`[Federal Register Volume 89, Number 218 (Tuesday, November 12, 2024)]
[Rules and Regulations]
[Pages 89216-89414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25024]



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Vol. 89

Tuesday,

No. 218

November 12, 2024

Part III





Federal Trade Commission





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16 CFR Parts 801 and 803





 Premerger Notification; Reporting and Waiting Period Requirements; 
Final Rule

  Federal Register / Vol. 89, No. 218 / Tuesday, November 12, 2024 / 
Rules and Regulations  

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FEDERAL TRADE COMMISSION

16 CFR Parts 801 and 803

RIN 3084-AB46


Premerger Notification; Reporting and Waiting Period Requirements

AGENCY: Federal Trade Commission.

ACTION: Final rule.

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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission''), with 
the concurrence of the Assistant Attorney General, Antitrust Division, 
Department of Justice (``Assistant Attorney General'' or ``Antitrust 
Division'') (together the ``Agencies''), is issuing this final rule and 
Statement of Basis and Purpose (``SBP'') to amend the Premerger 
Notification Rules (the ``Rules'') that implement the Hart-Scott-Rodino 
Antitrust Improvement Act (``the HSR Act'' or ``HSR''), including the 
Premerger Notification and Report Form for Certain Mergers and 
Acquisitions (``Form'') and Instructions to the Notification and Report 
Form for Certain Mergers and Acquisitions (``Instructions''). The final 
rule requires parties to transactions that are reportable under the HSR 
Act to provide documentary material and information that are necessary 
and appropriate for the Agencies to efficiently and effectively conduct 
an initial assessment to determine whether the transaction may violate 
the antitrust laws and whether to issue a Request for Additional 
Information (``Second Request'') as provided by the HSR Act. In 
addition, the final rule implements certain requirements of the Merger 
Filing Fee Modernization Act of 2022 (``Merger Modernization Act'') and 
ministerial changes to the Rules as well as the necessary amendments to 
the Instructions to effect the final changes.

DATES: This rule is effective on February 10, 2025.

FOR FURTHER INFORMATION CONTACT: Robert Jones, Assistant Director, 
Premerger Notification Office, Bureau of Competition, Federal Trade 
Commission, 400 7th Street SW, Washington, DC 20024, or by telephone at 
(202) 326-3100.

SUPPLEMENTARY INFORMATION: 

I. Executive Summary

    The Commission is amending and reorganizing the documentary 
material and information requirements for premerger notification 
required by the HSR Act, 15 U.S.C. 18a, (``notification'' or ``HSR 
Filing'' or ``Filing'') to improve the efficiency and effectiveness of 
premerger review and to implement changes mandated by the Merger 
Modernization Act, 15 U.S.C. 18b. The Act and the Rules require parties 
to certain mergers and acquisitions to submit a notification to the 
Agencies and to wait a short period of time before consummating the 
reported transaction. The reporting and waiting period requirements of 
the HSR Act are intended to enable the Agencies to determine whether a 
proposed merger or acquisition may violate the antitrust laws, 
including section 7 of the Clayton Act, 15 U.S.C. 18, if consummated 
and, when appropriate, to take appropriate law enforcement action prior 
to consummation to prevent a violation of the antitrust laws.
    To advance the Clayton Act's goal of preventing undue consolidation 
or stopping it in its incipiency,\1\ Congress passed the HSR Act to 
require mandatory premerger notification of some acquisitions. In 
particular, it charged the Agencies with reviewing the details of those 
proposed transactions in advance of consummation. The Agencies rely on 
information submitted in an HSR Filing to conduct a premerger antitrust 
risk assessment and to identify those transactions that require 
additional investigation to determine if they may harm competition, and 
thus violate the antitrust laws if consummated. The HSR Act requires 
that the parties not consummate their planned transaction while the 
Agencies conduct this assessment until the expiration of the statutory 
waiting period, which for most transactions is 30 days (15 days in the 
case of a cash tender offer or certain bankruptcy sales). During that 
short period of time, referred to as the initial waiting period, the 
Agencies review the information submitted in the parties' HSR Filings 
to identify those transactions that require a closer look, including 
through the collection of additional information from the acquiring and 
acquired persons or from third parties. If either agency determines 
during the initial waiting period to conduct an in-depth investigation 
of the transaction, section 7A(e) of the Clayton Act, 15 U.S.C. 18a(e), 
authorizes the Agencies to request additional information or documents 
from each party, which is referred to as a Second Request.\2\ Issuing 
Second Requests extends the waiting period under the HSR Act for 
another 30 days (ten days in the case of a cash tender offer or certain 
bankruptcy sales) after the parties have substantially complied with 
the Second Requests. During this second waiting period, 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.
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    \1\ See, e.g., Brown Shoe Co. v. United States, 370 U.S. 294, 
318 n.32 (1962).
    \2\ The FTC and DOJ share responsibility to enforce the 
antitrust laws and have established a protocol to clear the 
investigation of a transaction to one agency to avoid confusion and 
conserve public resources. The agency that receives clearance 
conducts the investigation and determines whether to issue Second 
Requests.
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    The Commission has administered the HSR Act's premerger 
notification program for over forty-five years, issuing an initial set 
of HSR Rules that took effect on September 5, 1978.\3\ Since then, it 
has regularly updated these rules, with the concurrence of the 
Assistant Attorney General, pursuant to its mandate under 15 U.S.C. 
18a(d), to require a premerger notification for each reportable 
acquisition that contains documentary material and information 
necessary and appropriate to enable the Agencies to determine whether 
the transaction is one that may violate the antitrust laws and proceed 
to an in-depth investigation through the issuance of Second Requests. 
In this rulemaking, the Commission is responding to several factors 
that make today's economic reality more challenging for conducting a 
premerger assessment with the limited information required by the 
current rules. Simply put, the economy of 2024 is different than it was 
in 1978 or 2000 and, in the Agencies' experience, the HSR Form has not 
kept pace with the realities of how businesses compete today. There is 
a higher degree of interconnectivity of businesses along the supply 
chain as well as with other companies that provide ancillary services. 
The focus of competitive interaction is not as obvious when companies 
that supply goods or services also generate revenues from other 
sources, such as data sales, and when even businesses in traditional 
sectors such as manufacturing generate significant revenues from the 
sale of associated services. The changing nature of competition makes 
it more difficult for the Agencies to identify existing business 
relationships that might be affected by the acquisition, including 
through non-price effects such as innovation competition, and that are 
not

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apparent from simply focusing on sales in output markets. In addition, 
changes in mergers and acquisition (``M&A'') activity, corporate 
structures, and investment strategies have rendered the current Form's 
focus on traditional corporate structures outdated, and often the 
Agencies are unable to determine which entities or individuals will be 
making competitive decisions post-merger.
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    \3\ The Commission commenced notice-and-comment rulemaking soon 
after the passage of the HSR Act and made extensive revisions to its 
proposed rules before issuing a final rule nearly two years later. 
See 41 FR 55488 (Dec. 20, 1976), 42 FR 39040 (Aug. 1, 1977), 43 FR 
33450 (July 31, 1978), 43 FR 34443 (Aug. 4, 1978), 43 FR 36053 (Aug. 
15, 1978). See Fed. Trade Comm'n & U.S. Dep't of Justice, Second 
Hart-Scott-Rodino Annual Report (FY 1978).
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    These profound changes that have occurred over time have created or 
exposed significant gaps in the information generated for premerger 
review under the current HSR Rules. These gaps curtail the Agencies' 
ability to efficiently and effectively detect transactions that may 
violate the antitrust laws. To fill in these gaps and to directly 
respond to the passage of the Merger Modernization Act, the Commission 
relied on its experience and expertise to identify specific information 
that is necessary and appropriate to conduct effective premerger 
screening.
    To initiate this rulemaking, the Agencies conducted a comprehensive 
review of the premerger notification process, relied on their 
experience collecting and reviewing data and documents during antitrust 
investigations, and considered the cumulative effects of changes in 
deal structure, investment strategies, and the competitive dynamics of 
the modern economy explained in more detail below. From this review, 
the Commission identified several information deficiencies in the 
current HSR Filing that prevent the Agencies from efficiently and 
effectively conducting a premerger assessment of reportable 
transactions to identify which ones may violate the antitrust laws. The 
Agencies compared documentary material and information they have 
received over the years during in-depth merger investigations with the 
information collected in HSR Filings and assessed whether having 
certain types of documentary material and information at the beginning 
of an investigation would have changed the Agencies' decision whether 
and how to investigate reportable transactions. These specific 
categories of information and documents, which are readily available to 
the merging parties, are not required by the current Rules, but would 
be highly probative to the initial antitrust screening of a transaction 
during the initial waiting period and thus are necessary and 
appropriate for that review. The information identified and required by 
this final rule will enable the Agencies to detect transactions that 
may violate the law in light of modern commercial realities and in 
furtherance of the statutory mandate to arrest trends toward 
concentration in their incipiency. The final rule also will allow the 
Agencies to identify potentially unlawful transactions more quickly and 
with greater accuracy, narrowing the scope of their investigations in 
some cases, and in others, reducing the need to conduct a more 
burdensome in-depth investigation by issuing Second Requests.
    In June 2023, the Commission proposed amendments to address the 
information deficiencies under the existing HSR Rules in a Notice of 
Proposed Rulemaking (``NPRM'').\4\ The Commission received 
approximately 721 comments.\5\ The majority of commenters were 
individuals who expressed general support for the rulemaking or for 
more vigorous antitrust enforcement more broadly. Others opposed 
certain aspects of the proposed rule and some questioned the 
Commission's authority to make any adjustments. After careful 
consideration of the comments and as discussed in more detail below, 
the Commission has substantially narrowed the information requirements 
proposed in the NPRM. In the final rule, the Commission is not adopting 
several proposed requirements outright, including those related to:
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    \4\ On June 29, 2023, the Commission published a Notice of 
Proposed Rulemaking, Premerger Notification; Reporting and Waiting 
Period Requirements, 88 FR 42178 (June 29, 2023) (hereinafter NPRM). 
On August 10, 2023, the Commission extended the comment period to 
receive public comments through September 27, 2023. 88 FR 54256. The 
comments on the NPRM (Doc. No. FTC-2023-0040) are available at 
https://www.regulations.gov/docket/FTC-2023-0040/comments.
    \5\ The Commission does not rely on any particular individual 
comment submission for its findings, but rather provides here (and 
throughout this final rule) examples of comments that were 
illustrative of themes that spanned many comments. The Commission's 
findings are based on consideration of the totality of the evidence, 
including its review of the empirical literature, its review of the 
full comment record, and its expertise and experience in identifying 
mergers that violate the antitrust laws.
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     a timeline of key dates for closing the proposed 
transaction;
     creating organization charts for the purpose of filing a 
notification;
     information about other interest holders;
     drafts of submitted documents;
     information about employees;
     information about board observers;
     geolocation information;
     prior acquisitions involving entities with less than $10 
million in sales or revenues, or consummated more than 5 years prior to 
filing; and
     information about steps taken to preserve documents or use 
of messaging systems.
    For other proposals, the Commission has substantially modified its 
proposals to minimize where possible the costs to filers and third 
parties, yet still provide the Agencies with information that is 
necessary and appropriate for effective and efficient premerger review. 
Overall, these modifications significantly reduce the effort required 
to comply with the final rule as compared to the proposed rule and 
include:
     Creating a new category of ``select 801.30 transactions'' 
for which the cost of complying with the information requirements has 
been limited because of the low risk that the transaction may violate 
the antitrust laws;
     Eliminating several document requirements to reduce costs;
     Limiting some requirements to materials that already 
exist;
     Excusing the seller \6\ from certain information requests 
if it would be duplicative of information received from the buyer;
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    \6\ References to ``seller'' throughout refer to the acquired 
person, as defined in 16 CFR 801.2, regardless of whether or not the 
acquired person is actually a party to the transaction.
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     Limiting some requirements to cover only recent 
information;
     Providing definitions or clarifications to reduce 
uncertainty and improve filer compliance;
     Creating de minimis exceptions to reduce the costs of 
generating information that has little economic impact; and
     Making the provision of certain information contingent on 
the identification of a significant business relationship between the 
filing persons that is critical to assessing whether the transaction 
may violate the antitrust laws.
    As modified, the final rule introduces necessary and appropriate 
updates to HSR information requirements to allow the Agencies to 
understand the reported transaction and conduct an initial antitrust 
assessment within the statutory timeframe and does so in a manner that 
aligns the associated costs with the likelihood that the transaction is 
one that presents antitrust risk. With more complete information that 
is targeted to disclose existing business relationships between the 
parties, the Agencies can determine whether and how to deploy their 
resources to further investigate potentially anticompetitive 
acquisitions prior to consummation. The final rule will also provide 
transparency for those contemplating a reportable transaction by 
describing the information the

[[Page 89218]]

Agencies rely on to conduct their initial assessment of whether a 
transaction may violate the antitrust laws. The amendments will also 
reduce the current burden on third parties (such as customers and 
competitors of the merging parties) on whom the Agencies often rely to 
fill in many of the information gaps during the initial review period 
because of inadequacies in the current Rules.
    With this rulemaking the Commission has closely tailored the burden 
of complying with the HSR Act to align as much as practicable with the 
risks of a law violation presented by the particular transaction. This 
alignment is consistent with the statutory purpose of premerger review, 
which is for the Agencies to determine which reported transactions may 
violate the antitrust laws during the brief period provided by the Act 
for an initial antitrust assessment. As a result, the final rule 
achieves the benefits associated with mandatory premerger review with 
an overall burden that is reasonable and consistent with the 
legislative purpose of the HSR Act.

II. Background

A. Premerger Review and the Implications for Merger Enforcement

    Section 7 of the Clayton Act is, by its terms, forward-looking and 
predictive, focused on acquisitions whose effect ``may be substantially 
to lessen competition, or to tend to create a monopoly.'' \7\ To better 
effectuate the Clayton Act's goal of preventing undue consolidation or 
stopping it in its incipiency, Congress passed the HSR Act to require 
mandatory premerger notification of some acquisitions, and charged the 
Agencies with reviewing the details of those proposed transactions in 
advance of consummation to determine whether they may violate the 
antitrust laws. In doing so, Congress fundamentally changed the way the 
Agencies enforce the nation's antitrust laws to prevent harmful 
consolidation.\8\
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    \7\ 15 U.S.C. 18. See Brown Shoe v. United States, 370 U.S. 294, 
317-18 (1962) (Congress provided authority for arresting mergers at 
a time when the trend to a lessening of competition in a line of 
commerce was still in its incipiency and assure courts had the power 
to brake the process of concentration at its outset and before it 
gathered momentum).
    \8\ See Peter W. Rodino, Jr., Statement on the 25th Anniversary 
of Hart-Scott-Rodino (2001), https://www.ftc.gov/enforcement/premerger-notification-program/hsr-resources/pno-news-archive/statement-peter-w-rodino (``Hart-Scott-Rodino was intended to give 
the anti-trust agencies two things: critical information about a 
proposed merger and time to analyze that information and prepare a 
case, if necessary. From what I hear, the legislation absolutely has 
transformed merger enforcement. Competition, as well as the 
consumer, has benefitted.'').
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    Congress specifically charged that the Commission engage in 
rulemaking to require information in the HSR Filing that is necessary 
and appropriate to detect acquisitions that may violate the antitrust 
laws. Section 18a(d)(1) of the HSR Act states that the Commission, by 
rule and in accordance with the Administrative Procedures Act, shall 
require that the notification contain such documentary material and 
information to determine whether the acquisition may, if consummated, 
violate the antitrust laws.\9\ Relying on this explicit rulemaking 
authority, the Commission has adjusted those requirements over time to 
carry out the purposes of the Act.
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    \9\ 15 U.S.C. 18a(d)(1).
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    In passing the HSR Act, Congress imposed mandatory premerger review 
only for certain large transactions, in part to ``improve and modernize 
antitrust investigation and enforcement mechanisms,'' \10\ ``ease 
burdens on the courts by forestalling interminable post-consummation 
divestiture trials . . . [, and] advance the legitimate interests of 
the business community in planning and predictability.'' \11\ The 
robust legislative history of the HSR Act makes plain that premerger 
review should focus on the likelihood that a reported transaction may 
violate the antitrust laws and that the Commission shall collect 
information to make that determination prior to consummation.\12\ 
Consistent with Congressional mandate, the Agencies rely on 
notifications under the HSR Act to target their enforcement efforts to 
their best use in preventing undue consolidation by seeking to prohibit 
the consummation of acquisitions that violate the antitrust laws.
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    \10\ S. Rep. No. 94-803, at 1 (1976).
    \11\ H.R. Rep. No. 94-1373, at 11 (1976). The HSR Act applies to 
acquisitions that met the statutory thresholds whether they are 
properly styled ``mergers'' and even if they do not result in a 
change of control. The terms ``mergers,'' ``acquisitions,'' and 
``transactions'' are used interchangeably to refer to transactions 
for which an HSR filing is required.
    \12\ 15 U.S.C. 18a(d)(1).
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    To focus the Agencies' screening and potential enforcement efforts 
on the mergers that are most likely to harm competition and consumers, 
Congress required notice in advance for the largest mergers and tasked 
the Agencies with conducting an assessment of the risk that the 
proposed acquisition may violate the antitrust laws. To perform this 
task, the Agencies must review thousands of filings each year and 
identify which ones should be targeted for an intensive investigation 
of their potential to violate the antitrust laws. This is a fact-
intensive endeavor that requires a deep understanding of precedent and 
economic analysis. The Agencies employ lawyers, economists, 
technologists, accountants, and support staff to conduct premerger 
analyses of reported transactions in order to perform this critical 
task on behalf of the American public.
    Nonetheless, transactions reported under the HSR Act are a small 
fraction of the total number of mergers and acquisitions that occur 
each year in the United States. Relying on commercial data on M&A 
activity and data from the Agencies' annual HSR reports, Table 1 shows 
that during the five-year period of FY 2018 to 2022, HSR filings 
represented a small percentage of overall deal activity in the United 
States, on average 16.5 percent a year.\13\
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    \13\ Using different commercially available data, the U.S. 
Government Accountability Office recently estimated that HSR filings 
during this same time frame averaged 15 percent of overall M&A 
activity. See U.S. Gov't Accountability Office, Defense Industrial 
Base: DOD Needs Better Insight into Risks from Mergers and 
Acquisitions 8 Fig. 1 (Oct. 2023) (GAO-24-106129), https://www.gao.gov/assets/d24106129.pdf (using Bloomberg data).

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[GRAPHIC] [TIFF OMITTED] TR12NO24.032

    While the Agencies investigate and ultimately seek to block only a 
small subset of reportable mergers each year, the challenges of 
administering mandatory premerger review have expanded and accelerated 
over time due to the changes in the nature of M&A activity discussed in 
detail below.
[GRAPHIC] [TIFF OMITTED] TR12NO24.033

    As depicted in Figure 1, there was a recent spike in HSR-reportable 
transactions: in FY 2021, the Agencies reviewed HSR Filings for 3,520 
transactions, over twice the number of the prior year's filings. In FY 
2022, the Agencies reviewed 3,152 transactions. Although the pace of 
HSR Filings has recently moderated somewhat, the recent period of 
intense merger activity highlighted significant inefficiencies and 
deficiencies in current notification requirements that must be 
addressed so that the Agencies can direct their scarce resources to 
prevent those acquisitions most likely to cause widespread harm.\14\
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    \14\ Contrary to suggestions from some commenters, it is not 
practical for the Agencies to identify specific illegal transactions 
that they ``missed'' during their premerger review, nor is the 
Commission required to establish that as a predicate for invoking 
its statutory rulemaking authority under the HSR Act. See Pharm. 
Rsch. & Mfrs. Am. v. FTC, 790 F.3d 198, 199, 206 (D.C. Cir. 2015) 
(hereinafter PhRMA). Doing so would require a redirection of 
resources to investigate consummated mergers and away from resources 
devoted to premerger review. Instead, it is imperative that the 
Agencies ensure that they have the right information to address 
deficiencies that have emerged to undermine premerger review as an 
effective tool for detecting which transactions may violate the 
nation's antitrust laws.
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    The Commission is mindful of recent economic research that 
underscores the importance of adequate detection for effective merger 
enforcement. For instance, researchers posit that some firms appear to 
be employing strategies to avoid antitrust scrutiny of their 
anticompetitive deals, deliberately negotiating and structuring their 
deals to avoid premerger review (so-called

[[Page 89220]]

stealth acquisitions),\15\ or identifying acquisition targets at a 
nascent stage to buy them before they are valuable enough to require 
premerger review, sometimes solely for the purpose of preempting future 
competition (so-called ``killer acquisitions'').\16\ One researcher 
concludes that merger enforcement falls by about 90 percent when 
transactions are not subject to premerger review.\17\ Because most 
mergers are not subjected to premerger review, these strategies have 
contributed to a rise in aggregate concentration by stimulating mergers 
between competitors, with attendant negative effects on markups, 
private investment, and the share of output going toward profits.\18\
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    \15\ John Kepler et al., ``Stealth Acquisitions and Product 
Market Competition,'' 78 J. Fin. 2837 (2023); John M. Barrios & 
Thomas G. Wollmann, ``A New Era of Midnight Mergers: Antitrust Risk 
and Investor Disclosures'' (Nat'l Bureau of Econ. Rsch., Working 
Paper No. 29655, Jan. 2022), https://www.nber.org/papers/w29655; see 
also Colleen Cunningham et al., ``Killer acquisitions,'' 129 J. 
Political Econ. 649, 653 (2021) (killer acquisitions of overlapping 
targets bunch just below HSR threshold while there is no such 
pattern for non-overlapping acquisitions).
    \16\ Cunningham et al., supra note 15, at 653.
    \17\ See Comment of Thomas Wollmann, Doc. No. FTC-2023-0040-0680 
at 1 n.2 (citing to Thomas G. Wollmann, ``Stealth Consolidation: 
Evidence from an Amendment to the Hart-Scott-Rodino Act,'' 1 a.m. 
Econ. Rev.: Insights 77-94 (2019) and Thomas G. Wollman, ``How to 
Get Away with Merger: Stealth Consolidation and Its Real Effects on 
US Healthcare'' (Nat'l Bureau of Econ. Rsch., Working Paper No. 
27274, 2021)).
    \18\ Thomas G. Wollmann, ``Stealth Consolidation: Evidence from 
an Amendment to the Hart-Scott-Rodino Act,'' 1 a.m. Econ. Rev.: 
Insights 77-78 (2019) (hereinafter ``Stealth Consolidation'').
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    These studies support Congress' determination that premerger review 
is essential to effective enforcement of the antitrust laws and that 
without effective premerger review, there is inadequate detection of 
mergers that violate the law and cause harm.\19\ While the Agencies can 
and do challenge acquisitions that are not reported under the HSR Act 
as well as consummated reported mergers that have caused harm, 
unwinding an illegal merger post-consummation still requires a 
significant investment of time and resources, and results in 
significant harm to market participants until unwound.\20\ Even after 
the Agency succeeds in establishing a law violation, it may be 
difficult or impossible to restore the premerger state of competition, 
especially if the parties have commingled, sold, or closed assets, 
shared confidential information, or terminated key employees.\21\ 
Moreover, the decision to pursue these time-consuming investigations 
involves opportunity costs, pitting the costs and benefits of 
challenging a consummated merger against devoting those enforcement 
resources to investigations into other potential antitrust violations, 
including investigations that may arise from HSR Filings.
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    \19\ See id. at 77 (post-2000, enforcement against newly exempt 
transactions dropped to nearly zero while mergers between 
competitors rose sharply, reflecting an endogenous response to 
reduced premerger scrutiny).
    \20\ In a recent example, the Commission ordered the unwinding 
of an illegal merger three years and two months after consummation. 
In December 2020, the Commission approved Otto Bock's divestiture of 
the assets of Freedom Innovations to another company to resurrect 
competition in the market for microprocessor prosthetic knees. In re 
Otto Bock HealthCare N. Am., Inc., No. 9378 (F.T.C. Dec. 1, 2020). 
The Commission's effort to unwind Polypore's illegal acquisition of 
rival battery separator manufacturer Microporous required five 
years, during which an Eleventh Circuit decision upheld the 
Commission's divestiture order. See Press Release, Fed. Trade 
Comm'n, ``FTC Approves Polypore International's Application to Sell 
Microporous to Seven Mile Capital Partners; Sale Will Unwind Illegal 
2008 Acquisition'' (Dec. 18, 2013), https://www.ftc.gov/news-events/news/press-releases/2013/12/ftc-approves-polypore-internationals-application-sell-microporous-seven-mile-capital-partners-sale. See 
also Debbie Feinstein, ``Un-consummated merger,'' Fed. Trade Comm'n 
Competition Matters blog (Dec. 18, 2013), https://www.ftc.gov/enforcement/competition-matters/2013/12/un-consummated-merger.
    \21\ Fed. Trade Comm'n, The FTC's Merger Remedies 2006-2012, 18-
19 (2017) (report of the Bureaus of Competition and Economics) (less 
than one-quarter of consummated merger remedies successfully 
restored competition), https://www.ftc.gov/system/files/documents/reports/ftcs-merger-remedies-2006-2012-report-bureaus-competition-economics/p143100_ftc_merger_remedies_2006-2012.pdf.
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    To fulfill the Agencies' mandate to conduct quick yet effective 
premerger review of reported transactions, the Commission must make the 
best use of the tools Congress gave the Agencies to detect and prevent 
harmful acquisitions, including by requiring that the notification 
contain the documents and information that are necessary and 
appropriate for screening reportable mergers prior to consummation. 
Because premerger review is critically important to effective merger 
enforcement, the information contained in an HSR Filing must be fit for 
the purpose of determining whether a reported transaction may violate 
the antitrust laws in light of current market realities. Having the 
information necessary to make that assessment allows the Agencies to 
decide when and how to expend public resources to investigate and 
potentially challenge mergers. The final rule will enable the Agencies 
to engage in efficient and effective detection of illegal mergers that 
are subject to the HSR Act and thus is a reasonable exercise of the 
Commission's rulemaking authority under the HSR Act.

B. The Need for the Final Rule

    The purpose of this rulemaking is to modernize the premerger review 
process in light of changing market dynamics, making adjustments that 
are necessary and appropriate to allow the Agencies to detect and 
prevent illegal mergers prior to consummation. The final rule also 
makes the process more efficient for filers, third parties, and the 
Agencies, shifting some of the burden of information collection and 
reporting to the merging parties (and away from third parties) and 
requiring the information needed for a preliminary antitrust assessment 
to be contained in the HSR Filing so that the Agencies have the full 
statutory review period to assess and confirm the information. Overall, 
the final rule addresses significant information gaps and asymmetries 
that have grown over time and undermined the Agencies' ability to 
conduct premerger review. In addition, this rulemaking implements 
requirements Congress imposed by passing the Merger Modernization Act, 
which broadened the scope of information the Agencies must collect as 
part of premerger review, including by requiring the collection of 
information about subsidies from foreign entities and governments of 
concern.
    Due to changing commercial realities referenced above, the existing 
requirements for an HSR Filing leave significant gaps in the 
information available to the Agencies for conducting this assessment. 
Many of these gaps can be filled by information that the filing parties 
already have and often use in their own assessment of the transaction. 
Certain deficiencies in the existing reporting requirements prevent the 
Agencies from spotting problem areas that would justify a more in-depth 
investigation or, alternatively, from readily obtaining the facts 
needed to conclude that the transaction does not merit in-depth review 
prior to consummation. The rulemaking addresses these problems as well.
    Based on the Agencies' extensive experience reviewing HSR Filings, 
transactions that present certain attributes are more likely to violate 
the antitrust laws and deserve further investigation. For instance, a 
merger of two firms that compete (or will soon compete) to provide 
goods or services to

[[Page 89221]]

the same set of customers, or a merger involving a manufacturer and its 
main distributor that also distributes the products of competing 
manufacturers, may warrant closer scrutiny. On the other hand, if the 
Agencies can determine from review of an HSR Filing that a transaction 
does not present such attributes, the Agencies can more quickly and 
confidently determine that the transaction does not require a more in-
depth review and may proceed to consummation.\22\ However, the Agencies 
cannot make these determinations with confidence in the initial 15- or 
30-day waiting period when the HSR Filings lack sufficient information 
about relevant premerger competitive relationships between the parties. 
By requiring the submission of such information, the final rule enables 
effective Agency decision-making during the initial 15- or 30-day 
waiting period.\23\ The intention of the final rule is to make it 
possible for the Agencies to identify the most concerning transactions 
for more in-depth review, including through the issuance of Second 
Requests, and also to more quickly and confidently complete the review 
of those transactions that do not merit additional investigation and 
can proceed to closing at the end of the statutory waiting period.
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    \22\ Until 2020, the Agencies routinely granted early 
termination of the initial waiting period for certain transactions 
that did not warrant further action pursuant to 15 U.S.C. 18a(b)(2). 
In March 2020, in order to transition filers to an e-filing system 
that permitted the Agencies to continue to process filings during 
the COVID-19 pandemic, the Agencies temporarily suspended the 
discretionary granting of early termination. In February 2021, the 
Agencies once again suspended the granting of early termination in 
response to an unprecedented volume of transactions. See Press 
Release, Fed. Trade Comm'n, ``FTC, DOJ Temporarily Suspend 
Discretionary Practice of Early Termination'' (Feb. 4, 2021), 
https://www.ftc.gov/news-events/news/press-releases/2021/02/ftc-doj-temporarily-suspend-discretionary-practice-early-termination.
    \23\ The HSR Act provides for a shortened 15-day initial waiting 
period for reportable acquisitions by means of a cash tender offer 
or acquisitions subject to certain Federal bankruptcy provisions. 15 
U.S.C. 18a(b)(1)(B); 11 U.S.C. 363(b)(2), as amended (1994). For 
these transactions, the second waiting period is also shorter, 10 
days (as compared to 30 days for most transactions) after 
appropriate certification of substantial compliance with the Second 
Request. 15 U.S.C. 18a(e)(2). For convenience, this rulemaking 
refers to the standard 30-day initial waiting period that applies to 
most transactions even though the Agencies have even less time to 
review information provided in the HSR Filing for cash tender or 
certain bankruptcy transactions.
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    The consequences of inadequate detection are revealed in a recent 
analysis of hospital mergers that were reported to the Agencies for 
premerger review co-authored by two economists from the Commission's 
Bureau of Economics.\24\ The paper examined a set of consummated 
hospital mergers and measured the effect of each merger on prices. The 
study concluded that mergers not reportable under the HSR Act did not 
result in larger price increases than reportable mergers. In contrast, 
the authors found different outcomes among mergers that were subject to 
premerger review based on how much review the transaction received. Of 
the mergers reported to the Agencies, the largest average percentage 
price increase occurred for those mergers that received early 
termination of the initial waiting period. This suggests that the HSR 
Filings failed to provide sufficient information to trigger additional 
investigations that could have blocked these harmful mergers before 
they were consummated; instead, the filings resulted in early 
termination of the waiting period. While the study was not designed to 
test the impact of this rulemaking, the study supports the Commission's 
belief that there are information deficiencies with the current HSR 
Rules that prevent the Agencies from identifying mergers that may 
violate the antitrust laws.\25\
---------------------------------------------------------------------------

    \24\ Keith Brand et al., ``In the Shadow of Antitrust 
Enforcement: Price Effects of Hospital Mergers from 2009-2016,'' 66 
J. L. Econ. 639 (2023).
    \25\ One commenter suggests that this study proves the opposite 
and provides evidence that the current HSR Form provides Agency 
staff with sufficient information to identify potentially 
anticompetitive mergers. See Comment of U.S. Chamber of Com., Doc. 
No. FTC-2023-0040-0684 at 14 n.32. The Commission disagrees with 
this assessment of the results. Indeed, in their study, the authors 
suggested that their results should encourage further study of the 
process of granting early termination to better illuminate why 
mergers that receive truncated review had higher price effects than 
those that received a preliminary review but not a Second Request. 
See Brand et al., supra note 24, at 663-64.
---------------------------------------------------------------------------

    Hundreds of individuals submitted public comments to describe their 
own experiences in the aftermath of mergers and urge the antitrust 
agencies to do more to prevent the harmful effects of consolidation, 
including collecting more information in the HSR Filing. Examples of 
supportive comments from these individuals include the following:
     I was an employee at a mobile gaming company. . . . We 
went through acquisition after acquisition, to finally end up in a 
subsidiary of a big gaming multinational company. . . . There was a 
hiring freeze, there were layoffs in another subsidiary we had been 
affiliated with and then a month ago they cancelled our project and 
laid off all California employees. . . . Before the final acquisition, 
our company had 2 profitable games and was developing a third. After 
the acquisition there were harsh [Key Performance Indicators] for the 
new game and investment was cut back. Had our company been able to 
resist the wave of subsequent acquisitions, it is likely we would still 
be employed in a profitable and vibrant company that was able to 
compete on the marketplace.\26\
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    \26\ Anonymous Comment, Doc. No. FTC-2023-0040-0134.
---------------------------------------------------------------------------

     I am a General Partner at a small Venture Capital firm. I 
support this proposal as I believe it will lead to increased 
transparency which benefits us all. . . . We are facing an oligopoly/
monopoly crisis in this country/the world and it's important we strive 
for real competition. I believe this proposal will provide the 
government more information with which it can make sure our industries 
thrive.\27\
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    \27\ Anonymous Comment, Doc. No. FTC-2023-0040-0203.
---------------------------------------------------------------------------

     As a retired person, I have noticed prices going up much 
more where a small group of suppliers have most of the market share. I 
see companies using near-monopoly power to stop employees from having 
unions. The only way the antitrust laws can be adequately enforced, is 
to insist that anyone proposing a merger provide full accurate 
information on what they are doing.\28\
---------------------------------------------------------------------------

    \28\ Comment of Joan Friedman, Doc. No. FTC-2023-0040-0237.
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     I work as a cybersecurity engineer. Leaving aside the 
economic concerns of monopolies, I want to bring up the security 
concerns of allowing unchecked mergers. Haphazard, rushed mergers 
increase the security risk across companies, as the engineering teams 
must stitch together the environments for disparate organizations 
quickly. . . . I look forward to these reporting requirements and I 
hope they cause companies to slow down and think of the knock-on 
effects of the mergers beyond the influx of cash and increased market 
power.\29\
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    \29\ Comment of Cybersecurity Engineer, Doc. No. FTC-2023-0040-
0238.
---------------------------------------------------------------------------

     As an investor and financial advisor, I approve of the 
changes requiring more disclosure about the nature of mergers. The 
impacts of industry consolidation are important. . . . A thorough 
understanding of the purpose of mergers should help ensure that deals 
are not anti-competitive.\30\
---------------------------------------------------------------------------

    \30\ Comment of Joseph Cook, Doc. No. FTC-2023-0040-0244.
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     As a retired CPA and former business professor, I support 
these proposed changes to the HSR form. The government needs the 
additional information and greater clarity in order to carry out its 
responsibility to oversee and evaluate proposed mergers and 
acquisitions with a view to protecting

[[Page 89222]]

the common good and promoting competition within and across 
industries.\31\
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    \31\ Comment of Sue Ravenscroft, Doc. No. FTC-2023-0040-0259.
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     Capitalism can only work with a robust system of 
competition, and we are lo[]sing that at an ever-increasing rate. I am 
in an agricultural business. There is virtually no competition for the 
dollars I spend, and an equal lack of competition for what I produce. 
This is stunningly true when looked at over the 40 years I have been in 
business.\32\
---------------------------------------------------------------------------

    \32\ Comment of Jeffrey Bender, Doc. No. FTC-2023-0040-0267.
---------------------------------------------------------------------------

     Businesses certainly have a right to pursue mergers and 
acquisitions as a means of improving their market positions, but the 
public also has a right to know the ``five W's'' driving these 
decisions: Who is funding the HSR Action; What are the specifics of the 
proposed action; When are the HSR Actions taking place; Where are the 
affected communities/localities; and Why are the stakeholders pursuing 
the HSR Action (or, what is their business goal)? Another key piece of 
information that the public has a right to know, is WHO will be 
affected by the proposed merger or acquisition? The issues at stake 
here are National Security, fair market competition, supply chain 
disruptions, and negative impacts on labor markets. . . . I hope the 
FTC sticks to their plan and implements these common-sense and much 
needed reporting requirements.\33\
---------------------------------------------------------------------------

    \33\ Comment of Thomas Newman, Doc. No. FTC-2023-0040-0325.
---------------------------------------------------------------------------

     I am a 25-year veteran in an industry (publishing) that 
has seen both jobs and innovation suffer due to unchecked consolidation 
by large players. It is very possible some of this consolidation might 
have been prevented, or at least steered in a direction that encouraged 
innovation and growth, if regulators had this kind of information 
available beforehand.\34\
---------------------------------------------------------------------------

    \34\ Anonymous Comment, Doc. No. FTC-2023-0040-0332.
---------------------------------------------------------------------------

     I am a private, sole-practitioner entrepreneur with a 
vested interest in a diversified economic ecology that supports and 
sustains vibrant, fair competition. . . . From my perspective, the 
requirements for getting approval for large mergers should include 
gathering enough information about the companies involved that the FTC 
can make a best and rational assessment of the effects of the maneuver 
on the industries, labor markets, consumer pricing, industry trends, 
trading markets, etc, that they (mergers) will potentially affect.\35\
---------------------------------------------------------------------------

    \35\ Comment of Marla McFadin, Doc. No. FTC-2023-0040-0377.
---------------------------------------------------------------------------

    On the other hand, several commenters stated that the Agencies have 
not provided any evidence that current information requirements are 
insufficient, or identified transactions they did not challenge due to 
shortcomings in the current premerger review process. One commenter 
suggested that if the Commission intends to expand the information 
requirements for the HSR Filing, it should lay a stronger legal and 
evidentiary foundation that would justify its need for the additional 
information. Another commenter urged the Commission to consider how 
best to balance the need to determine whether further investigation is 
warranted against the burden to filing parties.
    In response to the comments and to explain further the need for 
this rulemaking, the Commission discusses below the gaps that exist in 
current HSR information requirements relating directly to potential 
violations of the antitrust laws, and identifies the new information 
requirements in the final rule that will provide a factual basis for 
the Agencies to determine whether to conduct a more searching review of 
a transaction based on these concerns. The gaps described below are 
intended to be illustrative and not exhaustive.
1. Disclosure of Entities and Individuals Within the Acquiring Person
    In reviewing a transaction filed under the HSR Act, the Agencies 
must quickly understand the scope and nature of the buyer's business 
and business relationships to determine whether the acquisition may 
harm competition and thus violate the antitrust laws,\36\ which include 
section 7 of the Clayton Act. The scope of section 7 is broad: it 
prohibits any acquisition whose effect may be substantially to lessen 
competition or to tend to create a monopoly, including those that 
result in a small ownership stake.\37\ In many acquisitions, the buyer 
gains control of the acquired entities or assets and directs the 
decision-making at the combined firm post-merger. In addition, if the 
buyer has a complex corporate or governance structure, an acquisition 
can bring together individuals or investors within the buyer that 
control or influence decision-making at a competitively significant 
business, such as a competitor of the target \38\ of the filed-for 
transaction.\39\ Indeed, holdings of entities within the acquiring 
person that do not result in control under the HSR Rules nevertheless 
can result in the ability to influence competitively important 
decisions of the acquiring entity, and thus affect the analysis of 
whether the acquisition of the target may harm competition.\40\
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 12(a).
    \37\ 15 U.S.C. 18. See United States v. E.I. du Pont de Nemours 
& Co., 353 U.S. 586, 592 (1957) (any acquisition is within the reach 
of section 7 whenever the reasonable likelihood appears that the 
acquisition will result in a restraint of commerce or the creation 
of a monopoly in any line of commerce).
    \38\ To aid the clarity of the Form and Instructions, the 
Commission defines ``target'' in the Instructions to include all 
entities and assets to be acquired by the acquiring person from the 
acquired person in the reported transaction. See section VI.A.1.h.
    \39\ See, e.g., In re Red Ventures Holdco, LP, No. C-4627 
(F.T.C. Nov. 2, 2017) (complaint) (overlapping limited partnership 
holdings violated section 7); In re TC Group, L.L.C., No. C-4183 
(F.T.C. Mar. 16, 2006) (complaint) (acquisition involving minority 
stake giving two private equity investors seats on the boards of 
competitors); In re Dan L. Duncan, No. C-4173 (F.T.C. Aug. 18, 2006) 
(complaint) (acquisition combined general partners of competing 
energy storage companies under common control). Competition concerns 
about partial stakes can arise between horizontal competitors; 
United States v. Dairy Farmers of Am., 426 F.3d 850, 860 (6th Cir. 
2005), or a supply relationship, du Pont, 353 U.S. at 602-604 (23% 
interest in General Motors, a key supplier, and a shared board 
member). Section 7 does not apply to buyers making an acquisition 
solely for the purpose of investment when the buyer does not intend 
to use its position to bring about or attempt to bring about a 
substantial lessening of competition. United States v. Tracinda Inv. 
Corp., 477 F. Supp. 1093, 1100 (C.D. Cal. 1979).
    \40\ See du Pont, 353 U.S. at 607 n.36 (finding the influence of 
du Pont's 23% stock interest to be greater, due to diffusion of 
remaining shares); Denver & Rio Grande W. R.R. Co. v. United States, 
387 U.S. 485, 504 (1967) (identifying section 7 concerns with a 20% 
investment). See also Dairy Farmers of Am., Inc., 426 F.3d at 862 
(no voting interest but leverage via its position as financier to 
control or influence competitor's decisions).
---------------------------------------------------------------------------

    The HSR Act states that, unless exempt, no person shall acquire, 
directly or indirectly, any voting securities or assets of any other 
person without first filing a notification with the Agencies and 
waiting for the statutory period to expire.\41\ The HSR Rules require 
notification of the transaction from the entity that, pursuant to the 
Rules, controls the buyer (or seller), which the Commission has defined 
as the Ultimate Parent Entity or ``UPE.'' \42\ But to determine

[[Page 89223]]

whether the transaction may violate the antitrust laws, the Agencies 
need to understand the nature of the buyer's holdings pre- and post-
merger, as well as the identities of others who have holdings in the 
buyer and thus may have influence, including possible veto power, over 
the buyer's decision-making, since that ability affects the evaluation 
of the competitive effects of the acquisition of the target. 
Increasingly, this includes individuals and entities with significant 
management rights that give them a ``seat at the table'' when the buyer 
is making competitively important decisions.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 18a(a). Congress rejected a proposal to limit 
covered acquisitions to those made by corporations, using the term 
``person'' instead because the anticompetitive nature of a merger is 
not dependent upon the legal form of the acquiring entity. 122 Cong. 
Rec. 30876 (1976).
    \42\ One of the many initial challenges that the Commission 
faced in implementing the HSR Act was how to define ``control'' for 
the purposes of determining reportability of transactions. The 
Commission immediately understood that no set percentage of 
ownership dictated whether an individual or entity had functional 
control of or significant influence over a company, which is 
critical to the analysis of the competitive effects of a 
transaction. In 1976, the Commission originally proposed that 
``control'' would include not only ownership of 50% or more of the 
voting securities of an entity, but also the power to influence 
through a minority stake. 41 FR 55488, 55490 (Dec. 20, 1976). 
Commenters objected to such a subjective test for control. See 42 FR 
39040, 39043 (Aug. 1, 1977). So, the Commission proposed to include 
the contractual power to designate a majority of the directors or 
trustees of an entity. Id. This proposal was also criticized for 
being overly broad and subjective. In the end, in setting up the 
premerger notification program, the Commission adopted the simple 
50% or more threshold for control to give prospective filers 
certainty as to their reporting obligations. But in doing so, the 
Commission did not dismiss the significance of understanding who has 
actual or working control of the filing parties. 43 FR 33450, 33457-
58 (July 31, 1978). This definition limited the number of 
transactions subject to the filing requirements of the HSR Act, but 
the Commission did not minimize the importance of examining who may 
have significant influence over the acquiring person while assessing 
antitrust risk arising from the transaction.
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    Today, the mechanisms of influence are not limited to equity 
stakes; the ability to influence corporate decision-making arises from 
a variety of interests beyond voting rights.\43\ It may arise from 
sharing key decision-makers, such as executives or members of their 
respective boards of directors, or from a combination of a significant 
minority stake and rights to appoint or nominate members of the 
board.\44\ The power of key decision-makers of one competitor to place 
members on the board of another competitor or veto financial decisions 
can result in substantial influence over the buyer, and thus the target 
after the transaction is consummated, rendering an acquisition of a 
related target potentially illegal under section 7.\45\ A merger might 
also violate the law if it gives individuals and entities of one 
competitor access to officers, directors, or employees of another 
competitor.\46\ Similarly, the existence of subsidies, among other 
means, may subject the buyer to additional pressures from individuals 
or entities not directly a party to the reportable transaction.\47\ 
Beyond voting rights, these interest holders can have similar influence 
as holders of minority and non-corporate interests.
---------------------------------------------------------------------------

    \43\ Gabriel V. Rauterberg, ``The Separation of Voting and 
Control: The Role of Contract in Corporate Governance,'' 38 Yale J. 
Reg. 1124, 1148-54 (2021) (documenting trend of public companies 
being subject to stockholder agreements that provide various species 
of control rights to favored investors); Jill E. Fisch, ``Stealth 
Governance: Shareholder Agreements and Private Ordering,'' 99 Wash. 
U. L. Rev. 913, 930-33, 946-53 (2021) (discussing similar trend in 
private companies).
    \44\ E.g., United States v. U.S. West, Inc., No. 96-002529, 1997 
WL 269482 (D.D.C. Feb. 28, 1997) (acquired firm had 20% stake plus 
board seats in a competitor of acquiring firm).
    \45\ E.g., United States v. Univision Commc'ns., Inc., No. 1:03-
cv-00758, 2003 WL 23192527 (D.D.C. Dec. 22, 2003) (buyer held 
substantial equity stake plus ability to influence certain strategic 
decisions through issuance of equity or debt or veto of future 
acquisitions). See also Dairy Farmers of Am., 426 F.3d at 862 (buyer 
had influence due to role as financier, so that acquired firm is 
``locked in'' to a relationship with the buyer, which could lead to 
anticompetitive effects).
    \46\ E.g., In re Time Warner Inc., No. C-3709 (F.T.C. Sept. 12, 
1996) (analysis to aid public comment) (walling off two individuals 
and one entity to prevent them from influencing officer, directors, 
and employees of competitor and its day-to-day operations).
    \47\ As discussed elsewhere, Congress has directed the 
Commission to require the reporting of subsidies received from 
foreign countries or foreign entities of concern due to concerns 
that these entanglements can distort the competitive process by 
enabling the subsidized firm to submit a bid higher than other firms 
in the market, or otherwise change the incentives of the firm in 
ways that undermine competition following an acquisition. Merger 
Filing Fee Modernization Act of 2022, 15 U.S.C. 18b. Congress also 
enacted the Foreign Investment Risk Review Modernization Act of 2018 
(FIRRMA) to expand the jurisdiction of the Committee on Foreign 
Investment in the United States (CFIUS) over certain non-controlling 
investments and real estate transactions involving foreign persons 
that may be a threat to national security. Public Law 115-232, 132 
Stat. 2173, Title XVII, Subtitle A (2018). For certain foreign 
investments in U.S. businesses operating critical technologies or 
infrastructure, or that collect sensitive personal data of U.S. 
citizens, FIRRMA regulations require notification of non-controlling 
investments, direct or indirect, that afford the foreign investor 
(1) access to material non-public technical information; (2) 
membership or observer rights on the board directors (or similar) or 
the right to nominate an individual to that board; or (3) any 
involvement, other than through voting of shares, in substantive 
decision-making of the U.S. business. 31 CFR 800.211. Such 
relationships are deemed a non-controlling interest in a U.S. 
business that afford a foreign investor access to information or 
involvement in substantive decision-making. See 85 FR 3112 (Jan. 17, 
2020).
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a. Trends in Private Investment
    Understanding the operations of the buyer has become more 
challenging due to vast changes in M&A activity since the promulgation 
of the HSR Rules in 1978. One notable recent trend in M&A activity is 
that the role of private investors, including private equity, has 
become more pronounced.\48\ In the Agencies' experience, these private 
investors often utilize complicated structures of ownership and 
managerial control. They also frequently take either majority or 
minority stakes in many different operating companies (which may have 
competitively significant relationships) and can exercise significant 
influence over management and strategic decision-making. In particular, 
the percentage of equity interest is often not a good indicator of the 
extent to which investors can direct the strategic decisions of the 
business.\49\ Investors can participate in the management of companies 
by serving on the company's board, selecting or monitoring the 
management team, having veto rights, acting as sounding boards for 
CEOs, or stepping into management roles themselves.\50\
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    \48\ Elisabeth de Fontenay, ``The Deregulation of Private 
Capital and the Decline of the Public Company,'' 68 Hastings L. J. 
445, 447 (2017). Private equity has accounted for an increasing 
share of all merger activity over time, although private equity 
activity is highly cyclical. See Michael Mauboussin & Dan Callahan, 
``Public to Private Equity in the United States: A Long-Term Look,'' 
Morgan Stanley Inv. Mgmt., Counterpoint Global Insights 1 (Aug. 2, 
2020), https://www.morganstanley.com/im/publication/insights/articles/articles_publictoprivateequityintheusalongtermlook_us.pdf. 
Recent estimates suggest that private equity firms managed about 20% 
of U.S. corporate equity and that private equity deal-making has 
accounted for 40% or more of domestic M&A activity. Rog[eacute] 
Karma, ``The Secretive Industry Devouring the U.S. Economy,'' 
Atlantic (Oct. 30, 2023). See also Steven A. Cohen, et al., 
``Private Equity in 2023--A Year (Not) to Remember,'' Harv. L. Sch. 
Forum on Corp. Governance (Jan. 13, 2024), https://corpgov.law.harvard.edu/2024/01/13/private-equity-in-2023-a-year-not-to-remember/ (private equity deal volume declined in 2023 and 
increasingly focused on smaller deals and minority investments).
    \49\ See generally Bob Zider, ``How Venture Capital Works,'' 
Harv. Bus. Rev. (Nov.-Dec. 1998), https://hbr.org/1998/11/how-venture-capital-works; Thomas Hellman, ``The allocation of control 
rights in venture capital contracts,'' 29 RAND J. Econ. 57 (1998).
    \50\ See, e.g., Sec. Exch. Comm'n, ``Private Equity Funds,'' 
Investor.gov (last visited Sept. 10, 2024), https://www.investor.gov/introduction-investing/investing-basics/investment-products/private-investment-funds/private-equity.
---------------------------------------------------------------------------

    When these private investors take active positions in a wide 
variety of companies, such holdings can create direct links between 
competitors or other competitively relevant firms, such as critical 
suppliers or distributors. Economic research has shown that 
transactions that lead to cross-ownership of horizontal competitors or 
other firms in a competitively significant business relationship can 
create similar incentives and cause similar anticompetitive effects as 
a full merger.\51\ But when these relationships are not well known or 
easy to identify, the risk that anticompetitive harm from an unlawful 
acquisition will go

[[Page 89224]]

undetected is greatly increased.\52\ This includes the risk of 
collusive \53\ or coordinated behavior,\54\ or the risk that cross-
ownership of the combined firm will lead to foreclosure of rivals.\55\
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    \51\ Timothy Bresnahan & Steven C. Salop, ``Quantifying the 
competitive effects of production joint ventures,'' 4 Int'l J. 
Indus. Org. 155 (1986).
    \52\ Daniel P. O'Brien & Steven C. Salop, ``Competitive Effects 
of Partial Ownership: Financial Interest and Corporate Control,'' 67 
Antitrust L. J. 559, 570 (1999) (overview of the complex corporate 
financial and governance structures of modern corporations, 
including different types of shareholding and the relationships to 
the boards of directors).
    \53\ Robert J. Reynolds & Bruce R. Snapp, ``The competitive 
effects of partial equity interests and joint ventures,'' 4 Int'l J. 
Indus. Org. 141 (1986); David Flath, ``When is it rational for firms 
to acquire silent interests in rivals?,'' 9 Int'l J. Indus. Org. 573 
(1991); David Reitman, ``Partial Ownership Arrangements and the 
Potential for Collusion,'' 42 J. Indus. Econ. 313 (1994); Sandro 
Shelegia & Yossi Spiegel, ``Bertrand competition when firms hold 
passive ownership stakes in one another,'' 114 Econ. Letters 136 
(2012).
    \54\ Rune Stenbacka & Geert Van Moer, ``Cross ownership and 
divestment incentives,'' 201 Econ. Letters 109748 (2021).
    \55\ Nadav Levy et al., ``Partial Vertical Integration, 
Ownership Structure, and Foreclosure,'' 10 a.m. Econ. J.: 
Microeconomics 132 (2018).
---------------------------------------------------------------------------

    The increasing role of private capital is reflected in the shifting 
mix of reportable transactions. Using data from the Agencies' Annual 
HSR Reports for the past 20 years, Figure 2 shows that the number of 
transactions for which the name of the Ultimate Parent Entity of the 
acquiring person included ``fund'' or some variation of ``L.P.'' has 
increased from approximately ten percent to nearly 40 percent of all 
reportable transactions.\56\ The acquiring person for these 
transactions can be shell companies that have been created by an 
investment group in order to make a particular acquisition, or an 
entity that owns a variety of other operating entities (often referred 
to as ``portfolio companies''). In either scenario, the entity is part 
of the structure of a larger investment company or group.
---------------------------------------------------------------------------

    \56\ See Fed. Trade Comm'n & U.S. Dep't of Justice, Hart-Scott-
Rodino Annual Report, Fiscal Year 2010 appendix A (FY 2010) 
(reporting Adjusted Transactions in which a Second Request could 
have been issued from years 2001-2010); Fed. Trade Comm'n & U.S. 
Dep't of Justice, Hart-Scott-Rodino Annual Report, Fiscal Year 2013 
appendix A (FY 2013) (reporting Adjusted Transactions in which a 
Second Request could have been issued from years 2004-2013); Fed. 
Trade Comm'n & U.S. Dep't of Justice, Hart-Scott-Rodino Annual 
Report, Fiscal Year 2022 appendix A (FY 2022) (reporting Adjusted 
Transactions in which a Second Request could have been issued from 
years 2013-2022). See also Fed. Trade Comm'n Annual Reports to 
Congress Pursuant to the Hart-Scott-Rodino Antitrust Improvements 
Act of 1976, https://www.ftc.gov/policy/reports/annual-competition-reports (collecting reports). The Total Number of Adjusted 
Transactions omits from the total number of transactions reported 
all transactions for which the agencies were not authorized to 
request additional information. These include (1) incomplete 
transactions (only one party filed a complete notification); (2) 
transactions reported pursuant to the exemption provisions of 
sections 7A(c)(6) and 7A(c)(8) of the Act; (3) transactions which 
were found to be non-reportable; and (4) transactions withdrawn 
before the waiting period began. In addition, where a party filed 
more than one notification in the same year to acquire voting 
securities of the same corporation, e.g., filing for one threshold 
and later filing for a higher threshold, only a single consolidated 
transaction has been counted because as a practical matter the 
agencies do not issue more than one Second Request in such a case. 
These statistics also omit from the total number of transactions 
reported secondary acquisitions filed pursuant to Sec.  801.4 of the 
Premerger Notification rules. Secondary acquisitions have been 
deducted in order to be consistent with the statistics presented in 
most of the prior annual reports.
[GRAPHIC] [TIFF OMITTED] TR12NO24.034

    Since the beginning of the premerger program, the Commission has 
required filers to report certain entities that hold minority interests 
in the filing parties to alert the Agencies to situations in which the 
potential antitrust impact of the reported transaction does not result 
solely or directly from the acquisition, but may arise from direct or 
indirect shareholder relationships between the parties to the 
transaction.\57\ As explained in the NPRM, reporting requirements 
regarding the identification of certain minority holders of the filing 
persons have been adjusted over time to reflect market realities, 
including changes in investment activity and the growing role of these 
intermediaries.\58\ Nonetheless, changes in the investment landscape 
discussed above have created meaningful gaps in the reporting 
requirements for a growing number and type of minority holders that 
have the ability to influence competitive decision-making and to harm 
competition via acquisitions that violate the antitrust laws.
---------------------------------------------------------------------------

    \57\ 43 FR 33450, 33531 (July 31, 1978).
    \58\ NPRM at 42188.
---------------------------------------------------------------------------

b. Corporate Structure Changes
    Several commenters supported the need for additional information 
that would identify entities holding minority

[[Page 89225]]

positions. One commenter stated that investors have shifted strategies 
since the 1980s, when portfolios consisted of unrelated companies and 
investors mainly focused on optimizing capital structures and improving 
corporate governance.\59\ Another commenter stated that without a full 
picture of the entire corporate structure of the merging parties, it 
can be difficult or impossible to untangle or understand the potential 
anticompetitive impacts of a transaction. Several commenters supported 
the need to adjust information requirements to have a broader view that 
reflects how firms are organized today. One commenter supported the 
collection of more comprehensive information related to the merging 
entities, arguing that a more holistic and systems-level approach would 
examine the networks of firms involved in a market, which could expose 
companies that can operate as bottlenecks or supply key resources to 
other market participants. A group of State antitrust enforcers 
supported the collection of more information related to corporate 
control or the degree of financial interest so the Agencies can quickly 
assess how the resulting ownership structure may change the parties' 
incentives to compete, enhance the acquirer's ability to influence 
decision-making through changes in voting interests or governance 
rights, or facilitate the sharing of competitively sensitive 
information between rivals.
---------------------------------------------------------------------------

    \59\ See also Aslihan Asil et al., ``Misaligned Measures of 
Control: Private Equity's Antitrust Loophole,'' 18 Va. L. & Bus. 
Rev. 51 (2023). Asil et al. argue that the complicated structure of 
ownership in the typical private equity acquisition may make some 
anticompetitive deals technically non-reportable under the HSR act, 
because the investment structure under-represents the proportion of 
control actually conferred by the transaction. Id. at 53.
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    Another development that has caused the Commission to reassess its 
rules is that the particular corporate structure of an entity is now 
less indicative of its market behavior, and thus distinctions made on 
that basis may no longer be sound. The decision to form as a 
corporation, limited liability company, or limited partnership is often 
influenced more by risk, liability, and tax considerations than by the 
entity's business operations. Now more than ever, distinctions made 
based on corporate form have little impact on an assessment of whether 
and how firms compete. Moreover, corporate governance literature 
highlights the changing nature of decision-making within even standard 
organizational structures, such as corporations. Corporate law provides 
sufficient flexibility to alter traditional roles, including the rights 
of shareholders and the scope of director liability, by contract \60\ 
or through modification of bylaws or certificates of incorporation.\61\ 
The rise of shareholder agreements--private contracts by and among 
shareholders--has affected who has the ability to direct decisions of 
the company, separating voting and control, especially for those given 
veto rights via contract.\62\ These forms of `stealth governance' have 
implications for how decisions are made within the firm, making it 
difficult for investors to know who is exercising control within the 
company.\63\
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    \60\ See Jill E. Fisch, ``Governance by Contract: The 
Implications for Corporate Bylaws,'' 106 Cal. L. Rev. 373, 379 
(2018).
    \61\ Megan Wischmeier Shaner, ``Interpreting Organizational 
`Contracts' and the Private Ordering of Public Company Governance,'' 
60 Wm. & Mary L. Rev. 985, 988 (2019) (the charter and bylaws of 
public corporations are being used as tools for restructuring key 
aspects of corporate governance).
    \62\ Rauterberg, supra note 43.
    \63\ Jill E. Fisch, ``Stealth Governance: Shareholder Agreements 
and Private Ordering,'' 99 Wash. U. L. Rev. 913, 947 (2021) (One 
investor's capacity to monitor may be limited by an agreement to 
support director candidates chosen by another investor, or an 
ownership structure that appears to involve shared power may be 
undermined by the contractual formation of a control group).
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    After careful consideration of these points and others raised by 
commenters, the Commission has determined that the requirements of the 
current Form and Instructions have not kept pace with market realities 
and the accompanying changes in ownership structures. In light of these 
shifts in corporate formation and governance, the current requirements 
do not provide the Agencies with sufficient information that allow them 
to understand how decisions are made at the respective companies, let 
alone whether the acquiring person may have competitively relevant 
premerger entanglements with the target's industry and minority holders 
that may have significant rights to direct the acquiring entity's 
actions.
    To keep pace with prior changes in corporate form, the Commission 
has adjusted the disclosure requirements for minority investors over 
time and in light of its experience reviewing thousands of filings each 
year, balancing the need to surface competitively relevant 
relationships without burdening filers to provide information that 
would not change the Agencies' premerger screening decisions. Under the 
current rules, it has become increasingly difficult to screen 
transactions because deal structures often have minority investors with 
significant rights that are not disclosed. See Figures 4 through 8 
below, section VI.D.1.d.ii. This includes situations where an investor 
group is, for practical purposes, making the acquisition (or otherwise 
significantly involved), but the HSR Filing does not alert the Agencies 
to their role in the acquisition. These relationships are not currently 
disclosed if the minority investment is not in the UPE or acquiring 
entity, but rather in an entity (often a shell entity) that sits 
between these two in the structure of the acquiring person. Even if the 
minority investment is made in the UPE, if the UPE is an LP, only the 
name of the general partner is disclosed. For situations where the 
current information on the HSR Filing is unrelated to the public-facing 
name of the entity that controls the acquiring person, the HSR Filing 
does not alert the Agencies to the premerger relationships that exist 
solely due to that investor's relationship with and role in the 
buyer.\64\
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    \64\ For example, a fund that operates as Alpha Capital Partners 
could create an entity named 123ABC, LP to effectuate an 
acquisition. 123ABC, LP could be its own UPE because Alpha Fund I 
and Alpha Fund II each hold 49.9% of the 123ABC, LP, with the 
general partner, 123ABC GP, LP, holding 0.2%. Currently, the Form 
only requires 123ABC, LP to disclose that 123ABC GP, LP is its 
general partner. The issue is compounded if Alpha Capital Partners 
is co-investing with Beta Capital Partners and 123ABC, LP is held 
49.9% by Alpha and 49.9% by Beta (or if Beta invests in an entity 
that is not the UPE or acquiring entity). Disclosure of these 
relationships are not currently required.
---------------------------------------------------------------------------

    To close this information gap, the Commission has determined that 
the Agencies need additional information about entities in between the 
UPE and the acquiring entity. If any of these entities or individuals 
has a minority stake or other rights that give them the ability to 
influence decision-making post-merger, then they are functionally ``in 
the deal'' and their existing business relationships are relevant to a 
thorough premerger antitrust assessment of the transaction. As 
explained in more detail in section VI.D.1.d.ii.a., this information 
was required of all corporate entities within the acquiring person 
prior to a rule change in 2011 that limited the requirement in order to 
exclude entities not related to the transaction. However, as 
transaction structures have become more complex, application of the 
2011 change has eliminated the requirement to provide information about 
minority entities that are related to the acquiring entity. The final 
rule addresses this gap in information so that the Agencies can 
identify existing relationships among individuals and entities that 
have interests in (1) the acquiring entity (and any entities it 
controls or are controlled by it) and (2) other entities within the UPE 
that have competitive relationships

[[Page 89226]]

with the target. These minority holders are competitively relevant 
because they may have the ability to influence decision-making and 
operations of the target post-merger \65\ but it is difficult for the 
Agencies to detect these relationships based on information available 
the current Form.
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    \65\ See United States v. Dairy Farmers of Am., Inc., 426 F.3d 
850, 860 (6th Cir. 2005) (district court erred in focusing on 
control which ignored the possibility that there may be a mechanism 
that causes anticompetitive behavior other than control, such as 
leveraging position as financier).
---------------------------------------------------------------------------

    As discussed below in section VI.D.1.d. and VI.D.3.c., the final 
rule requires additional information for Minority Shareholders or 
Interest Holders as well as Officers and Directors from the acquiring 
person. Information about other individuals or entities holding a 
minority position or rights to serve or appoint members of the 
governing board will fill an existing gap that has created a blind spot 
for the Agencies that prevents a thorough premerger screening, 
especially for transactions involving complex corporate structures and 
investment vehicles. This information is most relevant from the entity 
that will be making decisions post-consummation, and so the final rule 
does not seek this information from the seller, other than the 
identification of minority interest holders that will ``roll over'' 
their investments post-consummation.\66\ This information is necessary 
to identify additional areas of competitive concern created by minority 
stakeholders or other influential decision-makers (i.e., officers and 
directors) that may have a relationship with entities related to the 
target of the acquisition.
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    \66\ In many transactions, the acquired firm ceases to exist 
post-consummation. Even when some entity continues to generate 
revenues, possibly in competition with some aspects of the buyer's 
business, the Commission has determined to collect additional 
information about entities within the UPE only from the acquiring 
person at this time.
---------------------------------------------------------------------------

    However, in light of concerns raised by commenters about the burden 
and relevancy of providing this information with respect to limited 
partners, the Commission has modified these requirements to focus only 
on those limited partners that also have management rights, such as the 
right to appoint members to the board. Moreover, the final rule does 
not adopt certain proposed requirements to identify board observers, or 
creditors, holders of non-voting securities, or entities with 
management agreements. The Commission has determined not to require 
this information at this time but will continue to monitor market 
activity as it implements the final rule.
    Similarly, new document requirements contained in the final rule 
are aimed at providing a more in-depth understanding of the motivation 
and purpose of the transaction, and how the combined company will be 
operated post-consummation. In particular, additional transaction-
related documents will provide a more complete picture of the buyer's 
reason for pursuing the transaction, and for companies with complex 
investment structures, these documents may reveal whether there are 
other individuals or entities who will be participating in competitive 
decisions post-merger. The final rule also requires a small set of 
business plans and reports shared at the highest level of management 
that discuss market shares, competition, competitors, or markets of any 
product or service that is provided by both the acquiring person and 
acquired entity. Together, these documents may reveal whether there are 
significant investors in either party that also have investments in 
businesses that compete with the target or if there are any other 
planned investments in competitively relevant businesses, such as 
competitors or suppliers, that would impact the Agencies' assessment of 
whether the transaction may violate the antitrust laws.
2. Identifying Potential Labor Market Effects
    The Clayton Act's prohibition on acquisitions that may 
substantially lessen competition or tend to create a monopoly applies 
to acquisitions that have these effects on competition to purchase 
inputs that firms use to produce goods and services just as it does to 
acquisitions that threaten competition in downstream markets for goods 
and services themselves,\67\ and the antitrust laws protect competition 
in markets for labor services.\68\ As evidence of decreasing 
competition for labor continues to mount,\69\ the Agencies have 
increasingly recognized the importance of evaluating the effect of 
mergers and acquisitions on labor markets and have stepped up efforts 
to identify and investigate potential labor market effects arising from 
reportable transactions. The Agencies have challenged a few 
transactions that may result in labor market harms,\70\ and consent 
agreements have included provisions that stop the use of certain non-
compete clauses that limit the ability of potential market entrants to 
hire key employees.\71\
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    \67\ See United States v. Bertlesmann SE & Co., 646 F.Supp.3d 1 
(D.D.C. 2022) (violation of section 7 where merger likely to 
substantially lessen competition in market for publishing rights to 
anticipated top-selling books due to harm to targeted sellers--
authors of top-selling books); Boardman v. Pac. Seafood Grp., 822 
F.3d 1011, 1022 (9th Cir. 2016) (acquisition may violate section 7 
by substantially lessening competition in multiple seafood input 
markets). See also Mandeville Island Farms, Inc., v. Am. Crystal 
Sugar Co., 334 U.S. 219, 235-36 (1948) (antitrust laws protects not 
just consumers, purchasers, competitors or sellers but all victims 
of illegal practices); Weyerhaeuser Co. v. Ross-Simmons Hardwood 
Lumber Co., 549 U.S. 312, 321-22 (2007); United States v. Syufy 
Enterprises, 903 F.2d 659, 663 n.4 (9th Cir. 1990); In re Grifols, 
S.A., No. C-4654 (F.T.C. Aug. 1, 2018) (order requiring divestitures 
to prevent monopsony in three local markets for the collection of 
plasma).
    \68\ NCAA v. Alston, 594 U.S. 69, 86-87 (2021) (plaintiff 
student-athletes need not show harm in seller-side market as well as 
buyer-side labor market); Anderson v. Shipowners Ass'n of the Pac. 
Coast, 272 U.S. 359, 365 (1926) (Sherman Act protects competition 
for labor).
    \69\ See e.g., Anna Stansbury & Lawrence H. Summers, ``The 
Declining Worker Power Hypothesis: An Explanation for the Recent 
Evolution of the American Economy'' (Nat'l Bureau of Econ. Rsch., 
Working Paper No. 27193, 2020), https://www.nber.org/papers/w27193; 
Orley Ashenfelter et al., ``Labor Market Monopsony,'' 28 J. Lab. 
Econ. 203 (2010); V. Bhaskar et al., ``Oligopsony and Monopsonistic 
Competition in Labor Markets,'' 16 J. Econ. Perspectives 155 (2002); 
William M. Boal & Michael R. Ransom, ``Monopsony in the Labor 
Market,'' 35 J. Econ. Lit. 86 (1997); Alan B. Krueger, Luncheon 
Address at Kansas City Federal Reserve Bank, Reflections on 
Dwindling Worker Bargaining Power and Monetary Policy (Aug. 24, 
2018), https://www.kansascityfed.org/documents/6984/Lunch_JH2018.pdf; Brianna L. Alderman et al., ``Monopsony, wage 
discrimination, and public policy,'' 61 Econ. Inquiry 572 (2022); 
David Berger et al., ``Labor Market Power,'' 112 a.m. Econ. Rev. 
1147 (2022); Chen Yeh at al., ``Monopsony in the US Labor Market,'' 
112 a.m. Econ. Rev. 2099 (2022); Jos[eacute] Azar et al., ``Labor 
Market Concentration,'' 57 J. Hum. Resources S167 (2022).
    \70\ Press Release, Fed. Trade Comm'n, ``FTC Challenges Kroger's 
Acquisition of Albertsons'' (Feb. 26, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/02/ftc-challenges-krogers-acquisition-albertsons; United States v. Anthem et al., 1:16-cv-
01493 ] 71 (D.D.C. filed July 21, 2016) (complaint); United States 
v. Aetna, et al., 3-99-CV 1398 ] 27 (N.D. Tex. filed June 21, 1999) 
(complaint). See also Concurring Statement of Commissioner Slaughter 
and Chair Khan Regarding FTC and State of Rhode Island v. Lifespan 
Corporation and Care New England 1-2 (Feb. 17, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/public_statement_of_commr_slaughter_chair_khan_re_lifespan-cne_redacted.pdf (recommending including a count in the complaint 
that the proposed merger would have violated section 7 of the 
Clayton Act in a relevant labor market).
    \71\ Press Release, Fed. Trade Comm'n, ``FTC Imposes Strict 
Limits on DaVita, Inc.'s Future Mergers Following Proposed 
Acquisition of Utah Dialysis Clinics'' (Oct. 25, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/10/ftc-imposes-strict-limits-davita-incs-future-mergers-following-proposed-acquisition-utah-dialysis.
---------------------------------------------------------------------------

    As stated in the NPRM, current notification requirements under the 
HSR Act do not require any specific information about employees. And 
yet virtually every firm competes for labor in at least one labor 
market and, more commonly, in multiple labor markets, and transactions 
that involve two firms

[[Page 89227]]

that purchase labor from the same labor market(s) may substantially 
lessen competition between employers for labor services. Merging 
parties may compete in the same labor market even when they do not 
compete in the same product market.
    The Commission received hundreds of comments from individuals, many 
of whom are in the entertainment industry, who supported the need for 
the Agencies to conduct a robust search for potential labor market 
effects before the acquisition is consummated. Several dozen recounted 
the effects that prior mergers have had on them. Examples of comments 
supportive of reviewing transactions for labor market effects include 
the following:
     I'm a working TV writer at the beginning of my career. I'm 
afraid for the future--the consolidation of the media companies in this 
town and their vertical integration has made things so much harder and 
less competitive, even in the time that I've been in LA and worked 
within the system. Now that there are so few ``shops'' in town, 
salaries are depressed and it's become incredibly difficult to not only 
demand fair pay, but treatment as well. They know that they don't have 
to negotiate or budge on whatever terms they set because there are 
increasingly few alternatives to them.\72\
---------------------------------------------------------------------------

    \72\ Anonymous Comment, Doc. No. FTC-2023-0040-0511.
---------------------------------------------------------------------------

     My background includes Strategy consulting for major 
transnational Mergers. I think the new rules are very good as they 
demand greater clarity from the firms before the transaction starts. I 
have seen a lot of waste and backtracking as executives struggle 
between their ego and the analytics that do not tell them the story 
that they want about why the transaction will succeed. And the new 
labor and financing provisions offer much needed transparency--layoffs 
are a knee jerk habit and are not really helpful for the firm or the 
industry.\73\
---------------------------------------------------------------------------

    \73\ Comment of Punya Upadhyaya, Doc. No. FTC-2023-0040-0283.
---------------------------------------------------------------------------

     Please collect data on labor markets. I've been affected 
by the monopolies in the entertainment industry and likely will lose my 
livelihood as well as that of my staff due to unchecked mergers within 
the next month. After starting a successful business 23 years ago, it's 
heartbreaking to lose it and will be costly to our economy as more and 
more of us lose our businesses due to these unchecked mergers and the 
power they wield to save them money.\74\
---------------------------------------------------------------------------

    \74\ Comment of Karen Wood, Doc. No. FTC-2023-0040-0271.
---------------------------------------------------------------------------

