On June 27, 2023, the Federal Trade Commission (“FTC”), with the concurrence of the Assistant Attorney General of the Antitrust Division of the U.S. Department of Justice (together with the FTC, the “Agencies”), announced that it is proposing extensive changes to the premerger notification form, instructions, and implementing regulations under the Hart-Scott-Rodino (“HSR”) Act. With these changes, the Agencies intend to improve and streamline their review of transactions within the initial 30-day HSR Act waiting period and implement certain aspects of the Merger Filing Fee Modernization Act of 2022, one of several antitrust-related laws passed via the December 2022 omnibus spending package. These proposed changes create new information and document requirements that, if implemented, will increase the burden on filing parties.
Importantly, the proposed changes likely will require filing parties to significantly increase both effort and time spent on any HSR Act filing submitted to the Agencies. While the current HSR form largely relies on information that the filing parties have collected in the ordinary course of business, the proposed changes will require parties to create additional information for purposes of the filing, including additional market information and descriptions of a transaction’s rationale and business context. Prior to these changes, much of this information would have been requested only if the Agencies decided to conduct a more in-depth investigation of a transaction.
The Agencies note that these changes do not intend to affect the reportability of transactions but are instead “motivated by the fundamental purpose of the HSR Act,” which requires the Agencies to identify problematic transactions prior to consummation.1 The proposed changes to the HSR form signal a shift away from the current, more objective HSR form, towards a more subjective, narrative-focused form, an approach that is more aligned with merger review processes in the European Union, the United Kingdom, and other foreign jurisdictions.
Of the proposed additional information requests, the FTC has identified the following as “key proposals”:
- details regarding transaction rationale in general;
- the identification of surrounding investment vehicles, corporate relationships, and the structure of involved entities such as private equity investments;
- much greater detail regarding prior acquisitions;
- information related to horizontal products and services and non-horizontal business relationships, including supply agreements;
- internal analysis of or documents relevant to the transaction’s effects, anticipated revenue streams, or existing market conditions; and
- information related to labor market issues and the classification of employees under the most recent Standard Occupational Classification categories.2
The Merger Filing Fee Modernization Act of 2022 requires the Agencies to request information on subsidies received from foreign governments or entities that have been identified as economic or strategic threats to U.S. interests. The proposed changes to the notification form would require submission of information regarding subsidies from foreign entities of concern.3
These changes to the scope of information requested will have important implications for private equity and other investment funds in terms of disclosures. The proposed changes include requests that appear aimed at investment funds, including additional requirements to disclose limited partners who own 5 percent or more of a limited partnership, to disclose minority holdings in entities in the buy-side structure, and to identify officers, directors, and board observers of controlled entities, among others. The FTC recognizes this increased burden and states that a more in-depth understanding of investment funds’ organizational structures is required to complete a thorough review, and the existing HSR form does not adequately capture such funds’ complex structures.4
More generally, the proposed changes, if implemented, will increase the time and burden to prepare the HSR filing for all filing parties. The NPRM asserts that this increased burden is justified by the need for the Agencies to have sufficient information to make an initial assessment of reportable transactions.
The proposed changes were published in the Federal Register on June 29, 2023. Interested parties will have until August 28, 2023 to provide comments online at https://www.regulations.gov/, by mail to the FTC’s Premerger Notification Office, or by telephone.
1 Fed. Trade Comm’n, RIN 3084-AB46, Premerger Notification; Reporting and Waiting Period Requirements (proposed June 27, 2023) (amendments to 16 C.F.R. pts. 801 & 803, pt. 803 Apps. A & B), https://www.govinfo.gov/content/pkg/FR-2023-06-29/pdf/2023-13511.pdf (“NPRM”).
2 Press Release, FTC and DOJ Propose Changes to HSR Form for More Effective, Efficient Merger Review, Federal Trade Commission (June 27, 2023), https://www.ftc.gov/news-events/news/press-releases/2023/06/ftc-doj-propose-changes-hsr-form-more-effective-efficient-merger-review.
3 For additional information on recent antitrust legislation, please refer to our previous V&E Antitrust Update V&E Antitrust Update on the topic.
4 See NPRM at 36.
