The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act), originally enacted by President Gerald Ford, requires parties to notify the Federal Trade Commission (FTC) when planning to execute large mergers and acquisitions. This pre-merger notification and an accompanying waiting period (typically 30 days) allows the FTC time to review the proposed action and determine whether it will violate any antitrust laws.
Not all mergers and acquisitions, however, must be pre-reported to regulators. Whether a business transaction requires a pre-merger notification or not depends on the size of the acquired/acquiring party, as well as the size of the transaction itself. The thresholds determining which transactions qualify as reportable are updated annually to account for changes in the U.S. gross national product.
While these thresholds are updated annually, the FTC also approved more substantive changes to the HSR Act that went into effect on February 10, 2025. These changes increased the amount of information required of companies that are reporting transactions.
The U.S. Chamber of Commerce, along with other plaintiffs, filed a complaint against the FTC in January of this year challenging the Commission’s authority to make such expansive changes. Filed in the Eastern District of Texas, the complaint argued that “…the Rule exceeds the constraints imposed by the HSR Act on the kinds of information and documents that the FTC may demand in the initial premerger notification.” The plaintiffs argued that the FTC was only authorized to require information and materials that:
In April, the FTC responded with a motion to dismiss the case, arguing that the updates to the pre-merger requirements were necessary to close certain information gaps and to reflect the complexities of modern-day M&A transactions and company structures.
More recently, on August 1, the Chamber filed a motion for summary judgment, pointing out that the HSR Act only allows the FTC to require “such documentary material and information relevant to a proposed acquisition as is necessary and appropriate to enable the [agencies] to determine whether such acquisition may, if consummated, violate the antitrust laws.”
The Chamber argued that the FTC misinterpreted this part of the statute as broadening its authority to request information when it should, in fact, restrict it. The Chamber further claimed that the FTC did not perform a proper cost-benefit analysis to determine whether the benefit of the new rules would warrant the additional burdens of time and expense placed upon HSR filers.
The Chamber has received backing from various other parties, including from co-plaintiffs Business Roundtable, American Investment Council, and the Longview Chamber of Commerce. Additionally, on August 8th, the American Hospital Association and the Federation of American Hospitals filed an amicus brief supporting the Chamber’s position.
The brief focused on how the new rules would be injurious to hospitals in particular, stating that many hospitals rely on mergers as a critical tool in surviving economic difficulties and keeping their doors open. The brief also argued that the changes were unnecessary and that the FTC “has not identified a single specific, problematic merger that slipped through its existing mandatory-disclosure process but that its reimagined form would have flagged for further review.”
It remains to be seen if the pre-merger changes will be upheld or if they will follow in the footsteps of the FTC’s now defunct noncompete ban that was successfully challenged in the courts late last year.
While the rule changes were a Biden-era initiative, they were approved unanimously by a Commission comprised of two republicans (Andrew Ferguson and Melissa Holyoak) and three democrats (Rebecca Kelly Slaughter, Alvaro Bedoya, and FTC Chair Lina M. Khan). Since the approval of the rules, all three democratic Commissioners have been ousted from the FTC by the Trump administration. New Republican Commissioner Mark Meador was sworn in in April 2024, while two Commissioner seats remain open as Slaughter and Bedoya have sued for wrongful dismissal.
Despite the change in party majority, the FTC does not appear to be backing down from enforcing the new rules. Ferguson, who was elevated to FTC Chair when Trump took office, has publicly backed the changes, stating in a post on X, dated February 10, 2025:
“The updates were the product of bipartisan consensus and will allow [the FTC] to find anticompetitive mergers efficiently, while more quickly getting out of the way of deals that will benefit the American people.”
Additionally, in a memo to FTC staff a few days later, he stated, “I have been asked a number of times about the fate of the 2023 [Merger] Guidelines now that I am Chairman. I think the clear lesson of history is that we should prize stability and disfavor wholesale rescission.”
If you have any further questions regarding M&A and corporate compliance, please contact Charles Hughes.
Charles B. Hughes