On June 27, 2023, the Federal Trade Commission and Antitrust Division of the Department of Justice (collectively, the Agencies) proposed plans to expand and reorganize the Hart-Scott-Rodino (HSR) Form and Instructions and the premerger notification rules implementing the HSR Act. This proposed overhaul stems from the first top-to-bottom review of the HSR Form and Instructions in 45 years and is the most recent example of increased antitrust scrutiny under the Biden Administration.
In the 133-page Notice of Proposed Rulemaking, the Agencies highlight issues they continue to encounter with the outdated HSR Form given the dynamic nature of modern markets, the importance of acquisition strategies to success and market growth, and increasing concerns that the Agencies’ review does not sufficiently address concerns with non-horizontal mergers. The Agencies emphasized that the current HSR Form leads to key gaps in information necessary to evaluate the potential competitive impact of a deal. As examples, the Agencies alluded that the HSR Form and Instructions as-is provides inadequate information about deal rationale; gives little to no details of how a particular investment vehicle is structured; and fails to capture information about key aspects of competition, such as labor markets and research and development activity. Put simply, the Agencies concluded that the current HSR Form yields insufficient information, increasing the burden on both the merging parties and the Agencies.
Proposed changes
The Agencies propose several changes to the current HSR Form, explanatory and ministerial changes to the premerger notification rules, and necessary amendments to the HSR Form Instructions to effect the proposed changes. Key proposals that significantly alter the requirements for merging parties are laid out below and categorized in accordance with the impacted sections of the HSR Form.
General instructions and information
- Provide a translated version of all foreign language documents.
Ultimate parent entity information – organization structure, transaction details, agreements, and timeline
- Provide a diagram of the deal structure along with a corresponding chart that explains the relevant entities and individuals involved in the transaction.
- Provide a draft agreement or term sheet on the deal. Merging parties may no longer submit an indication of interest, non-binding letter of intent, or agreement in principle.
- Identify and explain all strategic rationales for the transaction, including horizontal product or service overlaps, and for each potential future horizontal product or service overlap, provide projected revenue and an estimate of the volume to be sold.
- Identify the officers, directors, or board observers of all entities within the acquiring person and acquired entity, and identify other entities for which these individuals currently serve, or had served within the two years prior to filing, as an officer, director, or board observer.
- Identify and provide certain details on creditors and entities that hold non-voting securities, options, or warrants totaling 10% or more.
- Provide a detailed timetable for the transaction along with any important deadlines for closing or terminating the transaction.