The Federal Trade Commission (FTC) has announced that it is proposing changes to the Hart-Scott-Rodino Act (HSR Act) premerger notification form and rules. Almost every aspect of the form will be affected in some way. With one or two exceptions, noted below, the proposed changes will reduce the burden on filing parties, particularly for acquisitive clients such as private equity firms and strategic buyers who are active in mergers and acquisitions.
No longer will a filing company’s finance professionals need to dig up 2002 revenue broken down by the North American Industry Classification System (NAICS) code for businesses not even owned in 2002 nor will a private equity fund be required to collect the most recent nonpublic balance sheets from every company in its portfolio.
The FTC recognized that many items in the HSR form do not generate information useful to antitrust enforcement and that they be modified or dropped completely. The most significant of these proposed changes are:
The FTC has also proposed changes that codify two decades of informal FTC requirements and practice. As filers typically already provide much of this information, the actual additional burden should be light:
Because the proposed changes could potentially lead to the disclosure to the antitrust authorities of documents prepared in the ordinary course of business by outside advisors, it is imperative that companies ensure that their outside advisors use care in their written analysis. Hyperbole, such as claims of “dominating the market,” should be avoided to prevent unnecessary government scrutiny of transactions.
While the proposed changes will be of significant help to filing parties, the form could be further streamlined, as many of the requirements (other than Item 4(c) and the new Item 4(d) described above) do not provide meaningful guidance as to the competitive effects of a proposed transaction. Fortunately, however, the FTC has not followed many foreign jurisdictions that require the parties to define affirmatively and analyze the market(s) in which the parties operate. Such foreign filings can take weeks (and even months) to prepare, often require numerous hours of attention from key business professionals within the parties, and result in substantial legal fees even for transactions that raise little antitrust concern.
The public comment period is scheduled to end on October 18, 2010 and the new form and rules should go into effect shortly thereafter.