     I work in a small accounting firm and I have seen the 
effects of mergers on consumer satisfaction and worker wellbeing 
personally. . . . [M]any of the job-searching or hiring firms we'd 
contract with to seek additional workers are worried about raising the 
ire of the large firm in the region, as it comprises so much of their 
client base now[.] . . . As a result, we're forced to go with larger, 
national firms for hiring, and become part of the problem of sectoral 
concentration.\75\
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    \75\ Comment of John Kurpierz, Doc. No. FTC-2023-0040-0462.
---------------------------------------------------------------------------

     As a lifelong union member I also believe the requirement 
for detailing merger effects on workers and unions to be a vital 
necessity. Those of us outside the C suites, boardrooms and stockholder 
meetings are stakeholders too, and our livelihoods and well being 
should be considerations.\76\
---------------------------------------------------------------------------

    \76\ Comment of Chas McClelland, Doc. No. FTC-2023-0040-0273.
---------------------------------------------------------------------------

     I personally know many folks in entertainment (writers, 
crew, actors, etc.) who have had such a difficult time surviving in 
Hollywood that they've simply had to quit or move home. And, frankly, 
folks who specifically represent cultures that are least visible in 
society are often the first to go--because they don't necessarily have 
the resources or didn't face as many obstacles as other artists. It's a 
terrible cycle, magnified greatly by vertical mergers.\77\
---------------------------------------------------------------------------

    \77\ Comment of Alice Stanley, Doc. No. FTC-2023-0040-0508.
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    Numerous commenters, including State antitrust enforcers and 
members of Congress, expressed general support for an increasing focus 
on labor market competition in merger analysis and requiring additional 
labor market information in the Form to screen for such issues. Some 
commenters highlighted potential efficiencies in the merger review 
process from providing the Agencies with labor market information in 
the earlier stages of review, including a more uniform process that 
could result in the termination of more merger reviews within the 30-
day waiting period and a more efficient use of Agency resources where 
no labor market issues exist.
    The Commission disagrees with a commenter who stated that the 
analysis under the Clayton Act requires consideration of competition 
issues, but not labor. Antitrust law, including the Clayton Act, has 
always been concerned with workers and labor markets.\78\ As noted by 
the State antitrust enforcers, in the congressional debates on the 
Clayton Act in 1914, legislators expressed concerns regarding the 
monopsonist's power to dictate to its labor the wage it will pay for 
the only commodity labor has to sell.\79\ As recently as 2021, a 
unanimous Supreme Court in NCAA v. Alston affirmed that the antitrust 
laws are designed to prevent harm to competition in labor markets.\80\ 
As noted in the concurring opinion: ``Price-fixing labor is price-
fixing labor. And price-fixing labor is ordinarily a textbook antitrust 
problem because it extinguishes the free market in which individuals 
can otherwise obtain fair compensation for their work.'' \81\ And there 
is bipartisan agreement among current Federal enforcers and their 
predecessors that the Agencies are empowered to enforce the Clayton Act 
to prevent competitive harms in labor markets caused by mergers.\82\ 
Moreover, recent empirical work demonstrates the impact that mergers 
have on competition in labor markets.\83\
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    \78\ Anderson v. Shipowners Ass'n of the Pac. Coast, 272 U.S. 
359, 365 (1926).
    \79\ Comment of State Atty's Gen., Doc. No. FTC-2023-0040-0695 
at 21 n.123 (citing 51 Cong. Rec. 9184 (1914) (statement of Rep. Guy 
Helvering)). See also 21 Cong. Rec. 2457 (1890) (statement of Sen. 
Sherman asserting trusts command the price of labor).
    \80\ NCAA v. Alston, 594 U.S. 69 (2021). The Agencies' approach 
to evaluating the potential labor market effects of mergers is set 
forth in the Merger Guidelines. U.S. Dep't of Justice & Fed Trade 
Comm'n, Merger Guidelines 2.10 (2023).
    \81\ Alston, 594 U.S. at 109-110 (Kavanaugh, J., concurring).
    \82\ See generally FTC Chairman Joseph J. Simons, Prepared 
Keynote Address at American University Washington College of Law 
Conference on Themes of Professor Jonathan Baker's New Book, The 
Antitrust Paradigm: Restoring a Competitive Economy 9 (Mar. 8, 
2019), https://www.ftc.gov/system/files/documents/public_statements/1515179/simons_-_jon_baker_speech_3-8-19.pdf; Assistant Attorney 
General Makan Delrahim, Remarks at the Public Workshop on 
Competition in Labor Markets 3 (Sept. 23, 2019), https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-public-workshop-competition.
    \83\ See Elena Prager & Matt Schmitt, ``Employer Consolidation 
and Wages: Evidence from Hospitals,'' 111 a.m. Econ. Rev. 397 
(2021); David Arnold, ``Mergers and Acquisitions, Local Labor Market 
Concentration, and Worker Outcomes'' (Working Paper, Oct. 27, 2019), 
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3476369.
---------------------------------------------------------------------------

    One commenter stated that requiring merging parties to provide 
labor and employment information is at odds with the consumer welfare 
standard. This is not correct. Judge Easterbrook, writing for the 
Seventh Circuit, recently rejected an employer's argument that 
restrictions on the movement of employees could be justified because it 
expanded the output of consumer products: ``One problem with this 
approach is that it treats benefits to consumers (increased output) as 
justifying detriments to workers (monopsony pricing). That's not right; 
it

[[Page 89228]]

is equivalent to saying that antitrust is unconcerned with competition 
in the markets for inputs, and Alston establishes otherwise.'' \84\ 
There is a clear consensus that the consumer welfare standard is 
sufficiently flexible to encompass antitrust enforcement to prevent 
competitive harms to labor markets.\85\ Because section 7 reaches these 
concerns, it is appropriate for the Agencies to collect information to 
determine if the transaction may violate the antitrust laws by 
substantially lessening competition in any market for labor. The fact 
that the Commission has not previously required this information to be 
reported in HSR filings does not mean that the information is not 
necessary and appropriate to enable the Agencies to determine whether 
an acquisition, if consummated, may violate the antitrust laws. While 
not every negative impact on workers reflects a harm to competition, 
growing evidence about the potential for mergers to cause harm in input 
markets for labor in violation of the antitrust laws shows that the 
Agencies have a sound basis to review transactions for potential 
competitive impacts on labor markets.
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    \84\ Deslandes v. McDonald's USA, LLC, 81 F.4th 699, 703-04 (7th 
Cir. 2023).
    \85\ See Herbert Hovenkamp, ``Is Antitrust's Consumer Welfare 
Principle Imperiled?,'' 45 J. Corp. L. 65, 78 (2019) (injury that 
results from the exercise of monopsony power is technically similar 
to the injury caused by monopoly; in both cases the defendant 
reduces output); Delrahim, supra note 82, at 3-4 (consumer welfare 
standard is flexible enough to take into account harm to competition 
that is localized in an upstream labor market, not just a downstream 
product market); FTC Commissioner Christine S. Wilson, Keynote 
Address: Welfare Standards Underlying Antitrust Enforcement: What 
You Measure Is What You Get 7 (Feb. 15, 2019), https://www.ftc.gov/system/files/documents/public_statements/1455663/welfare_standard_speech_-_cmr-wilson.pdf (consumer welfare standard 
does address possible monopsony concerns, and the agencies apply the 
consumer welfare standard to labor markets).
---------------------------------------------------------------------------

    As discussed below in section VI.I.3., the final rule does not 
require filers to submit specific information about their employees as 
suggested in the proposed rule. Instead, the Agencies will rely on 
other information and documentary materials required in the final rule 
to conduct a preliminary assessment of whether the transaction may 
violate the antitrust laws with respect to any affected labor market. 
The Agencies have been gaining experience analyzing information about 
employees during ongoing merger reviews and other investigations of 
conduct that may harm competition for workers, and the Commission 
relies on this experience to determine which documents and information 
have been most useful in identifying those transactions that warrant an 
in-depth review of potential labor market effects through the issuance 
of Second Requests.
    As discussed below in section VI.I.3., the Commission will rely on 
information contained in the new Overlap and Supply Relationships 
Descriptions, as well as additional documents required by the final 
rule to conduct a preliminary assessment of potential labor market 
effects. In the Agencies' experience, those transactions that are 
flagged for closer review due to concerns about effects in output 
markets may also require a closer look at potential impacts in input 
markets, including labor markets. Because the final rule will allow the 
Agencies to conduct a more robust screening for potential effects in 
output markets, it will also permit more robust screening for potential 
effects in input markets, including those related to labor services. In 
addition, the final rule requires the submission of certain plans and 
reports shared at the highest level of management that discuss market 
shares, competition, competitors, or markets of any product or service 
that is provided by both the acquiring person and acquired entity. 
These documents may also indicate whether the parties view themselves 
as employing similar categories of employees or competing for certain 
types of labor services. As a result, the final rule will enhance the 
Agencies' ability to conduct a premerger assessment to determine if the 
transaction may violate the antitrust laws with respect to competition 
for labor. Although the Commission has determined not to require 
specific information about workers or workplace safety information in 
the HSR Filing at this time, as the Agencies acquire more experience 
with conducting competition analyses of labor markets, the Commission 
may revisit the issue in future rulemakings.
3. Identifying Acquisitions That Create a Risk of Foreclosure
    Mergers between firms that are not direct competitors can still 
violate the antitrust laws. As stated in the NPRM, an acquisition may 
violate the law if it creates opportunities for post-merger foreclosure 
of rivals arising from vertical or non-horizontal relationships.\86\ 
The nature and scope of potential non-horizontal competitive concerns 
can often be complex and unique. To fully account for all the ways in 
which a proposed transaction may violate the antitrust laws, the 
Agencies need information to determine whether there are any existing 
or emerging business relationships between the merging parties that 
would allow the merged firm to limit access to products or services 
that its rivals use to compete, referred to as ``foreclosure.'' \87\ 
Current information requirements in the Rules do not reveal these 
existing relationships, which are well known to the parties. Even more 
than in horizontal mergers, which require an assessment of whether the 
merger may eliminate existing competition between rivals whose products 
are viewed as substitutes, non-horizontal concerns arise from distinct 
facts and industry structure that are not readily available to the 
Agencies from other sources.
---------------------------------------------------------------------------

    \86\ NPRM at 42179.
    \87\ See Illumina, Inc. v. FTC, 88 F.4th 1036, 1055 (5th Cir. 
2023) (violation of section 7 where merger will result in the 
potential foreclosure of key input by the sole supplier). See also 
Ford Motor Co. v. United States, 405 U.S. 562 (1972).
---------------------------------------------------------------------------

    Various commenters, including members of Congress, supported new 
information requirements targeting non-horizontal competitive issues. A 
comment from State antitrust enforcers underscored the concern about 
foreclosure, noting that because mergers may change the firms' 
incentives or ability to disadvantage or eliminate rivals at one or 
more levels of their supply chains, one of the anticompetitive harms 
that may result from a merger--particularly non-horizontal mergers--is 
the risk of foreclosure. The comments from a farmer-led advocacy 
organization warned that dominant firms have expanded across product 
markets--primarily through product-extension and conglomerate mergers--
to insulate against cross-industry competition or to develop product-
tying and other capacities for entrenchment and exclusion.
    Other commenters maintained that vertical merger challenges are 
uncommon and that antitrust precedent does not sufficiently support 
non-horizontal theories of competitive harm to warrant the new 
information requirements. For example, commenters stated that the 
Agencies challenge very few vertical transactions, and the courts 
generally have not been receptive to those challenges. One commenter 
stated that an assessment of potential future competitors goes well 
beyond what is typically relevant because non-horizontal theories of 
harm are rare under section 7. The same commenter reasoned that when 
challenging a vertical merger the antitrust agency must prove that one 
party has substantial market power and that information regarding the 
vendor-vendee relationship is not required to assess this threshold 
question. A tech industry trade association stated that

[[Page 89229]]

most vertical mergers promote competition, so filers should not need to 
answer detailed questions about vertical relationships.
    While in the past non-horizontal challenges were less common than 
those involving direct competitors, in recent years the Agencies have 
brought a significant number of non-horizontal merger enforcement 
actions that have resulted in merger abandonment and ordered 
divestitures,\88\ and other mergers were abandoned or restructured 
prior to legal action.\89\ The Commission also disagrees that potential 
harm from foreclosure is uncommon or does not warrant robust scrutiny. 
Empirical economic studies of vertical mergers find no basis to assume 
that they are either procompetitive or anticompetitive in general. 
Instead, each transaction must be examined on its facts and in the 
context of the markets served by the merging parties. A review of 
twenty-nine recent studies of vertical integration reports that 
fourteen studies found some evidence of competitive harm, while 
fourteen found some evidence of benefits.\90\ The same review also 
evaluated two frequently cited surveys of vertical integration and 
found that the subjects and methods used limit any conclusions that can 
be drawn for antitrust policy purposes.\91\
---------------------------------------------------------------------------

    \88\ Illumina, 88 F.4th at 1048, 1059; FTC v. Tempur Sealy 
Int'l, Inc., 4:24-cv-02508 (S.D. Tex. filed July 2, 2024) 
(complaint); In re Lockheed Martin Corp., No. 9405 (F.T.C. Jan. 25, 
2022) (complaint alleging merger would enable missile systems 
manufacturer to use control over missile propulsion systems to harm 
rival defense prime contractors) (transaction abandoned); In re 
Nvidia Corp., No. 9404 (F.T.C. Dec. 2, 2021) (complaint alleging 
merger would give chip manufacturer the ability and incentive to use 
control over microprocessor design technology to undermine 
competitors) (transaction abandoned). For a compilation of the 
Agencies' enforcement actions involving vertical mergers, see Steven 
C. Salop & Daniel P. Culley, ``Vertical Merger Enforcement Actions: 
1994-April 2020'' (Geo. L. Faculty Pub. & Other Works No. 1529, 
2020), https://scholarship.law.georgetown.edu/facpub/1529/ 
(reporting 66 vertical matters over 26 years).
    \89\ See, e.g., Press Release, U.S. Dep't of Justice, 
``Antitrust AAG Kanter Statement After Adobe and Figma Abandon 
Merger'' (Dec. 18, 2023), https://www.justice.gov/opa/pr/antitrust-aag-kanter-statement-after-adobe-and-figma-abandon-merger; Cat 
Zakrzewski, ``Amazon ends $1.7B iRobot acquisition in rare victory 
for tech regulators,'' Wash. Post (Jan. 29, 2024), https://www.washingtonpost.com/technology/2024/01/29/amazon-irobot-antitrust-europe/.
    \90\ Marissa Beck & Fiona Scott Morton, ``Evaluating the 
Evidence on Vertical Mergers,'' 59 Rev. Indus. Org. 273, 274 (2021) 
(explaining many of the studies reviewed were not designed to assess 
the net effect of vertical integration on welfare).
    \91\ Id.
---------------------------------------------------------------------------

    The Agencies have an obligation to screen transactions for non-
horizontal effects, including the risk of post-merger foreclosure, 
because the law clearly requires it. In 1950, Congress amended section 
7 of the Clayton Act to expressly reach non-horizontal transactions to 
combat ``the rising tide of economic concentration . . . [providing] 
authority for arresting mergers at a time when the trend to a lessening 
of competition in a line of commerce was still in its incipiency.'' 
\92\ The Supreme Court subsequently set forth frameworks for analyzing 
vertical \93\ and other non-horizontal \94\ mergers to address concerns 
about foreclosure.\95\ Relying on these precedents, the Agencies bring 
enforcement actions against transactions that create a risk that the 
merger will create a firm that may limit access to products or services 
rivals use to compete.\96\ Several of these enforcement actions 
resulted in the parties abandoning their merger plans in the face of 
litigation. Just recently, the U.S. Court of Appeals for the Fifth 
Circuit upheld the Commission's finding that Complaint Counsel carried 
their initial burden of showing that Illumina's acquisition of Grail 
was likely to substantially lessen competition in the U.S. market for 
research and development of multi-cancer early detection tests and that 
Illumina failed to establish cognizable efficiencies.\97\ The decision 
is significant for its application of vertical theories of harm, as 
well as its inclusion of products in the relevant market based on 
precommercial activity.
---------------------------------------------------------------------------

    \92\ Brown Shoe Co. v. United States, 370 U.S. 294, 317 (1962); 
Celler-Kefauver Antimerger Act of 1950, Pub. L. 81-899, 64 Stat. 
1125 (1950).
    \93\ Brown Shoe, 370 U.S. 294 (vertical merger violated section 
7); see also Ford Motor Co. v. United States, 405 U.S. 562 (1972) 
(same).
    \94\ See FTC v. Procter & Gamble Co., 386 U.S. 568, 577-578 
(1967) (product-extension merger violated section 7). See also 
Fruehauf Corp. v. FTC, 603 F.2d 345 (2d Cir. 1979); U.S. Steel Corp. 
v. FTC, 426 F.2d 592, 599 (6th Cir. 1970).
    \95\ The Agencies' analyses of how vertical and other non-
horizontal transactions may harm competition are set forth in detail 
in the recently revised Merger Guidelines. U.S. Dep't of Justice & 
Fed Trade Comm'n, Merger Guidelines 5 (2023).
    \96\ See, e.g., FTC v. Tempur Sealy Int'l, Inc., 4:24-cv-02508 
(S.D. Tex. filed July 2, 2024) (complaint); In re Amgen, Inc, No. 
9414 (F.T.C. Dec. 13, 2023) (consent order settling charges that the 
acquisition would enable Amgen to leverage its large portfolio of 
drugs to pressure insurance companies and PBMs into favoring 
Horizon's monopoly products or disadvantaging rivals); In re 
Lockheed Martin Corp., No. 9405 (F.T.C. Jan. 25, 2022) (complaint 
alleging merger would enable missile systems manufacturer to use 
control over missile propulsion systems to harm rival defense prime 
contractors) (transaction abandoned); In re Nvidia Corp., No. 9404 
(F.T.C. Dec. 2, 2021) (complaint alleging merger would give chip 
manufacturer the ability and incentive to use control over 
microprocessor design technology to undermine competitors) 
(transaction abandoned); In re Microsoft Corp., No. 9412 (F.T.C. 
Dec. 8, 2022) (complaint).
    \97\ Illumina, Inc. v. FTC, 88 F.4th 1036, 1048, 1059 (5th Cir. 
2023) (remanding to Commission to consider whether supply agreement 
offered to rivals sufficiently mitigated merger's effect). See also 
United States v. AT&T, Inc., 916 F.3d 1029, 1045 (D.C. Cir. 2019) 
(vertical mergers can create harms beyond higher prices for 
consumers, including decreased product quality and reduced 
innovation).
---------------------------------------------------------------------------

    In the Agencies' experience, it can be difficult to detect whether 
current or potential rivals of one merging party are dependent on the 
other merging party for a key product, service, or route to market 
necessary to compete. The Agencies currently do not receive sufficient 
information in the HSR Filing to identify candidate ``related 
products'' nor to assess the degree to which rivals may be dependent on 
the related product.\98\ Accordingly, the Agencies are not well 
positioned to conduct a robust initial screen for this significant 
mechanism of competitive harm. Being able to quickly assess whether the 
transaction presents a risk of foreclosure would permit the Agencies to 
target their investigative resources most efficiently on those 
transactions that are most likely to raise this competitive concern.
---------------------------------------------------------------------------

    \98\ See U.S. Dep't of Justice & Fed Trade Comm'n, Merger 
Guidelines 2.5 (2023).
---------------------------------------------------------------------------

    As discussed in more detail below, the Commission has determined 
that information that reveals existing supply relationships between the 
merging parties or their rivals is necessary to fully account for the 
potential that the transaction may create a firm that could limit 
rivals' access to key products or services they need to compete in 
violation of the antitrust laws. The Commission previously required 
information about vendor-vendee relationships, but eliminated this 
requirement when the reported information did not provide a sufficient 
basis for that analysis such that the benefit to the Agencies did not 
outweigh the burden of providing it.\99\ The Supply Relationships 
Description in the final rule requires information that is specifically 
targeted to identifying whether rivals may be dependent on the merged 
firm for key inputs post-merger. Thus, the information is more relevant 
to the Agencies' screening for such risks than prior vendor-vendee 
information.
---------------------------------------------------------------------------

    \99\ NPRM at 42196-97.
---------------------------------------------------------------------------

    Additionally, the final rule also contains new document 
requirements that are intended to reveal any existing or future non-
horizontal business relationships that could give rise to risks from 
foreclosure of rivals. For example, the buyer must indicate whether it 
has existing contracts with the seller in broad categories that are 
relevant to an initial antitrust assessment, such as leases, licensing 
agreements, master service agreements, operating agreements or supply 
agreements, or

[[Page 89230]]

any noncompete or non-solicitation agreements that might be affecting 
current levels of competition. Filers with an existing business 
relationship also will submit one year's worth of plans and reports 
provided to a Chief Executive Officer or the Board of Directors that 
analyze markets and competition pertaining to any product or service 
both parties supply (including products or services in development). 
Based on the Agencies' experience, these types of high-level business 
documents can reveal whether and how the parties interact in the market 
today to understand how the merger may affect market conditions more 
broadly, including any risk of foreclosure that could harm other market 
participants as well as competition overall. Finally, the expanded set 
of transaction-related documents ensure that the Agencies receive key 
documents that have been collected for the purposes of the deal but 
have not yet been shared with the board of directors. In the Agencies' 
experience, when there is an existing non-horizontal business 
relationship between the parties, these documents often reference that 
relationship and how it might be affected by the transaction, including 
whether the parties believe that there are synergies or efficiencies 
that may be gained.
4. Identifying Potential Law Violations Involving Innovation Effects, 
Future Market Entry, or Nascent Competitive Threats
    In markets where concentration is already great or trending in that 
direction, a merger may be illegal if it eliminates ongoing innovation 
efforts or the possibility that entry or expansion by one or both firms 
would have resulted in new or increased competition.\100\ Relatedly, 
the acquisition of a firm that represents a nascent competitive 
threat--namely, a firm that could grow into a significant rival, 
facilitate other rivals' growth, or otherwise spur more robust 
competition in the future--may violate the antitrust laws.\101\ 
Concerns that a transaction may violate the antitrust laws by reducing 
innovation efforts \102\ or eliminating a future competitor \103\ are 
core to section 7's purpose to arrest the anticompetitive effects of 
market power in their incipiency. Established incumbents may seek to 
acquire a potential entrant or a nascent competitive threat in order to 
eliminate beneficial future competition, especially at critical 
junctures when the acquired firm is poised to introduce a disruptive 
product.\104\
---------------------------------------------------------------------------

    \100\ United States v. Marine Bancorp, Inc., 418 U.S. 602, 630 
(1974).
    \101\ See FTC v. Procter & Gamble, 386 U.S. 568, 577-78 (1967). 
See also United States v. El Paso Nat. Gas Co., 376 U.S. 651 (1964); 
Polypore Int'l v. FTC, 686 F.3d 1208 (11th Cir. 2012) (acquisitions 
that eliminate competitive threats violate section 7). Like the 
Clayton Act, the Sherman Act bars a firm from gaining or maintaining 
a monopoly position through anticompetitive conduct, including 
acquisitions that exclude nascent or potential threats to its 
dominance. See, e.g., United States v. Grinnell Corp., 384 U.S. 563 
(1966) (acquisitions are among the types of conduct that may violate 
the Sherman Act). Acquisitions by monopolists of nascent competitive 
threats violate section 2 of the Sherman Act because they are 
reasonably capable of contributing significantly to the defendant's 
monopoly power. United States v. Microsoft Corp., 253 F.3d 34, 79 
(D.C. Cir. 2001) (en banc) (per curiam) (Sherman Act does not allow 
monopolists free reign to squash nascent, albeit unproven, 
competitors at will).
    \102\ For a discussion of how mergers may violate section 7 by 
eliminating on-going innovation competition, see Note by the United 
States to the OECD, The Role of Innovation in Enforcement Cases 
(Dec. 5, 2023) (DAF/COMP/WD(2023)84), https://one.oecd.org/document/DAF/COMP/WD(2023)84/en/pdf.
    \103\ See United States v. Falstaff Brewing Corp., 410 U.S. 526, 
561-62 (1973) (Marshall, J, concurring). See also United States v. 
Continental Can Co., 378 U.S. 441, 465 (1964) (fact that merging 
parties were not direct competitors for all end uses at the time of 
the merger may actually enhance the long-run tendency of the merger 
to lessen competition).
    \104\ See United States v. Visa Inc., No. 3:20-cv-07810 (N.D. 
Cal. Nov. 5, 2020) (complaint) (transaction abandoned and case 
dismissed) and Assoc. Attorney General Vanita Gupta, Remarks at 
Georgetown Law's 15th Annual Global Antitrust Enforcement Symposium 
(Sept. 14, 2021), https://www.justice.gov/opa/speech/associate-attorney-general-vanita-gupta-delivers-remarks-georgetown-law-s-15th-annual. See also supra note 15 (collecting studies).
---------------------------------------------------------------------------

    As noted in the NPRM, there has been tremendous growth in sectors 
of the economy that rely on technology, such as pharmaceutical, medical 
device, and digital markets. Given the dynamic nature of these markets 
and the importance of acquisition strategies to success as well as 
market growth and penetration, mergers and acquisitions in these 
markets present a unique challenge for the Agencies. In particular, the 
Agencies must closely examine mergers in these and other rapidly 
evolving markets to account for the possibility that the merger may 
violate the antitrust laws by eliminating a nascent competitor or 
potential entrant, including the acquisition's effects on ongoing 
innovation competition.\105\
---------------------------------------------------------------------------

    \105\ FTC v. PPG Indus., Inc., 798 F.2d 1500, 1505-06 (D.C. Cir. 
1986) (Bork, J.).
---------------------------------------------------------------------------

    Competition policy debates in Congress have increasingly focused on 
markets that lack sufficient competition, especially in critical 
technology sectors.\106\ Concerns about the role of certain dominant 
companies have caused the Agencies to deploy additional resources to 
counter the economic power of these firms, including through costly and 
resource-intensive monopolization suits, some of which focus on the 
harmful effects of their prior acquisitions.\107\ Both Agencies have 
hired technologists and other experts to build their in-house capacity 
to keep pace with developments in dynamic markets that are reliant on 
emerging technology.\108\ The Agencies have also invested in better 
understanding how dominant firms can use strategic acquisitions as part 
of an interrelated course of monopolistic conduct. For example, the 
Agencies have brought challenges alleging that firms have engaged in 
``buy-or-bury'' strategies against actual or potential rivals.\109\ The 
Agencies have also alleged that firms have attempted to buy or exercise 
control of adjacent products or services that might be used to steer 
customers to their other products or exclude competing platforms.\110\ 
These strategies can be very hard to detect because merger activity in 
these sectors increasingly involves firms in business lines that 
currently may not be related in a clearly horizontal or vertical way. 
Without information that identifies products in development and the 
firms' assessments of where potential competitive threats are likely to 
emerge in the future, the Agencies have no basis to identify whether a 
transaction may eliminate ongoing innovation competition, a potential 
entrant, or a nascent competitive threat.\111\
---------------------------------------------------------------------------

    \106\ Majority Staff of H.R. Subcomm. on Antitrust, Com. & Admin 
L. of the Comm. On the Judiciary, 116th Cong., Majority Staff Rep. & 
Recommendations, Investigation of Competition in Digital Mkts. 38 
(2020), https://democrats-judiciary.house.gov/uploadedfiles/competition_in_digital_markets.pdf (hereinafter ``Investigation of 
Competition in Digital Markets'').
    \107\ FTC v. Facebook, Inc., 581 F. Supp. 3d 34, 40-42 (D.D.C. 
2022); United States v. Google LLC, No. 1:23-cv-00108 at 31-35, 65-
68 (E.D. Va. filed Jan. 24, 2023) (complaint); United States v. Live 
Nation Entertainment, Inc., No. 1:24-cv-03973 (S.D.N.Y. filed May 
23, 2024); see also Klein v. Meta Platforms, Inc., No. 3:20-cv-8570 
(N.D. Cal. filed Dec. 3, 2020).
    \108\ See Note by the United States to the OECD, Theories of 
Harm for Digital Mergers (June 16, 2023) (DAF/COMP/WD(2023)50), 
https://one.oecd.org/document/DAF/COMP/WD(2023)50/en/pdf.
    \109\ FTC v. Facebook, Inc., 581 F. Supp. 3d at 54.
    \110\ United States v. Microsoft Corp., 253 F.3d 34, 73-74 (D.C. 
Cir. 2001).
    \111\ See United States v. Google LLC, No. 20-cv-3010, 2024 WL 
3647498 (D.D.C. Aug. 5, 2024). (loss of nascent competitors is a 
clear anticompetitive effect).
---------------------------------------------------------------------------

    When transactions involve firms whose premerger relationship is not 
yet well established in the marketplace and is occurring outside the 
public eye through ongoing product development efforts, the Agencies 
cannot rely on the reporting of current overlapping revenues to spot 
transactions that may

[[Page 89231]]

eliminate areas of emerging or potential competition.\112\ The Agencies 
need a reliable factual basis for identifying transactions that create 
this risk, which is not provided in the current Form. For instance, the 
Agencies need information about products in development that are not 
currently generating revenues, but that the filer expects will soon. 
Because legal precedent makes clear that a merger that substantially 
lessens competition for innovation or research and development violates 
the law,\113\ the Agencies need information that will identify areas of 
pre-revenue investments and competition. The Agencies also need 
information that reveals the rationale for the transaction, including 
whether the acquired firm is considered a nascent competitive threat, 
and documents that reflect each firm's horizon-scanning for potential 
acquisition targets. This information is known only to the parties and 
is relevant to an initial assessment of whether the transaction may 
violate the antitrust laws by eliminating a potential entrant or 
nascent competitive threat.
---------------------------------------------------------------------------

    \112\ See Illumina, Inc. v. FTC, 88 F.4th 1036, 1049-51 (5th 
Cir. 2023) (antitrust markets not limited to products that exist but 
may include those that are anticipated or expected or encompass 
research, development and commercialization of products in 
development); FTC v. PPG Indus., Inc., 798 F.2d, 1500, 1504 (D.C. 
Cir. 1986) (merging firms competed in evolving high technology 
market at the request-for-proposal stage of product development).
    \113\ See United States v. Anthem, Inc., 855 F.3d 345, 361 (D.C. 
Cir. 2017) (threat to innovation alone is anticompetitive effect 
from acquisition); Illumina, Inc. v. FTC, 88 F.4th 1036, 1051 (5th 
Cir. 2023) (``Antitrust law does not countenance such a cramped view 
of competition, particularly in a research-and-development 
market.'').
---------------------------------------------------------------------------

    Failure to account for the merger's potential impact on ongoing 
innovation competition can have meaningful implications. Consumers and 
businesses reap enormous benefits from the efficiency and convenience 
brought about by significant innovations. According to Nobel Prize 
winner Robert Solow: ``Technological progress, very broadly defined to 
include improvements in the human factor, was necessary to allow long-
run growth in real wages and the standard of living.'' \114\ Courts, 
academic literature and commenters confirm the importance of innovation 
to growth in the economy and as a source of dynamism that can shake 
loose entrenched incumbents.\115\ Acquisitions of innovator firms may 
also deny the public the benefits of those investments in innovation, 
including any future competition those investments may have unleashed, 
if the acquirer does not make use of the discoveries \116\ or is able 
to crowd out nascent competitors by foreclosing access to a key 
input.\117\ The stakes are also high for innovators: startups may find 
fewer investors and lower acquisition prices in sectors where the 
expectation is that incumbents will ultimately identify and acquire any 
promising innovation.\118\
---------------------------------------------------------------------------

    \114\ Robert Solow, ``Growth Theory and After,'' 78 Am. Econ. 
Rev. 307, 313 (1988).
    \115\ See Giulio Federico et al., ``Antitrust and Innovation: 
Welcoming and Protecting Disruption,'' 20 Innovation Pol'y & Econ. 
125, 128-29 (2020); C. Scott Hemphill & Tim Wu, ``Nascent 
Competitors,'' 168 U. Pa. L. Rev. 1879, 1886 (2020).
    \116\ See Hemphill & Wu, supra note 115, at 1893. See also Mark 
Lemley & Andrew McCreary, ``Exit Strategy,'' 101 B.U. L. Rev. 1 
(2020).
    \117\ See Illumina v. FTC, 88 F.4th at 1053.
    \118\ Sai Krishna Kamepalli et al., ``Kill Zone'' (Nat'l Bureau 
of Econ. Rsch., Working Paper No. 27146, May 2020 rev. June 2022), 
https://www.nber.org/papers/w27146.
---------------------------------------------------------------------------

    Comments from State antitrust enforcers supported proposals seeking 
materials and information regarding potential or nascent entrants. 
However, other commenters stated that the HSR Filing is not an 
appropriate vehicle for advancing novel legal theories such as nascent 
competition or research and development competition, and any related 
revisions should be postponed until those theories are better 
established in case law.
    The Commission disagrees with commenters who suggested that 
concerns about innovation competition, potential entrants, and nascent 
threats are not well-grounded in existing law and economic learning. 
The importance of scrutinizing mergers for potential effects on 
innovation is well-documented.\119\ Economic evidence supports current 
legal precedent. Research demonstrates a growing phenomenon of dominant 
firms--buoyed by acquisitions--taking over industries.\120\ This is 
particularly true in the tech industry, where the markets in which 
digital platforms compete share several characteristics that tend 
toward a single dominant firm.\121\ Sustained high economic profits 
suggest that dominant firms in these concentrated sectors possess 
substantial and durable market power.\122\ In addition, insufficient 
competition and entry result in harms to investment and 
innovation.\123\ For these reasons, economic research supports the 
current legal framework, and reflects the need to carefully scrutinize 
proposed transactions involving a dominant incumbent or monopolist 
seeking to acquire a nascent threat or adjacent complement that could 
someday challenge the incumbent's position.\124\
---------------------------------------------------------------------------

    \119\ See generally Carl Shapiro, ``Competition and Innovation: 
Did Arrow Hit the Bull's Eye?,'' in The Rate and Direction of Econ. 
Activity Revisited 389-400 (Josh Lerner & Scott Stern eds., 2012).
    \120\ Carl Shapiro, ``Protecting Competition in the American 
Economy: Merger Control, Tech Titans, Labor Markets,'' 33 J. Econ. 
Perspectives 69 (2019).
    \121\ Stigler Comm. On Digital Platforms, Final Report 7-8 
(2019), https://www.chicagobooth.edu/-/media/research/stigler/pdfs/digital-platforms-committee-report-stigler-center.pdf (explaining 
network effects, returns increasing with scale, low marginal costs, 
high returns on amassing user data, and low distribution costs 
underlie trend toward monopoly).
    \122\ Shapiro, supra note 120, at 70.
    \123\ Stigler Comm. On Digital Platforms, supra note 121, at 31.
    \124\ Cunningham et al., supra note 15 (presenting empirical 
evidence that pipeline drug program is less likely to be developed 
when acquired by firm with overlapping existing product with 
significant market power); Stigler Comm. On Digital Platforms, supra 
note 121, at 81, 88; Shapiro, supra note 120, at 75; Michael L. 
Katz, ``Big Tech mergers: Innovation, competition for the market, 
and the acquisition of emerging competitors,'' 54 Info. Econ. & 
Policy 100883 (2021).
---------------------------------------------------------------------------

    Going back many years, the Agencies have successfully challenged 
several mergers that would have eliminated a potential entrant or 
nascent competitive threat. These enforcement actions include the 
acquisition of a pipeline firm or product that, once launched, would 
compete directly with the incumbent merging party,\125\ as well as the 
acquisition of a firm with products already on the market that, 
although small, was poised to add features or capabilities in the 
future that could render it a closer and more formidable competitor 
than it is today.\126\ Other transactions challenged by the Agencies 
involved the acquisition of a firm whose current market share 
understated its future competitive significance because it did not 
account for new innovations, business strategies, or other 
factors.\127\ Mergers that impact future competition between products 
or services that have not yet been developed can also violate the 
antitrust laws.\128\
---------------------------------------------------------------------------

    \125\ See, e.g., In re Sanofi Corp., No. 9422 (F.T.C. Dec. 11, 
2023) (complaint) (transaction abandoned); United States v. Visa 
Inc., No. 3:20-cv-07810 (N.D. Cal. Nov. 5, 2020) (transaction 
abandoned); FTC v. Mallinckrodt ARD Inc. (f/k/a Questcor Pharms., 
Inc.), No. 1:17-cv-120 (D.D.C. Jan. 30, 2017) (consent decree 
ordered license and $100 million equitable monetary relief); United 
States v. Westinghouse Air Brake Techs. Corp., No.1:16-cv-02147 
(D.D.C. Oct. 26, 2016) (consent decree ordered divestiture); In re 
Thoratec Corp., No. 9339 (F.T.C. July 28, 2009) (transaction 
abandoned); In re Inverness Med. Innovations, Inc., No. C-4244 
(F.T.C. Dec. 23, 2008) (Commission order requiring divestiture and 
other conditions).
    \126\ FTC v. PPG Indus., Inc., 798 F.2d 1500, 1505-06 (D.C. Cir. 
1986) (Bork, J.). See also In re Illumina, Inc., No. 9387 (F.T.C. 
Dec. 17, 2019) (complaint) (transaction abandoned).
    \127\ United States v. Novelis, Inc., No. 1:19-cv-02033 (N.D. 
Ohio Aug. 26, 2020) (arbitration-ordered divestiture); In re The 
Procter & Gamble Co., No. 9400 (F.T.C. Dec. 8, 2020) (complaint) 
(transaction abandoned); In re CDK Global, Inc., No. 9382 (F.T.C. 
Mar. 19, 2018) (complaint) (transaction abandoned).
    \128\ See, e.g., PPG Indus., Inc., 798 F.2d at 1505-06. See also 
United States v. Bayer AG, No. 1:18-cv-01241 (D.D.C. Feb. 8, 2019) 
(consent decree ordered divestiture); Press Release, U.S. Dep't of 
Justice, ``Applied Materials Inc. and Tokyo Electron Ltd. Abandon 
Merger Plans After Justice Department Rejected Their Proposed 
Remedy'' (Apr. 27, 2015), https://www.justice.gov/opa/pr/applied-materials-inc-and-tokyo-electron-ltd-abandon-merger-plans-after-justice-department; In re Nielsen Holdings N.V., No. C-4439 (F.T.C. 
Feb. 28, 2014) (Commission order requiring divestiture).

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[[Page 89232]]

    A number of commenters opposed changes contained in the proposed 
rule over concerns that they would disproportionally impact small 
innovation companies and startups, which rely on venture capital and 
acquisitions to sustain their business model. One commenter stated that 
preventing such exit strategies would make it difficult for startups to 
obtain early-stage funding, reducing both the number and vitality of 
these innovative firms. Several cautioned the Commission to avoid 
increasing the burden and risk associated with the acquisition of 
startups, which they stated would damage the dynamic U.S. tech 
innovation system. Another stated that acquisitions that increase 
concentration can still be procompetitive and drive dynamic efficiency.
    As the discussion above clearly demonstrates, acquisitions 
involving nascent or potential competitors as well as those that impact 
innovation competition may violate the antitrust laws. The Commission 
disagrees with commenters that contend that these types of acquisitions 
should be subjected to a more permissive standard or that the Agencies 
are singling them out for closer scrutiny. The Agencies routinely 
review acquisitions of and by innovative companies and apply the same 
legal standard to those mergers as any other acquisition. When the 
Agencies challenge these mergers, they are held to the same liability 
requirements necessary to establish a violation of section 7. However, 
as discussed above, there is a gap in the current information 
requirements that undermines the Agencies' ability to determine whether 
a transaction would eliminate nascent or future competition. To detect 
those types of acquisitions and to assess whether they violate the 
antitrust laws, the Agencies need information regarding these forms of 
ongoing or emerging competition, even if some commenters disagree with 
the law as applied by the courts in this area.
    The Commission acknowledges that the sale of a business to an 
incumbent may represent a valuable exit strategy for startups. But when 
such exits are effectuated by a dominant firm to absorb a future or 
emerging competitor, the overall effect may be to reduce innovation and 
violate the law.\129\ In fact, antitrust enforcement can drive 
innovation and growth by ensuring that market outcomes are determined 
through competition rather than left to the decisions of a dominant 
incumbent who can on its own determine the fate of innovative companies 
and the future of competition. The history of U.S. antitrust 
enforcement contains many examples of how government action was 
required to unleash the forces of competition and innovation, creating 
new opportunities for investments and startups.\130\ Recent research 
suggests that existing firms may be acquiring innovative capacity not 
for the purpose of advancing those discoveries but rather to shelve 
those discoveries, leading to a reduction in innovative output and 
eliminating an independent source of future competition.\131\ Two 
individual commenters shared their experiences with acquisitions that 
have had that effect:
---------------------------------------------------------------------------

    \129\ See Lemley & McCreary, supra note 116 (exit by acquisition 
leads to concentration in the tech industry and short-circuits the 
development of truly disruptive new technologies that have 
historically displaced incumbents in innovative industries).
    \130\ See Giovanna Massarotto, ``Driving Innovation with 
Antitrust,'' Promarket (Apr. 10, 2024) https://www.promarket.org/2024/04/10/driving-innovation-with-antitrust/.
    \131\ See Cunningham et al., supra note 15. See also Florian 
Sz[uuml]cs, ``M&A and R&D: Asymmetric Effects on acquirers and 
targets?'' 43 Rsch. Pol'y 1264 (2014); Carmine Ornaghi, ``Mergers 
and innovation in big pharma,'' 27 Int'l J. Indus. Org. 70 (2009); 
Justus Haucap et al., ``How mergers affect innovation: Theory and 
evidence,'' 63 Int'l J. Indus. Org. 283 (2019) (showing a reduction 
in innovation competition post-merger).
---------------------------------------------------------------------------

     I work in the software industry and despite the constant 
talk of ``innovation,'' I have seen many mergers that eliminate new 
product development. Mergers/acquisitions often consist of a company 
acquiring a product and immediately discontinuing either the acquired 
product or their own competing product. Most engineers I know want to 
develop new products and many mergers stop this from happening.\132\
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    \132\ Comment of Darryl Pretto, Doc. No. FTC-2023-0040-0434.
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     I work in the tech industry for a large technology firm. 
It's disgusting that our philosophy is now to buy other companies and 
never grow organic products because it is too hard. There's no 
innovation anymore it is simply make enough money to buy out the actual 
innovators in an industry. Any new startup is now faced with a massive 
hill to climb as getting VC money is paramount, but then the moment you 
do well your VC's will just sell to the highest bidder. This is 
stagnating tech, and you won't see the effects for some years down the 
road when 5 tech companies are left in this country. We need tighter 
oversight on mergers . . . .\133\
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    \133\ Anonymous Comment, Doc. No. FTC-2023-0040-0600.
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    In light of all these considerations, the Commission believes this 
rulemaking strikes the right balance that permits the Agencies to 
evaluate transactions for their potential effects on innovation while 
not standing in the way of acquisitions and other investments that do 
not present antitrust risks that need to be addressed prior to 
consummation. The critical task for the Agencies is to identify which 
transactions may substantially lessen competition or tend to create a 
monopoly, prior to consummation and before the possibility of future 
competition is snuffed out.\134\ The Commission is not subjecting 
acquisitions of startups or innovative firms to heightened scrutiny, as 
some commenters suggest. Rather, the Agencies are modernizing premerger 
requirements in light of the changes in M&A activity for all 
transactions that must be reported under the HSR Act, including those 
involving innovative firms.\135\ However, the final rule has been 
adjusted to lessen the burden on the targets of acquisitions generally. 
Moreover, many of the new requirements focus on increasing visibility 
into complex entities and therefore would not be applicable to the 
relatively straightforward structures of many startup companies.
---------------------------------------------------------------------------

    \134\ See Cristina Caffarra et al., ```How Tech Rolls:' 
Potential Competition and `Reverse' Killer Acquisitions,'' 2 CPI 
Antitrust Chron. 13, 15 (May 2020).
    \135\ According to a recent study, investment in U.S. startups 
continues to grow each year, reaching a combined deal value of 
$165.8 billion for 12,235 such deals in 2020. See Gary Dushnitsky & 
D. Daniel Sokol, ``Mergers, Antitrust, and the Interplay of 
Entrepreneurial Activity and the Investments That Fund It,'' 24 
Vand. J. Ent. & Tech. L. 255, 271 Table 1 (2022). The authors note 
that a case-by-case analysis of particular deals allows for a more 
nuanced approach to address particular potentially problematic deals 
in such settings. Id. at 277-78. See also D. Daniel Sokol, ``Merger 
Law for Biotech and Killer Acquisitions,'' 72 Fla. L. Rev. Forum 1, 
8 (2020) (explaining that innovation effect is fact-dependent).
---------------------------------------------------------------------------

    The Commission notes that many acquisitions of startups and small 
innovator firms are not reportable and thus are not subject to 
antitrust scrutiny prior to consummation. In September 2021, the 
Commission released its findings from an inquiry into past acquisitions 
by the largest technology platforms that did not require reporting 
under the HSR Act.\136\ Launched in

[[Page 89233]]

February 2020, this inquiry analyzed the terms, scope, structure, and 
purpose of exempted transactions by five large technology companies: 
Alphabet, Inc., Amazon.com, Inc., Apple Inc., Facebook, Inc., and 
Microsoft Corp. The study covered ten years of acquisitions (from 
January 1, 2010 to December 31, 2019) and found that the companies 
collectively made 819 acquisitions that were not reported under the HSR 
Act.\137\ None of these acquisitions was filed under HSR, although many 
of them were concentrated in just a few categories of technology, such 
as mobility, application software, and internet content and 
commerce.\138\
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    \136\ See Press Release, Fed. Trade Comm'n, ``FTC Staff Presents 
Report on Nearly a Decade of Unreported Acquisitions by the Biggest 
Technology Companies'' (Sept. 15, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/09/ftc-staff-presents-report-nearly-decade-unreported-acquisitions-biggest-technology-companies.
    \137\ See Fed. Trade Comm'n, Non-HSR Reported Acquisitions by 
Select Technology Platforms, 2010-2019: An FTC Study 10-11 Fig. 1 
(2021), https://www.ftc.gov/system/files/documents/reports/non-hsr-reported-acquisitions-select-technology-platforms-2010-2019-ftc-study/p201201technologyplatformstudy2021.pdf (hereinafter ``Non-HSR 
Reported Acquisitions''). Data supplied by commenter Engine confirms 
that the vast majority of startup acquisitions are valued below $50 
million, meaning that they are rarely reported to the Agencies in 
advance. See Comment of Engine, Doc. No. FTC-2023-0040-0681, 
appendix B at 16.
    \138\ Non-HSR Reported Acquisitions, supra note 137, at 27-35.
---------------------------------------------------------------------------

    This study provided other insights into these companies' practices 
and acquisition strategies, including how they structured acquisitions 
and how these acquisitions fit into the companies' overall business 
strategies.\139\ For instance, not only were many of the acquisitions 
``small'' in deal value (i.e., under the various HSR reporting 
thresholds), they were also ``young,'' with nearly 40 percent of the 
acquisitions involving target firms that were less than five years 
old.\140\ Most of the acquisitions involved the buyer taking control of 
the acquired assets or entity, although there were also a significant 
number of investments that resulted in the large company holding a 
minority interest in the target firm.\141\ Moreover, over three-
quarters of the transactions included non-compete clauses for founders 
and key employees of the acquired entities, with relatively small 
variation in the percentage of transactions with non-compete clauses 
across the five respondents. \142\ Together, these findings indicate 
that during the study period, these five companies acquired many small, 
nascent firms operating in related business lines and their founders 
and other key employees agreed to refrain from continuing their own 
efforts to innovate outside the company for some period of time. While 
the study focused on transactions that were not reportable under the 
HSR Act, the information collected from these tech companies provided 
the Commission with insight into information that is available to 
parties in all types of acquisitions but that is not required by the 
current Form and Instructions.
---------------------------------------------------------------------------

    \139\ Other competition enforcement agencies around the world 
conducted similar studies involving acquisitions of digital platform 
companies. Id. at 2 n.6.
    \140\ Id. at 23-26.
    \141\ Id. at 15.
    \142\ Id. at 21-22.
---------------------------------------------------------------------------

    In light of the benefits to the public from preventing mergers that 
violate the antitrust laws by reducing innovation competition or 
eliminating a potential entrant or nascent threat, the Commission has 
determined that the Agencies need certain additional information with 
the HSR Filing to conduct an initial antitrust assessment prior to 
consummation. In the Agencies' experience, it is necessary to obtain 
this type of information directly from the filing parties because 
typically their plans regarding future products or business lines are 
not public.
    Several new information requirements in the final rule are aimed at 
providing the Agencies with sufficient information to determine if the 
transaction is likely to raise concerns about potential, emerging, or 
nascent competition. For instance, the new Overlap Description and 
Supply Relationships Description directly address the scope of existing 
and emerging competition between the parties. In particular, the 
Overlap Description requires filers to identify their own products and 
services, including those that are pre-revenue, that compete with the 
products and services of the other party that are known to the 
filer.\143\ This information will provide a basis for the Agencies to 
know that there are areas of emerging and direct competition beyond 
existing products or services, including important ongoing innovation 
competition. The Overlap Description also requires filers to produce 
measurement information for products or services not yet generating 
revenue, or those whose performance is not measured by revenue, such as 
projected revenue, estimated volume, or any other applicable 
performance metric. This change recognizes the importance of capturing 
the competitive significance of nascent or emerging products and 
services.
---------------------------------------------------------------------------

    \143\ As explained in section VI.I., the parties should not 
exchange information for the purpose of responding to the 
Competition Descriptions.
---------------------------------------------------------------------------

    The final rule also requires the buyer to indicate whether there 
are any existing contracts between the parties, including non-compete, 
non-solicitation, or licensing agreements, which would alert the 
Agencies to any limits on future competition that are created by these 
agreements, especially when the buyer is not acquiring all of the 
acquired entity. The existence of non-compete or non-solicitation 
agreements can be especially useful in revealing that the parties 
consider themselves to be `in competition' with one another, now or in 
the future, such that there is value in contracting away the ability to 
compete for or solicit business or workers. In addition, the Supply 
Relationships Description requires information for products, services, 
or assets (including data) that the other party or any other business 
uses or could use to compete. This forward-looking assessment, based on 
each filer's business experience, would reveal whether there are future 
uses of either party's products that could give rise to concerns about 
non-horizontal effects from the transaction. The inclusion of data as a 
potentially key asset is purposeful, given the competitive significance 
of data access for effective competition in so many modern 
markets.\144\
---------------------------------------------------------------------------

    \144\ See FTC v. IQVIA Holdings Inc., No. 1:23 Civ. 06188 
(S.D.N.Y. Dec. 29, 2023) (order granting preliminary injunction on 
horizontal theories of harm without addressing FTC allegations that 
the acquisition would allow IQVIA to foreclose other industry 
participants from accessing its data as a key input for healthcare 
professional programmatic advertising).
---------------------------------------------------------------------------

    Similarly, new document requirements contained in the final rule 
are aimed at revealing each firm's assessment of market conditions and 
horizon-scanning for competitive threats. For instance, the final rule 
requires a broader search for documents that evaluate or analyze the 
transaction to include not only those provided to board members but 
also to the person who has primary responsibility for supervising the 
deal. These documents, along with certain ordinary course plans and 
reports shared at the highest level of management described above and 
in section VI.G.2., will reveal additional information about how each 
filer views the competitive landscape more broadly, including in ways 
that may impact current or future competition. Together, these 
documents may signal whether either party has identified emerging 
threats to competition--from the other party or from firms not involved 
in the transaction--that would impact the Agencies' assessment of 
whether the transaction may violate the antitrust laws.
    As discussed above in section II.B.1., new information contained in 
the

[[Page 89234]]

Minority Shareholders or Interest Holders and Officers and Directors 
sections will provide a basis for the Agencies to identify any existing 
or potential management relationships between the acquiring person and 
target, including through entities or individuals who can influence 
decision-making of the acquiring person post-merger. These 
relationships can be especially concerning if used to gain access to 
non-public information about future plans or investments in products-
in-development when those same individuals also have interests in 
competitively relevant businesses.
    Finally, the final rule collects additional information about the 
acquisition rationale of the buyer to assist the Agencies in 
understanding the purpose of the transaction. For example, the final 
rule requires the buyer to describe any rationale for the transaction 
and to indicate any document submitted with the HSR Filing that 
confirms or discusses that rationale. These answers will provide 
context for the Agencies' initial antitrust assessment through a deeper 
understanding of what purpose the buyer has for engaging in a 
transaction that is large enough to require premerger review. In 
addition, the final rule for the first time requires the seller to 
report prior acquisitions in the same or related lines of business, 
which would provide a basis for the Agencies to better assess whether 
the transaction implicates emerging, nascent, or potential competition, 
especially through the combined effects of roll-up or serial 
acquisition strategies or ``killer'' acquisitions in which assets were 
purchased but not used as a means of eliminating a competitor.
5. Disclosing Roll-Up or Serial Acquisition Strategies
    Another trend in M&A activity has been the rise of serial 
acquirers, firms that engage in strategic acquisitions in the same 
industry, often ``rolling up'' many small competitors in the same or 
adjacent markets to establish a large, sometimes dominant, 
position.\145\ Serial acquisition strategies have been subject to 
antitrust scrutiny for over 100 years.\146\ In the seminal merger case, 
United States v. Philadelphia National Bank, 374 U.S. 321 (1963), the 
Supreme Court noted that both the buyer and the seller had previously 
acquired many other independent banks,\147\ driving a trend toward 
concentration that rendered their merger suspect.\148\ Given the 
popularity and prevalence of these serial acquisition strategies in 
recent years, especially in healthcare and technology markets, this 
trend has attracted the attention of academics and policymakers 
alike.\149\ A pattern or strategy of buying up smaller competitors or 
firms in the same or related lines of business can lead to harm of the 
same magnitude and type as mergers of larger or established firms, but 
serial acquisitions are less likely to attract the attention of 
enforcers until the strategy is identified. A series of small 
acquisitions can lead to consolidation within an industry, often 
without ever triggering the obligation to report these acquisitions 
under the HSR Act. This strategy has been particularly prevalent in 
healthcare markets involving private equity buyers.\150\
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    \145\ NPRM at 42202 n.62 (citing Gerry Hansell et al., ``Lessons 
from Successful Serial Acquirers: Unlocking Acquisitive Growth,'' 
Boston Consulting Grp. (Oct. 1, 2014), https://www.bcg.com/publications/2014/mergers-acquisitions-unlocking-acquisitive-growth); ``Stealth Consolidation,'' supra note 18.
    \146\ See, e.g., United States v. Grinnell Corp., 384 U.S. 563, 
576, 578, 580 (1966); Standard Oil Co. v. United States, 221 U.S. 1, 
31-42 (1911); United States v. Am. Tobacco Co., 221 U.S. 106, 157-60 
(1911). See also Note by the United States to the OECD, Serial 
Acquisitions and Industry Roll-ups (Dec. 6, 2023) (DAF/COMP/
WD(2023)99), https://one.oecd.org/document/DAF/COMP/WD(2023)99/en/
pdf (discussing the history and roots of antitrust enforcement 
against anticompetitive serial acquisitions). Serial acquisition 
strategies may also violate section 2 of the Sherman Act when a firm 
with monopoly power relies on acquisitions, among other conduct, to 
acquire or maintain its monopoly. See Credit Bureau Reps., Inc. v. 
Retail Credit Co., 358 F. Supp. 780 (S.D. Tex. 1971), aff'd, 476 
F.2d 989 (5th Cir. 1973); United States v. Jerrold Elecs. Corp., 187 
F. Supp. 545 (E.D. Pa. 1960).
    \147\ See United States v. Phila. Nat'l Bank, 374 U.S. 321, 331 
(1963) (PNB previously acquired nine independent banks while Girard 
acquired six).
    \148\ Id. at 367 (evidence of several remaining competitors 
insufficient to rebut inherently anticompetitive tendencies of high 
post-merger market shares, in light of strong trend toward mergers, 
including those of the defendants).
    \149\ See Investigation of Competition in Digital Markets, supra 
note 106, at 24-25.
    \150\ Richard M. Scheffler et al., Am. Antitrust Inst., 
``Soaring Private Equity Investment in the Healthcare Sector: 
Consolidation Accelerated, Competition Undermined, and Patients at 
Risk'' 8-16 (May 18, 2021), https://publichealth.berkeley.edu/wp-content/uploads/2021/05/Private-Equity-I-Healthcare-Report-FINAL.pdf. The Commission recently hosted a public workshop to 
discuss the growing body of economic research examining the role of 
private equity investment in health care markets. Fed. Trade Comm'n, 
Private Capital, Public Impact: An FTC Workshop on Private Equity in 
Health Care (Mar. 5, 2024), https://www.ftc.gov/news-events/events/2024/03/private-capital-public-impact-ftc-workshop-private-equity-health-care.
---------------------------------------------------------------------------

    Often the Agencies are not able to detect these strategies until it 
is too late, after the serial acquirer has established a dominant 
position and is able to exercise market power to the detriment of 
market participants. For instance, in September 2023, the FTC charged 
U.S. Anesthesia Partners, a for-profit corporation, with a multi-year 
anticompetitive scheme to consolidate anesthesia practices in 
Texas.\151\ This lawsuit, which is pending in Federal court in Texas, 
alleges that the company acquired over a dozen anesthesiology practices 
in Texas to eliminate competition and create a single dominant provider 
with the power to demand higher prices.
---------------------------------------------------------------------------

    \151\ FTC v. U.S. Anesthesia Partners, Inc., No. 4:23cv3560 
(S.D. Tex. Sept. 21, 2023) (complaint).
---------------------------------------------------------------------------

    The Commission is aware of the impact of serial acquisitions based 
on its experience with the dialysis industry, which is an area in which 
economic research has documented adverse effects from serial 
acquisitions. Throughout the 2000s, the Commission reviewed a series of 
large acquisitions by DaVita, the largest U.S. provider of life-
sustaining treatments for end stage renal disease patients. In 2006, in 
conjunction with DaVita's $3.1 billion acquisition of rival Gambro 
Healthcare, Inc., the Commission required DaVita to divest 69 dialysis 
clinics in 35 markets across the United States to resolve charges that 
the acquisition violated section 7. In 2011, DaVita sought to acquire 
rival DSI for $689 million, and the Commission required divestitures to 
preserve competition for dialysis services in 22 local markets. Then in 
2017, the Commission ordered DaVita to divest seven clinics in New 
Jersey and Dallas to proceed with its $358 million acquisition of Renal 
Ventures. During roughly the same period, the Commission also reviewed 
a series of acquisitions by Fresenius, the other leading U.S. provider 
of dialysis services, and required significant divestitures to maintain 
competition.\152\
---------------------------------------------------------------------------

    \152\ See In re Fresenius AG, No. C-4159 (F.T.C. July 5, 2006) 
(decision and order requiring divestiture of ninety-one clinics and 
financial interests in twelve more); In re Am. Renal Assocs. Inc., 
No. C-4202 (F.T.C. Oct. 23, 2007) (consent order terminating 
purchase agreement for five clinics and closure of three additional 
clinics); In re Fresenius Med. Care AG, No. C-4348 (F.T.C. May 25, 
2012) (decision and order requiring divestiture of sixty dialysis 
clinics).
---------------------------------------------------------------------------

    Notwithstanding these enforcement actions, the dialysis industry 
has experienced growing concentration, mostly as a result of 
acquisitions that were not reportable under the HSR Act. According to 
one 2020 study, there were more than 1,200 acquisitions of independent 
dialysis facilities over a 12-year period, resulting in DaVita and 
Fresenius operating more than 60 percent of all clinics 
nationwide.\153\ The study concluded that these changes in

[[Page 89235]]

ownership resulted in higher prices, lower levels of service, and worse 
outcomes for patients.\154\ One commenter stated that, based on his 
research, merger enforcement against reportable acquisitions prevented 
illegal consolidation 95 percent of the time, while the many non-
reportable acquisitions of dialysis clinics were blocked only 5 percent 
of the time. He contended that these `stealth' acquisitions accounted 
for much of the increase in within-market concentration.\155\
---------------------------------------------------------------------------

    \153\ Paul J. Eliason et al., ``How Acquisitions Affect Firm 
Behavior and Performance: Evidence from the Dialysis Industry,'' 135 
Q. J. Econ. 221, 222 (2020) (from 1990 to 2020, the share of 
independent dialysis facilities fell from 86% to 21%).
    \154\ Id. at 223.
    \155\ See Comment of Thomas Wollmann, Doc. No. FTC-2023-0040-
0680 at 1 n.2 (citing to Thomas G. Wollmann, ``Stealth 
Consolidation: Evidence from an Amendment to the Hart-Scott-Rodino 
Act,'' 1 a.m. Econ. Rev.: Insights 77-94 (2019) and Thomas G. 
Wollman, ``How to Get Away with Merger: Stealth Consolidation and 
Its Effects on US Healthcare'' (Nat'l Bureau of Econ. Rsch., Working 
Paper No. 27274, May 2020 rev. Mar. 2024), https://www.nber.org/papers/w27274).
---------------------------------------------------------------------------

    In light of the failure of prior interventions to stem the adverse 
consequences of roll-up acquisitions in this industry, when DaVita in 
2022 sought to buy 18 clinics in a non-HSR-reportable transaction, the 
Commission unanimously voted to require DaVita not only to divest three 
clinics but also to obtain prior Commission approval before buying any 
new ownership interest in dialysis clinics in Utah.\156\ The Commission 
determined that imposing a prior approval obligation was appropriate in 
light of the company's history of attempting anticompetitive 
transactions that do not trigger a notification under the HSR Act.\157\
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    \156\ In re DaVita Inc., No. C-4677 (F.T.C. Oct. 25, 2021) 
(decision).
    \157\ See Fed. Trade Comm'n, Statement of the Commission on Use 
of Prior Approval Provisions in Merger Orders (Oct. 25, 2021), 
https://www.ftc.gov/system/files/documents/public_statements/1597894/p859900priorapprovalstatement.pdf.
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    The Commission has also imposed prior notice or prior approval 
provisions on another serial acquirer, JAB Consumer Partners, a private 
equity firm that has made several significant acquisitions in the 
emergency and specialty veterinary services markets across the United 
States. JAB is the parent company of two large veterinary clinic 
chains, Compassion-First Pet Hospitals and National Veterinary 
Associates Inc., that have been built through a series of acquisitions. 
In 2020, Compassion-First bought NVA for $5 billion, and the Commission 
required JAB to divest clinics in three local markets.\158\ In June 
2022, Compassion-First/NVA acquired Sage Veterinary Partners for $1.1 
billion, and the Commission required divestitures in three additional 
local markets.\159\ The Commission also determined that, in light of 
JAB's ongoing acquisition strategy, it would require prior approval and 
prior notice requirements on JAB's future acquisitions of specialty and 
emergency veterinary clinics.\160\ Later in 2022, when JAB also sought 
to acquire another veterinary chain with significant competitive 
overlap in four geographic markets, the Commission again required 
divestitures and prior approval requirements in the affected local 
markets for emergency and specialty veterinary services markets.\161\
---------------------------------------------------------------------------

    \158\ In re Agnaten SE, No. C-4707 (F.T.C. Apr. 9, 2020) 
(decision and order).
    \159\ In re JAB Consumer Partners SCA SICAR, No. C-4766 (F.T.C. 
Aug. 2, 2022) (decision and order).
    \160\ The Commission's order requires JAB to obtain prior 
Commission approval before acquiring a specialty or emergency 
veterinary clinic within twenty-five miles of any JAB clinic in 
California or Texas, and prior notice to the Commission thirty days 
prior to a similar acquisition anywhere in the United States that is 
not required to be reported under the HSR Act. Id. (decision and 
order).
    \161\ In re JAB Consumer Partners SCA SICAR, No. C-4770 (F.T.C. 
Oct. 10, 2022) (decision and final order).
---------------------------------------------------------------------------

    But resorting to imposing prior approval obligations after an 
industry has already experienced significant concentration due to roll-
up strategies is suboptimal. A central purpose of the HSR Act is to 
allow the Agencies to arrest trends toward concentration through 
effective premerger review. For any reportable transaction under the 
HSR Act, the Agencies have an obligation to determine whether the 
transaction is one of a series of acquisitions that could lead to harm 
in the affected markets. Information about each party's prior 
acquisitions will provide a basis for the Agencies to assess this risk 
to competition during their initial antitrust assessment for any 
reportable transaction.
    Several commenters supported the need for more information related 
to prior acquisitions, including a group of State antitrust enforcers. 
One commenter noted that the private equity industry pioneered and 
perfected the serial `roll-up' acquisitions that were too small to 
attract antitrust agency attention but nonetheless amassed considerable 
market power over time. The same commenter pointed out that private 
equity firms use these add-on buyout deals to purchase multiple 
competitors of an existing portfolio company or expand their geographic 
reach to create a much bigger player in an industry--and that this 
strategy can in aggregate substantially lessen competition or tend to 
create a monopoly. Another commenter raised similar concerns that the 
business strategy of making a series of small acquisitions--whether an 
intentional tactic to avoid regulatory scrutiny or not--has become 
concerningly common in recent decades and led to many consolidated 
industries. An individual commenter shared their experience with the 
broader impact of rollup acquisitions on local communities:
     As the wife of a small business owner and member of a 
community, I'm dismayed at seeing how many small local and regional 
businesses have disappeared after becoming the target of mergers and 
rollups. Those businesses--funeral homes, hospice care, newspapers, 
hardware stores, coffee shops, veterinarians--were [] an important part 
of the community. Now it is nearly impossible to start local businesses 
in those sectors and turn any sort of profit while competing with PE 
backed rollups.\162\
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    \162\ Comment of Nora Johnson, Doc. No. FTC-2023-0040-0618.
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    Other commenters stated that the proposed changes are unnecessary 
because they lack sufficient justification, are out of step with their 
view of case law and market realities, and do not seem to have a strong 
factual basis. One commenter stated that the proposal to expand the 
lookback period for prior acquisitions would invite the Agencies to 
scrutinize long-consummated deals, including those that the HSR Act 
were never intended to capture. Some raised concerns that the proposed 
changes will substantially increase the burden of reporting on prior 
acquisitions beyond what is currently required for the HSR Form. 
Another stated that the costs of the proposed changes regarding prior 
acquisitions far outweigh the potential benefit that information about 
immaterial prior transactions could provide to the evaluation of the 
transaction. One commenter stated that requiring disclosure of non-
reported transactions will reduce investments in startups.
    The Commission has determined that, to detect whether serial or 
roll-up acquisition strategies have changed the market dynamics such 
that the transaction under review could have widespread harmful effects 
that will be hard to undo, the Agencies need additional information 
about prior acquisitions, including from the acquired firm. Knowing 
each party's record of prior acquisitions in the same business lines 
will allow the Agencies to understand the long-term competitive 
strategy for the transaction at issue, including whether it is one in a 
series of prior or planned acquisitions in the same industry and 
whether the

[[Page 89236]]

transaction is a merger of ``consolidators.'' The additional 
information would also permit the Agencies to better identify 
transactions whose effects should not be viewed in isolation but rather 
as a pattern of consolidation.\163\
---------------------------------------------------------------------------

    \163\ See Brown Shoe Co. v. United States, 370 U.S. 294, 334 
(1962).
---------------------------------------------------------------------------

    The Commission has always required information about prior 
acquisitions in the HSR Filing to help identify strategies aimed at 
gaining market share through acquisitions rather than internal 
expansion or more vigorous competition, and the Commission disagrees 
that it is outside its rulemaking authority under the HSR Act to 
require filers (including the target) to report prior acquisitions in 
the same or related business lines even if they were not previously 
reported to the Agencies for premerger review. The final rule contains 
modest expansions of this long-standing requirement, to better account 
for the increased number of firms engaged in roll-up strategies. 
Nonetheless, the final rule does not contain certain expansions 
suggested in the proposed rule, such as eliminating the $10 million 
exception or expanding the lookback period from 5 to 10 years in 
response to comments that providing this level of information about 
prior acquisitions would be costly and burdensome. The modest expansion 
of this information requirement should provide the Agencies with a more 
complete record of consolidation in the relevant business lines that 
has been driven by the merging parties in order to identify when a 
reported transaction is the latest in a series of acquisitions, and 
thus one that may violate the antitrust laws.
    As noted elsewhere, the Agencies remain committed to identifying 
consummated mergers that have resulted in harm and to take steps to 
unwind them as resources permit. But regardless of the legality or 
reportability of any particular prior acquisition, the fact that it 
occurred and involved the same business lines under review is directly 
relevant to whether the reported transaction may violate the antitrust 
laws, including through a series of mergers that ``convert an industry 
from one of intense competition among many enterprises to one in which 
three or four large concerns produce the entire supply.'' \164\ For 
these reasons, the Commission has determined there is a need to collect 
information about prior acquisitions from the seller as well as the 
buyer. The cost of complying with this requirement should be minimal 
except in instances where the seller has made many acquisitions in the 
same or related business lines, in which case the information may prove 
highly relevant to Agency review.
---------------------------------------------------------------------------

    \164\ Id. (quoting S. Rep. 81-1775, at 5 (1950) and citing H.R. 
No. Rep. 81-1191, at 8 (1949)).
---------------------------------------------------------------------------

    Other new requirements in the final rule will also help the 
Agencies identify these roll-up strategies. In particular, the Overlap 
Description will provide an alternative basis for identifying product 
or service market overlaps for which prior acquisitions should be 
reported. Information about the buyer's acquisition rationale will 
reveal the purpose of the transaction, including whether is it part of 
a strategy of pursuing transactions in similar business lines. The new 
requirement to submit a small set of business plans and reports shared 
with the highest levels of management that discuss market shares, 
competition, competitors, or markets of any product or service that is 
provided by both the acquiring person and acquired entity may reveal 
whether there are other acquisition targets identified by either the 
acquiring or acquired person.

