complying with the new filing requirements will be issued in advance of the Final Rule taking effect.

Key Changes

• Expanded Submission of Documents. One of the most onerous changes under the Final Rule will be the obligation to gather and submit certain “ordinary course” documents that are not prepared for specific purposes of analyzing the transaction at issue. This change will require filing parties to expand the scope of their Item 4(c) and 4(d) document canvasses. Additionally, documents considered responsive to Item 4(c) and 4(d) will no longer be limited to those prepared by or for officers or directors, but will now include certain documents prepared by or for supervisory deal team leads. 
• Narratives. The Final Rule will require narrative descriptions of: (1) the parties’ business operations or operating businesses; (2) transaction rationale (citing to documents within their filings); (3) “overlap” between the parties, including current (planned) products or services that compete with the other party, along with sales and customer information from the previous year; and (4) “supply relationships” detailing the products, services, or assets—limited to sales and purchases representing at least $10 million from the previous year—sold to, or purchased from, the other party, or a competitor of the other party, and the sales information of top suppliers.
• Expanded Disclosures of Minority Holders and Prior Transactions. The Final Rule will require limited partnerships to disclose both general and limited partners with certain management rights. Additionally, the Final Rule will require both acquiring and acquired parties to report a broader range of prior acquisitions within the five years preceding the filing. This change is designed to facilitate increased scrutiny of “roll-up” transactions.
• Filing on Letters of Intent. Under the Final Rule, parties filing on the basis of a letter of intent must provide a document that identifies the parties, structure of the transaction, scope of the acquisition, calculated purchase price, estimated closing timeline, employee retention policies, post-closing governance and transactions, and other material terms. 
• Reporting on International Merger Control. The Final Rule requires acquiring persons to disclose whether the transaction is subject to merger control in a foreign jurisdiction and, if so, provide a list of each jurisdiction in which it has filed, is preparing to file, or has a good faith belief it will need to file. Such reporting is voluntary under the current version of the HSR form. 
• Foreign Investments & Defense Contracts. Under the Final Rule, parties must identify any subsidy received from any foreign entity or government of concern, as well as products produced in areas of concern that are subject to countervailing duties or an investigation of countervailing duties. Filers must also identify government contracts and bids with the intelligence community that are valued at $100 million or more and involve specific NAICS industry overlap or overlapping product or services.
• Online Portal for Public Comment on Proposed Transactions. The FTC announced a new online portal for the general public to comment on pending transactions that may be under review by the FTC and DOJ. This portal is intended for exclusive use by the FTC and DOJ in their review of transactions, and is not searchable by the public.
• Return of Early Termination. The FTC announced that it would lift the longstanding moratorium on Early Termination for transactions that do not pose antitrust concerns. 

Conclusion

Filing an HSR notification is about to become substantially more complex and time-consuming. Parties contemplating transactions for the beginning of 2025 should consider expediting and/or filing based on a letter of intent before the end of the year. Merging parties and their counsel should plan ahead for the new reporting requirements and draft their transaction documents to allow sufficient time to prepare their filings. Additionally, parties should be mindful of the expanded scope of documents and narrative descriptions that will need to be included in their filings.

If you have any questions regarding the Final Rule or the HSR Act, please contact a member of our Antitrust Practice Group.