[Podcast] Antitrust Insights: New HSR Rules Now in Effect

On this episode of Ropes & Gray’s Antitrust Insights podcast series, seasoned antitrust partners and former FTC and DOJ prosecutors Jonathan Klarfeld and Samer Musallam discuss significant changes—and their substantial impact on businesses—to the Hart-Scott-Rodino (“HSR”) rules, which went into effect on February 10, 2025, with private equity transactions partner Chau Le. The discussion covers expanded data and disclosure requirements, enhanced business and competition documents, and increased scrutiny of prior acquisitions. They also offer practical advice on navigating these new rules, emphasizing the importance of early engagement with antitrust counsel and diligent compliance efforts. *Since the recording of this podcast, the new FTC Chair, Andrew Ferguson, has publicly endorsed the new HSR rules.

Transcript:

Chau Le: Welcome to Antitrust Insights, your go-to podcast for the latest antitrust law and policy. Today, we’re diving into the significant changes to the Hart-Scott-Rodino (“HSR”) rules. These changes will have a substantial impact on all businesses, but private equity firms, in particular. For this episode, I’m your host, Chau Le. I’m a partner in the private equity (“PE”) transactions group at Ropes & Gray. Joining me to break down these changes and offer practical advice are my amazing partners at Ropes & Gray, Jonathan Klarfeld and Samer Musallam, both seasoned antitrust lawyers and former FTC and DOJ prosecutors. Welcome, Jonathan and Samer.

Jonathan Klarfeld: Thanks, Chau. Good to be here with you.

Samer Musallam: Happy to join the discussion.

Chau Le: I’m excited to talk to you guys because I have seen you do incredible things for our clients, and I know that you’re going to give them incredible advice today. Let’s start with an overview of the new HSR rules. Jonathan, can you walk us through the key changes?

Jonathan Klarfeld: Sure. These have been a long time coming, as most anyone who’s interested enough to be listening to us today knows. They were first proposed in June 2023, and weren’t issued in their final form until this past October. And the changes: the agencies have introduced pretty significant revisions to the HSR notification form and the related instructions to enhance, to augment, and just maybe overburden pre-merger reviews, though, at least not quite as many revisions as were on tap in the initial rule publication. So, just running through the biggest of them as a category, key changes include:

• The expanded data and disclosure requirements. Basically, more detailed descriptions of the transaction, a new provision regarding its strategic rationale that actually needs to be reported in the form, new narratives of competitive overlaps (more like some ex-U.S. regimes)—both horizontal and vertical in terms of those overlaps—and descriptions and information related to supply relationships are now required.
• Also, the other big category, enhanced business and competition documents. More documents will be coming in including through someone known as the “supervisory deal team lead,” in addition to drafts that are going to the board and other ordinary course documents from officers and directors that need to be collected now.
• There are more disclosures around prior acquisitions intentionally going after roll-up acquisition strategies that, obviously, some in the PE area have used.
• There’s more information on certain ownership disclosures. Disclosures of minority holders with a 5% or greater stake in all the entities within the acquiring person silo is now going to be required.
• Then, just some typical early investigation-type information is going into the filing itself, things like top 10 customers and suppliers. Parties have to list their top 10 customers and suppliers in overlap deals, providing really a head start for the agencies on outreach to the market that otherwise would have started later in the process.

Chau Le: Thanks, Jonathan. You mentioned the supervisory deal team lead—that’s a new term for me. Can you explain who qualifies as one?

Jonathan Klarfeld: Sure, and it’s a new term for you because it’s a new term for all of us. A supervisory deal team lead, as described in the guidance, is an individual primarily responsible for supervising the strategic assessment of the deal—often, that’s going to be the senior-most member of the deal team responsible for supervising the strategic assessment. The guidance conflicts in places, but generally speaking, this person’s going to be the one who oversees the transaction review but isn’t an officer or a director, although, it’s also contemplated that in certain circumstances, that might be the case.

Chau Le: This seems like a significant change. Samer, what documents need to be submitted from the supervisory deal team lead?