III. Statutory Authority and Economic Analysis

    The HSR Act directs the Commission, with the concurrence of the 
Assistant Attorney General and consistent with the purposes of the Act, 
to issue rules requiring the submission of 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.'' \165\ 
The HSR Act was enacted to assist the Agencies in enforcing other 
provisions of the Clayton Act, and to give the FTC and the Department 
of Justice a tool--premerger notification--to identify problematic 
mergers and acquisitions before they are consummated and a short period 
of time to complete their analysis.\166\ The statute grants the 
Commission explicit authority to require the submission of documents 
and information the Agencies determine are necessary and appropriate to 
identify proposed acquisitions that may result in an antitrust 
violation.\167\
---------------------------------------------------------------------------

    \165\ 15 U.S.C. 18a(d)(1).
    \166\ PhRMA, 790 F.3d at 199, 206.
    \167\ Id. at 199, 201, 205.
---------------------------------------------------------------------------

    In the administrative law context, the Supreme Court has held that 
Congress' use of terms such as ``appropriate'' or ``reasonable'' in a 
statute authorizing agency rulemaking gives the agency ``flexibility'' 
to regulate.\168\ As the Supreme Court has explained, ``[o]ne does not 
need to open up a dictionary in order to realize the capaciousness of 
this phrase. In particular, `appropriate' is the classic broad and all-
encompassing term that naturally and traditionally includes 
consideration of all the relevant factors.'' \169\ The phrase ``leaves 
agencies with flexibility,'' although ``an agency may not entirely fail 
to consider an important aspect of the problem.'' \170\ In at least 
some contexts, courts have held that ``necessary and appropriate'' 
requires consideration of a rule's costs and benefits.\171\
---------------------------------------------------------------------------

    \168\ Loper Bright Enterprises v. Raimondo, 144 S.Ct. 2244 
(2024).
    \169\ Michigan v. EPA, 576 U.S. 743, 752 (2015) (citation and 
internal quotation marks omitted).
    \170\ Id. (citation and internal quotation marks omitted).
    \171\ See id.; Mex. Gulf Fishing Co. v. U.S. Dep't of Commerce, 
60 F.4th 956, 965 (5th Cir. 2023) (finding that the necessary and 
appropriate standard at a minimum requires that a rule's benefits 
reasonably outweigh its costs).
---------------------------------------------------------------------------

    The Commission is not convinced that Congress intended the words 
``necessary and appropriate'' to require a cost-benefit analysis in 
this context. Had Congress intended to require the Commission to 
consider costs and benefits, it could easily have done so.\172\ 
Instead, it gave the Commission broad authority to establish 
requirements it deems necessary and appropriate for determining whether 
a proposed acquisition may violate the antitrust laws during premerger 
review, and even gave the Commission express authority to define 
statutory terms. Nonetheless, in the particular circumstances of this 
rule, the Commission has considered the reasonableness of requiring 
additional information in the HSR Filing in light of the statutory 
scheme established by Congress to more effectively prevent undue 
consolidation that violates the antitrust laws, including the costs and 
the benefits of the final rule. The Commission has evaluated, on the 
one hand, the benefits to the Agencies, the parties, third parties and 
the public in making premerger review more efficient and effective by 
obtaining information necessary to properly assess the competitive 
effects of proposed acquisitions; and on the other hand, the need to 
reduce unnecessary burden, costs, and delay on filers and the 
transactions they hope to pursue in a manner consistent with the

[[Page 89237]]

mandatory premerger notification regime of the HSR Act.
---------------------------------------------------------------------------

    \172\ See Chamber of Com v. Sec. Exch. Comm'n., 412 F.3d 133, 
142 (D.C. Cir. 2005) (statute requires SEC to consider whether rule 
will promote efficiency, competition, and capital formation which 
requires a consideration of the costs of the conditions imposed by 
the rule).
---------------------------------------------------------------------------

    In determining what information is necessary and appropriate to 
determine whether a reported transaction merits the issuance of Second 
Requests, the Commission also draws on the Agencies' decades of 
experience reviewing filings and responding to informal requests for 
guidance.\173\ This operational experience informs the Commission's 
assessment of the existing rules' shortcomings and supports its 
decision that it is necessary and appropriate--and consistent with the 
text and purpose of the HSR Act--for the Agencies to require the 
merging parties to provide sufficient information to enable the 
Agencies to conduct a preliminary assessment of the risk that the 
filed-for transaction may violate the antitrust laws, particularly 
where some information is available only from the parties.
---------------------------------------------------------------------------

    \173\ See PhRMA, 790 F.3d at 210 (the Commission may provide the 
factual predicate for a finding through its cumulative experience 
and resulting expertise).
---------------------------------------------------------------------------

    After careful consideration of the public comments as well as the 
costs and benefits of the proposed changes, the Commission has 
determined to adopt a modified version of the information requirements 
proposed in the NPRM. As modified, the final rule will facilitate the 
provision of relevant documentary materials and information that allow 
the Agencies to assess whether a proposed acquisition may violate the 
law within the statutory period available for their initial review 
while minimizing the cost and burden of producing such materials as 
much as practicable.
    The following analysis considers the potential economic effects 
that may result from the final rule consistent with the Commission's 
statutory power to obtain information necessary and appropriate to 
conduct an effective premerger review, including the benefits and costs 
to market participants. In conducting this assessment, the Commission 
has identified existing costs to filers, the Agencies, and third 
parties that could be avoided by adjusting the information requirements 
for HSR Filings. Avoiding such costs would generate benefits for 
filers, the Agencies, and third parties in addition to broader public 
benefits of effective premerger screening to identify potentially 
unlawful mergers prior to consummation.
    The Commission believes that the final rule will improve the 
efficiency of the premerger review process and help the Agencies 
identify transactions that may violate the antitrust laws along all 
parameters of potential harm, but not all of these benefits can be 
quantified. Wherever possible, the Commission quantifies the likely 
economic effects of its final rule. However, some economic effects are 
inherently less conducive to sound quantification either due to the 
lack of reliable data or the lack of a well-established economic 
methodology that would provide estimates or ranges of costs. For 
example, producing quantitative estimates of certain costs and benefits 
would require numerous assumptions to generate a behavioral forecast of 
how parties contemplating an acquisition and other affected third 
parties would respond to the rule, and how those behavioral responses 
would in turn affect the overall cost of compliance and the merger 
review process. In addition, some factors determining certain economic 
effects of the rule are transaction-, firm- and industry-specific and 
thus inherently difficult to quantify. Even if it were possible to 
calculate a range of potential quantitative estimates for these 
effects, the range would be so wide as to not be informative about the 
magnitude of the associated benefits or costs. Where sound economic 
methodology is not available to measure particular benefits or costs, 
the Commission addresses those qualitatively.\174\ In sum, to show the 
connection between the facts found and the agency's decision, the 
Commission provides, where feasible and appropriate, a quantified 
estimate of the economic effects of the final rule, and a qualitative 
description of the benefits and costs.
---------------------------------------------------------------------------

    \174\ See Chamber of Com v. Sec. Exch. Comm'n., 85 F.4th 760, 
768 (5th Cir. 2023) (quoting Motor Vehicle Mfrs. Ass'n of U.S., Inc. 
v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). See also 
id. at 773-74 (explaining that securities law provisions providing 
rulemaking authority do not require the agency to conduct a 
quantitative inquiry to ascertain the economic effects of a rule, 
that the agency could instead rely on a qualitative assessment of 
the rule's economic implications, and that the agency can determine 
the analysis that most effectively reflects the economic 
consequences of its rule) (citation omitted); All. For Fair Bd. 
Recruitment v. Sec. Exch. Comm'n., 85 F.4th 226, 263 (5th Cir. 2023) 
(agency's analysis of unquantifiable benefits sufficiently supports 
a rule as long as it provides an adequate explanation for its 
determination, and agency need not support its analysis with hard 
data where it reasonably relied on intangible benefits that were 
difficult to quantify) (citations omitted); Mex. Gulf Fishing., 60 
F.4th at 965-66 (a necessary-and-appropriate condition does not 
require applying a strict cost-benefit analysis but simply a showing 
that expected benefits are reasonably related to anticipated costs) 
(citations omitted).
---------------------------------------------------------------------------

A. Statutory Authority and Congressional Intent

    The HSR Act provides that the Commission ``shall require'' that 
premerger notifications be in such form and contain 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.\175\ 
Thus, the HSR Act explicitly requires the Commission, with the 
concurrence of the Assistant Attorney General, to determine what types 
of documents and information are required to conduct an initial 
assessment of antitrust risk. Mandatory premerger review strengthens 
merger enforcement by giving the Agencies a fair and reasonable 
opportunity to detect and investigate large mergers before 
consummation.\176\ The ability to spot ``problem areas'' during the 
initial screen is the key feature of the HSR Act that converts merger 
enforcement from ineffective ex-post litigation to expeditious and 
effective premerger proceedings.\177\
---------------------------------------------------------------------------

    \175\ 15 U.S.C. 18a(d)(1).
    \176\ H.R. Rep. No. 94-1373, at 5 (1976).
    \177\ Id. at 10-11 (chief virtue of the Act is to help eliminate 
endless post-merger proceedings and replace them with far more 
expeditious and effective premerger review generating considerable 
savings; if the initial notification form reveals `problem areas,' 
the government can request additional data during the initial 30-day 
period).
---------------------------------------------------------------------------

    To that end, Congress passed the HSR Act to provide the Agencies 
with advance notice of planned acquisitions and an opportunity to 
challenge such acquisitions as unlawful prior to consummation. The 
overall intent was to avoid lengthy, costly post-consummation 
enforcement that is ineffective at preventing undue concentration and 
permits an illegal acquisition to cause harm until unwound:

    The problem this bill cures is startlingly simple, but it goes 
to the very foundations of our merger law. Under present law, 
companies need not give advance notification of a planned merger to 
the Federal Trade Commission and the Department of Justice. But if 
the merger is later judged to be anticompetitive, and divestiture is 
ordered, that remedy is usually a costly exercise in futility--
untangling the merged assets and management of the two firms is like 
trying to unscramble an omelet.\178\
---------------------------------------------------------------------------

    \178\ 122 Cong. Rec. 25051 (1976) (remarks of Rep. Rodino). 
Premerger review was not the only tool given the Agencies to rectify 
the inadequacy of post-consummation merger enforcement. In 1973, 
Congress amended the FTC Act to authorize the Commission to seek 
injunctions in Federal court in recognition of the inadequacy of 
post-consummation divestitures. See FTC v. H.J. Heinz Co., 246 F.3d 
708, 726 (D.C. Cir. 2001) (Section 13(b) of the FTC Act reflects 
congressional recognition that divestiture is an inadequate and 
unsatisfactory remedy in a merger case, citing 119 Cong. Rec. 36612 
(1973)). The inability of the Commission to obtain injunctive relief 
sooner to prevent widespread harm from mergers was a widely 
acknowledged shortcoming of its agency design. See, e.g., FTC v. 
Dean Foods Co., 384 U.S. 597, 606 n.5 (1966) (experience shows that 
the Commission's inability to unscramble merged assets frequently 
prevents entry of an effective order of divestiture).


[[Page 89238]]


---------------------------------------------------------------------------

    As noted by the Antitrust Modernization Commission (AMC)--a special 
body commissioned by Congress in 2002 to conduct a comprehensive review 
and make recommendations for revisions to U.S. antitrust laws--the HSR 
Act addressed the defects of post-consummation merger enforcement, 
which ``could neither fully compensate society for the interim loss of 
competition, nor fully restore a competitive market structure, 
particularly if the companies had already integrated their productive 
assets, or `scrambled the eggs.' '' \179\ Congress also intended to 
avoid deterring or impeding the consummation of the vast majority of 
acquisitions and therefore fashioned a regime that reflected ``a 
careful balancing of the need to detect and prevent illegal mergers and 
acquisitions prior to consummation without unduly burdening business 
with unnecessary paperwork or delays.'' \180\
---------------------------------------------------------------------------

    \179\ Antitrust Modernization Comm'n, Rep. & Recommendations 155 
& n.21 (2007), https://govinfo.library.unt.edu/amc/report_recommendation/toc.htm (citing H.R. Rep. No. 94-1373 at 7-11) 
(hereinafter ``AMC Report''). The Antitrust Modernization Commission 
was created pursuant to the Antitrust Modernization Commission Act 
of 2002, Pub. L. 107-273, 116 Stat. 1856, Div. C., Title I, Subtitle 
D (2002). The AMC was charged with examining whether there was a 
need to modernize the antitrust laws and to identify and study 
related issues; to solicit views; and to evaluate proposals for 
change. The AMC provided its Report and Recommendations to Congress 
and the President on April 2, 2007, and was terminated on May 31, 
2007, having completed its statutory duties.
    \180\ S. Rep. No. 94-803, at 65 (1976).
---------------------------------------------------------------------------

    The Agencies have administered the premerger notification program 
required by the HSR Act for more than 45 years, and the Commission has 
engaged in numerous rulemakings to change the information requirements 
for premerger notification in response to changes in market realities. 
Although many commenters object in whole or in part to the proposals 
contained in the NPRM, several conceded that some updates to the Rules 
are reasonable or justified by increasingly complex markets. Others 
commended the Commission for undertaking a periodic review of its 
rules. Even so, some argue that the Commission lacks the authority to 
make any changes to its current process that would increase the burden 
or delay HSR-reportable transactions, asserting that Congress intended 
to reduce costs and delay and to focus the Agencies' scrutiny on only 
the largest corporate transactions. The Commission disagrees with 
certain commenters that the Commission lacks the authority to adjust 
information requirements over time to make premerger review efficient 
and effective for the purpose of detecting potentially illegal mergers 
in light of changing market conditions.
    Given the number of comments that assert that the proposed rule 
violated the intent of the HSR Act, the Commission responds first to 
these broad objections. The Commission also responds to assertions that 
it has failed to properly weigh the benefits and costs of changing the 
notification requirements in light of the statutory premerger scheme.
    As an initial matter, the Commission disagrees that avoiding 
potential cost or delay to those involved in dealmaking is the primary 
focus of the HSR Act. The legislative history and plain text of the HSR 
Act make clear that the goal of establishing a premerger review regime 
was not to minimize the number of transactions that are reviewed by the 
Agencies or to reduce the delay for reported transactions below the 
statutory obligations.\181\ In fact, it is clear that Congress 
explicitly contemplated that a mandatory premerger notification regime 
would impose burdens on merging parties. Prior to the passage of the 
HSR Act, parties were free to merge without providing any notification 
and without any delay, which led to concerns that the Agencies were 
practically unable to block or unwind illegal transactions.\182\ 
Congress determined that new and meaningful requirements were necessary 
to achieve the overarching Congressional goal of promoting vigorous and 
effective enforcement of the antitrust laws:
---------------------------------------------------------------------------

    \181\ Efforts to require premerger notification date back to 
1908. Leading up to the passage of the HSR Act, the Commission 
regularly urged Congress to pass legislation that would require 
advance notice for acquisitions. For a short time, the Commission 
relied on its authority under section 6 of the FTC Act to require 
merging parties to file special reports 60 days prior to 
consummation in certain industries, such as food distribution and 
cement. None of these programs required the parties to stay their 
merger plans. After passage of the HSR Act, the Commission 
discontinued reliance on special reports for prior notice of pending 
mergers. See Kelly Signs, ``Milestones in FTC History: HSR Act 
launches effective premerger review,'' Fed. Trade Comm'n Competition 
Matters blog (Mar. 16, 2015), https://www.ftc.gov/enforcement/competition-matters/2015/03/milestones-ftc-history-hsr-act-launches-effective-premerger-review.
    \182\ See S. Rep. No. 94-803, at 64 (1976).

    Amended Section 7 has failed to achieve its objectives--not 
because of its substantive standards, but because of the lack of an 
effective mechanism to detect and prevent illegal mergers prior to 
consummation. . . . The Committee believes that [premerger 
notification] represents a careful balancing of the need to detect 
and prevent illegal mergers and acquisitions prior to consummation 
without unduly burdening business with unnecessary paperwork or 
delays . . . Complex mergers or acquisitions of the kind encompassed 
within this subsection generally require a great deal of prior 
planning, and this provision will provide the Government appropriate 
opportunity to evaluate the legality of significant business 
behavior at the most propitious moment for all parties, with the 
least possible disaccommodation.\183\
---------------------------------------------------------------------------

    \183\ Id. at 63-66. See also id. at 9-10.

    When setting up the premerger notification program, the Commission 
rejected assertions that the term ``notification'' implies only a 
minimal burden for the initial HSR Filing. Some commenters at the time 
maintained that the initial notification should do little more than 
inform the Agencies of the participants to the transaction, the 
projected date of consummation, and other noncontroversial and 
generally uninformative data, leaving a fuller information demand to 
the Second Request. The Commission disagreed that the HSR Act should be 
read this way, stating that this position is contrary to the statutory 
text and fundamentally misconceives the amount of information necessary 
to make even a tentative determination whether a transaction may 
violate the antitrust laws.\184\ The Commission explained that the HSR 
Filing should contain information necessary and appropriate for an 
effective premerger notification program.\185\ The Commission reasoned 
that requiring perfunctory information in the HSR Filing would not 
fulfill the statutory provision and would result in more Second 
Requests that would extend the average waiting period under the HSR 
Act.\186\ Then and now, to fulfill the purpose of premerger review, 
there must be sufficient information provided in an HSR Filing to 
determine whether to issue Second Requests and what information those 
requests would seek. Consistent with Congress' expectations that HSR 
Filings would consist of data and documents reasonably available to 
filing companies, such as the information and documents they relied

[[Page 89239]]

on when contemplating the deal,\187\ the final rule seeks information 
that is readily available to the parties to fill information gaps that 
the Agencies have identified in the current HSR Form.
---------------------------------------------------------------------------

    \184\ 43 FR 33450, 33519-20 (July 31, 1978).
    \185\ Id. The Commission also rejected suggestions that it make 
certain burdensome requests optional for the parties, finding that 
such an approach would undermine the usefulness of the second 
request mechanism, hinder the Agencies in their efforts to carry out 
their congressionally mandated review, and be administratively 
unworkable. Id. at 33520.
    \186\ Id. at 33520. See also 42 FR 39040, 39043 (Aug. 1, 1977).
    \187\ 122 Cong. Rec. 30877 (1976) (remarks of Rep. Rodino).
---------------------------------------------------------------------------

    As discussed above, information reported in the current HSR Form is 
not sufficient due to differences in corporate structure and investment 
activity as well as profound changes in economic activity. In this 
rulemaking, the Commission is responding to these changes and how they 
have affected the Agencies' ability to conduct premerger screening in 
light of today's market realities. The Agencies need information to be 
able to spot all types of potential harm and the Commission has 
determined that the information requirements contained in the final 
rule are necessary and appropriate to conduct effective and efficient 
premerger screening and avoid even greater costs associated with 
collecting additional information through issuing more Second Requests. 
Without sufficient information available in the HSR Filing on the first 
day of the statutory review period, the Agencies cannot fulfill their 
mandate to identify and prevent illegal mergers or avoid potentially 
costly and protracted investigations.
    Several commenters suggested that because Congress recently 
authorized the collection of additional information relating to foreign 
subsidies, that is the only information the Commission has the 
authority to collect.\188\ The Commission disagrees that in passing 
this new requirement, Congress intended to repeal or in any way limit 
the Commission's statutory authority under 15 U.S.C. 18a(d) to impose 
other reporting requirements that are necessary and appropriate to 
determine whether the transaction may violate the antitrust laws. 
Indeed, the Commission is relying on its section 18a(d) authority to 
require the submission of information related to foreign subsidies in 
the final rule. The other changes contained in the final rule are a 
reasonable exercise of the Commission's rulemaking authority to require 
information that is necessary and appropriate for detecting problematic 
mergers during the initial waiting period of the HSR Act. The final 
rule updates the premerger notification regime based on the Agencies' 
experience in reviewing thousands of HSR Filings each year and in light 
of observable changes in market dynamics, contemporary investor 
behavior, investment arrangements, and acquisition strategies, as 
discussed in section II.B. above.
---------------------------------------------------------------------------

    \188\ See Consolidated Appropriations Act, 2023, Public Law 117-
328, 136 Stat. 4459 (2022).
---------------------------------------------------------------------------

    Some commenters suggested that the Commission lacks authority to 
make changes to the notification requirements because doing so 
increases the likelihood that the Agencies will subject more 
transactions to close scrutiny or seek to block them as illegal, and 
that this increased scrutiny will disincentivize dealmaking. This line 
of argument is contrary to the purpose of the HSR Act and the final 
rule.
    Congress passed the HSR Act to create an effective mechanism to 
detect, deter, and prevent large transactions that violate the 
antitrust laws. The inadequacy of current notification requirements may 
encourage parties to enter into unlawful transactions due to the low 
risk of premerger detection.\189\ One commenter supporting the need for 
change noted that the gaps created by the existing HSR Form and 
Instructions make it possible for anticompetitive mergers to go through 
unnoticed. Parties considering a merger are aware of this, so under the 
current system, parties are likely more willing to consider or attempt 
a merger that would be more obviously unlawful under a more rigorous 
disclosure regime. To the extent that one effect of the final rule 
would deter unlawful dealmaking, that effect is clearly consistent with 
Congress' intent that mandatory premerger review more effectively 
prevent illegal mergers.\190\ Filing parties cannot claim an interest 
in inadequate detection or in avoiding an in-depth antitrust 
investigation that may lead to a court injunction blocking the merger 
because these concerns directly contravene U.S. law. Based on statutory 
text and clear Congressional intent, the Commission must ensure that 
HSR notification requirements enable the Agencies to detect the 
potential for harm before the harm occurs; that is the purpose of 
premerger review. When the Agencies' ability to detect the violation is 
compromised by inadequate disclosures in the HSR Filing, the Commission 
must use the authority expressly conferred by Congress to adjust the 
Agencies' detection tools to fulfill the purpose of premerger review.
---------------------------------------------------------------------------

    \189\ See ``Stealth Consolidation,'' supra note 18.
    \190\ See S. Rep. No. 94-803, at 65 n.28 (the purposes 
underlying enactment of section 7 of the Clayton Act could have been 
accomplished if premerger notification had been enacted when 
originally proposed, and that if it had the economy would be less 
concentrated.).
---------------------------------------------------------------------------

    Other commentors suggested that the Agencies' infrequent challenges 
to consummated mergers, including those reported but not challenged 
prior to consummation, are proof that the Agencies are not ``missing 
deals'' that cause harm. But given the significant effort required to 
unwind completed mergers, the frequent lack of information about the 
effects of consummated mergers, and the limited resources the Agencies 
have available to devote to all types of merger enforcement, in 
addition to their other statutory responsibilities,\191\ the relatively 
low number of challenges to consummated mergers does not indicate that 
the current information requirements for premerger screening are 
sufficient to detect illegal deals. The Agencies must make difficult 
decisions about how to use their resources to address consummated 
mergers that may be causing real and ongoing harm while also working to 
fulfill their obligations to conduct a robust premerger screening of 
reported transactions. The critical task of screening reported 
transactions for antitrust risks can be especially challenging during 
times of peak M&A activity. See Figure 1.
---------------------------------------------------------------------------

    \191\ In addition to merger enforcement, both Agencies 
investigate and challenge anticompetitive conduct that may violate 
the antitrust laws. The Antitrust Division has sole responsibility 
to prosecute criminal violations of the antitrust laws, while the 
Commission has authority under section 5 of the FTC Act (15 U.S.C. 
45) to challenge unfair methods of competition beyond the scope of 
the Sherman or Clayton Acts. In addition, the Commission's budget 
supports its consumer protection work, which is devoted to stopping 
unfair or deceptive acts or practices that violate the FTC Act as 
well as enforcement of more than 80 other statutes. See generally 
Fed. Trade Comm'n, ``Legal Library: Statutes,'' https://www.ftc.gov/legal-library/browse/statutes.
---------------------------------------------------------------------------

    According to one commenter whose members have been directly 
affected by consolidation in the retail food sector, third parties 
sometimes alert the Agencies to competitive issues, but that may not 
occur until after the waiting period has expired or the deal has been 
consummated. This commenter noted that these untimely scenarios are 
exactly the opposite of the HSR Act's legislative intent and force the 
Agencies and courts into a precarious position to preserve competition 
or obtain effective remedies. Congress certainly did not provide 
immunity for reported mergers that are not challenged prior to 
consummation (as most jurisdictions do) \192\ so it is not a binary 
choice for the

[[Page 89240]]

Agencies to ``act or stand down'' on a reported merger. But once a 
merger is consummated (whether reported in advance or not), the 
Agencies face decisions about the significant costs of mounting a 
merger challenge to unwind the deal as well as the opportunity costs of 
doing so. Given the limited resources the Agencies have to devote to 
merger enforcement, the Agencies will often focus on enforcement of 
reported mergers due to these opportunity costs.\193\
---------------------------------------------------------------------------

    \192\ See The Merger Control Review Preface, x (Ilene Knable 
Gotts, ed., 14th ed., 2023) (in most jurisdictions, a transaction 
that is not notified is not subject to review or challenge by the 
competition authority), https://www.wlrk.com/webdocs/wlrknew/AttorneyPubs/WLRK.28469.24.pdf. Canada recently extended its 
lookback period from one year to three years for non-notified 
transactions but left unchanged the one-year limitation to challenge 
notified transactions. See Competition Bureau Canada, ``Guide to the 
June 2024 amendments to the Competition Act'' (June 25, 2024), 
https://competition-bureau.canada.ca/how-we-foster-competition/education-and-outreach/guide-june-2024-amendments-competition-act.
    \193\ See Zarek Brot-Goldberg, et al., ``Is There Too Little 
Antitrust Enforcement in the US Hospital Sector?'' (U. Chi., Becker 
Friedman Inst. for Econ. Working Paper No. 2024-59, May 2024) 
(forthcoming, Am. Econ. Rev.: Insights), https://bfi.uchicago.edu/working-paper/is-there-too-little-antitrust-enforcement-in-the-us-hospital-sector/ (FTC is intervening in the most anticompetitive 
transactions but not preventing a significant number of hospital 
mergers that nonetheless cause harm).
---------------------------------------------------------------------------

    The legislative record leading to the HSR Act is replete with 
references to the costs, delays, and ineffectiveness of relying on 
post-consummation enforcement to interdict mergers that may cause harm 
in their incipiency.\194\ In the Agencies' experience, unwinding 
illegal consummated mergers continues to be a costly exercise, and 
there remain significant delays in obtaining effective relief through 
unwinding. A merged firm has strong incentives to delay the outcome, 
and Commission orders requiring divestiture of acquired assets are 
often appealed, further deferring relief.\195\ Moreover, smaller or 
seemingly inconsequential acquisitions can later be revealed as 
potentially illegal exclusionary conduct when they are used by firms 
with dominant market positions to maintain or extend a monopoly in 
violation of section 2.\196\ There are enormous costs and delays 
associated with prosecuting section 2 cases involving the largest 
companies in the world to unwind harmful acquisitions.\197\
---------------------------------------------------------------------------

    \194\ See H.R. Rep. No. 94-1373, at 7-10 (1976).
    \195\ See, e.g., Illumina, Inc. v. FTC, 88 F.4th 1036 (5th Cir. 
2023); ProMedica Health Sys., Inc. v. FTC, 749 F.3d 559 (6th Cir. 
2014), cert. denied, 575 U.S. 996 (2015); Polypore Int'l, Inc. v. 
FTC, 686 F.3d 1208 (11th Cir. 2012).
    \196\ See supra note 107 (collecting cases).
    \197\ The Commission filed its monopolization complaint against 
Facebook (now Meta) on December 9, 2020, and was joined by a 
coalition of forty-six States, the District of Columbia and Guam. 
See Press Release, Fed. Trade Comm'n, ``FTC Sues Facebook for 
Illegal Monopolization'' (Dec. 9, 2020), https://www.ftc.gov/news-events/news/press-releases/2020/12/ftc-sues-facebook-illegal-monopolization. The FTC is seeking a permanent injunction that 
would, among other things, require the divestiture of previously 
acquired assets. As of September 27, 2024, the parties have 
concluded pretrial discovery; a trial date has not been set.
---------------------------------------------------------------------------

    In mandating government review of acquisitions prior to 
consummation, Congress intended for the Agencies to avoid these types 
of protracted antitrust cases when possible. Instead, Congress 
envisioned that merger enforcement would occur mostly through a system 
of premerger review, even at the cost of requiring premerger review for 
many mergers that may not ultimately warrant an in-depth investigation 
let alone a challenge in court.\198\ The Commission has determined that 
imposing some limited additional upfront costs on filers so that they 
submit sufficient information to allow the Agencies to conduct the 
mandatory initial antitrust review fulfills the Agencies' statutory 
responsibilities and should be weighed against the benefit of avoiding 
large expensive antitrust actions required to unwind illegal 
acquisitions that were not detected at the screening phase. 
Importantly, the final rule imposes fewer information requirements on 
transactions that are reportable but have low antitrust risk while 
seeking the most information from those transactions most likely to 
require in-depth review at the screening phase. Otherwise, the 
consequences of poor detection are improperly shifted to those harmed 
by illegal consummated mergers--which is plainly at odds with the 
purpose of the HSR Act.
---------------------------------------------------------------------------

    \198\ The Agencies can and do challenge reportable mergers after 
the expiration of the waiting period. See, e.g., Chi. Bridge & Iron 
Co. N.V. v. FTC, 534 F.3d 410 (5th Cir. 2008); United States. v. 
Parker Hannifin Corp., No. 17-cv-01354 (D. Del. Sept. 26, 2017) 
(complaint). See also Note by the United States to the OECD, 
Investigations of Consummated and Non-Notifiable Mergers (Feb. 25, 
2014) (DAF/COMP/WP3/WD(2014)23), https://one.oecd.org/document/DAF/COMP/WP3/WD(2014)23/En/pdf (discussing Agencies' challenges of 
consummated mergers); Menesh S. Patel, ``Merger Breakups,'' 2020 
Wisc. L. Rev. 975, 990 (2020) (observing that, since 2001, the 
Agencies have challenged at least four mergers that previously 
underwent HSR review). Because of the confidentiality protections 
afforded HSR filings, market participants are often not aware of the 
merger or the timing of the expiration of the statutory waiting 
periods. See Comment of Strategic Org. Ctr., Doc. No. FTC-2023-0040-
0708 at 3 (urging public notice of the date of HSR filings and the 
identity of the filers so that interested and affected parties can 
contact the Agencies during the initial review period). Many 
investigations of consummated mergers, including reported but not 
challenged transactions, are initiated after market participants 
reach out to the Agencies about the observed effects of the merger.
---------------------------------------------------------------------------

    The benefits of stopping an illegal merger before it happens can be 
significant, especially for those who would bear the consequences of 
harm induced by the merger. The chart below collects estimates of 
avoided harm due to likely price changes for affected products or 
services in cases litigated by the Agencies and accepted by Federal 
courts as a basis for enjoining illegal mergers in recent years.

[[Page 89241]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.035

    In addition to merger-induced price effects, which can vary widely 
due to differences in the economic size of the relevant markets 
affected by the merger, there can also be harm to customers from the 
loss of non-price competition. For example, the court found that 
JetBlue's anticipated reconfiguration of Spirit's aircraft would result 
in a decrease in the number of seats available on JetBlue flights of 
more than 6,100,000 per year.\199\ These types of effects reduce output 
and result in a welfare loss due to the exercise of market power. In a 
vertical merger context, the Fifth Circuit affirmed the Commission's 
findings that Illumina's acquisition of Grail lessened competition via 
a different mechanism: the potential foreclosure of a key input by the 
sole supplier would lead to chilled investment by firms reliant on 
those inputs for their own competitive success.\200\
---------------------------------------------------------------------------

    \199\ United States v. JetBlue Airways Corp., No. 1:23-cv-10511 
at 43 (D. Mass., Jan. 16, 2024) (Findings of Fact and Conclusions of 
Law).
    \200\ Illumina, Inc. v. FTC, 88 F.4th 1036, 1055 (5th Cir. 
2023).
---------------------------------------------------------------------------

    Moreover, merger retrospectives document merger-induced effects 
such as increased prices and decreased product quality or availability 
across a range of industries.\201\ Given the significant economic costs 
imposed on market participants harmed by an illegal consummated merger, 
the Agencies will continue to challenge consummated mergers when 
practical and as resources permit. But relying on post-consummation 
merger enforcement to correct for information deficiencies in the HSR 
Form is contrary to Congressional intent that premerger review be used 
to stop illegal mergers before they occur.
---------------------------------------------------------------------------

    \201\ See generally Vivek Bhattacharya et al., ``Merger Effects 
and Antitrust Enforcement: Evidence from US Consumer Packaged 
Goods'' (Nat'l Bureau of Econ. Rsch., Working Paper No. 31123, Apr. 
2023, rev. June 2024), https://www.nber.org/papers/w31123 (studying 
fifty mergers in the consumer-packaged goods industry and finding 
that, on average, these mergers raised prices by 1.5 percent and 
decreased quantities sold by 2.3 percent); Daniel Hosken et al., 
``Do Retail Mergers Affect Competition? Evidence from Grocery 
Retailing,'' 27 J. Econ. & Mgmt. Strategy 3 (2018) (finding that the 
majority of grocery mergers in highly concentrated markets resulted 
in price increases of more than 2 percent); John E. Kwoka, Jr., 
Mergers, Merger Control, and Remedies: A Retrospective Analysis of 
U.S. Policy 110-11 (2014) (providing a meta-analysis of 
retrospective literature, finding that more than 80 percent of 
mergers resulted in price increases and the mean price increase was 
5.88 percent across all studied transactions); Orley C. Ashenfelter 
et al., ``Did Robert Bork Understate the Competitive Impact of 
Mergers? Evidence from Consummated Mergers,'' 57 J. L. & Econ. S67 
(2014) (reviewing prior retrospectives and concluding that mergers 
in oligopolistic markets can result in economically meaningful price 
increases, as 36 of 49 studies surveyed found evidence of merger-
induced price increases); Leemore Dafny et al., ``Paying a Premium 
on Your Premium? Consolidation in the US Health Insurance 
Industry,'' 102 a.m. Econ. Rev. 1161 (2012) (examining healthcare 
mergers and finding the mean increase in local market HHI during the 
studied period raised premiums by roughly 7 percent); Orley 
Ashenfelter & Daniel Hosken, ``The Effect of Mergers on Consumer 
Prices: Evidence from Five Mergers on the Enforcement Margin,'' 53 
J. L. & Econ. 417 (2010) (examining a set of mergers that were 
unchallenged by the government and finding that the majority 
resulted in a significant increase in consumer prices in the short 
run); Thomas Koch & Shawn W. Ulrick, ``Price Effects of a Merger: 
Evidence from a Physicians' Market,'' 59 Econ. Inquiry 790 (2021) 
(concluding that a merger of orthopedic physicians' practices 
increased prices to some payors by ten to twenty percent while 
prices in nearby areas not affected by the merger remained 
unchanged); Zack Cooper et al., ``The Price Ain't Right? Hospital 
Prices and Health Spending on the Privately Insured,'' 134 Q. J. 
Econ. 51 (2019) (examining 366 hospital mergers and finding that 
prices increased by over six percent when merging hospitals were 
geographically close); Prager & Schmitt, supra note 83 (examining 
hospital mergers and finding reduced wage growth when merger 
significantly increases concentration).
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1. Congress Determined Which Acquisitions Must Bear the Costs 
Associated With Premerger Review
    Congress determined that the burden of premerger review should 
apply, regardless of antitrust risk, to a small subset of mergers where 
that burden would not be so great in comparison to the size of the deal 
and the size of the parties involved. Because the final rule does not 
require reporting for any additional transactions, it maintains the 
balance struck by Congress that only some mergers be subject to 
mandatory premerger review.
    Congress incorporated several features in the HSR Act to lessen the 
burden on dealmaking, especially for small business and small 
transactions.\202\ For instance, the HSR Act as first passed in 1976 
contained three specific requirements that determined reportability for 
a planned transaction: the acquiring person is engaged in interstate 
commerce (the commerce test); one of the parties was worth at least $10 
million and the other worth at

[[Page 89242]]

least $100 million (the size-of-person test); and as a result of the 
transaction, the acquiring person would hold at least 15 percent or $15 
million of the acquired entity (the size-of-transaction test). These 
thresholds were adopted in response to concerns that requiring 
reporting for all mergers would unduly affect capital markets.\203\ The 
size-of-person test was seen as especially important to limit the 
impact of premerger reporting on small businesses:
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    \202\ The Senate version of the premerger notification bill 
would have given the Commission authority to require reporting from 
additional ``small'' mergers, but the House bill and the final law 
did not include this provision. 122 Cong. Rec. 30877 (1976).
    \203\ See S. Rep. No. 94-803, at 65-66 (1976).

    Approximately the largest 700 U.S. companies meet the $100 
million jurisdictional requirement. Although $100 million companies 
account for roughly 40 percent of mergers and acquisitions, Title 
V's dual requirement of (i) a $100 million acquiring company, and 
(ii) a $10 million acquired company would have required such 30-day 
notification, over the past 5 years, in less than 100 acquisitions 
per annum. With this limitation, the Committee sought to include 
within the ambit of the premerger notification provision primarily 
those mergers or acquisitions that were most likely to have a 
substantial effect on competition. That is not to say that smaller 
mergers may not run afoul of the Clayton Act. To include the bulk of 
the approximately 3,000 mergers that would have occurred annually in 
the course of the past several years would, however, in the 
Committee's judgement, impose an undue and unnecessary burden on 
business.\204\
---------------------------------------------------------------------------

    \204\ Id. at 66.

    Together, these criteria were designed to focus mandatory premerger 
review on the largest transactions and limit the number of transactions 
that would have to be reported to the Agencies. See Table 1 (on average 
16.5% of mergers reported during FY 2018 to FY 2022).
    During the 1990s, several years of intense M&A activity drove 
merger filings ever higher, so that by FY 2000, the Agencies reviewed 
over 4,900 reported transactions.\205\ This dramatic increase in HSR 
filings led to calls for Congress to amend the HSR Act to reduce its 
broad sweep, and to especially address its impact on small businesses. 
In response, Congress made several changes in 2000 to reduce the number 
of transactions subject to reporting: (1) increased the size-of-
transaction threshold from $15 million to $50 million and required the 
Commission, starting in 2005, to adjust the thresholds in the HSR Act 
annually based on changes in the gross national product; (2) eliminated 
the 15 percent size-of-transaction threshold, making $50 million (as 
adjusted) an absolute floor; and (3) eliminated the size-of-person test 
for larger transactions, making transactions valued in excess of $200 
million (as adjusted) reportable without regard to the size of the 
parties.\206\ Today, as a result of these adjustments and with annual 
indexing, HSR filings are required for only a small fraction of overall 
merger activity in the United States. See Table 1.
---------------------------------------------------------------------------

    \205\ Fed. Trade Comm'n & U.S. Dep't of Justice, Annual Report 
to Congress Pursuant to Subsection (j) of Section 7A of the Clayton 
Act, Hart-Scott-Rodino Antitrust Improvements Act of 1976 1 (Twenty-
Third Report) (FY 2000).
    \206\ Public Law 106-553, 114 Stat. 2762 (2000) (codified at 15 
U.S.C. 18a(a)). See also 146 Cong. Rec. S11872 (daily ed. Dec. 15, 
2000) (statement of Sen. Kohl) (exempting small transactions from 
premerger review will significantly lessen regulatory burdens and 
expenses imposed on small businesses). This legislation also 
provided the Agencies more time to review materials submitted in 
response to a Second Request, extending the second waiting period 
under the HSR Act from 20 to 30 days after substantial compliance. 
See 15 U.S.C. 18a(e)(1)(A). See Fed. Trade Comm'n & U.S. Dep't of 
Justice, Annual Report to Congress Pursuant to Subsection (j) of 
Section 7A of the Clayton Act, Hart-Scott-Rodino Antitrust 
Improvements Act of 1976 (Twenty-Fifth Report) appendix A (FY 2002) 
(from FY 2000 to 2002, reported transactions dropped from 4,926 to 
1,187).
---------------------------------------------------------------------------

    Many commenters pointed out that the Congress that enacted the HSR 
Act envisioned the Agencies reviewing only 150 of the largest 
mergers.\207\ In 1976 when the HSR Act was passed, 150 mergers 
represented approximately 12.8 percent of M&A deal volume, given that 
there were 1,171 completed acquisitions in 1976.\208\ Overall, the 
burden imposed on M&A activity by the HSR Act is not that different 
today than in 1976. See Table 1 (HSR reportable mergers on average 16.5 
percent of M&A from FY 2018 to 2022). At the same time, the size of the 
U.S. economy has grown exponentially: in 1976, the seasonally adjusted 
U.S. Gross Domestic Product was $1.934 trillion; today it is over $28 
trillion.\209\ From these figures, it appears that M&A activity, and 
the economy in general, has not been affected by the obligations 
imposed on those pursuing certain large acquisitions to submit to 
mandatory premerger review.
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    \207\ The prediction of 150 mergers turned out to be unrealistic 
from the start. In just the first three months of the premerger 
program, the Agencies received notifications for 292 transactions, 
nearly double the expected amount. See Fed. Trade Comm'n, Second 
Annual Report to Congress pursuant to Section 201 of Hart-Scott-
Rodino Antitrust Improvements Act of 1976 3 (FY 1978). In the first 
full year of the HSR program, the Agencies received filings for 814 
transactions. Fed. Trade Comm'n, Third Annual Report to Congress 
pursuant to Section 201 of Hart-Scott-Rodino Antitrust Improvements 
Act of 1976 3 n.4 (FY 1979). The Commission moved quickly to amend 
the HSR Rules to exempt additional types of transactions to further 
reduce the burden of the premerger reporting program. 44 FR 66781 
(Nov. 21, 1979). See also David A. Balto, ``Antitrust Enforcement in 
the Clinton Administration,'' 9 Cornell J. L. & Pub. Pol'y 61, 119-
20 (1999) (discussing two early HSR exemptions which resulted in 
approximately 20% and 10% reductions in filings).
    \208\ See Fed. Trade Comm'n, Statistical Report on Mergers and 
Acquisitions 25 Table 10 (1978), https://www.ftc.gov/system/files/documents/reports/statistical-report-mergers-acquisitions-1978/statistical_report_on_mergers_aug1980.pdf. This number does not 
include partial acquisitions which did not confer control on the 
buyer.
    \209\ U.S. Bureau Econ. Analysis, Gross Domestic Product 
(updated Aug. 29, 2024) (retrieved from FRED, Fed. Reserve Bank of 
St. Louis), https://fred.stlouisfed.org/series/GDP.
---------------------------------------------------------------------------

    Moreover, Congress enacted several explicit statutory exemptions to 
reduce the burden of reporting,\210\ and also authorized the Commission 
to issue rules exempting persons and acquisitions that it deemed at the 
time as posing little to no antitrust risk, which eliminated the burden 
of reporting for many additional transactions.\211\ The Commission has 
also faithfully implemented Congress' mandate to annually index the HSR 
thresholds, which keeps premerger review limited to those acquisitions 
Congress wants the Agencies to review prior to consummation.\212\
---------------------------------------------------------------------------

    \210\ See 15 U.S.C. 18a(c) and 16 CFR part 802.
    \211\ See 15 U.S.C. 18a(d)(2)(B) and 16 CFR part 802. Several 
commenters urge the Commission to engage in rulemaking to exempt 
additional transactions from HSR filing obligations. These 
suggestions are outside the scope of this rulemaking. Due to 
deficiencies in the information currently collected in the Form, as 
explained elsewhere in this document, the Commission is not able to 
identify any additional types of transactions that could be exempted 
at this time. Until the Commission has sufficient information to 
provide a reasonable basis to exempt additional categories of 
transactions from HSR reporting requirements, the Commission is not 
in a position to reduce the total number of reported transactions. 
As discussed in section VI.A.1.f., the Commission is excusing 
certain types of transactions (select 801.30 transactions) from many 
requirements of the final rule and has modified the proposed rule in 
many places to apply only where certain conditions have been met.
    \212\ To the extent that commenters suggest that the NPRM 
expands reporting requirements for additional transactions, they are 
wrong. Nor would changing the information requirements of the HSR 
Filing affect the obligations of public companies to comply with 
disclosure requirements of the Securities and Exchange Commission 
(``SEC''). See Comment of Am. Sec. Ass'n, Doc. No. FTC-2023-0040-
0682 at 2.
---------------------------------------------------------------------------

    Some commenters noted that the current process is inefficient 
because of the over-inclusiveness of HSR reporting standards. They 
pointed out that of all reported transactions, the Agencies issue 
Second Requests in only 2 to 3 percent per year, suggesting that this 
is a reason for the Commission to keep the status quo and not adopt any 
adjustments to current information requirements.
    The Commission believes that the low percentage of transactions 
that have received Second Requests is not a reliable indicator that the 
Agencies have achieved the goals of mandatory premerger review or that 
the current

[[Page 89243]]

process is efficient in identifying problematic transactions and 
effective in deterring illegal mergers. As discussed above in section 
II.B., the Commission has identified significant deficiencies in the 
information provided in the HSR Filing that prevent the Agencies from 
assessing the potential harm presented by reportable transactions. In 
light of these deficiencies, the number of mergers investigated through 
the issuance of Second Requests is not instructive on whether the 
Agencies are fulfilling their duty to the American public to screen 
large mergers in advance of consummation. The Agencies must continue to 
review reportable transactions to determine which ones warrant the 
issuance of Second Requests regardless of, and despite, fluctuations in 
the overall number of filings.
2. Delays Associated With Premerger Review Depend on Antitrust Risk
    Congress also determined how much delay would be associated with 
those transactions subject to mandatory premerger review, and this 
rulemaking attempts to adjust the information required for premerger 
screening in light of legislative intent to avoid delays for any deal 
other than those with the highest antitrust risk. The main statutory 
feature of the HSR Act is the suspensory waiting period, which requires 
that the parties not consummate the proposed acquisition until the 
prescribed waiting period has expired. For all transactions, the 
statute limits that delay by keeping the waiting period short: 30 days 
for most transactions and 15 days for those most at risk of not 
happening at all due to delay, such as cash tenders and acquisitions of 
assets out of bankruptcy. Congress determined to hold up cash tender 
offers and the purchase of assets in bankruptcy only briefly due to 
heightened concerns over timing. For cash tender offers, which do not 
require consent of the target and can sometimes be actively opposed by 
the target, Congress shortened the suspensory waiting period to 15 days 
to balance premerger notice with the intent of the securities laws, 
specifically the Williams Act, so as not to ``tip the balance'' in 
favor of the incumbent management of the target firm.\213\ Similarly, 
for acquisitions of assets subject to bankruptcy proceedings, Congress 
understood that time is of the essence to prevent liquidation of 
productive assets and applied the shortened 15-day initial waiting 
period to these transactions as well. Congress thus recognized that a 
particular subset of transactions require especially speedy review.
---------------------------------------------------------------------------

    \213\ 122 Cong. Rec. 30877 (1976) (listing a number of defensive 
actions the target could take to undermine the offer if it had 
enough time, effectively denying shareholders of the target firm the 
choice to accept the offer).
---------------------------------------------------------------------------

    At the same time, Congress provided that the Agencies can extend 
the waiting period for any type of reportable acquisition by requiring 
the submission of additional information or documentary material in 
response to a Second Request. The decision to issue Second Requests has 
significant consequences for the transaction because if that happens, 
the parties cannot consummate the transaction until 30 days after each 
party has substantially complied with the Second Requests.\214\
---------------------------------------------------------------------------

    \214\ The Agency that issued the Second Requests can grant early 
termination of the waiting period, permitting the parties to 
consummate their proposed acquisition, or a Federal court may extend 
the waiting period if the Agency applies for preliminary relief and 
the court finds that the party has not substantially complied with 
the information requirements of the HSR Act. 15 U.S.C. 18a(g)(2).
---------------------------------------------------------------------------

    The Commission disagrees that the final rule entails any delay 
beyond that which was expressly contemplated in the HSR Act. First, the 
final rule does not extend the statutory waiting periods, which are 
established by Congress.\215\ Second, Congress made clear that the 
initial waiting period will commence once the Agencies have received a 
completed Form, or a partially completed Form with a specific statement 
of the reasons for partial non-compliance.\216\ Third, Congress 
directed the Commission to devise and maintain a mandatory notification 
program that would give the Agencies the information that is necessary 
and appropriate to conduct an initial antitrust assessment during the 
initial 15- or 30-day waiting period.
---------------------------------------------------------------------------

    \215\ As discussed in section V.D. below, if the parties have 
not executed a definitive agreement, the final rule requires that 
they submit a document with the HSR Filing that contains sufficient 
details of the transaction they intend to consummate. This may be 
the executed preliminary agreement, or the agreement may be 
supplemented by one additional dated document, such as a term sheet 
or the latest draft agreement. While this new requirement may cause 
some filers to delay notification compared to the current rules, the 
Commission believes this change is necessary and the delay is 
appropriate to avoid wasting the Agencies' time and attention on 
deals that may never occur or are too hypothetical or lacking 
material details to assess.
    \216\ 122 Cong. Rec. 30876 (1976). The Commission does not 
dispute that the HSR Act allows for substantial compliance with its 
requirements. In response to such arguments, the sponsors dropped 
the ``automatic stay'' provisions and adopted a requirement that 
filers ``substantially comply'' with the Second Request so that 
arguments that the parties had not fully complied could not hold up 
the deal. Under 15 U.S.C. 18a(g)(2), a district court may extend the 
statutory waiting periods of the HSR Act if filers fail to 
substantially comply with the requirements of the HSR Act.
---------------------------------------------------------------------------

    That said, the Commission does not question the need, when 
appropriate, to minimize delay for notified transactions, especially 
for non-problematic deals. In fact, the Commission believes that the 
final rule may shorten the overall waiting period for a significant 
number of transactions and perhaps even reduce the overall number of 
delayed transactions. As discussed above, Congress determined that 30 
days was the appropriate delay for the majority of reportable 
transactions (other than cash tenders and acquisitions in bankruptcy), 
regardless of their size or economic impact. It is a feature of the HSR 
Act that an open market stock purchase by an individual can be subject 
to the same 30-day initial waiting period as a multi-billion-dollar 
merger of competitors operating in multiple local markets throughout 
the country. Yet these two transactions present very different 
antitrust risks.
    In order to quickly dispense with those transactions that present 
low risk of a law violation so as to focus on those with moderate to 
high risk, the Agencies need more information in the HSR Filing. Any 
time and effort the Agencies must spend collecting necessary 
information that is not contained in the HSR Filing is time and effort 
taken away from quickly determining which deals do not warrant an in-
depth investigation. Especially as it relates to cash tender 
acquisitions--which are among some of the largest deals reviewed by the 
Agencies over the years and yet are subject to a 15-day initial waiting 
period--the short time given for the initial antitrust assessment 
severely strains the Agencies' limited resources, especially during 
periods of intense M&A activity. See Figure 1. But the statutory time 
limit is absolute and if the Agencies do not issue Second Requests 
before the end of the initial waiting period, the parties are free to 
consummate the transaction.\217\ This is as Congress intended, but 
Congress also gave the Commission the authority to determine the 
necessary and appropriate information that must be included in HSR 
Filings to make the

[[Page 89244]]

statutory scheme work--not for the purpose of minimizing delay but for 
the purpose of enforcing the antitrust laws for the benefit of the 
public. That is the problem this rulemaking addresses: by adjusting the 
amount of information available to the Agencies on the first day of the 
waiting period, the final rule makes possible quick but thorough 
premerger review for all reportable transactions.
---------------------------------------------------------------------------

    \217\ As part of the 2000 amendments to the HSR Act, Congress 
made plain that if the end of the waiting period falls on a 
Saturday, Sunday, or legal public holiday, then the waiting period 
is extended to the next day that is not one of those days. 15 U.S.C. 
18a(k). This change was necessary to eliminate gamesmanship by 
parties who timed their compliance so that the waiting period ended 
on a weekend or holiday, effectively shortening the waiting period 
to the previous business day. 146 Cong. Rec. S11872 (daily ed. Dec. 
15, 2000) (statement of Sen. Kohl).
---------------------------------------------------------------------------

    For many years, and mainly due to the lack of sufficient 
information contained in HSR Filings, many filers and practitioners 
have become accustomed to artificially lengthened waiting periods. In 
2013, the Commission issued a rule that formalized a previously 
informal process that offers filers the option to withdraw and refile 
their filings without paying an additional filing fee. The option to 
withdraw-and-refile was intended to benefit both the parties and the 
Agencies by providing an additional 15- or 30-day waiting period for 
the Agencies to review the transaction without issuing Second Requests 
while seeking additional relevant information on a voluntary basis from 
the merging parties or from third parties.\218\
---------------------------------------------------------------------------

    \218\ 78 FR 10574, 10576 (Feb. 14, 2013).
---------------------------------------------------------------------------

    As shown in Table 3 below, the option to withdraw-and-refile has 
been used with some frequency by filers to give the Agencies more time 
to conduct an initial premerger assessment. Based on the Agencies' 
review of their HSR-related investigations during the five-year period 
of FY 2018 to 2022, parties withdrew their HSR filing and refiled in a 
total of 546 transactions. In the majority of these extended 
investigations, the Agencies determined not to issue a Second Request: 
nearly two-thirds of the time, opting to withdraw and refile resulted 
in the transaction closing at the end of the initial waiting period, 
thereby avoiding the cost and burden of a Second Request investigation. 
That is, once the filing parties submitted information beyond what was 
submitted with the HSR Form, the investigating Agency was able to 
determine that the transaction did not warrant Second Requests.
[GRAPHIC] [TIFF OMITTED] TR12NO24.036

    While the parties can rely on the option to withdraw and refile as 
an ad hoc tactic to avoid the issuance of Second Requests, the 
Agencies' experience illustrates in a very tangible way the 
inefficiencies associated with the current HSR Form. Over the five 
years sampled, an average of 73 transactions each year (546 in total) 
were delayed by an additional 30 days and filers were burdened by 
having to submit additional materials on a voluntary basis even though 
the investigation did not lead to the issuance of Second Requests. 
These delays impose costs on the parties and the Agencies, as well as 
third parties contacted during the extended initial review period.
    Moreover, getting more time to review the transaction does not 
address the information deficiencies outlined above and addressed by 
the final rule. While serving as an existing work-around to give the 
Agencies more time to collect additional information not contained in 
the HSR Filing, the option to withdraw-and-refile is a poor substitute 
for having the necessary information submitted with the HSR Filing for 
several reasons. First, the current information requirements leave 
important gaps, as detailed above in section II.B., leading staff to 
flag filings for no-action when in fact they may warrant a closer 
review.\219\ In practical terms, the HSR Filing must contain sufficient 
information from the filers to allow the Agencies to spot transactions 
that may warrant follow up. Merely adding time on the clock does not 
fill the information gaps identified above.
---------------------------------------------------------------------------

    \219\ See supra note 24 (citing research finding that 
consummated hospital mergers that received early termination 
resulted in the largest average percentage price increase).
---------------------------------------------------------------------------

    Second, withdraw-and-refile is optional for filers and thus is not 
a tool the Agencies can rely on to collect more information when 
needed. While parties may decide to delay their transaction to lower 
the chances of receiving a Second Request, in many instances the 
parties do not withdraw and refile precisely because they fully expect 
to receive Second Requests. When the parties do withdraw and refile, 
the Agencies spend considerable time waiting for answers to key 
questions; in any event, having more time is not the same as having the 
information needed to conduct an initial antitrust assessment. The 
Agencies' experience is that these voluntary submissions are often late 
or incomplete. When the information arrives near the end of the 
extended waiting period, there is often not enough time to review and 
verify the information. As a result, investigations that are extended 
through a withdrawal and refile are costly in time and effort for both 
Agency staff and the parties: extra time does not always translate to 
collecting the right information to make the initial determination 
whether the transaction should be fully investigated through the 
issuance of Second Requests.
    Finally and most importantly, a filer's submission of any 
additional information beyond what is required for an HSR Filing is 
voluntary. Given that the Agencies have no ability to demand compliance 
with voluntary requests, there is an overwhelming incentive for filers 
to prioritize the collection and submission of information suggesting 
that there is no competitive problem, rather than supplying the 
necessary information in an objective and neutral manner. Thus, while 
the agency may receive additional relevant information on a voluntary 
basis, it remains extremely challenging for the Agencies to both review 
and verify this information in whatever short period of time is 
available to decide whether to issue Second Requests.
    Expending so many resources on withdraw-and-refile investigations 
is

[[Page 89245]]

inefficient both for the parties and the Agencies and is a source of 
undue delays for many deals every year, because having more time is not 
a substitute for having sufficient and reliable information provided on 
a mandatory basis on the first day of the waiting period. The 
Commission believes that requiring more information in the HSR Filing 
through a final rule that is focused on surfacing competition problem 
areas will reduce the need for extended withdraw-and-refile 
investigations for a significant number of transactions that do not 
require Second Requests.
    Expanding the information that filers are required to provide 
upfront has certain benefits for filers and gives full effect to the 
purpose of a very short initial waiting period: because the information 
will be available to the Agencies on the first day of the initial 
waiting period, this will reduce delays for deals that do not receive 
Second Requests but nonetheless are delayed because staff must collect 
information from third parties or public sources, including when the 
parties withdraw and refile their HSR Filing. In addition, having this 
information upfront may allow Agency staff to narrow the areas of focus 
to only those business lines that require further investigation.\220\ 
Based on the Commission's experience, the additional information will 
allow the Agencies to significantly reduce burdens on filing parties in 
many circumstances.
---------------------------------------------------------------------------

    \220\ As discussed elsewhere, the Commission did not consider 
any ``burden'' associated with better detection of illegal mergers. 
Identifying additional transactions for investigation and possible 
challenge is a benefit of effective and efficient premerger review.
---------------------------------------------------------------------------

    Moreover, the additional information required by the final rule 
addresses the fundamental information asymmetry that currently exists 
between what the parties know about their business and what information 
they are required to reveal to the Agencies in the HSR Filing. Shifting 
the burden of information collection from the Agencies to the filing 
parties minimizes the burden on Agency staff to collect basic business 
information about the filers from other sources, such as their 
customers or other market participants, or from public sources, which 
may not surface key confidential business information known only to the 
parties. It also minimizes the burden on those third parties. This 
basic business information is relevant to the Agencies' antitrust 
assessment and often comes in late in the initial waiting period close 
to when the Agencies need to determine whether to issue Second 
Requests.
    Moreover, certain information is most readily and reliably 
available from the parties to the transaction. Although Agency staff 
collect relevant information from other sources including third parties 
during the initial waiting period, the benefit of getting this 
information from the filing parties is that it is likely more accurate 
and up-to-date and therefore more reliable for the purpose of quickly 
conducting a premerger assessment of antitrust risk. Obtaining basic 
business information about the operations of the filing parties 
secondhand from third parties and public sources is no substitute for 
getting that information directly from the parties themselves. The 
parties will have the most reliable and relevant information necessary 
to conduct a preliminary assessment of the transaction during the 
initial waiting period.
    Having reliable and accurate information directly from the entity 
most likely to have it reduces overall information-collection costs and 
delays. That is just good government, according to some members of 
Congress: ``Requiring transacting parties to provide regulators with 
the information necessary to examine a proposed merger is a commonsense 
way to save taxpayer dollars and enable antitrust enforcers to fulfill 
their congressional mandate and protect consumers, the economy, and 
national security.'' \221\
---------------------------------------------------------------------------

    \221\ Comment of Sen. Elizabeth Warren et al., Doc. No. FTC-
2023-0040-0711 at 5.
---------------------------------------------------------------------------

    To further reduce delays for transactions that pose little or no 
antitrust risk based on information contained in the HSR Filing, the 
statute also provides the Agencies with the discretion to grant an 
early termination of the initial waiting period, reducing the statutory 
15- or 30-day delay to something less.\222\ For many years, the 
Agencies routinely granted early termination to those filers that 
requested it.\223\ Contrary to the assertions of some commenters, the 
Commission reviews the information provided in every filing (typically 
two filings per transaction) \224\ to ensure compliance with the 
requirements of the HSR Act and to conduct a preliminary assessment of 
antitrust risk. The decision to grant discretionary termination of the 
waiting period prior to the statutory deadline is the result of staff 
review of the information contained in the HSR Filing, a determination 
that takes time, knowledge of the HSR Rules, and often additional 
research from public sources to ensure that there is little to no risk 
that the transaction requires additional investigation prior to 
consummation. There is also the additional time spent coordinating both 
Agencies' conclusions as well as processing the granting of early 
termination through publication in the Federal Register.\225\
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    \222\ 15 U.S.C. 18a(b)(2).
    \223\ Not all parties request early termination; whether to 
request early termination is solely at the discretion of the filing 
parties. Because the Agencies are required to make public grants of 
early termination through publication in the Federal Register, some 
filers may prefer not to have their acquisitions made public in this 
way.
    \224\ As reflected in appendix A of the Annual HSR Reports, the 
Agencies typically receive two filings for each transaction, one 
from the acquiring person and one from the acquired person. In FY 
2022, the Agencies reviewed 6,288 filings for 3,152 reported 
transactions. Fed. Trade Comm'n & U.S. Dep't of Justice, Hart-Scott-
Rodino Report, Fiscal Year 2022 appendix A (FY 2022).
    \225\ Commission staff take seriously the statutory obligation 
not to disclose information about an HSR Filing. Because the 
granting of early termination requires public notice in the Federal 
Register and is often the first indication that a proposed 
acquisition is in the works, staff must take great care to avoid 
mistakes when processing these requests.
---------------------------------------------------------------------------

    Prioritizing staff resources to reduce delays through early 
termination over the identification of problematic deals became 
impractical during the latest surge in HSR-reportable transactions, 
beginning in the fall of 2020 when the Agencies were faced with an 
unprecedented increase in merger filings.\226\ As reflected in Figure 1 
above, the number of HSR-reportable transactions spiked in FY 2021, 
resulting in more than twice the number of filings as compared to the 
prior year. Given the time and effort required to collect additional 
information during the initial waiting period--information that is not 
contained in the current Form but that bears directly on whether the 
Agencies should conduct a more in-depth investigation or grant early 
termination--the Agencies temporarily suspended the granting of early 
termination, first briefly in order to adjust to the challenges of 
processing premerger filings during the COVID-19 pandemic, and then 
again due to a surge in merger filings.\227\
---------------------------------------------------------------------------

    \226\ Fed. Trade Comm'n & U.S. Dep't of Justice, Hart-Scott-
Rodino Annual Report, Fiscal Year 2021 appendix B (FY 2021) 
(reporting monthly HSR filings for FY 2012 to FY 2021). See 
Statement of Chair Lina M. Khan Joined by Commissioner Rebecca Kelly 
Slaughter Regarding the FY 2020, Hart-Scott-Rodino Annual Report for 
Transmittal to Congress (Nov. 8, 2021) (``FY 2020 HSR Statement''), 
https://www.ftc.gov/system/files/documents/public_statements/1598131/statement_of_chair_lina_m_khan_joined_by_rks_regarding_fy_2020_hsr_rep_p110014_-_20211101_final_0.pdf.
    \227\ See Press Release, Fed. Trade Comm'n, ``FTC, DOJ 
Temporarily Suspend Discretionary Practice of Early Termination'' 
(Feb. 4, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/02/ftc-doj-temporarily-suspend-discretionary-practice-early-termination.
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    As an additional measure, the Commission determined that it would

[[Page 89246]]

provide notice to filers whose deals could not be adequately screened 
during the initial waiting period, warning them that although the 
waiting period had expired, the transaction remains subject to 
antitrust challenge under section 7.\228\ In the Commission's view, 
these pre-consummation warning letters are consistent with the 
legislative intent that lack of agency action prior to the expiration 
of the initial 15- or 30-day waiting period does not bar the Agencies 
(or other enforcers of the Clayton Act such as States or private 
parties) from later challenging the notified transaction. That is, 
premerger review provides the Agencies with the opportunity to 
investigate and challenge suspect transactions as violative of section 
7; it does not require nor allow the Agencies to determine that the 
merger does not or would never violate section 7.
---------------------------------------------------------------------------

    \228\ See FY 2020 HSR Statement, supra note 226.
---------------------------------------------------------------------------

    These recent adjustments to the Agencies' premerger review process 
reflect the burdens on Agency staff to triage filings during the very 
limited statutory period allowed for the initial review, which 
underscores the need for additional information at the outset of the 
initial waiting period. Even for those transactions in which the 
parties give the Agencies additional time by withdrawing and refiling 
their notification, relying on voluntary submissions has not been 
sufficient to overcome the lack of relevant information needed to 
conduct a robust screening for a significant number of deals.
    As several commentators noted, it is appropriate that the Agencies, 
who have the responsibility to identify which transactions should be 
challenged, address the significant information asymmetry between the 
parties and the Agencies by collecting more information from the 
parties upfront. The Commission agrees. The Commission has determined 
that the information deficiencies of the current reporting requirements 
are imposing undue delay on those transactions that the Agencies 
determine do not require intervention prior to consummation. The final 
rule addresses these inefficiencies by shifting more of the costs of 
information acquisition to the merging parties, both because they are 
the most reliable and ready sources for that information and to reduce 
the costs and delays associated with information acquisition from other 
sources, including third parties. The Commission believes that the 
final rule represents a reasonable adjustment to the information 
requirements for premerger notification that will reduce the number of 
transactions that are delayed beyond the initial review period.
3. The Purpose of the HSR Form Versus Second Requests
    Several commenters asserted that if the Agencies need more 
information, they should issue more Second Requests as an alternative 
to issuing this final rule, because that is the mechanism Congress gave 
the agencies to collect more information. Commenters also compared the 
requirements of the proposed rule to those contained in a Second 
Request, asserting that this rulemaking would inappropriately convert 
the HSR Filing into the equivalent of a Second Request in terms of 
scope and burden. As discussed below, the Commission disagrees with 
these commenters. Congress gave the Agencies a mandate to collect 
information that is necessary and appropriate in the HSR Filing to 
determine whether the reported transaction may violate the antitrust 
laws, which would justify the burden (on both the parties and the 
Agency) associated with issuing Second Requests. The purpose of 
requiring an HSR Filing is to give the Agencies time and information to 
conduct mandatory premerger screening. The purpose of issuing Second 
Requests is to conduct an in-depth review of other information and 
documentary materials that would allow the Agency to determine whether 
to challenge the transaction prior to consummation. The Commission has 
concluded that the final rule more appropriately reflects the purpose 
of the statutory scheme, which requires the information from all filers 
that is necessary for premerger screening but requires extensive 
information in response to a Second Request (which today, often 
represents millions of documents and terabytes of data) only from those 
filers whose transactions warrant an in-depth antitrust investigation. 
Thus the final rule is a reasonable exercise of the Commission's 
rulemaking authority to address the information deficiencies identified 
in section II.B. rather than rely on the extraordinarily costly 
alternative of using Second Requests to address those deficiencies.
    Commenters point to research that indicates there is a high 
probability that a transaction will be challenged if the Agencies issue 
Second Requests and suggest that this means that Second Requests are 
the most reliable tool for the Agencies to identify potentially harmful 
deals. But a close read of the study cited by commenters reveals that 
there are reasons to question the conclusions commenters have drawn 
from the low number or high through-rates of Second Requests. Billman 
and Salop examined the Agencies' enforcement record and calculated that 
for those transactions that receive a Second Request, 28 percent are 
cleared as proposed.\229\ Billman and Salop also report that the 
percentage of Second Request investigations has fallen over time, from 
about 3.49 percent in 2001 to 2.92 percent in 2020. These figures are 
consistent with information reported by the Agencies in annual HSR 
Reports.\230\ In their report, Billman and Salop contend that the 
reason behind the falling number of Second Requests is limited agency 
resources, not diminishing antitrust risk due to mergers:
---------------------------------------------------------------------------

    \229\ Logan Billman & Steven C. Salop, ``Merger Enforcement 
Statistics: 2001-2020,'' 85 Antitrust L. J. 1, 6 (2023).
    \230\ See appendix A of HSR Annual Reports, available at Fed. 
Trade Comm'n, Annual Reports to Congress Pursuant to the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, supra note 56.

    The agencies issue so few second requests because they have been 
budget constrained during this entire period. Under these 
circumstances, the agencies must engage in a type of triage process. 
Being limited in the number of second requests they can issue and 
cases that they can afford to litigate in court, the agencies target 
only the limited number of most problematical looking mergers for 
second requests. Not surprisingly, they generally discover evidence 
of potential anticompetitive effects. And not surprisingly, the 
firms generally consider the validity of the concerns, and most are 
then willing to accept a consent decree or abandon the transaction. 
Indeed about 26% (i.e., 254/969) of the firms that receive second 
requests choose to abandon the transaction even before a complaint 
is issued.\231\
---------------------------------------------------------------------------

    \231\ Billman & Salop, supra note 229, at 7.

    The Commission is well aware of the challenges of fulfilling its 
mission to prevent harmful mergers with existing resources. Fully 
resourcing the Commission's competition mission--especially merger 
review--has been an ongoing challenge. For instance, the Commission's 
headcount remains well below what is needed in light of the volume and 
complexity of proposed deals. Over the past ten years, the absolute 
number of HSR filings has nearly doubled, while the number of FTC 
employees assigned to competition work has remained nearly flat. As a 
result, the Commission has been forced to make difficult triage 
decisions and forgo potentially worthy investigations.\232\ Moreover, 
funding

[[Page 89247]]

levels for the antitrust agencies has not kept pace with the impressive 
growth of the U.S. economy: according to one report, from 2010 to 2019, 
U.S. GDP increased 37 percent but appropriations for the Antitrust 
Division and the FTC increased only 3 percent.\233\
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    \232\ See Statement of Chair Lina M. Khan, joined by 
Commissioner Rebecca Kelly Slaughter and Commissioner Alvaro M. 
Bedoya Regarding the FY 2022 HSR Annual Report to Congress (Dec. 21, 
2023). https://www.ftc.gov/system/files/ftc_gov/pdf/StatementofChairKhanJoinedbyComm%27rSlaughterandComm%27rBedoyareFY2022HSRAnnualReport.pdf.
    \233\ Michael Kades, ``The state of U.S. federal antitrust 
enforcement,'' Wash. Ctr. Equitable Growth 22-23 & Fig. 12 (Sept. 
17, 2019), https://equitablegrowth.org/research-paper/the-state-of-u-s-federal-antitrust-enforcement/?longform=true.
---------------------------------------------------------------------------

    Commenters who supported expanded information requirements 
suggested that limited resources justify this rulemaking, while those 
opposed claimed that resource limitations are the real source of 
underenforcement of the antitrust laws, a problem that will not be 
solved by adding burdensome new information requirements. Whatever the 
funding levels, the Agencies must deploy their resources to be good 
stewards of public funds and make resource allocation decisions to 
pursue their mutual mission to enforce the antitrust laws for the 
benefit of the public. The Commission has concluded that regardless of 
resource levels, it is critical to the task of detecting illegal 
mergers that the HSR Filing contain sufficient information for an 
effective premerger antitrust assessment of the transaction rather than 
relying on issuing more Second Requests to compensate for information 
deficiencies in the HSR Filing.
    The Commission has determined there are several reasons why issuing 
more Second Requests is not a reasonable alternative to address the 
information gaps discussed in section II.B. above. First, without the 
additional information required by the final rule, the Agencies would 
continue to struggle to uncover key facts necessary to determine 
whether to issue Second Requests for reported transactions that warrant 
in-depth review. The Agencies are currently making these assessments 
and relying on Second Requests when necessary, but they are doing so 
knowing that there are deficiencies in the information currently 
collected on the HSR Form, resulting in significant extra effort to 
generate sufficient information to make that determination prior to the 
expiration of the initial waiting period. In light of the deficiencies 
in the information currently collected that are discussed in section 
II.B., the Commission has determined that the status quo does not 
permit the Agencies to fulfill their statutory mandate to identify 
those transactions that warrant the issuance of Second Requests.
    Second, issuing more Second Requests is an extremely costly 
alternative to the final rule. The costs, burdens, and delay associated 
with Second Requests--for both the parties and the Agencies--are well 
documented. In 2000, Congress amended the HSR Act to provide for an 
optional internal review process for Second Request recipients to 
object to the breadth and cost of complying with those requests \234\ 
and requiring the Agencies to conduct ``an internal review and 
implement reforms of the merger review process in order to eliminate 
unnecessary burden, remove costly duplication, and eliminate undue 
delay, in order to achieve a more effective and more efficient merger 
review process.'' \235\ Yet despite Agency reforms to reduce burdens 
and costs, \236\ the AMC noted the widespread belief that complying 
with a Second Request imposed significant costs. The AMC cited a survey 
conducted by the Antitrust Section of the American Bar Association 
which reported that, on average, investigations during the second 
waiting period took seven months and resulted in median compliance 
costs of $3.3 million.\237\ A more recent survey conducted in 2014 by 
the Mergers & Acquisitions Committee of the ABA reported that average 
cost of compliance with a Second Request was $4.3 million among 
respondents.\238\ Another study shows that Second Requests impose 
significant delays and risks, even for deals that are ultimately not 
challenged by the Agencies, increasing the time required for premerger 
review from an average of 98 days (3.3 months) for acquisitions that do 
not receive a Second Requests to 237 days (7.9 months) from 
announcement to closing.\239\
---------------------------------------------------------------------------

    \234\ 15 U.S.C. 18a(e)(1)(B).
    \235\ Id. sec. 18a(e)(1)(B)(iii).
    \236\ See Prepared Statement of the Fed. Trade Comm'n Before the 
Comm. on the Judiciary, Subcomm. on Antitrust, Competition, and 
Small Bus. and Consumer Rights, United States Senate Concerning An 
Overview of Fed. Trade Comm'n Antitrust Activities 3 (Sept. 19, 
2002), https://www.ftc.gov/sites/default/files/documents/public_statements/prepared-statement-federal-trade-commission-overview-enforcement-antitrust-laws/020919overviewtestimony.pdf. In 
2002, the Commission's Bureau of Competition issued Guidelines on 
Merger Investigations, which eliminated some of the more onerous 
requirements of compliance. See Debbie Feinstein, ``A fine balance: 
toward efficient merger review,'' Fed. Trade Comm'n Competition 
Matters blog (Aug. 4, 2015), https://www.ftc.gov/enforcement/competition-matters/2015/08/fine-balance-toward-efficient-merger-review.
    \237\ AMC Report, supra note 179, at 163. The AMC noted that the 
survey's value was limited due to reliance on a non-scientific, 
self-selected sample of only twenty-three responses, and that the 
median values for most measures of cost were much lower than the 
means, suggesting the average values were influenced by a few very 
high observations. Id.
    \238\ Peter Boberg & Andrew Dick, ``Findings from the Second 
Request Compliance Burden Survey,'' Vol. XIV No. 3 Threshold: 
Newsletter of the Mergers & Acquisitions Comm. 26, 37 (Summer 2014) 
(A.B.A. Antitrust L. Sec.). In about one-third of these 
investigations, parties had withdrawn and refiled their 
notification, indicating that the strategy was not always effective 
in avoiding a Second Request. This is consistent with the 
Commission's assessment of withdraw and refile data, reflected in 
Table 3 supra.
    \239\ Jana Fidrmuc et al., ``Antitrust merger review costs and 
acquirer lobbying,'' 51 J. Corp. Fin. 72, 73 (2018).
---------------------------------------------------------------------------

    The Commission has determined that the final rule is a better 
regulatory alternative than issuing more Second Requests because the 
final rule provides the Agencies with the information necessary for an 
efficient and effective premerger assessment and to determine which 
reportable transactions warrant the issuance of Second Requests. The 
Commission considers the costs that would be associated with issuing 
more Second Requests as an alternative to the final rule to be 
unnecessary and unjustified. By relying on only the information 
contained in current HSR requirements and issuing more Second Requests, 
the Agencies would be imposing these significant costs on deals that 
are even more ``on the margin'' than the ones that are currently 
identified for a Second Request investigation. Issuing more Second 
Requests without adjusting the information in the HSR Filing would most 
likely result in significant costs for additional transactions and 
undue delay for even more deals that are not ultimately challenged in 
court.
    More importantly, without addressing the information deficiencies 
outlined in section II.B., the Agencies would miss certain transactions 
that warrant further review. For these transactions, which are 
currently not subject to Second Requests, the costs of complying with 
the additional information requests for the HSR Filing are justified by 
the enhanced ability of the Agencies to detect the potential for the 
transaction to violate the antitrust laws. In other words, the final 
rule makes it more likely that the transactions that present the most 
significant risk violating the antitrust laws, and therefore most 
clearly warrant the costs and delays associated with an in-depth 
investigation, are those that will receive Second Requests.
    As an added benefit, the additional information contained in the 
HSR Filing will allow the Agencies to focus their investigation on 
those aspects of the transaction that create antitrust risk, and

[[Page 89248]]

minimize ``overly broad'' Second Requests, which can also impose 
unnecessary costs and delays. Specifically, the final rule provides the 
Agencies with the information that is necessary to make the critical 
decision whether and how to burden the filers and the Agencies with the 
costs and delays associated with an in-depth investigation of the 
reported transaction.
    Indeed, one goal of this rulemaking is to reduce the number of 
Second Request investigations that do not lead to an enforcement 
action. Imposing substantial costs in addition to undue delay on 
transactions that are unlikely to face a court challenge is the wrong 
response to the information deficiencies outlined in section II.B. The 
Commission has determined that imposing minimal additional costs on all 
filers to properly conduct premerger screening will likely reduce the 
number of transactions that receive a Second Request but do not face a 
court challenge, a very significant benefit to filers. The Commission 
expects that, on balance, the final rule will reduce the number of 
unnecessary or overly broad Second Requests and that this outcome is 
consistent with the statutory scheme created by Congress.
    Much of the increased cost of a Second Request investigation (for 
both the parties and the Agencies) is due to the increasing complexity 
of merger litigation, and including the costs associated with post-
complaint discovery. Federal judges overseeing merger trials routinely 
remark on the scope and effort of proving and refuting the facts needed 
to assess whether a proposed transaction violates the antitrust 
laws.\240\ The Agencies' costs in litigating these cases have also 
increased significantly in recent years, especially the cost of hiring 
outside experts to support the litigation.\241\ To a large extent, the 
scope and burden of a Second Request is driven by the growing need for 
data and other evidence required to make an informed decision whether 
to devote scarce resources to a particular case in light of the 
likelihood that the agency can establish liability under section 7 of 
the Clayton Act.
---------------------------------------------------------------------------

    \240\ See, e.g., FTC v. Peabody Energy Corp., 492 F. Supp. 3d 
865, 874 (E.D. Mo. 2020); FTC v. Staples, Inc., 190 F. Supp. 3d 100, 
110 (D.D.C. 2016); FTC v. Sysco Corp., 113 F. Supp. 3d 1, 15 (D.D.C. 
2015); United States v. JetBlue Airways Corp., cv-23-10511 (D. Mass. 
Jan. 16, 2024).
    \241\ See Letter from Lina M. Khan, Chair, Fed. Trade Comm'n to 
Rep. Thomas P. Tiffany 5-6 (Nov. 3, 2023) https://www.ftc.gov/system/files/ftc_gov/pdf/2023.11.3_chair_khan_letter_to_rep._tiffany_re_merger_challenges.pdf 
(citing expert witness costs related to merger enforcement in 
Federal court).
---------------------------------------------------------------------------

    Of the commenters objecting to the proposed rule, some argued that 
the final rule would collapse the distinction between the notification 
form and a Second Request. The Second Request is the Congressionally 
mandated tool for the collection of additional information to determine 
whether to challenge the transaction prior to consummation. The 
Commission states that it is not its intention in any way to require in 
the initial notification all the information that may be necessary to 
determine whether to file a complaint alleging an antitrust violation. 
Instead, the final rule ensures that the Agencies have the information 
necessary to identify those transactions that require the issuance of 
Second Requests, a decision that must be made prior to the expiration 
of the statutory waiting period. The Commission disagrees that the 
final rule requires anything near the amount of data and documents 
sought in Second Requests, which are tailored for each recipient. For 
example, the Commission's Model Second Request requires the submission 
of all documents related to pricing for any relevant product for the 
last three years \242\ and the Department of Justice's Model Second 
Request requires the submission of each database or data set containing 
a range of information about the relevant product.\243\ That level of 
detail and analysis is not required by the final rule and is not 
warranted in an HSR Filing. In the final rule, the Commission has 
identified the information that the Agencies need to conduct a 
preliminary screen for antitrust risks. A Second Request represents a 
whole different level of detail and analysis, one much more aligned 
with determining whether there are facts sufficient to establish to a 
court that the merger may substantially lessen competition or tend to 
create a monopoly.
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    \242\ See Fed. Trade Comm'n, Bureau of Competition, Model Second 
Request Specifications 8 (rev. Jan. 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/Final-Rev-Model-Second-Request-01-26-2024.pdf.
    \243\ U.S. Dep't of Justice, Model Second Request, Specification 
2, https://www.justice.gov/atr/file/706636/dl.
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    As discussed in section III.A., the Commission believes that it is 
consistent with the statutory premerger regime to collect certain 
critical information directly from those involved in the transaction 
and to have that information available on the first day of the initial 
waiting period. The Commission believes that it is well within its 
statutory authority to require minimally sufficient information in the 
HSR Filing that is necessary and appropriate to screen each reported 
transaction for antitrust risk without resorting to issuing more Second 
Requests to require information that is not currently submitted with 
the HSR Form.
    Moreover, the Commission believes that Second Requests should 
continue to be reserved for those transactions more likely to violate 
the antitrust laws and to result in measurable harm if not blocked 
prior to consummation. Issuing more Second Requests as a remedy for 
deficient HSR Filings imposes opportunity costs on the Agencies, 
diverting resources that could be used to address other potential 
violations of the antitrust laws. Moreover, as discussed above, one 
potential benefit of the final rule is that it may reduce the number of 
Second Requests or limit their scope. Issuing more Second Requests runs 
counter to that goal and would also impose significant additional costs 
on the Agencies, the filing parties, and third parties. In the words of 
one commenter: ``These proposed changes exemplify good government. They 
would save regulators valuable time and resources in evaluating merger 
proposals, making the agency's processes more efficient.'' \244\
---------------------------------------------------------------------------

    \244\ Comment of SEIU, Doc. No. FTC-2023-0040-0699 at 2.
---------------------------------------------------------------------------

    In sum, in adopting this final rule, the Commission believes that 
it has identified the specific additional information that, in the 
Agencies' experience, is most relevant to determining whether to issue 
Second Requests or narrow their scope. Moreover, as detailed below in 
sections IV. through VI., the Commission has made significant 
modifications in the final rule to better balance the need for 
additional relevant information while avoiding undue delay and cost 
where the likely benefit to the Agencies is low, especially for those 
deals that they can quickly determine are not likely to violate the 
antitrust laws. The Commission believes that the final rule, as 
modified, would better address the information deficiencies outlined 
above as compared to other available regulatory options such as relying 
on more Second Requests.
    The Commission has also considered whether to rely on the expanded 
use of voluntary supplemental submissions from the parties, including 
as part of a pull-and-refile investigation, as an alternative to the 
final rule. See section III.A.2. But this alternative does not address 
the information deficiencies that this rulemaking has identified with

[[Page 89249]]

the current information requirements. Without the collection of 
information related to the antitrust risks identified in section II.B., 
the Agencies lack a basis to identify the need for additional voluntary 
submissions from the parties. The Agencies are already relying on 
supplemental submissions from a large number of filers, often resulting 
in the parties withdrawing and refiling their notification. See Table 
3. Routinely requiring voluntary submissions from even more filers as 
an alternative to obtaining needed information in the HSR Filing would 
impose unnecessary burden and delay on filings that are not currently 
flagged for follow up.
    Based on the Agencies' experience of conducting premerger review 
for over four decades, the Commission identified the additional data 
and documents that, if submitted with the HSR Filing, would reduce 
delays and burdens associated with information-gathering during the 
initial waiting period and satisfy the Agencies' mandate to conduct a 
premerger assessment of each reported transaction. To that end, the 
final rule targets information that is likely already available to 
filers, such as documents related to the transaction, as well as 
historical data and documents about their business, including ordinary 
course business plans and reports. The final rule marries descriptive 
responses with documents submitted with the HSR Filing, providing the 
Agencies with a holistic view of the operations of each party, 
including any existing business relationships that would be affected by 
the transaction. Overall, the final rule aligns the information 
requirements of the HSR Filing with the Agencies' task of identifying 
transactions that may violate the antitrust laws. For many of the new 
requirements, parties only have to respond if they identify an existing 
business relationship (e.g., one party is the other party's competitor 
or supplier). Based on the Agencies' experience, parties in most cases 
do their own assessment of the antitrust risk associated with the 
planned transaction before submitting an HSR Filing and will therefore 
already have relevant information about any existing business 
relationship. In short, the Commission has calibrated the HSR Filing's 
reporting requirements so that the filing contains sufficient 
information for the Agencies to determine whether the transaction is 
one that is likely to raise antitrust concerns. The Commission believes 
that the final rule is well within the authority given to it by 
Congress to implement a notification scheme that minimizes costs and 
delays associated with mandatory premerger review and yet generates the 
benefits of preventing illegal mergers prior to consummation.

