A New Era for Merger Filings: Final HSR Rule Imposes More Burden (But Far Less than Previously Proposed Rule)

On October 10, the Federal Trade Commission and the Antitrust Division of the Department of Justice issued the Final Rule amending the Premerger Notification Rules and propounding new Hart-Scott-Rodino (“HSR”) filing forms and instructions.¹ Back in April, a government official said that the new Rule would come in “weeks, not months.” The delay – and seemingly many of the changes – may be due to the appointment of the two Republican FTC Commissioners in March. It seems that negotiations between them and the three Democratic Commissioners and the Antitrust Division may have taken some time, which resulted in significant changes to the Rule initially proposed in June 2023, when the Commission consisted of only the three Democratic Commissioners.²

While there will still be a significant increase in the burden and cost from current filings, there is a drastic reduction from the dramatic and incredibly burdensome proposed Rule. Whatever the reason or negotiations behind the scenes, the Final Rule is far less burdensome than the Proposed Rule.³

Ten of the 29 provisions in the proposed Rule are excluded entirely from the Final Rule:

1. Labor Market and Employee Information
2. Drafts of Transaction-Related Documents
3. Organizational Chart of Authors and Recipients
4. Other Types of Interest Holders that May Exert Influence
5. Expand Current 4(d)(iii) to Include Financial Projections to Synergies and Efficiencies
6. Deal Timeline
7. Provision of Geolocation Information
8. Identification of Messaging Systems
9. Litigation Hold Certification Language
10. Identification of Former Names Proposal

Other significant modifications from the proposed Rule include:

• Prior Acquisitions – Final Rule retains the five-year lookback and $10 million sales/assets threshold that existed in prior iterations of the HSR rules.
• Other Agreements Between the Parties - filers are not required to produce or describe agreements between the parties; instead, they must only, via checkbox, identify types of agreements between them, if any.
• Officers, Directors, and Board Observers – The Final Rule excludes reporting on board observers; reporting is limited to acquiring person only; and is limited to officers and directors of entities in overlap industries.
• 4(c) Documents by or for Supervisory Deal Team Lead(s) – The Final Rule is limited to apply only to one individual (not the plural “leads” like in the proposed rule) supervisory deal team lead
• Supply Relationships – The Final Rule requires only “brief” descriptions rather than a narrative; excludes “Select 801.30 Transactions”⁴; has a de minimis threshold; and limits descriptions to a business assessment rather than an antitrust analysis.
• Overlap Products and Services – The Final Rule requires only “brief” descriptions rather than a narrative; excludes “Select 801.30 Transactions”; and limits the description to a business assessment rather than an antitrust analysis.
• Ordinary Course Documents (Periodic Plans and Reports) – The Final Rule excludes “Select 801.30 Transactions” and is limited to only require documents provided to Chief Executive Officers.
• Identification of Limited Partners – The Final Rule limits disclosure requirements for limited partners who do not have management rights.
• Description of Entity Structures and Organizational Chart for Funds and MLPs – The Final Rule eliminates the proposed Rule’s requirement to create an organizational chart.
• Transaction Diagram – The Final Rule excludes “Select 801.30 Transactions” and filing is only necessary if diagrams previously existed (i.e., no need to create diagrams).
• Mandatory Identification of Foreign Jurisdiction Reporting by Both Parties – The Final Rule is limited to the acquiring person.
• Requiring a draft agreement or term sheet and transaction specific agreements for filings on non-definitive agreements – The Final Rule clarifies the scope and provides more details about the information required.
• Transaction Rationale – The Final Rule excludes “Select 801.30 Transactions.”
• Voluntary Waivers for State AGs and International Enforcers – The Final Rule returns to the current voluntary status.
• Defense or Intelligence Contracts – The Final Rule is limited to contracts generating $100 million or more of revenue and only if there is an overlap or supply relationship.
• Document Log Requirements – The Final Rule limits the requirement to identifying authors in certain and limited circumstances.

Nevertheless, even the Republican Commissioners agreed that updates to the old HSR filing form and rules were needed, and that staff required more information to make initial decisions on whether to open fuller investigations (via so called “Second Requests”), given that by law staff has only 30 days to make that decision.⁵ As a result, there are significant changes from current filings, generally to require a significant number of required additional documents and amount of required information. The additional burden imposed by the new Rule, by the government’s own estimate, will (at least) double the time and cost of preparing a filing.⁶

On the other hand, Early Terminations will be re-instated, after a three and a half year hiatus that was touted to be “brief” and “temporary.” They will be re-instated “because the Final Rule will provide the agencies with additional information necessary to conduct antitrust assessments, [and therefore] the rule will help inform the processes and procedures used to grant early terminations.”

The current HSR form is the same for both acquirer and the acquired entity. In a notable change, there are new separate forms for acquirer and acquired entity, with the acquired entity required to provide less information and documentation than the acquirer.

The Final Rule will take effect in 90 days. In the interim, the current rules and form will continue to apply.

More details to come with time to digest the almost 400 pages of commentary and publication of supporting documents.

¹ HSR filings are required for all transactions with a value greater than $478 million and for transactions valued between $119.5 million and $478 million when the parties are of sufficient size. HSR thresholds are updated annually by law.
²See Concurring Statement of Commissioner Andrew N. Ferguson
³See Notice of Proposed Rulemaking for the Premerger Notification, Reporting and Waiting Period Requirements which implements the Hart-Scott-Rodino Antitrust Improvements Act
⁴ The Instructions to the HSR reporting form define a “Select 801.30 Transaction” as “A transaction to which § 801.30 applies and where (1) the acquisition would not confer control, (2) there is no agreement (or contemplated agreement) between any entity within the acquiring person and any entity within the acquired person governing any aspect of the transaction, and (3) the acquiring person does not have, and will not obtain, the right to serve as, appoint, veto, or approve board members, or members of any similar body, of any entity within the acquired person or the general partner or management company of any entity within the acquired person. Executive compensation transactions also qualify as select 801.30 transactions.”
⁵See Concurring Statement of Commissioner Andrew N. Ferguson and Statement of Commissioner Melissa Holyoak
⁶ Filing fees are not changed by the Rule. Reportability thresholds are also not changed. Both are updated annually by law.

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