Samer Musallam: Yes, I agree—it is a significant change. With respect to documents, the new rules require the filer to submit the final documents prepared by or for the supervisory deal team lead that look at the acquisition in terms of market shares, competition, competitors, markets, and the potential for sales growth or expansion into new products or regions. These have traditionally been referred to as “Item 4” documents or documents that contain Item 4 material.

With the new rules, if you edit a draft document containing Item 4 material before sharing it with the board or investment committee members, you only need to produce the final version. However, if you share such a draft with a board member or member of the investment committee, you’ll generally need to include it in the filing. But what happens if a document that contains Item 4 material goes to the supervisory deal team lead but isn’t shared or never gets finalized? In that case, you have to produce the most recent version that’s in the supervisory deal team lead’s files.

Chau Le: Jonathan, I know a lot of our listeners are used to submitting materials like IC decks as Item 4 materials. How do these new regulations differ from the current requirements?

Jonathan Klarfeld: Generally speaking, under the current rules, it’s only the final versions that are going into the filing itself—versions that were circulated to the entire board or the latest version at the time of filing were those that were required. Under the new rules and the related guidance, drafts shared with any member of the board, or its IC equivalent, have to be submitted, even if they aren’t finalized—and that’s the biggest direct change. Drafts containing Item 4 information that go to the supervisory deal team lead must also be submitted if there is no final version —that’s what Samer was just referring to before. Now, there’s some nuance that comes into play if someone has dual hats as between the IC or board, and their role as a supervisory deal team lead, depending on the capacity in which that individual receives the draft. That guidance is ongoing—it has come out since the change in administration—but the working assumption is that materials that hit a board or IC member absent other circumstances, if that material hits a board or IC member with Item 4 content, then it’s going to be going into the filing even if it’s a draft.

Chau Le: That is a really helpful rule of thumb. Thanks, Jonathan. Samer, how do these changes specifically impact our private equity clients?

Samer Musallam: Chau, that’s a great question.

• The first thing is that it increases the reporting burden. Private equity firms are going to now need to gather and provide a lot more information from both the sponsor and the portfolio companies. The agencies actually estimate that the new rules will add about 68 hours, on average, to the time it takes to prepare an HSR filing.
• The second major impact is a real increased scrutiny of prior acquisitions. The new rules will require filers to provide a list of certain relevant prior acquisitions from the past five years, whether or not they were reportable under the HSR Act. As we’ve talked about in the past, increased scrutiny on private equity firms and roll-up strategies, this is really where the agencies are trying to scrutinize by requiring this disclosure, but this is really specifically for those transactions with horizontal overlap.
• The third major impact is the disclosure of minority holders. Private equity firms are going to have to pay attention to any strategic or veto rights that are granted to co-investors, as these will need to be disclosed.
• The fourth area of impact is on interlocking directorates. Firms are going to need to be careful in evaluating and disclosing officers and directors who hold similar roles in the same industry or on boards of competing companies. So, this was a key focus for antitrust enforcers in the last administration, and it will likely continue to be an important one in this one.
• The other thing is elongated preparation timelines. The increased reporting requirements might extend the time needed to prepare filings and may also impact closing timelines. This is especially true for more complex transactions or those with competitive overlaps or supply relationships.
• The final major area of impact, and maybe this is the positive that comes out of all these new rules, is the return of early termination. Parties are now able to once again request the option of receiving “early termination,” which really means that it’s going to get you quicker clearance for non-competitive transactions.

Chau Le: I know folks will be excited for that. Thanks, Samer. Jonathan, what practical advice can you offer to help firms navigate these new rules?