B. Major Questions Doctrine

    Two commenters suggested that the proposed rule implicates the 
major questions doctrine.\245\ The Commission disagrees. According to 
the Supreme Court, the major questions doctrine is implicated in 
``extraordinary cases . . . in which the history and the breadth of the 
authority that the agency has asserted, and the economic and political 
significance of that assertion, provide a reason to hesitate before 
concluding that Congress meant to confer such authority.'' \246\
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    \245\ One commenter also argues that the Commission's rule runs 
afoul of the non-delegation doctrine. The Commission disagrees. 
First, the Commission's rule has no bearing on the authority 
Congress delegated to the Commission when it passed the HSR Act. 
Second, Congress' delegation of rulemaking authority to the 
Commission does not run afoul of the non-delegation doctrine. The 
non-delegation doctrine is based on the Supreme Court's 
interpretation of Article I, Section 1 of the Constitution, which 
vests all legislative powers in Congress. The Court has interpreted 
this clause to mean that Congress cannot delegate its legislative 
power to another branch of government without supplying an 
intelligible principle. See J.W. Hampton, Jr., & Co. v. United 
States, 276 U.S. 394, 409 (1928); Gundy v. United States, 139 S. Ct. 
2116, 2129 (2019). Congress provided several intelligible principles 
in the HSR Act to guide the Commission's exercise of authority. For 
instance, it directed the Commission to require notification in such 
form and contain such documentary material and information relevant 
to a proposed acquisition as is necessary and appropriate to enable 
the Agencies to determine whether the acquisition may, if 
consummated, violate the antitrust laws. Congress also stated that 
the Commission may define terms and exempt classes of persons, 
acquisitions, transfers, or transactions not likely to violate the 
antitrust laws from the reporting requirements.
    \246\ West Virginia v. EPA, 597 U.S. 697, 721 (2022) (cleaned 
up); see also Biden v. Nebraska, 143 S. Ct. 2355, 2372 (2023).
---------------------------------------------------------------------------

    This rulemaking does not involve a major question as the Supreme 
Court has used that term. The final rule merely updates the disclosure 
requirements for acquisitions that already are required to submit to 
mandatory premerger notification. As reflected in Table 1, transactions 
reported under the HSR Act constitute only a fraction of the total 
number of mergers and acquisitions that occur each year in the United 
States. Congress has determined that most acquisitions should not be 
subject to premerger review, and this rule does not impact them.
    Considerations of history and breadth also demonstrate that the 
final rule does not involve a major question. The breadth of the 
Commission's authority here ``fits neatly within the language of the 
statute. . . .'' and is well established.\247\ The Commission has clear 
congressional authorization to issue rules and a long history of 
exercising its authority to promulgate HSR Rules under section 18a(d). 
The Commission has made both substantive and ministerial amendments to 
the rules dozens of times to improve the program's effectiveness and to 
adjust the reporting requirements to keep pace with market 
realities.\248\ Requiring

[[Page 89250]]

information necessary and appropriate to determine whether a 
transaction, if consummated, may violate the antitrust laws is 
certainly a ``tool'' in the Commission's ``toolbox,'' given the 
Commission's history of taking action against anticompetitive 
mergers.\249\ Since 1977, the Commission and the Antitrust Division of 
the Department of Justice have published an annual report outlining 
their efforts to protect competition by identifying and investigating 
mergers and acquisitions that may violate the antitrust laws.\250\ 
These reports demonstrate that premerger notification and merger 
enforcement is an area that falls squarely within the Commission's 
``wheelhouse.'' \251\
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    \247\ Biden v. Missouri, 595 U.S. 87, 93 (2022).
    \248\ See 43 FR 33450 (July 31, 1978) (publishing final rules 
for premerger notification); 44 FR 66781 (Nov. 21, 1979) (increasing 
minimum dollar value exemption contained in 16 CFR 802.20); 45 FR 
14205 (Mar. 5, 1980) (replacing requirement that certain revenue 
data for the year 1972 be provided in the Notification and Report 
Form with a requirement that comparable data be provided for the 
year 1977); 48 FR 34427 (July 29, 1983) (amending premerger 
notification rules to clarify and improve the effectiveness of the 
rules and of the Form and reduce the burden of filing notification); 
50 FR 46633 (Nov. 12, 1985) (revising Form at 16 CFR part 803 
appendix); 51 FR 10368 (Mar. 26, 1986) (same); 52 FR 7066 (Mar. 6, 
1987) (amending rules to reduce cost of complying with the rules and 
to improve the program's effectiveness); 52 FR 20058 (May 29, 1987) 
(amending definition of the term ``control'' as it applies to 
partnerships and other entities that do not have outstanding voting 
securities); 54 FR 21425 (May 18, 1989) (interim rule codifying 
practices that make public administrative grants of early 
termination of the waiting period through means other than 
publication in the Federal Register); 55 FR 31371 (Aug. 2, 1990) 
(revising revenue reporting); 60 FR 40704 (Aug. 9, 1995) (same); 61 
FR 13666 (Mar. 28, 1996) (defining or creating exemptions to 
filing); 63 FR 34592 (June 25, 1998) (exempting divestitures 
pursuant to consent agreements); 66 FR 8680 (Feb. 1, 2001) (interim 
rule implementing changes to the HSR Act); 66 FR 23561 (May 9, 2001) 
(interim rule revising revenue reporting); 66 FR 35541 (July 6, 
2001) (implementing May 9, 2001 interim rule with slight changes); 
67 FR 11898 (Mar. 18, 2002) (amending certain exemptions); 67 FR 
11904 (Mar. 18, 2002) (clarifying); 68 FR 2425 (Jan. 17, 2003) 
(same); 70 FR 4988 (Jan. 31, 2005) (amending the premerger 
notification rules to reflect adjustment and publication of 
reporting thresholds required by the 2000 amendments to section 7A 
of the Clayton Act, 15 U.S.C. 18a); 70 FR 11502 (Mar. 8, 2005) 
(amending rules to address treatment of corporations, partnerships, 
limited liability companies and other types of non-corporate 
entities and the application of certain exemptions); 70 FR 73369 
(Dec. 12, 2005) (amending Form and Instructions to relieve some of 
the burden of complying with Items 4(a) and (b) and specifying that 
notifications in certain types of transactions expire after eighteen 
months if a second request remains outstanding); 70 FR 77312 (Dec. 
30, 2005) (requiring that 2002 revenue data, identified by the 2002 
NAICS, be provided in response to certain items on the Form); 71 FR 
35995 (June 23, 2006) (allowing submission of notification and 
report forms electronically via the internet); 76 FR 42471 (July 19, 
2011) (implementing changes to streamline the Form, adding Items 
4(d), 6(c)(ii) and 7(d) to capture additional information that would 
significantly assist the Agencies in their initial review, 
addressing omissions from 2005 rulemaking involving unincorporated 
entities); 78 FR 41293 (July 10, 2013) (setting forth the procedure 
for voluntarily withdrawing an HSR filing, establishing when an HSR 
filing will be automatically withdrawn if a filing publicly 
announcing the termination of a transaction is made with the SEC, 
and setting forth the procedure for resubmitting a filing after a 
withdrawal without incurring an additional filing fee); 78 FR 68705 
(Nov. 15, 2013) (defining and applying the concepts of ``all 
commercially significant rights,'' ``limited manufacturing rights,'' 
and ``co-rights'' in determining whether the rights transferred with 
regard to a patent or a part of a patent in the pharmaceutical 
industry constitute a potentially reportable asset acquisition under 
the Act); 81 FR 60257 (Sept. 1, 2016) (allowing DVD submissions and 
clarifying the Instructions to the Form); 82 FR 3212 (July 12, 2017) 
(amending the Form); 83 FR 32768 (July 16, 2018) (amending rules for 
clarity, allowing use of email, and updating Instructions); 84 FR 
30595 (June 27, 2019) (requiring use of 10-digit codes based upon 
the North American Product Classification System in place of the 10-
digit codes based upon the North American Industry Classification 
System); 88 FR 5748 (Jan. 30, 2023) (amending the Rules to conform 
to the new filing fee tiers enacted by the Merger Filing Fee 
Modernization Act of 2022, 15 U.S.C. 18b); 89 FR 7609 (Feb. 5, 2024) 
(amending Parts 801 and 803 of the Rules to make ministerial changes 
required to reflect the annual adjustment of the filing fee 
thresholds and amounts required by 2022 Amendments).
    \249\ West Virginia v. EPA, 597 U.S. at 730.
    \250\ See Fed. Trade Comm'n Annual Reports to Congress Pursuant 
to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, supra 
note 56 (collecting reports).
    \251\ Biden v. Nebraska, 143 S. Ct. 2355, 2382 (2023) (Barrett, 
J., concurring).
---------------------------------------------------------------------------

    Even if the final rule could be characterized as implicating a 
major question, the HSR Act provides ``clear congressional 
authorization'' for the rule.\252\ Congress spoke clearly when it 
granted the Commission authority to determine the form and content of 
premerger notifications as necessary and appropriate to enable the 
Agencies to determine whether a proposed acquisition may, if 
consummated, violate the antitrust laws,\253\ and the final rule falls 
squarely within that delegation of authority. The Commission is asking 
filers to provide information necessary to evaluate whether a 
transaction may violate the antitrust laws. This information is missing 
from the current filings, and it is appropriate that filers, who are in 
the best position to report basic information about their own 
businesses, provide that information. The rule updates are necessary 
and appropriate for the Commission to accomplish the goals Congress set 
out for it: effective premerger review as a tool to prevent illegal 
mergers prior to consummation and fully enforce the antitrust laws' 
proscription against undue concentration. And just recently, Congress 
increased the requirements of the premerger notification program by 
requiring the Commission to collect information about foreign subsidies 
in order to use this data as part of the Agencies' premerger 
review.\254\ Congress has left it to the Commission to ``fill up the 
details'' based on the many clear principles articulated in the HSR Act 
\255\ and in furtherance of sound and effective enforcement of the U.S. 
antitrust laws. Accordingly, even if the major questions doctrine 
applies, the Commission's authority to issue the final rule is clear.
---------------------------------------------------------------------------

    \252\ West Virginia v. EPA, 597 U.S. at 723-24.
    \253\ 15 U.S.C. 18a(d)(1).
    \254\ See Merger Filing Fee Modernization Act of 2022, 15 U.S.C. 
18b (requiring the Commission to promulgate a rule requiring HSR 
filings to include information on subsidies received from certain 
foreign governments or entities that are identified as foreign 
entities of concern).
    \255\ Gundy v. United States, 139 S. Ct. 2116, 2136 (2019) 
(Gorsuch, J., dissenting) (quoting Wayman v. Southard, 23 U.S. 1, 
31, 43 (1825)).
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C. Benefits and Costs of the Final Rule

    The final rule is intended to address existing information 
deficiencies in the current HSR Rules so the Agencies can identify 
transactions that may violate the antitrust laws during the short 
period of mandatory premerger review provided in the HSR Act. The 
Commission has determined that the status quo is insufficient because 
it leaves information gaps that prevent the Agencies from efficient and 
effective premerger screening to identify which transactions require 
in-depth review. The final rule also addresses significant information 
asymmetries between the parties and the Agencies by shifting more of 
the costs of information acquisition to the parties, who are most 
familiar with their business operations and structure and who are 
pursuing the transaction under review. The Commission has considered 
alternatives to the final rule that would rely on other regulatory 
options, including the Short Form Alternative discussed in section 
III.E., and has determined that those alternatives offer different 
tradeoffs between benefits and costs. The Commission believes that the 
final rule has the best balance of benefits and costs within the 
statutory scheme of the HSR Act because it imposes less delay and is 
less costly than issuing more Second Requests, and it imposes less 
delay and provides more certainty regarding the completeness of the 
information than relying on more extensive voluntary submissions of 
information. Moreover, the final rule is superior to the short form 
alternative, an option suggested by commenters and discussed below in 
section III.E., because the Commission lacks a basis at this time to 
identify a set of transactions that should be eligible for short form 
treatment using the current information requirements. Most importantly, 
none of the other alternatives close the information gaps identified in 
section II.B. to permit the Agencies to effectively and appropriately 
identify a subset of filings for which Second Requests are warranted 
and to make critical resource decisions, preventing the Agencies from 
fulfilling their mandate to conduct a premerger antitrust assessment of 
reported transactions.
    Given that the final rule is the best of the available 
alternatives, the Commission now addresses comments on whether it is a 
reasonable exercise of the Commission's statutory authority to adopt 
the final rule to enable the Agencies to determine whether an 
acquisition may, if consummated, violate the antitrust laws in 
fulfillment of their premerger review obligations under the HSR Act.
1. Benefits
    The Commission has determined that, due to evolving commercial 
realities, the current information requirements for the HSR Form and 
Instructions are not delivering the benefits of mandatory premerger 
review as contemplated by Congress. As discussed in section II.B., 
changes in M&A activity, corporate structures, and investment 
strategies have exposed significant information gaps that undermine the 
Agencies' ability to efficiently and effectively identify transactions 
that may violate the antitrust laws during the initial 30-day waiting 
period based on information contained in the current HSR Form. As a 
result, the Agencies lack sufficient information about the parties and 
transaction to conduct an initial antitrust assessment for all types of 
potential harm that could occur due to the merger. Moreover, these 
changes have amplified information asymmetries between what the parties 
know about their business activities and how the Agencies collect the 
information necessary to decide whether to issue Second Requests. The 
Commission has determined that to realize the benefit of detecting 
illegal mergers prior to

[[Page 89251]]

consummation through mandatory premerger review, the Agencies need more 
information relevant to the antitrust risk of reportable acquisitions 
in the HSR Filing.
    The Commission has considered the extent to which the final rule 
furthers the Congressional goal of preventing illegal mergers prior to 
consummation through mandatory premerger review. The benefit of having 
sufficient information in the HSR Filing to screen for all types of 
antitrust risks derives from several sources:
    (1) the non-consummation of harmful mergers that otherwise would 
not have been caught during premerger screening, whose harm continues 
unless and until the merger is unwound and competition in the affected 
market is restored, if it can be restored at all;
    (2) the reallocation of staff hours from attempting to collect 
additional necessary information from the parties on a voluntary basis 
and reduced uncertainty that delay and insufficiency create for 
resource allocation decisions;
    (3) the reallocation of staff hours from collecting additional 
necessary information from third parties regarding the parties' 
business operations;
    (4) the reduction in burden required for third parties to respond 
to the Agencies' outreach to provide information known to the filing 
parties, but not currently required by the Form;
    (5) improvements in premerger screening through
    (i) more accurate identification of transactions requiring in-depth 
review;
    (ii) the reduction in the number of HSR Filings withdrawn and 
refiled for the purpose of allowing Agency staff to collect and review 
more information from the parties;
    (iii) reduction in delays associated with HSR Filings, including 
those that are withdrawn and refiled but do not receive Second 
Requests;
    (iv) the narrowing of issues required to properly focus any in-
depth review, including through the issuance of more targeted and less 
burdensome Second Requests;
    (v) the reduction in the number of Second Request investigations 
that do not ultimately result in enforcement or voluntary 
restructuring; and
    (6) a more efficient allocation of resources devoted to merger 
enforcement, including by avoiding expensive and time-consuming 
litigation to unwind consummated mergers that cause harm but were not 
identified under the current rules.
    Consistent with Congressional intent, all of these benefits accrue 
to the American public in the form of reductions in the harmful effects 
of illegal consummated mergers, including price increases or reductions 
in output, reductions in quality and innovative activity, lower wages, 
and other effects, and more effective use of public resources devoted 
to antitrust enforcement. Other market participants that would 
otherwise be harmed by an illegal merger also benefit from improved 
detection that leads to enforcement that prevents or neutralizes the 
harm from that merger.
    Many of these benefits cannot be quantified, or quantification 
cannot be done with a high degree of reliability. Where the Commission 
is unable to estimate a benefit quantitively, it provides a qualitative 
description of the benefit using the best available methods,\256\ and 
in light of the purpose of mandatory premerger review. Based on its 
experience gathered over decades of premerger review of transactions 
reported under the HSR Act, the Commission considered the following 
benefits that would derive from the final rule as compared to the 
status quo.
---------------------------------------------------------------------------

    \256\ See generally Anthony E. Boardman et al., Cost-Benefit 
Analysis: Concepts and Practice 44 (5\th\ ed. 2018); Office of 
Management and Budget, Circular A-4 at 5 (Nov. 9, 2023), https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf.
---------------------------------------------------------------------------

a. Detecting Additional Harmful Mergers
    Section 7 of the Clayton Act prohibits an acquisition where the 
effect of such acquisition may be to substantially lessen competition 
or to tend to create a monopoly. Acquisitions that have these effects 
deprive the public of the benefits of competition, which include lower 
prices, improved wages and working conditions, higher quality and 
resiliency in the supply chain, and more innovation and choice, among 
other benefits. section 7 of the Clayton Act was designed to arrest 
anticompetitive tendencies in their incipiency,\257\ and mandatory 
premerger review gives the Agencies time and information to assess 
whether a reported transaction may violate the antitrust laws and seek 
to block it in Federal court prior to consummation. While it is 
difficult to calculate with precision the likely ill effects of an 
acquisition before it happens, Table 2 above contains estimates of 
potential harm from mergers in cases that were litigated by the 
Agencies in recent years, representing a range of outcomes from mergers 
that were not consummated as a result of premerger review and a 
subsequent Agency enforcement action. For any particular illegal 
merger, the potential for harm may be small or large and depends on 
many factors, including the size of the companies involved, the 
geographic scope of their operations, the number of customers they 
serve, and the value of their products. Many of the benefits of 
competition that may be lost due to a merger are more difficult to 
quantify, such as the loss of innovation competition or degradation in 
the quality of products or services offered. Thus, the magnitude of the 
anticompetitive effect of any particular merger that would have 
occurred but for the Agencies' intervention is imprecise at best and 
does not capture the full impact of the loss of dynamic and beneficial 
competition now and in the future.
---------------------------------------------------------------------------

    \257\ See, e.g., Brown Shoe Co. v. United States, 370 U.S. 294, 
318 nn.32-33 (1962); see also United States v. AT&T, Inc., 916 F.3d 
1029, 1032 (D.C. Cir. 2019); Saint Alphonsus Med. Ctr.-Nampa v. St. 
Luke's, 778 F.3d 775, 783 (9th Cir 2015); Polypore Int'l., Inc. v. 
FTC, 686 F.3d 1208, 1213-14 (11\th\ Cir. 2012); FTC v. IQVIA 
Holdings Inc., No. 1:23 Civ. 06188 (S.D.N.Y. Dec. 29, 2023).
---------------------------------------------------------------------------

    In connection with their enforcement and reporting mandates, the 
Agencies also provide public estimates of the average consumer savings 
resulting from antitrust enforcement, including mergers that the 
Agencies challenge in an enforcement action (which include negotiated 
settlements requiring divestitures or transactions that are 
restructured prior to consummation). These estimates are contained in 
each agency's budget justification submitted to Congress.\258\ Table 4 
below summarizes the Agencies' estimates of harms to consumers and 
other market participants that would have occurred in the affected 
markets but for the agency's antitrust enforcement action. These 
savings reflect all civil antitrust enforcement activities, which 
include merger enforcement.
---------------------------------------------------------------------------

    \258\ The Agencies provide annual budget justifications to 
Congress which contain these estimates. See Fed. Trade Comm'n, 
``Budget, Performance, and Financial Reporting,'' https://www.ftc.gov/about-ftc/budget-strategy/budget-performance-financial-reporting (collecting reports) and U.S. Dep't of Justice, ``Budget 
and Performance,'' https://www.justice.gov/doj/budget-and-performance (collecting reports).

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[[Page 89252]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.037

    The Agencies' estimates of consumer savings in Table 4 are 
calculated based on the relevant product and geographic markets that 
were alleged (or would have been alleged) in either a litigation or 
settlement complaint. However, sometimes litigation or settlements do 
not address the full scope of the Agencies' competitive concerns. Due 
to various reasons (resource constraints, investigative efficiency, 
litigation strategy, etc.), a complaint may, for example, exclude 
certain markets of concern or theories of harm. When such a merger is 
blocked or abandoned in its entirety, any expected harm is avoided in 
all implicated markets and for all theories of harm. In those cases, 
limiting the calculations to just those markets and theories that would 
have appeared in a filed complaint further understates the full scope 
of consumer benefit.\259\ These calculations also do not include less 
quantifiable harms that are avoided through antitrust enforcement, such 
as reduced innovation or quality.
---------------------------------------------------------------------------

    \259\ Most calculations seek to use quantification tools that 
align theories of harm being pursued, but not all theories are 
associated with readily available tools. Thus, for some merger wins, 
the Agencies' estimates of consumer savings will not reflect the 
full scope of theories due to the challenges of quantification. This 
is most relevant for coordinated effects; when a merger raises both 
unilateral and coordinated effects concerns, the calculations put 
forward will often reflect only the unilateral concerns (due to the 
greater availability of unilateral merger simulation tools) but not 
a robust estimation of additional harm arising from the threat of 
increased coordination.
---------------------------------------------------------------------------

    The Commission believes that the enhanced ability of the Agencies 
to detect illegal mergers under the final rule will result in similar 
benefits to additional consumers and other market participants that 
would have been affected by an illegal merger but for the enhanced 
detection made possible by the final rule. In addition to these 
benefits, the final rule permits the Agencies to fulfill their 
statutory mandate to conduct premerger review for the purpose of 
preventing illegal mergers prior to consummation, which is a key 
competition policy directive that undergirds our nation's reliance on 
open and competitive markets to drive innovation and economic growth.
b. Avoidable Costs and Delays Arising From Insufficient Information on 
the HSR Form
    To understand the inefficiencies created by inadequate information 
in the current HSR Filing, the Agencies conducted a review of the 
effort required to collect additional information beyond what is 
contained in the HSR Filing for investigations that did not result in 
an enforcement action.\260\ The Agencies examined all HSR Filings in FY 
2021, when they received 7,002 HSR Filings for an associated 3,520 
transactions.\261\ The Agencies identified those transactions for which 
either Agency opened an investigation that did not result in (1) an 
action brought in Federal court to block the transaction, (2) a 
negotiated settlement with divestitures, or (3) the transaction being 
abandoned or restructured as a result of one agency's antitrust 
investigation.\262\ On the basis of this review, the Agencies 
determined that they conducted 100 investigations in FY 2021 for which 
they collected information from non-public sources but that did not 
result in an enforcement action, referred to here as ``no-action 
investigations.'' \263\ Investigational costs associated with these no-
action investigations are one product of inefficiencies created by 
insufficient information in the HSR Filing because they create 
unnecessary burdens for the parties, the Agencies, and third parties 
that could be avoided if the HSR Filing contained sufficient 
information to determine that the transaction is not one that requires 
challenge via litigation prior to consummation. In addition to the 
benefits of improved detection outlined above, these benefits represent 
opportunity costs for Agency staff (who would spend their time on other 
tasks if not collecting necessary information for transactions that do 
not warrant enforcement action prior to

[[Page 89253]]

consummation), as well as burdens and costs for the parties and third 
parties who respond to staff inquiries designed to collect the 
information necessary to conduct a premerger assessment of a reported 
transaction.
---------------------------------------------------------------------------

    \260\ The Agencies selected FY 2021 for this effort because of 
the large number of reportable transactions that year, 3,520, which 
provided for a robust data set. The Agencies have no basis to 
believe that the mergers that occurred in that year were different 
in any material way from the mergers that occurred in other years 
and so consider them to be representative of HSR-reportable merger 
activity in general.
    \261\ Fed. Trade Comm'n & U.S. Dep't of Justice, Hart-Scott-
Rodino Annual Report, Fiscal Year 2021 appendix A (FY 2021). As 
appendix A n.1 notes, there are typically two filings for each 
transaction, one from the acquiring person and one from the acquired 
person.
    \262\ These criteria are the ones used by the Agencies to report 
publicly on their merger enforcement activities.
    \263\ In FY 2021, the Agencies took action against 32 
transactions. See Fed. Trade Comm'n & U.S. Dep't of Justice, Hart-
Scott-Rodino Annual Report, Fiscal Year 2021 appendix A (FY 2021) at 
2. The Agencies provide data on HSR reportable mergers on a fiscal 
year basis, but enforcement decisions may occur in a fiscal year 
after the transaction was first reported. As a result, the number of 
enforcement actions reported in the annual HSR reports are not 
necessarily related to the transactions that are reported for that 
fiscal year. For this exercise, the Agencies tracked the outcomes of 
transactions that were reported to the Agencies in FY 2021 but 
decisions about those transactions may have occurred in the 
following fiscal year.
---------------------------------------------------------------------------

    In the 100 no-action investigations, staff contacted at least one 
third party, with an average number of 18 third-party interviews per 
investigation. Each of these interviews required significant time from 
these third parties to identify the knowledgeable personnel in the 
related business operations, and prepare for questions in advance of 
talking to Agency staff. While some third parties rely on in-house 
counsel to help prepare for these interviews, some retain outside legal 
counsel who have experience with antitrust investigations. The 
Commission lacks a reliable methodology to calculate or estimate the 
costs borne by third parties to provide necessary information relevant 
to the Agencies' initial antitrust assessment. The Commission believes 
that it is appropriate to shift some of this information-gathering 
burden to the merging parties and away from other market participants--
including customers who may suffer harm if the merger is consummated--
who currently absorb this burden due to deficiencies in the existing 
HSR Form. The final rule realigns the burden of providing necessary 
information toward the parties themselves and away from other third-
party companies, including smaller entities who are saddled with 
unexpected compliance and legal costs solely because they operate in 
the same or adjacent business lines as the merging parties. As a 
result, the Commission anticipates a reduction in third parties' costs 
from adopting the final rule.
    Moreover, given the effort that is required to obtain this 
information from third parties, there is often a delay in collecting 
critical business facts until late in the initial waiting period, near 
the time when a decision must be made about issuing Second Requests. As 
discussed above, additional information from the parties and third 
parties that is submitted on a voluntary basis often arrives late in 
the review period. These delays contribute to additional avoidable 
costs through the issuance of Second Requests that might have been 
avoided or that were not tailored to areas of competitive concern due 
to insufficient information in the HSR Filing.\264\
---------------------------------------------------------------------------

    \264\ For any investigation that results in Second Requests, 
staff spends a significant amount of time during the initial 30-day 
waiting period trying to identify the areas of a potential antitrust 
violation. Both Agencies make public their Model Second Requests. 
See supra notes 242-43. Starting from these models, staff customize 
each request by identifying areas of existing competition and 
modifying the terms to fit the particular industry dynamics, 
products and services, or geographic reach.
---------------------------------------------------------------------------

    One source of delay is the parties' voluntary decision to withdraw 
and refile their HSR Filing. In 53 of the 100 no-action investigations, 
the parties voluntarily withdrew and refiled their HSR Filings, which 
restarted the initial waiting period and gave Agency staff additional 
time to conduct the review. As discussed above, the Commission believes 
that most of the investigations in which the parties withdraw and 
refile their HSR Filings are the result of the parties' concern that 
the Agency may issue Second Requests when they are not warranted or 
that the Agency will issue a Second Request that is too broad. As Table 
3 shows, when the parties withdrew and refiled, they avoided Second 
Requests nearly 70 percent of the time in the period FY 2018 through FY 
2022. For the remaining 30 percent, the additional time allowed the 
parties to engage in additional advocacy to avoid or potentially narrow 
any Second Requests. For withdraw and refile transactions that avoid 
Second Requests altogether, there is unnecessary delay and uncertainty 
that could be avoided if the information required to make a no-action 
decision was provided sooner, including with the HSR Filing.
    But for transactions that receive Second Requests, the delay can be 
substantial; seventeen of the 100 no-action investigations referenced 
above involved a Second Request. The decision to issue Second Requests, 
which requires approval from Agency leaders,\265\ has significant 
consequences. As discussed in section III.A.3., the costs and delays 
associated with Second Requests are substantial, and for any no-action 
Second Request investigation, those burdens may be avoided if 
sufficient information were available at an earlier time in the 
investigation, including in the HSR Filing. For the Agencies, there are 
significant consequences as well. A Second Request investigation 
requires a team of lawyers, economists, and support staff. The broader 
the scope of the investigation (e.g., covering many different products 
or many different geographic areas), the more staff must be assigned. 
As a result, avoiding unnecessary or unfocused Second Requests would 
provide a benefit to the parties, the Agencies, and any third parties 
contacted during the investigation.
---------------------------------------------------------------------------

    \265\ For the Commission, the Chair issues the Second Requests; 
for the Antitrust Division, that determination is made by the 
Assistant Attorney General. 15 U.S.C. 18a(c)(1)(A).
---------------------------------------------------------------------------

    Based on this experience, the Commission believes that the final 
rule will provide a substantial benefit to the Agencies, the parties, 
and third parties by reducing the number of Second Requests issued or 
narrowing the scope of any Second Request. A more efficient process 
that better identifies transactions that do not require additional 
investigation benefits parties as well.
    Many commenters asserted that the Commission failed to take into 
account the increased burden on staff of reviewing additional 
information in HSR Filings. Several stated that given the purportedly 
huge volume of materials generated by the new requirements, especially 
the expanded document demands, Agency staff would be overwhelmed, 
thereby undermining effective screening even for deals they could 
evaluate with current information requirements. One commenter estimates 
that the proposed rule would result in over 177,000 additional staff 
hours (100 full-time attorneys) needed to review the information 
contained in the revised HSR Filing. On the other hand, other 
commenters asserted that the proposed changes would modernize the 
premerger process to better account for the evolving complexities of 
today's mergers and address potential shortcomings of past merger 
review that have become clearer in retrospect.
    Based on its own experience and in light of the significant 
reductions contained in the final rule as compared to the proposed 
rule, the Commission believes that the additional information required 
by the final rule would result in an overall reduction in the number of 
staff hours spent collecting additional information from all sources, 
including the parties, as well as a reduction in associated burdens of 
reviewing and processing that information. For example, while Agency 
staff may need to review the transaction documents and additional 
information submitted with an HSR Filing, they would spend less time on 
more costly and time-consuming tasks such as conducting independent 
research or outreach to third parties, preparing voluntary information 
requests, reviewing additional information submitted by the parties, 
drafting Second Requests, reviewing voluminous submissions from the 
parties in response to those requests, and preparing internal reports 
and memoranda for review by managers. The Commission also acknowledges 
that it may incur minimal additional administrative and support system 
costs associated with the revised HSR Form,

[[Page 89254]]

such as technology costs to process and host additional documents and 
filings. Overall, however, the work of Agency staff will be more 
efficient and effective as they will be able to more readily and 
accurately identify those transactions that pose a risk that they may 
violate the antitrust laws.
    In sum, under the existing HSR reporting requirements, inadequate 
information in the HSR Filing leads to significant time and effort for 
Agency staff, third parties, and merging parties even for transactions 
that do not warrant a legal challenge. These costs (and associated 
delays) represent an opportunity for the Agencies to realize benefits 
from the enhanced information requirements contained in the final rule 
by (1) streamlining the Agencies' internal processes and resources 
devoted to merger review; (2) reducing costly delays for certain 
parties whose deals are eventually consummated; and (3) reducing the 
burden on third parties to collect information for premerger screening. 
By requiring more of the information to be collected upfront from the 
parties as part of the HSR Filing, the final rule will reduce some of 
the costs and effort currently associated with premerger review for 
transactions that the Agencies ultimately determine do not require 
enforcement action.
    The Commission acknowledges that for some filings, Agency staff 
will still engage in some of these activities to verify the information 
in the HSR Filing and reach out to stakeholders who may be affected by 
the transaction. However, the Agencies will not need to spend as much 
time and resources to acquire the basic business information about the 
parties and the transaction that is needed to evaluate the antitrust 
risk, because more of that basic information will now be contained in 
the HSR Filing. The reduction in those information-acquisition costs 
will allow resources to be redeployed to other critical tasks of the 
Agencies, such as investigating other mergers (including consummated 
mergers) or other antitrust violations. In addition, any reduction in 
the costs and burdens imposed on third parties during no-action 
investigations is a direct benefit of the final rule.
2. Costs
    The Commission anticipates that the incremental costs attributable 
to the final rule will primarily fall on individuals and companies who 
must make HSR Filings because they are a party to a reportable 
transaction. The final rule may have effects on other individuals or 
companies who are considering a reportable transaction but do not 
eventually pursue one, although these costs will be indirect and hard 
to quantify. This indirect effect does not include those potential deal 
partners who decide not to pursue an unlawful transaction because the 
final rule decreases the likelihood that it will go undetected. That 
is, any improvement in the Agencies' ability to detect potentially 
illegal mergers is a benefit of the final rule and cannot reasonably be 
viewed as imposing unnecessary or unreasonable costs on parties 
contemplating a reportable transaction. The final rule may also impose 
additional costs on the Agencies to ensure compliance and review 
additional information contained in the HSR Filing, although these 
costs will be more than offset by other reductions in costs, as 
discussed above.
    For those individuals and companies that must submit an HSR filing, 
the burden of complying with the final rule will primarily consist of 
the additional cost of completing and submitting an HSR Filing to the 
Agencies. This includes internal costs (for employees tasked with 
collecting and reviewing relevant information as well as in-house 
compliance attorneys and other non-legal support staff) and external 
costs (including outside experts hired to assist in preparing the HSR 
Filing such as counsel expert in HSR rules or other tasks that filers 
chose to outsource to a third-party service provider). The majority of 
filers hire experienced attorneys who are familiar with current HSR 
Rules. The Commission expects that filers will continue to do so and 
that those professionals (and other legal and technical support staff) 
will require some additional time to prepare filings.\266\ Current 
requirements also require knowledgeable personnel from the filing 
entity to collect and prepare data and documents for the Filing, and 
the Commission expects that these individuals will expend some 
additional time and effort to comply with the final rule.
---------------------------------------------------------------------------

    \266\ The Agencies receive a small number of filings from 
companies or individuals who do not hire attorneys to prepare their 
HSR Form.
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    The Commission anticipates that the final rule will result in 
incrementally higher direct costs for all filers.\267\ As discussed 
above, some of these information acquisition costs are currently borne 
by third parties and the Agencies and will now be borne directly by the 
filers themselves. Incremental direct costs associated with the final 
rule will be borne primarily by those UPEs (and the entities they 
control) that must submit an HSR Filing, though some portion of the 
costs may be borne by officers or directors of entities within the 
acquiring person that will have to provide information to the acquiring 
person related to other entities for which they serve as officers and 
directors to complete the HSR Filing.\268\ Direct costs vary depending 
on a number of factors that are different for each reportable 
transaction: the type of interest being acquired; the complexity of the 
transaction; the complexity of the UPE and its related entities and 
investors; the scope and number of existing business relationships 
between the merging parties; whether the filer is the acquiring or the 
acquired person; and the size and scope of each filer's business 
operations. Generally, costs are lower for simple transactions (such as 
for open market purchases of stock or conversion of stock options), for 
acquisitions of non-controlling stakes, and for acquisitions of control 
where the merging parties do not have an existing business 
relationship. Costs are highest for strategic acquisitions of a 
competitor or of a key supplier or customer where the Agencies must 
engage in a thorough review and are more likely to engage in an in-
depth investigation including through the issuance of Second Requests. 
The key variable that is likely to determine the monetary impact of the 
final rule on any particular filer is the level of the antitrust risk 
associated with the reported transaction. The Commission believes that 
this outcome is consistent with the legislative intent in imposing 
mandatory premerger review as a means of preventing illegal mergers 
prior to consummation.
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    \267\ As compared to the current rules, the proposed rule 
contained modifications that eliminated certain information 
requirements that the Commission has determined no longer provide a 
benefit for premerger screening. These reductions in burden are 
incorporated in the final rule and are reflected in the analysis of 
incremental costs associated with the final rule.
    \268\ Sometimes, the parties will allocate the costs associated 
with premerger review between them by contract. These provisions are 
typical for strategic acquisitions where the parties expect some 
level of antitrust scrutiny and often require the acquiring party to 
compensate the acquired party for costs related to the HSR Filing as 
part of the purchase price. In conducting its cost assessment, the 
Commission has assumed that each filer is responsible for its own 
costs.
---------------------------------------------------------------------------

    The Commission expects that the incremental increase in costs 
associated with the final rule will be most significant for the first 
HSR Filing prepared by a given filer because there will be costs 
associated with becoming familiar with the new reporting Form and 
Instructions and to gather the required information about the filer's 
operations. In addition, the Commission believes that some filers (or 
their counsel) will find it efficient to

[[Page 89255]]

automate some portion of the reporting process, which will increase the 
burden of the first filing. For any subsequent HSR filing related to 
another acquisition, these repeat filers will incur lower costs because 
some of this prior work will not be necessary to the extent that they 
made investments to put processes in place to maintain or automate the 
collection of relevant business information. In other words, any 
estimated incremental costs are expected to decline over time.
    Nothing in this rulemaking affects the filing fees for making an 
HSR Filing, which are mandated by Congress and adjusted by the 
Commission annually.\269\ While the final rule does not alter these 
HSR-related costs, recent congressional changes in these fees use an 
approach that takes into account the size of the reportable transaction 
and the size of the parties involved. Last year, Congress revised the 
schedule of HSR filing fees, creating a new fee structure with five 
tiers, which increased fees for some transactions while reducing them 
for others.\270\ Specifically, the new fee structure lowered fees for 
some mergers valued under $500 million and increased fees for 
transactions valued at $1 billion and more. Prior to this law, HSR 
filing fees had a three-tier structure, with thresholds adjusted every 
year. The purpose of creating a new five-tier fee structure was two-
fold: to provide the Agencies with additional resources to review 
mergers and enforce the antitrust laws, and to better reflect that 
reviews of larger mergers generally consume more Agency resources.\271\ 
Effective February 28, 2023, the Commission implemented the new fee 
levels, and on March 6, 2024, the Commission published the adjusted 
fees for 2024.\272\
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    \269\ Each year, the thresholds that determine reportability 
under the HSR Act are adjusted based on changes in the gross 
national product, 15 U.S.C. 18a note, while filing fees are adjusted 
in line with the Consumer Price Index, Public Law 117-328, 136 Stat. 
5967-68, Div. GG, Title I, sec. 101.
    \270\ Public Law 117-328, 136 Stat. 5967, Div. GG, Title I.
    \271\ H.R. Rep. No. 117-493 pt. 1, at 3-5 (2022).
    \272\ See Fed. Trade Comm'n, ``New HSR thresholds and filing 
fees for 2024,'' Fed. Trade Comm'n Competition Matters blog (Feb. 5, 
2024), https://www.ftc.gov/enforcement/competition-matters/2024/02/new-hsr-thresholds-filing-fees-2024.
[GRAPHIC] [TIFF OMITTED] TR12NO24.038

    The Commission has identified significant deficiencies in existing 
information requirements, and those gaps are hindering the Agencies' 
ability to obtain key facts needed for an initial assessment of whether 
the transaction may violate the antitrust laws and to determine whether 
to issue a Second Request. See section II.B. Congress authorized the 
Commission to issue rules to collect information that is necessary and 
appropriate for the Agencies to conduct premerger review within the 
statutory time frame. The final rule requires filers to gather 
information relevant for screening the transaction and results in 
relatively higher costs for those reported transactions that are more 
likely to pose competition issues, including transactions with complex 
party or deal structures, or transactions involving two entities with 
many overlapping business operations or existing business relationships 
in the supply chain, or transactions in which the parties have a 
history of acquisitions in the same business lines. This is consistent 
with the HSR Act's focus on the largest transactions, which are often 
the most complex, and the overall intent to reduce cost and delay for 
reportable transactions other than those that may violate the antitrust 
laws.
    As discussed in more detail in section V.D., the Commission 
believes that most filers will not experience delays because the final 
rule requires collection of business information that should be readily 
available or collected as part of each filer's due diligence efforts 
related to the transaction. Filers who would prefer to submit a letter 
of intent or other preliminary agreement that is no longer compliant 
with the final rule may need to come to an agreement on more details of 
the planned-for transaction. But the Commission has determined that 
this represents less than 10 percent of current filers, meaning that 
most parties are already coming to agreement on the key terms that are 
required by the final rule even if their transaction documents are 
referred to as a letter of intent.
a. Calculation of Direct Costs
    To estimate the potential increase in direct costs for filers 
attributable to the changes in the final rule, the Commission 
calculated the average compliance burden by conducting a survey of 
experienced HSR attorneys who now work for the Agencies. See section 
VIII. That survey revealed a range of estimated costs for each new 
information requirement in the final rule. These estimates include the 
amount of additional time required from a variety of knowledgeable 
individuals, including, for example, HSR specialists at law firms hired 
to prepare the Filing as well as individuals associated with the UPE 
who collect and verify the business information and responsive 
documents, as well as costs associated with any outside vendors hired 
to complete the HSR Filing, such as data vendors.
    As explained in section VIII., the Commission estimates that the 
amendments contained in the final rule would increase the time required 
for a filer to prepare an HSR Filing, on average, 68 hours, resulting 
in

[[Page 89256]]

additional costs of approximately $39,644 per filing on average.\273\ 
The Commission believes that this level of direct costs is small in 
relation to other merger costs. Indeed, these total costs are small in 
relation to the value of the deals that must be reported under the Act. 
The current minimum size for a reportable transaction is $119.5 
million; as outlined in section VIII, for FY 2023, the Commission 
estimates that the total direct costs associated with the final rule 
would have been only slightly more than the value of a single 
reportable transaction. Moreover, the Commission believes that these 
direct costs may be overstated and should decline over time as parties 
and their lawyers become more familiar with the requirements of the 
final rule. Finally, these direct costs do not take account of the 
substantial benefits to the Agencies, the parties, and third parties 
generated from a more efficient premerger review process that shifts 
some of the burden of information collection and reporting away from 
third parties to merging parties and allows the Agencies to obtain 
critical business facts earlier in the initial waiting period, which in 
turn helps mitigate avoidable costs associated with Second Requests 
that might have been avoided or that were not tailored to areas of 
competitive concern due to insufficient information in the HSR Filing.
---------------------------------------------------------------------------

    \273\ As further described in section VIII, the Commission 
estimates the range at 10 to 121 additional hours, or approximately 
an additional $5,830 to $70,500 per filing, with the highest costs 
borne by the acquiring person in a transaction with overlapping 
products or supply relationships in the target's industry.
---------------------------------------------------------------------------

    In addition, the costs associated with completing an HSR Filing are 
often minimal compared to other fees associated with mergers and 
acquisitions. Based on publicly available data, the 20 largest M&A 
transactions during 2021 and 2022 ranged in size from $1.44 billion to 
over $70 billion, with average deal size of $10.6 billion.\274\ Using 
the current Congressionally mandated HSR filing fees associated with 
deals of this size, the average HSR filing fee for these transactions 
would be $1,198,500, ranging from $415,000 to $2,335,000. For 18 of 
these deals, the fees paid by the target to financial advisors are 
available from public sources. These fees varied considerably, ranging 
from $800,000 to $96 million. In 14 out of these 18 cases, the fees 
paid by the targets to just their financial advisors were more than ten 
times the estimate by one commenter of the average total cost per 
filing for completing the HSR Form ($437,314) \275\ and in five cases, 
fees to financial advisors were more than 100 times of that estimate. 
In any of these cases, financial adviser fees are several multiples of 
the estimated average new costs associated with the final rule of 
$79,288 per transaction ($39,644 + $39,644) based on the Commission's 
estimates. See section VIII. These advisor fees are instructive in 
demonstrating that HSR filing fees and HSR-related transaction costs 
for most transactions do not comprise a significant share of total 
transaction costs and therefore would have minimal impact on costs of 
dealmaking across the economy.\276\
---------------------------------------------------------------------------

    \274\ See ``Deal Analytics,'' Bloomberg L. (last viewed Apr. 3, 
2024) (Prologis Inc.'s June 13, 2022 acquisition of Duke Realty 
Corp. (advisor fees over $135M); Thermo Fisher's Apr. 15, 2021 
purchase of PPD Inc. (advisor fees over $70M); sale of Twitter Apr. 
25, 2022 (advisor fees over $50M)). See also Comment of U.S. Chamber 
of Com., Doc. No. FTC-2023-0040-0684 at 20-21 & Fig. 3.
    \275\ Comment of U.S. Chamber of Com., Doc. No. FTC-2023-0040-
0684.
    \276\ In conjunction with the passage of the Merger 
Modernization Act, the Congressional Budget Office estimated the 
budgetary impact of changing merger filing fees for transactions 
reported under the HSR Act. CBO estimated that the bill H.R. 3843 
(which reflected fee levels that were eventually enacted) would 
increase HSR filing fees by $1.4 billion over the 2023-2027 period. 
Cong. Budget Office, Cost Estimate, H.R. 3843, Merger Filing Fee 
Modernization Act of 2021 3 (Sept. 27, 2022), https://www.cbo.gov/publication/58527. CBO estimated that the aggregate cost of the 
private-sector mandate would be about $325 million in each of the 
first five years. Id.
---------------------------------------------------------------------------

    Another survey of middle-market investment bankers, brokers and 
other advisors reports that merger advisory fees for deals valued up to 
$150 million come in the form of retainers, monthly or hourly charges, 
or success fees, which are paid if the deal closes.\277\ For deals in 
the $100 to $150 million range, namely those most likely to be 
reportable under the HSR Act, success fees paid to financial advisors 
represented 1 to 2 percent of deal value, or $1,500,000 to $3,000,000 
for a $150 million deal. As with higher valued transactions, the other 
merger-related costs for transactions on the lower end of HSR 
reportability dwarf the costs associated with the final rule.
---------------------------------------------------------------------------

    \277\ Firmex, M&A Fee Guide 22/23 (N. Am. ed., 2022-23).
---------------------------------------------------------------------------

    One commenter commissioned a report (``the Kothari Report'') that 
projected that the direct cost of the proposed changes may be nearly 
seven times greater than the Commission estimated for the proposed 
rule, after accounting for both direct monetary costs and further costs 
to the economy.\278\ The Kothari Report critiqued the Commission's 
methodology of calculating direct costs in the NPRM's PRA analysis in 
several respects. The Commission considered these comments and those of 
other commenters and, as discussed in section VIII, made adjustments to 
its cost estimate methodology for the final rule.
---------------------------------------------------------------------------

    \278\ Comment of U.S. Chamber of Com., Doc. No. FTC-2023-0040-
0684 at 21. Professor Kothari's report is attached as an annex to 
this comment. See id. at 54-85 (hereinafter ``Kothari Report'').
---------------------------------------------------------------------------

    As a result, the Commission disagrees that the final rule will 
impose the level of costs presented in the Kothari Report for several 
reasons. First, the Commission made significant modifications to all 
aspects of the proposed rule in response to concerns raised in this 
report and in other comments. As a result, the estimates contained in 
the Kothari Report reflect costs for a very different rule, one that 
the Commission has determined not to adopt. The Kothari Report relied 
on a survey of experienced practitioners and so did the Commission. The 
survey of practitioners relied on in the Kothari Report estimated that 
the proposed rule would require an additional 242 hours of time from 
outside counsel and internal personnel. While the Commission's estimate 
was much lower, that comparison is no longer relevant because the 
Commission is not adopting the rule it proposed. Instead, the 
Commission is adopting a rule that is substantially more modest in 
scope, one that aligns compliance costs as much as practicable with the 
risk that reported transaction is one that requires a closer look.
    Moreover, even if the Commission's estimate of the economic impact 
of the proposed rule was flawed, the Commission made improvements to 
the methodology it used to estimate the additional effort that will be 
required of filers to comply with the final rule. As discussed in 
section VIII, the Commission has accounted for the same costs in its 
own estimates, such as the time required from outside counsel, in-house 
counsel, and business personnel as well as costs associated with other 
services such as data vendors. The Commission believes that its 
estimates of the economic impact of the final rule are reliable and 
sufficient for it to determine that the final rule is a reasonable 
exercise of its rulemaking authority even if it imposes modest costs on 
overall dealmaking and in light of the benefits of the final rule for 
efficient and effective detection of illegal mergers via mandatory 
premerger review.
    Much of the difference between the Commission's estimate and the 
one contained in the Kothari Report is attributable to the higher 
hourly rate applied to the required hours, which the Kothari Report 
suggests is more likely

[[Page 89257]]

$936 per hour, and a category of ``other'' costs that is nearly one-
third of the total projected costs. The Commission believes that its 
estimates of incremental costs associated with the final rule are more 
consistent with the range of filings and filers based on its experience 
receiving thousands of filings every year and the merger investigations 
conducted by the Agencies. See section VIII. The Commission has no 
basis to inflate the overall costs associated with the final rule 
beyond what was estimated by those with experience filling out HSR 
Forms for a variety of filers and transactions. As with prior 
rulemakings, if the Commission determines that certain requirements in 
the final rule are not generating a benefit to the Agencies' 
preliminary antitrust assessment in light of the associated costs, the 
Commission can consider adjusting those requirements in future 
rulemakings.
    The Commission acknowledges that the incremental costs associated 
with this rulemaking are more material than its prior rulemakings, 
which frequently reduced the burdens associated with submitting an HSR 
Form. In fact, the current Form is very similar to the original 1978 
version in its scope and content. But the cumulative effect of the 
economy-wide changes described in section I. have seriously undermined 
the Agencies' ability to engage in extensive fact-gathering to 
compensate for deficiencies in the HSR Form. The effort required by the 
Agencies to conduct premerger review in today's economy threatens to 
render the process ineffective for its specific purpose--detecting and 
preventing illegal mergers before they cause harm that cannot be 
undone. The status quo does not allow the Agencies to quickly identify 
which transactions may violate the antitrust laws, causing them to 
spend too much time on ones that likely do not while at the same time 
lacking sufficient information to identify ones that do. With this 
rulemaking, the Commission is updating the Agencies' tools for 
detecting illegal mergers during premerger review to match the size and 
complexity of reportable transactions, restoring rigor and efficiency 
to the task of premerger review.
    The Commission disagrees with other assertions made in the Kothari 
Report or finds them unpersuasive and not entitled to significant 
weight. The report focuses on the small number of transactions that 
receive a Second Request and ignores the benefits to filers from the 
Agencies reviewing and dispensing with non-problematic transactions 
with greater efficiency and assurance than before. The Kothari Report 
also ignores the benefits to the public from the Agencies' ability to 
more effectively identify and investigate potentially problematic 
transactions based on the availability of better initial information 
about potential competitive harms. The Commission discusses these and 
other benefits of the final rule in section III.C.1.
b. Other Costs Not Attributable to the Final Rule
    Commenters raised concerns that the proposed rule would lead to 
other costs for those seeking to engage in M&A activity. The Kothari 
Report predicted that the proposed rule would so increase the costs of 
M&A that it would reduce the number of mergers, including ones that 
would be beneficial for consumers, innovation, investors, and the 
economy. Other commenters similarly argued that the Commission's 
objective is to stop all mergers by making them too costly to pursue. 
The Commission disavows any intention to stop all mergers by imposing 
unreasonable costs on those that are subject to premerger review and 
disagrees that the final rule will have this effect. Moreover, the 
commenters provided only speculation that the proposed rule would deter 
or delay some deals merely by increasing the costs associated with 
making an HSR Filing as compared to other factors that more directly 
affect M&A activity, such as interest rates. In the absence of actual 
data from commenters, the Commission must make a predictive judgment 
based on the evidence available to it.\279\ As noted in section 
III.C.1., the evidence available to the Commission indicates that the 
Agencies' antitrust enforcement saves consumers and other market 
participants billions of dollars a year, and in light of known 
information deficiencies outlined in section II.B., there are strong 
indications that closing known information gaps will allow the Agencies 
to better identify additional transactions that may also violate the 
antitrust laws if consummated. The final rule does not impose new 
incremental costs that could plausibly deter beneficial or 
competitively benign acquisitions, particularly after the additional 
revisions narrowing the requirements in the final rule are taken into 
account.
---------------------------------------------------------------------------

    \279\ See, e.g., Huawei Techs. U.S., Inc. v. FCC, 2 F.4th 421, 
454 (5th Cir. 2021) (``Huawei does not object to specific cost 
calculations such as these but to the agency's failure to consider 
additional, difficult-to-measure costs about which the FCC lacked 
hard data, such as `the broader economic costs of depriving 
Americans of access to Huawei's market-leading technology.' The 
agency's decision to base its analysis instead on the replacement 
cost estimates before it does not render its analysis 
unreasonable.''); FCC v. Prometheus Radio Project, 592 U.S. 414, 427 
(2021) (``The APA imposes no general obligation on agencies to 
conduct or commission their own empirical or statistical studies. . 
. . In the absence of additional data from commenters, the FCC made 
a reasonable predictive judgment based on the evidence it had.'').
---------------------------------------------------------------------------

    Relatedly, other commenters raised arguments about additional macro 
impacts of expanding information requirements for HSR Filings, such as 
concerns about the impact on institutional investors, including retail 
investors, by indirectly impacting the performance of investment 
portfolios. Some said they were concerned generally about the chilling 
effect on M&A. Others raised concerns that changing the status quo 
would create market uncertainty, citing increased market, labor, and 
operational volatility. Several of these commenters raised specific 
concerns that acquisitions in their particular sector were typically 
not challenged or even reviewed closely by the Agencies. Concerns about 
disproportionate impact for certain sectors or types of filers are 
addressed in section III.D. below.
    The Kothari Report states that delays caused by the additional time 
that will be required to prepare a HSR filing could kill deals and lead 
parties to abandon transactions. It also stated that delay breeds 
uncertainty in product, labor, and capital markets, enabling 
competitors to raid customers and staff, and that delay would lead to 
lost economic efficiencies that are realized through mergers. For these 
propositions, the Kothari Report cites an advisory committee report by 
the U.S. Department of Justice issued in 2000. While that committee 
report explains how delays can influence pending mergers, the cited 
portion is discussing international jurisdictions that do not impose 
strict timelines or which have prolonged agency investigations into 
mergers \280\--this rule does not contemplate either. In addition, as 
discussed above, the final rule will allow the Agencies to reduce the 
number of Second Requests or narrow their scope, significantly reducing 
delays in many instances.
---------------------------------------------------------------------------

    \280\ Int'l Competition Pol'y Advisory Comm., Final Report to 
the Attorney General and Assistant Attorney General for Antitrust 
Ch. 3 (2000), https://www.justice.gov/atr/final-report.
---------------------------------------------------------------------------

    Moreover, the Commission disagrees that any delays and incremental 
costs associated with an HSR Filing could have a significant impact on 
overall M&A activity. Deal volumes fluctuate, often substantially, from 
year to year, and these fluctuations are reflected in the number of HSR 
Filings received by the Agencies. But these fluctuations are 
attributable to many economic factors,

[[Page 89258]]

including the cost of capital. Research relied on by one commenter 
provides evidence that a major driver of uncertainty in M&A activity 
generally is stock market volatility.\281\ This is consistent with the 
Agencies' experience. Figure 1 reflects the volatility of HSR-
reportable transactions, and the Commission believes that much of this 
volatility is attributable to changes in interest rates and other macro 
factors that drive M&A activity generally, unrelated to premerger 
review or the specific information collected in an HSR Filing.
---------------------------------------------------------------------------

    \281\ Comment of U.S. Chamber of Com., Doc. No. FTC-2023-0040-
0684 (Kothari Report ] 57 n.46, citing Vineet Bhagwat et al., ``The 
Real Effects of Uncertainty on Merger Activity,'' 29 Rev. Fin. 
Studies 3000-34 (2016)).
---------------------------------------------------------------------------

    The Kothari Report also asserted that M&A activity is beneficial to 
the economy, and that any potential delay or chilling of acquisitions 
due to the final rule would lead to significant loss of value creation. 
But the evidence cited to support these concerns is inapposite. For 
instance, a paper cited for support that acquired plants become more 
productive points to credit spreads and aggregate market valuation as 
being major drivers for merger activity.\282\ Similarly, another source 
relied on a stylized, theoretical model of mergers that does not 
provide any empirical evidence about the benefits of M&A, applying the 
theoretical model to a situation where there is no M&A at all to 
calculate the benefits of M&A.\283\ There is no reason to believe that 
the final rule will significantly chill M&A activity. Furthermore, in 
the model, the author finds that preventing a small fraction of deals 
over $1 billion has little effect on aggregate efficiency, and that due 
to the inefficiencies in the M&A market, a policy of blocking a fixed 
number of deals regardless of antitrust concerns can improve aggregate 
outcomes. Thus, the paper actually demonstrates that preventing some 
deals can improve economic performance. The paper does not provide a 
basis for the Commission to conclude that changes of the magnitude 
contained in the final rule threaten economic efficiencies gained 
through M&A activity generally.
---------------------------------------------------------------------------

    \282\ Comment of U.S. Chamber of Com., Doc. No. FTC-2023-0040-
0684 (Kothari Report at 24 n.47, citing Vojislav Maksimovic et al., 
``Private and Public Merger Waves,'' 68 J. Fin. 2177-2217 (2013).
    \283\ Id. (Kothari Report at 25 n.49, citing Joel M. David, 
``The Aggregate Implications of Mergers and Acquisition,'' 88 Rev. 
Econ. Studies 1796-18 (2021)).
---------------------------------------------------------------------------

    Another paper cited in the Kothari Report, which purports to 
support the proposition that any discouragement of pending mergers 
results in significant value loss, is not on point.\284\ First, this 
final rule is not intended to and should not discourage mergers--the 
final rule merely requires companies who are already submitting HSR 
Filings to submit more information with their filings. In the paper's 
survey of past empirical assessments of mergers, it highlights evidence 
that mergers that create market power yield no better performance, and 
sometimes worse. That assessment is wholly consistent with the 
Commission's efforts in this final rule: to collect information that 
better allows Agency staff to identify potentially anticompetitive 
mergers. The Kothari Report mischaracterizes this study as supporting 
the value of all mergers. In fact, the author concludes that mergers 
are not universally accretive in value, stating: ``[T]he buyer in M&A 
transactions must prepare to be disappointed. It is also true that most 
transactions are associated with results that are hardly consistent 
with optimistic expectations. Synergies, efficiencies, and value-
creating growth seem hard to obtain. It is in this sense that deal 
doers' reach exceeds their grasp.'' \285\ Last, it should be noted the 
study is dated 2002, and the latest mergers it analyzes are from 1999, 
whereas the Commission crafted this final rule to address changes it 
has observed in more recent transactions that reflect current 
dealmaking dynamics discussed in section II.B.
---------------------------------------------------------------------------

    \284\ Id. (Kothari Report at 26 n.52, citing Robert F. Bruner, 
``Does M&A Pay? A Survey of Evidence for the Decision-Maker,'' J. 
Applied Fin. 48-68 (Spring/Summer 2002)).
    \285\ See Bruner, supra note 284, at 65.
---------------------------------------------------------------------------

    Indeed, one goal of this rulemaking is to ensure that any benefits 
from M&A are realized as quickly as possible and that the costs of 
anticompetitive mergers do not materialize. The Commission acknowledges 
that there are benefits generated from M&A activity generally, and that 
those benefits flow broadly throughout the economy. But the Agencies 
are not tasked with determining whether an acquisition is 
``beneficial'' in any sense. The challenge given to the Agencies by 
Congress is to distinguish which acquisitions, among the many thousands 
they review each year, may violate U.S. antitrust law. For this task, 
they need certain facts that would reveal potential antitrust risks. 
For instance, event studies may indicate that M&A can result in 
significant value creation, but these outcomes may be the result of 
genuine synergies or they can also occur due to the anticompetitive 
creation of market power.\286\ This highlights the very purpose of 
mandatory premerger review: to subject a certain number of larger 
acquisitions to a quick and thorough antitrust review prior to 
consummation solely for the purpose of identifying the few that need 
in-depth investigations. Throughout the history of the HSR Act, the 
Agencies have investigated just a small fraction of deals through the 
issuance of Second Requests. The Commission believes that the final 
rule will render premerger review more effective and efficient in 
identifying those mergers that may lead to anticompetitive harm, and 
that the small incremental costs and delays associated with the final 
rule are necessary and appropriate and consistent with the scheme 
established by Congress.
---------------------------------------------------------------------------

    \286\ W. Kip Viscusi et al., Economics of Regulation and 
Antitrust 217-18 (5th ed. 2018) (horizonal mergers raise the 
possibility of creating market power and the possibility of 
achieving socially beneficial cost savings).
---------------------------------------------------------------------------

    Moreover, to the extent these concerns arise from a belief that 
disclosure of additional relevant information to the Agencies will mean 
that a reported transaction is more likely to be challenged or 
investigated, that outcome fulfills the purpose of premerger review. As 
discussed above, to the extent that the HSR Act itself requires 
reporting for a large number of transactions that may never violate the 
antitrust laws, that has always been a feature of HSR premerger 
notification. Congress recently reaffirmed that particular tradeoff by 
imposing new disclosure requirements for foreign subsidies on all 
filers while not adjusting existing filing obligations.
    In light of these considerations, the Commission does not believe 
that the final rule will have an undue effect on dealmaking, including 
by discouraging transactions that have little or no antitrust risk. The 
expected costs of this final rule are very small relative to the 
overall value of reportable transactions, the level of M&A activity in 
the United States, and the size of the overall economy. The benefits of 
the final rule are expected to be proportional to reductions in the 
errors in detection of illegal mergers that this final rule addresses.
    Each year, the Agencies review reported transactions with an 
aggregate dollar value of nearly $2 trillion, on average.\287\ Yet this 
is just a fraction of the level of M&A activity in the United States: 
as reflected in Table 1, over 80 percent of mergers completed in the 
United States are not reported to the Agencies. The costs associated 
with the

[[Page 89259]]

final rule are very small in comparison to the U.S. economy, which was 
valued at nearly $28 trillion in 4Q 2023.\288\ Any improvement in the 
Agencies' ability to detect illegal mergers prior to consummation will 
lead to benefits that will help reduce antitrust harm from illegal 
mergers and improve the efficiency and effectiveness of premerger 
review. The greater the improvement in detection and in avoiding the 
costs and burdens of acquiring information from sources other than the 
parties, the greater the benefits. The Commission expects that the 
costs from the final rule will be so small in relation to the total 
value of reported transactions, to the level of U.S. M&A activity in 
general, or to the U.S. economy that there will be negligible indirect 
effects, if any, on dealmaking, innovation, investments, and growth.
---------------------------------------------------------------------------

    \287\ See HSR Annual Reports for FY 2014 through 2023, available 
at Fed. Trade Comm'n, Annual Reports to Congress Pursuant to the 
Hart-Scott-Rodino Antitrust Improvements Act of 1976, supra note 56.
    \288\ U.S. Bureau Econ. Analysis, Gross Domestic Product 
(updated Aug. 29, 2024) (Q2 2024 $28,652,337,000,000) (retrieved 
from FRED, Fed. Reserve Bank of St. Louis), https://fred.stlouisfed.org/series/GDP.
---------------------------------------------------------------------------

    Nonetheless, the Commission has narrowed its proposals so that the 
final rule limits the incremental costs for filers as much as 
practicable while still generating additional information that is 
critical for the initial antitrust assessment in light of changes in 
market realities and information gaps outlined in section II.B. The 
need to modernize premerger review to adjust to market changes is 
compelling, and the Commission is acting within its statutory mandate 
to determine what information is required to conduct premerger 
screening that is appropriate in the modern economy.
    The Kothari Report also commented that there is additional 
uncertainty for potential filers arising from the Agencies turning away 
from the decades of practice under the current rules. Any change brings 
with it some level of uncertainty and will require adjustment by all 
those involved. As with other adjustments to the HSR rules in the past, 
the Commission's PNO staff will be providing guidance and assistance to 
filers who have questions about the final rule. But the Commission 
believes that the uncertainty related to the new rule is a short-term 
issue that will be resolved after the final rule goes into effect. The 
commenters are overstating the effect of uncertainty on the economy. 
Not only are these concerns temporary; they ignore the greater benefits 
of a more efficient premerger review process that may result in a 
faster resolution of some deals, including by reducing the number of 
Second Requests and narrowing others. The goal of this rulemaking is to 
provide sufficient information so that the Agencies can quickly and 
confidently distinguish those transactions that present little or no 
risk that they may violate the antitrust laws, and identify those 
transactions that require a more searching investigation. As discussed 
above, the Commission believes that the final rule will reduce the 
delays that are attributable to information deficiencies.
    Moreover, the Commission disagrees that the final rule will lead to 
greater uncertainty about the outcome of the Agencies' premerger 
review. This rulemaking does not (and cannot) affect the ultimate 
determination of whether a transaction violates the antitrust laws. A 
Federal court will make that determination for any transaction that the 
Agencies or others seek to block prior to consummation under prevailing 
legal standards.\289\ Any ``uncertainty'' about the eventual outcome of 
premerger review is directly related to whether the merger violates the 
antitrust laws and whether the Agencies are able to detect that risk 
when conducting a premerger assessment. Premerger review is simply the 
tool Congress gave to the Agencies to detect those mergers that may 
violate the law so that the Agencies can take steps to prevent their 
consummation. On the margin, the Commission believes that the final 
rule will reduce uncertainty about the outcome by providing more 
transparency to the parties (and the public) about the information the 
Agencies rely on to make their assessment that a transaction may 
violate the antitrust laws. To the extent that the commenters are 
concerned that disclosing more information reveals a risk to 
competition that the current rules do not, that additional 
``uncertainty'' is a benefit of the final rule as a result of improved 
detection and possibly greater deterrence achieved through more 
effective premerger review.
---------------------------------------------------------------------------

    \289\ In the Agencies' experience, when faced with an imminent 
or pending legal challenge to the legality of the transaction, many 
parties chose to abandon their merger plans rather than incur the 
additional legal costs associated with defending an injunction 
action in Federal court. This decision is solely in the discretion 
of the parties and reflects their assessment of litigation risks.
---------------------------------------------------------------------------

    It is not feasible to design premerger review requirements to only 
apply to those mergers that will be found to violate the antitrust 
laws, because there are too many variables that weigh in that outcome. 
Establishing that a merger may substantially lessen competition or tend 
to create a monopoly is highly fact-dependent exercise. The final rule 
represents a reasonable reflection of the Congressional policy to 
screen those mergers in advance to discover the few that may cause 
lasting harm throughout the economy and that should be blocked prior to 
consummation. The Commission has determined that the current HSR 
reporting requirements are not sufficient for the critical task of 
premerger review in light of changes in the economy and in M&A 
activity.\290\
---------------------------------------------------------------------------

