FTC Proposes Increased Merger Scrutiny

The Justice Department and Federal Trade Commission (“FTC”) last week proposed more than a dozen new rules intended to decrease corporate concentration and increase market competition. The new rules follow what antitrust regulators argue was a period of reduced merger scrutiny and more permissive regulatory policies. The comment period on the new rules will remain open for 60 days.

The FTC is proposing changes to the required premerger notification form (“HSR Form”) required under the Hart-Scott-Rodino Act (“HSR”). HSR requires that parties to mergers meeting certain transaction size and size of party requirements to notify the FTC and the Antitrust Division of the Justice Department of the merger and the parties involved and then wait for a specified review period prior to closing the merger.

The FTC chairwoman and Attorney General Merrick Garland have commented on what they perceive as the threat to free markets due to underregulated corporate consolidation. The Biden Administration has made increased antitrust scrutiny an administration priority.

The key proposed modifications to the HSR Form will require additional details regarding the rationale for the proposed transaction and additional details regarding the parties and their corporate affiliate relationships and investment vehicles about transaction rationale and details surrounding investment vehicles or corporate relationships. Because of the additional required information and disclosures, transactions may be delayed due to the increased scrutiny, delayed review, and increased requests for supplemental information.

The FTC estimates that the preparation time for a typical HSR Form could triple or quadruple, thereby potentially affecting transaction timing and legal costs. The increased scrutiny, timing, and cost could all have a potential chilling affect on corporation’s consideration of potential merger transactions and will almost certainly increase law firm involvement in the HSR process.