Dive Brief:

• The 30-day pre-merger antitrust review process will be far more burdensome for companies to meet under changes to the Hart-Scott-Rodino form proposed by the Federal Trade Commission and the antitrust division in the Department of Justice.
• Details about transaction rationale, investment vehicles, corporate relationships, previous acquisitions, private equity involvement and labor issues would be newly required, among other things.
• Companies on average will need 144 hours to complete the form, up from 37, according to the FTC’s Paperwork Reduction Act analysis. The agency expects just over 7,000 filings this year, which means in the aggregate companies would pay an additional $350 million in legal fees and executive compensation to fill out the form.

Dive Insight:

The additional information is needed because the FTC is spending too much time trying to get information within the 30-day window to decide if further review is needed.

“The information currently collected by the HSR form is insufficient for our teams to determine, in the initial 30 days, whether a proposed deal may violate the antitrust laws,” FTC Chair Lina Khan said in a statement that was joined by commissioners Rebecca Kelly Slaughter and Alvaro Bedoya.

The two other FTC commissioner seats are vacant. Christine Wilson and Noah Phillips, both Republican appointees, resigned – Wilson in February and Phillips last year in October. In her resignation letter, Wilson blasted Khan of abusing power “to achieve desired outcomes.” 

Review challenges

In her statement on why more information is needed in the HSR form, Khan said FTC staff spend too much time within the 30-day window trying to get what they need to conduct an informed analysis. 

“Our staff are put in the position of expending significant time and effort to develop even a basic understanding of key facts,” Khan said. 

To address that, the updated form would require companies to submit a narrative description of the transaction rationale along with details about investment vehicles or corporate relationships. They would also need to provide information on horizontal products and services and non-horizontal business relationships such as supply agreements.

The company would also have to submit analyses of why the company wants to do the deal, which would include disclosing projected revenue streams, a transactional analysis and internal documents on market conditions. They would also have to disclose details on previous acquisitions and provide information that screens for labor market issues. 

Tougher review

This level of detail won’t be a surprise to companies that have experience getting deals approved outside the United States in countries that have more thorough requirements.  

“Other jurisdictions already require firms to provide narrative responses with information about business lines, the transaction’s structure and rationale, business overlaps, and vertical and other relationships,” Khan said. 

What’s more, some of the new information would be the kind of thing companies provide if their deal is flagged for further review. The HSR Act, enacted in 1976, already requires document-intensive submissions if the agency sees something in the initial submission that raises antitrust concerns and thus warrants what’s known as a second request under the HSR review.

Since most deals don’t get flagged for further review, the extra detail required upfront amounts to a kind of tax on the bulk of companies, Amanda Wait, Norton Rose Fulbright’s head of antitrust in the U.S., told Bloomberg Law.

“They are taking the vast number of transactions that don’t create any antitrust issues whatsoever and imposing significant costs on those parties,” she said. 

The FTC is giving companies and others a chance to offer feedback under a 60-day public comment period.