    \290\ As discussed in section III.E., other countries have 
adopted other procedures to review proposed and consummated mergers.
---------------------------------------------------------------------------

    Some commenters argued that the proposed rule's expansion of 
reporting requirements would negatively impact investments in biotech 
innovation, or deny startups or other innovative companies an exit 
strategy. Others asserted that the acquisition of a small company by a 
larger one can create efficiencies by bringing together two entities 
that specialize in activities in which they have a comparative 
advantage or provide assistance necessary to bring discoveries to 
market. One study cited by a commenter estimates that it costs 
approximately $2.6 billion to develop and bring a new drug to 
market.\291\ Another commenter noted that startups operate on tight 
budgets and that exits, most often facilitated by an acquisition, 
provide liquidity, enable capital flows through the startup ecosystem, 
and give startups incentives to innovate. The Commission recognizes 
these possible benefits and does not seek to deny them to small 
companies or others, nor does it believe that the HSR reporting 
requirements in this final rule will have any of these negative effects 
on the opportunities for small or startup companies to exit via lawful 
acquisitions. As noted in section II.B.4., many acquisitions of 
startups and small innovator firms are not reportable. For those 
acquisitions that Congress has determined are large enough to be 
reportable, the long-term benefits, both monetary and non-monetary, 
well outweigh the incremental costs associated with the final rule. Not 
surprisingly, acquisitions of this type (and others) declined in 2023 
due to higher interest rates. Nonetheless, the Commission does not 
believe that small companies are so short-sighted that they will forgo 
benefits of a negotiated exit acquisition where the expected benefits 
dwarf HSR filing costs.
---------------------------------------------------------------------------

    \291\ Comment of Biotech. Innovation Org., Doc. No. FTC-2023-
0040-0706 at 7 n.16 (citing Joanna Shepherd, ``Consolidation and 
Innovation in the Pharmaceutical Industry: The Role of Mergers and 
Acquisitions in the Current Innovation Ecosystem,'' 21 J. Health 
Care L. & Pol'y 1, 16 (2018)).
---------------------------------------------------------------------------

    Moreover, the Commission cannot ignore that certain acquisitions 
may also reduce innovation and harm

[[Page 89260]]

competition in violation of the antitrust laws, particularly when 
dominant firms use acquisitions to acquire nascent threats. One 
commenter acknowledged that an environment where a few large companies 
dominate is undesirable, and another noted that smaller companies have 
flexibility, the ability to pivot in response to new evidence, and a 
willingness to accept risk that is rare in larger firms. While 
acquisitions of small firms by large firms can be beneficial, when they 
substantially lessen competition or tend to create a monopoly, they can 
be detrimental to innovation and growth. For these reasons, and as 
discussed in section II.A., Congress tasked the Agencies with carrying 
out premerger review. The Agencies would be remiss if they did not 
fulfill that task by ensuring that the HSR reporting requirements are 
attuned to the risk that large firms are buying up smaller firms in 
order to eliminate nascent and potential threats. For any negotiated 
exit acquisition that must be reported under the HSR Act, the 
incremental costs imposed by the final rule are justified by the 
benefit to the Agencies and the public of assessing the risk that the 
acquisition may violate the antitrust laws.
    To be clear, not all exit partners are denied to small firms due to 
antitrust scrutiny; it is only those whose acquisition would violate 
the antitrust laws. For instance, when a large incumbent seeks to 
acquire a smaller company that constitutes a nascent threat or an 
actual or potential competitor, the Agencies may challenge that merger. 
But in the Agencies' experience, a startup firm deemed valuable by a 
dominant incumbent also enjoys other exit options. For example, the 
Commission recently challenged the proposed acquisition of a license to 
an innovative, early-phase candidate drug treatment for Pompe disease 
by the company with the only FDA-approved treatments for the 
disease.\292\ The parties abandoned the transaction after the 
Commission authorized a lawsuit to block the deal; within five months 
the innovator company had found an alternative partner, negotiated a 
new agreement, completed antitrust review, and closed the deal. 
Moreover, the terms of the new deal appear largely equivalent to what 
the innovator had negotiated with the incumbent.\293\ In other words, 
if the acquisition of a startup by a dominant incumbent carries a risk 
that the Agencies may determine that the transaction is one that may 
violate the antitrust laws, it is likely that there are other buyers 
that do not create those risks and any of those buyers present a viable 
exit strategy via acquisition.
---------------------------------------------------------------------------

    \292\ In re Sanofi Corp., No. 9422 (F.T.C. Dec. 11, 2023) 
(complaint alleging Sanofi's proposed acquisition of an exclusive 
license to Maze Therapeutics' pipeline Pompe therapy would have 
eliminated nascent threat to Sanofi's monopoly) (transaction 
abandoned).
    \293\ Compare Press Release, Maze Therapeutics, ``Maze 
Therapeutics Announces Exclusive Worldwide License Agreement with 
Sanofi for MZE001, an Oral Substrate Reduction Therapy for the 
Treatment of Pompe Disease'' 1-2 (May 1, 2023), https://mazetx.com/wp-content/uploads/2023/04/Maze-Therapeutics-Press-release-MZE001-license-Final-.pdf (proposed license included $150 million upfront 
cash and equity investment, the possibility of another $600 million 
in development, regulatory, and commercial milestone payments, plus 
further royalties), with Press Release, Shionogi & Co., ``Shionogi & 
Co., Ltd. and Maze Therapeutics, Inc. Announce Exclusive Worldwide 
License Agreement for MZE001, a Novel Therapeutic Candidate for the 
Treatment of Pompe Disease'' 1 (May 10, 2024), https://mazetx.com/wp-content/uploads/2024/05/CONFIDENTIAL_Project-Magenta-Press-Release_Final-FINAL.pdf ($150 million upfront fee, plus development, 
regulatory, and commercial milestones, plus further royalties).
---------------------------------------------------------------------------

    The Commission disagrees with the suggestion that incremental 
changes in the information requirements for HSR Filings could have a 
chilling effect in sectors that are especially acquisitive. One 
commenter stated that in 2022 alone, 16,464 U.S.-based VC-backed 
companies received $240.9 billion in funding, yet when these 
transactions were reportable they were rarely investigated. Unless the 
new information requirements in the final rule reveal that a reported 
transaction may violate the antitrust laws, the Commission expects M&A 
activity in these sectors to continue to be subject to other economic 
forces that will determine their viability or profitability.\294\ 
Similarly, claims that an industry or sector is ``unconcentrated'' are 
unavailing. The Agencies must conduct a fact-specific, case-by-case 
assessment of market dynamics to determine whether any particular 
relevant market affected by the merger is concentrated, and that 
assessment is typically left to an in-depth investigation after the 
issuance of Second Requests. Although the Agencies routinely decline to 
investigate transactions where there are many remaining competitors 
post-merger, this is a decision made after assessing relevant facts 
about the transaction including those contained in the HSR Filing, and 
is not based on an advance determination that certain sectors are 
``unconcentrated.''
---------------------------------------------------------------------------

    \294\ See, e.g., Press Release, Nat'l Venture Cap. Ass'n, ``NVCA 
2024 Yearbook: Charting the New Path Forward for Venture Capital'' 
(Apr. 9, 2024) (noting that the U.S. venture capital investment 
ecosystem is still the envy of the world.), https://nvca.org/press_releases/nvca-2024-yearbook-charting-the-new-path-forward-for-venture-capital/.
---------------------------------------------------------------------------

    The Commission has taken into account the additional costs imposed 
on small and innovative companies, as well as those that operate in 
sectors where the Agencies have historically not engaged in merger 
enforcement. As discussed in section II.B.5., the emergence of 
strategic buyers engaged in serial acquisition strategies raises the 
possibility that some sectors that were not concentrated in the past 
are becoming more concentrated, especially through transactions that 
are not subject to premerger review. Thus, the Agencies should not rely 
on assumptions about historical levels of concentration when conducting 
premerger review of a reportable transaction in those sectors. By 
requiring information about prior acquisitions of both the buyer and 
target, the Agencies are given better information about the current 
competitive landscape so that they can make more accurate assessments 
about the potential effect of the filed-for transaction.
    To the extent possible, the Commission has imposed as few 
additional requirements as is practicable in light of the benefits 
derived from more effective premerger review. If, based on experience 
of collecting new information, the Commission finds that some 
requirements generate less-than-expected benefits to the Agencies, it 
can eliminate those requirements in future rulemakings. In many prior 
rulemakings, the Commission adjusted its rules to reduce the burden on 
filers after experience revealed that the information did not provide 
the hoped-for benefit to the Agencies sufficient to justify the costs 
to filers of providing the information.\295\
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    \295\ See, e.g., 76 FR 42741 (July 19, 2011) (elimination of 
requirement to provide Base Year in Item 5); 81 FR 60257 (Sept. 1, 
2016) (elimination of requirement to explain valuation of the 
transaction).
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3. Adjustments Made to the Final Rule To Align Costs With Antitrust 
Risk
    Since establishing a premerger notification program pursuant to the 
HSR Act, the Agencies have relied on information contained in HSR 
Filings to conduct their initial premerger review. However, in light of 
the information gaps identified in section II.B., the Commission has 
determined that the current requirements are not sufficient for that 
task and determined to reset the baseline requirements for all filers 
to fill these information gaps. As a result, the final rule eliminates 
some requirements that are contained in the current Form, and requires 
each filers to submit some

[[Page 89261]]

information that is not currently required or certify that the request 
does not apply to its operations.
    After careful consideration of the comments that identified aspects 
of the proposed rule that would be a source of significant costs for 
filers if adopted, the Commission made significant modifications to the 
final rule as compared to the proposed rule. In several instances, the 
Commission determined that the costs of a particular proposed 
requirement outweighed the benefits and chose not to adopt those 
provisions as part of the final rule. For other proposals and where 
possible, the Commission has tailored each information request 
contained in the final rule to reduce the cost of compliance for filers 
yet generate the information that is necessary and appropriate for the 
Agencies to conduct a premerger assessment of the transaction. See 
sections IV to VI. Overall, the final rule balances the cost of 
collecting additional information in the HSR Filing in light of the 
benefits of obtaining additional information that is relevant to the 
Agencies' premerger antitrust risk assessment, and aligns those costs 
in proportion to the antitrust risk associated with the transaction 
under review. As a result, the final rule is a reasonable exercise of 
the Commission's authority to require information that is necessary and 
appropriate to determine whether an acquisition may, if consummated, 
violate the antitrust laws. The additional information required by the 
final rule will close information gaps described in section II.B. and 
address information asymmetries by shifting the burden of collecting 
necessary information about the transaction and the business of the 
filers from the Agencies and third parties to filers.
    To make these modifications to align costs and benefits, the 
Commission relied on the following tools and approaches it has used 
when exercising its HSR rulemaking authority over the last forty-six 
years and consistent with the statutory scheme. In addition to the 
features of the HSR Act described in section III.A. above that treat 
different filers differently (e.g., requiring notification from 
acquirers but not the acquired person for cash tender offers in order 
to start the waiting period and exempting certain types of acquisitions 
entirely), the Commission has administered HSR reporting requirements 
over the years in a flexible way to minimize the burden on each filer 
and each type of transaction as much as practicable. Thus, contrary to 
the assertions of several commenters, the reporting requirements of the 
HSR Act have never been a ``one-size-fits-all'' reporting scheme 
because different filers face different burdens for complying with 
applicable reporting requirements. Rather, the HSR Form and 
Instructions have relied and will continue to rely on an IF/THEN format 
that excuses certain filers from information requirements based on 
answers provided to other requirements. For instance, several current 
information requirements need only be answered if the filer reports 
that it generates revenues in the same NAICS \296\ code as the other 
party to the transaction. The final rule expands the existing IF/THEN 
format as the primary means of mitigating the costs of reporting 
certain new information in a way that, as much as practicable, aligns 
the information with the antitrust risk associated with the 
transaction, resulting in higher costs for those transactions most 
likely to require close scrutiny by the Agencies to determine if they 
may violate the antitrust laws.
---------------------------------------------------------------------------

    \296\ The North American Industry Classification System is the 
standard used by Federal statistical agencies in classifying 
business establishments for the purpose of collecting, analyzing, 
and publishing statistical data related to the U.S. business 
economy. See U.S. Census Bureau, North American Industry 
Classification System (rev. Sept. 10, 2024), https://www.census.gov/naics/.
---------------------------------------------------------------------------

    As summarized above in section I. and explained in further detail 
in section VI., the Commission has also eliminated several information 
and document requirements and reduced the scope of many others as 
compared to the proposed rule to align the cost of reporting to the 
antitrust risk associated with each transaction. First, the Commission 
has eliminated in toto the proposals that would have imposed 
significant costs as compared to the benefits, such as those requiring 
filers to provide employee information, geolocation information, the 
identity of other interest holders or board observers, or draft 
versions of submitted documents. Second, the Commission created a new 
category of filings, select 801.30 transactions, for which the costs of 
complying with the final rule will be minimal as compared to current 
requirements. Next, the final rule imposes relatively fewer new 
reporting requirements on acquired persons, reducing their costs as 
compared to the acquiring person, which is the party pursuing the 
transaction that requires HSR reporting, and will operate the acquired 
interests post-consummation. The Commission has also reduced the burden 
on filers by limiting the lookback periods for several categories of 
information and created de minimis exclusions where appropriate. 
Finally, the Commission will continue to allow filers to rely on good 
faith estimates or answer in the negative to confirm that certain 
information does not exist. For instance, for a transaction in which 
there are no existing overlaps or supply relationships responsive to 
the final rule, filers can indicate that there are no such overlaps or 
relationships, although there may be costs for the filer associated 
with verifying that response.
    The Commission also relies on definitions and clarifications to 
reduce or eliminate filing obligations or to reduce uncertainty 
regarding compliance. For instance, the Act applies to a wide variety 
of acquisitions; as a result, the Commission has provided definitions 
and guidance over the years to maximize compliance. Sometimes this 
results in certain transactions not being reported or reducing 
reporting requirements for certain types of transactions. The final 
rule contains several new definitions that are intended to reduce 
uncertainty and costs, and improve compliance.
Select 801.30 Transactions
    As part of the Commission's effort to reduce the cost of the final 
rule, the Commission has created a new category of transactions, 
defined as ``select 801.30 transactions,'' that will have minimal 
reporting requirements, including a few of the new information 
requirements required by the final rule. Where the Commission has not 
excused requirements, it believes that the burden of compliance will be 
low because parties to select 801.30 transactions generally have less 
complex internal structures, do not hold significant stakes in similar 
companies, and have not generated the types of documentation the Form 
and Instructions generally require. As a result, the Commission expects 
that responses to the remaining requirements for these types of 
transactions will generally be short, and may just confirm that the 
parties do not have responsive material. However, for those 
transactions in which select 801.30 filers incur additional costs from 
complying with the final rule, there will be a benefit to the Agencies 
in learning about potential competitive issues that are not revealed by 
the current information requirements, especially the new information 
related to other entities between the UPE and acquiring or acquired 
person.
    For select 801.30 transactions, filers are excused from the 
following information requirements:

i. Transaction Rationale
ii. Transaction Diagram
iii. Plans and Reports
iv. Transaction Agreements
v. Overlap Description

[[Page 89262]]

vi. Supply Relationships Description
vii. Defense and Intelligence Contracts

    Additionally, even where select 801.30 transactions are not 
expressly excused from responding, there are many items for which the 
Commission believes the response will be ``none'' because of the nature 
of the transaction or of the parties.
Less Information From the Acquired Person
    The final rule also seeks to reduce costs by tailoring information 
requests to each party's role in the transaction. Because the buyer 
(the acquiring person) will have a larger stake in or control of the 
target (the acquired entity or assets), and often will be operating the 
assets or business acquired post-consummation, more information is 
needed from acquiring persons than acquired persons. The acquiring 
person is more likely to have certain types of information relevant to 
the Agencies' enforcement analysis, such as the transaction's 
structure, information about other minority holders who might have 
managerial control or influence, and overlapping officers and directors 
who could affect competitive decision-making after consummation. This 
approach reflects the more limited time the seller has had to consider 
the implications of the planned transaction, and to a lesser extent, 
the seller's less-honed strategic assessments of competitive 
opportunities. In addition, for certain information, such as a 
transaction diagram, the Agencies only need one response, and it is 
appropriate to place the cost of providing this information on the 
acquiring person and not require the acquired person to provide 
duplicative information.
    Consistent with these considerations, the final rule excuses the 
acquired person from certain additional information requirements that 
apply to acquiring persons. In the final rule, acquired persons are 
excused from the following requirements:

i. Minority Shareholders, other than those that will roll over to the 
acquiring person
ii. Ownership Structure Description and Chart
iii. Reporting of Officers and Directors
iv. Identification of International Antitrust Notification
v. Transaction Diagram
vi. Identification of Other Agreements Between the Parties

    Balanced against these reductions in burden, the final rule does 
require the acquired person to report prior acquisitions for the first 
time, for the reasons explained in sections II.B.5. and VI.J.4.
IF/THEN Format
    Certain information requirements of the final rule are only 
applicable to filers who provide a positive response to other 
information requirements. That is, the final rule reflects an IF/THEN 
format by requiring some information only if filers have provided other 
information first. For example, many information requirements do not 
require a response if the filer indicates that there is no reported 
overlap or supply relationship between the merging parties. This is a 
main feature of the current HSR Form, and the Commission expands that 
approach in the final rule to closely align the information 
requirements with the risk of a law violation the transaction presents, 
resulting in an IF/THEN format that adjusts the cost of complying based 
on the existing competitive relationship of the parties to the 
transaction.
    Importantly, information that is critical to identifying 
competitive overlaps or areas of premerger competition justifies a 
higher cost of collection and reporting.\297\ Examples include 
reporting revenues for identified overlaps by geographic location so 
that the Agencies have some basis to screen overlapping products for 
local market impacts.\298\ Even if there is some additional cost 
associated with collecting this information, a notification form that 
does not contain such information would be unreliable for detecting the 
risk that the transaction would cause harm to competition at the State 
or local level. Limiting the requirement to provide certain information 
only if both parties generate revenues in the same or similar business 
lines (as reflected in overlapping NAICS code reporting or the 
descriptive responses) or only if the parties operate in the same areas 
of the country is a powerful limitation aimed at generating information 
that bears directly on the question whether the transaction involves 
direct competitors. For any transaction that does not have these 
overlaps, there is no burden associated with answering questions that 
depend on the reporting of such overlaps other than certifying that 
such overlaps do not exist. In the final rule, the following 
information requirements are dependent on the identification of an 
existing overlap or a supply relationship:
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    \297\ In the initial rulemaking implementing the HSR premerger 
program, the Commission proposed to require the reporting of 
revenues by Standard Industry Classifications (SIC) codes. Many 
commenters complained about the costs associated with providing this 
information. But the Agencies needed to establish some system for 
reporting overlaps. This provides an early example of the Commission 
determining that, where the information is essential to enforcement 
of the antitrust laws, the costs associated with collecting and 
reporting that information is justified by the benefits in light of 
other available options.
    \298\ The Agencies rely on analytical tools to identify an area 
of effective competition, often by defining a relevant antitrust 
market. A relevant antitrust market comprises both product (or 
service) and geographic elements. See U.S. Dep't of Justice & Fed. 
Trade Comm'n, Merger Guidelines 4.3 (2023) (describing the 
information and analysis used by the Agencies to define markets for 
the purpose of antitrust analysis). For screening purposes, the 
Agencies may conclude that the parties to the transaction do not 
serve the same set(s) of local customers if there is reliable 
information in the HSR Filing that indicates that they generate 
revenues in different locales even if they supply the same product 
or service.

i. Overlap Description
ii. Supply Relationships Description
iii. Officers and Directors (acquiring person only)
iv. Plans and Reports
v. Prior Acquisitions
vi. State and Street-Level Reporting of Geographic Market Information
vii. Author information for submitted documents
viii. Defense and Intelligence Contracts
Limited Lookback Periods
    The Commission also relies on limited lookback periods to collect 
the most recent and reliable information and data related to the risk 
of a law violation. For example, filers are only required to submit the 
most recent annual reports and annual audit reports. This type of 
limitation is intended to focus on more recent economic activity and 
reduce the cost associated with collecting potentially less probative 
or out-of-date historical data. As discussed below in section VI., the 
Commission has reduced the lookback periods for some information 
requirements as compared to the proposed rule to reduce compliance 
costs and focus the information requirements on the most recent and 
probative data needed for premerger screening. In other places, the 
Commission has identified a fixed reporting period to limit the 
information filers must gather to prepare the HSR Filing and provide 
certainty for filers about what is required. For example, as compared 
to the proposed rule, the final rule contains shortened lookback 
periods for the following information:

i. Overlap Description
ii. Supply Relationships Description
iii. Officers and Directors
iv. Transaction Rationale
v. Minority Shareholders
vi. Prior Acquisitions

[[Page 89263]]

De Minimis Exclusions
    The Commission also relies on de minimis exclusions to excuse the 
reporting of otherwise relevant information that might be costly to 
collect. De minimis exclusions can sometimes require extra effort by 
filers, because filers must evaluate whether the information is above 
or below the de minimis threshold. In the Commission's experience, it 
can sometimes take less time for filers to collect and report all 
responsive information than to report less information after conducting 
the assessment required to eliminate de minimis amounts. In deciding 
whether to add de minimis exclusions, the Commission carefully weighed 
the additional costs for filers to determine what information falls 
below the de minimis thresholds and can therefore be excluded, as 
compared to the costs of collecting all responsive information. The 
final rule contains new de minimis exclusions for certain information 
in the following requirements:

i. Supply Relationships Description
ii. Prior Acquisitions
iii. Defense and Intelligence Contracts
Voluntary Information
    Finally, one new information request is not strictly required by 
the final rule, but filers may provide it on a voluntary basis. As part 
of the HSR Form, filers may agree to waive the confidentiality 
protections of the HSR Act to permit the Agencies to share HSR 
materials with other enforcers in order to facilitate cooperation 
during any investigation of the transaction. Such a waiver would be 
beneficial for the Agencies, and the filer may want to provide it as a 
way to limit the need to produce multiple or duplicative data sets and 
documents to other enforcers that are investigating the transaction, 
thereby reducing its overall regulatory compliance costs. Filers may 
view this as a benefit and therefore may grant a waiver even though 
their HSR Filing would be compliant with the final rule without it.
Non-Compliance Statement
    In addition to these limits, the Act allows for incomplete answers 
with a statement of the reasons for non-compliance, and the Commission 
has the discretion to permit filers to rely on good faith estimates or 
no answer at all. If the filer is unable to answer any question fully, 
it must provide the information that is available and provide a 
statement of reasons for non-compliance as required by Sec.  803.3, 
which is intended to reduce disagreements between filers and PNO 
staff.\299\ Where exact answers cannot be given, filers are allowed to 
enter best estimates, while indicating the source or basis of the 
estimate, and marking the information with the notation ``est'' to any 
item where data are estimated. Finally, filers already routinely 
indicate under the current rules that certain required information is 
not applicable given the type of transaction being reported, and filers 
will continue to be able to do so under the final rule.
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    \299\ The submission of the statement of reasons for 
noncompliance is not intended to be a substitute for compliance with 
the notification obligation but it serves two salutary purposes: (1) 
reducing disagreement between the Agencies and the filer, and (2) 
providing a basis for any civil penalty proceeding that may be 
brought under 15 U.S.C. 18a(g)(1). See 122 Cong. Rec. 29342 (1976); 
see also 43 FR, 33450, 33508-09 (July 31, 1978).
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Summary of Requirements Based on Transaction Type
    In the final rule, the Commission has employed all of these 
techniques to align the cost of complying with the final rule in light 
of the benefit to the Agencies, filers, and the public of the Agencies 
having the information on the first day of the statutory review period 
to conduct their preliminary antitrust assessment. The chart below 
summarizes the different information requirements of the final rule for 
the acquiring person and the acquired person for three distinct types 
of transactions: (1) select 801.30 transactions, (2) those transactions 
that will have no NAICS or described overlaps or supply relationships; 
and (3) transactions that report a NAICS or a described overlap, or a 
supply relationship, which includes transactions with significant pre-
merger competitive interaction between the filers (for example a 
company acquiring one of its principal competitors or suppliers).\300\ 
The chart indicates which type of filer will not provide this 
information because it is not required by the final rule. As depicted 
in this chart, the final rule creates different information 
requirements for different types of filers and different types of 
transactions, resulting in a range of costs associated with filing that 
are directly proportional to the complexity of the deal, corporate 
structure, and most importantly the risk of law violation.
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    \300\ These three scenarios were used to calculate costs for the 
Paperwork Reduction Analysis, discussed below in section VIII.

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[[Page 89264]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.039

D. Disproportionate Impact on Certain Sectors

    Here the Commission addresses arguments that the final rule would 
have a disproportionate impact on certain sectors as part of its 
consideration of how the benefits and costs associated with the final 
rule are distributed among various groups.\301\
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    \301\ See generally Boardman et al, supra note 256, at 506; 
Executive Order 12866 directs agencies when designing regulation to 
``consider incentives for innovation, consistency, predictability, 
the costs of enforcement and compliance (to the government, 
regulated entities, and the public), flexibility, distributive 
impacts, and equity.'' E.O. 12866 Sec. 1(b)(5) (1993).
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Small Businesses
    Several commenters are concerned about the additional costs 
associated with the final rule for small businesses who are parties to 
a reportable transaction, stating that the proposed rule would 
disproportionally affect small businesses because they would be less 
equipped than larger businesses to cover the additional costs. 
Commenters said that these additional costs would not only deprive 
small businesses of funds that are needed for operations or innovation, 
they might also slow or deter dealmaking involving small businesses 
altogether. On the other hand, an individual commenter explained that 
the proposed rule would help small businesses who have been affected by 
mergers.
    The Commission addresses concerns about undue costs throughout this 
final rule, making many adjustments to limit the costs of complying for 
those filers who do not have complex corporate structures or extensive 
business lines, including small businesses. In section IX., the 
Commission certifies that the final rule will not have a significant 
economic impact on a substantial number of small entities as that term 
is defined by the Small Business Administration (``SBA''). HSR 
reporting requirements apply to very few small businesses. Congress 
adjusted the statute in 2000 to require annual indexing of reporting 
thresholds so as to minimize the effect of inflation that would 
otherwise require more reporting for small businesses and small 
transactions, and nothing in the final rule changes which acquisitions 
are subject to premerger review. See section III.A.1.
    In fact, the Commission believes that many small entities will 
benefit from the final rule. As noted by one commenter, the goal of 
antitrust enforcement is to strike the right balance: too little 
enforcement could allow some companies to gain an unfair advantage, 
while too much enforcement risks driving up compliance costs and 
undermining legitimate efforts to compete. The Supreme Court has 
explained that Congress designed section 7 of the Clayton Act to 
``prevent economic concentration in the American economy by keeping a 
large number of small competitors in business,'' \302\ and to retain `` 
`local control' over industry and the protection of small businesses.'' 
\303\ As a result, a merger of two small companies that allows the 
combined entity to compete more effectively with larger rivals may be 
unlikely to violate the antitrust laws. In contrast, the legislative 
history of the Clayton Act reveals Congress was very much concerned 
with, and sought to prevent, acquisitions involving large companies 
buying smaller or up-and-coming rivals that would otherwise cease to be 
independent businesses.\304\ By making possible more effective and 
efficient premerger review of HSR-reportable transactions, the final 
rule will facilitate effective enforcement of the antitrust laws, which 
in turn will preserve opportunities for small businesses to thrive in 
markets that are not dominated by much larger competitors.
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    \302\ United States v. Von's Grocery Co., 384 U.S. 270, 275-76 
(1966) (also noting that undue concentration drives small businesses 
out of the market).
    \303\ Brown Shoe Co. v. United States, 370 U.S. 294, 316 (1962).
    \304\ United States v. Aluminum Co. of America, 377 U.S. 271, 
281 (1964).
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    In passing the HSR Act, Congress made plain that it was not 
interested in burdening mergers between two small companies with 
premerger review, since small businesses generally do not present the 
same risks of anticompetitive effects as do larger businesses. To that 
end, the HSR Act specifically exempts certain smaller companies from 
its reach. But it is not possible to say that all transactions 
involving small businesses carry little or no antitrust risk, whether 
they are

[[Page 89265]]

reported or not. When they are required to be reported, the Agencies 
are obligated to conduct a premerger assessment. Therefore, it is 
appropriate for the Agencies to receive information from even small 
businesses that are a party to a reportable transaction to determine 
whether those transactions may violate the antitrust laws.
    Based on the Commission's experience, deals of any size can present 
significant antitrust risk. The American Antitrust Institute analyzed 
historical data about HSR filings from 1985 to 2020 and prepared a 
chart that reflects the percentage of Second Request investigations to 
transactions by deal value.\305\ This data shows that while 
transactions valued at under $100 million rarely receive Second 
Requests, a not insignificant number of transactions in the $100 to 
$150 million range do. This confirms the Agencies' experience that 
although many deals that are subject to an in-depth investigation 
involve large companies, especially on the buyer side, it is not 
possible to ignore that some transactions that involve small businesses 
also violate the antitrust laws.\306\ And of course, the Agencies are 
also attentive to small-value acquisitions that cause harm even if they 
were not subject to premerger review and seek to unwind them as 
resources and precedents allow.\307\
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    \305\ See Diana L. Moss, Am. Antitrust Inst., ``What Does the 
Billion-Dollar Deal Mean for Stronger Merger Enforcement?'' 3 Fig. 2 
(Sept. 20, 2022), https://www.antitrustinstitute.org/wp-content/uploads/2022/09/AAI_Billion-Dollar-Mergers_9.20.22.pdf.
    \306\ See, e.g., United States v. Neenah Enterprises, Inc., No. 
1:21-cv-02701 (D.D.C. Oct. 14, 2021) (complaint) ($110 million asset 
purchase); In re Global Partners LP, No. C-4755 (F.T.C. Mar. 2, 
2022) (decision and final order) ($151 million acquisition); In re 
ANI Pharmaceuticals, Inc., No. C-4754 (F.T.C. Jan. 12, 2022) 
(decision and final order) ($210 million acquisition); United States 
v. Grupo Verzatec S.A. de C.V., No. 1:22-cv-01401 (N.D. Ill. Mar. 
17, 2022) (complaint) ($360 million acquisition). Note that the 
value of the transaction is considered by some filers to be 
confidential information and is not always disclosed in public 
filings. See FTC v. IQVIA Holdings Inc., No. 1:23-civ-06188 
(S.D.N.Y. Dec. 29, 2023); In re Lifespan Corp., No. C-9406 (F.T.C. 
Feb. 17, 2022) (complaint).
    1 See, e.g., In re The Golub Corp., No. C-4753 (F.T.C. Jan. 20, 
2022) (decision and final order) (divestiture of 12 supermarkets); 
United States v. B.S.A. S.A., No. 1:21-cv-02976 (D.D.C. Mar. 15, 
2022) (divesture of two business lines).
    \307\ See, e.g., Polypore Int'l, Inc. v. FTC, 686 F.3d 1208 
(11th Cir. 2012); In re Otto Bock HealthCare N. Am., Inc., No. 9378 
(F.T.C. Dec. 1, 2020).
---------------------------------------------------------------------------

    As modified, however, the final rule imposes lower costs on 
transactions involving independent small businesses, as they typically 
involve fewer business lines and less complex corporate structures. 
Typically, the larger the company, the more extensive and complex its 
business lines. Many of the changes in the final rule are designed to 
allow the Agencies to quickly understand complicated entities and the 
businesses that they have connections to. These changes generally will 
not impact small business. Further, where possible, the final rule 
imposes less burden on sellers (the acquired person), which tend to be 
smaller in size than buyers.\308\ In effect, the final rule imposes 
costs on filers that are commensurate with the antitrust risk presented 
by the transaction: those with low risks (e.g., simple corporate 
structures, few lines of business or no preexisting commercial 
relationship with the other party) have the lowest costs. Wherever 
practicable, the Commission took into account the burden across smaller 
businesses who may engage in competitively benign transactions and has 
adjusted the final rule in several significant ways to mitigate this 
burden. For example, the Commission has excluded select 801.30 
transactions from certain requirements, eliminated other proposed 
requirements, and modified other proposed requirements as described 
throughout this final rule. The Commission believes that this approach, 
which is focused on antitrust risk and not necessarily business size, 
nonetheless minimizes the costs for small businesses involved in 
transactions subject to mandatory premerger review consistent with the 
statutory scheme.
---------------------------------------------------------------------------

    \308\ See Fed. Trade Comm'n & U.S. Dep't of Justice, Hart-Scott-
Rodino Annual Report, Fiscal Year 2022, Tables VI through IX (FY 
2022).
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Startups
    A number of commenters expressed the view that the requirements of 
the proposed rule would deter innovation by denying startup firms an 
exit path; they observed that many startups plan for eventual 
acquisition, and this strategy drives investment that allows the firm 
to grow. Commenters stated that any change to the status quo will upset 
this balance. Others observed that acquisitions by large, established 
firms play a crucial role as an exit strategy for startups securing 
venture capital, which is an important source of funding in many 
sectors, including tech. Some of the same commenters, however, 
acknowledged the valuable role startups play by challenging established 
incumbents. Various commenters made nonspecific objections to increased 
burdens imposed upon startups by the proposals in the proposed rule.
    Startup companies are not unique to particular industries but 
represent an important business model throughout the U.S. economy. For 
any transaction that does not present facts indicating it may violate 
the antitrust laws--including those involving startups--the minimal 
additional burden of disclosing more information is justified by the 
Agencies' need to conduct a thorough review in light of the information 
gaps discussed in section II.B. Where those facts are absent, there 
should be no additional delay or additional risk of detection for those 
transactions. Given the small incremental costs associated with the 
final rule relative to other M&A costs and the potential magnitude of 
returns from an exit sale of a successful startup, HSR compliance costs 
would not plausibly factor into the ex ante investment decision. To the 
extent that the final rule requires additional disclosures regarding 
the business lines of startups, that burden is not different from those 
imposed on established businesses in the same sector. Moreover, the 
Commission has no basis to excuse startup companies from complying with 
the final rule; it is not the case that they always or mostly present 
no antitrust risk. See sections II.B.4. and III.C.2.
Private Equity and Other Types of Investments
    The Commission received several comments from groups representing 
investors raising concerns about the burden of gathering the 
information for the proposed rule as well as the burden of having to 
disclose the new information. One commenter asserted that certain 
proposed requirements would be particularly onerous for transactions 
involving private equity and venture capital, such as the expanded 
lookback period, information regarding limited partnerships, more 
information about prior acquisitions, the identities of past and 
present members of boards of directors, and disclosure of the buyer's 
prior acquisitions. Another commenter said that the burden of the 
information requirements would affect the efficiency of transactions 
and introduce more uncertainty and risk into the deal process, which 
would adversely impact returns for investors. Another noted that the 
burden of the proposed information requirements would, among other 
effects, make capital markets less efficient, resulting in a 
significant impact on its members and the thousands of pensioned 
workers, retirees, universities, and other investors who rely upon 
them. The Commission discusses these concerns elsewhere and has 
concluded that the incremental costs associated with the

[[Page 89266]]

final rule are small relative to the value of the transaction and the 
costs of other merger-related fees. As noted throughout this final 
rule, the Commission has taken many steps to reduce the burden on all 
types of filers as compared to the proposed rule, including investors.
    The same commenter who mentioned the effect on capital markets also 
noted that the HSR-reportable transactions in which its members engage 
often do not pose competitive risk. These are transactions in which the 
acquiring persons are investment groups, trusts, or other financial 
vehicles or are providing securities, commodities contracts, and other 
financial investments or related advice. According to this commenter, 
its members rarely, if ever, have horizontal or even vertical 
relationships with the issuers whose securities they acquire. Rather, 
the kinds of HSR-reportable transactions in which its members engage 
are not mergers or acquisitions but the acquisition of minority 
positions, for instance, when concentrated funds make large purchases 
due to sizeable investor inflows, when benchmark-relative funds make 
large purchases due to index rebalancing, or when managers shift 
portfolios into highly liquid names in anticipation of redemptions or 
in connection with wind-downs.
    This and other comments generally reflect three different types of 
concerns: potential burdens for investors that must make HSR filings, 
potential burdens for minority investors in entities that have to make 
HSR filings (but have no HSR filing obligation themselves), and 
potential burdens related not to filing out the Form, but to potential 
enforcement actions to block the transaction that may arise from the 
Agencies having more complete information. The Commission addresses 
each below.
    As a starting point, the Commission emphasizes that the final rule 
does not change who must file \309\ and the HSR Act and Rules exempt 
passive investments of 10% or less,\310\ or 15% or less for 
institutional investors.\311\ The final rule does not alter the 
analysis regarding passive investments and therefore the final rule has 
no impact on investors who hold passive investments \312\ unless these 
investors acquire more of a company than these significant ``investment 
only'' exemptions permit and are, as a result, required to report their 
investments for premerger review. As a result, many of the types of 
investors discussed in the comments will not have HSR filing 
obligations for their transactions, and thus would not be required to 
fill out the Form that is the subject of the final rule.
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    \309\ One commenter suggests that the proposed rule would result 
in an increase in filings among investors. Comment of TIAA, Doc. No. 
FTC-2023-0040-0691 at 3. The Commission disagrees.
    \310\ 15 U.S.C. 18a(c)(9); 16 CFR 802.9.
    \311\ 15 U.S.C. 18a(c)(11); 16 CFR 802.64.
    \312\ Some commenters discussed shareholder engagement 
encouraged by the SEC. See, e.g., Comment of Managed Funds Ass'n, 
Doc. No. FTC-2023-0040-0651 at 8. The Commission notes that the SEC 
is a different agency with a different law enforcement mission.
---------------------------------------------------------------------------

    Some investors will have filing obligations either because they 
will hold a stake that provides them with the ability to direct or 
influence the management of the company in which they are investing 
(i.e., above the 10% and 15% exemptions), or because they do not intend 
to be merely passive investors. In these instances, the Act treats them 
as any other acquiring person and the Agencies use the Form to screen 
for potential competitive effects. Until now, though, the Agencies have 
received less information about transactions where private equity and 
other types of investors are involved because the current Form does not 
require sufficient information to explain the often complex structures 
and relationships between different entities that are within the 
acquiring or acquired person. The final rule intends to close these 
information gaps and focuses on information that should be within the 
records of the acquiring or acquired person.
    Further, the Commission acknowledges that investors can have 
different motivations in making acquisitions. Some do not seek to 
control or influence the companies in which they invest, but rather 
only seek a desired rate of return. In contrast, others seek positions 
with significant management rights or stakes that result in control of 
or influence in the target business. The Commission has sought to 
tailor the requirements of the final rule to illuminate those factors 
that could give rise to competitive concerns while minimizing 
additional costs for those investors that do not seek to participate in 
or influence decision-making of entities related to the acquiring 
entity or other entities within the buyer that are in the same industry 
as the target. As a result, the Commission has made significant changes 
as compared to the proposed rule, declining to adopt many of the 
proposed changes and significantly tailoring others. The Commission has 
also introduced the concept of select 801.30 transactions, which it 
anticipates will capture the transactions of many investors that do not 
seek to influence, direct, or manage the companies in which they 
invest. See section VI.A.1.f. The Commission has relieved such 
transactions from many of the new requirements, which it anticipates 
will mitigate the potential burden of providing information for many 
investors who do have to file.
    As to investors that do not have HSR filing obligations but hold 
minority interests in entities that do, the final rule does require 
additional information about some minority investors if those 
investments are in entities controlled by the acquiring person that are 
either related to the transaction or operate in the same industry as 
the target. However, as described in section VI.D.2.a., the burden of 
providing this information rests on the acquiring person, not on those 
minority investors. Their presence as an investor should be known to 
the filer because the filer controls the entity, and when revealed in 
the HSR Filing, will provide information that will assist the Agencies 
in determining whether those investors also hold interests or have 
relationships with entities related to the target.
    Additionally, the Commission modified the proposed rule to scale 
back requirements that would have broadly required disclosure of the 
limited partners of certain entities. As discussed below, the 
Commission has limited the final rule to require identification of only 
those limited partners that have certain rights related to the board of 
directors or a similar body. When required, this information is limited 
to providing the legal and business name of the minority investor, its 
address, and the percentage the investor holds in the entity controlled 
by the acquiring person. In most instances, the Commission believes 
this information should be available in the records of the acquiring 
person. When it is not, the Commission has explained that the acquiring 
person can note that the information is not available and why. The 
final rule does not create an obligation for the acquiring person to 
request this information from its minority investors. Therefore, the 
final rule imposes no burden on such minority investors in filling out 
the revised Form. Investors that do not have HSR Act filing 
obligations, but hold minority interests in entities that do, will not 
have any new obligations to either make filings or provide information 
for the filings of entities in which they have minority holdings.
    Several commenters raised concerns that the additional information 
requirements for funds, especially those managed by activist investors, 
would

[[Page 89267]]

have a detrimental impact on these investors as a result of the 
disclosure of the information itself. They pointed to the disclosure of 
the interests and rights of limited partners as creating disincentives 
for shareholder engagement or as undue interference in the market for 
corporate control. Another commenter stated that disclosure 
requirements may deter investments in private equity firms, potentially 
reducing the flow of capital to small- and medium-sized businesses.
    The final rule does not target information specific to any type of 
investor. But if an investor holds a small but significant stake (five 
percent or more) or plays a role in the acquiring person's decision-
making, the Commission believes that disclosure of these interests is 
justified by the Agencies' need to know about such investments to 
conduct premerger screening. As discussed in section II.B.1. and 
section VI.D.1.d.ii, there have been significant changes in the number 
and breadth of investment companies managing portfolios that include 
investments in companies with competitively significant relationships. 
Due to these changes and others, the Commission has determined that the 
Agencies need more information about minority holders between the UPE 
and the acquiring person, as well as information about those who serve 
as officers and directors and who will be involved in decision-making 
after the transaction is consummated. Many commenters specifically 
objected to providing any information about limited partners, noting 
that the existence of significant management rights such as board seats 
or board approval rights, is ``atypical.'' The final rule has been 
modified to require disclosure only of these types of limited partner 
situations, which should mitigate these concerns.
    Another commenter said that having to disclose the required 
information would deter investment in in certain types of investment 
vehicles because of the exposure of proprietary contractual information 
and Personally Identifiable Information (PII) about every facet of the 
M&A process. This commenter noted, for instance, that the requirement 
to provide a term sheet or draft agreement reflecting sufficient detail 
about the proposed transaction when filing on the basis of a 
Preliminary Agreement would expose details about transactions that 
could undermine competition in the industry and harm returns to LPs. In 
addition, this commenter stated that the requirement for PE firms to 
submit a narrative describing the justification for certain 
transactions would impinge on the proprietary information that PE firms 
exchange with target companies and their consultants.
    As noted above and elsewhere, the Commission has made significant 
changes as compared to the proposed rule, and the changes in this final 
rule should address many of this commenter's concerns. That said, the 
Commission believes the commenter has overread the Commission's intent. 
The purpose of the final rule is to provide the Agencies with more 
information on those factors that could give rise to competitive 
concerns, not to expose every facet of the M&A process or investor 
strategy. The required information does not require social security 
numbers, addresses or other sensitive PII. Moreover, the final rule 
requires the disclosure of additional information to the Agencies, not 
to the public or third parties, and the confidentiality of the 
information provided to the Agencies as part of the HSR filings process 
is protected by statute, specifically 15 U.S.C. 18a(h).
    Finally, as described in section VI, the final rule will provide 
the Agencies with more transparency into what the acquiring person 
holds and whether any person or entity that has influence over the 
acquiring person is also involved in the business of the target. 
Specifically, the Commission has not limited the information required 
about the acquiring person even in the case of select 801.30 
transactions. As stated in the NPRM and throughout this final rule, the 
Commission believes this information is critical to the Agencies' 
initial review and the benefit for robust premerger screening justifies 
the burden of disclosing the information because it may identify an 
existing business relationship between the acquiring person and target 
(via common investors or shared managers) that are otherwise not 
revealed in the HSR Filing.
    The Commission disagrees with comments that identify increased 
transparency about the filed-for transaction itself (and not the 
specific burden of collecting and providing the information) as a 
cognizable burden associated with the final rule. The purpose of the 
final rule is to require information that allows the Agencies to 
accomplish the task assigned to them by Congress: to determine whether 
the acquisition subject to the Act, if consummated, may violate the 
antitrust laws. Suggestions that increased transparency would endanger 
certain filed-for transactions implicitly indicate that the current 
Rules have led to under-enforcement of the antitrust laws. Any burden 
related to deal uncertainty that might arise from increased 
transparency is not a burden related to compliance with the HSR Act and 
the final rule, but rather is tied to whether the transaction itself 
may violate the antitrust laws.
Biopharmaceuticals
    Two commenters from the biopharmaceutical sector suggested that 
several requirements of the proposed rule would disproportionately 
burden biopharmaceutical firms and transactions. They pointed to the 
burden of identifying information related to products in early stages 
of clinical development, and stated that, because the Commission's 2013 
rule specific to pharmaceutical license agreements increased the 
universe of reportable transactions, any expansion of the Form 
disproportionately burdens the pharmaceutical sector. One additionally 
objected to providing information about employees, and the other 
asserted disproportionate impact from providing information regarding 
additional prior acquisitions because of the number of acquisitions in 
this sector, and from disclosing officers and directors due to biotech 
firms' dependence ``on a small cadre of qualified directors and 
officers.'' Both commenters claimed the changes to the HSR Form and 
Instructions will prolong the time required for HSR filing preparation 
and agency review, resulting in delayed transactions.
    The final rule does not target any information that is unique to 
biopharmaceutical companies, and the Commission disagrees that the 
additional information that would be sought from these companies is not 
relevant. Where the final rule requires additional information from 
biopharmaceutical companies, the cost of supplying that information is 
justified by the benefit to the Agencies in having a more complete 
understanding of the companies' existing business operations and their 
business strategy, including prior acquisitions involving the same 
business lines. For instance, many biotech and pharmaceutical companies 
invest in extensive R&D pipelines, and the Agencies need information 
about products in development to determine if the companies are current 
competitors for innovation in a particular space to meet a particular 
need, or if one or both merging parties are potential competitors for 
any existing products.\313\ As the commenters

[[Page 89268]]

acknowledged, mergers, acquisitions, and exclusive licenses are 
particularly prevalent in the pharmaceutical sector, where the business 
model for new drug development centers around such transactions. 
Similarly, the comparatively higher number of transactions occurring in 
this sector can be expected to trigger a higher number of HSR Filings 
and could require filers to disclose a greater number of prior 
acquisitions. Even if biopharmaceutical companies have to report more 
prior acquisitions, this disclosure is also justified because it is 
relevant to determining whether there is a pattern of serial 
acquisitions. The fact that sharing of officers and directors is more 
common among companies in this sector means there is a greater need for 
the Agencies to screen for related competitive problems.\314\
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    \313\ See In re Sanofi Corp., No. 9422 (F.T.C. Dec. 11, 2023) 
(complaint alleging Sanofi's proposed acquisition of an exclusive 
license to Maze Therapeutics' pipeline Pompe therapy would have 
eliminated nascent threat to Sanofi's monopoly) (transaction 
abandoned); FTC v. Mallinckrodt ARD Inc. (f/k/a Questcor Pharms., 
Inc.), No. 1:17-cv-120 (D.D.C. Jan. 25, 2017) (complaint alleging 
Questcor's acquisition of rights to pipeline competing drug 
eliminated nascent threat and protected its monopoly ACTH drug H.P. 
Acthar Gel) (consent decree ordered license and $100 million 
equitable monetary relief); In re Thoratec Corp., No. 9339 (F.T.C. 
July 28, 2009) (complaint alleging Thoratec's proposed acquisition 
of HeartWare eliminated pipeline threat to Thoratec's left 
ventricular assist device monopoly) (transaction abandoned).
    \314\ Mark A. Lemley et al., ``Analysis of Over 2,200 Life 
Science Companies Reveals a Network of Potentially Illegal 
Interlocked Boards'' (Stan. L. & Econ. Olin Working Paper No. 578, 
2022), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4253144.
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    On the other hand, other information requirements have been 
modified to reduce the costs for all types of filers, including those 
in the biopharmaceutical sectors. For instance, the Commission declined 
to adopt new information requirements related to employees, which 
commenters asserted could impose significant costs on those in the 
biopharmaceutical as well as other sectors. Overall, the impact of the 
final rule is proportional to the number and characteristics of 
transactions that occur in any given sector of the economy (including 
biopharmaceuticals). To the extent that the revised Rules will result 
in delayed transaction closings, the potential impact of incremental 
delay is outweighed by the Agencies' statutory mandate to examine each 
transaction for the potential for that it may violate the antitrust 
laws. In other instances, the additional information may actually 
reduce delay by permitting the Agencies to avoid issuing a Second 
Request or issuing Second Requests that are more tailored to the 
potential for competitive harm than would have been issued under the 
existing reporting requirements.
    In sum, the Commission has determined that the burden imposed on 
this sector by the final rule is proportionate to the market realities 
and complexities of these companies and the likelihood that any 
transaction may require more in-depth antitrust review.
Hospitals
    A national organization representing hospitals and several State 
hospital associations stated that the proposed rule would have a 
negative and wholly unnecessary impact on hospitals and health systems. 
They asserted that the additional information required by the proposed 
rule would not generate actionable information with respect to hospital 
mergers. They objected to specific requirements, stating that reporting 
prior acquisitions has no relevance in the context of hospital mergers, 
or that it is inconceivable that a hospital-related merger could 
plausibly harm competition in any labor market without also presenting 
at least some competitive risk in a downstream market.
    The Commission responds that the final rule does not target any 
information that is unique to hospitals and health systems, and 
disagrees that the additional information, when sought from hospitals, 
is not relevant. For example, the commenters' suggestion that the 
Agencies not screen for hospital labor competition issues is 
inconsistent with growing empirical evidence of competitive harm to 
labor markets from consolidation generally and from hospital mergers in 
particular.\315\ Moreover, as discussed above, an empirical assessment 
of the price effects of consummated hospital mergers reveals that there 
are meaningful information gaps in the current requirements that led 
the Commission to grant early termination of the waiting period for 
hospital mergers that caused significant price increases.\316\
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    \315\ Concurring Statement of Commissioner Rebecca Kelly 
Slaughter and Chair Lina M. Khan, supra note 70, at 2 n.1; In re 
Lifespan Corp., No. 9406 (F.T.C. Feb. 17, 2022) (complaint).
    \316\ See supra note 24 and related text.
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    As discussed, the final rule will exclude non-profit entities 
organized for religious or political purposes from the specific 
requirement to produce information disclosing officers, directors, and 
members. This carve-out will likely encompass some healthcare 
organizations, including certain religious-affiliated hospitals or 
other provider groups. While these entities will not be required to 
provide such information as a matter of course in the HSR Filing, it 
can nonetheless be relevant in any in-depth investigation of the 
transaction and may be sought from the parties at a later date.
    Given the Commission's significant expertise and interest in 
preventing hospital mergers that may violate the antitrust laws, the 
final rule is appropriately focused on transactions that are most 
likely to present antitrust risk. The Agencies have determined the 
information sought by the final rule will close the information gaps 
that now exist with regard to hospital and other healthcare 
acquisitions. Moreover, because many hospital mergers are not 
reportable under the HSR Act, several States have enacted premerger 
notification laws for certain healthcare acquisitions, including those 
involving hospitals, to prevent consolidation that may affect their 
citizens directly. In light of all this evidence of a need for robust 
screening in this critical sector, there is no basis to excuse 
hospitals or health systems from any of the new requirements of the 
final rule beyond the modifications that reduce costs on filers 
overall, including on hospitals.
E. Regulatory Alternatives Considered
    In addition to considering the costs and benefits of the final rule 
as compared to the status quo, the Commission considered other 
alternatives suggested by commenters.\317\ The first alternative is to 
not finalize any modification to the current HSR Form and Instructions 
and to issue more Second Requests when the HSR Filing is insufficient 
to determine whether the proposed acquisition may violate the antitrust 
laws. Relatedly, commenters suggested that the Commission maintain 
current reporting requirements and make more extensive use of voluntary 
submissions from the parties post-filing. These alternatives are 
discussed above in section III.A.3. Another alternative suggested by 
commenters is for the Commission to create two separate sets of 
information requirements, one for acquisitions that present a low risk 
of a law violation and therefore require less reporting (a ``short 
form'') that would continue to report the information required by 
current HSR rules and a second form for acquisitions that cannot be 
considered low risk and that would contain all of the new information 
requirements in the final

[[Page 89269]]

rule. Here the Commission discusses the relative merits of adopting 
this alternative over the final rule.
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    \317\ Executive Order 12866 requires an assessment of costs and 
benefits of potentially effective and reasonably feasible 
alternatives to the planned regulations and an explanation of why 
the planned regulatory action is preferable to the potential 
alternatives. E.O. 12866 sec. 6(a)(3)(C) (1993). As an independent 
agency, the Commission is not subject to the requirements of this 
executive order but nonetheless used the principles outlined there 
to explain why the Agencies' chosen regulatory action is preferable 
to potential alternatives.
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    Several commenters suggested that the Commission consider creating 
two separate sets of information requirements for notification, stating 
that this approach is used by other jurisdictions to alleviate some 
costs and delays associated with merger notification under their laws. 
They asserted that it would be suitable for effective and efficient 
premerger review under U.S. law.
    As discussed above, the HSR Form is not ``one size fits all'' and 
the costs of making an HSR Filing are unique for each transaction. In 
this rulemaking, the Commission is publishing, for the first time, 
separate Forms for the acquiring person and the acquired person. The 
final rule has materially different requirements for each filing 
person, and providing separate Forms allows for clearer instructions 
(avoiding terminology in the proposed rule such as ``the acquired 
person or acquired entity (as applicable)''). The Commission expects 
that having two separate forms for each side of the transaction will 
improve compliance and reduce errors for filers.
    Moreover, while not styled as a ``short'' or ``long'' form, the 
final rule reflects the Commission's consideration of each requirement 
and makes clear where there is a need for the information for each type 
of transaction. In particular, the IF/THEN structure of the information 
requirements results in some filers responding to only a few 
information requirements. As a result, in practice, there are 
``shorter'' and ``longer'' versions of the forms depending on the type 
of filer and the type of transaction under review. The Commission 
determined that this approach better reflected the varying information 
requirements the Agencies need in order to effectively and efficiently 
analyze the broad spectrum of filers and transactions.
    Most importantly, in its review of past filings, the Commission 
found no set of objective criteria that would appropriately sort 
transactions into one or more discrete categories for the development 
of a single short form. Rather, the final rule adopts new information 
requirements but imposes them differently to reflect each filer's role 
in the transaction (acquirer versus acquired) and the relative 
antitrust risk associated with the proposed transaction. Filers with 
the highest information and document requirements are acquirers 
pursuing the acquisition of a firm with whom they have extensive 
existing business relationships or offer products or services in the 
same industries that must be assessed prior to consummation.
    For one category of transactions, select 801.30 transactions 
(described in section VI.A.1.f.), the Commission has determined that 
the Agencies need minimal additional information such that the final 
rule should impose fewer new requirements. The Commission believes that 
the few new information requirements for select 801.30 transaction are 
justified in order to ensure that the Agencies conduct a premerger 
assessment to determine that even these transactions do not present 
risk of a law violation. Similarly, the Commission determined that 
other characteristics justify a different and lighter burden, such as 
whether the filing person is the buyer or the seller in the 
transaction. Finally, many requirements are tied to the acquiring and 
acquired person operating in the same industry or having a business 
relationship. These questions would be inapplicable to many filers, 
particularly activist, institutional, and retail investors, which 
typically do not have controlling stakes in operating companies or do 
not focus on a particular industry. As a result, the costs of complying 
with the final rule are tailored to the risk of a law violation 
associated with each transaction in a way that is similar to, but more 
flexible than, the ``short form'' alternative. The size and complexity 
of each party to the transaction, as well as the size and scope of 
their respective business, vary widely across filings. As discussed in 
section II.B., there are specific risks to competition that the current 
information requirements do not disclose, making the final rule a 
better alternative to achieve robust premerger screening even for 
select 801.30 transactions as compared to a short form alternative.
    In addition, the short form alternative is likely to create 
uncertainty for filers that do not qualify for short form treatment but 
whose deals would suddenly be viewed as ``not low risk.'' Having a 
bifurcated system that targets some transactions as ``low risk'' is not 
consistent with the statutory premerger scheme Congress created when it 
determined that reporting would be required based on deal value 
regardless of the risk of a law violation, with additional authority 
for the Commission to exempt transactions that it has determined to 
present little to no antitrust risk. At this time, the Commission does 
not have a basis to conclude that the existing requirements continue to 
be sufficient for any category of transactions.
    The Commission believes that broadening the use of the HSR Form's 
existing IF/THEN format so that the final rule aligns the cost of 
complying with the associated antitrust risks of the transaction is the 
most appropriate way to implement the premerger notification scheme 
established by Congress. Congress has determined which transactions are 
subject to premerger review, relying on deal value to determine 
reportability. This criterion provides administrative clarity and 
predictability for businesses. Some jurisdictions use market share or 
revenue (``turnover'') thresholds to determine reporting or eligibility 
for short form treatment. But in doing so, these regimes also typically 
depend on the competition authorities to provide extensive guidance to 
business, often prior to formal notification, regarding the proper 
definition of markets. This may require an in-depth analysis of the 
potential markets at issue and can delay formal notification.\318\ 
Congress has chosen to rely on an objective and administrable system of 
reportability based on deal value and revenues for filers. Adopting a 
different standard for determining eligibility for short form treatment 
would require the Commission to engage in a separate and challenging 
rulemaking to seek public comment on what types of thresholds should be 
adopted that would be consistent with the premerger scheme Congress 
adopted in the HSR Act. At this time, the Commission has determined 
that one category of filings, select 801.30 transactions, will have 
minimal additional information requirements as compared to the current 
HSR Form and has made other modifications in the final rule to reduce 
the costs for other types of filers and transactions as well.
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    \318\ Relying on market share thresholds presents many 
challenges, and several jurisdictions have replaced them with 
thresholds that are easier to administer. In the early 2000s, 
approximately half of the jurisdictions with merger control had 
subjective notification thresholds such as market share but by 2010 
more than forty percent of these jurisdictions had replaced their 
subjective thresholds with objective, sales- or assets-based 
thresholds.
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    Although the short form alternative would save some filers 
additional direct costs associated with making an HSR, the Commission 
chose to adopt the final rule with modifications designed to reduce the 
cost of filing as much as possible for all types of filings, including 
those transactions that might be eligible for short form treatment. The 
Commission believes that this approach reflects, to the extent 
practicable, the antitrust risks associated with a variety

[[Page 89270]]

of filings, not just ones that could be eligible for short form 
treatment. A final rule that reasonably balances the benefits to 
Agencies' premerger review with the costs imposed on filers and others 
is a reasonable exercise of the Commission's rulemaking authority under 
the HSR Act and is consistent with the overall mandatory premerger 
review scheme established by Congress. The Commission believes that the 
final rule, with its tailored modifications based on the Agencies' 
experience in reviewing thousands of transactions, will result in 
minimal additional costs for certain filers and is preferable to 
adopting and maintaining a short form.

Final Instructions and Changes From the Proposed Rule

IV. Part 801

A. Sections 801.1(d)(2): Ministerial Changes To Reflect Reorganization 
of Form and Instructions

    While the Commission will continue to use the same mechanism for 
electronic filing, it has re-organized the Form and Instructions, as 
discussed below in section VI. As a result, several ministerial changes 
must be made to Sec.  801.1(d)(2). This section, which defines 
``Associate'' and provides examples, currently refers to item numbers 
used in the current Form and Instructions. The Commission adopts 
revisions that align with the Form and Instructions as adopted in this 
final rule.
    Specifically, the definition of ``Associate'' and the related 
examples refer to Items 6(c)(i), 6(c)(2), and 7. This information is 
now required by the Minority-Held Entity Overlaps and Controlled Entity 
Geographic Overlaps sections, which replace the previous item numbers. 
The Commission, accordingly, modifies the Rule to reflect these 
changes.

B. Section 801.1(r): Definitions of ``Foreign Entity or Government of 
Concern'' and ``Subsidy''

    On December 29, 2022, the President signed into law the 
Consolidated Appropriations Act, 2023, which included amendments to the 
HSR Act in the Merger Modernization Act. 15 U.S.C. 18b. The Merger 
Modernization Act required the Commission, with concurrence of the 
Assistant Attorney General, and in consultation with Chairperson of the 
Committee on Foreign Investment in the United States, the Secretary of 
Commerce, the Chair of the United States International Trade 
Commission, the United States Trade Representative, and heads of other 
appropriate agencies (``Relevant Agencies''), to promulgate a rule to 
require persons making an HSR Filing to disclose subsidies received 
from countries or entities that are strategic or economic threats to 
the United States.
    After conducting its own internal diligence to draft a rule and in 
consultation with the Relevant Agencies on this topic, the Commission 
proposed amending Sec.  801.1 to add proposed paragraphs (r)(1) and 
(2), which define ``foreign entity or government of concern'' and 
``subsidy,'' respectively.
    The Commission received no objections to the proposed definitions 
and received input that they appear to be a reasonable implementation 
of the Merger Modernization Act. As such, the Commission adopts these 
definitions as proposed.

V. Part 803

A. Sections 803.2, 803.5, and 803.10: Adoption of Electronic Filing

    The Commission proposed amending Sec. Sec.  803.2(e) and (f); 
803.5(a)(1) \319\ and (3) and (b); and 803.10(c)(1)(i) and (ii) to 
eliminate references to paper and DVD filings and delivery to physical 
offices. The Commission has been successfully accepting filings 
electronically since March 17, 2020, as a result of the COVID-19 
pandemic and resulting closures of Federal office buildings during the 
COVID emergency. The Commission received only one comment on this 
proposed change: One commenter noted that electronic filing is 
generally preferable and less burdensome to filing by paper or DVD. The 
Commission received no negative comments on the elimination of paper 
and DVD filings. The Commission adopts this change as proposed, though, 
as explained below, Sec.  803.2(e) and (f) have been redesignated as 
(d) and (e), respectively.
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    \319\ In making this change, the Commission also takes the 
opportunity to correct the capitalization of ``act'' to lower case 
to be consistent with the definitions and other usage of the term in 
the Rules.
---------------------------------------------------------------------------

    Separately, the Commission noted in the NPRM that the Agencies were 
developing a new e-filing platform that would eventually replace the 
current mechanism for electronic filing. The same commenter stated that 
before seeking to impose an e-filing requirement on all parties, the 
FTC should provide further details regarding the proposed user 
interface; the ability for users to collaborate on a single filing; the 
ability of users to save, review, and edit; and how filing persons will 
receive complete copies of filings as submitted. At this time, no 
change has been made to the method for accepting filings. While the 
Form and Instructions have been updated, filers will continue to use 
the platform that has been in use since March 2020. The Commission 
continues to develop a new interface for electronic filing and will, at 
the appropriate time, issue a rulemaking that provides instructions and 
access to the new e-filing platform in advance of its effective date.

B. Sections 803.2(b), (c), and (e); 803.9(c); and 803.12(c): 
Ministerial Changes To Reflect Reorganization of Form and Instructions 
and Clarification of Time Zone

    As discussed above in section IV.B., several ministerial changes 
must be made to the Rules to reflect the new organization of the Form 
and Instructions. Existing Sec. Sec.  803.2(b), (c), and (e), and 
803.9(c) all currently refer to item numbers used in the current Form 
and Instructions. The Commission adopts revisions that align the 
references in the Rules with the headings in the Form and Instructions 
as adopted in this final rule.
    Additionally, existing Sec.  803.2(b) of the Rules currently 
explains what information needs to be provided by the acquiring and 
acquired person for Items 5-8 of the current Form. As described below, 
the Commission adopts separate instructions for the acquiring and 
acquired person, making existing Sec.  803.2(b) unnecessary. For this 
reason, existing Sec.  803.2(b) is being removed, and existing Sec.  
803.2(c)-(f) are being redesignated as Sec.  803.2(b)-(e), 
respectively. Further, existing Sec.  803.2(c) and (e) have references 
to the current Form numbering and are being updated.\320\ Similar 
ministerial changes are being made to Sec. Sec.  803.9(c) and 
803.12(c). Finally the references to time in, redesignated Sec.  
803.2(d) have been updated to specify Eastern Time, consistent with 
other provisions of the Rules and with longstanding practice.
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    \320\ For purposes of consistency and clarity, the Commission is 
also making a ministerial change to Sec.  803.2 to explain that 
documents must be provided by 5 p.m. Eastern Time. Because 
electronic filing permits parties to submit documents from different 
time zones, they will need clarity as to which time zone the 
Commission is referencing in the rules. The Commission notes that 
Sec.  803.10 already specifies that Eastern Time should be used when 
determining the expiration of the waiting period as well as the date 
of receipt of filings and it has long been the practice of the 
Commission to use Eastern Time in applying this rule.
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C. Section 803.2: Requiring Separate Forms for Acquiring and Acquired 
Persons

    The Commission proposed amending Sec.  803.2(a) and deleting Sec.  
803.2(b)(1)(v) so that filing persons that are both the acquiring and 
acquired person are

[[Page 89271]]

required to submit separate Forms in each capacity. The Commission 
proposed this change because, in its experience, filers that opt to 
combine the information on a single Form often do not include 
everything that is required and would be reported if they filed on 
separate Forms. Such combined filings are also very confusing for the 
Agencies to review. In contrast, when filers choose to submit two 
separate Forms for such transactions, the filings provide all the 
required information and in a much clearer format that allows the 
Agencies to quickly understand how the transaction might change the 
operation of the acquiring person post-acquisition.
    The Commission received only one comment on this proposal, which 
expressed support and noted that it will enhance the understanding of 
the entire transaction. The Commission adopts the change as proposed 
but replaces the word ``should'' with ``shall.''

D. Section 803.5(b): Requiring Detailed Letters of Intent, Draft 
Agreements, or Term Sheets

    The Commission proposed amending Sec.  803.5(b) to require filers 
who have not executed a definitive transaction agreement to submit a 
draft agreement or term sheet describing the transaction that is the 
subject of the HSR Filing with sufficient detail to permit accurate 
analysis.\321\ The Commission received numerous comments on this 
proposal focused on the increased burden and delay for filing parties. 
The Commission has adopted the proposal in the final rule with 
modifications that respond to these concerns.
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    \321\ NPRM at 42182.
---------------------------------------------------------------------------

    Although filers can currently file on the basis of preliminary 
agreements, such as an indication of interest, letter of intent, or 
agreement in principle (``Preliminary Agreements''), in the 
Commission's experience, a small but significant minority 
(approximately 10%) of filings made on the basis of Preliminary 
Agreements do not contain enough information to permit the Agencies to 
conduct an accurate determination of whether the contemplated 
acquisition may violate the antitrust laws if consummated.\322\ In 
addition, such filings may be made prior to significant negotiations or 
due diligence and can be so lacking in specifics that they could force 
the Agencies to expend resources on transactions too uncertain to merit 
review.
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    \322\ Some commenters assert that documents such as letters of 
intent and preliminary agreements give the agencies enough 
information to identify those transactions that require further 
scrutiny. Based on its experience over forty-five years of reviewing 
merger filings that include these Preliminary Agreements, the 
Commission disagrees that they always provide sufficient 
information, especially when filings are made prematurely, prior to 
any significant due diligence.
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    As discussed below, the Commission has determined that it is 
necessary to assure that filings are not made prematurely--before the 
scope of the transaction has been sufficiently determined and before 
the parties have engaged in enough diligence such that consummation is 
not merely hypothetical--and in contravention to the purpose of 
requiring an affidavit stating that there is a good faith intent to 
consummate the transaction. However, the final rule will not 
specifically require term sheets or draft agreements for all 
transactions where a definitive agreement has not been executed. 
Rather, the Commission will continue to require filers to submit an 
executed agreement but, if that agreement does not describe with 
specificity the scope of the transaction that the parties intend to 
consummate, filers must also submit an additional dated document, such 
as a term sheet or draft definitive agreement, that does contain 
sufficient details about the transaction that the parties intend to 
consummate. This dated document can also take other forms; the title of 
the document is not determinative.
    One commenter sought clarity on what level of information would 
constitute sufficient detail as required by the proposed rule, 
including what types of terms that may still be subject to negotiations 
would render a term sheet as an insufficient basis to submit an HSR 
filing. The Commission agrees that the additional clarity suggested by 
the commenter would be helpful in reducing uncertainty. The Commission 
revises the Instructions accordingly, as noted in section VI.H.1., to 
describe what would be sufficient. The Instructions state that the 
transaction agreement or supplemental document should contain some 
combination of the following terms: the identity of the parties; the 
structure of the transaction; the scope of what is being acquired; 
calculation of the purchase price; an estimated closing timeline; 
employee retention policies, including with respect to key personnel; 
post-closing governance; and transaction expenses or other material 
terms. The Commission notes that these examples are meant to be 
illustrative and not exhaustive. In contrast, indications of interest 
or other agreements that merely indicate that the parties will commence 
negotiations or begin diligence will not be sufficient.\323\
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    \323\ Here is an example of the type of terms contained in 
agreements that have been filed with an HSR Form and conformed to 
existing requirements, but will no longer be accepted without filing 
an additional document that provides the key terms of the agreement 
once the final rule is effective: This letter agreement confirms the 
good faith intention of Alpha (``Purchaser''), to consummate the 
acquisition of Target, a corporation, from Beta (``Seller''), for in 
excess of $119.5 million and less than $235 million, subject to the 
terms of a definitive agreement to be negotiated and executed by 
them with respect to such acquisition and the satisfaction of 
conditions to be set forth therein. This letter agreement is non-
binding and subject to satisfactory completion of due diligence, 
mutually acceptable definitive documentation to be negotiated 
between Purchaser and Seller. Purchaser will pay all filing fees in 
connection with all filings under the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, as amended, and the rules and regulations 
thereunder.
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    Using the criteria adopted in the final rule, the Commission 
analyzed all filings that contained Preliminary Agreements submitted in 
FY 2021 to determine how many transactions would be impacted by the 
final rule.\324\ Of the transactions that were submitted on the basis 
of a letter of intent, term sheet, or similar document that was not a 
definitive agreement, less than 10% did not provide the Commission with 
a sufficient level of detail to assess the transaction. From this data, 
the Commission believes that filing parties typically reach agreement 
on key terms prior to filing, and there would be no additional cost to 
them to comply with the final rule. Of those that do not reach such 
agreement prior to filing, the Commission believes that antitrust 
review is not warranted until such time as the parties have resolved 
key aspects of the transaction, such as those described above, because 
the transaction may never be consummated, or key terms may change in 
ways that would affect the Agencies' initial review.
---------------------------------------------------------------------------

    \324\ The Commission reviewed transactions filed during FY 2021 
due to the large number of filings received by the Agencies during 
that fiscal year, which made for a robust data sample. See supra 
note 260.
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    The Commission believes the transaction agreement requirements of 
the final rule represents a middle ground between a merely conceptual 
deal and a ``ready to close'' deal. The Agencies need to know the key 
terms of the transaction to determine whether it may violate the 
antitrust laws if consummated. Given the short period of time given to 
the Agencies to make that determination, it is necessary for the 
transaction to be one that is likely to close. The Commission 
acknowledges that even with this modification, the final rule may not 
permit some parties to make an HSR Filing as early in their deal 
process as is currently permitted. However, parties will be able to 
file after they have agreed to material terms of the transaction even 
if a final agreement has

[[Page 89272]]

not been executed. The Commission notes that for many filings that do 
not contain an executed agreement today, the parties continue to 
negotiate final terms. The Commission expects that after the final 
rule, parties that have come to an agreement on key terms but have not 
yet signed a definitive agreement will continue to work to an executed 
agreement while the Agencies are conducting their antitrust review.
    The transaction agreement requirements of the final rule are 
necessary to address a real shortcoming of allowing notification on 
Preliminary Agreements. As noted above, currently, some parties submit 
a ``letter of intent'' that substantively only states that the two 
parties have the good faith intent to consummate a transaction. Some 
documents are labeled an ``expression of interest'' in a future 
transaction that is similarly not specific. In the Agencies' 
experience, such filings are often made prior to any significant due 
diligence has begun and do not demonstrate that the parties have 
considered or agreed to key terms that would be required for 
consummation. Such filings require staff to dedicate time to collect 
facts and make an initial determination of potential illegality for a 
transaction that may never occur or without a sufficient basis to know 
the full scope of what the parties may agree to in the future. As noted 
in the original Statement of Basis and Purpose from 1978, because of 
the time and resource constraints upon the agency staff, the Agencies 
should not expend resources to review transactions so lacking in 
specifics that they could be considered merely hypothetical.\325\
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    \325\ 43 FR 33450, 33511 (July 31, 1978).
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    The Commission has considered the additional effort required to 
review transactions that are filed with Preliminary Agreements and has 
determined that permitting filings on barebones agreements lacking 
sufficient details about key terms is contrary to the overall intent of 
the HSR Act. When a filing is made, triggering the initial waiting 
period, staff must start their review of the transaction and decide 
whether to issue Second Requests within the applicable statutory 
waiting period (15 or 30 days). If key terms of the transaction have 
not yet been established, staff may not have sufficient information to 
determine the potential antitrust risks. Further, if the parties have 
not yet begun robust negotiations or due diligence, the filing will not 
contain documents that provide business assessments of the transaction 
because such assessments have not been made. If the parties have not 
yet analyzed the impact of the transaction, it is not appropriate for 
the Agencies to begin such an assessment. This is particularly true if 
such assessments or negotiations lead the parties to abandon the 
transaction. In those cases, the Agencies will have needlessly spent 
scarce resources and may have burdened third parties investigating the 
transaction. Even if the parties do not abandon their transaction and 
the reviewing agency issues Second Requests, these investigations are 
often unnecessarily slowed down by the uncertainty surrounding the deal 
terms. The Commission understands that filers are anxious to get their 
HSR review completed so that it does not delay consummation of the 
transaction. But putting the burden on the Agencies to conduct 
antitrust assessments prematurely based on Preliminary Agreements that 
lack specificity undermines the purposes of the HSR Act. In addition, 
allowing notifications on mere expressions of interest in a future 
transaction creates opportunities to file as early as possible knowing 
that early filings put the Agencies at a disadvantage in conducting a 
thorough review.
    Commenters raised concerns that the delay associated with 
negotiating additional deal terms would cause filers not to pursue 
beneficial transactions. One commenter claimed that as time is often of 
the essence in mergers, the result would be a significant chill on 
mergers. Another commenter contended that the proposal would deter 
investment in private equity and would increase costs that would likely 
be passed down to limited partners. Another commenter claimed that the 
Agencies failed to consider additional costs resulting from the 
additional delays in the transaction timeline.
    The Commission disagrees that requiring more detail about 
transactions filed on Preliminary Agreements will chill M&A activity 
generally or for any particular type of investment. First, based on the 
Commission's review of filings detailed above, most reported 
transactions already meet the requirements adopted in the final rule. 
For those that do not, the Commission has identified a specific need 
for more detail to ensure that the reported transaction is likely to 
occur so that it is ripe for antitrust review. In addition, Congress 
identified those transactions where time is of the essence--namely, 
those that will be accomplished through a cash tender offer--and 
provided for a very short 15-day initial waiting period. For these 
transactions, the acquiring person does not need to file any agreement; 
it merely attests that its intention to make the tender offer has been 
publicly announced.\326\ For other transactions, the Agencies need some 
basis to know that the reported transaction is one that is likely to 
occur so that they do not begin an antitrust assessment before fully 
understanding how the transaction will likely change the premerger 
market dynamics. In the Commission's experience, when parties cannot 
reach agreement on a few key terms within their desired timeline to 
consummate the transaction, that is an indication that the deal is one 
that is not likely to close or is likely to close on terms that are 
very different from the ones in the Preliminary Agreements. Finally, 
while the parties have an interest in starting the 30-day review period 
as soon as possible so that it does not unnecessarily delay their deal, 
the Commission has an obligation to review the transaction to determine 
whether it may violate the antitrust laws, and cannot effectively do so 
prematurely. The Commission believes that any delay associated with 
filers complying with the transaction agreement requirements of the 
final rule is necessary and justified by the benefits to the Agencies 
and the public in avoiding premature review of reported transactions.
---------------------------------------------------------------------------

    \326\ 16 CFR 803.5(a)(2).
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    Separate from the concerns about delay, one commenter expressed 
concerns that, as drafted in the NPRM, the Instruction arguably 
requires the production of the most recent draft agreement, even if a 
term sheet was also provided. The final rule requires filers to analyze 
the executed agreement to determine whether it provides sufficient 
detail about the transaction. If that document does not, then filers 
must provide one additional dated document that does sufficiently 
describe the transaction. The same commenter also questioned the value 
to the Agencies of receiving the most recent draft agreement, which 
they state is often slanted to reflect the views of the most recent 
party to circulate a draft and thus is not necessarily representative 
of what the definitive agreement will ultimately become. If the most 
recent draft agreement does not reflect the key terms of the 
transaction, then some other document, such as a term sheet, should be 
submitted. Otherwise, as described above, the filing may be premature. 
Further, the Commission acknowledges that certain provisions of a draft 
agreement that are not strictly necessary to understanding the 
antitrust implications of a transaction may change, sometimes 
substantially, and that the final definitive agreement is the most 
probative. However, the Commission believes that not permitting

[[Page 89273]]

filing until a definitive agreement has been reached is not necessary 
and could impose too great a cost due to the associated delays. The 
Agencies have extensive experience with reviewing draft agreements and 
find that even they can be probative. So long as the draft agreement 
and the associated executed agreement comply with the transaction 
agreement requirements of the final rule, the Commission will accept a 
supplemental document that is in draft form.
    The same commenter suggested revising proposed Sec.  803.5 to 
change ``will be consummated'' to ``the parties intend to consummate.'' 
The Commission agrees that this change in wording better captures the 
requirement for the parties to attest to their good faith intention to 
proceed with the transaction based on the submitted document and will 
add the phrase ``the parties intend to consummate'' to Sec.  803.5. The 
Commission notes, however, that in order to satisfy the Act, parties 
must file and observe the waiting period for the transaction that will 
be consummated. Therefore, if there are material changes to the 
transaction after filing, the parties must continue to notify the 
Agencies so that they can determine whether an amended or new filing 
may be required. The Commission thus adopts the proposed requirement to 
submit a draft agreement or term sheet with the clarifications noted 
above.
    In sum, the Commission has determined that changes to Sec.  803.5 
contained in the final rule are necessary and appropriate to prevent 
the Agencies from reviewing transactions for which the merging parties 
have not yet reached agreement on key terms. For premerger review to be 
timely and effective, the Agencies need some assurance that the 
transaction is likely to occur and that the scope of the transaction is 
revealed in the transaction documents submitted with the HSR Filing. 
The Commission has modified the final rule as compared to the proposal 
for this requirement to reduce the cost and delay for filers as much as 
practicable.

