U.S. FTC Announces Long-Awaited Changes to Hart-Scott-Rodino Filing Rules

On October 10, 2024, the U.S. Federal Trade Commission (FTC) published final amendments to the Hart-Scott-Rodino (HSR) premerger notification rules applicable for filings submitted starting around the middle of January 2025. The FTC also announced it will reinstate the early termination program after the effective date. This Update explores what to know.

Key Takeaways

1. Although the amendments are less extensive than those proposed in the June 2023 Notice of Proposed Rulemaking (NPRM), these new rules will significantly increase the cost and time required to prepare filings for most notified transactions.

2. Parties should consider filing preparation well in advance of signing to minimize the impact on closing timing.

3. These amendments do not change the exemptions governing whether or not a filing is required.  

Q&A

1. If parties file before the effective date (likely mid-January) but do not close until after the effective date, will they need to make a new HSR filing?

No, parties will not be required to supplement or resubmit their filings.

2. How long will it take to prepare the filings?

For most filings, the FTC estimates that the additional time to prepare and produce filings will range from 68 to 121 hours, two to four times longer than their estimate for filings under the current rules. Preparation timing will largely depend on the number of overlapping products or supply relationships between the filing parties. 

3. Will parties still be able to file on a letter of intent?

Yes. Parties can still file using an executed letter of intent or term sheet, but the amended rules require an enhanced description of the transaction, and the certification accompanying the filing must attest that the executed letter of intent or term sheet includes sufficient detail about the scope of the reported transaction.

4. What additional corporate and co-investor information must be produced?

The form will now require the following additional information about corporate entities:

• the ownership structure of the acquiring entity (i.e., the entity that will directly acquire the target’s equity and/or assets) 

• for transactions where a fund or master limited partnership is the acquiring ultimate parent entity, any existing organizational chart that shows the relationship of any entities that are affiliates or associates; if such an organizational chart does not exist, there is no requirement to create one 

• minority interest holder information for any entities invested in the acquirer’s corporate chain (Covered Entities), although the acquired entity no longer needs to identify minority interest holders

• for Covered Entities that are limited partnerships, the acquiring person must provide certain minority holder information for (a) the general partner and (b) limited partners that (i) currently hold or will hold over 5% of the Covered Entity and (ii) have or will have certain board member approval rights over any Covered Entity or the general partner or management company of a Covered Entity

5. Do parties need to include narrative and data responses?

Yes. In addition to a narrative description of the transaction rationale, the new form will require narrative information.

• Overlaps related to current or planned products or services must be identified and described, top customers must be identified, and certain sales data must be provided on an overlap and/or customer basis. 

• Significant existing or potential supply relationships must be identified, top customers or suppliers involved in the same potential supply relationship must be identified and described, and certain sales or purchase data related to those relationships must be provided, including on a customer or supplier basis. 

Parties to certain §801.30 transactions (described below) are exempt from these requirements.

6. What are the expanded document collection and production requirements? 

The new rules expand the document collection and production requirements in two key ways: 

• First, in addition to transaction-specific documents prepared by or for officers or directors, parties must now collect competition-related documents related to the deal prepared by or for the “supervisory deal team lead.” The FTC has defined the supervisory deal team lead as the person with primary responsibility for supervising the strategic assessment of the deal and who does not qualify as a director or officer.

• Second, parties must now produce regularly prepared business plans provided to the CEO or board of directors pertaining to any overlapping product or service of the acquiring person that is also produced, sold, or known to be under development by the acquired entity. For this purpose, regularly prepared business plans means annual, semiannual, and quarterly high-level strategic plans provided to the CEO and all high-level strategic plans provided to the board of directors that analyze market shares, competition, competitors, or markets and were created within one year of the HSR filing date.

7. Do parties need to submit drafts of competition-related documents?  

While the FTC eliminated the requirement to produce drafts, it will be updating its informal guidance regarding drafts submitted to the board of directors. Currently, once a document is provided to the board of directors, it is no longer a draft and must be produced (if the other responsive criteria are met). The FTC is updating this guidance so that a document provided to any member of the board (not just the board in its entirety) will no longer be considered a draft and must be produced (if the other responsive criteria are met).  

8. What additional types of information must be provided?

a. Foreign subsidies

In a new section of the form, required by Congress, filers must provide information about subsidies from particularly identified foreign entities or governments of concern along with the description of the subsidy. Filers must also provide additional information about products produced in “covered nations” as defined by the Infrastructure Investment and Jobs Act. 

b. Foreign merger control filing disclosures

The acquiring person must now identify other jurisdictions where the transaction requires merger filings and the date (or anticipated date) of those filings.

c. Defense/intelligence contracts

In any area where the acquiring and acquired person have product or service overlaps (including NAICS code overlaps) or a vertical supply relationship, each filing person must identify nonclassified details regarding (i) any pending requests for proposals from the Defense Department or certain U.S. intelligence agencies for which the filing person has submitted a proposal, or (ii) any procurement contracts valued at $100 million awarded to the filing person by the Defense Department or such intelligence agency. 

d. Officer/director positions

The acquiring party must identify and provide information about certain officers and directors (or in the case of unincorporated entities, individuals exercising similar functions) of its entities, with a focus on information identifying whether those officers or directors have similar roles in companies with overlapping products. This rule change is intended to provide the antitrust agencies with information to analyze potential board interlocks that may violate the antitrust laws.

e. Existing agreements between filing parties

The acquiring person must identify whether it currently has, or had within one year of filing, any contractual agreements with the target and list the types of agreements. 

9. How do the new rules affect 801.30 transactions?

Some of the more burdensome new filing requirements (including overlapping product and supply relationship information) are not required of parties to certain §801.30 transactions — that is, certain tender offers, minority acquisitions of voting securities from third parties, and warrant or option conversions where (i) the acquisition does not confer control, (ii) there is no existing or contemplated transaction agreement, and (iii) the acquiring person will not have and will not obtain the rights to appoint or veto board members. Executive compensation transactions are also exempt from providing this additional information.

10. What are some of the key proposed additions from the NPRM that were cut from the Final Rule?

Many other proposed additions to the form were removed or pared back. Some of the exclusions from the final rules:

• disclosure of labor market and employee information

• document preservation requirements and production of draft 4c/4d documents

• disclosure of certain interest holders that may exert influence

• employee organizational charts

• disclosure of filer’s messaging and document retention systems 

• corporate entity information about creditors

Sidley’s antitrust team is ready to assist clients in implementing effective solutions to help minimize the cost and closing timeline effects. If you have questions about how the new rules may specifically affect your company, please reach out to one of the Sidley contacts below.