On June 27, 2023, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) jointly announced a proposed overhaul of the Hart-Scott-Rodino (HSR) Act filing requirements. The proposed changes, detailed in a formal Notice of Proposed Rulemaking (NPRM), are sweeping and will substantially increase the burden and expense required to complete the HSR notification and report form. The FTC estimates that the proposed changes, if implemented, will require approximately 12-222 additional hours to complete a filing and $350 million annually in labor costs for executives and attorneys.
Background. The HSR Act and implementing rules require parties to file a notification and report form with the FTC and the DOJ to notify the agencies of certain transactions and to observe a mandatory waiting period prior to closing (usually 30 days). During the waiting period, the agencies will review the transaction to determine whether it poses no antitrust risk and can close, or whether the transaction poses a risk of harm to competition and therefore warrants additional investigation and review.
The proposed changes to the preclosing notification requirements are the most significant since the HSR Act was implemented in 1976. In a statement issued in conjunction with the NPRM, FTC Chair Lina Khan states that the proposed changes address gaps in the information that parties are currently required to submit with their filings that hinder the ability of the agencies to perform an adequate review during the initial waiting period. As discussed in greater detail below, the agencies now propose to require parties to submit extensive information with their filings relating to deal rationale, key horizontal (competitive) and vertical (e.g., supply chain) relationships between the parties, details on the parties’ organizational structure and management, and minority investors. The changes would also require the parties to provide information relating to topics of recent antitrust enforcement activity, including interlocking directorates and the labor market.
Noteworthy Changes
Practical Guidance. According to the agencies, the changes proposed to the HSR notification process would add significant burdens to parties filing HSR notifications. The agencies predict that, on average, the proposed changes will increase the time required to prepare an HSR notification on average by 107 hours (ranging from 12 hours to 222 hours per filing) and cost $350 million annually in additional labor costs for executives and attorneys. These changes will therefore dramatically impact transaction timing and expense. Interested parties will have 60 days after the date the NPRM is published in the Federal Register to submit comments. If your company has questions about the HSR process, the proposed rule, or wants to submit a comment regarding the proposed rule, please feel free to contact Beau Buffier, Michelle Yost Hale, Ben Labow, Kim Biagioli, Todd Hahn, or another member of the antitrust and competition practice at Wilson Sonsini Goodrich & Rosati.