E. Section 803.8: Translation of Documents

    The Commission proposed amending Sec.  803.8 to require submission 
of English-language translations for all foreign-language documents 
submitted with the notification. Under Sec.  803.8(a), filers currently 
do not need to translate these materials for the initial filing, and 
English-language outlines, summaries, extracts, or verbatim 
translations need only be provided if they already exist. Section 
803.8(b), in contrast, requires that all foreign-language documents 
responsive to a Second Request be provided with English translations. 
The Commission proposed combining Sec.  803.8(a) and (b) so that 
proposed Sec.  803.8 would therefore be one paragraph requiring that 
verbatim English translations be provided with all foreign-language 
materials submitted as part of an HSR Filing or in response to a Second 
Request. The Commission adopts this proposed change with a revision to 
reduce potential confusion.
    As explained in the proposed rule, when the Agencies receive key 
documents, such as the transaction agreements, relevant financial 
analyses or transaction-related assessments required by Item 4(c) with 
no translation at all or with unhelpful English-language outlines, 
summaries, or extracts, the Agencies are at a significant disadvantage 
during the very short period provided for initial review. The 
Commission received several comments on this proposal, principally 
regarding the burden and overall need for the proposed translation 
requirement. One commenter supported the proposed change, noting that 
with the help of modern software the cost of producing English 
translations should not be burdensome. The Commission agrees. As stated 
in the proposed rule, the Commission believes that translation tools 
available to the parties have become more abundant and these tools 
provide many options for translation that should significantly reduce 
the cost of providing translations. Moreover, it is important that the 
parties themselves provide translations because they created the 
documents at issue. The parties should ensure that translations are 
faithful to the original documents, a task that the Agencies are unable 
to complete, as they do not have the context or background to the 
transaction or companies that would be necessary to identify material 
errors. The Commission wants to avoid disputes over translations of 
these complex business documents that the parties have not reviewed.
    The Commission notes that not requiring English-language 
translations from all entities, including foreign entities, under the 
current rule puts the Agencies at a disadvantage when reviewing HSR 
Filings with only foreign-language documents. This also creates an 
advantage for non-U.S. firms (whose materials are most likely to be in 
a foreign language). If key documents are not translated, the Agencies 
cannot give the transaction the same level of rigorous review and 
scrutiny as they do for transactions where all of the documents can be 
reviewed starting on the first day of the waiting period. Translation 
requires time that should not be taken from the short period available 
to the Agencies for the initial review. Time spent translating 
documents reduces the time available for more critical tasks, such as 
assessing the antitrust risk of filed transactions.
    To understand the potential costs associated with requiring 
submitted documents to be translated, the Commission examined all HSR 
filings submitted in FY 2021.\327\ Of the 7,002 HSR Filings that year, 
only 40 contained documents submitted in a language other than English 
and did not provide a translation. This represents fewer than 0.6 
percent of filings that year. While the cost of providing translations 
may increase the cost of making an HSR Filing for these particular 
filers, the overall impact of this requirement is limited.
---------------------------------------------------------------------------

    \327\ As noted above in footnote 260, the Agencies selected FY 
2021 for this effort because of the large number of reportable 
transactions that year, 3,520, which provided for a robust data set. 
For these transactions, there were 7,002 filings, roughly two per 
transaction. See Fed. Trade Comm'n & U.S. Dep't of Justice, Hart-
Scott-Rodino Annual Report, Fiscal Year 2021 appendix B (FY 2021).
---------------------------------------------------------------------------

    Beyond the issue of increased cost, some comments questioned the 
need to include translations with HSR Filings, especially for 
transactions that do not raise competitive concerns. The Commission 
disagrees that translations of submitted documents are not necessary 
for the Agencies to complete their analysis or that they are useless to 
the Agencies. The foreign-language versions of the documents are 
required by the Rules because they are responsive to specific 
information requests. As stated in the NPRM, the Agencies receive HSR 
Filings that contain only foreign-language versions of key materials, 
such as the transaction agreements submitted in response to current 
Item 3(b) of the Form, the relevant financials submitted in response to 
current Item 4(b), and the documents submitted in response to current 
Items 4(c) and 4(d) of the Form. These are the very documents that 
allow the Agencies to conduct a preliminary review of HSR Filings for 
compliance with filing requirements and to determine whether the 
transaction may violate the antitrust laws. Other filers submit these 
same types of documents in a form that staff can quickly review. Not 
being able to review these key materials on the first day of the 
waiting period puts the Agencies at a material disadvantage during 
their initial review.
    After carefully considering the objections in the comments, the 
Commission continues to believe requiring translations of foreign-

[[Page 89274]]

language documents with HSR Filings is necessary and appropriate for 
the Agencies' premerger assessment, and notes that such translations 
may be especially important for those transactions that report foreign 
subsidies.\328\ Despite the cost to filing parties, translations permit 
staff to review transactions and determine whether they require further 
investigation on the basis of the materials contained in the HSR 
Filing. With this cost in mind, the Commission invited commenters to 
suggest other alternatives that might achieve the Commission's goal of 
being able to understand and assess foreign-language documents while 
lessening the cost for filing parties and received a range of potential 
modifications to the proposal. One commented suggested that the 
requirement to provide verbatim translations should be limited to only 
final documents, not draft versions. As noted in section VI.G.1.b., the 
Commission has not adopted the proposal to require drafts, so no 
translations will be required for such documents in connection with the 
submission of the Form.
---------------------------------------------------------------------------

    \328\ NPRM at 42182-83.
---------------------------------------------------------------------------

    Commenters also proposed requiring only general summaries in 
English in lieu of verbatim translations, or permitting a filing party 
to produce a better-quality translation within a reasonable time period 
if the Agencies request them. The Commission acknowledges these 
suggestions but does not believe either presents a viable alternative 
to the version of Sec.  803.8 contained in the final rule. General 
summaries do not provide the Agencies with a complete, detailed picture 
of the transaction. The Agencies' preliminary analysis of transactions 
often relies upon a nuanced and thorough reading of documentary 
attachments, and general summaries may not include facts or 
descriptions that the Agencies find relevant. The ability to require a 
better-quality translation within a reasonable time period after the 
submission of the HSR Filing will mean the Agencies must depend on 
filing parties to respond; this would likely delay Agency review within 
the already time-constrained initial waiting period. The time saved by 
the parties in preparing a summary in lieu of a translation is 
outweighed by the benefit to the Agencies of having a version of the 
underlying document available at the beginning of the waiting period.
    Given the importance of having translations of key documents, the 
Commission adopts the proposed changes to Sec.  803.8 but deletes the 
reference to ``understandable.'' The Commission believes this word is 
superfluous when used in conjunction with ``accurate and complete'' and 
may introduce confusion. Section 803.8 does not require any particular 
method of translation but specifies that, whatever translation method 
the parties choose, all verbatim translations must be readily 
understood, materially accurate, and complete. One commenter suggested 
revising the instructions to state explicitly that the submission of 
machine translations is acceptable. The Commission declines to state 
this explicitly and notes that in complying with the requirement to 
provide translations, parties must certify that translations are 
materially accurate even if they do not identify how they were created.
    In sum, the Commission has determined that the translation 
requirement contained in the final rule is necessary and appropriate to 
enable the Agencies to quickly review submitted documents with English 
translations that have been certified as accurate.

F. Section 803.10: Commencement of Waiting Periods

    The Commission proposed amending Sec.  803.10(c)(1)(i) to clarify 
that filings made electronically are to be credited as received by the 
Agencies on the date filed if: (i) the electronic submission is 
complete by 5 p.m. Eastern Time; and (ii) such date is not a Saturday, 
Sunday, legal public holiday (as defined in 5 U.S.C. 6103(a)), or the 
observed date of such legal public holiday. This change codifies the 
current policy, and no comments were received. The Commission adopts 
this change as proposed.

G. Section 803.12: Information To Be Updated With Refiling

    The Commission proposed amending Sec.  803.12(c) to specify what 
updates would be required to the acquiring person's filing if the 
acquiring person chose to withdraw its HSR Filing and refile it. This 
procedure for voluntary withdrawal and refiling permits the acquiring 
person to restart the initial waiting period, providing the Agencies an 
additional 15 or 30 days (depending on the transaction type) to review 
the transaction without issuing a Second Request, as long as certain 
conditions are met. Currently, the rules require updates to Items 4(a), 
4(b), 4(c), and 4(d). The NPRM proposed changes to Sec.  803.12(c) 
including: eliminating the requirement to provide updated financials, 
currently required by Items 4(a) and (b); requiring updated 
Transaction-Related Documents with the updated HSR Filing; requiring 
updated transaction agreements; and requiring updated information about 
subsidies from Foreign Entities of Concern. The Commission adopts the 
proposed change with modifications to reflect ministerial changes to 
the names of sections of the Form.
    The Commission received one comment on this proposal that noted 
that the proposal would impose a significant additional burden on the 
merging parties by requiring them to conduct a new search for 
Transaction-Related Documents with an expanded set of custodians. 
According to this commenter, it would also discourage the parties' use 
of pulling and refiling, and divert agency resources away from the 
review of other reported transactions.
    Parties who withdraw and refile under Sec.  803.12(c) must already 
search for new documents responsive to current Items 4(c) and 4(d). The 
basic requirement to search for new Transaction-Related Documents 
remains largely the same with the addition of only a single new 
custodian (the supervisory deal team lead, as defined) and a 
clarification that versions sent to any member of the board of 
directors (or similar body for non-corporate entities) are responsive 
and should not be treated as draft documents. The search required is a 
limited one, reaching back at most to the 15 or 30 days since the 
original filing was made. The Commission notes that these newly created 
documents and updated agreements are material to the Agencies' 
evaluation of the transaction and the determination of whether to issue 
a Second Request. Additionally, a change in information about subsidies 
may also be material and, until the Agencies have more experience with 
receiving this information, as required by Congress, parties must also 
provide updates to this item. The Commission therefore adopts the 
proposal with changes made to the names of the sections in the Form and 
Instructions.

VI. Part 803 Appendix A and Appendix B

    Below, the Commission describes the changes to the appendices to 
Part 803, the Form and the Instructions. As discussed in section V.A., 
the Commission will continue to use the same electronic filing 
mechanism that has been in place since March 2020. Therefore, the 
Commission now provides a Form which will be available on the FTC's 
website in Microsoft Word format to collect the information required by 
the Instructions. Additionally, as discussed in section V.B., separate 
forms will be required for

[[Page 89275]]

parties that are filing both as acquiring and acquired persons for 
related transactions. As a result, and to aid parties in understanding 
which provisions are applicable to acquiring persons and which are 
applicable to acquired persons, the Commission has now provided 
separate Instructions and Forms for acquiring and acquired persons. 
This change has also allowed the Commission to simplify the language of 
some of the instructions, such as by defining ``target'' to include all 
acquired entities or assets and eliminating use of phrases such as 
``acquiring person or acquired entity as appropriate'' that were 
included in the draft instructions. Other ministerial changes to aid 
readability of the Instructions are also noted below.
    For ease of reference, the Commission includes the following 
materials regarding the adopted Instructions and Form:
     An outline of the organization of the Form and 
Instructions,
     A chart that identifies proposed new locations of the 
current Items of the Form and Instructions, including whether 
substantive changes are adopted, and
     A chart of the new categories of required information.
    These materials appear immediately below.
Instructions Outline
 General Instructions and Information
 Fee Information
 General Information
 Ultimate Parent Entity Information
[cir] UPE Details
[cir] Acquiring Person or Acquired Entity Structure
[cir] Additional Acquiring Person Information (Acquiring Person Only)
 Transaction Information
[cir] Parties
[cir] Transaction Details
[cir] Transaction Description
[cir] Additional Transaction Information
[cir] Joint Ventures (Acquiring Person Only)
[cir] Business Documents
[cir] Agreements (Acquiring Person Only)
 Competition Descriptions
[cir] Overlap Description
[cir] Supply Relationships Description
 Revenues and Overlaps
[cir] NAICS Codes
[cir] Controlled Entity Geographic Overlaps
[cir] Minority-Held Entity Overlaps
[cir] Prior Acquisitions
 Additional Information
[cir] Subsidies from Foreign Entities or Governments of Concern
[cir] Defense or Intelligence Contracts
[cir] Voluntary Waivers
 Certification
 Affidavits
BILLING CODE 6750-01-P

[[Page 89276]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.040


[[Page 89277]]


[GRAPHIC] [TIFF OMITTED] TR12NO24.041

BILLING CODE 6750-01-C

A. General Instructions and Information

    The Commission proposed creating a General Instructions and 
Information section within the proposed Instructions that largely 
parallels the General section of the current Instructions but is 
significantly reorganized and includes a ministerial change to clarify 
what information is found on the PNO website. Within the proposed 
General Instructions and Information section, the Commission proposed 
substantive changes to the following sections: Definitions, 
Identification of the Filing Person, Responses, and Translations. As 
discussed below, the Commission adopts some of the changes as proposed, 
adopts others with modification, and does not adopt others. In 
addition, in order to effectuate separate, tailored Forms and 
Instructions for the acquiring and acquired person, and to enhance 
clarity, the Commission adopts certain ministerial changes discussed 
below.
1. Definitions and Explanation of Terms
a. Economic Research Service's Commuting Zones
    The Commission proposed adding a definition for Economic Research 
Service's Commuting Zones to facilitate responses to proposed 
requirements related to labor markets. The Commission received several 
comments on the Economic Research Service's Commuting Zones, and all 
cited the burden of this proposal. Many noted that the U.S. Department 
of Agriculture

[[Page 89278]]

has not updated these metrics since 2012, which makes them unreliable 
as a basis for determining the geographic scope of labor markets. As 
the Commission is not adopting the information requirements for 
employees in the final rule (see section VI.I.3.), the Commission does 
not adopt this definition.
b. Fee Information
    The Commission adopts a ministerial change related to this item. As 
a result of the new fee structure mandated by Congress in the Merger 
Modernization Act, the fee information description now refers to the 
adjusted fees and fee tiers.
c. North American Product Classification System Data
    The Commission proposed eliminating the reporting of 10-digit North 
American Product Classification System (``NAPCS'') based codes, and, as 
a result, proposed deleting the NAPCS definition from the proposed 
Instructions. The Commission received one comment on the elimination of 
the NAPCS definition; the comment supported the proposed streamlining 
of manufacturing revenue reporting. The Commission adopts this change 
as proposed. See section VI.J.1. for further discussion on the 
elimination of NAPCS-based codes.
d. Notification Thresholds
    The Commission adopts a ministerial change related to this item. 
Currently, the section entitled ``Thresholds'' discusses filing fee and 
notification thresholds as a single item. With the fee changes that 
were enacted in the Merger Modernization Act, these are now separate 
thresholds. As discussed in section VI.A.1.b., ``Fee Information'' 
discusses the fee tiers. The definition of ``Notification Thresholds'' 
now discusses only the notification thresholds that are defined in 
Sec.  801.1(h).
e. Standard Occupational Classification
    The Commission proposed adding a definition for Standard 
Occupational Classification (``SOC'') codes to facilitate responses to 
proposed requirements related to labor markets. As the Commission is 
not adopting information requirements for employees in the final rule 
that would require reporting on this basis (see section VI.I.3.), the 
Instructions do not contain a definition for SOC codes.
f. Select 801.30 Transactions
    As discussed in section III.C., the Commission received many 
comments that objected to the burden of the new requirements as 
proposed. Among the objections were claims that the proposed 
requirements reached transactions that typically were not investigated 
by the Agencies, that the burden of the new requirements could slow the 
pace of some transactions and deter others, and that the burden would 
fall not just on acquiring persons but on target companies that did not 
initiate or consent to the transaction. One commenter urged the 
Commission to exempt from HSR reporting requirements certain 
transactions that the Agencies rarely challenge, including acquisitions 
of voting securities that do not transfer control of the target 
company. The Commission acknowledges these comments, and while it 
disagrees that there is any category of transaction for which all of 
the adopted proposals should not apply, it does agree that exempting 
certain transactions from some of the new requirements will not inhibit 
the Agencies' ability to understand the transaction and determine that 
it warrants further investigation. To that end, the Commission limits 
the amount of information required for the notification of certain 
transactions subject to Sec.  801.30 that also meet specific 
conditions.
    Section 801.30(a), first promulgated by the Commission in the 
original rules, defines certain types of transactions in which the 
consent of the acquired person may not be required.\329\ These 
transactions include acquisitions made on the open market, via tender 
offers, through the exercise of warrants or options, or through the 
conversion of non-voting securities. The involvement of the acquired 
person varies across these transactions. In some instances, such as an 
investor acquiring voting securities on the open market, the acquired 
person does not have to agree to the transaction and may not even have 
knowledge of it. In others, the acquiring and acquired person both 
assent to the deal. For example, some transactions are effectuated by a 
tender offer or the acquisition of purchases on the open market or from 
third parties--making Sec.  801.30 applicable--but are also subject to 
an agreement between the acquiring and acquired person.
---------------------------------------------------------------------------

    \329\ 16 CFR 801.30(a); see also 43 FR 33450, 33483 (July 31, 
1978).
---------------------------------------------------------------------------

    When the agreement of the acquired person is not required in a 
transaction, the Commission believes that certain requirements of the 
final rule are unlikely to provide information necessary to determine 
whether that transaction may violate the antitrust laws. Several 
commenters agreed that in such transactions the target in particular 
would not be able to provide the new information required in the final 
rule in the short time they have to make their filing. Further, in such 
transactions, the acquired person may not know that it has a filing 
obligation until the acquiring person has filed and will have limited 
time to prepare its filing. For this select set of transactions, the 
Commission has determined that it is not necessary to collect certain 
information, particularly in light of the costs that would be imposed 
on these types of filings which often carry low antitrust risk. 
Therefore, the Commission, adapting suggestions from the comments, 
introduces and defines the term ``select 801.30 transactions.'' Select 
801.30 transactions are those transactions that do not result in the 
acquisition of control to which Sec.  801.30 applies and where there is 
no agreement or contemplated agreement between any entity within the 
acquiring and acquired person. An example of a select 801.30 
transaction includes an acquisition of voting securities on the open 
market via a national exchange by an investor that has no other ties to 
the issuer and which acquisition does not result in the acquisition of 
control. Additionally, select 801.30 transactions include acquisitions 
resulting from a traditional executive compensation arrangement where 
the executive exercises contractual benefits pursuant to a compensation 
package to acquire voting securities and nothing more.
    In addition to excluding transactions in which there is an 
agreement between the acquiring and acquired person, the definition of 
``select 801.30 transactions'' excludes transactions that would result 
in the acquiring person obtaining control, as defined by the Rules, of 
the acquired entity or where the acquiring person has obtained or will 
obtain certain rights related to the board of directors, general 
partner, or management company of an entity within the acquired person. 
These excluded transactions are likely to require a more thorough 
review for potential antitrust risk, and therefore it is necessary and 
appropriate for the Agencies to receive some additional information 
related to them as contemplated in this rulemaking. The Commission uses 
the term ``select 801.30 transaction'' throughout the discussion below, 
and transactions that meet the definition will not be required to 
respond to certain items as part of the Commission's efforts to limit 
costs to filing parties in response to the comments. See Figure 3.

[[Page 89279]]

g. Supervisory Deal Team Lead
    As discussed in section VI.G.1, the Commission proposed that, in 
addition to requiring documents prepared by or for officers and 
directors in response to current Item 4(c), filing persons must also 
submit transaction-related documents prepared by or for supervisory 
deal team lead(s). This proposal targeted documents authored by or for 
the person who functionally led the deal team even if not an officer or 
director. In the Agencies' experience with Second Request responses, 
these documents often include information that would have been highly 
relevant to the Agencies' analysis of the transaction during the 
initial waiting period to determine whether Second Requests should 
issue and what additional information they should seek. The Commission 
adopts this definition to limit the proposal to a single individual and 
provide clarity regarding identification of the appropriate individual.
    The proposed rule noted that the identification of any supervisory 
deal team lead would not be based upon title alone and that this 
addition would require the filing person to determine the individual or 
individuals who functionally lead or coordinate the day-to-day process 
for the transaction at issue. A supervisory deal team lead need not 
have ultimate decision-making authority but would have responsibility 
for preparing or supervising the assessment of the transaction and be 
involved in communicating with the individuals, such as officers or 
directors, who have the authority to authorize the transaction. In the 
proposal, any such individual(s) might be the leader(s) of an 
investment committee, tasked with heading the analysis of mergers and 
acquisitions, or otherwise given supervisory capacity over the flow of 
information and documents related to transaction.
    The Commission received many comments on its proposal to require 
current 4(c) documents from the supervisory deal team lead(s). Several 
comments noted that the proposed Instructions do not offer a definition 
of supervisory deal team lead(s) and that the proposed rule's 
description of the term was vague, ambiguous, and subjective, leaving 
filers uncertain which individuals must be searched in addition to 
officers and directors. One comment stated that the term was neither 
defined nor self-explanatory, and the proposal's descriptions of what 
constitutes a supervisory deal team lead(s) offers two separate 
standards. Yet another comment noted that the description could 
potentially describe a company's entire corporate development team.
    Concerns about the meaning of the term ``supervisory deal team 
lead'' led a number of commenters to propose a definition. One 
commenter suggested limiting supervisory deal team lead to the senior 
most member of the corporate development deal team responsible for 
driving the strategic vision and assessment of the deal, who would not 
otherwise qualify as an officer or director. Another commenter 
suggested it should be the most senior member of a filing party's deal 
team responsible for the company's strategic vision and who otherwise 
would not qualify as a director or officer. Also, another commenter 
offered that supervisory deal team lead(s) should be expressly defined 
to mean the individual with primary responsibility for supervising the 
assessment of the transaction, and that it should only be one person.
    The Commission acknowledges that a definition of supervisory deal 
team lead in the Instructions would help filers accurately identify the 
appropriate individual to be searched for responsive materials. The 
Commission notes that many of the comments' proposed definitions 
provided useful contours to help define the term. As discussed above, 
certain commenters suggested a definition that the relevant individual 
have responsibility for business strategy associated with the 
transaction under review. The Commission agrees that centering the 
definition on the ``primary responsibility'' for the strategic 
assessment of the deal will help identify the correct individual.
    The Commission also agrees that the definition should focus on one 
supervisory deal team lead to mitigate any confusion or uncertainty 
raised in the comments about having two or three supervisory deal team 
leads. As discussed in section VI.G.1., several commenters also raised 
concerns with the burden associated with collecting documents from 
additional custodians, particularly if multiple individuals fulfilled 
that role.
    The Commission therefore adopts a new definition for ``supervisory 
deal team lead'' as the individual who has primary responsibility for 
supervising the strategic assessment of the deal, and who would not 
otherwise qualify as a director or officer. This definition focuses on 
the one person who oversees the strategic assessment of the transaction 
and it should mitigate the concerns of some commenters that the term is 
so vague that it might introduce uncertainty as to when the initial HSR 
waiting period begins. These commenters explained their concern that 
Agency staff may become aware of another employee who would better 
constitute a supervisory deal team lead than the individual selected by 
the filer and reject the filing. In response to comments that requiring 
filers to select a supervisory deal team lead will allow the Commission 
to reject filings, the Agencies will continue to rely on filers to 
certify to their good faith belief in completing and certifying to the 
accuracy of the filing, and the Agencies will continue to rely on that 
good faith. In the situation where the only individuals supervising the 
strategic assessment of the deal are already either an officer or 
director, filers can state that this is the case and identify an 
officer or director as the supervisory deal team lead.
h. Target
    For additional clarity in the instructions, the Commission 
introduces and defines the term ``Target'' as a ministerial change. The 
target includes all entities and assets to be acquired by the acquiring 
person from the acquired person and eliminates the need to use the 
inadvertently confusing phrase ``the acquired entity(s) or assets'' 
throughout the Instructions. The Commission notes, however, that the 
Instructions do continue to use ``acquired entity(s)'' in certain 
instances where a question may not be relevant to the acquisition of 
assets.
i. Year
    As part of the Commission's effort to add more clarity to the 
Instructions, the Commission makes a ministerial change to the 
definition of ``most recent year'' found in the definition of ``year'' 
to make clear that the ``most recent year'' is the most recently 
completed calendar or fiscal year. This is the current intent of the 
definition and consistent with the guidance that has been given 
informally and with how filing persons complete the form and provide 
information.
2. Filing as an Acquiring and Acquired Person
    As discussed in section V.C., the Commission adopts the proposed 
changes to Sec.  803.2 such that filing persons will be required to 
submit separate forms when filing as an acquiring and acquired person. 
Additionally, the Commission has created separate, tailored Forms and 
Instructions for the Acquiring and Acquired Person. Since filers will 
choose the appropriate Form for the filing, the Commission adopts the 
ministerial change to eliminate the question, currently Item 1(c), 
asking the

[[Page 89280]]

filing person to identify whether the filing is being made as an 
acquiring or acquired person.
3. Responses
    In the new Responses section, the Commission proposed setting out 
the specifics of how filers would provide the information responsive to 
the proposed new questions. The revisions included eliminating 
instructions regarding filings made on paper or DVD, see above at 
section IV.A; the Commission adopts these changes as proposed. The 
proposed responses section also described the information that filing 
persons would need to provide in a log of responsive documents and 
descriptive responses to be submitted with an HSR Filing. This 
information would have generally been the same as the information 
currently required for documents submitted in response to Items 4(c) 
and 4(d) of the current Form, with two proposed expansions. The first 
would have required the filing person to identify the request(s) to 
which the document would be responsive. The second would have required 
the identification of the individual within the acquiring or acquired 
person who supervised the preparation of documents prepared by third 
parties, or for whom the document was prepared. The Commission adopts 
the proposal with modifications to reflect the layout of the Form and 
to reduce the burden for transactions that do not have either a NAICS 
overlap, see section VI.J., or overlap or supply relationship 
identified in the Competition Descriptions, see section VI. I.
    The Commission received two comments regarding the new Responses 
section, both of which focused on the proposed requirement for filing 
persons to provide the name, title, and company of the individuals 
within the filing person who supervised the preparation of third-party 
documents or for whom the documents were prepared. One commenter 
expressed concern that the proposal could put certain fund employees at 
risk of violating their nondisclosure agreements with target companies. 
Another commenter noted that there is minimal if any value to the 
Agencies having this information for every single reportable 
transaction, but collecting and filing a comprehensive list of all the 
people who may have supervised the creation of these documents will 
require many hours of work.
    The Commission acknowledges the cost but disagrees that this 
information is not valuable or informative. In the Agencies' 
experience, knowing the authors of documents assists in the evaluation 
of the documents as well as any subsequent investigation by providing 
context regarding who was involved in the preparation of the document. 
Currently, the Agencies do not receive this context for documents 
prepared by third parties. Therefore, for documents prepared by third 
parties, such as consultants or bankers, the Commission adopts the 
proposal for the filing person to identify the individual or 
individuals who supervised the production of such documents, or for 
whom the document was prepared. This information will not be required 
for documents that were provided to the parties without solicitation, 
or for documents provided to the acquiring or acquired person by the 
other party.
    As part of the Commission's overall effort to reduce the burden on 
filing parties, the Commission has revised the proposal to only require 
authors (or the individuals that supervise the creation of documents) 
for filings in which there are NAICS overlaps, or overlaps or supply 
relationships identified in the Competition Descriptions. For those 
transactions where such an overlap or supply relationship has been 
identified, filers will be required to provide the same author 
information as is currently required for documents responsive to Items 
4(c) and 4(d), as well as the individuals within the filing person who 
supervised the preparation of third-party documents or for whom the 
documents were prepared. The Commission notes that these third-party 
documents are already required. The additional information is related 
to the identification of the individuals within the acquiring or 
acquired person, so no new non-disclosure risks should result from the 
requirement. Finally, because the Form requires identification of the 
file name for each document submitted, the ``Responses'' section does 
not require a document log. A privilege log will still be required.
4. Translations
    As noted in section V.E., the Commission amends Sec.  803.8 to 
require the filing person to submit English translations of all 
foreign-language documents. The Instructions also reflect this change.
5. Non-Compliance
    While the Commission does not make any changes to the explanation 
of ``non-compliance,'' it does emphasize that if the filer is unable to 
answer any question fully, it is required to provide the information 
that is available and provide a statement of reasons for non-compliance 
consistent with Sec.  803.3 and as permitted by the HSR Act.\330\ 
Further, where exact answers cannot be given, filers are allowed to 
enter best estimates, while indicating the source or basis of the 
estimate and marking the information with the notation ``est'' for any 
item where data are estimated. The Commission routinely accepts filings 
and commences waiting periods for filings that avail themselves of this 
procedure. For example, publicly traded filers are often unable to 
identify with certainty their minority shareholders, and instead 
provide information that has been filed with the SEC. The Commission 
did not propose any changes to this Instruction and does not change it 
now.
---------------------------------------------------------------------------

    \330\ 15 U.S.C. 18a(b)(1)(A)(ii).
---------------------------------------------------------------------------

B. Fee Information

    Although the Commission proposed moving the filing fee information 
to the Transaction Information section of the proposed Instructions, in 
the final Form and Instructions, filing fee information will instead be 
collected in its own section. The Form also includes new areas for 
filing persons to indicate whether the fee is being paid by more than 
one entity, and if so, how much each entity will pay. Additionally, the 
Commission adopts a ministerial change to eliminate the need to provide 
Taxpayer Identification or Social Security Numbers and the name of the 
institution, such as the bank, from which the fee will be paid. The 
Commission has determined that it no longer needs this information to 
identify filing fees, and parties therefore no longer need to provide 
it.

C. General Information

    The General Information section of the Form and Instructions 
requires filing persons to indicate whether the transaction is a post-
consummation filing, cash tender offer, or bankruptcy, and whether 
early termination of the transaction is requested--information that is 
currently collected on the first page of the Form. The Commission did 
not propose and does not adopt any material changes to these items.

D. Ultimate Parent Entity Information

1. UPE Details
    The UPE Details section of the Form and Instructions requires 
information about the UPE of the acquiring or acquired person, 
including contact information, financial documents, and information 
about certain minority shareholders or interest holders. Much of this 
information is currently required by Items 1, 4(a) and (b), and 6(b). 
The Commission proposed (1) requiring

[[Page 89281]]

contact information for the individual to whom Second Requests should 
be sent; (2) clarifying the instructions related to the provision of 
financial documents for natural person UPEs; (3) requiring filers to 
stipulate that the appropriate size of person threshold is met, if 
applicable; (4) identifying additional minority holders of entities 
within the acquiring person; and (5) reducing the types of minority 
holders of the acquired entity that must be reported. As discussed 
below, the Commission adopts some of these proposals without change and 
some with modification.
a. Contact Information
    The Commission proposed that all filers, not just foreign filers, 
must identify the individual to whom Second Requests should be 
addressed. The Commission received no comments on this change and 
adopts it as proposed.
b. Annual Report and Audit Reports of the UPEs
    This section requires information currently required by Items 4(a) 
and 4(b) as it pertains to the UPE of the acquiring or acquired person. 
Annual and audit reports of other entities within the acquiring and 
acquired person are required by the Acquiring and Acquired Person 
Structure section, as discussed in section VI.D.2.b. The Commission 
proposed clarifying the current instructions regarding which annual 
reports and audit reports are required from natural person UPEs. The 
Commission makes no change to the instruction that natural person UPEs 
should not produce any personal balance sheets or tax returns. Since 
natural persons should not provide personal financial information, no 
information should be provided in the UPE section. The Commission did 
not propose and does not make any change to the annual or audit reports 
required of the UPE of the acquiring or acquired person.
    The Commission did propose clarifications regarding what other 
annual and audit reports entities within the same person as natural 
person UPEs must provide. This proposed clarification is discussed in 
section VI.D.2.b.
c. Size of Person Stipulation
    The Commission proposed adding an item on the Form that would allow 
filers to stipulate that the size of person test is met (at the 
appropriate dollar amount) or indicate that the size of person test is 
not applicable. The Commission received no comments on this change and 
adopts it as proposed.
d. Minority Shareholders or Interest Holders
    The Commission proposed a Minority Shareholders or Interest Holders 
section to require identification of minority interest holders of 
certain entities within the acquiring person and the acquired entities. 
Currently, Item 6(b) requires acquiring persons to identify minority 
holders of 5% or more but less than 50% of the acquiring entity and the 
UPE of the acquiring person (or, for natural person UPEs, the highest-
level entities they control). Acquired persons are required to report 
such minority holders of the acquired entity. For UPEs of the acquiring 
person, acquiring entities, and acquired entities that are limited 
partnerships, only disclosure of the general partner is currently 
required.
    The Commission proposed several changes to require additional 
information about the identity of minority holders, as well as 
identification of additional minority interest holders by the acquiring 
person, but potentially fewer by the acquired person. First, the 
Commission proposed requiring disclosure of the ``doing business as'' 
or ``street name'' of minority investors that are related to a master 
limited partnership, fund, investment group, or similar entity. Second, 
the Commission proposed to expand the entities for which the acquiring 
person must identify certain minority interest holders to include 
entities related to the acquiring entity. Third, the Commission 
proposed requiring the identification of certain minority holders of 
limited partnerships, rather than just the general partner. Finally, 
the Commission proposed limiting the minority interest holders that 
acquired persons would need to identify. The Commission adopts the 
first two proposals without change but modifies the limited partners 
that need to be identified, as discussed below.
(i) Provision of ``Doing Business As'' or ``Street Names''
    First, the Commission proposed that the acquiring person provide 
the doing business as or ``street name'' of minority investors that are 
related to master limited partnerships, funds, or investment groups. 
The Commission did not receive comments on this specific proposal but 
did receive comments to similar proposed requirements in other areas of 
the Instructions. Objections in these other sections generally focused 
on the lookback period and the burden of searching for all names that 
were potentially used by a business. In this section, the Commission 
did not propose a lookback period, but instead proposed requiring only 
the current name of the related master limited partnership, fund, 
investment group, or similar entity.
    The Commission continues to believe that this information should 
not be costly for filers. In many cases, communication between the 
acquiring person and the investor will include this information. For 
example, though the minority investor may be RANDOMNAME, LLC, the 
acquiring person regularly communicates with INVESTMENT GROUP and sends 
information related to the investment in care of that business. 
However, if this information is not known to the acquiring person, it 
can so note in a statement of non-compliance.
    The task of screening transactions for potential competitive 
effects is stymied when filers provide only legal names, which are 
often unrelated to the name by which the public knows the business. 
Knowing the d/b/a or street name of the entities involved in the 
transaction allows staff to use public resources to gather additional 
information, for example through internet searches or look-ups using 
commercial services relied on by the Agencies to provide industry data. 
Because of the value to the screening process, the Commission adopts 
this requirement as proposed.
(ii) Identification of Additional Minority Investors in the Acquiring 
Person
    The Commission next proposed two changes that could increase the 
number of minority investors the acquiring person would need to 
identify: First, it proposed that the acquiring person be required to 
report holders of 5% or more but less than 50% of (1) the acquiring 
entity, (2) any entity directly or indirectly controlled by the 
acquiring entity, (3) any entity that directly or indirectly controls 
the acquiring entity, and (4) any entity within the acquiring person 
that has been or will be created in contemplation of, or for the 
purposes of, effectuating the transaction. Second, it proposed that 
filing persons report holders of 5% or more but less than 50% of 
limited partnerships, in addition to the general partner.\331\
---------------------------------------------------------------------------

    \331\ This change also relieved natural person UPEs from the 
obligation to identify minority shareholders of all top-level 
entities, instead only requiring identification for entities related 
to the transaction.
---------------------------------------------------------------------------

    Comments on these two proposed changes were similar and often 
intertwined. One commenter urged the Agencies to collect the proposed 
new information and stated that the ownership structure resulting from 
the

[[Page 89282]]

transaction may change the parties' incentives to compete, enhance the 
acquirer's ability to influence decision making through changes in 
voting interests or governance rights, or facilitate the sharing of 
competitively sensitive information between rivals. Two others also 
supported the proposal, with each noting the various potential 
anticompetitive impacts of minority interests. Specifically, one 
commenter stated that these new requirements would address complex 
corporate structures, which may obscure potentially significant 
relationships. The other commenter also supported providing more 
information about shareholders, particularly since the current Form and 
Instructions can treat portfolio companies of private equity funds as 
independent from each other and their management companies.
    Broadly, critics of these proposed changes expressed concerns about 
the burden of collecting the requested information. Additional 
criticisms included objections to the five percent threshold for 
identification, with commenters stating that the interests of such 
minority investors may be wholly unrelated to the notified transaction, 
or less likely to result in a substantial lessening of competition. 
Concerns were also raised about confidentiality and disclosure, noting 
the Commission's prior consideration of the fact that the identity and 
investment level of limited partners is often highly confidential when 
it decided in 2011 not to require disclosure of limited partners. 
Commenters further speculated that requirements to disclose the 
identity of additional minority investors could create a chilling 
effect on fundraising and deals. Finally, commenters stated that such a 
decrease in fundraising and deal volume could affect smaller 
businesses, pension plans, endowments, charitable foundations, and 
activist investors, among others. Each of these objections is discussed 
below.
(a) Identification of Minority Holders of Additional Entities
    Regarding the first proposal to expand the entities for which 
minority holders must be identified, the Commission notes that until 
2011 acquiring persons were required to report minority holders of 5% 
or more for all corporate entities within the acquiring person that had 
assets of $10 million or greater. As part of the 2011 rulemaking, the 
Commission determined that this broad requirement, which could reach 
entities within the acquiring person that had no nexus to the reported 
transaction, was not essential to an initial review of the 
transaction.\332\ Through this change, the Commission expanded the 
requirement to include identification of minority holders of non-
corporate entities, but it limited the obligation for the acquiring 
person to the identification of minority holders of only the acquiring 
UPE and the acquiring entity. As a result, the Agencies receive 
information about what entities have a ``seat at the table'' in the 
case of very simple corporate structures where the acquiring person UPE 
directly controls the acquiring entity without any intermediary 
entities, or where intermediary entities are wholly owned by the 
acquiring person, without the acquiring person providing information 
about entities unrelated to the transaction.
---------------------------------------------------------------------------

    \332\ 75 FR 57110, 57118 (Sept. 17, 2010); 76 FR 42471, 42472 
(July 19, 2011).
---------------------------------------------------------------------------

    Since 2011, however, the Commission has learned through experience 
that many acquiring persons have more complex structures that include 
many entities between the UPE and acquiring entity that are not wholly 
owned but that are related to the acquiring entity. For example, ``A'' 
plans to acquire a target and will bring in ``B'' as a co-investor. The 
UPE of ``A'' creates (or already has) a number of intermediary entities 
within its person to effectuate the transaction. ``B'' does not invest 
in either the UPE of ``A'' or the entity that will make the 
acquisition, but rather in one of these intermediary entities. 
Currently, as illustrated in Figures 4 and 5a, when ``A'' makes its 
filing, it is not required to disclose the co-investment of ``B'' so 
long as the investment is below 50%. The current focus on just the UPE 
and the acquiring entity deprives the Agencies of key information about 
individuals and entities that may have influence, or even management or 
operational oversight, over entities related to the transaction and 
could make or influence competitively important decisions post-
acquisition.

[[Page 89283]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.042


[[Page 89284]]


[GRAPHIC] [TIFF OMITTED] TR12NO24.043

    As discussed in section II.B.1., and illustrated in Figure 5a, 
individuals or entities that have significant rights or holdings in 
entities related to the acquiring entity may also take active positions 
in or exert control over competitively significant businesses, 
including competitors, and the disclosure of these relationships could 
surface antitrust risks that require the Agencies' attention during the 
initial antitrust review. Because information that reveals whether 
there are existing investment relationships between the acquiring 
person and the target is necessary and appropriate for the Agencies' 
initial antitrust review, the Commission adopts this change as 
proposed. As a result, as shown in Figure 5b, the Agencies will receive 
the information necessary to determine whether the acquisition of the 
target by the acquiring entity may violate the antitrust laws.

[[Page 89285]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.044

    In objecting to these proposals, commenters stated that 
identification of these additional minority holders would be 
burdensome. The Commission notes that, rather than merely reviving an 
expansive requirement to disclose all the minority investors of 
entities within the acquiring person, it proposed a more tailored 
instruction to require disclosure only of the entities related to the 
transaction. Given this limitation and the information gaps caused by 
vast changes to the M&A landscape discussed in section II.B.1., the 
Commission believes that the identification of the minority holders of 
the entities that are related to the transaction is necessary and 
appropriate and should be contained in an HSR Filing. Further, if the 
acquiring person does not have knowledge of the identity of the 
minority investors, it can so indicate and explain, just as acquiring 
persons currently do when the minority investors of the UPE or 
acquiring entity are unknown.\333\ For example, acquiring persons that 
have publicly traded UPEs routinely note that they do not have 
information about minority holders beyond what is reported to the SEC.
---------------------------------------------------------------------------

    \333\ See also the discussion of non-compliance in section 
VI.A.5.
---------------------------------------------------------------------------

    One commentor stated that the ``direct or indirect'' and ``control 
or controlled by'' language was broad and would require substantial 
time and resources to navigate. The Commission disagrees and notes that 
this requirement does not require a broad analysis of various theories 
of control but rather requires a determination of ``control'' as 
defined by Sec.  801.1(b). The proposed instruction stated that the 
controlling relationship can be either direct or indirect to make clear 
that the requirement was not limited to entities just one level above 
or below the acquiring entity. For example, in a common scenario 
involving multiple shell entities, the acquiring UPE controls an 
intermediary entity that controls an intermediary entity that controls 
the acquiring entity, as shown in Figure 6a below. The Instructions 
contained in the final rule require disclosure of minority holders of 
five percent or more of each of those intermediary entities, subject to 
the limitations on disclosure of limited partners discussed below in 
section VI.D.1d.ii., as shown in Figure 6b. Control is a long-standing 
concept in the Rules, and the determination of control in this context 
is consistent with control determinations that filers need to make for 
a variety of items currently included in the Form and Instructions.
    The Commission received suggestions to change the existing five 
percent threshold but declines to adopt this change. Because of the 
complexity of investment structures, minority investors with even low 
equity stakes can have formal rights to direct or influence the 
strategic decisions of the company, informal channels to exert 
influence, or the right to obtain sensitive business information about 
the entity in which they are invested. Further, as illustrated in 
Figures 6a and 6b, investment groups may be broken up

[[Page 89286]]

across multiple entities that are, for HSR purposes, separate 
persons.\334\ These types of organizations can take active positions in 
multiple companies in the same or related industry, a trend that the 
Commission and commenters have observed. As a result, the Agencies need 
to know who these investors are in order to determine whether the 
acquiring person has connections to the target's business that could 
have competitive effects.
---------------------------------------------------------------------------

    \334\ In 2020, the Commission proposed changing the HSR Rules to 
require aggregation of such interests when determining whether a 
filing must be made. 85 FR 77053 (Dec. 1, 2020). The Commission has 
not adopted any of those proposals. This more modest proposal to 
identify minority shareholders does not create any new obligations 
to file but does provide the Agencies with the identity of funds and 
other investors that hold, or will hold, interests in entities 
related to the acquiring entity through multiple HSR persons, 
allowing for further investigation as warranted.
[GRAPHIC] [TIFF OMITTED] TR12NO24.045


[[Page 89287]]


[GRAPHIC] [TIFF OMITTED] TR12NO24.046

    The Commission disagrees with the commenters' assertions that this 
information is not necessary to assess the competitive effects of the 
filed for transaction and is beyond the authority of the Commission. As 
discussed in section II.B.1., that analysis requires the Agencies to 
understand the scope of the acquiring person's involvement in the 
business of the target. Minority holders of entities within the 
acquiring person that are related to the acquiring entity may have the 
ability to influence decision-making of the acquiring entity and target 
post-acquisition. Therefore, they are functionally ``in the deal'' and 
their existing business relationships are relevant to a thorough 
antitrust analysis of the transaction. The increasing complexity of 
corporate structures and investment vehicles has increased the number 
of transactions with these types of minority interest holders, and the 
Commission has determined that the Agencies need to update the 
information requirements to keep pace with these changes.
    The Commission finds the additional critiques of the proposal 
unpersuasive as well. The Commission addresses arguments about chilling 
deal volume and investment levels in section III.C.2. above. As to 
commenters opposing this particular change to the Instructions, the 
Commission is unaware of any evidence that fundraising or deal volume 
was negatively affected during the period prior to 2011 when HSR rules 
required broader disclosure of minority investors, nor that such 
activity increased when the requirement was dropped. Given the many 
other factors that influence the level of investment and M&A activity 
generally, the Commission believes it is unlikely that the disclosure 
of minority holdings in parties involved in reportable transactions has 
any measurable effect on dealmaking or investment levels.
    Further, commenters objecting to the Agencies' need for 
identification of additional minority interest holders also offered 
contradictory critiques, with some stating that the Commission did not 
identify transactions where the minority interest holders were relevant 
to the competition analysis, and others stating the fact that the 
Commission offered two examples demonstrated that the current Form and 
Instructions provided the Agencies with sufficient information. First, 
cases cited in the NPRM provide examples of enforcement actions brought 
by the Agencies on various legal theories and fact patterns and do not 
necessarily reflect cases that were discovered through the HSR process. 
Second, the need for this information is obvious and its relevance 
plain: the Agencies need to know who will be making decisions for the 
combined entity post-acquisition. For example, the hypotheticals 
discussed above demonstrate that existing information gaps in the 
current Form leave the Agencies without enough information to even know 
to ask additional questions about additional individuals and entities 
within ``A.'' In the hypotheticals above, ``B'' could hold up to a 
49.9% stake in an entity related to the transaction and functionally 
jointly control the acquiring entity along with ``A.'' Or ``B'' could 
hold only 5% but have ancillary rights or outsized influence over the 
operations of the acquiring entity (and thus the target after 
consummation). Or ``B'' could be its own person for HSR purposes, but 
one of several related entities that each has a minority interest that, 
when aggregated, account for a significant, or even majority, stake in 
the acquiring entity. In any of these scenarios, as well as many 
others, the identity of the minority interest holder would be critical 
to understanding the competitive implications of the transaction. 
Though the filing requirement falls on ``A,'' ``B'' has a seat at the 
table, and the Agencies must be able to investigate whether ``B'' has 
ties

[[Page 89288]]

to the business of the target. If the Agencies are not alerted to the 
existence of ``B'' on the Form, there is no ability to screen for 
potential issues that arise from ``B's'' involvement in both the 
acquiring entity and, upon consummation, the target.
    Regarding concerns about privacy, the Commission notes that the 
contents of HSR filings are confidential.\335\ Unlike requirements for 
disclosure made by private parties or government rules promulgated to 
require public disclosure, information included in HSR filings is 
protected by statute. Additionally, disclosure of minority investors, 
other than limited partners, which are discussed below, is already 
required by the current Form. The proposal to require identification of 
additional minority investors, including some limited partners, is an 
incremental expansion of what is currently required (and for corporate 
entities, less than what was required under the HSR Rules from 1978 to 
2011). Additionally, the Agencies often require disclosure of an even 
broader group of minority investors, including limited partners, in 
response to a Second Request, as discussed in more detail below. The 
proposed requirements, therefore, did not introduce any new privacy 
concerns, and commenters did not offer any evidence that the current 
disclosure rules have created any substantive issues related to 
privacy.
---------------------------------------------------------------------------

    \335\ 15 U.S.C. 18a(h).
---------------------------------------------------------------------------

    The Commission further notes that the proposed requirements do not 
require the acquiring person to ask the minority investors for any 
information. Therefore, completion of the Form itself should impose no 
burden on the minority investors themselves. Only if the identity of 
the minority investor reveals a competitively relevant connection and 
an investigation is opened would the investor potentially have any 
cost. These costs are not imposed by the information requirements of 
Form and Instructions but rather by a potential investigation or 
enforcement action for a violation of the antitrust laws. Disclosure of 
an existing business or financial relationship in an entity that is 
engaging in an HSR-reportable transaction is not an improper burden and 
allows the Agencies to fulfill their statutory mandate to scrutinize 
every filing to determine whether it may violate the antitrust laws.
(b) Identification of Limited Partners
    In addition to increasing the number of entities for which minority 
shareholders would need to be identified, the Commission also proposed 
requiring the identification of minority investors of limited 
partnerships that held 5% or more, in addition to the general partner. 
Filing persons are currently only required to identify the general 
partners of limited partnerships, but not limited partners, regardless 
of the percentage held. After considering the comments received 
regarding this proposal, the Commission adopts a modified requirement 
to identify only the general partner and limited partners that have 
certain rights related to the board of directors (or similar bodies) of 
entities related to the acquiring entity.
    The current requirement to identify only the general partner of 
limited partnerships, and not its minority investors, was based on the 
understanding that limited partners had no control over the operations 
of the fund or portfolio companies.\336\ As discussed above and in 
section II.B.1., the operations and investments of limited partnerships 
and limited partners cannot be easily generalized. Though some argue 
that limited partners may have limited influence over investment or 
operational decisions, this is not universally true. Limited 
partnerships often file for acquisition of control of entities. 
Investment groups, which utilize limited partnerships, often make 
investments in specific industries, leaving open the possibility that 
there is a competitive relationship between these investments and the 
target of the filed-for transaction.
---------------------------------------------------------------------------

    \336\ 75 FR 57110, 57118 (Sept. 17, 2010) (proposed rule), 
adopted 76 FR 42471 (July 19, 2011).
---------------------------------------------------------------------------

    Further, the Commission has learned through its work that limited 
partnerships are not exclusively used as vehicles for diffuse groups of 
passive investors to invest their capital. Instead, some limited 
partnerships function as aggregation vehicles that allow private equity 
or other investor groups to direct the strategic business decisions of 
the portfolio companies in which they invest. The decision to organize 
as a limited partnership rather than an LLC or incorporated entity may 
be driven not by how the entity will function in the marketplace but by 
other factors, such as tax and liability.
    The scenario in Figure 7a illustrates how the current Form and 
Instructions' lack of information about limited partnerships can affect 
a preliminary antitrust assessment. ``A'' and ``B'' form a new limited 
partnership that will be an acquiring person. ``A'' and ``B'' will each 
hold 49.9% of this entity and will have rights related to the board (or 
similar bodies) of entities related to the transaction. The remaining 
0.2% will be held by the general partner. Pursuant to the current 
Instructions, this newly formed acquiring person would not be required 
to provide any information other than the name and address of its 
general partner when making a filing for a reportable transaction.

[[Page 89289]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.047

    Compounding the difficulty in understanding the scope of the 
acquiring person's relationships, A Investment Group and B Investment 
Group may have used a code name for the transaction, such as ``Project 
Alpha,'' and also used that code name to name the newly created entity. 
In this scenario, the Agencies could receive a filing from Alpha Fund, 
L.P., that only discloses that it has a general partner, Alpha GP, L.P. 
There is no requirement that Alpha Fund, L.P. disclose that A 
Investment Group and B Investment Group each hold nearly 50% and will 
effectively co-own and manage the target after consummation. A Fund I 
or B Fund I could be head-to-head competitors of the target (or control 
competitors of the target) or have some other competitively significant 
relationship with the target. But the current Form would not make the 
Agencies aware of their significant stake in Alpha Fund, L.P. As shown 
in Figure 7b, the final rules address this by requiring the 
identification of A Fund I and B Fund I (and their affiliations with A 
Investment Group and B Investment Group, if known to UPE), allowing the 
Agencies to research whether the transaction may violate the antitrust 
laws.
[GRAPHIC] [TIFF OMITTED] TR12NO24.048

    The Commission notes, as did one commenter, that in some instances 
the Agencies may receive some disclosure through the reporting of 
associate overlaps in current Items 6(c)(ii) or 7(b)(ii) and 7(d). 
However, many

[[Page 89290]]

investment groups are set up such that the associate definition, which 
focuses on entities, does not apply, even though the same individuals 
may be managing multiple funds. The Commission considered changing the 
definition of associates but determined that, at this time, it would be 
less complex and less burdensome on filers to merely require the 
identification of certain limited partners, which the Commission 
believes will allow the Agencies to use other sources to conduct a 
preliminary assessment of the competitive implication of these minority 
holders. If this proves to be insufficient, the Commission may revisit 
the requirements in future rulemakings.
    Despite the need for identification of some limited partners, the 
Commission understands that there are still many limited partners who 
are essentially ``silent'' investors that do not participate in 
management decisions. They hold only financial interests for the 
purpose of earning a return on their investment and do not hold 
additional rights or participate in the governance or business 
operations of the limited partnership or the investments of the limited 
partnership. Therefore, the Commission adopts an incremental change for 
the identification of limited partners, implementing in part the 
suggestion of one commenter to require only limited partners that have 
certain rights related to the board of directors or similar bodies of 
entities related to the acquiring entity.\337\ The hypothetical in 
Figure 8a shows a structure where the UPE of the acquiring person is a 
limited partnership in which its limited partners do not have any 
rights related to the board of directors or similar bodies of any of 
the UPE, Acquiring Entity, or either of the two Controlled entities 
between them. Additionally, UPE controls a limited partnership in which 
B Fund, an active co-investor for the transaction, has made its 
investment. Currently, UPE is only required to disclose its general 
partner.
---------------------------------------------------------------------------

    \337\ Comment of Dechert, Doc. No. FTC-2023-0040-0659 at 11 
(commenting that it is not clear why a broad requirement to disclose 
all limited partners who hold interests of five percent or more is 
necessary to identify a potential competitive concern irrespective 
of such limited partners' ability or inability to participate in the 
management or control of the applicable fund, general partner, or 
acquired business).
[GRAPHIC] [TIFF OMITTED] TR12NO24.049

    As shown in Figure 8b, the final rules would not require the 
disclosure of the ``Outside Investor Limited Partners'' because none 
has any rights to the board or similar body of an entity related to the 
acquiring entity. In contrast, UPE would need to disclose that B Fund 
is a limited partner of the Controlled entity as well as the general 
partners of UPE and Controlled LP.

[[Page 89291]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.050

    In the Commission's experience, competitive concerns that arise 
from limited partners holding interests in the acquiring person most 
frequently stem from those limited partnerships that act as vehicles 
for investor groups to manage, direct, or influence the portfolio 
companies in which they invest. The Commission has determined that it 
is not necessary to know the names of limited partners that do not also 
have certain management rights and the final rule does not require 
disclosure of their minority interests.
    The Commission expects that this modification will address concerns 
of commenters that disclosing limited partners would require investment 
firms to renegotiate agreements with limited partners. As discussed 
above, there is no restriction on the Agencies' ability to require 
disclosure of the identity of limited partners today during an in-depth 
investigation of the transaction. As a result, limited partners should 
be aware that their holdings may be relevant to an antitrust review of 
any transaction involving one of their investments. Indeed, the 
Commission has brought enforcement actions against acquisitions 
involving minority holdings of limited partners in competing 
businesses.\338\ As the agencies charged with enforcing the antitrust 
laws, the Agencies have the authority to investigate the commercial 
dealings of limited partners for potential law violations regardless of 
any private agreements that promise non-disclosure. Therefore, any 
deficiency in agreements to permit disclosure to government agencies 
already exists. Further, if disclosure is the source of the Agencies' 
being made aware of a potential competitive concern with the 
transaction, any cost to the limited partner related to the completion 
and submission of the HSR Filing is justified because the information 
is necessary to determine whether the transaction may violate the 
antitrust laws. Nonetheless, the Commission has modified the 
requirement to reduce the type of limited partners that must be 
disclosed, focusing only on those with the ability to participate in 
management or control. On this basis, filers can exclude limited 
partners who serve as passive investors, who are essentially the 
customers of private investment firms, according to one commenter. To 
the extent that these limited partners do not participate in the 
management of the filing person, they need not be disclosed as a 
minority holder.
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    \338\ See, e.g., In re Red Ventures Holdco, LP, No. C-4627 
(F.T.C. Nov. 3, 2017) (overlapping limited partnership holdings 
violated section 7); In re TC Group, L.L.C., No. C-4183 (F.T.C. Mar. 
16, 2006) (acquisition involving minority stake giving two private 
equity investors seats on the boards of competitors).
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(iii) Limiting Requirements for Acquired Persons
    Finally, the Commission proposed limiting the reporting 
requirements for the acquired person. Currently, the acquired person 
must identify the name and headquarters address of all holders of 5% or 
more but less than 50% of the acquired entity, along with the 
percentage held. If the acquired entity is a limited partnership, only 
identification of the general partner and its headquarters address is 
required. The Commission proposed limiting this requirement to minority 
holders of the acquired entity that would hold an interest after that 
consummation or would receive an interest in another entity within the 
acquiring person as a result of the transaction. However, the proposed 
requirements to identify certain limited partners also applied to the 
acquired person, if the minority investors will stay with the target 
post-acquisition. The Commission adopts this proposal with 
modification.
    The proposed limitation to identify only minority interest holders 
of the target that will remain invested after consummation is intended 
to reduce the cost of complying with the final rule for the acquired 
person. The Commission has determined that the identity of any minority 
interest holder of the target that will cease to be involved with the 
target or acquiring person post consummation has limited relevance to 
understanding who could influence decision-making of the business post-

[[Page 89292]]

acquisition. The Commission adopts this portion of the proposed rule. 
It modifies the proposed instruction to reflect the modification it 
adopts for the identification of limited partners, as described above. 
Thus, the final rule will require the acquired person to only identify 
minority holders of 5% or more if such holder will continue to be 
invested in the target or will acquire an interest in an entity within 
the acquiring person. If the target is a limited partnership, only 
limited partners (1) that hold 5% or more in the acquiring entity, (2) 
will continue to hold an interest in the acquired entity, or acquire an 
interest in the acquiring person, after the transaction is consummated, 
and (3) will have that have certain rights related to the board of 
directors or similar bodies of entities related to the acquiring entity 
will need to be identified. If the acquired person does not have this 
information, it can so note in an endnote.
    The Commission also notes that one commenter focused on the 
requirement to identify roll-over investors, stating it would be a new 
burden that would discourage continued post-transaction investment. The 
Commission disagrees with this assessment. Currently, the acquired 
person already must identify all 5%-49.9% holders of the acquired 
entity, including roll-over investors. Further, the Commission once 
again notes that the amount of information required is limited; only 
the name of the minority interest holder (and the name of the master 
limited partnership, fund, or investment group, if applicable), its 
headquarters address, the name of the acquired entity it holds an 
interest in, and the percentage held must be disclosed.
2. Acquiring Person and Acquired Entity Structure
    The Acquiring and Acquired Person Structure sections of the Form 
and Instructions require the reporting of information currently 
required by Items 1(f), 4(a) and (b), and Item 6(a). The Commission 
proposed that filing parties provide more information about the 
structure of the acquiring person and acquired entity, as well as the 
names under which they do business. The Commission also proposed a 
clarification regarding annual reports and audit reports of natural 
person UPEs. As discussed below, the Commission adopts some of these 
proposals without change and some with modification.
a. Entities Within the Acquiring Person and Acquired Entity
    This section contains information currently required by Items 1(f) 
and 6(a) of the current Form. The Commission proposed requiring filing 
persons to organize the list of controlled entities by operating 
company or business, and, for each such operating company or business, 
the Commission proposed that filers identify the name(s) by which the 
company or business does business, as well as any name(s) by which it 
formerly did business within the three years prior to filing. The 
Commission adopts the proposal with modification.
    The Commission received several comments opposed to this proposal. 
One commenter stated that the Agencies do not need to know the 
relationships between and among all related entities for its initial 
review of the HSR filing. The commenter asserted that the majority of 
covered entities will likely have no overlapping activities with the 
acquired company, and thus learning about them adds no value to the 
Agencies' initial screen. The Commission disagrees that the Agencies do 
not need this information and that it adds no value to the initial 
screen. This is the very information that allows the Agencies to 
understand what businesses are involved in the reported transaction.
    The Commission does, however, make several modifications to these 
proposals that should reduce the cost of providing this information. 
The Commission adopts the proposal to require DBA names but does not 
adopt the proposal to adopt ``formerly known as'' (FKA) names. One 
commenter noted the difficulty of providing ``doing business as'' names 
for filing parties that do not maintain such records, but the 
Commission believes these DBA names will be of great value to the 
Agencies in the initial waiting period. Businesses create (or change) 
DBA names for a variety of reasons and may be required to register 
these names with State or local authorities. One commenter objected to 
the three-year period, and, as part of its overall efforts to reduce 
costs associated with an HSR Filing, the Commission eliminates this 
lookback so that filing parties must only provide this information as 
it stands at the time of filing.
    Another commenter recommended that for executive compensation 
transactions the filing persons be permitted to dispense with the 
requirement to report ``doing business as'' names, assuming certain 
conditions are met. They stated that these transactions are unlikely to 
generate meaningful antitrust issues but that requiring prior business 
names will add materially to the burden on the acquired side without a 
corresponding benefit. The Commission agrees and as part of its overall 
effort to reduce cost, adopts the modification to allow both filing 
parties in select 801.30 transactions (which include those related to 
executive compensation) to provide this information as kept in the 
ordinary course without DBA names.
    Finally, one commenter noted that the proposed rule appears to use 
the terms ``operating business,'' ``operating entity,'' and ``operating 
company'' interchangeably. The commenter requested clarification of the 
definitions or adoption of one term for consistency. The Commission 
agrees that using these three terms interchangeably is confusing and 
thus adopts ``operating business'' to capture entities that comprise 
distinct operations. Under this modification, filing parties need to 
organize their response by operating business(es) whether they are 
corporations, non-corporate entities, or assets that function as an 
operating business.
    In sum, the Commission adopts modifications that require filing 
persons, except for those in select 801.30 transactions, to organize 
controlled entities at the time of filing by operating business and, 
for each such operating business, identify the name(s) by which the 
operating business does business. For example, a fund must organize its 
response by portfolio company(s), and a conglomerate must organize its 
response by business(es).
b. Annual Report and Audit Reports
    Information for this section is currently required by Items 4(a) 
and (b). The Commission proposed clarifying the current instructions 
regarding which annual reports and audit reports are required from 
natural person UPEs. Currently, natural person UPEs, in lieu of 
personal financial documents, must produce financial documents for the 
highest-level entity(s) within their person. In addition, natural 
person UPEs must produce the same additional reports that non-natural 
person UPEs must produce: for acquiring persons, the reports of the 
acquiring entity(s) and any entity controlled by the acquiring person 
whose dollar revenues contribute to an NAICS overlap; and for acquired 
persons, the reports of the acquired entity(s). The Commission proposed 
new language to make this requirement clearer and the Commission adopts 
this change with modification.
    The Commission received one comment that supported the proposal. 
Another commenter suggested two

[[Page 89293]]

revisions to the proposed Instructions. This commenter first suggested 
that for natural person UPEs who filed as acquired persons, the 
instructions should only require the most recent annual reports for the 
highest-level entity the Natural Person controls that includes the 
assets or entities being sold. Second, as a general matter, the 
commenter stated that persons filing notification should not be 
required to provide annual reports for entities that have less than $10 
million in total assets, unless that entity's revenues contribute to a 
competitive overlap between the parties.
    In considering the two suggested revisions in this comment, the 
Commission agrees that it is sufficient for the UPE of the acquired 
person to provide financial reports for only the highest-level entities 
that control the acquired entity, as appropriate, in lieu of providing 
personal financial documents. The Commission also has determined that 
this limitation is appropriate for acquiring persons with natural 
person UPEs as well. Therefore, the Commission adopts this suggestion, 
and natural persons, in lieu of providing personal financial 
statements, will need only provide financial reports for the highest-
level entities that control the acquiring entity or acquired entity, as 
appropriate. The financial information for these highest-level entities 
should be provided in this section and not the UPE Details section, as 
discussed in section VI.D.1.
    The Commission declines to adopt the suggestion that persons filing 
notification should not be required to provide annual reports for 
entities that have less than $10 million in total assets, unless that 
entity's revenues contribute to a NAICS overlap or any overlap 
identified in the Overlap Description. ``The person filing 
notification'' is a defined term for the purpose of the Instructions 
and is limited to the UPE. Therefore, other than for natural persons, 
the proposed Instructions only require reports from the UPE and, for 
the acquiring person, acquiring entity(s) and entities that contribute 
to a NAICS overlap, and for the acquired person, the acquired 
entity(s), which is consistent with the current requirement. The 
Commission finds these reports valuable, regardless of whether those 
entities have $10 million in assets.
3. Additional Acquiring Person Information
    The Commission proposed requiring additional information about the 
acquiring and acquired person. These proposals included a description 
of the ownership structure of the acquiring person and acquiring entity 
as well as an organizational chart if the acquiring person UPE is a 
master limited partnership or fund, information about other types of 
interest holders that may exert influence over the acquiring person, 
and the identification of officers, directors, and board observers of 
the acquiring person and acquired entity. As discussed below, the 
Commission adopts some of the items as proposed, adopts some of the 
proposals as modified, and does not adopt others.
a. Ownership Structure
    The Commission proposed that acquiring persons provide a 
description of the ownership structure of the acquiring entity and, for 
fund or master limited partnership UPEs, an organizational chart 
sufficient to identify and show the relationship of all the entities 
that are affiliates or associates. The Commission also proposed that 
acquired persons describe the ownership structure of the acquired 
entity.
    The Commission did not receive any comments regarding the 
requirement to provide a description of the acquiring and acquired 
entities' ownership structure. The Commission believes that such 
descriptions will provide information and nuance about ownership 
structures that may not be clear from a simple list of minority 
holders. Moreover, descriptive responses allow filers to offer 
clarification about the structure, including whether the ownership 
structure is subject to change between filing and consummation of the 
transaction. As a result, the Commission adopts this item as proposed 
for the acquiring person. However, this information is less relevant 
from the acquired entity. As part of its efforts to reduce the cost 
related to filing where possible, the Commission does not adopt the 
proposal for the acquired person.
    As for the proposed requirement for the acquiring person to provide 
organizational charts, commenters noted that organizational charts are 
not always kept in the ordinary course of business, and structures may 
be so complex that they cannot be synthesized into a chart. The 
Commission acknowledges that there may be some cost associated with 
creating organizational charts just for the purpose of making an HSR 
Filing and modifies this item to require charts that show the 
relationship of entities that are affiliates or associates if such 
charts exist, even if they were created for other purposes. The 
Commission declines to adopt the suggestion to limit this requirement 
to transactions where there is an identified NAICS or product or 
service overlap. These charts are necessary for staff to understand the 
totality of the transaction, including the role of key decision makers 
and their responsibilities relative to the business lines under review.
    The complex structure of investment entities is not adequately 
captured by the current Form, and there is often no other source for 
Agencies to learn of these relationships. Information about the 
acquiring entity's ownership structure is therefore necessary and 
appropriate for the Agencies to evaluate the transaction at issue. The 
Commission has modified the proposal to limit the reporting costs by 
requiring only the acquiring person to provide a description of its 
ownership structure and to provide organizational charts only if they 
exist.
b. Other Types of Interest Holders That May Exert Influence
    The Commission proposed an Other Types of Interest Holders that May 
Exert Influence section that would have required the acquiring person 
to identify certain individuals or entities, beyond those with the 
minority interests discussed above, that may have material influence on 
the acquiring entity and entities related to it. These included certain 
individuals or entities that (i) provide credit; (ii) hold non-voting 
securities, options, or warrants; (iii) are board members or board 
observers or have nomination rights for board members or board 
observers; or (iv) have agreements to manage entities related to the 
transaction. As discussed below, while understanding these 
relationships can be very important in assessing the competitive 
effects of certain transactions, the Commission has elected not to 
adopt proposals (i), (ii), and (iv) at this time. As discussed in 
section VI.D.3.c., the Commission adopts with modification the proposal 
to require identification of officers and directors, which incorporates 
some of proposal (iii).
    The Commission received several comments in support of the proposed 
change to disclose other types of interest holders. One commenter 
stated that disclosure of these interest holders would be helpful to 
close a loophole when the filing parties may have influence or joint 
profit maximizing incentives with rivals. Another commenter noted that 
the information would also enable the Agencies to assess conflicts of 
interest or the potential for inappropriate sharing of competitively 
sensitive information. Other comments highlighted the

