Publications

Consistent with this administration’s stated antitrust priorities, both the Federal Trade Commission (“FTC”) and the Department of Justice Antitrust Division (“DOJ”) have made recent proposals that, if enacted, would significantly expand the scope of merger review in the United States. First, the FTC has proposed a major expansion to the information to be included in the HSR form. Second, the agencies have proposed new, sweeping merger guidelines that would bring many more transactions within the scope of agency review than existing guidelines. Both proposals are subject to comment and further review, and thus whether they will be enacted in their present form is not certain. But regardless of the final form, these actions by the agencies are another clear signal that the agencies will continue their heightened scrutiny of a wide range of transactions.

Under the Hart-Scott-Rodino Antitrust Act (“HSR Act”), mergers, acquisitions or tender offers meeting a certain threshold are required to be reported on the Hart-Scott Rodino form (“HSR form”) to the FTC and the DOJ for antitrust review.^[1] Parties to the transaction must submit filings under the HSR Act to the FTC and DOJ and then wait for 30 days (less if a tender offer) prior to closing the deal. To aid the agencies’ review of the transaction, the HSR form requires the parties to submit basic information such as their revenues, competitive overlaps, and production of a limited set of documents concerning the transaction and its competitive effects.

On June 27, 2023, the FTC issued a proposal that, if adopted in its present form, would materially expand the information that parties would be required to include in the HSR form.^[2] Some of the significant additions in the FTC’s proposal would include requiring the parties to provide the following information in the HSR form:

• details regarding the strategic rationale and structure of the transaction;
• details on competitive/horizontal overlaps for goods and services and supply or other non-horizontal products business relationships;
• English translations of foreign language documents;
• details regarding investment vehicles and corporate relationship involved in a transaction (a requirement of special concern to private equity firms);
• jurisdictions where merger control filings will be made;
• previous acquisitions in the past 10 years;
• analysis regarding impact of the deal on labor markets; and
• information on subsidies received from certain foreign governments or entities of concern that could impact competitiveness.

The FTC justifies these changes as necessary to aid up-front identification of potential antitrust issues. As FTC Chair Lina M. Khan has described in an accompanying statement, “the HSR form is insufficient for our teams to determine, in the initial 30 days, whether a proposed deal may violate antitrust laws. Our staff are put in a position of expending significant time and effort to develop even a basic understanding of key facts. They must often rely on extensive third-party interviews and materials, information that can be challenging to obtain in 30 days.”^[3]

Public comments to this proposal must be filed within 60 days from June 29, 2023, the date that notice of the FTC’s proposed revisions were published in the Federal Register.

We anticipate significant pushback to the proposed revision of the forms, primarily because the vast majority of reported transactions pose no conceivable antitrust issue, and, as a consequence, both the burden and the expense of compliance with the enhanced reporting requirements are likely to be deemed unwarranted. To the extent that some number of transactions may conceivably pose an antitrust issue, we expect that public comments may perhaps suggest a narrowing of the categories identified above, and further that the enhanced requirements be limited to a subcategory of transactions significantly greater in size than the current size of transaction test. Accordingly, whether the FTC’s proposed changes to the HSR form will in fact materialize, and in what form, remains to be seen.

The proposed revision to the HSR form is just one major development that has occurred this year. On July 19, 2023, DOJ and the FTC also proposed substantial changes to the agencies’ merger guidelines.^[4] Perhaps the most significant change is the proposal to fundamentally alter the current metric to determine whether a market is “highly concentrated,” such that a transaction is viewed to have the potential to harm competition. The metric is known as the Herfindahl-Herschman Index (“HHI”).  Since 2010, highly concentrated has meant an HHI of more than 2,500. The 2023 draft Merger Guidelines propose to reduce the highly concentrated HHI number from 2,500 to just 1,800.^[5] Such a change could potentially dramatically increase the number of mergers and acquisitions challenged. As with the HSR form proposal, the proposed merger guidelines have their own 60-day public comment period, which will end on September 18, 2023. Accordingly, whether the proposed guidelines, and the decreased HHI thresholds, are ultimately adopted also remains to be seen.

Given the agencies’ clear focus on vigorous merger review, companies considering potential transactions would be well served to engage antitrust counsel early. Wiggin and Dana routinely advises clients in connection with the full range of antitrust matters, including potential transactions and representation before the DOJ and FTC.

[1] The 2023 revised size of transaction threshold is $111.4 million (up from $101 million), and the revised size of person thresholds are $22.3 million and $222.7 million (up from $20.2 million and $202 million), respectively).

[2] FTC and DOJ Propose Changes to HSR Form for More Effective, Efficient Merger Review | Federal Trade Commission; Proposed Amendments to HSR Rules Form Instructions (ftc.gov); 16 CFR Parts 801 and 803: Premerger Notification; Reporting and Waiting Period Requirements | Federal Trade Commission (ftc.gov).

[3] Statement of Chair Lina M. Khan Joined by Commissioners Slaughter and Bedoya Regarding Proposed Amendments to the Premerger Notification Form and the Hart-Scott-Rodino Rules | Federal Trade Commission (ftc.gov).

[4] FTC and DOJ Seek Comment on Draft Merger Guidelines | Federal Trade Commission

[5] The HHI is calculated by summing the squares of the individual firms’ market shares. As an example, pre-merger a market includes four companies with a 20% market share, and two companies with a 10% market share. Squaring the pre-merger market shares equals an HHI of 1800, i.e., 1600 (20% squared x 4) plus 200 (10% squared x 2). If one 20% company and one 10% company were to merge, the post-merger HHI would be 2200, i.e., 900 (30% squared) plus 1200 (20% squared x3) plus 100 (10% squared). Under the 2010 Merger Guidelines, the market would be deemed moderately concentrated, while under the 2023 proposed Merger Guidelines, the market would be deemed highly concentrated, and thus more likely to be challenged.