Today [June 27], the Federal Trade Commission, with the collaboration and concurrence of the Department of Justice’s Antitrust Division, is issuing a Notice of Proposed Rulemaking (“NPRM”) to amend the Hart-Scott-Rodino (“HSR”) Form and Instructions.1 This marks the first time in 45 years that the agencies have undertaken a top-to-bottom review of the form (the “HSR Form”) that businesses must fill out when pursuing an acquisition that must be notified in accordance with the HSR Act.2

These proposed changes are designed to effectuate the goals that Congress laid out when crafting the HSR Act. Lawmakers passed that statute to solve a specific problem. While the Clayton Act had prohibited mergers whose effect “may be substantially to lessen competition, or to tend to create a monopoly,” antitrust enforcers had struggled to block unlawful mergers prior to their consummation and before they could cause widespread harm. A primary reason was that businesses faced limited obligations to report their proposed mergers to antitrust enforcers and— critically—faced no restrictions on their ability to consummate the deal right away. “Midnight deals” were the norm, allowing companies to close deals quickly to avoid government detection. As a result, even once the FTC implemented a limited merger notification program in 1969,3 the agencies were left seeking post-acquisition relief.

For lawmakers, the agencies’ inability to halt mergers pre-acquisition contravened the prophylactic orientation of the Clayton Act, which was designed to stop monopolies in their incipiency, before they ripened into full-scale violations of the Sherman Act.4 In practice, it would take on average five years for antitrust enforcers to obtain a court order requiring the unwinding of an illegal merger.5 During this time, the acquiring firm would reap ill-gotten gains; the assets and management of the companies would become commingled; and key employees would have often left.6 As a result, post-consummation merger enforcement was often a “costly exercise in futility.”7

The HSR Act addressed this problem by creating for certain transactions a premerger notification regime that included two key requirements: (1) that firms proposing a merger submit information needed to assess preliminarily whether a deal may violate the antitrust laws, and (2) that these firms wait for a short period, typically 30 days, after filing before consummating the deal. As a result of these requirements, enforcers now have a short period after a merger filing comes in to determine whether it is likely to violate the antitrust laws and whether to open an in- depth investigation. Absent any further inquiry from the agencies during that period, the merging parties are free to consummate their deal after the initial waiting period expires, usually 30 days or less.

Much has changed in the 45 years since the HSR Act was passed. Deal volume, for example, has soared. The House Report for the HSR Act estimated that the statute would “requir[e] advance notice” for approximately “the largest 150 mergers annually.”8 Today, the agencies often receive more than 150 filings each month.9 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.

The lack of relevant information is especially problematic during periods of high merger activity, including the recent surge where the number of HSR reportable transactions doubled.10 The Commission’s recent 6(b) inquiry into unreported acquisitions by Apple, Amazon, Facebook (now Meta), Google, and Microsoft during 2010-2019 also highlighted the importance of collecting more information on the firm’s history of acquisitions, including non-horizontal and small prior acquisitions.11 The study captured how these firms structured acquisitions, the sectors they had identified as strategically important for acquisitions, and how these acquisitions figured into the companies’ overall business strategies.12

The proposed revisions to the HSR form draw on learnings from these experiences. They seek to fill key gaps that our staff most routinely encounter, such as inadequate information about deal rationale or the details of how a particular investment vehicle is structured. In addition, the current HSR form fails to capture information about key aspects of competition, such as labor markets or research and development activity. The NPRM proposes to address these and other shortcomings.

Congress also recently recognized that assessing risks to competition in today’s economy will require collecting additional forms of information. The Merger Filing Fee Modernization Act of 2022 requires that merging firms provide data about any subsidies they have received from certain foreign governments and other entities of concern.13 The NPRM proposes changes to fulfill this statutory requirement.

Many of the updates in the proposal are consistent with data already collected by antitrust authorities around the world. For example, competition enforcers in other jurisdictions already require firms to provide narrative responses with information about business lines, the transaction’s structure and rationale, business overlaps, and vertical and other relationships.

Accordingly, much of what would be required in the updated HSR form should be familiar to market participants and their counsel.

This NPRM reflects tremendous work by staff across the FTC, in particular from the Premerger Notification Office, the Office of Policy and Coordination, and the Office of Policy Planning, as well as from throughout the Bureau of Competition, the Office of General Counsel, and the Bureau of Economics. We are deeply grateful to this team for their diligent efforts, as well as to our partners at DOJ for their collaboration.

This proposal is designed to ensure that we can efficiently and effectively discharge our statutory obligations and faithfully execute on the mandate that Congress has given us. We look forward to the public comments.

ENDNOTES

1 The Hart-Scott-Rodino Act of 1978 provides that the FTC, with the concurrence of the Assistant Attorney General, shall require parties to file notifications of transactions that “contain such documentary material and information . . . as is necessary and appropriate” to allow a determination “whether such acquisition may, if consummated, violate the antitrust laws” and to “prescribe such other rules as necessary and appropriate.” 15 U.S.C. § 18a(d)(1), (2)(C).

2 Congress determined that only deals over a certain size should be notified. The original valuation threshold was set at $15 million, but was raised to $50 million in 2000 and is adjusted every year to reflect changes in gross national product. Currently, transactions valued at $111.4 million or more must be reported. See Revised Jurisdictional Thresholds, 88 Fed. Reg. 5,004 (Feb. 27, 2023).

3 In order to assist antitrust enforcers in obtaining preliminary injunctions, the FTC initiated a merger notification program on May 6, 1969. The program was expanded by resolutions in 1972, 1973, and 1974, but proved ineffective because the Commission could not require a waiting period. See Bill Baer, Reflections on 20 Years of Merger Enforcement Under the Hart-Scott-Rodino Act, Speech at the 35th Annual Corporate Counsel Institute, at nn.24-26 (Oct. 31, 1996), https://www.ftc.gov/news-events/news/speeches/reflections-20-years-merger-enforcement-under- hart-scott-rodino-act.