Jonathan Klarfeld: I think some steps that private equity firms, really everyone, will find themselves wanting to take:

• First, and this goes back to the earlier part of the conversation, identify a supervisory deal team lead early in the process, when you’re first putting together the deal team for a particular transaction. It’s important to identify that individual because, as we’ve discussed, you’ll need to submit certain types of documents about competitive topics that go to that individual, as well as from officers and directors.
• The second piece of practical advice we have is, for better or worse, early engagement with your antitrust counsel, engaging them earlier in the transaction process. Sadly, the days of five business day filings from signing are gone, and the work that needs to go into this filing, in particular, in things like developing the overlap narratives or even identifying whether those overlaps exist across your portfolio, become more important because there’s a premium on describing those overlaps.
• A third issue is data collection, updating the regular portfolio monitoring that you do—these issues of going after interlocking directorates. You’re going to need to have much better recordkeeping on directorships and cross-directorships across your holdings, not necessarily interlocks but just all the directorships that those individuals are on.
• I think detailed recordkeeping on prior acquisitions and ownership structures are going to be more important because of the reporting requirements around them.
• And then, ultimately, coordination among counsel, with the deal teams just making sure information is flowing in a way that’s helpful and efficient, because one of the areas of competitive advantage for a private equity firm is often its ability to move quickly, and that will influence your ability to get that filing in quickly.

Chau Le: My big takeaway from those great tips you just gave us are to call your antitrust lawyer early and call him or her often. Samer, do you have anything else to add—any additional tips?

Samer Musallam: Yes. I hate to add on more here, but there may be a few others:

• Regulatory clauses. In negotiating deals, parties have typically been able to include a requirement that the parties file HSR within five or 10 business days. As Jonathan just noted, those days are over, so depending on the anticipated complexity of the HSR filing, parties may consider agreeing to file HSR “as promptly as practicable” to allow sufficient time to prepare the filing, rather than identifying a specific number of days.
• The second thing I would add is regular training. Hold regular training sessions for your deal teams about these new rules. Make sure they know how to accurately describe competitors, competition, and market shares in their documents. They should avoid using unnecessary puffery that doesn’t reflect the real competitive dynamics and market realities.
• The third—and one of the reasons we want to have early coordination and early engagement with counsel—is to do a thorough antitrust risk assessment for each transaction from the very beginning. This will allow parties to identify any horizontal and vertical relationships and enable the parties to draft the newly required competition analysis.
• And last, I would add, is communication with investors. Keep your investors updated on the new requirements and how they might affect timelines. This will help avoid unnecessary surprises.

Chau Le: It’s clear that the new HSR rules will require private equity firms to be more diligent and proactive in their compliance efforts. I am really glad that you guys are there to help them through it, and I know that people are grateful for these great tips you’ve been giving them.

Before we sign off, I’m sure many listeners are wondering whether the new rules will remain in place since, on January 10, the U.S. Chamber of Commerce and other business groups sued the FTC claiming that they overstepped their statutory authority by implementing these new rules. Any predictions, Jonathan?

Jonathan Klarfeld: I don’t know about predictions, Chau, but there hasn’t been much going on in that case. As we sit here, the rules are in effect, and no one filed a preliminary injunction in that matter. Whether or not there’s a long-term possibility of a permanent injunction from that court, I guess we’ll have to see. We know the Chamber of Commerce also wrote a letter to Congress this past week seeking review under the Congressional Review Act—that’s a hail Mary and certainly won’t affect implementation in the near term. We’re under the new rules and we’re going to be filing under those rules until something else happens. Perhaps, most likely, is that when the third Republican Commissioner joins the Commission there’s a review of the rules as they’re being implemented and seeing how they’re going and maybe scaling back some of the excesses that they see, but I think that’s more of a long-term issue. I think we’re going to be living under the new rules for the foreseeable future.

Chau Le: Good to know. Thank you, Jonathan, and thank you very much, Samer. This is quite a change, and since it sounds like we are going to be living under these rules for the foreseeable future, I am very grateful to you both for the advice here and for the advice in the future. That wraps up today’s episode of Antitrust Insights. We hope you found this discussion on the new HSR rules and their impact on private equity firms informative. If you’d like more information on this topic or have any follow-up questions, please feel free to reach out to Jonathan, Samer, or myself or any of your contacts at Ropes & Gray. You can also visit ropesgray.com. Also, we are delighted to get any suggestions for future episodes. You can subscribe and listen to other Ropes & Gray podcasts on your preferred podcast platform, including Apple and Spotify. Thank you again so much for listening. Until next time, stay compliant and stay informed.