FTC and DOJ Finalize Major Changes to HSR Form and Disclosure Requirements

On October 10, 2024, the U.S. Federal Trade Commission (“FTC”) and Antitrust Division of the U.S. Department of Justice (“DOJ”) announced a Notice of Final Rulemaking regarding the Hart-Scott-Rodino (“HSR”) Premerger Notification Form and Instructions¹ that will be effective February 10, 2025.² While some of the most onerous changes initially proposed in 2023 have been omitted or substantially modified, the final rules dramatically expand the information required for an HSR filing and, as a result, increase the associated burden and time to make such filings.

Parties contemplating transactions should consider the following headline additions to the HSR disclosure requirements:

• Expansion of Internal Documents Required to be Filed. Definition of “transaction-related documents” (commonly known as “Item 4 Documents”) expanded to include:
  
  • “plans and reports” that analyze markets or competition for any existing or planned overlapping products or services of the parties, which are either (1) produced on a regular basis (i.e., annually or quarterly) and provided to the CEO, or (2) provided to the board (whether prepared on a regular basis or not), 
  • documents prepared by or for “supervisory deal team leads” (in addition to directors and officers as required under the existing rules), defined as “the individual who has primary responsibility for supervising the strategic assessment of the deal, and who would not otherwise qualify as a director or officer,” 
  • draft documents that were shared with any board member,³ and
  • full English-language translations of all foreign documents.
• Additional Party Ownership Information. Additional information about the ownership structure for both parties, which includes:
  
  • limited partners who control, or have the ability to participate in the management of investment vehicles, 
  • structure charts (if they exist) and,
  • identification of directors and officers, including their positions in other companies. 
• Description of Party Relationships (Including Competitive Overlaps). Description of any existing or planned overlapping products or services and other non-horizontal business relationships (such as supply agreements) between the parties, along with descriptions of top customers, data on historical or projected revenue streams, and potential regulatory approvals for products in development.
• Additional Requirements for Filing on Letters of Intent. More stringent requirements when filing with letters of intent or term sheets.  Such agreements will need to include “some combination of the following terms: the identity of the parties; the structure of the transaction; the scope of what is being acquired; calculation of the purchase price; an estimated closing timeline; employee retention policies, including with respect to key personnel; post-closing governance; and transaction expenses or other material terms.”
• Other Notable Disclosures:
  
  • Details about transaction rationale.
  • Mandatory disclosure of non-U.S. antitrust filings.
  • Information on foreign subsidies from certain foreign governments or entities as mandated by the Merger Filing Fee Modernization Act of 2022, as well as any contracts with U.S. defense or intelligence agencies.

While the final rules do not include some of the most burdensome proposals, such as the requirement to produce all draft Item 4 documents, and certain labor statistics relating to commuting zones and employee classifications, the net result is a drastic change to the process of gathering and maintaining the information required for HSR filings. The increased disclosure requirements in the final rules are expected to significantly increase preparation time for most HSR filers, prolonging transaction timelines. On a positive note, the FTC and DOJ will reinstate the use of discretionary “early termination,” which could reduce waiting periods for transactions with no substantive overlap.

There are several key takeaways for parties considering future transactions:

• HSR filing deadlines in transaction agreements may need to be longer or “as soon as practicable” without specified deadlines;
• Merging parties may consider beginning HSR filing preparation significantly earlier in the deal process in order to accelerate HSR filing timing; and
• Antitrust counsel should review relevant ordinary course documents that assess competitors, competition, or market shares and transaction-specific documents as early in the deal process as possible.

For further guidance, please contact Paul Jin, Simone Waterbury, Kevin Walsh, or any member of the Goodwin Antitrust & Competition team.

 

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^[1] FTC Finalizes Changes to Premerger Notification Form | Federal Trade Commission (https://www.ftc.gov/news-events/news/press-releases/2024/10/ftc-finalizes-changes-premerger-notification-form).
^[2] The effective date may be pushed out to approximately the end of March as the Trump Administration is likely to issue a regulatory freeze on the first day of office, which delays the effective date of any pending regulations posted in the federal register for 60 days. While a more remote possibility, there is also the potential for a Congressional override of the new rules pursuant to the Congressional Review Act.
^[3] Existing guidance only requires submission of drafts of transaction-related documents that were circulated to the entire board or an entire board committee.

 

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee a similar outcome.