The FTC and DOJ-Proposed “Dramatic” And “Sweeping” Changes To The HSR Notification Form Are Burdensome, Time-Intensive, And Costly
Last month, the FTC and the Antitrust Division of the DOJ announced proposed changes to the Premerger Notification and Report Form (the “HSR Form”) and the premerger notification rules and instructions implementing the Hart-Scott Rodino (“HSR”) Act. These changes are not justified or substantiated by agency need and therefore serve as an unnecessary, substantial burden on businesses.
The sweeping overhaul of the HSR premerger notification requirements will dramatically increase the time and labor costs of preparing the notifications. These changes to the more complex revised HSR notification and report form would:
— Take 144 hours to prepare—four times more than the current average
— Cost an additional $350 million in labor expenses
— Expand document production requirements significantly
— Impose litigation-style document holds on an increasingly large group of employees
The agency’s estimates greatly underestimate the actual time and cost requirements to comply with the new reporting requirements.
Several notable law firms have weighed in on the dramatic expansion of the form and the practical implications for businesses. Here’s what you need to know about the new merger guidelines and the issues they pose to businesses and consumers.
WilmerHale: The “sweeping” changes to the HSR notification form “will be much more burdensome and require substantially more preparation time and consideration”—”4 times more than the current average,” according to an FTC estimate.
— “First, if the proposed revisions are adopted, HSR notifications will be much more burdensome and require substantially more preparation time and consideration. This will materially extend the time to closing and transaction costs for many transactions. For instance, the FTC estimates that businesses would need on average 144 hours to prepare the revised notification, or 4 times more than the current average, and 7 times more for complex transactions. In addition, the parties will need to adopt at the time of filing critically important positions relating to overlaps and non-horizontal relationships, which will frame any subsequent investigation or litigation, a process that will require great care.”
Gibson, Dunn & Crutcher: Under the revision, merging parties must “build in considerably more time to prepare their HSR filings” and “not over-commit in Merger Agreements regarding filing deadlines.”
— “Most importantly, merging parties should ensure that they build in considerably more time to prepare their HSR filings, including by not over-committing in Merger Agreements regarding filing deadlines. Currently, it is customary for parties to commit to making HSR filings in Merger Agreements within 7 to 10 business days, a timeframe that likely will be challenging if and when the new filing requirements are adopted. The FTC itself estimates that the proposed new rules could extend the time required to prepare an HSR filing from about 37 hours to 144 hours.”
Freshfields: The significant overhaul to the HSR Act filing form and rules would impose unnecessary burdens on all filing parties, including “electronic discovery burdens” similar to litigation-style holds “irrespective of the [deal’s] competitive implications” and compliance burdens that require parties to produce “all drafts of responsive documents.”
— “New HSR Rules could impose electronic discovery burdens—i.e., litigation hold-type obligations—on merging parties irrespective of the competitive implications or issues raised by a transaction.”
— “The new rules would expand the existing HSR document production requirements by: Requiring production of all drafts of responsive documents provided to any team lead, officer, or director.”
Smith Anderson: The proposed changes will result in an additional “144 hours from the current estimate” to prepare the filing and “an additional $350 million in labor costs to complete the more complex revised HSR notification and report form.”
— “If adopted, the proposed changes will dramatically increase the time and effort required to prepare HSR filings. The FTC estimates that the proposed changes will result in an additional 12 to 222 hours to complete an HSR filing, with the average estimated hours per filing rising to 144 hours from the current estimate of 37 hours. The FTC also projects an additional $350 million in labor costs to complete the more complex revised HSR notification and report form.“
To view previous Springboard content related to the DOJ and FTC’s new merger guidelines, click here.