The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) requires that proposed acquisitions of voting securities, assets or non-corporate interests meeting certain criteria be reported to the Federal Trade Commission (the “FTC”) and the Antitrust Division of the Department of Justice (the “DOJ,” and together with the FTC, the “Agencies”). Whether a particular acquisition must be reported depends upon the value of the acquisition and the size of the persons involved, as measured by their sales or assets.
After filing, the parties must observe a waiting period, usually 30 days, before they may complete the transaction. The waiting period may be shortened by a grant of early termination by the Agencies. However, the waiting period may be extended by service of a request for additional information or documentary material by one of the Agencies (a “Second Request”). In the event of a Second Request, the waiting period is extended until the 30th day after compliance with the Second Request.
The primary purpose of the HSR Act is to provide the Agencies with the opportunity to review reportable mergers and acquisitions and assess their potential competitive consequences before they are consummated. On May 21, 2014, the Agencies issued their Hart-Scott-Rodino Annual Report for Fiscal Year 2013. The Report contains interesting data regarding the review of HSR notifications filed during FY 2013 (October 1, 2012 through September 30, 2013).
During FY 2013, 1,326 transactions were reported under the HSR Act, down from 1,429 the previous year. Of these, 1,286 transactions were actually subject to HSR review. (The other reported transactions were not subject to HSR review because (i) the notification was incomplete; (ii) it was subject to review by another government agency; (iii) it was not reportable; or (iv) it was withdrawn.) Of these 1,286 transactions, 217 (or approximately 16.9%) were “cleared” to one of the Agencies for further inquiry because of competitive questions. The remaining 1,069 transactions either were granted early termination or were allowed to close at the expiration of the initial waiting period. (In fact, early termination was requested in 990 filings and granted in 797.)
Second Requests were issued in 47 transactions (25 by the FTC and 22 by the DOJ) or in 3.7% of notified transactions. This also means that more than 88% of the 217 “cleared” transactions subject to further inquiry by one of the Agencies did not ultimately involve a Second Request.
During FY 2013, 38 merger enforcement actions were brought by the FTC (23) and DOJ (15), although these include several transactions that were not subject to HSR reporting requirements. Six merger cases were filed in court seeking a preliminary or permanent injunction. In addition, the Agencies brought two enforcement actions for failure to comply with the HSR Act’s premerger notification requirements, resulting in $1.2 million in civil penalties.
In sum, less than 17% of notified transactions received any further inquiry from one of the Agencies and only 3.7% received Second Requests. Thus, more than 96% of reported transactions either received early termination or were allowed to close at the expiration of the initial waiting period.