DOJ and FTC Release Final Rule Expanding HSR Premerger Filing Requirements

The FTC's final rule expands the scope and burden of preparing a merger filing. The final rule scaled back several of the initial proposed requirements but still: (i) introduces novel obligations to address substantive antitrust issues in HSR filings; and (ii) requires submission of additional data and documents compared to the current HSR form. The final rule will take effect 90 days after it is published in the Federal Register, which is likely to occur within a few days or weeks. Therefore, parties expecting to file in mid- to late-January 2025 will need to file under the new rules.

Substantive Antitrust Issues

The most significant change is the obligation to identify certain substantive antitrust issues in the HSR filing, including a "brief" description of horizontal overlaps and vertical supply relationships. Certain acquisitions unlikely to involve overlaps and deals involving products or services generating less than $10 million in revenue are excepted from this obligation.

Product Descriptions and Horizontal Overlaps. The final rule requires merging parties to describe the "principal categories" of products and services they offer, "as reflected in documents created in the ordinary course of business" of the company. Parties also must list and describe current or known planned products or services that compete or "could compete" with the other party to the transaction if those products or services are mentioned in the documents submitted with the filing.

For each competitive or potentially competitive product or service, parties are required to provide the sales (in dollars) for the most recent year or other metrics for products or services "not generating revenue or whose performance is not measured by revenue in the ordinary course of business." The rule also requires parties to provide a description of all categories of customers that purchase or use the product or service and the top 10 customers (as measured in dollars) in the most recent year for each overlap product or service and each category identified.

Non-Horizontal (or Supply) Relationships. The final rule also requires parties to list products, services, or assets that are sold, licensed, or otherwise supplied to the other party or any other business that competes with the other party. These disclosures also require information about sales to the other party or any competitors and the top 10 customers for these products.

Strategic Rationale. The final rule requires each party to explain the strategic rationale for the transaction and identify any documents included in the filing that confirm or discuss the rationale. 

New Document, Data, and Information Disclosures

The most significant disclosure obligation for many companies will be submission of regularly prepared business plans provided to the company's CEO "that analyze market shares, competition, competitors, or markets pertaining to any product or service of the acquiring person also produced, sold, or known to be under development by" the other party to the transaction. This obligation is limited to documents prepared or modified within one year of the filing.

The final rule also requires submission of more so-called 4(c) and 4(d) documents, which analyze the transaction with respect to competition issues if those documents are prepared by or for any officers, directors, or now, the supervisory deal team lead.

Additional submission obligations are listed below:

• Translations for all foreign language documents
• "Doing business as" (or "d/b/a") names for entities at the time of filing
• Organize legal entities by operating business
• Describe the business operations of the acquiring entity 
• Transaction diagram (if one exists)
• All exhibits and schedules to the transaction agreement
• Pending awarded procurement contracts with the Department of Defense or any member of the U.S. intelligence community (defined by statute) valued at $100 million or more (if an overlap exists)
• Identify merger control filings outside the United States (now mandatory rather than voluntary)
• Disclose (via checkbox) the existence of licensing arrangements, non-competes, and non-solicits between the parties
• Identify officers and directors of the acquiring person in overlap industries and certain limited partners with management rights
• Identify other entities for which identified officers and directors serve as an officer or director
• Disclose more information about minority investments
• Identify subsidies from any "foreign entity or government of concern"

HSR Filings Based on a Letter of Intent. The HSR regulations require parties to submit an affidavit attesting they have executed a contract, letter of intent ("LOI"), or agreement in principle, and have the good-faith intent to complete the transaction. Historically, a simple nonbinding LOI sufficed.

The new rules still permit merging parties to file even if they have not executed a definitive agreement but only if the merging parties provide more detail about the transaction compared to the existing requirement. The new HSR rules will require a dated document that describes some combination of the parties' identities, the transaction's structure, the scope of the acquisition, the calculation of the purchase price, an estimated closing timeline, employee retention policies, post-closing governance, and transaction expenses or other material terms.