Commonly referred to as the HSR Act, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 was adopted as a way to provide the federal government with a formal process in which to help avoid anti-competitive outcomes during the course of mergers and acquisitions. The HSR Act requires that before consummating a proposed acquisition, the parties to the merger or acquisition notify the Federal Trade Commission (FTC) and the Department of Justice (DOJ) and wait a specific period of time while the agencies review the proposed transaction. The review process is administered and managed as part of the Federal Premerger Notification Program with the goal of avoiding some the difficulties and expenses that the enforcement agencies may encounter if potential impediments to competitive relevant markets are identified.
The Federal Premerger Notification Program
The Premerger Notification Program provides the FTC and the DOJ with information about large mergers and acquisitions before they occur. The program is administered by the FTC and supported by the Premerger Notification Office. Under the program parties to certain proposed transactions must submit a premerger notification to the FTC and DOJ. Premerger notification involves completing and filing an HSR Form, also called a “Notification and Report Form for Certain Mergers and Acquisitions,” with information about each company’s business. After filing the HSR Form, parties typically must wait 30 days (15 days in the case of a cash tender offer or bankruptcy sale) while the FTC and DOJ complete their review of the proposed transaction. The parties may not close their deal until the waiting period has passed or the government has granted early termination of the waiting period. However, if either the FTC or DOJ determines that further inquiry is necessary, they may request additional information and documentary materials. This further inquiry is commonly referred to as a Second Request.
The Second Request Process
A Second Request is a discovery procedure used by the FTC and DOJ to investigate mergers and acquisitions that warrant further investigation regarding the potential impact on competitive relevant markets. The Second Request consists of the formal request for additional information and documentary material and generally follows the framework highlighted in the Model Request for Additional Documentary Material (Second Request), published by the FTC Premerger Notification Office.Model Request for Additional Information and Documentary Material – May 2019
A Second Request extends the waiting period for a specified time frame, typically 30 days (10 days in the case of a cash tender offer or bankruptcy sale), after required parties have complied with the additional request for information. The additional time provides the reviewing agency with the opportunity to analyze the additionally requested information and take appropriate action if required before the transaction is consummated. If the reviewing agency believes that a proposed transaction may violate the antitrust laws, it may seek an injunction in federal district court to prohibit consummation of the transaction. Once Second Requests are made, a staff attorney from the evaluating agency is usually assigned to manage the request and those parties involved in the Second Request can expect to hear directly from the agency requesting the information on the status of the investigation.
The Bureau of Competition Production Guide
Designed as an eDiscovery resource to help explain what the FTC Bureau of Competition generally requires when they send a formal request for additional information, the BC Production Guide shares suggested formats that both help to organize submissions and minimize the chance of incompatibility with processes and systems.Bureau of Competition Production Guide - August 2015
Small Percentages. Short Timelines. Proactive Planning.
While the percentage of transactions in which a Second Request was issued by either the FTC or DOJ was only 2.7% in 2015, 3.0% in 2016, and 2.6% in 2017, organizations engaged in merger and acquisition activities, either directly from a participatory position or indirectly from a supporting position, should proactively prepare to support the potential for a Second Request given the short deadlines and potential voluminous information requests that may require extensive use of data discovery and electronic discovery technologies and experts to ensure compliance with requests.
- HSR Threshold Adjustments and Reportability for 2019
- Premerger Notification Program HSR Resources (FTC)