[[Page 89294]]

importance of identifying situations in which a single creditor to 
competing firms could have an incentive to facilitate their 
coordination or collusion as well as situations in which a private 
lender may assert control or an investor may have a dual role as 
private provider of leveraged loans to finance buyouts.
    The Commission also received several comments opposed to these 
proposed changes. Critics noted that some of this information may not 
be available at the time of filing or would be burdensome to collect 
and report. Others questioned the utility of the information. Another 
commenter noted that it will not be readily apparent whether identified 
entities or individuals have overlaps, supply, or other relationships 
relevant to the target.
    In regards to identifying certain creditors, commenters stated that 
in the vast majority of credit arrangements, the creditor's rights and 
financial incentives are distinctly different than those of equity 
holders and that many creditors are unable to control investment 
decisions. In addition, one commenter observed that these disclosure 
requirements could impede access to credit, which would seriously 
impact private equity as its deals frequently rely on third-party 
financing. Several commenters also expressed concern about the burden 
of identifying and describing complex credit arrangements, particularly 
for infrequent filers.
    Regarding the proposed requirement related to non-voting 
securities, options, or warrants, one commenter questioned the 
necessity of the information to examine the anticompetitive effects of 
any proposed transaction, noting that, in exempting acquisitions of 
non-voting securities from filing, Congress must have concluded, based 
on the legislative history, that such acquisitions pose no 
anticompetitive threat. No specific comments were received with respect 
to the proposed requirement to identify individuals or entities that 
have agreements to manage entities related to the transaction.
    The Commission disagrees with assertions that information about 
individuals or entities that can influence the acquiring person through 
mechanisms such as credit relationships, non-voting interests, or 
management contracts is not relevant to the assessment of the 
competitive effects of a reported transaction. Further, the Commission 
notes that the HSR Act specifically defines voting securities as 
securities which at present or upon conversion entitle the holder the 
right to vote for the board of directors.\339\ Nevertheless, the 
Commission acknowledges that the mechanisms of influence or managerial 
control are often bespoke and vary from entity to entity. The proposed 
rule was intended to sweep broadly but in a manner that was 
straightforward and relatively uncomplicated for filers to navigate. 
The comments raised issues that warrant further consideration. Given 
the other proposals that the Commission does adopt, particularly 
identification of additional minority interest holders, information 
about officers and directors of entities related to the acquiring 
entity, and the collection of additional documents, the Commission has 
decided not to adopt the proposals related to credit relationships, 
non-voting securities, and management agreements at this time. If these 
additional requirements still leave significant gaps in information 
that impede the Agencies' ability to screen for transactions that 
warrant additional investigation, the Commission may revisit these 
proposals in future rulemakings.
---------------------------------------------------------------------------

    \339\ 15 U.S.C. 18a(b)(3)(A).
---------------------------------------------------------------------------

c. Officers and Directors

    The Commission proposed adding a section that would have required 
the identification of the officers, directors, or board observers (or 
in the case of unincorporated entities, individuals exercising similar 
functions) of all entities within the acquiring person and acquired 
entity. Further, the proposal required for those individuals, the 
identity of other entities for which those individuals currently serve, 
or within the two years prior to filing had served, as an officer, 
director, or board observer (or in the case of unincorporated entities, 
roles exercising similar functions). After consideration of the 
comments and in light of the varied roles that religious or political 
non-profit organizations can play, the Commission has determined to 
narrow this requirement to (1) eliminate reporting related to board 
observers; (2) limit reporting to certain entities within the acquiring 
person (including officers and directors of the acquired entity who 
will continue to hold one of these positions post-consummation, if the 
acquiring person has filed for the acquisition of control); (3) only 
require identification of officers or directors that serve in those 
roles at the target or entities that are in the same industry as the 
target; and (4) exempt any non-profit entity organized for a religious 
or political purpose, even if that entity carries on substantial 
commerce, as described below.
    Several commenters wrote in support of the proposal, recognizing 
the value to the Agencies' understanding of the ownership and 
management structure of companies involved in the transaction. One 
commenter stated that common board members at intermediate levels of 
ownership can influence competition directly. Another commenter also 
noted that private equity minority investment interests can confer 
rights to appoint board members or allow board observers that create 
anticompetitive opportunities to exert coordinated market power. This 
comment further explained that some entities place the same person on 
several boards to coordinate business strategies across those entities 
even where they hold only minority positions. The Commission agrees 
that, due to the influential impact that officers and directors can 
have on competitive decision-making of entities within the acquiring 
person, this information is relevant to the Agencies' initial antitrust 
assessment of the acquiring person's acquisition of interests in the 
target. The same commenter recommended that the Commission require 
disclosure of board membership information for any prior acquisitions 
identified in the HSR Filing. Because this requirement has been 
designed to identify potential competitive concerns between acquiring 
person and target at the time of filing and going forward, the 
Commission declines to expand the final rule to require this historical 
information.
    However, the majority of the comments related to this proposal 
suggested significant modifications, either by eliminating the 
requirement in its entirety or acknowledging the relevance of the 
information but urging revisions to more narrowly tailor the 
requirements to achieve the Agencies' objectives. Critics across both 
of these groups raised some common issues.
    Some commenters questioned the Commission's authority to require 
information on common officers and directors in an HSR Filing to 
enforce section 8 of the Clayton Act, pointing to the absence of any 
reference to section 8 or interlocking directorates in the HSR Act or 
in the Commission's original Statement of Basis and Purpose issued with 
the final HSR rules in 1978. A law firm commenter stated that 
legislative statements support that Congress disavowed any intention 
that premerger notification be used to allow the accumulation of 
information on businesses for general enforcement purposes, and the 
commenter asserted that the HSR Act is concerned only with potential 
violations of section 7. Another commenter wrote that even if it was 
appropriate to enforce section 8 using the HSR Act process, the

[[Page 89295]]

proposed instructions went beyond the text of section 8 by requiring 
information about unincorporated entities as well as historical 
information.
    Additionally, several commenters questioned the Commission's legal 
basis for the requirement to report officers and directors. For 
example, one commenter stated that this requirement had no bearing on 
the antitrust analysis of transactions under section 7 and that the 
NPRM does not provide evidence that the Agencies have missed 
anticompetitive interlocks due to lack of information in HSR Forms. One 
commenter stated that the NPRM does not identify any cases where a 
court stated that this information has relevance for review under 
section 7 of the Clayton Act.
    The Commission disagrees that the identity of officers and 
directors is immaterial to an analysis of whether an acquisition may 
violate section 7. As described in sections II.B.1 and VI.D.1.d.ii, and 
elsewhere, the structures of entities have become more complex, 
allowing for the levers of influence and managerial control to be 
distributed through a variety of mechanisms beyond controlling equity 
stakes, or even minority equity stakes. The important role of board 
members in particular has been recognized in court cases and the focus 
of consent decrees to resolve competitive issues.\340\
---------------------------------------------------------------------------

    \340\ See, e.g., In re Red Ventures Holdco, LP, No. C-4627 
(F.T.C. Nov. 2, 2017) (complaint) (overlapping limited partnership 
holdings that provided board seats violated section 7); In re TC 
Group, L.L.C., No. C-4183 (F.T.C. Mar. 16, 2006) (complaint) 
(acquisition involving minority stake giving two private equity 
investors seats on the boards of competitors); In re Time Warner 
Inc., No. C-3709 (F.T.C. Sept. 12, 1996) (analysis to aid public 
comment) (walling off two individuals and one entity to prevent them 
from influencing officer, directors, and employees of competitor and 
its day-to-day operations). See also cases cited in section II.B.1.
---------------------------------------------------------------------------

    Further, contrary to assertions that the HSR Act limits the 
Agencies to evaluating whether a notified transaction may violate 
``Section 7,'' the HSR Act explicitly directs the Agencies to 
promulgate rules necessary and appropriate to determine whether a 
notified acquisition may, if consummated, violate the ``antitrust 
laws.'' \341\ The HSR Act amended the Clayton Act, and the term 
``antitrust laws'' is defined in the Clayton Act to include the Sherman 
Act and the Clayton Act, including section 8's prohibition on 
interlocking directorates.\342\ As discussed in the NPRM, when the 
Agencies do become aware of existing or potential interlocks created by 
a reported transaction, they typically seek to remediate them 
consistent with the Agencies' enforcement authority and before 
consummation of the transaction. Counter to suggestions that the 
proposal sought to create a ``dossier'' on the filing parties for 
general enforcement purposes, this information is relevant to enforcing 
the antitrust laws with respect to the transaction under review.
---------------------------------------------------------------------------

    \341\ See 15 U.S.C. 18a(d)(1).
    \342\ See 15 U.S.C. 12.
---------------------------------------------------------------------------

    Moreover, while a notified transaction could create a violation of 
section 8 as described in the NPRM, the same competitive concerns that 
underpin section 8 are also relevant to whether a transaction would 
violate section 7. In fact, as highlighted by some commenters, section 
8 does not necessarily cover all officer and director relationships 
that may give rise to competition issues. But that does not mean that 
these relationships are benign or that they do not create the same 
opportunities or incentives to coordinate competitive decision-making, 
for example, if the CEO or director of the acquiring entity serves as a 
member of the board of a rival of the target. In this scenario, section 
8's thresholds for strict liability may not capture this relationship, 
but it would be relevant to analysis under section 7, particularly in 
nascent markets where one of the entities involved does not meet the 
minimum sales trigger for application of section 8.\343\ That risk 
alone is relevant to the Agencies' assessment of whether the 
transaction is likely to substantially lessen competition or tend to 
create a monopoly in violation of section 7, regardless of whether the 
interlock is of the type that violates section 8. It is in part because 
the Agencies cannot rely on section 8 compliance to capture all 
relationships that create interlocks between entities with competitive 
relationships that the Commission proposed the new section.\344\
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    \343\ Section 8 of the Clayton Act, 15 U.S.C. 19, prohibits, 
with certain exceptions, one person from serving as an officer or 
director of two competing corporations if two thresholds are met. 
Competitor corporations are covered by section 8 if each one has 
capital, surplus, and undivided profits aggregating more than 
$10,000,000 with the exception that no corporation is covered if the 
competitive sales of either corporation are less than $1,000,000. In 
accordance with section 8(a)(5), the Commission adjusts these 
thresholds annually based on changes in gross national product. The 
thresholds in effect for 2024 are $48,559,000 and $4,855,900 
respectively. 89 FR 3926 (Jan. 22, 2024).
    \344\ Commenter International Bar Association notes that 
beginning in September 2023, the European Union requires merging 
parties to provide information on any current interlocking 
directorships, and that Brazil requires similar information for both 
fast-track and regular notifications. See Comment of Int'l Bar 
Ass'n, Doc. No. FTC-2023-0040-0687 at 16-17. While this is not a 
basis for the final rule, the Commission notes that this information 
is relevant to competition issues examined in other jurisdictions.
---------------------------------------------------------------------------

    Currently, the Agencies cannot screen for these relationships 
unless they are mentioned in the transaction documents submitted with 
the HSR Filing, and often they are not. This information is often not 
publicly available from any source other than the filers. As explained 
in the NPRM, information on the identity of officers and directors will 
help the Agencies identify potential anticompetitive harms that may 
arise from the proposed transaction.
    Additionally, identification of these individuals will assist the 
Agencies in determining whether the filers have had an opportunity to 
improperly share confidential information or integrate their businesses 
before the HSR Act's waiting period expires. For the Agencies to 
conduct a thorough premerger review, the business operations of the two 
filing entities must maintain their premerger competitive status quo 
until the HSR waiting period expires. When the Agencies are aware that 
there are common officers and directors, they may investigate whether 
there are on-going communications or interactions affecting the 
premerger competitive status quo, for example, by interfering with the 
other filer's competitive decision-making or placing executives from 
one entity into management positions at the other.\345\ The Commission 
believes that information about these relationships is relevant to 
ensuring that the parties are complying with the requirements of the 
HSR Act to hold their operations separate and continue to compete until 
the expiration of the waiting period. This is true regardless of the 
antitrust risk presented by the transaction or the possibility that 
these relationships are improper interlocks; parties must wait until 
the waiting period has expired to begin integrating operations. 
Violations of the

[[Page 89296]]

stay provisions of the HSR Act are subject to civil penalties.\346\
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    \345\ The Agencies' concern about premature coordination between 
merging firms, referred to as ``gun jumping,'' dates back many 
decades, and they have brought enforcement actions for violations of 
the HSR Act, as well as other antitrust laws that prohibit 
competitors from acting jointly prior to consummation of any 
acquisition. See also Note by the United States to the OECD, 
Suspensory Effects of Merger Notifications and Gun Jumping (Nov. 27, 
2018) (DAF/COMP/WD(2018)94), https://www.ftc.gov/system/files/attachments/us-submissions-fjun-2010-present-other-international-competition-fora/gun-jumping_united_states.pdf. For a discussion of 
cases prior to 1995, see Mary Lou Steptoe, Acting Dir., Bureau of 
Competition, Fed. Trade Comm'n, Prepared Remarks Before A.B.A. Sec. 
Antitrust L. Spring Meeting, 1994 WL 642386 (Apr. 7, 1994).
    \346\ 15 U.S.C. 18a(g)(1). See, e.g., United States v. Legends 
Hospitality Parent Holdings, LLC, No. 1:24-cv-5927 (S.D.N.Y. filed 
Aug. 5, 2024) (seeking civil penalties for obtaining beneficial 
ownership of acquired person prior to expiration of HSR waiting 
period); United States v. Duke Energy Corp., No. 17-cv-00116 (D.D.C. 
Apr. 7, 2017); United States v. Input/Output, Inc., No. 1:99-cv-
00912 (D.D.C. May 13, 1999).
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    Two commenters objected to requiring board observer information as 
outside the scope of section 8 and not related to the Agencies' 
antitrust assessment of the transaction. The Commission is aware that 
board observers do not have the same rights and duties as officers or 
directors. Comments submitted in response to the Commission's December 
2020 Advance Notice of Proposed Rulemaking stated that individuals 
serving as board observers typically receive the same information as 
the board of directors but there may be ways to exclude them from 
reviewing privileged or competitively sensitive information. 
Consequently, the Commission views the risks of sharing competitively 
sensitive information or changing competitive decision making via board 
observers to be lower than the risk present with officers and 
directors. As a result, the Commission agrees that the need for 
information about board observers is not as great at this time for the 
purpose of the Agencies' premerger risk assessment, and the final rule 
does not require filers to identify individuals who have these rights.
    In addition to comments related to the authority \347\ and purpose 
of the proposed rule, several commenters raised concerns about the 
burden of collecting this information, especially historical 
information about individuals no longer serving in one of these roles, 
noting that it has little relevance and would be burdensome to collect. 
One commenter suggested that the requested information on officers and 
directors be limited to any positions they currently serve or expect to 
serve in the future. Another comment agreed, noting that current and 
expected future overlaps are relevant for assessing interlocking 
directorships and coordinated effects, but that detailed and historic 
information across all entities of the company has minimal relevance to 
the antitrust assessment of a particular transaction. Citing practical 
concerns, another comment noted that there should be no requirement to 
collect post-departure information from former personnel.
---------------------------------------------------------------------------

    \347\ Comment of A.B.A. Antitrust L. Sec., Doc. No. FTC-2020-
0086-0015 at 10 (board observers generally receive the same 
information that a director would except when there are conflict-of-
interest issues or when the information concerns competitively 
sensitive topics); Comment of Comput. & Commc'ns Indus. Ass'n, Doc. 
No. FTC-2020-0086-0002 at 11 (board observers are usually entitled 
to the same information as board directors although companies have 
more leeway to exclude observers from privileged or competitively 
sensitive information).
---------------------------------------------------------------------------

    Other commenters stated that the burden of collecting any 
information about officers and directors was not justified by the 
benefit to the Agencies' review of any reported transaction. Some cited 
the higher burden of this requirement for large companies. For 
instance, one commenter noted that, in some instances, the individuals 
that would be identified would not be relevant to the Agencies' 
premerger review because, for small subsidiaries within a large 
entity's corporate structure, an officer might be someone who merely 
drew up the paperwork forming the entity whose role would not be 
relevant to the Agencies' antitrust assessment. Another suggested 
limiting this requirement to certain revenue thresholds or entities 
with overlaps or other relationships.
    Additional commenters objected to having to report information 
regarding any individual's board membership or other association. They 
raised concern that this requirement could sweep in memberships with 
religious, political, or other non-commercial groups. One commenter 
stated that some of these individuals do not want to share information 
about their membership in certain organizations. The Commission has no 
intention of forcing disclosure in the HSR Filing of any officers or 
members of the governing board of non-commercial entities, or other 
non-profit entities with a religious or political purpose. The Form and 
Instructions that are part of this final rule counsel filers not to 
report any individual's role as a director, officer, or member of a 
non-profit entity organized for a religious or political purpose, even 
if that entity carries on substantial commerce. Filers who would 
otherwise be required to report these affiliations are excused from 
such reporting.
    In response to the comments and to better tailor this requirement 
to the purpose of premerger review, the Commission has further decided 
to limit this requirement in several ways. First, the Commission has 
eliminated the requirement to identify officers or directors of 
acquired entities; the requirements of the final rule related to 
reporting information for officers and directors will apply to the 
acquiring person only. Second, the Commission limits the entities 
within the acquiring person to entities that (1) have responsibility 
for the development, marketing, or sale of products or services that 
are reported overlaps identified in the Overlap Description or supply 
relationships identified in the Supply Relationships Description or (2) 
directly or indirectly control or are controlled by the acquiring 
entity. If any of these entities is a non-profit entity organized for a 
religious or political purpose, even if that entity carries on 
substantial commerce, no reporting is required for individuals serving 
as officers or directors. Third, the Commission has limited the 
lookback periods contained in the proposed rule. For entities in 
category (1), filers will report officers and directors serving within 
three months prior to the HSR Filing. For category (2), there is no 
requirement to lookback to any individual who is no longer serving as 
an officer or director at the time of the HSR Filing but filers must 
consider individuals who have not yet officially taken the relevant 
positions. Fourth, the acquiring person will only be required to report 
the names of officers and directors of these entities if those 
individuals also serve as an officer or director of an entity that 
derives revenue in the same NAICS code (or is in the same industry) as 
the target at the time of filing and the name of such other entities. 
This will result in a list of only those individuals with the relevant 
connection.
    As noted elsewhere, the Commission has carefully evaluated each of 
the requirements of the proposed rule in light of the comments and 
adjusted the final rule to calibrate information requirements to 
antitrust risk, burden, and importance to the Agencies' ability to 
screen for transactions that may violate the antitrust laws. On 
balance, the Commission has determined that an analysis of the board of 
the target entities is less probative in analyzing the potential 
effects of the transaction than is an analysis of certain entities 
within the acquiring person. Many filings are for acquisitions of 
control, and therefore the officers or directors of the target often 
change upon consummation. For those transactions where control is not 
being acquired, the acquired person may not be a party to the 
transaction, making the burden of collecting the information in the 
period of time between when it receives the required notice letter and 
when its filing is required higher than that of the acquiring person, 
which generally controls the timing of its filing. As a result, the 
Commission has not adopted the proposal for the acquired person.
    For the acquiring person, as discussed elsewhere, due to the 
competitive significance of entities with products or services in 
development that have not

[[Page 89297]]

yet generated any revenue, the Commission declines to adopt a de 
minimis revenue requirement for this information but agrees that 
information related to officers and directors is most relevant to the 
antitrust assessment when the companies have an existing business 
relationship or are related to the entity making the acquisition. Thus, 
the Commission modifies this proposal to look only at those entities 
within the acquiring person that are responsible for the development, 
marketing, or sale of the products or services identified in the 
Overlap Description or the Supply Relationships Description, or 
directly or indirectly control or are controlled by the acquiring 
entity. This modification addresses commenters' concern about 
potentially needing to report information on many officers and 
directors, especially across larger or more diffuse organizations with 
many subsidiaries irrespective of antitrust risk. So modified, this 
requirement would focus the Agencies' inquiry on those entities that 
would be most likely to have a competitively important relationship 
with the target post-consummation.
    The Commission believes that limiting this information requirement 
to those entities for which the acquiring person and the target have 
reported overlaps or supply relationships in the same sector as well as 
the entities that are related to the acquiring entity provides 
information the Agencies need for premerger screening. As modified, 
this requirement properly targets the information that reveals any 
antitrust risk that common officers and directors could act to 
undermine competition during the waiting period or post-consummation. 
The Commission acknowledges that there may be other such relationships 
involving the parties to the transaction that may be relevant to the 
competition assessment under section 7 or that present section 8 
concerns but agrees that the Agencies can continue to collect this 
information only for those transactions that are flagged for closer 
review. While the final rule may impose a higher cost to large 
companies with many competitively relevant business lines, the 
Commission believes that the benefit to the Agencies is necessary and 
proportionate: it is more difficult for the Agencies to discover on 
their own all the individuals who serve in these key roles at different 
levels of larger companies when those companies have many business 
lines related to the target.
    The Commission has also considered comments related to the proposed 
lookback period, and, in light of these concerns and to minimize the 
cost of collecting historical information about officers and directors, 
the Commission has modified this requirement to shorten the lookback 
period to three months before the filing date. The Commission believes 
providing information about individuals who served in one of these 
positions recently, but not at the time of the filing, is sufficient to 
identify those individuals who would have been in a position to share 
competitively sensitive information during a due diligence or 
negotiation phase for the transaction. It will also serve as a 
disincentive for these individuals to step down temporarily to avoid 
disclosure on the HSR Form.
    Once the relevant entities and individuals have been identified 
(and excepting any non-profit entities organized for religious or 
political purposes), the acquiring person must determine whether those 
individuals also serve as an officer or director (or in the case of 
unincorporated entities, roles that serve similar functions) of another 
entity that derives revenue in the same NAICS codes as the target. If 
NAICS codes are unavailable, reporting should be based upon the 
industry overlaps, to the knowledge and belief of the acquiring person 
or the officer or director. Only if an individual serves in such 
capacity does the acquiring person need to provide the name of that 
individual, along with the name of the entity within the acquiring 
person they serve as an officer or director, their title at that 
entity, and the name of the other entity for which they serve as an 
officer or director (and excepting any non-profit entity organized for 
religious or political purposes). The Commission believes that these 
limitations will allow the Agencies to have information about key 
affiliations with other businesses in competitive overlap relationships 
while limiting the burden on filing parties and their officers and 
directors.
    Finally, commenters representing the pharmaceutical industry voiced 
concerns about the applicability and effects of the proposed 
instruction on reportable transactions in the pharmaceutical and 
biomedical sectors. For example, one pointed out that biotech firms 
generally rely on a small cadre of qualified directors and officers who 
have the appropriate business background and stated that disclosure of 
these positions in an HSR Filing would discourage highly sought-after 
experts and specialists from accepting biotech leadership roles. 
Another explained that many pharmaceutical transactions that trigger 
HSR Filings involve only the acquisition of exclusive licenses, where 
the parties remain as independent firms post-transaction. This 
commenter also objected to reporting this information for acquisitions 
of companies with no sales.
    The Commission is aware, from its own experience and from research 
done by others,\348\ that there are individuals who serve on the boards 
of multiple life science companies. The final rule does not impose a 
disproportionate obligation for companies operating in this sector; 
these individuals are obligated to comply with the antitrust laws 
regarding interlocks as much as individuals serving in other sectors. 
The Commission does not agree that there is a unique risk that 
disclosure of recent, current, or future leadership positions will 
limit the number of talented and qualified individuals who are 
available to serve as officers or directors in the biopharma or life 
sciences sector beyond whatever limits the antitrust laws impose. Many 
sectors prefer knowledgeable professionals with distinct credentials 
and experience to serve as board members. Moreover, the cost of 
reporting these relationships is directly related to the number of 
reportable transactions that occur each year in this sector and the 
number of existing or potential relationships. The Commission does not 
believe that HSR reporting requirements will improperly deter qualified 
individuals from serving on the boards of these or any other companies.
---------------------------------------------------------------------------

    \348\ See Lemley, supra note 316.
---------------------------------------------------------------------------

    The Commission believes that the modifications made to the final 
rule will ensure that the Agencies receive the information about 
recent, current, and future officers and directors that may create 
opportunities for anticompetitive harm under any antitrust law, 
including section 7 of the Clayton Act, section 1 of the Sherman Act, 
or the HSR Act itself. The Commission disagrees that the instruction 
will newly create a chilling effect on lawful and procompetitive 
activity or board membership. When individuals agree to serve as board 
members, they take on fiduciary responsibilities that statutory and 
common law require. Separate from any HSR requirements, these fiduciary 
duties require directors to, inter alia, act in the best interest of 
the organization and to ensure that the organization follows applicable 
laws.\349\ Courts have found that directors may breach their duty of 
loyalty if they do not make a good faith effort to provide adequate

[[Page 89298]]

oversight and monitoring.\350\ A merger or acquisition that requires 
reporting under the HSR Act is not an insignificant occurrence. When an 
organization to which an individual owes a fiduciary duty is involved 
in a reportable transaction, it is reasonable to expect those 
individuals to exercise their duties of care and loyalty by 
participating in compliance activities. Moreover, individuals who serve 
on boards must comply with the prohibitions in the antitrust laws that 
relate to interlocks and should be aware of how their role in a senior 
leadership position is relevant to the Agencies' assessment of proposed 
transactions. These risks exist without regard to the disclosure of 
their board position in an HSR Filing. Given the responsibilities that 
board members already carry, the Commission believes that the reporting 
requirement is reasonable and appropriate, particularly when balanced 
against the increased transparency and value it provides to the 
Agencies' premerger antitrust analysis.
---------------------------------------------------------------------------

    \349\ Jeremy S. Piccini, ``Director Liability, the Duty of 
Oversight, and the Need to Investigate,'' Bus. L. Today 1 (Feb./Mar. 
2011).
    \350\ See Marchand v. Barnhill, 212 A.3d 805, 824 (Del. 2019) 
(reversing dismissal of stockholder's claims that directors breached 
their duty of loyalty by failing to establish a reasonable system of 
controls and reporting regarding food safety in connection with 
listeria outbreak); In re Boeing Co. Derivative Litig., No. CV 2019-
0907-MTZ, 2021 WL 4059934, at *33 (Del. Ch. Sept. 7, 2021) (finding 
that plaintiffs stated a claim that board breached its duty of 
oversight by failing to establish a reporting system for airplane 
safety).
---------------------------------------------------------------------------

    In sum, the Commission has determined that the reporting 
requirements for UPEs contained in the final rule are necessary and 
appropriate to enable the Agencies to identify transactions that may 
violate the antitrust laws because the acquiring person and the target 
have existing business relationships, including through shared 
individuals or entities, that must be considered as part of that 
assessment, and that these requirements, as modified, have been 
tailored to reduce the cost of reporting as much as practicable.

E. Transaction Information

    This section of the Form and Instructions reorganizes, clarifies, 
and expands the information required in the initial portion of the 
current Form as well as in Items 2, 3, and 5. The Commission proposed 
new sections to facilitate the reorganization, clarification, and 
expansion of these items and received comments on certain portions of 
the Transaction Information section. As discussed below, the Commission 
adopts some of these proposals without change and some with 
modifications.
1. Parties
    This section requires the information currently mandated by Item 
3(a). The Commission did not propose and does not adopt any material 
changes to the information required by this item.
2. Transaction Details
    This section requires the information currently mandated by Items 
2(b), 2(c) and 2(d). The Commission did not propose and does not adopt 
any material changes to the information required by these items. The 
Commission notes that the requirement to indicate the notification 
threshold in Item 2(c) is not applicable to the acquired person and is 
therefore excluded from the Form and Instructions for the acquired 
person. The Commission did not propose and does not adopt any material 
changes to the information required by this item.
3. Transaction Description
    This section requires the information currently mandated by Items 
2(a) and Item 3(a). The Commission did not propose and does not adopt 
any material changes to information required by these items. The 
Commission also proposed requiring the acquiring person to describe the 
business operations of all the entities within the acquiring person, 
which it adopts with modification, as discussed below.
a. Business of the Acquiring Person
    The Commission proposed requiring the acquiring person to briefly 
describe the business operations of all entities within the acquiring 
person to provide a clear overview of all aspects of the acquiring 
person's pre-transaction business. The Commission adopts the proposal 
with modification.
    The Commission received two comments expressing general support for 
the proposal, with one noting that the change is essential to ensuring 
that the Agencies can meet the statutory deadline. One law firm 
commenter was critical of the burden that the proposal would impose, 
stating that companies may have several dozen subsidiaries and written 
descriptions as to each of the respective business operations is not 
information readily maintained in the ordinary course of business and 
could be incredibly burdensome to collate.
    The Commission adopts a clarified version of this requirement. The 
proposal was intended to require a short description of the operating 
businesses within the acquiring person, not an entity-by-entity 
description. The Commission understands that a single operating 
business may comprise multiple entities, such as shell entities or 
separate entities for each location of the business. Therefore, the 
Commission amends the requirement to remove ``of all entities within'' 
to make clear that the acquiring person does not need to describe its 
operations on an entity-by-entity basis.
    Understanding the business of the acquiring person is necessary to 
understanding the potential competitive implications of the 
transaction. Investment groups often control multiple portfolio 
companies across many lines of business. Similarly, some corporations 
also have multiple and varied operations. These other operations may be 
related to the operations of the target, even if they do not directly 
overlap with it. Therefore, particularly for acquiring persons with 
complex structures or many businesses, knowing just the business of the 
acquiring entity is not sufficient for the Agencies to evaluate the 
impact of the acquiring person merging with or acquiring an interest in 
the target. The scope of the acquiring person's holdings is often not 
publicly available, necessitating the Agencies receiving the 
information from the acquiring person itself.
b. Business of the Target
    This section requires the information currently required by Item 
3(a). The Commission did not propose and does not adopt any material 
changes to the information required by this item.
c. Non-Reportable UPEs
    This section requires the listing of non-reportable UPEs, which is 
currently required by Item 2(a). The Commission did not propose and 
does not adopt any material changes to the information required by this 
item.
d. Transaction Description
    This section requires the information currently mandated by Item 
3(a). The Commission did not propose and does not adopt any material 
changes to the information required by this item.
e. Related Transactions
    This section requires filing persons to identify related 
transactions, and the Commission proposed a list of common 
circumstances in which multiple filings are required to guide filing 
parties in their responses. Although Item 3(a) of the current Form asks 
parties to indicate whether there are additional filings related to the 
transaction, filers sometimes overlook this requirement. The Commission 
received three comments in support of the proposed changes, with one of 
these commenters

[[Page 89299]]

noting that they appear to be reasonably designed to provide 
potentially helpful clarification. The Commission adopts this 
requirement as proposed.
f. Transactions Subject to International Antitrust Notification
    The Commission proposed creating a Transactions Subject to 
International Antitrust Notification section that would require parties 
to identify the jurisdictions where each filing person has already 
filed or is preparing notifications to be filed as well as a list of 
the jurisdictions where it has a good faith belief it will file. The 
Commission adopts this requirement as proposed, but only for the 
acquiring person.
    Although the Form currently asks filing parties to voluntarily 
identify other jurisdictions in which filings will be made, most filers 
do not disclose the information even though more and more transactions 
are subject to review in multiple jurisdictions around the world. As 
noted in the NPRM, in order to fully benefit from inter-agency 
consultations, the Agencies need to know as early as possible which 
foreign jurisdictions may also be evaluating a proposed transaction.
    The Commission received two comments in opposition to this 
proposal. One commenter expressed concern about the effects of inter-
agency consultations, and another recommended maintaining the status 
quo where filers voluntarily identify other jurisdictions where the 
transaction will trigger premerger notification under the laws of that 
jurisdiction. Both stated that the proposal would only impact 
international companies, which might be forced to speculate about 
potential foreign filings. The Commission acknowledges that the 
proposed requirement will have a greater impact on companies with 
operations outside the United States. But the Commission disagrees that 
it is asking parties to speculate about potential foreign filings; 
however, it has determined that it is sufficient for the information to 
be provided only by the acquiring person. As stated in the NPRM, the 
text of the proposed rule provides flexibility for parties who, at the 
time of the HSR Filing, may not have yet identified all the other 
jurisdictions where they will file. Indeed, the final rule specifies 
that filing parties can respond based on their good faith belief, which 
provides filing parties with the ability to respond based on their 
knowledge at the time of filing. Otherwise, the requirement asks for 
facts that are already known: the jurisdictions where the party has 
already filed and the ones for which it is preparing a filing. The Form 
also affords parties the option to voluntarily make certain waivers 
related to other jurisdictions, as discussed in section VI.K.3. 
Accordingly, knowing which other jurisdictions are reviewing the 
transaction can expedite the waiver process if the parties intend to 
provide a waiver after filing.
    Given the importance of knowing which foreign jurisdictions may 
also be evaluating a proposed transaction and the benefits to the 
Agencies and the parties of early case-specific cooperation facilitated 
by waivers, the Commission adopts this necessary change as proposed for 
the acquiring person. However, because filing parties often coordinate 
their notification to other jurisdictions and in order to further 
reduce the burden on acquired persons, the Commission does not adopt 
the change for acquired persons because it is sufficient to obtain this 
information from only one filing party.
4. Additional Transaction Information
a. Transaction Rationale
    The Commission proposed that the acquiring and acquired person be 
required to describe all strategic rationales for the transaction. 
These rationales would include those related to, for example, 
competition for current or known planned products or services that 
would or could compete with a current or known planned product or 
service of the other reporting person, expansion into new markets, 
hiring the sellers' employees (so-called acqui-hires), obtaining 
certain intellectual property, or integrating certain assets into new 
or existing products, services, or offerings. The Commission also 
proposed that the filing person identify which documents submitted with 
the HSR Filing support the rationale(s) described in the narrative. The 
Commission adopts the requirement as proposed but does not require the 
information from select 801.30 transactions.
    The Commission received several comments supporting disclosure of 
transaction rationales. Individual commenters described the changes as 
common-sense requirements and noted the need to ensure each party in 
the transaction explains the reasoning from their perspective. One 
commenter stated that mergers may be beneficial to an acquiring company 
for anticompetitive reasons that might not be immediately apparent from 
a surface-level analysis of market shares and concentration in a 
particular market, and that requiring a firm to submit its 
justification for the strategic wisdom of a particular transaction 
would help diminish the role of guesswork in the Agencies' review of a 
proposed merger.
    Commenters opposing disclosure of transaction rationales focused on 
the evolving nature of the information, which may very well differ 
across the various personalities and business roles that span an 
organization and which in some instances may be only discovered in the 
course of post-signing diligence. The Commission understands that there 
may be many goals for the transactions and that different perspectives 
within the filing person may be difficult to resolve. But that is 
precisely the problem that this requirement is intended to resolve. The 
Agencies are not in a position to understand which rationales are 
predominant nor choose among different rationales presented in the 
other materials submitted with the notification, such as transaction-
related documents, without additional context. That is why the 
Commission believes that requiring filers to point to documents or 
other materials in the HSR Filing that support the stated rationale 
would help resolve any uncertainty about which rationale (or 
rationales) may predominate. The Commission also understands that 
rationales may change throughout the diligence process. The parties are 
not required to wait to file their notification until they have settled 
on a single or predominant rationale.
    Others described the request as unfair because in the past the 
merging parties' strategic rationale for the transaction has only been 
revealed after the Agencies have sued to block a deal. The Commission 
disagrees that the parties lack rationales for the transaction until 
they are before a court defending a lawsuit, or that it is unfair to 
require them to state each strategic rationale for the transaction 
known at the time of making an HSR Filing. Indeed, each filer may have 
different reasons for entering into the transaction. Whatever the 
reasons for agreeing to the transaction, that is the information the 
Agencies seek. Knowing why each party sees the transaction as 
beneficial is highly relevant to the initial antitrust assessment and 
may cause the Agencies to determine, relying on the documentary support 
for that rationale, that the transaction does or does not warrant 
additional investigation.
    In addition, commenters noted that a description of transaction 
rationales would be burdensome to generate and duplicative of other 
materials submitted in the HSR Filing, particularly documents 
responsive to current Item 4. The Commission acknowledges that there is 
some cost to filers to provide a description of strategic rationales 
but

[[Page 89300]]

disagrees that it is duplicative. There is no current requirement that 
the parties describe the rationale for the transaction, and for many 
transactions, there are no documents or other information submitted 
with the HSR Filing that reference a rationale. For these filings, the 
Agencies do not know what benefits either party hopes to achieve 
through the transaction. Alternatively, where there are many different 
rationales discussed in submitted materials, the Agencies lack the 
context to know which ones predominate or reflect the views of the 
organization. Requiring each filer to describe each strategic rationale 
for the transaction provides the Agencies with a starting place to 
understand the motivation behind the transaction without having to make 
judgments about which ones are still under consideration. Given the 
Agencies' experience with asking this question during the initial 
waiting period or reviewing other white papers that the parties 
voluntarily provide, the Commission believes that the cost of supplying 
a transaction rationale will be minimal and, in any event, is necessary 
for the Agencies to determine whether the transaction may violate the 
antitrust laws. Filers are invited (but not required) to copy and paste 
text or provide a summary from documents produced with the HSR Filing 
and reference the specific portions of those documents where the 
discussion of that rationale exists. However, if documents provide 
inconsistent rationales, filers should address these inconsistencies. 
The Commission believes that relying on statements contained in 
documents submitted with the HSR Filing will reduce the burden of 
preparing the filer's description of rationales for the transaction.
    One commenter requested clarification as to whether the proposal 
contemplates a single consistent response submitted by all parties 
notifying the same transaction (in the context of a simple acquisition, 
buyer and seller) or whether it contemplates that each notifying party 
submits a separate narrative, noting that the motivations of buyers and 
sellers may diverge. The Instructions clarify that each filing party is 
required to submit a description of its strategic rationales because it 
is important to have such a description from both sides of a given 
transaction.
    Another commenter suggested that to reduce burden the Commission 
should only require the acquiring person to submit its transaction 
rationale, reasoning that the acquiring person's strategy is the most 
competitively relevant and that the seller's rationale for a 
transaction is often no more than obtaining cash to distribute to 
investors or to use for unrelated business purposes. The same commenter 
suggested that the instruction be limited to requiring a brief 
description of the primary strategic rationale for the transaction. For 
the reasons outlined above, the Commission declines to adopt these 
suggestions but notes that a brief description of the transaction 
rationale is sufficient so long as it is accurate and does not conflict 
without explanation with stated rationales in documents submitted with 
the HSR Filing.
b. Transaction Diagram
    The Commission proposed a new requirement that filing persons 
provide a diagram of the deal structure along with a corresponding 
chart that would explain the relevant entities and individuals involved 
in the transaction. The Commission adopts this proposal with 
modification.
    The Commission received many comments in support of this proposal, 
all of which noted the value of such materials to the Agencies as they 
work quickly to assess the transaction. One commenter stated that 
without a diagram of all the entities and their relationships it can be 
hard to understand what's going on. Another highlighted that the 
proposed requirement would leverage documentation that often already 
exists. Noting that transaction diagrams can sometimes be incomplete or 
inaccurate, a law firm commenter suggested that this proposed 
instruction be modified to require the submission of the most recent 
diagram of the transaction, but only to the extent that such a diagram 
already exists and is not materially inaccurate. Finally, two 
commenters expressed general support for the proposal.
    Three commenters opposed the proposal on the grounds that it would 
unnecessarily increase the burden on filing parties. One commenter 
stated that these materials are often not maintained in the ordinary 
course of business or created in the course of a deal negotiation. 
Another noted that deal structure may not be ``set in stone'' even 
after signing. In addition, another commenter pointed out that, besides 
burdening the parties, the proposal would increase the burden on Agency 
staff reviewing the information, adding that the additional information 
is not likely to be any more informative to the Agencies than the 
information already required under the current HSR Form.
    Two commenters proposed modifications in light of the fact that 
many times these charts are drafted by outside tax advisors to show the 
pre-transaction reorganization needed to achieve the desired tax 
structure and benefits and that the charts sometimes include detailed 
tax advice that is protected by the attorney-client privilege or 
otherwise commercially sensitive. A law firm commenter suggested 
modifying the instructions to permit parties to redact, omit, or 
simplify any diagram, to exclude information that relates solely to tax 
considerations. Another commenter noted that where the details of the 
pre-transaction reorganization are irrelevant to the antitrust 
assessment of the transaction, such as where all or a majority of the 
outstanding equity of a target is being acquired, less detailed 
diagrams should provide the agencies with the desired information.
    The Commission acknowledges the cost of having to create both a 
diagram along with a corresponding chart explaining the relevant 
entities and individuals involved in the transaction. Although such 
information would be materially useful to the Agencies, the Commission 
adjusts the proposal to require only the acquiring person in non-select 
801.30 transactions to provide a diagram of the deal structure and only 
if one exists. That is, filers are not required to create a diagram or 
a chart solely for the purposes of submitting an HSR Filing. The 
Commission believes that such a diagram would be useful even if 
prepared for other purposes. With regard to privileged materials, HSR 
Rules already accommodate withholding certain material based on a claim 
of attorney-client privilege; if such a claim is made with respect to 
transaction diagrams, the filer can follow those requirements.
    In sum, the Commission has determined that the transaction 
information requirements contained in the final rule are necessary and 
appropriate to enable the Agencies to fully understand the scope of the 
transaction being considered and to identify those that may violate the 
antitrust laws, and that the requirements, as modified, have been 
tailored to reduce the cost of reporting as much as practicable.

F. Joint Ventures

    This section requires information currently mandated by Item 5(b) 
of the Form. As discussed in section VI.J.1.f, the Commission adopts 
the proposal to eliminate the use of 10-digit NAPCS codes, including in 
this section. The

[[Page 89301]]

Commission did not propose and does not adopt any other material 
changes to the information required by this item. The Commission notes 
that no acquired person filings are required for joint ventures, so 
this section is not included in the Form or Instructions for acquired 
persons.

G. Business Documents

    The Commission proposed a Business Documents section that would 
require the submission of documents currently required by Items 4(c) 
and 4(d) of the Form as well as additional categories of documents. 
Specifically, the Commission proposed expanding the current requirement 
found in Item 4(c) to the ``supervisory deal team lead(s);'' altering 
the language of current Item 4(d)(ii); requiring the production of 
certain ordinary course documents; requiring drafts of Transaction 
Related Documents; and requiring an organizational chart of authors and 
recipients. As discussed below, the Commission adopts some of these 
requirements with modification and does not adopt others.
    As noted in the proposed rule, the Agencies compared documents they 
have received over the years in response to Second Requests with those 
submitted in the HSR Filing and assessed whether having certain types 
of documents at the beginning of the waiting period would have changed 
the Agencies' determination of whether and how to move into an in-depth 
investigation of the transaction. As a result of this review, the 
Commission identified documents that are not required by the current 
Form but would have been highly probative to the initial antitrust 
assessment of the transaction during the initial waiting period.
1. Transaction-Related Documents
a. Competition Documents
    In the proposed rule, the Commission proposed expanding the 
documents currently required by Item 4(c) of the Form, which are 
prepared by or for officers and directors for the purpose of evaluating 
or analyzing the transaction. Since the beginning of the premerger 
notification program, these transaction-related documents have been a 
key screening tool for the Agencies to determine whether the 
transaction may violate the antitrust laws because they discuss the 
acquisition with respect to market shares, competition, competitors, 
markets, potential for sales growth or expansion into product or 
geographic markets. The Commission proposed requiring the filing person 
to submit such documents prepared by or for supervisors of the team of 
individuals working to complete the transaction, which the Commission 
referred to as the supervisory deal team lead(s).
    In response to comments that the proposal was not clear about whom 
the Commission intends for filers to search for responsive documents 
and information in addition to officers and directors, the Commission 
has introduced a definition of supervisory deal team lead and limited 
the term to just one person. As discussed in section VI.A.1.g., the 
Commission believes these changes will provide clarity for filing 
parties. The Commission now turns to comments that were not directed at 
the definition of supervisory deal team lead but concerning the 
requirement to submit documents prepared by or for someone other than 
officers and directors.
    The Commission received one comment from State antitrust enforcers 
supporting the proposal, but other commenters expressed concerns about 
the costs associated with identifying, collecting, and producing 
documents from the supervisory deal team lead. Certain commenters 
stated that expanding 4(c) to include documents to and from supervisory 
deal team lead(s) would create a significant burden to filers that is 
not justified by any benefit to the Agencies. One commenter said that 
adding documents from these individuals would not likely generate 
material that would allow staff to better assess the need for Second 
Requests.
    The Commission disagrees that adding documents prepared by or for 
the senior leader of the deal team would not likely generate additional 
key documents to help staff better assess whether to issue Second 
Requests. Since the beginning of the premerger notification program, 
4(c) documents have been a principal source of information that allows 
the Agencies to identify those transactions that may violate the 
antitrust laws and that require a more in-depth review through the 
issuance of Second Requests. Based on documents submitted in response 
to Second Requests, it is the Agencies' experience that someone other 
than an officer or director is often in charge of the deal team and 
this person typically has additional documents that would be responsive 
to 4(c), but the documents have not been transmitted to an officer or 
director at the time of the HSR Filing. This is even more likely to be 
true when the HSR Filing occurs before due diligence is complete or a 
final agreement is executed. Requiring the submission of transaction-
related documents prepared by or for the supervisory deal team lead 
would result in the Agencies receiving additional probative documents 
that speak directly to whether the transaction may or may not violate 
the antitrust laws even if the document has not been shared with an 
officer or director prior to filing the notification. Based on the 
Agencies' experience, the analysis of the transaction's competitive 
implications contained in these documents is extremely probative.
    Certain commenters explained that the addition of the supervisory 
deal team lead to the existing officer and director custodians, 
combined with the other new document requirements, would require filers 
to submit a significantly larger volume of documents. One commenter 
estimated that adding documents from the supervisory deal team lead(s) 
as well as draft documents as proposed in the NPRM may increase the 
number of documents submitted with each filing by tenfold or greater. 
Another comment pointed out that adding supervisory deal team lead(s) 
to Item 4(c) could also add a burden related to internal document 
preservation and retention. The comments did not provide specific 
estimates of how many additional documents or pages of materials adding 
a supervisory deal team lead may generate, however.
    As discussed throughout this final rule, the Commission has taken 
steps to lessen the costs identified by commenters. After careful 
consideration of the comments, the Commission has modified this 
proposal to reduce the cost associated with requiring 4(c) documents by 
limiting new custodians to be searched to a single individual, the 
supervisory deal team lead. This modest expansion of custodians by one 
individual is necessary because documents responsive to Item 4(c) are 
some of the most relevant material that staff receives, and based on 
the Agencies' experience there are also probative documents containing 
4(c) content generated by and for the supervisory deal team lead that, 
if submitted with the HSR Filing, would allow staff to better gauge the 
competitive implications of the transaction--as understood by the 
filing person--and conduct a more informed, efficient screening 
analysis.
    Another concern articulated by a small number of commenters was 
that documents created by or for the supervisory deal team lead may 
convey information that does not reflect the actual assessment of the 
proposed merger at senior levels. As one commenter explained, the 
Agencies may draw conclusions that do not actually

[[Page 89302]]

align with the documents provided to or sent by the personnel that can 
make final decisions for an entity, such as officers and directors. The 
Commission acknowledges this concern but believes that the exclusion of 
these documents from HSR Filings is often technical and simply a matter 
of timing. HSR Rules do not require filers to complete due diligence or 
sign an executed agreement before filing a notification. Even the 
modification discussed in section V.D. which requires filing parties to 
have agreed to key terms of the transaction still allows parties to 
file prior to the completion of all diligence and negotiation. In the 
Agencies' experience, staff often receives these 4(c)-type documents in 
response to a Second Request and finds that the reason they were not 
submitted with the filing was that they had not been shared with any 
officer or director at the time of the HSR Filing but were eventually 
shared with them. Even if such documents were never shared with an 
officer or director, any document that is responsive to 4(c) and was 
only shared with the supervisory deal team lead--the person who has 
primary responsibility for supervising the strategic assessment of the 
deal--is still highly probative of whether the transaction is likely to 
violate the antitrust laws.
    The Commission believes that by limiting this requirement to the 
individual who has primary responsibility for supervising the strategic 
assessment of the deal, and who would not otherwise qualify as a 
director or officer, it has been tailored to provide a benefit to the 
Agencies with minimal cost to filers. In the situation where the only 
individuals supervising the strategic assessment of the deal are 
already either an officer or director, this requirement will not 
require searching for responsive documents from anyone new. As 
discussed above, to the extent that the supervisory deal team lead has 
responsive documents, it is just often a matter of timing that the 
document is not submitted with the HSR Filing. Rather than requiring 
parties to complete their due diligence and provide all responsive 
transaction assessments provided to key decision makers prior to 
filing, the Commission has determined that also requiring documents 
provided to the supervisory deal team lead is the most direct way to 
obtain these highly relevant assessments of the transaction with the 
HSR Filing. The cost associated with searching one additional 
individual for these documents is necessary and appropriate given their 
importance to the Agencies in quickly identifying those transactions 
that warrant a closer look. Thus, the Commission adopts this proposal 
as modified in the final rule.
b. Drafts
    The Commission proposed requiring drafts of responsive transaction-
related documents if that draft document was provided to an officer, 
director, or supervisory deal team lead(s). The Commission does not 
adopt the proposal at this time.
    As explained in the NPRM, filers are currently required to submit 
draft versions of documents responsive to Items 4(c) or 4(d) only if 
there is no final version or if the draft was sent to the board of 
directors. Under this guidance, if a not-final version of a document is 
sent to the board of directors, it ceases to be a ``draft'' and must be 
submitted, even if a final version is also submitted. Based on the 
Agencies' experience with receiving other drafts of documents during a 
Second Request investigation, in some cases prior draft versions have 
been edited to remove candid assessments of factors relevant to 
competition prior to circulation to officers or directors.
    The Commission received numerous comments on this proposal, raising 
four principal issues: (1) the burden of producing draft transaction-
related documents is not justified by the benefit to the Agencies; (2) 
such drafts do not reflect sufficient deliberation to be probative of 
antitrust risk; (3) the term ``drafts'' is not defined in the NPRM and 
has no common meaning; and (4) requiring the production of drafts would 
chill internal discussions related to the strategic assessment of the 
transaction. These concerns are discussed in turn.
    First, some commenters emphasized the burden of producing drafts, 
noting that filing parties will need assistance from counsel and may 
have to use e-discovery or forensic collection tools to capture all 
drafts. Requiring drafts, one commenter stated, would significantly 
increase the volume of documents produced; another commenter noted that 
it is not uncommon for the authors of these documents to prepare many 
discrete drafts as part of the drafting process. Some commenters 
underscored that Agency staff would also face the challenge of 
reviewing these additional documents. Another commenter pointed out 
that the proposal would disproportionately affect smaller businesses, 
which may not have staff lawyers or the ability to incur hundreds of 
thousands of dollars in legal fees.
    In addition, some commenters expressed doubt regarding the 
probative value of drafts. Drafts may be duplicative, they noted, and 
often include boilerplate language that may not be accurate as well as 
incomplete thoughts, dummy slides, and placeholders. One commenter 
observed that the Agencies do not typically request drafts during the 
initial waiting period, and that it is exceedingly rare for Agency 
staff to use a draft document as a deposition exhibit or in any 
subsequent litigation.
    Commenters also sought guidance from the Agencies regarding what 
constitutes a ``draft'' transaction-related document. In the context of 
a shared document platform, where several contributors may be working 
on a document simultaneously, one commenter asked if each saved 
iteration would be considered a draft that must be produced. Another 
commenter asked whether a document is considered to be ``submitted'' to 
an officer, director, or supervisory deal team lead if that individual 
simply has access to the document via a collaborative drafting tool. As 
a result of such vagueness, commenters noted, merging parties will face 
the enormous practical challenge of preserving all versions of 
documents, even at highly preliminary, incomplete stages. Moreover, 
such vagueness will lead to arbitrary and capricious enforcement of the 
requirement to submit drafts if Agency staff later discovers a draft 
document that they believe should have been submitted with the HSR 
Filing, according to one commenter.
    Finally, some commenters raised concerns about the implications for 
internal deliberation during the drafting process. One commenter stated 
that the proposed requirement would chill open discussion ``for fear of 
creating documents that do not reflect the final thoughts of the 
company.'' Another commenter warned that it might cause some risk-
averse businesses to remove officers, directors, and supervisory deal 
team leads from the document-drafting process.
    Although several commenters recommended eliminating the proposed 
requirement entirely, the Commission did receive a few suggestions for 
ways to narrow the proposal. One suggestion was to limit drafts to 
specific types of documents identified by the Agencies as likely to 
contain probative information. Another commenter suggested requiring 
filers to submit the first draft, the last draft, and the final 
document. Alternatively, one commenter proposed that only the initial 
draft version submitted to an officer, director, or supervisory deal 
team lead be produced. None of the commenters supported the alternative 
proposed in the NPRM, which would require filing parties to

[[Page 89303]]

withhold drafts and submit them within 48 hours only if requested to do 
so by the Agencies.
    Having carefully considered the comments, the Commission has 
decided not to adopt the proposed change to require draft documents at 
this time.
    However, in light of concerns that the Agencies are receiving 
documents edited to remove candid assessments of the transaction and 
market competition, the Commission modifies its informal guidance 
regarding drafts that were shared with the board of directors or 
similar body. Currently, a document, even in draft form, that is shared 
with the board of directors (or similar) is responsive and no longer 
considered a ``draft.'' This distinction is based on the belief that if 
a document is shared with the board of directors, it is sufficiently 
reliable to be submitted with the HSR Filing. However, this guidance 
has sometimes been limited to require that the document be shared with 
the entire board. The Commission now clarifies that any Transaction 
Related Document (currently referred to as 4(c) and 4(d) documents) 
that was shared with any member of the board of directors (or similar 
body) is responsive and should not be considered a draft; rather, it 
should be treated as a final version and submitted with the HSR Filing 
as a Competition Document.
    As explained in the NPRM, draft versions of responsive documents 
can contain highly relevant, probative, or candid statements about the 
transaction's competitive impact not reflected in the final version of 
the document, and in some cases, it appears that the final document has 
been edited to remove candid assessments of factors relevant to 
competition prior to circulation to officers or directors. The 
Agencies' experience is buttressed by multiple commenters, who 
similarly acknowledged that `sanitizing' these documents in 
anticipation of antitrust investigation by the Agencies is a legitimate 
concern. The Commission believes that modifying its informal guidance, 
as well as obtaining additional documents and information as outlined 
in this final rule, including those shared with the supervisory deal 
team lead, will help ensure that the documents the Agencies review 
contain factual, accurate assessments of the strategic and competitive 
implications of the transaction.
c. Confidential Information Memoranda
    This section requires information currently collected in by Item 
4(d)(i) of the current Instructions. The Commission did not propose and 
does not adopt any material changes to the information required by this 
item.
d. Third-Party Studies, Surveys, Analyses, and Reports
    This section requires information currently required by Item 
4(d)(ii) of the current Instructions. The Commission did not propose 
and does not adopt any material changes to this item.
e. Synergies and Efficiencies
    The Commission proposed a Synergies and Efficiencies section to 
collect the information currently required by Item 4(d)(iii) of the 
Instructions, with a proposed modification to clarify that forward-
looking analyses are responsive. Although one comment expressed general 
support, some objected to the proposed modification, noting that it 
would expose firms' proprietary information. More generally, another 
commenter expressed concern that the burden of identifying the 
documents that relate to potential synergies or efficiencies would 
increase greatly if expanded to include supervisory deal team lead(s) 
and drafts, because synergy analyses in particular can generate a large 
number of drafts.
    In light of the comments and to reduce the overall cost of the 
final rule as compared to the benefit this information would provide to 
the Agencies, the Commission does not adopt the proposed modification. 
However, the Commission declines to repeal the requirement to provide 
documents that reflect expected synergies and efficiencies, as the 
Agencies find these analyses to be relevant to understanding any such 
expected benefits of the transaction. Parties often provide more 
information about potential efficiencies than is strictly required by 
the Rules if they want the Agencies to consider such information during 
their initial review. Thus, the current language in the Instructions 
regarding synergies and efficiencies remains in effect as part of the 
final rule.
2. Plans and Reports
    The Commission proposed requiring filers to submit two sets of 
plans and reports not created specifically for analyzing the filed-for 
transaction. First, it proposed requiring the submission of periodic 
plans and reports that discuss market shares, competition, competitors, 
or markets of any product or service that is provided by both the 
acquiring person and acquired entity, if those documents were shared 
with a chief executive officer of an entity involved in the 
transaction, or with certain individuals who report directly to such a 
CEO. Second, the Commission proposed requiring the submission of all 
plans and reports submitted to the board of directors (or, in the case 
of unincorporated entities, individuals exercising those functions) 
that discuss market shares, competition, competitors, or markets of any 
product or service that is provided by both the acquiring person and 
acquired entity. The NPRM called for all such plans and reports that 
went to the board, not merely those prepared on a periodic basis, 
because it is the Commission's experience that any report sent to the 
board reflects market intelligence that is important to the top 
decision-makers. As proposed, the Commission limited this document 
requirement to those materials prepared or modified within one year of 
the filing date of the notification. The Commission adopts the proposal 
with modifications explained below.
    As explained in the NPRM, plans and reports prepared in the 
ordinary course often contain detailed assessments of core business 
segments, markets, competitors, other acquisition targets, and 
projections about future competitive dynamics--insights that have 
direct bearing on the Agencies' antitrust assessment of the transaction 
in the initial waiting period. Staff at the Agencies frequently request 
these documents voluntarily from filing parties early in their review 
to better understand and analyze the relevant markets at issue.
    The Commission received several comments on these proposals. Some 
comments stated that the proposed requirement was overly broad and 
would create a significant burden for filers without commensurate 
benefit to the Agencies. In particular, for example, some comments said 
that this requirement would mean that filing company personnel must 
identify, collect, and produce responsive material from several 
individuals who are not currently searched for documents or materials 
submitted with an HSR Filing. These comments disagreed with the NPRM's 
statement that companies frequently collect these documents as part of 
the due diligence process for transactions. In addition, one commenter 
stated that, even if such documents were collected, the collection 
process would not occur in a systematic way to ensure compliance with 
HSR requirements. In order to effectively collect and produce 
responsive material, some comments contended that filers would need to 
use e-discovery and other forensic discovery tools, which are expensive 
and add

[[Page 89304]]

additional time. Certain comments explained it would be 
counterproductive and burdensome for the Agencies' staff to review and 
assess the significant volume of documents this new request will likely 
yield.
    The Commission acknowledges that this proposal would have increased 
the costs for certain filers and has tailored the final rule to 
minimize these costs. For instance, commenters suggested that there 
would be additional costs to collect these types of documents, such as 
interviewing additional personnel, collecting additional documents for 
production, and having those documents reviewed by counsel, among other 
tasks. In response to these concerns, the Commission notes the revised 
requirement is very targeted: it applies only to documents that already 
exist and are dated within one year of filing, and that discuss 
overlapping products and services. But in response to concerns that a 
search for even this limited set of documents could require forensic 
document technology or other investments in discovery tools, the 
Commission modifies this requirement to limit the business executives 
whose files need be searched, dropping the need to collect and produce 
documents from any person who reports directly to the relevant CEO. As 
a result, this requirement will not require documents from any new 
custodians. With this modification, the Commission believes that the 
number of responsive documents will be reduced so that the burden on 
the parties to submit and the burden on staff to review these documents 
will be manageable.
    The Commission believes that limiting responsive plans and reports 
to those shared with the CEOs and with the Boards of Directors of the 
entities involved in the transaction will still provide the Agencies 
with sufficient context necessary to determine whether the transaction 
is likely to violate the antitrust laws. Importantly, these individuals 
are often involved in preparing the HSR Filing and are the same 
individuals who are searched for other responsive documents, such as 
Competition Documents. From the Agencies' experience, those that report 
directly to the CEO typically collect and retain the types of reports 
that contain important and relevant business facts so that documents 
provided to the CEO contain important market analyses and facts that 
are highly relevant to the Agencies' initial antitrust assessment. They 
can be especially important for determining the scope of any 
investigation, potentially narrowing the areas of inquiry or 
identifying areas of emerging competition that are not otherwise 
discussed or described in documents generated in connection with 
evaluating the reported transaction.
    The Commission has determined that at this time, requiring reports 
provided to lower-level executives who report to the CEO, as proposed 
in the NPRM, would add cost for filers, even those with known 
overlapping business lines who may expect that the Agencies will be 
taking a close look at the documents submitted with the HSR 
Filing.\351\ The Commission is also mindful of the burden to the 
Agencies of receiving HSR Filings with many additional documents that 
must be reviewed during the initial waiting period. The Commission 
believes that getting ordinary course plans and reports from the Board 
of Directors and CEOs should be sufficient to provide staff with highly 
relevant information with important market context for other submitted 
documents and information, including the Overlap Description, without 
overwhelming the current level of staffing devoted to premerger review.
---------------------------------------------------------------------------

    \351\ In the final rule, the Commission adopts the suggestion of 
one commenter to limit plans and reports to those provided to the 
CEO but declines to seek another round of public comment before 
finalizing this requirement as modified. Another commenter suggested 
that the Commission only require these documents that were provided 
to the board and not to the CEOs. The Commission declines to adopt 
this suggestion because it believes that excluding CEOs would 
prevent the Agencies from having the type of relevant information 
that is routinely provided to senior leaders related to markets with 
overlapping products and services. Based on its cumulative 
experience in collecting these types of documents during merger 
investigations, the Commission has determined that it is necessary 
and appropriate to collect a limited set of plans and reports that 
were provided to the highest level of decision-makers, including the 
CEOs, because they contain important context for conducting the 
Agencies' initial antitrust assessment of the transaction.
---------------------------------------------------------------------------

    In addition to limiting the people who must provide plans and 
reports, the Commission has also determined that these documents are 
not required for select 801.30 transactions. As discussed above, select 
801.30 transactions are those where the Commission believes that 
certain requirements of the final rule are unlikely to provide 
information necessary to determine whether that transaction may violate 
the antitrust laws. Not requiring plans and reports for HSR Filings of 
select 801.30 transactions is another way the Commission is lessening 
cost based on the lower likelihood that the transaction may violate the 
antitrust laws.
    Other commenters mentioned that responsive plans and reports are 
unlikely to contain only information about the specific products or 
services offered by the other filers and this requirement would thus 
sweep in irrelevant information. One such comment noted that the 
material received would contain much irrelevant material that would 
lack sufficient probative value. The Commission disagrees that 
requiring the plans and reports at issue will generate irrelevant 
documents. Based on the Agencies' experience, plans and reports, taken 
as a whole, are highly relevant to staff's analysis of the nature and 
scope of product or service markets, geographic markets, competitors 
and competitive dynamics in the industry, new or potential entrants 
that could mitigate competition concerns, among other key 
considerations that could determine whether the transaction may violate 
the antitrust laws. Documents that were created in the ordinary course 
of business and not solely for the purpose of evaluating the 
transaction frequently contain important discussions about development 
efforts for non-commercial products or services or explain competitive 
dynamics in a broader way that would reveal ways that the transaction 
could impact non-horizontal competition. In addition, they may identify 
potential entrants or emerging threats, or discuss other potential 
acquisition targets. In the Agencies' experience, such plans and 
reports provide market facts and long-range assessments that bear 
directly on whether the transaction is one that may violate the 
antitrust laws in ways described in section II.B.4. Staff has routinely 
requested that filers provide these documents on a voluntary basis 
during preliminary-phase investigations, however, because of the 
voluntary nature of the request there is no requirement that filers 
produce all or even any of these materials.
    Moreover, the modifications the Commission has made to the final 
rule ensure that the plans and reports are relevant to understanding 
the nature and extent of existing competition between the merging 
parties. The only filers who must provide these documents are those 
involved in transactions in which both parties provide the same types 
of products or services or that are known to be under development. The 
Commission acknowledges that these plans are also important to 
investigate competitive effects in transactions involving supply 
relationships but has limited this request in the interest of 
administrability, efficiency, and reducing cost. Transactions between 
two entities that currently compete (or have pre-revenue products in 
development that will result in direct

[[Page 89305]]

competition soon) typically warrant a close look during the initial 
waiting period. For these transactions, filers need provide only the 
plans and reports that discuss market shares, competition, competitors, 
or markets for those overlapping lines of business created within a 
year of filing. This is exactly the kind of information the Agencies 
rely on to determine whether to investigate a transaction during the 
initial waiting period because it provides key information about the 
competitive landscape at issue in the transaction. While the Commission 
acknowledges there may be select portions of these responsive documents 
that do not contain relevant information, it is often the case that 
responsive documents contain non-responsive portions. Therefore, the 
Commission adopts this requirement with a clarification that the 
relevant products and services are those that both the acquiring person 
and target produce, sell, or are known to be developing.
    One commenter explained that this requirement means filers must 
self-assess the products and services in which they overlap, and filers 
may disagree on the existence or degree of the overlap. The Commission 
agrees that this requirement requires a self-assessment by each party 
and does not expect that the products and services that are identified 
in the Overlap Description by each filer will always align, since the 
acquired person may not have complete information about all the 
products and services that the acquiring person offers or is 
developing. The Commission expects that the acquiring person, through 
its normal diligence of the target, will have a more fulsome 
understanding of the target's products and services, including those 
under development. However, as discussed in section VI.I.1., filers 
should not exchange information with each other when responding to the 
Overlap Description and each filer may refer to any submitted business 
document that supports the analysis of overlaps contained in the 
Overlap Description. In this way, the Commission expects that the 
analysis of markets reflected in the submitted plans and reports will 
be reflected in each party's assessment of overlaps contained in the 
Overlap Description. As is currently the case with a filer's 
identification of overlapping NAICS codes and for the new requirement 
to provide an Overlap Description, the Commission will rely on the good 
faith of the filer to provide accurate information.
    Another commenter explained that ordinary course documents not 
prepared for the transaction are arguably outside the HSR statutory 
mandate because the Commission had previously declined to adopt a 
proposal to include such ordinary course documents. The Commission's 
1976 proposal had contemplated filers providing, among other items, 
copies of studies, surveys, analyses, and/or reports prepared by or for 
the company in the three years before filing, which contain information 
regarding market shares, competition, competitors, markets and more in 
relation to any product or service currently made or sold by the other 
filing party. The Commission states that merely because it declined to 
require the submission of ordinary course documents with the HSR Filing 
in the past does not mean it lacks the authority to do so now. The 
Commission believed that it had the statutory authority to require 
ordinary course documents in 1976 when it first set up the premerger 
review program but determined that excluding these types of documents 
was unlikely to impede effective premerger review.
    The Commission believes that it is now necessary and appropriate to 
require such documents to be submitted with the HSR Filing. As 
discussed in section II.B., many aspects of the economy, deal 
structure, and technology have changed dramatically since Congress 
passed the HSR Act. Based on their experience, the Agencies know that 
ordinary course documents often contain important horizon-scanning 
discussions, including market intelligence about other competitors in 
the market or emerging competitive threats, and that these high-level 
plans and reports provide important information about the competitive 
dynamics that may be affected by the transaction. Indeed, these 
documents often identify other competitors, including their strengths 
and weaknesses, and this information is highly probative of the 
competitive assessment of the transaction. Moreover, with the practical 
limitation to collect and submit only documents that were shared at the 
highest levels of management--those provided to the CEO or the Board of 
Directors--the Commission believes the final rule carefully balances 
the burden of this requirement (for the parties and the Agencies) in 
light of their clear relevance to the antitrust assessment of the 
transaction.
    One comment noted that requiring plans and reports would be 
inconsistent with international jurisdictions' merger control regimes. 
However, the Commission does not find the issue of varying 
international jurisdictions' document requirements for government 
merger review dispositive. Each jurisdiction establishes, for itself, 
the information needed for the particulars of their laws, economies, 
and priorities. The Commission relies on its own experience in 
enforcing the U.S. antitrust laws, in light of binding precedent, to 
assess the most relevant and probative information to determine whether 
an acquisition may violate those laws. Based on its own experience and 
expertise in enforcing the U.S. antitrust laws, the Commission has 
determined that due to the changes in corporate structure and market 
dynamics described in section II.B., it is now necessary and 
appropriate to collect a limited set of plans and reports with the HSR 
Filing.
    A smaller set of comments stated that the terms used in the new 
proposed requirements were vague and unclear. For example, one comment 
said that the proposed instructions do not provide a clear definition 
of ``semi-annual and quarterly'' or ``plans and reports,'' which 
creates uncertainty and compliance risks for filers. Another comment 
said that the expanded requirements will create uncertainty because 
they do not directly reference the transaction under review or 
documents shared during the due diligence process, which would lead 
filers to make subjective determinations as to which materials are 
responsive.
    The Commission disagrees that there is uncertainty or ambiguity 
about what is responsive. As stated in the NPRM, regularly prepared 
plans and reports are high-level strategic business documents created 
not in contemplation of the transaction but in the ordinary course of 
business within one year of filing and that are prepared at regular 
intervals. Responsive plans and reports will discuss market shares, 
competition, competitors, or markets of any product or service that is 
provided by both the acquiring person and acquired entity, if those 
documents were shared with a CEO of an entity involved in the 
transaction, or of any entity it controls or is controlled by. 
Targeting documents that discuss market shares, competition, 
competitors, or markets tracks similar language in Item 4(c) of the 
current HSR Form, which in the Commission's experience is familiar to 
many filers and uses phrases that are known to businesspeople. The NPRM 
references to semi-annual and quarterly rely on standard terms that are 
routinely used in document requests sent to filers and third parties by 
the Agencies during their investigations. In the interest of clarity, 
however, the Commission notes that regularly prepared documents

[[Page 89306]]

include those that are produced at regular intervals, such as 
``annual'' (once a year), ``semi-annually'' (two reports or plans each 
year), and ``quarterly'' (once every quarter or every three months). To 
help resolve any remaining uncertainty, the Commission clarifies that 
regularly prepared plans and reports are those that are prepared by the 
filers in the ordinary course and at regular intervals and does not 
include special reports prepared for a specific purpose. Filers should 
submit one year's worth of annual, semi-annual, or quarterly plans or 
reports provided to a CEO but do not need to submit plans or reports 
that are produced more frequently, such as monthly or weekly. The 
Commission clarifies that filers should submit all plans and reports 
provided to the Board of Directors and not only those that are 
regularly prepared. These documents, which were shared at the highest 
level of decision-making, may include special reports if they contain 
responsive material.
    Yet other commenters were concerned that requiring plans and 
reports would raise confidentiality concerns, forcing filers to 
disclose potential transactions to employees before they are ready to 
do so. As modified, this requirement alone would not lead other 
personnel to become aware of the transaction prematurely. The 
Commission believes that plans and reports can be obtained from these 
CEOs and Board members in a way that does not necessitate divulging the 
transaction to other executives and businesspeople who do not otherwise 
know about the pending transaction. Finally, the Commission notes that 
plans and reports are also not required in filings for select 801.30 
transactions.
    Certain comments that opposed the requirement to submit plans and 
reports also offered suggested modifications. One of these comments 
recommended that the Commission tailor the requirements to clarify that 
it is limited only to the filing party's products and services in the 
United States and that filers need only produce documents, or portions 
thereof, that discuss specifically identified subject matter. Certain 
comments agreed that the Commission should allow filers to redact non-
responsive materials from these documents. The Commission declines to 
adopt these suggestions because it finds that allowing filers to redact 
non-privileged information or information related solely to matters 
outside the United States on the basis of relevance would introduce too 
much uncertainty into the value of these documents, leaving Agency 
staff with incomplete, piecemeal material. Agency staff is experienced 
with reviewing documents that contain relevant as well as non-relevant 
content and the Commission believes it is important for documents be 
produced as they were shared with the relevant decision-makers, 
properly redacted for privilege only.
    The Commission also considered alternatives proposed by commenters. 
One commenter explained that the Agencies could request filers to 
submit these documents on a voluntary basis, because those requests are 
narrowly tailored and have historically followed initial substantive 
discussions between filers and Agency staff. When used in combination 
with withdrawing and refiling, this process would provide the Agencies, 
the commenter said, with at least 30 days to review and analyze 
strategic plans before issuing Second Requests. The Commission 
disagrees that it is sufficient to continue to obtain plans and reports 
on a voluntary basis after staff has identified that they are needed 
because there is no obligation for filers to comply, substantially or 
minimally, with such a request for information prior to the expiration 
of the initial waiting period. In the Agencies' experience, even when 
parties are asked to provide these documents on a voluntary basis, they 
are often do not provide them prior to the end of the first review 
period (either 30 or 15 days) and often choose to pull and refile their 
notification in order to submit these and other materials that were 
requested on a voluntary basis. Moreover, in the Agencies' experience, 
these particular documents contain important information that is 
currently missing from the HSR Filing that would identify the 
transaction as one that requires a closer look.
    Another comment suggested that Agencies could get these documents 
using Second Requests as they do now. While either Agency can obtain 
these documents through the issuance of Second Requests, the Commission 
believes that the probative value of these documents makes them 
necessary for staff's initial screening assessment, both because they 
can identify different areas of antitrust risk, including for areas of 
future competition, and because they may contain additional information 
about the business lines of interest that may alleviate the need to 
issue Second Requests or narrow their scope. As discussed above, 
because issuing Second Requests is time- and resource-intensive for 
both the parties and the investigating agency, is it not a substitute 
for having additional information in the HSR Filing that minimizes the 
need to issue Second Requests at all. Having additional relevant and 
targeted information on the front-end benefits both the Agencies and 
the parties because it allows the Agencies to focus on the most 
concerning transactions, and allows parties to avoid Second Requests 
when they are not warranted, and thereby avoid unnecessary expense and 
delay.
    Finally, certain comments discussed earlier also suggested not 
adopting the proposed requirement at all. In light of the Agencies' 
experience with the probative value of high-level ordinary course 
documents and their belief that having them would provide necessary 
context to other material submitted with an HSR Filing, the Commission 
declines to dismiss the requirement altogether. The Commission believes 
this final rule, as modified, reflects a reasonable balancing of the 
importance of these documents to a premerger assessment and the burden 
of requiring them for any transaction where filers have overlapping 
business lines. The Commission has in considered the specific concerns 
raised by comments and tailored the requirement to preserve the 
important benefit to the Agencies while mitigating the cost to filers 
(and to the Agencies).
3. Organizational Chart of Authors
    As the final part of its Business Documents section, the Commission 
proposed requiring an organizational chart(s) that would reflect the 
position(s) within the filing person's organization held by identified 
authors and, for privileged documents, recipients of each document 
submitted with the HSR Filing. The Commission also proposed requiring 
the filer to identify the individuals searched for responsive 
documents. The Commission does not adopt this proposal.
    The Commission received several comments opposing this proposed 
instruction, with commenters noting that many companies do not maintain 
these types of organizational charts in the ordinary course of 
business, and to the extent they do, such charts are often incomplete 
or inaccurate. According to one commenter, such charts would need to be 
prepared solely for the purpose of the HSR Filing, which would be time-
consuming. Other commenters pointed out that authors of certain 
documents may not even be employees of the filing entity, thereby 
complicating the certification of the filing.
    In addition, multiple commenters questioned the Agencies' need for 
organizational charts to determine whether to issue a Second Request. 
As one commenter noted, it is unclear why organizational charts will 
assist staff in

[[Page 89307]]

assessing whether a particular transaction merits further review as 
opposed to their value for identifying potential custodians for a 
potential Second Request.
    As to the proposed requirement to identify the individuals searched 
for responsive documents, one commenter stated that parties may claim 
privilege on information regarding whose files were searched. Another 
commenter observed that, for the majority of HSR filings, documents are 
identified through targeted self-collection, directed and overseen by 
legal counsel, rather than running Second Request-style searches 
through custodial files. The same commenter cautioned that the proposed 
disclosure requirement would disincentivize companies to err on the 
side of over-collection so as not to raise a red flag to the Agencies 
or suggest that the persons searched should be custodians in a Second 
Request.
    Finally, as an alternative to providing an organizational chart, 
one commenter suggested requiring parties to identify the person who 
supervised the drafting and the person to whom that drafter directly 
reports.
    After considering the comments and weighing the benefit to the 
Agencies during the initial waiting period in light of the cost of 
complying, the Commission does not adopt this proposal. As discussed in 
section VI.A.3., elsewhere the final rule requires filers to identify 
authors of documents if the filer has identified a NAICS overlap, 
product or service overlaps in the Overlap Description, or a supply 
relationship in the Supply Relationships Description. The Commission 
has determined that author information is not relevant for all filers 
and that limiting author information in this way provides sufficient 
benefit to the Agencies while reducing the cost for filings without 
such relationships.
    In sum, the Commission has determined that the requirements to 
submit business documents contained in the final rule are necessary and 
appropriate to enable the Agencies to identify transactions that may 
violate the antitrust laws and to provide important information about 
each party's view of market realities and that these requirements, as 
modified, have been tailored to reduce the cost of submitting 
responsive documents as much as practicable.

