FTC Issues Final Rule Affecting HSR Act Premerger Notification Requirements

On October 10, 2024, in part to implement certain provisions of the Merger Filing Fee Modernization Act of 2022, the US Federal Trade Commission (FTC), with the concurrence of the Department of Justice (DOJ), issued a final rule (Final Rule) to amend the Premerger Notification Rules of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). Pursuant to the Final Rule, the HSR Act (which was originally signed into law so that certain transactions would be subjected to a premerger antitrust risk assessment by the FTC and DOJ) will experience the most sweeping changes to its filing requirements since its inception.

Accordingly, for most transactions that are subject to the HSR Act, the amount of time needed to complete a filing is expected to significantly increase once the requirements of the Final Rule become effective (which is expected to be in January 2025).

In terms of new requirements of the Premerger Notification Rules, the Final Rule implements the items described below:

Competitive Overlap and Supply Relationship Descriptions. In conjunction with the new versions of the HSR Act forms that are submitted by the acquiring party and acquired party respectively, descriptions of competitive overlaps and supply relationships will need to be provided. For example, this requirement will include the filing parties giving the most recent year’s sales data for overlapping products or services and a description of the categories of customers and clients that purchase such products or services, in addition to various other items of information.

Disclosure of Subsidy from Foreign Entity or Government of Concern. Any subsidy received by a filing party in the prior two years from a foreign entity or government of concern (which would presently include China, Russia, Iran, and North Korea) will need to be disclosed.

Disclosure of Officers and Directors. To the extent there is an overlap of products or services between the acquiring and acquired parties, the acquirer may need to list recent officers and directors that have responsibility for the development or sale of overlapping products.

Disclosure of Ownership Structure. A description of the ownership structure (and potentially an organizational chart) of the acquirer will now be required.

Additionally, with respect to expansions on existing requirements, the following changes for filings under the HSR Act should also be noted:

Business Documents (f/k/a Item 4(c)/(d) Documents). The Final Rule will require that a greater degree of documents be produced than are presently required pursuant to Items 4(c) and 4(d) of the current forms submitted by the filing parties. These documents include (1) transaction-related documents covering competitive topics from the person designated as the supervisory deal team lead, (2) regularly prepared reports provided to the CEO that discuss competitive topics related to overlapping products or services, and (3) any documents responsive to Items 4(c) or 4(d) that are provided to any board member.

English Translations of Documents. Any documents that are written in a foreign language must be translated to English prior to submission.

Prior Acquisition Information. Both the acquiring and the acquired parties (instead of just the acquirer) will have to disclose relevant prior acquisitions which took place during the five years preceding the filing.

Minority Owner Information. A greater swath of minority owners and indirect interest holders may need to be disclosed, along with certain entities positioned between the acquirer and its ultimate parent entity.

Other notable items that will result from the Final Rule taking effect include the ability for the FTC to once again grant requests by the filing parties for early termination of the review period (granting of early terminations has been suspended since early 2021), and the introduction of an online portal through which third parties may submit issues or other comments in regard to a particular transaction.

While the foregoing provides a brief overview of both the new and expanded requirements of making a filing pursuant to the HSR Act, the specifics of any filing will depend on the facts and circumstances surrounding the parties involved and the nature of the transaction.

Although being subject to a pre-transaction assessment by the FTC and DOJ is only applicable to those qualifying parties and transactions which surpass certain dollar thresholds, in the event that the particulars of a transaction requires the parties to make a filing under the HSR Act, it is important that the information disclosures and the completed form, produced and submitted to the FTC and DOJ, appropriately follow the requirements of the Premerger Notification Rules then in effect.

Whether subject to the reporting requirements of the HSR Act or not, the attorneys at Dvorak Law Group are available to provide analysis and insight on the transaction process to help guide you and your business through any type of merger, sale, or acquisition.