US Federal Trade Commission Issues Final Rules on HSR Pre-Merger Reporting

By: Harry T. Robins , David R. Brenneman , Joshua M. Goodman , Qian (Susan) Zhu , Damos Anderson , Bernard W. Archbold & John Ceccio (Morgan Lewis)

It remains uncertain whether the final HSR Rules will face court challenges, but the reduction in the originally proposed burdens reflects a bipartisan effort within the FTC to avoid legal disputes. It is also unclear how consistently filing parties will be able to fully comply with the final rules, and how often the FTC or DOJ will seek injunctions or impose fines for non-compliance.

Although the final HSR Rules have removed several of the most burdensome provisions from the initial proposal, merging parties will still be required to submit significantly more information and documentation than is currently required. This is particularly true for industries like life sciences, technology, and private equity. The FTC estimates that the implementation of these new rules could increase the average time per filing by three to five times.

The final HSR Rules raise at least four important issues for dealmakers to consider in their planning and strategy:

1. Timing: The new rules will take effect no earlier than January 13, 2025. Any filings submitted after this date must comply with the new requirements, making it critical for parties to plan ahead, particularly in competitive deal processes.
2. Early Termination: The FTC has announced, albeit reluctantly, that it will resume granting requests for early termination once the new rules are in place, a practice suspended since February 2021. However, it is unclear how frequently early termination will be granted.
3. Signed Writing: While parties can still file based on a nonbinding term sheet or letter of intent, the new rules require more detailed terms to be included and disclosed. Additionally, merging parties with overlapping interests must disclose customer names, making it less likely that such transactions will remain confidential.
4. Competitors, Suppliers, and Private Equity Filers: Transactions involving competitors, potential competitors, or supply arrangements between the parties, as well as those involving private equity, will require the collection and disclosure of significantly more information in the HSR filing.

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