Hart-Scott-Rodino Amendments Will Soon Upend Merger Clearance Processes

Kathryn, what are the most notable aspects of the HSR filing changes?

Historically, U.S. antitrust regulators required a lighter lift as part of the HSR filing. Now, there will be more burdensome requirements up front. Legal teams may be surprised that the form could require never-before-requested information, including disclosures of past antitrust violations. While the current HSR form has asked for documents or analyses about the potential transaction created for or by an officer or director, the new form will require the production of a more expansive set of communications regarding the transaction.  

Another burdensome change is that parties may be required to produce ordinary course business documents up front during the HSR process. Because the rigor of the exercise has increased, counsel will be required to spend more time preparing the form along with all of the information that now must accompany it. Since the process will be new, there is the possibility that regulators may find deficiencies in the filing itself. Failure to include the right documents at the time of filing may trigger additional timing issues and fines during the merger review.

Since historically only roughly 2-3% of deals in the U.S. trigger second requests, parties to most transactions have typically been immune from the rigor that the antitrust authorities require during an extended investigation. With the changes, all transactions will be required to produce a much broader set of documents and information in advance. The bottom line is to be prepared with a strategy for dealing with an antitrust investigation — and even potential litigation — well before the deal is signed. 

Is there anything companies can do to prepare?

Again, the amendments to the HSR form will add significant filing burdens for parties. In thinking about timing, counsel should consider that gathering, reviewing and submitting the information required under the new HSR filing will create longer lead times to close a deal. So, they should be thinking about how and where documents and relevant data are stored, so they are ready to review and produce relevant information early on in the filing process. Should a second request be issued, a company that has its hands around the systems at play will be able to respond to the government authorities more expediently.

In the past, many companies often prepared the HSR form and attendant required documents on their own or with their outside counsel. Based on the new rules, and in the interest of accuracy and time, companies should consider involving advisors with expertise in HSR processes, data challenges and technology to preserve, process and cull both traditional information sources as well as emerging data that may need to be reviewed and produced to the government. 

What are the global implications of these developments?

Interestingly, once the HSR amendments take effect, the U.S. will be more aligned with the current filing process in the European Union. While the U.S. HSR form has not traditionally been very burdensome, the European Commission has long required much more detailed information about a deal and the competitive issues in the initial filing stage.

The European Commission has already been scrutinizing transactions in this way, particularly when it comes to deals regarding technology. In the U.K., the Competition and Markets Authority has also been looking at novel theories of antitrust harm. While there has been greater cooperation between the antitrust authorities globally, there have been divergent outcomes in recent cross-border deals. 

Therefore, dealmakers should consider having a jurisdiction-by-jurisdiction strategy that increases the sophistication required to ferry cross-border deals through to completion. When deciding to engage a provider to support the merger clearance process, working with a company with a global footprint can increase efficiency and ease the stress of getting a deal done.

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The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.