Last summer, on June 27, 2023, the Federal Trade Commission (FTC), with the concurrence of the Department of Justice (DOJ), unveiled proposed new rules governing implementation of the Hart-Scott-Rodino Act’s (HSR) premerger notification requirements. As was widely reported at the time, and discussed extensively since then, the new rules—if implemented as originally proposed—would dramatically increase the burden on filing parties by expanding certain existing requirements and imposing numerous demanding new ones.  

By the FTC’s own estimates, the burden on filing parties, including those involved in deals without antitrust concerns, would increase fourfold, with even greater additional burdens on more complex transactions. The proposed changes could make the HSR process considerably more expensive and could add several weeks or even months to HSR-reportable M&A timelines.

As we approach the one-year anniversary of the proposal, however, the FTC has yet to announce a final set of rules.

This has led to speculation in the antitrust community about the reasons for the delay. Some speculated that the FTC might announce final rules in conjunction with the ABA Antitrust Section Spring Meeting in April of this year. Andrew Forman, Deputy Assistant Attorney General for the DOJ's Antitrust Division, at that meeting indicated that revisions to the proposed rules were still ongoing, but that a final set of rules should be expected "in a matter of weeks, as opposed to months.” 

Others theorized that the FTC would aim to release the new rules in advance of a Congressional Review Act deadline, which would prevent a potentially hostile new Congress to be sworn in next January from reviewing and reversing the final rules. That deadline came and went last month. 

The FTC's final rule banning most employment non-competes may provide a clue about what to expect for final HSR rules. That rule was published on April 23, 2024, a full 16 months after it was first proposed in early January 2023. In anticipation of legal challenges, the final rule was published in the form of an astonishing 570-page document justifying the agency's rationale and the sufficiency of the rulemaking process it had undertaken, as well preemptively addressing questions around the legitimacy of the FTC's authority to implement such a rule. As expected, private suits challenging the non-compete rulemaking and seeking to stay its implementation were filed immediately after the final rule was announced (including one suit filed the same day).

Similar legal challenges are expected when the final HSR rules are announced, potentially including some of the same plaintiffs challenging the non-compete ban. Indeed, certain public comments submitted in response to the proposed HSR rulemaking last year read like the outline of a complaint to be filed in opposition to the proposed changes.

What does this mean for companies considering future M&A transactions?

It's difficult to answer that question with any certainty just yet, but here are the key takeaways based on what we currently know:

• The FTC, in consultation with the DOJ, is likely pruning and shaping their originally proposed rules to withstand judicial review. The necessary defensive work may take the FTC significant additional time. It took them 16 months to publish the final non-compete rule—and while that rule is arguably more sweeping from a policy standpoint, the proposed HSR rules are much more technically and procedurally complex. 
• Companies can likely expect final rules that are at least somewhat less burdensome than the initial proposal, but still substantially more so than the current rules.
• The current HSR rules require parties to submit key internal documents relating to the deal, and these documents often provide the impetus for the agencies to open investigations. The proposed rules significantly expand the scope of the documents that will be subject to this requirement (including superseded early drafts of certain documents). As such, companies contemplating future M&A, particularly deals that may happen within the next several months, should implement careful and well-crafted document creation guidelines, and strictly observe the company's document retention and destruction policies. Consult antitrust counsel early in your deal process to avoid problems down the road.
• Companies that are currently considering M&A activity will likely have adequate time to adjust their expectations around timing and resource requirements for HSR when the final rule is announced. The FTC tends to give significantly longer effectiveness periods for more complex rules, or those with significant impacts on business operations, compared to simple or ministerial rule changes that can become effective in as little as 30 days after publication. Further, a longer effectiveness period allows time for the FTC to respond to any lawsuits before the courts issue injunctions to block implementation. This seems to have been part of the consideration in setting an effectiveness date for its non-compete rule of 120 days after publication in the Federal Register.