Client Alert: FTC Publishes Final Rule Changing the Premerger Notification Form
This afternoon, the Federal Trade Commission published its long-delayed Final Rule revising the Hart-Scott-Rodino (“HSR”) Premerger Notification Form and Instructions—the first thorough overhaul of the HSR Form since its introduction in the 1970s. The Final Rule comes more than a year after the FTC published a Notice of Proposed Rule Making (NPRM), which elicited substantial criticism for imposing significant new burdens on all filers, changes that essentially would have transformed the premerger filing process into a “mini-Second Request” regardless of whether the transaction raises antitrust concerns.
Following “intense negotiations” with Commissioners Ferguson and Holyoak, the Republican-appointed Commissioners, the FTC unanimously approved a Final Rule, set to become effective 90 days after publication in the Federal Register, that scales back or abandons several of the most controversial proposed provisions, such as the expansion of Item 4 to include draft documents and the requirement to produce labor-related information. The FTC also announced that the revisions to the Form under the Final Rule would enable the Commission to lift its ban on early termination.
Nonetheless, despite some welcome changes compared to the NPRM, the Final Rule still appears to impose new and potentially significant burdens on filers.
Some notable changes to the Premerger Filing Process under the Final Rule include:
- Expanded scope of Item 4(c). Filers must now produce transaction-related documents prepared by or for the “supervisor deal team lead” in addition to officers or directors.
- Expanded UPE section. Expands the description of the ultimate parent entity (“UPE”) and requires that each filer provide extensive information about officers and directors (or in the case of unincorporated entities, individuals exercising similar functions), for each entity within the UPE and the merged firm (apparently to facilitate investigation of potential board interlocks in violation of the Antitrust Laws).
- Narrative Descriptions. Notwithstanding the Commission’s contention that the Final Rule would no longer require filers to engage in an antitrust analysis, it continues to require filers to provide detailed “transaction rationale” as well as a “Competition Description” section including “market analysis” of “overlaps,” supply relationships, and customer information.
- Severability. In recognition of the likelihood of litigation challenging the validity of the Final Rules, FTC included the NPRM’s reference to the severability of the provisions of the Final Rule.
Rule Garza Howley LLP is continuing to review the Final Rule and its implications and will be providing additional analysis.