Could FTC’s Updated Premerger Notification Form Usher Heavier Filing Burden?

The Federal Trade Commission and Department of Justice Antitrust Division on October 10 announced approval of long-awaited changes to a premerger notification form that provides information used to screen proposed deals. Critics fear updating the form could also double the filing burden and costs for businesses.

The final rule’s changes represent the first significant updates to the form – known as the HSR form –  since it was established in 1978 following passage of the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Updates were designed to address critical gaps in the information submitted by companies, which hindered the government’s ability to detect mergers that may violate the antitrust laws, according to the FTC.

“The Commission is responding to changes in corporate structure and deal-making, as well as market realities in the ways businesses compete, that have created or exposed information gaps that prevent the agencies from conducting a thorough antitrust assessment of transactions subject to mandatory premerger review,” the FTC said in a release.

The rule requires businesses to provide additional information that the FTC said is necessary to help it determine which deals will require in-depth antitrust investigations or the issuance of second requests. The rule will also reduce the current burden on third parties, including small businesses, that the government routinely relies on to fill in existing information gaps, the FTC said. The final rule also requires parties to disclose information on subsidies received from certain foreign governments or entities that are strategic or economic threats to the United States as required by the Merger Filing Fee Modernization Act of 2022.

“This rulemaking is a much-needed update to address changes in the marketplace that have undermined the agencies’ ability to detect and prevent illegal mergers, while at the same time creating a more efficient review process,” said Shaoul Sussman, Associate Director for Litigation of the FTC’s Bureau of Competition.

Essentially, the idea behind the changes is to streamline the review process upfront by supplying antitrust regulators with more useful information about proposed transactions. That might work for the regulators, but the legal community broadly agrees the changes, in the words of attorneys from Freshfields, “will materially increase the time, cost and burden of HSR filings.” In a memo on the final rules, the Freshfields lawyers estimated a process that usually took 37 hours to complete would now require about 70 hours. Apparently, the pain will be especially acute for private-equity firms, given their expansive webs of investors and affiliates.

The FTC’s likely response to objections to the new rules: Tell it to the judge. Notably, the FTC’s commissioners voted unanimously in favor of the changes after dialing back some of the proposed changes, including labor-related disclosures. That kind of alignment indicates the commissioners feel confident the new rules will hold up in court.