H. Agreements

    The Commission proposed an Agreements and Timeline section to 
require filing persons to provide a term sheet or draft agreement that 
reflects sufficient detail about the proposed transaction to 
demonstrate the transaction is more than hypothetical, if a definitive 
agreement has not been executed. In addition, the Commission proposed 
additional changes to require the submission of the entirety of all 
agreements related to the transaction and a new requirement to submit 
other agreements between the filing persons that are not related to the 
transaction, as well as a timetable for the transaction. As discussed 
below, the Commission adopts some proposals with modification and does 
not adopt the requirement to submit a timeline.
1. Transaction-Specific Agreements
    The Commission proposed requiring filing persons to produce all 
documents that constitute the agreement between the acquiring person(s) 
and the person(s) whose assets, voting securities, or non-corporate 
interests are to be acquired, inclusive of schedules, exhibits, and the 
like, that relate to the transaction, regardless of whether both 
parties to the transaction are signatories. Further, consistent with 
the proposed changes to Sec.  803.5, the Commission proposed requiring 
the most recent draft agreement or term sheet, if filers were not 
submitting a definitive agreement. The Commission adopts the 
requirements with modification.
    Currently, only the production of certain schedules is required, 
although many filers do provide schedules regardless. As noted in the 
NPRM, in the Commission's experience, the structure of transactions has 
become increasingly complex, often comprising not only multiple 
agreements between the filing persons but also agreements with third 
parties. Understanding the entirety of the transaction, including but 
not limited to non-competition and non-solicitation agreements and 
other agreements negotiated with key employees, suppliers, or customers 
in conjunction with the transaction, is crucial to determining the 
totality of the transaction and assessing during the initial waiting 
period the transaction's potential competitive impact.
    The Commission received one comment in support of this proposal. 
The State antitrust enforcers wrote in support of the request for non-
competition agreements, noting that non-compete clauses that bind 
employees post-employment prevent new businesses from emerging and 
stifle entrepreneurship and innovation. One commenter opposed the 
proposal, noting that this requirement will significantly increase the 
burdens for filers and recommended requiring that notifying parties 
provide a descriptive index of such agreements from which investigating 
staffs could identify specific agreements that they require (with 
translations if needed). Another commenter expressed the concern that, 
as written, the proposed instruction would capture clean-team 
agreements, used by merging parties to reduce the antitrust risk 
associated with exchanging competitively sensitive information, as well 
as confidentiality agreements that include similar antitrust 
safeguards, and that in doing so this proposal might have unintended 
effects. The commenter cautioned that in response some parties might 
forgo using clean-team agreements entirely, on the thinking that 
including a clean-team agreement in the HSR filing would signal a 
larger competitive concern than actually exists.
    The Commission finds that having the complete set of documents that 
will govern the transaction is necessary to understand the potential 
effects of ``the transaction.'' Therefore, it does not adopt 
suggestions to provide an index in lieu of the actual documents that 
constitute the agreement. In the Commission's experience, voluntary 
production of documents can delay the review of transactions within the 
initial waiting period. The Commission does limit the requirement to 
those agreements that will be in effect on and after closing, with the 
intention of excluding agreements such as clean team agreements. The 
Commission also adopts the clarification, discussed in section V.D., 
that the requirement relates to the transaction that the parties intend 
to consummate.
    The Commission also proposed requiring that, if there is no 
definitive executed agreement, the filing parties provide a copy of the 
most recent draft agreement or term sheet that provides sufficient 
detail about the scope of the entire transaction that the parties 
intend to consummate. As discussed in section V.D., the Commission is 
modifying the proposed instructions in response to certain comments 
that requested clarification. One commenter sought clarity on what 
constitutes ``sufficient detail'' about the scope of the transaction, 
noting that certain transaction details are often not fully determined 
at the time of signing a definitive agreement or filing HSR, but also 
may not be necessary to determine whether to issue Second Requests. The 
same commenter cautioned that the proposed requirement will likely 
cause undue delays and risk unnecessarily increasing the overall timing 
to close a transaction especially in instances where parties intend to 
file on the basis of a letter of intent.

[[Page 89308]]

    To address this concern, the Commission has revised the 
Instructions to describe what would be sufficient:

some combination of the following terms: the identity of the 
parties; the structure of the transaction; the scope of what is 
being acquired; calculation of the purchase price; an estimated 
closing timeline; employee retention policies, including with 
respect to key personnel; post-closing governance; and transaction 
expenses or other material terms.

    The Commission notes that these examples are meant to be 
illustrative and not exhaustive.
2. Other Agreements Between the Parties
    The Commission proposed requiring filing persons to submit all 
agreements between any entity within the acquiring person and any 
entity within the acquired person in effect at the time of filing or 
within the year prior to the date of filing. The Commission adopts the 
proposal with a significant modification to reduce the burden that 
would have been associated with producing copies of these agreements 
with the HSR Filing.
    As explained in the NPRM, understanding the scope of any existing 
contractual relationships between the filers, such as an existing 
customer-supplier relationship, would materially assist the Agencies' 
review by revealing any business interactions or relationships that 
exist prior to the transaction and that may be affecting premerger 
competition, which is material to assessing how the transaction may 
affect post-acquisition competition.
    The Commission received two comments in support of the proposed 
requirement. The State antitrust enforcers noted that it would shed 
light on any licensing or supply agreements, as well as any non-compete 
agreements, between the parties. A union commenter also supported the 
request and suggested expanding it for certain non-compete and non-
solicitation agreements. The commenter noted that the filing parties 
might have such agreements related to the products, but these 
agreements might be with third parties and not between the filing 
persons. In addition, the same commenter suggested requiring parties to 
submit copies of collective bargaining agreements, at least with any 
common unions.
    Several commenters, however, objected to the burden the proposed 
requirement would impose, particularly in industries where companies 
rely heavily on agreements with other industry participants to do 
business. One commenter noted that broadband and telecommunications 
providers routinely have myriad agreements with each other, covering a 
wide range of aspects of the services they offer. The commenter stated 
that many, if not most, of these agreements have little potential to 
create competition concerns, and in fact many are pro-competitive. 
Another commenter stated that, in the wireless communications industry, 
some pairs of wireless carriers might have up to 1,000 agreements to 
which they are both parties.
    A few commenters recommended modifications of the proposed 
instruction to reduce the burden. One commenter suggested relying on 
the Competition Descriptions or excluding de minimis agreements and 
only requiring ``Material Other Agreements,'' which would be defined as 
exceeding in value some percentage of entity revenues. Another 
commenter recommended only requiring the production of three categories 
of pre-existing contracts between the acquiring person and the acquired 
entity or assets: (i) noncompete agreements in effect within one year 
of filing, (ii) non-solicitation agreements in effect within one year 
of filing, and (iii) supply or license agreements that generated annual 
revenue of $10 million or more within one year of filing. The commenter 
also suggested clarifying that purchase orders do not need to be 
produced, nor do contracts that have expired or terminated before the 
filing date. A third commenter also recommended limiting the 
requirement to contracts that are material in terms of dollar value. In 
addition, the commenter proposed that notifying parties be permitted to 
exclude standard-form agreements that they use with numerous other 
counterparties.
    In light of the comments, the Commission has made significant 
modifications to this proposal. First, the Commission has determined 
that only one party need provide this information; in accordance with 
its general approach, the Commission has determined to require only the 
acquiring person to indicate if there are existing agreements between 
the parties. Second, the acquiring person will not be required to 
provide the agreements, but rather only to answer whether any such 
contractual agreements exist and, if so, to indicate via checkbox which 
types. The Commission has identified specific types of agreements that 
reflect a significant business relationship that is relevant to the 
premerger assessment: agreements with non-compete or non-solicitation 
terms; leases, licensing agreements, master service agreements, 
operating agreements, or supply agreements. If the there are other 
types of agreements, the acquiring person should indicate ``other.'' 
The Commission clarifies that these are agreements that the parties 
have with one another and which may affect the antitrust assessment of 
the reported transaction.\352\ Third, the Commission has limited the 
requirement to those agreements that are between the acquiring person 
and the target, rather than the acquired person. This is the specific 
relationship that is of interest to the Agencies for the premerger 
assessment and should limit the information to those agreements most 
relevant to that analysis. These limitations should provide the 
Agencies with sufficient information to screen for transactions that 
may require further review due to existing contractual obligations, 
while relieving much of the cost associated with the requirement.
---------------------------------------------------------------------------

    \352\ For example, a non-compete or non-solicitation agreement 
between two otherwise independent companies is indicative that the 
parties may have a competitively significant relationship, and in 
certain situations, may violate the antitrust laws. See, e.g., 
United States v. Brown, 936 F.2d 1042 (9th Cir. 1991). In a merger 
context, non-compete restrictions can implicate post-merger 
competition in ways that violate the antitrust laws. See, e.g., In 
re ARKO Corp., No. C-4773 (F.T.C. Aug. 9, 2022) (final decision and 
order); In re DTE Energy Co., No. C-4691 (F.T.C. Nov. 24, 2021) 
(decision and final order). Other agreements between the parties, 
including those related to distribution or licensing, can limit 
competition post-merger in ways that may violate section 7, 
including by increasing the risk of foreclosure. See, e.g., FTC v. 
Tempur Sealy Int'l, Inc., 4:24-cv-02508 (S.D. Tex. filed July 2, 
2024) (complaint) (alleging that buyer attempted to use existing 
distribution relationship to exclude rival mattress brands 
premerger).
---------------------------------------------------------------------------

3. Timeline
    The Commission proposed that filing persons provide a narrative 
timeline of key dates and conditions for closing. After careful 
consideration of concerns raised by commenters, the Commission does not 
adopt this proposal.
    In the NPRM, the Commission reasoned that, just as it is critical 
for the Agencies to understand the totality of the transaction during 
the initial waiting period, it is critical to understand the timing of 
key milestones and the conditions to closing, which are often complex 
and not easily understood from the transaction documents themselves. 
The Commission suggested that this basic information would help the 
Agencies understand key deal milestones and better manage the timing 
and focus of the investigation during the initial waiting period.
    The Commission received a few comments expressing general support 
for the proposal; however, one commenter raised concerns regarding the 
burden, noting that the proposed

[[Page 89309]]

requirement is broader and more onerous than the interrogatory that 
staff routinely requires during in-depth investigations. The same 
commenter suggested that this instruction be limited to requiring a 
brief description of the timetable for the transaction and a brief 
description of any termination fees, break-up fees, ticking fees, or 
similar arrangements.
    After considering the comments and weighing the benefit to the 
Agencies of requiring a deal timeline in light of the cost of 
compliance presented by commenters, the Commission is not adopting this 
proposal. Even though the Agencies would benefit from knowing the 
timeline for the transaction to help manage their time and 
investigative resources during the initial waiting period, the 
Commission does not adopt the proposed change to require one. In the 
Agencies' experience, these timelines can change throughout the course 
of an investigation, although not typically within the initial waiting 
period. The decision not to require a timeline is one of the ways in 
which the Commission aims to lessen cost on all filers of preparing an 
HSR Filing and staff can continue to ask for (or parties can choose to 
provide) this relevant information when warranted.
    In sum, the Commission has determined that the requirements for the 
transaction agreement and information about other types of agreements 
between the parties contained in the final rule are necessary and 
appropriate to enable the Agencies to understand the scope of the 
transaction as well as any existing business relationship that might be 
affected by the transaction and that these requirements, as modified, 
have been tailored to reduce the cost of reporting as much as 
practicable.

I. Competition Descriptions

    The Commission proposed a new Competition Analysis section in the 
Instructions to require filers to provide three categories of narrative 
responses: (1) an Overlap Narrative, (2) a Supply Relationships 
Narrative, and (3) Information related to Labor Markets. As proposed, 
filers would provide, among other things, a description of their basic 
business lines as well as product and service information for all 
related entities; identify current and potential future overlaps and 
supply relationships between the filing persons; and provide 
information about their employees and what services these employees 
provide in areas where both parties employ the same types of workers. 
As noted in the NPRM, this information would supply crucial information 
about existing and future competitive relationships between the filing 
parties, which is the starting point for any assessment of whether the 
transaction may violate the antitrust laws.
    As discussed in detail below, in the final rule the Commission does 
not adopt requirements related to Labor Market Information, and adopts 
requirements to submit an Overlap Description and a Supply 
Relationships Description with significant modifications. On the Form, 
this section is now labeled Competition Descriptions.
    The Commission received several comments that supported the 
introduction of narrative responses. One commenter strongly supported 
the collection of information in narrative form related to products, 
services, workers, supply and distribution relationships, licensing, 
and industry and geographic overlaps, believing that this information 
is necessary to help the Agencies evaluate the effects of an 
acquisition more thoroughly and efficiently, and identify potential 
threats to competition. Another commenter suggested that pre-
acquisition disclosure of vertical linkages is necessary for antitrust 
agencies to effectively assess the potential anticompetitive impact of 
these non-horizontal acquisitions. Another noted that, while HSR rules 
have always required parties to identify downstream products and 
revenues by NAICS and NAPCS codes, they have never required the 
disclosure of any information at all about input markets, including 
those for labor. It stated that this lack of information leaves initial 
filing screeners at a loss to spot these competition issues and 
potential violations, and further noted that this omission forces 
investigatory staff scrambling to ask companies to volunteer such 
critical input market information. The same commenter stated that the 
proposed rule would help narrow this information asymmetry and empower 
the Agencies to clearly identify impact in both output and input 
markets.
    The Commission also received several comments that objected to the 
collection of this information in narrative form. In general, comments 
asserted that expansive narrative requirements are arbitrary and 
capricious because they would change HSR notification from an objective 
task to a subjective task, creating delays, disputes, and uncertainty 
with no countervailing benefit especially for those deals where no 
antitrust issues are present. For a number of reasons discussed in 
detail below, the Commission disagrees, but has nonetheless modified 
these requirements as appropriate to tailor them to their relevance in 
determining whether the transaction may violate the antitrust laws and 
warrant a Second Request.
Experience With Narratives
    The Agencies have extensive experience reviewing narrative 
responses to requests for voluntary submissions from the filing parties 
during the initial waiting period (and to other types of investigative 
demands where responses can be compelled) and are aware of the effort 
required to produce them. From this experience, the Commission knows 
that when the parties submit this information on a voluntary basis 
during the initial waiting period--and it is complete and timely--
narratives that discuss existing business relationships between the 
parties are critically important to determining whether there is a need 
to issue a Second Request. In the Agencies' experience, voluntary 
narrative responses are especially helpful in focusing any potential 
Second Request on the areas of competition most in need of in-depth 
review but just as often can lead staff to conclude that no Second 
Request is necessary. As discussed above in section III.A.2., when the 
Agencies engage with the parties during a withdraw-and-refile 
investigation, which typically involves the submission of some 
narrative responses from the parties, the transaction is more likely to 
proceed without the need for a Second Request.
    But voluntary narrative responses often come late in the initial 
waiting period and are frequently incomplete. More importantly, staff 
only asks for additional information on a voluntary basis when it has 
determined, on the basis of other information contained in the HSR 
Filing, that the transaction may alter existing competitive conditions 
in a way that may violate the antitrust laws but that more information 
is needed. As discussed in section II.B., the current information 
requirements do not surface the facts that would flag transactions for 
certain types of violations, and for those filings staff has no basis 
to know that additional information is needed. Where there are 
deficiencies in the initial information requirements, resorting to 
collecting information on a voluntary basis does not cure the 
deficiency because staff will not know that relevant facts exist to 
flag the transaction for follow up.
    The Commission believes that requiring additional information with 
the HSR Filing that would reliably reveal any existing business 
relationships between the filers is

[[Page 89310]]

necessary and appropriate to enable the Agencies to determine whether 
an acquisition may, if consummated, violate the antitrust laws. Because 
the information called for in the Competition Descriptions is provided 
directly by the parties to the transaction and is reflective of each 
filer's business operations, it is highly probative and reliable for 
the purpose of conducting a quick and thorough premerger assessment of 
existing and future business relationships between them. The 
information collected on the current Form does not reveal these 
relationships, yet these are the relationships that are foundational to 
flagging whether the transaction is one that warrants a closer look. As 
discussed in sections II.B.3. and 4., the need is especially great for 
information related to potential non-horizontal concerns because there 
is currently no information that specifically identifies existing 
supply relationships. Information about existing supply relationships 
will fill critical information gap in the current Form and provide a 
factual basis for the Agencies to screen for potential non-horizontal 
impacts during the initial waiting period.
    Nonetheless, to make clear that the Commission does not require the 
parties to submit an antitrust analysis akin to a ``white paper,'' or 
hire counsel or experts simply to create narratives for the purpose of 
an HSR Filing, the Commission eschews the use of the term 
``narratives'' and instead adopts the term ``description'' to better 
reflect the type of answer that is required. Filers should rely on 
business personnel to describe the products and services they offer (or 
that are under development) using terms and language that is natural in 
the marketplace. Given the breadth and tone of the objections to the 
proposed narratives, the Commission believes that commenters 
misunderstood what is sought. The Commission intends to collect factual 
information about overlaps and supply relationships via a written 
answer (as opposed to documents or data) but is not seeking opinions or 
arguments about what those facts should imply. While in other contexts 
a narrative response may contain opinions, tell a story, or take a 
position, the final rule does not require any of that from filers. 
Instead, filers should collect and report the type of information it 
provides to customers, suppliers, investors, or the public for purposes 
other than an antitrust analysis--to simply describe the products or 
services it offers for sale. This is the type of basic business 
description required by the final rule, and the Commission adopts with 
terms Overlap Description and Supply Relationships Description to 
address concerns that the final rule requires something other than 
that. Moreover, the Instructions ask filers to provide a brief 
description in an attempt to discourage lengthy responses or 
unnecessary commentary beyond what is strictly required. \353\
---------------------------------------------------------------------------

    \353\ A significant number of filers who report NAICS overlaps 
initiate contact with the Agencies to provide supplemental 
information (often in the form of white papers) that supplies 
context for how they view competition, regardless of NAICS 
reporting. In the Agencies' experience, these presentations often 
contain descriptions of the parties' respective business operations 
as well conclusions that the parties would like the Agencies to 
reach to dismiss concerns about the transaction. The former is now 
required by the final rule while the latter is not.
---------------------------------------------------------------------------

    The Overlap Description is a key reform and is motivated by the 
Commission's experience over time with relying on NAICS codes to 
identify areas of horizontal competition. Based on its experience 
reviewing narrative responses submitted on a voluntary basis during the 
initial waiting period, the Commission has identified problems with 
relying exclusively on NAICS code overlaps as the basis for screening 
whether the merging parties are current competitors. While NAICS codes 
are well suited for reporting in some sectors, the Commission agrees 
that NAICS codes can be both overinclusive and underinclusive in 
reflecting whether the parties offer competing products or services to 
any set of customers. As discussed in section II.B.4., when it comes to 
certain sectors of the economy that are undergoing technological change 
or growth, including through the introduction of novel products or 
services, NAICS codes are especially unhelpful, and have not been 
updated to reflect current market offerings.
    The mismatch between existing NAICS codes and market realities can 
be most acute in new sectors of the economy, for which there are not 
many codes. For instance, NAICS code 518210 is for companies that 
provide computing infrastructure, data processing, web hosting, and 
related services, which covers businesses as diverse as those providing 
data entry services, cloud storage services and cryptocurrency 
mining.\354\ Included in this six-digit NAICS code are a whole array of 
businesses offering complex and evolving products, some of which may 
compete for the same customers but some of which surely do not. Adding 
further complexity, the Census Bureau provides cross-references to 
fourteen other NAICS codes with related business lines. This single 
category is very broad, potentially reflecting ``competition'' between 
the parties that does not exist in the marketplace. As a result, each 
filer in a transaction may report revenues in 518210 reflecting an 
``overlap'' in their respective business lines, when in reality they 
offer very different products or service.
---------------------------------------------------------------------------

    \354\ See U.S. Census Bureau, North American Industry 
Classification System, 51280 Computing Infrastructure Providers, 
Data Processing, Web Hosting, and Related Services (rev. Sept. 10, 
2024), https://www.census.gov/naics/?input=518210&year=2022&details=518210.
---------------------------------------------------------------------------

    These cross-references create a different but equally vexing 
problem. For instance, NAICS code 541511 is for companies that offer 
custom computer programming services to meet the needs of a particular 
customer while NAICS code 513210 is for companies primarily engaged in 
software publishing. Here, a company that provides both standard and 
custom solutions may report revenues only in 513210 even if some of the 
companies it competes with would only report revenues in 541511, 
reflecting its focus on custom products. Overall, companies select 
their own NAICS codes for revenue reporting, introducing discretion 
into the use of this ``objective'' system of classification, which was 
established for a purpose other than identifying companies that offer 
competing products or services. As a result, companies that may 
regularly compete against one another may not identify any overlapping 
NAICS codes.
    Despite these shortcomings, the Commission will continue to rely on 
NAICS code reporting for revenues and the identification of overlaps to 
give filers some common system of reference and because the 
identification of horizontal overlaps is a key screening step in the 
Agencies' initial antitrust assessment. But new sectors have emerged 
over the years and NAICS codes have not been refined or updated. 
Accordingly, the Commission has determined that receiving overlap 
information in description provided by the filer is necessary and 
appropriate to enable the Agencies to determine whether an acquisition 
may, if consummated, violate the antitrust laws. The Agencies may also 
use the Overlap Description to conclude that the parties are not 
current or future rivals because the exercise provides filers with an 
opportunity to correct any ``false positives'' that result from 
inaccurate reporting of NAICS revenue overlaps. As a result, the 
Overlap Description may contain a factual basis for the Agencies to 
determine, solely on the basis of information contained in the HSR 
Filing, that the transaction is not likely

[[Page 89311]]

to violate the antitrust laws at that time. In the Overlap Description, 
a filer can make clear that further investigation is unnecessary. 
Allowing the agencies to reach these conclusions at the outset is more 
efficient than having the parties provide the information at a later 
stage or requiring the Agencies to discover this information indirectly 
through document requests.
    As the Commission acknowledged in the NPRM, the cost to filers to 
create these descriptions could be significant, especially for 
transactions involving close competitors with multiple overlapping 
product or service lines or those who operate in the same supply chain. 
But identifying those transactions that present broad and complex 
competition issues is a critical first step for the Agencies, and 
information from these descriptions is highly relevant to flagging the 
transaction as one that may violate the antitrust laws. Thus, the cost 
of providing these descriptions is proportional to the likelihood that 
the transaction is one that warrants a close look: the more extensive 
the existing competitive relationship between the parties, the more 
relevant these relationships are in identifying the transaction as one 
that warrants further investigation. It is also possible that these 
descriptions will provide important context for other information 
contained in the HSR Filing that would allow the Agencies to narrow any 
potential investigation to those areas of important existing or future 
competitive interaction, or to conclude that the transaction is not one 
that is likely to violate the antitrust laws. Thus, the descriptions 
are necessary and appropriate for the Agencies to assess the potential 
for anticompetitive impacts, including some indication of their scope. 
This information will also permit the Agencies to manage their 
resources appropriately, increasing overall efficiency. For example, if 
the Overlap Description identifies hundreds of products or services, 
the Agencies can devote sufficient staff resources to reviewing those 
areas of overlap to determine whether any rise to the level of 
requiring a Second Request investigation. On the other hand, if the 
notification identifies no areas of overlap, the Agencies may be able 
to quickly determine whether there are other materials in the filing 
that would nonetheless raise concerns about the competitive impact of 
the transaction.
    It is appropriate for the filers to bear the burden of providing 
basic business information that they possess. It is unreasonable and 
inefficient to require the Agencies, who do not possess basic 
information about the filers' businesses, to expend resources gathering 
the information from outside sources, or to require the Agencies to 
issue a separate request for this critical information which only 
delays the review process and in turn the filers' ability to consummate 
transactions. Yet the status quo requires the Agencies to obtain basic 
business facts that are needed to evaluate transactions through 
voluntary requests to the parties or Second Requests. As one commenter 
noted, the Federal Rules of Civil Procedure encourage Federal courts to 
order civil discovery based on the obvious principle that the person 
already in possession of the information is in the best position to 
provide it, and properly so.\355\ This principle is apt here.
---------------------------------------------------------------------------

    \355\ Fed. R. Civ. P. 26(b)(1) advisory committee note (2015) 
(identifying information asymmetry as a justification for placing a 
heavier burden on the party who has the information).
---------------------------------------------------------------------------

    The Commission also believes that parties will be able to reduce 
the cost of creating descriptions by drafting them during the period of 
due diligence when the companies are learning more about their 
respective business operations. Discovering the extent of existing 
business operations is key to the diligence process, and companies 
often create descriptions of their operations as part of the 
process.\356\
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    \356\ When establishing the premerger regime, the Commission 
acknowledged that requiring information in the notification may 
actually reduce the cost associated with compiling it. 42 FR 39040, 
39043 (Aug. 1, 1977).
---------------------------------------------------------------------------

    The Commission has made every effort to calibrate its need for the 
requested information and the availability of that information from the 
parties or from others, including the cost to filers associated with 
collecting information and creating the descriptive responses. For this 
reason, as discussed below, the Commission has decided to significantly 
modify certain aspects of the proposed descriptions, for instance when 
the information is duplicative of other information in the notification 
or when the information is available from a source other than the 
parties. In taking this approach, the Commission rejects alternatives 
suggested by commenters to reduce the cost by excusing transactions 
below a certain value or without a NAICS overlap, because it has found 
no basis for doing so. In the Agencies' experience, deal value is not a 
reliable indicator of the potential for antitrust harm,\357\ especially 
when the transaction involves multiple business lines or when 
competition occurs in local markets.\358\ Instead, the Commission has 
determined to excuse select 801.30 transactions from the requirement to 
provide Competition Descriptions. As discussed in section VI.A.1.f., 
these transactions rarely involve entities with existing competitive 
relationships and do not confer control, and thus the Commission has 
determined not to require these filers to provide descriptions of any 
existing business relationships, should they exist.
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    \357\ See, e.g., United States v. Neenah Enterprises, Inc., No. 
1:21-cv-02701 (D.D.C. Oct. 14, 2021) (complaint) ($110 million asset 
purchase); In re Global Partners LP, No. C-4755 (F.T.C. Mar. 2, 
2022) (decision and final order) ($151 million acquisition); In re 
ANI Pharmaceuticals, Inc., No. C-4754 (F.T.C. Jan. 12, 2022) 
(decision and final order) ($210 million acquisition); United States 
v. Grupo Verzatec S.A. de C.V., No. 1:22-cv-01401 (N.D. Ill. Mar. 
17, 2022) (complaint) ($360 million acquisition). Note that the 
value of the transaction is considered by some filers to be 
confidential information and is not always disclosed in public 
filings. See FTC v. IQVIA Holdings Inc., No. 1:23-civ-06188 
(S.D.N.Y. Dec. 29, 2023); In re Lifespan Corp., No. C-9406 (F.T.C. 
Feb. 17, 2022) (complaint).
    \358\ See, e.g., In re The Golub Corp., No. C-4753 (F.T.C. Jan. 
20, 2022) (decision and final order) (divestiture of 12 
supermarkets); United States v. B.S.A. S.A., No. 1:21-cv-02976 
(D.D.C. Mar. 15, 2022) (divesture of two business lines).
---------------------------------------------------------------------------

    The Commission now turns to a discussion of both the general and 
specific objections to the Competition Descriptions requirements.
General Objections to the Competition Descriptions
    Several commenters questioned the general utility of these 
requirements. One commenter suggested that burdening all filers with 
these descriptive requirements is not particularly well targeted to 
identifying acquisition-related antitrust concerns. Another stated that 
the information called for is duplicative of documentary materials that 
are now also required. Two other commenters suggested that the 
Commission continue to ask for this information on a voluntary basis 
and only for deals that have been flagged for closer review.
    The Commission disagrees that the information required by the 
Competition Descriptions would be of little use or contain repetitive 
information. Requiring filers to provide a description of their 
existing competitive relationships is a key reform of the final rule to 
make the premerger review process more effective and efficient. Such 
descriptions should contain a factual summary of the parties' existing 
business relationships, which is critical information for identifying 
those transactions that require a closer look. This is information that 
is known to filers and bears directly on whether the transaction may 
violate the antitrust laws. The Commission has determined

[[Page 89312]]

that it is necessary to require this descriptive information from 
filers because other information in the HSR Filing is not sufficient to 
screen transactions for all types of potential harm, and, as discussed 
above, staff cannot rely solely on voluntary collection of this 
information to flag the transaction for a closer review.
    Moreover, as discussed elsewhere, the Commission intends to rely on 
information in the Competition Descriptions as the basis for 
determining whether the filer also has to provide other information 
required by the final rule. The Commission has determined that, for 
many additional information requirements, these descriptions (in 
addition to the NAICS code overlap reporting) will determine the scope 
of most of the other information requirements in the HSR Filing. It is 
appropriate for the Commission to condition additional information 
requests on the identification of an existing business relationship as 
the most effective way to calibrate the cost of reporting the antitrust 
risk associated with each transaction. In order to reduce the cost for 
filers whose transactions raise little to no antitrust risk, it is 
necessary that all filers go through the exercise of determining 
whether they are in a horizontal or supply relationship with the other 
party. Those filers who do not have such relationships will so indicate 
by responding ``none'' and will be relieved of the obligation to 
respond to other questions that are conditional on an affirmative 
response. Relying on this conditional response format is a key feature 
of the final rule to ensure that filers who do not have an existing 
business relationship with the other party (e.g., as a competitor or 
supplier) have a lower cost associated with submitting an HSR Filing.
    One commenter stated that because these descriptions are not 
prepared in the ordinary course, they cannot be required to be 
submitted with the notification. Further, this commenter stated that 
Congress only intended the Commission to collect information and 
documentary materials reasonably available to the reporting companies, 
suggesting that anything not kept in the ordinary course of business 
runs afoul of Congressional intent. The Commission disagrees with the 
commenter's reading of both the statute and the legislative history. 
The rulemaking provision in 15 U.S.C. 18a(d) contains no ordinary 
course limitation. To the contrary, it states that HSR filings shall be 
in such form and contain such documentary material and information 
relevant to a proposed acquisition as is necessary and appropriate to 
enable the Agencies to determine whether an acquisition may, if 
consummated, violate the antitrust laws. The commenter quotes the 
Commission's 1977 Notice of Proposed Rulemaking for the premerger 
notification rules when making this assertion, but in that notice, the 
Commission did not state that information reasonably available was 
limited to ordinary course documents.\359\ Further, the Competition 
Narratives as adopted do not require any information that is not kept 
in the ordinary course of business of the acquiring or acquired person. 
These descriptions require parties to gather and present this 
information in a format that will permit the Agencies to understand 
their lines of business, areas in which the parties offer similar 
products and services, and relationships in the relevant supply chains.
---------------------------------------------------------------------------

    \359\ 42 FR 39040, 39043 (Aug. 1, 1977).
---------------------------------------------------------------------------

    The Commission also disagrees that businesses do not develop an 
understanding of their business operations in comparison to those of 
the other merging party ``in the ordinary course.'' In the Agencies' 
experience, businesses routinely conduct competitive assessments in 
which they compare their operations to those of others. These internal 
assessments of other market participants are often done long before any 
specific assessment of a particular transaction and may be contained in 
documents such as plans and reports. In the specific context of a 
proposed transaction, parties (especially those that are publicly 
traded) conduct due diligence assessments of prospective targets. These 
comparative assessments may be done specifically for the purpose of 
analyzing the filed-for transaction, and the Commission considers those 
to be in the ordinary course of acquisition planning. The descriptions 
required by the final rule would summarize these types of assessments 
and reflect their underlying business facts. In the Commission's view, 
this is exactly the type of materials the House conferees intended 
would be submitted with the notification: ``the very data that is 
already available to the merging parties, and has already been 
assembled and analyzed by them. If the merging parties are prepared to 
rely on it, all of it should be available to the Government.'' \360\
---------------------------------------------------------------------------

    \360\ 122 Cong. Rec. 30877 (1976) (remarks of Rep. Rodino).
---------------------------------------------------------------------------

Compliance Concerns
    Some comments expressed concern that the descriptions would create 
HSR Act compliance issues, noting that, because the descriptions 
require subjective judgments, the Agencies have no objective standards 
or precedent against which compliance or substantial compliance could 
be judged. One commenter suggested that each of the descriptions may 
generate disagreements between the Agencies and the merging parties 
regarding the accuracy or completeness of the information provided, 
leading the Agencies to retroactively declare a notification to be 
incomplete and restarting the initial waiting period. One commenter 
stated that the descriptive responses will require extensive iterative 
discussions with PNO to determine compliance, which will delay the 
start of the waiting period. Others asserted that the Commission could 
deem a descriptive answer to be incomplete simply because staff 
disagrees with the assessment, or that the Agencies may be tempted to 
second-guess or nitpick the parties' responses, leading to uncertainty 
about deal timelines.
    As discussed above, the Agencies have decades of experience with 
reviewing descriptive responses, including those submitted on a 
voluntary basis during the initial waiting period and in response to 
Second Requests. In fact, staff routinely seeks this information as the 
first supplement to the information contained in the HSR Filing for any 
transaction that is identified as requiring a closer look. But the 
current practice of permitting parties to submit descriptive responses 
on a voluntary basis while the waiting period is underway has 
encouraged parties to submit incomplete responses or submit them at a 
time when staff is unable to verify the information before it must make 
a determination whether to issue Second Requests. Any deficiency in a 
voluntary descriptive response prevents staff from being able to 
quickly determine whether the Agency should issue a Second Request to 
require a more complete narrative answer.
    The Commission believes that requiring Competition Descriptions to 
be submitted with the HSR Filing provides the proper incentive for 
filers to submit a complete and accurate response, one that is 
certified by the responsible executive who signs the notification and 
that is available at a time when the information can be reviewed and 
assessed by staff. The certification allows the Commission to accept 
filings containing descriptive responses and to start the waiting 
period. If, upon reviewing the notification, staff determines that the

[[Page 89313]]

descriptive responses are directly contradicted by other information 
submitted with the notification, staff may request supplementary 
information to explain the contradictions, which could require a 
restarting of the waiting period. If the notification contains no such 
materials that call into question the reliability of the descriptions, 
any supplementary submissions to clarify or correct them would likely 
not require a restarting of the waiting period under the Act.
    Other comments raised compliance concerns related to who must help 
prepare the information. Some comments stated that the descriptive 
responses will require filers to hire expensive antitrust counsel, and 
possibly an expert economist, to draft the descriptions prior to 
filing. According to one commenter, filing parties will be forced to 
engage antitrust counsel, economists, and other professional class 
consultants on every deal, regardless of its impact on competition. 
Another commenter suggested that hiring consultants to draft narratives 
may be prohibitive for some parties that may be most in need of a 
merger or affiliation. One comment noted that, as a practical matter, 
the only people who are eligible to certify the notification often lack 
personal knowledge necessary to opine about things like the relevant 
product market definition or the competitive effects of a transaction. 
The Commission disagrees that filers need to hire outside personnel, 
who do not know the filer's business operations and would need to be 
given the very information that the Competition Descriptions call for 
in order to draft them. As noted in the NPRM, those who author the 
descriptive responses should be the individuals who best know the 
business of the filing person. The Commission reiterates that the 
Competition Descriptions should be based on a businessperson's 
understanding of the filer's business operations and consistent with 
other business documents and materials submitted with the HSR Filing.
    Other comments raised a related point, stating that the type of 
detailed, competitively sensitive information necessary to draft these 
narratives is often deliberately kept away from the business 
executives, which would require certain filing parties to employ 
antitrust safeguards to collect information without sharing 
confidential business information with or about one another. Several 
commenters asserted that providing customer contact information, 
including identifying specific individuals for Agency outreach, would 
create significant uncertainty and further increase the risk that 
confidential acquisition plans would be known more widely, or increase 
the risk of insider trading.\361\
---------------------------------------------------------------------------

    \361\ Commenter American Securities Association states that 
certain aspects of the proposed rule would require public companies 
to announce and file details with the SEC about signed deals, 
``creating additional hurdles that will test investor confidence.'' 
Comment of Am. Sec. Ass'n, Doc. No. FTC-2023-0040-0682 at 2. Because 
the final rule does not change who is required to file notification 
under the Act, there are no new obligations to disclose transactions 
nor to make statements to the SEC. To the extent that this comment 
is based on a concern that the Agencies may flag additional deals as 
requiring Second Requests because they may determine that a 
particular transaction may violate the antitrust laws, that is the 
intention of the final rule and well within the Commission's 
authority under the Act, regardless of filers' obligations to make 
statements required by the securities laws.
---------------------------------------------------------------------------

    As discussed in the section below, the Commission agrees that it is 
important to reduce the need to share information about the transaction 
more broadly than is necessary to complete an HSR Filing, but rejects 
the idea that companies are unfamiliar with managing these risks or 
that the rule would significantly increase them. Also, complying with 
securities laws to prevent insider trading in public shares is an 
obligation of every publicly traded company, and the rule does not 
increase the risk that those with knowledge of the deal will violate 
those laws. Nonetheless, in response to these concerns, as discussed 
below, the Commission has determined to modify certain requirements for 
the Competition Descriptions in order to reduce the need for filers to 
share information outside of the company, for instance with customers 
or suppliers. The Commission agrees that the process required to 
collect information for the notification should not require 
information-sharing beyond what is absolutely necessary. Specifically, 
the Commission has added to the instruction a statement that the 
parties should not exchange information for the purpose of responding 
to the Overlap or Supply Relationships Descriptions. The acquiring and 
acquired persons should each respond on the basis of information known 
to them in the ordinary course of their business or through normal 
transaction diligence. The Commission understands that, unlike the 
NAICS overlap identification, the filings may not identify the same 
products and services in the Competition Descriptions. This may require 
those contemplating a transaction to plan for limits on the flow of 
information about the deal, including ``clean teams'' and data rooms 
with limited access, but the Commission believes filers have experience 
with managing these risks and employ protections to prevent the sharing 
of information or disclosing knowledge of the deal beyond these limits. 
The Commission has determined that the requirement to prepare 
descriptive responses does not increase the risk that those protections 
will be breached or that filers will be required to change their 
approach to comply with the final rule. To the extent that this process 
reveals existing business relationships of which either or both parties 
were not aware, this is an appropriate outcome of requiring this 
analysis to be done prior to filing.
    Another group of comments raised compliance concerns related to 
taking an affirmative position on specific elements of an antitrust 
violation, such as the definition of relevant markets and any 
competitive effects, impermissibly shifting the burden of proving such 
elements of an antitrust violation to the parties. For instance, one 
commenter read the rule as not requiring filers to define a relevant 
market or provide market shares but nonetheless objected that filers 
lack the benefit of established competition law principles to guide the 
scope of their responses. Others suggested that the Commission adopt 
the practice of the European Union and other regimes and make available 
written decisions about market definitions.
    As stated in the NPRM, the Commission does not intend for the 
Competition Descriptions to contain an assessment of relevant markets 
or reference any ``market.'' The Commission understands that the 
determination of a relevant antitrust market is a fact-bound process 
that is the result of extensive information gathering, including from 
third parties (who may be other participants in the ``market''). 
Information contained in the notification has never been, and never 
could be, sufficient to determine whether a relevant antitrust market 
exists in which the transaction could potentially cause harm. Rather, 
the Commission intends the identification of competing products or 
supply relationships to be a statement of business fact, not a 
conclusion that there is a relevant antitrust market that comprises an 
area of effective competition.\362\ The Agencies recently

[[Page 89314]]

released updated Merger Guidelines that contain a detailed discussion 
of how and why the Agencies undertake the exercise of defining 
markets.\363\ Thus, the Commission disagrees that filers are unable to 
understand how information about whether and to what extent the merging 
parties are direct competitors factors into the Agencies' initial 
antitrust assessment.
---------------------------------------------------------------------------

    \362\ A party responding to an interrogatory under Rule 33 of 
the Federal Rules of Civil Procedure ``must furnish information that 
is available to it and that can be given without undue labor and 
expense,'' and a party must ``provide relevant facts reasonably 
available to it but should not be required to enter upon independent 
research in order to acquire information merely to answer 
interrogatories.'' Lynn v. Monarch Recovery Mgmt., Inc., 285 FRD. 
350, 357 (D. Md. 2012) (citation and internal quotations omitted). 
Filers should take a similar approach to providing business facts 
here.
    \363\ See Dep't of Justice & Fed Trade Comm'n, Merger Guidelines 
4.3 (2023).
---------------------------------------------------------------------------

Comparison to Other Jurisdictions
    Some comments suggested that the Commission is improperly 
attempting to model the U.S. premerger notification regimes on those in 
other jurisdictions. The Commission rejects this suggestion. The 
purpose of this rulemaking is to maintain a premerger notification 
regime that fulfills the Agencies' congressional mandate to vigorously 
enforce the U.S. antitrust laws and prevent undue concentration in its 
incipiency. As the Commission noted in the NPRM, many other 
jurisdictions rely on submissions from the parties that contain basic 
information about business lines or company operations, and several 
require the parties to self-report overlaps.\364\ The Commission 
expects that the burden on filers (or their counsel) with experience 
drafting these submissions for other jurisdictions will be 
comparatively low because of their familiarity with such drafting. This 
does not mean that the Commission is relying on the experience of other 
jurisdictions in enforcing their laws. Rather, the Commission is simply 
noting that the prevalence of descriptive requirements among other 
competition enforcers supports its belief that, for some filers, 
preparing descriptive responses is not a new exercise or overly 
burdensome. The Commission further notes that other businesses might be 
familiar with preparing a business plan or conducting a market research 
and competitive analyses, which would contain much of the same 
information as is required by the narratives.\365\
---------------------------------------------------------------------------

    \364\ NPRM at 42180.
    \365\ The Small Business Administration provides guidance for 
how to conduct market research and find a competitive advantage, 
including links to free government databases and resources to help 
with that assessment. See U.S. Small Bus. Admin, ``SBA Business 
Guide, Market research and competitive analysis'' (last updated May 
31, 2024), https://www.sba.gov/business-guide/plan-your-business/market-research-competitive-analysis#id-use-market-research-to-find-customers.
---------------------------------------------------------------------------

    One commenter stated that pharmaceutical transactions are not 
acquisitions of other companies but instead involve exclusive licenses, 
which are not reportable in other jurisdictions. As a result, according 
to this commenter, the descriptive requirements introduce an entirely 
new and significant burden that will fall disproportionately on parties 
to pharmaceutical transactions. The Commission disagrees that there 
will be a measurably different impact on pharmaceutical companies. As 
discussed above, the requirement to submit Competition Descriptions is 
not dependent on having prepared similar materials for other 
jurisdictions, and there are many kinds of transactions that are not 
reportable in other jurisdictions for which the parties will now be 
required to submit a descriptive response. In addition, the Commission 
has no reason to exempt pharmaceutical licensing deals from any 
requirements of the Act because these transactions, like other 
reportable transactions, can raise antitrust concerns.\366\ As the D.C. 
Circuit found when it upheld the Commission's authority to require the 
reporting of pharmaceutical licensing transactions, the Act does not 
prevent the Commission from adopting rules of general applicability and 
the Commission can rely on its experience in reviewing HSR Filings to 
adjust the HSR rules.\367\ Certain sectors have more reportable 
transactions, but the Commission is not imposing different requirements 
on any sector. Nor should it remove information reporting requirements 
for those sectors where there are more reportable transactions merely 
because more companies in those sectors are involved in reportable 
transactions. Moreover, the Commission believes that complying with the 
Competition Description requirements for transactions involving 
licensing agreements will be less costly than for other types of 
transactions because those transactions are fairly limited in purpose 
as they relate to uses for the licensed technology.
---------------------------------------------------------------------------

    \366\ See, e.g., In re Sanofi Corp., No. 9422 (F.T.C. Dec. 11, 
2023) (complaint) (transaction abandoned); FTC v. Mallinckrodt ARD 
Inc. (f/k/a Questcor Pharms., Inc.), No. 1:17-cv-120 (D.D.C. Jan. 
30, 2017) (stipulated order for permanent injunction and equitable 
monetary relief).
    \367\ PhRMA, 790 F.3d at 201.
---------------------------------------------------------------------------

    After careful consideration of the comments raising general 
objections to requiring descriptions of existing business operations of 
the merging parties, the Commission has determined to require 
Competition Descriptions in the final rule due to the benefit they 
would provide to the Agencies. These responses will provide the 
Agencies with key information that is necessary to determine whether an 
acquisition, if consummated, may violate the antitrust laws. It is 
appropriate for filers to provide this information because they are in 
the best position to do so. Competition Descriptions will allow the 
Agencies to conduct a fact-based assessment of the antitrust risks 
posed by each transaction, rather than expend time and resources 
issuing voluntary access letters and Second Requests for information 
that bears directly on the determination that further investigation is 
warranted. Nonetheless, in light of the concerns expressed by 
commenters, the Commission has made significant modifications to these 
requirements to better calibrate the information that would be most 
beneficial to the Agencies while reducing the cost as much as 
practical, including excusing select 801.30 transactions from these 
requirements.
1. Overlap Description
    The Commission proposed a new Overlap Narrative section that would 
require each filing person to provide an overview of its principal 
categories of products or services (current and planned) as well as 
information on whether it currently competes with the other filing 
person. The Commission further proposed that each filing person would 
describe its current and planned principal categories of products and 
services in a way that those business lines are referred to in the 
company's day-to-day operations, and identify any documents submitted 
with the HSR Filing that support information contained in the 
narrative. For each identified overlapping product or service, the 
Commission proposed that the filing person would also provide sales, 
customer information (including contacts), a description of any 
licensing arrangements, and a description of any non-compete or non-
solicitation agreements applicable to the employees or business units 
related to the product or service.\368\
---------------------------------------------------------------------------

    \368\ NPRM at 42196.
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    The Commission received numerous comments on this requirement. As 
one commenter noted, the Commission's original proposal in 1977 would 
have required a filer to identify its top five most significant 
competitors for overlapping operations. The Commission did not adopt 
this proposal, as well as other proposals, not because they were 
improper, as suggested by this commenter, but because the Commission 
determined at the time that it was important to reduce

[[Page 89315]]

the overall burden of complying with notification requirements,\369\ 
which were unfamiliar to the M&A business community at that time. After 
forty-five years of experience with reviewing thousands of transactions 
each year, the Agencies are now well aware of the importance of 
understanding who the parties view as their competitors, especially if 
that group includes the other merging party, because it is relevant to 
whether the transaction may violate the antitrust laws.\370\ The need 
for this self-identification of competitors has grown over time as 
NAICS codes and other information do not always provide a consistent 
and reliable benchmark for filers, resulting in over- or under-
reporting of competitive overlaps. In this rule, filers are merely 
required to describe each of the principal categories of products and 
services they offer, and list and describe each product or service that 
they both provide to the market. The Commission believes that in light 
of the shortcomings of other more objective reference points, it is 
necessary to require filers to identify whether they offer products or 
service that compete with the other filing party.
---------------------------------------------------------------------------

    \369\ See 42 FR 39040, 39043 (Aug. 1, 1977).
    \370\ See, e.g., Illumina, Inc. v. FTC, 88 F.4th 1036, 1049 (5th 
Cir. 2023); FTC v. Whole Foods Market, Inc., 548 F.3d 1028, 1045 
(D.C. Cir. 2008) (Tatel, J., concurring in judgment).
---------------------------------------------------------------------------

    Several comments pointed to the burden of providing an Overlap 
Description for all filings. For instance, one commenter stated that 
the proposal lacks a relevance test or de minimis threshold so that 
companies will be required to delve deep into complex corporate 
structures to identify individual products and services offered by 
their subsidiaries. Another raised concerns that providing a detailed 
analysis of competitive dynamics in each of these theoretical segments, 
particularly in transactions that are occurring in manifestly 
competitive environments, is wasteful and unduly burdensome.
    As discussed above, in light of concerns about the cost this 
requirement places on all filers, the Commission has modified its 
proposal in several ways to reduce the cost on filer. First, it has 
decided to limit the requirement to report planned or future products 
to those referenced in another document submitted with the HSR Filing. 
The Commission has also eliminated the requirement to provide an 
estimate of how much of the product or service each customer category 
purchased or used monthly for the last fiscal year. And rather than 
require reporting for the two most recent fiscal years, the Commission 
has limited reporting to the most recent fiscal year. In addition, the 
Commission has decided not to require sales information in units--only 
dollars. It has also eliminated the requirement to provide individual 
contact information for customers. Additionally, the Commission has 
eliminated the requirement to describe licensing agreements and non-
compete or non-solicitation agreements in this section. These changes 
are discussed in greater detail in the sections that follow. Finally, 
the Commission has decided not to require Overlap Descriptions for 
select 801.30 transactions. In the Commission's experience, these 
filings almost never report overlaps on the basis of NAICS codes and 
there is no reason to think that requiring this class of filers to 
provide a descriptive confirmation would provide a benefit to the 
Agencies that would enhance premerger screening of this particular set 
of transactions.
    At this time, the Commission lacks a basis to excuse other 
categories of filings either on the basis of complexity of the filer's 
corporate structure or the general robustness of competition in the 
markets in which the filers compete. In fact, complex corporate 
structures can make it much harder for the Agencies to discover 
competing lines of business from any source other than the filers. When 
information in the HSR Filing is inconclusive, staff often must try to 
discover these existing relationships based on imperfect information 
from public sources, the parties' submitted documents, and other 
sources of market information, such as third parties. Requiring filers 
to provide a description of any overlap is a much more direct, 
efficient, and reliable way to get this critical information because it 
will be coming from the parties. If the parties are aware of other 
companies that also provide products or services that compete, they can 
(but are not required to) provide that information as part of their 
descriptive response. If this requirement creates a significant cost to 
filers, it is due to their significant pre-acquisition business 
relationships, meaning that the effort to provide the description is 
directly proportional to the risk that the transaction may violate the 
antitrust laws.
    After careful consideration of the comments, the Commission has 
made significant modifications to the Overlap Description to reduce the 
cost to filers while also providing a factual basis for identifying 
whether the filing parties are actual or potential competitors. This 
information will improve Agency decision-making during the initial 
waiting period. Modifications reflected in the final rule are discussed 
below.
a. Identification of Current or Future Overlaps
    The Commission proposed that each filing person provide a brief 
overview of its principal categories of products and services (current 
and planned) as well as information on whether it currently competes 
with the other filing person. As noted in the NPRM and discussed above, 
such information is core to the Agencies' substantive antitrust 
analysis during the initial waiting period and is not readily 
accessible from sources other than the filers themselves.\371\ A 
comment from State antitrust enforcers supported the requirement for 
additional information about present and potential horizonal 
competitive overlaps, noting that State antitrust enforcers are 
particularly concerned with acquisitions of potential or nascent 
competitors and the protection of rivalrous innovation. As fellow 
enforcers of the Federal antitrust laws, they noted that most research 
and development (``R&D'') pipelines are known only to the companies and 
that disclosing current or known plans, including R&D efforts, up front 
would ensure effective deal reviews. They noted that, at times, deals 
that appear benign may mask significant anticompetitive effects lurking 
below the surface. Sophisticated incumbent companies have a greater 
incentive and more developed means to detect industry developments--and 
a correspondingly far-reaching ability to curb competition in ways that 
harm consumers.
---------------------------------------------------------------------------

    \371\ NPRM at 42196.
---------------------------------------------------------------------------

    As discussed in section II.B.4., the Agencies currently lack a 
sufficient basis from information in the notification to determine if 
the transaction is likely to violate the antitrust laws by eliminating 
on-going innovation competition, a potential competitor, or a nascent 
competitive threat that has yet to make sales. Without information that 
indicates there are known areas of competition based on expected 
revenues, this will continue to be a blind spot that results in less-
than-optimal enforcement on this basis. Because these areas of 
potential or emerging competition are typically not well-known to 
others uninvolved in the transaction, the Agencies do not have a source 
for this information other than the filing parties.
    The need for information related to planned products and services 
is especially important for transactions in which one (or both) filers 
already have

[[Page 89316]]

a dominant position and the other party has planned products that could 
soon be introduced to the market to provide some level of competition 
to the dominant player. According to the State antitrust enforcers, 
acquisitions of potential or nascent entrants may empower already 
dominant incumbents to discontinue either the target firm's or its own 
innovation, thereby eliminating existing and future competition between 
the merging parties and information supplied by the Overlap Description 
is critical for the Agencies to analyze acquisitions affecting 
potential competition or present rivalrous innovation.
    Other commenters object to the requirement to identify overlaps 
based on planned products or services under development by the other 
party. One pointed out that many companies have a pipeline of product 
ideas that may or may not result in an actual product sold to 
customers. Others indicated that in the pharmaceutical and biotechnical 
sectors, this information would be speculative at best for many ongoing 
R&D initiatives. The Commission acknowledges that the assessment of 
when a planned product or service will start generating revenues is 
likely imprecise, and that products in development often do not meet 
important deadlines for commercial release. But the Commission 
disagrees that companies with extensive R&D pipelines are unfamiliar 
with these drawbacks or that imprecision prevents them from having 
target launch dates based on their best information. In the Agencies' 
experience, companies with ongoing product development efforts 
routinely adjust expected timelines to commercialization based on new 
information. In particular, as part of preparing for the transaction, 
many of these companies prepare an assessment of the target's products, 
including products in development. Products in development can compete 
with other products in various stages of commercialization, forming the 
basis for antitrust liability in certain circumstances.\372\
---------------------------------------------------------------------------

    \372\ See, e.g., Illumina v. FTC, 88 F.4th at 1050.
---------------------------------------------------------------------------

    Nonetheless, to provide an objective reference point that would 
determine whether a filer would need to include a product in 
development as part of its descriptive response, the Commission 
modifies this requirement to limit the reporting of current or known 
planned products or services to those that are reflected in documents 
submitted with the filing. This limitation should serve to reduce the 
cost and increase the certainty that the planned product or service is 
likely to be introduced. In particular, plans and reports provided to 
the CEOs and Boards of Directors and submitted with the HSR Filing 
would likely provide a solid reference point for filers to determine if 
the planned product is sufficiently likely to meet targets for 
commercial introduction because it is discussed in these high-level 
reports shared with key decision-makers.
    In addition to the objections discussed above, several commenters 
objected to the specific requirements of identifying overlaps or 
customers based on sales information, which might include sales 
generated in markets outside the United States. One commenter stated 
that the requirement to provide historical information should be 
limited to sales and customers from U.S. operations and should be 
further limited to sales information based solely on sales by dollars, 
not additionally by units. The Commission declines to limit the Overlap 
Description to U.S. sales information. Many transactions every year 
involve industries whose companies compete on a global basis such that 
the relevant antitrust markets in which they compete are broader than 
the United States or involve facilities or customers that are located 
outside the United States.\373\ Having this information is critical to 
the Agencies' assessment during the initial waiting period.
---------------------------------------------------------------------------

    \373\ See, e.g., Polypore Int'l, Inc. v. FTC, 686 F.3d 1208 
(11th Cir. 2012); FTC v. Wilh. Wilhelmsen Holding ASA, 341 F. Supp. 
3d 27 (D.D.C. 2018); FTC v. Tronox Ltd., 332 F.Supp.3d 187 (D.D.C. 
2018); In re Nvidia Corp., No. 9404 (F.T.C. Dec. 2, 2021) 
(complaint); United States v. ZF Friedrichshafen A.G., No. 1:20-cv-
00182 (D.D.C. Jan. 23, 2020) (complaint); United States v. United 
Techs. Corp., No 1:18-cv-02279 (D.D.C. Oct. 1, 2018) (complaint); 
United States v. Novelis, Inc., No. 1:19-cv-02033 (N.D. Ohio Sept. 
4, 2019) (complaint); In re Corpus Christi Polymers LLC, No. C-4672 
(F.T.C. Feb. 20, 2019) (decision and final order): In re Quaker 
Chem. Corp., No. C-4681 (F.T.C. Sept. 9, 2019) (decision and final 
order).
---------------------------------------------------------------------------

    The Commission agrees with the other modification suggested by one 
commenter to limit this requirement by reporting revenues only based on 
sales by dollars and not also by units. As the commenter notes, in many 
service sectors such as healthcare or professional services, the 
concept of ``units'' is arbitrary and estimates would be both 
burdensome and unreliable. The Commission believes that it is less 
costly for filers to rely on only one measure of sales and that 
reporting by other measures in addition to sales often does not lead to 
different results. Thus, the Commission does not adopt the requirement 
to report sales based on units in addition to dollars and limits the 
reporting of sales and customer information only to dollar sales.
    To further reduce the cost of collecting data to support the 
Overlap Description, the final rule requires the reporting of sales 
data only for the most recent fiscal year, down from the last two years 
as proposed. This limitation parallels other reporting requirements 
that are similarly limited to the most recent fiscal year.
    The commenter also suggested that, in order to prevent the sharing 
of information between existing competitors that would inadvertently 
increase the risk of anticompetitive coordination, the information 
required by the Overlap Description be limited to information within 
the knowledge, information, or belief of the person filing. The 
Commission confirms that filers should prepare the Overlap Description 
based on the knowledge and belief of the filing person.
b. Customer Information
    The Commission proposed that, for each principal category of 
products and services and each overlapping product or service, filers 
(a) describe all categories of customers, including an estimate of 
monthly sales or purchases in each category; (b) contact information 
(including the individual's names, title, phone, and email) for the top 
10 customers (based on units and sales) for the last year, and the top 
10 customers in each customer category.
    Some individual commenters supported this proposal, urging the 
Agencies to take steps to better understand the impact of acquisitions 
on those most affected by them, including customers. Other comments 
raised concerns about the type and amount of information collected 
about customers, as well as the risks associated with identifying them 
in an HSR Filing, including providing individual contact information. 
One commenter asserted that the Agencies' stated intention to contact 
customers during the initial waiting period raises serious 
confidentiality concerns and places a transaction at considerable risk. 
Another commented that there may be legitimate business justifications 
for not disclosing a potential transaction internally or to commercial 
partners at the time of filing, and requiring specific contact 
information practically necessitates such disclosures to maintain 
employee and customer relations. According to another commenter, for 
the vast majority of transactions, customer information is not required 
to make an assessment that the transaction requires Second Requests, 
and thus the Agencies should

[[Page 89317]]

continue to ask for customer contact information on a voluntary basis 
only when it may be necessary.
    After considering these comments and others, the Commission 
modifies the amount of information required in the Overlap Description 
related to customers but has determined that some information related 
to customers is important for the initial antitrust assessment of the 
transaction. The Agencies will continue to reach out to customers in 
order to get their input and reactions to reportable transactions as 
time and resources allow during the initial waiting period regardless 
of whether they are referenced in the notification. Contacting 
customers to learn about the business lines of the filing parties is 
often the very first thing staff does to begin the investigation of a 
potentially problematic transaction. As discussed in section III.C.1., 
the Agencies routinely contact many customers of the filing parties, 
often without the filing parties' knowledge, during the course of an 
investigation, especially if the initial waiting period is prolonged by 
a withdrawal and refile.
    There is nothing improper about the Agencies' contacts with third 
parties to learn facts about the industry or the operations of the 
filing parties. The HSR Act contains strict limits on the disclosure of 
information submitted or collected during an investigation,\374\ and 
unauthorized disclosure carries criminal penalties.\375\ At all times 
during the investigation, Agency staff comply with these requirements. 
For example, when contacting customers or other market participants, 
Agency staff may disclose that the agency is conducting a nonpublic 
investigation of the proposed transaction, but Agency staff will not 
disclose any information contained in an HSR Filing without a waiver.
---------------------------------------------------------------------------

    \374\ 15 U.S.C. 18a(h).
    \375\ See 18 U.S.C. 1905, 15 U.S.C. 50.
---------------------------------------------------------------------------

    Although collecting more information from filers in the HSR Filing 
should reduce the Agencies' reliance on contacting third parties to 
learn basic business facts about the merging parties, conducting 
outreach with third parties is an essential task of premerger screening 
to ensure that the Agencies' antitrust assessment fully considers any 
potential impact of the transaction on other market participants.\376\ 
Because transactions may not have been publicly disclosed, it is 
imperative that the Agencies initiate contact with third parties and 
not wait for them to reach out. The Agencies routinely conduct public 
research to learn about customers for potential outreach, regardless of 
whether the filing parties have provided their contact information. 
Moreover, customer information is typically in the agency's first 
request to filers to submit additional information on a voluntary basis 
during the initial waiting period. At times, filers have anticipated 
this voluntary request and provide this information quickly, sometimes 
the same day. However, this is not universally true and any delay in 
obtaining this information about top customers is inefficient and 
undermines the Agencies' ability to conduct third-party outreach. While 
the Agencies may be able, on their own, to identify some customers of 
the filing parties, it is important that such third-party outreach also 
include those customers most affected by the transaction, that is, 
those customers who are most reliant on the filing parties to conduct 
their own business.
---------------------------------------------------------------------------

    \376\ Some commenters believe that the Agencies have been 
insufficiently attentive in the past to those most affected by 
harmful consolidation.
---------------------------------------------------------------------------

    Nonetheless, in light of concerns about identifying particular 
individuals as customer contacts, the Commission does not adopt that 
requirement as proposed. Instead, the Commission modifies the 
requirement so that filers must identify customers by company name 
without providing contact information for any individual employed by 
the company. The Commission believes that company contact information 
has value even without knowing the name or title of the individual at 
the customer business that is most knowledgeable about the existing 
business relationship with the filer. Moreover, knowing which companies 
are top customers provides important context to determining whether any 
particular customer may be affected by the elimination of competition 
between the parties and is additional information beyond knowing what 
the overlapping product or service is.
    To further reduce the cost of providing information related to 
customers, the Commission has modified this requirement so that filers 
do not have to estimate monthly purchases or sales by customer category 
as proposed. Filers will be required to describe all categories of 
customers without providing specific sales or purchase estimates by 
category. Simply describing categories of customers will enable the 
Agencies to determine if there are unique end-uses for the product, 
possibly reflecting some degree of non-uniform demand that would 
indicate limits on substitutability across different customers. 
Qualitative descriptions of customer categories are sufficient for the 
Agencies to determine, at a preliminary stage, whether demand is 
segmented, a fact that is important for gauging potential competitive 
effects of the transaction. Relatedly, this additional information may 
help eliminate or reduce antitrust concerns if the parties serve very 
different customers or customer categories.
    With these significant modifications, the Commission adopts the 
requirement that filers providing an Overlap Description also include 
some information about customers for those products or services.
c. Descriptions of Agreements With the Other Filing Party
    The Commission proposed that as part of the Overlap Description, 
for each overlap product or service identified, filers would provide a 
description of certain competitively significant agreements between the 
filing parties, such as licensing arrangements and any non-compete or 
non-solicitation agreements applicable to employees or business units 
related to the product or service.\377\
---------------------------------------------------------------------------

    \377\ NPRM at 42196.
---------------------------------------------------------------------------

    One commenter supported the collection of information related to 
existing agreements between the filing parties because it may be 
relevant to an assessment of whether something short of a full merger 
may be sufficient to enable the parties to realize the potential 
procompetitive benefits of a transaction without potential competitive 
harm. No commenter specifically objected to this particular requirement 
of the Overlap Description. However, in light of objections to the 
overall cost of the final rule, the Commission does not adopt this 
proposal at this time. Instead, the Commission believes that the 
requirement, discussed in section VI.I.1, to indicate via check boxes 
whether certain types of agreements exist between the acquiring person 
and target will alert the Agencies to transactions that may require 
further investigation.
2. Supply Relationships Description
    The Commission proposed to require each filing person to provide 
information about existing or potential purchase or supply 
relationships between the filing persons. This description would 
require filers to describe each product, service or asset (including 
data) that the filer sold, licensed or otherwise supplied, to the other 
party or to any other business that, to the filer's knowledge or 
belief, uses its product, service, or asset to compete with the other 
party's products or services, or as an input for a product or

[[Page 89318]]

service that competes with the other party's products or services.\378\ 
Similar information is required for purchases from the other party. 
According to the NPRM, this information would allow the Agencies to 
identify whether the transaction would create opportunities for post-
acquisition foreclosure of rivals arising from vertical or diagonal 
relationships.\379\ As discussed in section II.B.3., current 
information requirements do not provide a factual basis to alert the 
Agencies that there is an existing supply relationship that might 
require a closer look to determine whether the transaction is likely to 
violate the antitrust laws.
---------------------------------------------------------------------------

    \378\ Id. at 42196-97.
    \379\ See Dep't of Justice & Fed Trade Comm'n, Merger Guidelines 
2.5 (2023).
---------------------------------------------------------------------------

    As noted in the NPRM, in the past the Commission had required 
filers to provide similar information about vertical vendor-vendee 
relationships, but the requirement was eliminated in 2001; since that 
time, filers have provided no specific information related to existing 
vertical or other supply relationships. Several commenters objected to 
including this information again, noting that vertical concerns will 
not be a feature of most transactions, and information related to these 
issues is more appropriate for a Second Request once the Agencies have 
determined that the transaction genuinely raises vertical foreclosure 
concerns. One commenter stated that information about sales to and 
purchases from non-transacting parties has limited, if any, relevance 
to the transaction and is thus outside the scope of the Act. Another 
noted that concerns about unwinding already-consummated transactions 
that motivated the Act are not present in non-horizontal transactions, 
and urged the Agencies to exempt purely non-horizontal transactions 
from the reporting requirements of the Act on that basis.
    Other commenters supported the reintroduction of the requirement to 
report information related to key supply relationships, suggesting that 
descriptive responses should provide a more accurate and complete basis 
for screening transactions. One commenter commended the Commission for 
recognizing the need to request information about input markets and 
noted the historical lack of such information has resulted in an 
information asymmetry between the Agencies and filing parties. Others 
identified industry-specific concerns related to non-horizontal 
implications of acquisitions. One commenter cited the example of the 
seed industry, commenting that to understand market power in that 
industry the Agencies must have information regarding the unique 
supply, distribution, and licensing dynamics that are present. Another 
commenter discussed the proposal's impact on private equity firms, 
claiming it is common for firms to have portfolios that include 
upstream and downstream segments, a structure that can incentivize 
preferential treatment between portfolio companies in ways that 
disadvantage rivals.
    State antitrust enforcers also supported the need to better 
understand any supply relationships, including through the collection 
of information regarding data assets. They explained that the merger of 
two firms' complementary data sets can create, augment, and maintain 
market power. As antitrust enforcers, they stated that they also seek 
to understand how the target's data can be combined with the buyer's, 
and whether the combined data can be used to leverage power into 
further applications. To fully account for the potential that the 
combination of the buyer's and seller's data could be leveraged into 
additional applications, the State antitrust enforcers recommended the 
Commission consider whether these requests should be expanded beyond 
the related purchases and related sales narrative.
    After considering the concerns raised by commenters on both sides, 
the Commission has determined that the final rule will require, once 
again, the submission of information related to supply relationships. 
Contrary to assertions that the Agencies rarely challenge, and even 
more rarely prevail against, non-horizontal acquisitions, the Agencies 
have blocked several non-horizontal mergers since 2021 and have another 
challenge pending review.\380\ The Commission specifically rejects the 
suggestion that the final rule exempt non-horizontal mergers from the 
reporting requirements of the Act. Such an exemption would abrogate the 
Agencies' direct Congressional mandate not to ignore mergers that do 
not involve horizontal competitors. With the 1950 amendments to the 
Clayton Act, Congress made clear that section 7 applies not only to 
mergers between actual competitors but also to vertical and 
conglomerate mergers.\381\
---------------------------------------------------------------------------

    \380\ See Press Release, Fed. Trade Comm'n, ``Statement 
Regarding Illumina's Decision to Divest Grail'' (Dec. 18, 2023), 
https://www.ftc.gov/news-events/news/press-releases/2023/12/statement-regarding-illuminas-decision-divest-grail; In re Lockheed 
Martin Corp., No. 9405 (F.T.C. Jan. 25, 2022) (complaint alleging 
merger would enable missile systems manufacturer to use control over 
missile propulsion systems to harm rival defense prime contractors) 
(transaction abandoned); In re Nvidia Corporation, No. 9404 (F.T.C. 
Dec. 2, 2021) (complaint alleging merger would give chip 
manufacturer the ability and incentive to use control over 
microprocessor design technology to undermine competitors) 
(transaction abandoned); In re Microsoft Corp., No. 9412 (F.T.C. 
Dec. 8, 2022) (complaint). See also FTC v. Procter & Gamble Co., 386 
U.S. 568, 577 (1967) (whether classified as horizontal, vertical, 
conglomerate or other, all mergers tested by the same standard under 
section 7).
    \381\ Brown Shoe Co. v. United States, 370 U.S. 294, 317 (1962) 
(explaining that by the deletion of the acquiring-acquired language 
in the original statutory text, Congress hoped to make plain that 
section 7 applied not only to mergers between actual competitors, 
but also to vertical and conglomerate mergers whose effect may tend 
to lessen competition in any line of commerce in any section of the 
country). See also H.R. Rep. No. 1191, at 11 (1949).
---------------------------------------------------------------------------

    The Commission observes that mergers that create a risk of non-
horizontal concerns are more varied in their effects, with the over-
arching concern being the risk that the transaction provides the merged 
firm with the ability and incentive to foreclose rivals. According to 
controlling precedent, there are myriad ways in which the merged firm 
could engage in foreclosing behavior, such as by making late deliveries 
or subtly reducing the level of support services.\382\ In light of that 
variety of potential mechanisms, it is important to have some basis to 
assess whether the transaction creates a risk that the merged firm may 
limit access to products or services that its rivals use to 
compete.\383\
---------------------------------------------------------------------------

    \382\ See Illumina, Inc. v. FTC, 88 F.4th 1036, 1053 (5th Cir. 
2023).
    \383\ See Dep't of Justice & Fed Trade Comm'n, Merger Guidelines 
2.5 (2023).
---------------------------------------------------------------------------

    Some commenters questioned whether, as a practical matter, filers 
will be able to gather the information required by the Supply 
Relationships Description. For instance, one commenter stated that 
providing this information would require filers to create a new tool 
for tracking related sales and purchases, while another noted that, 
especially for retailers who are often ``price takers,'' there may be 
no need internally for conducting this type of analysis, meaning it 
would be undertaken solely to comply with the Act for reporting 
transactions. Two other commenters stated that this narrative is 
duplicative of document requests and thus should be eliminated.
    The Commission disagrees that the new Supply Relationships 
Description requires special reporting tools or is duplicative of 
document requests. In the Agencies' experience, documents submitted 
with the HSR Filing often do not contain references to key suppliers or 
purchasers, or the documents do not

[[Page 89319]]

provide sufficient context to understand whether the merged firm will 
have the ability to foreclose key inputs in violation of the antitrust 
laws. Nor does the Commission agree that companies are unaware that 
they are in an existing supply relationship or that there would be no 
records for a company to determine that it has purchases from or sales 
to another company. As with the Overlap Description, requiring filers 
to provide a brief description of any sales or purchase relationship is 
a much more direct, efficient, and reliable way to get this critical 
information because it will be coming from the parties and does not 
require staff to interpret references in documents to these types of 
relationships. Even given the expansion of document requirements in the 
final rule, this specific information that describes an existing 
business relationship in the same supply chain is unlikely to be 
revealed in transaction-specific documents or those generated in the 
ordinary course. This is especially true because the Supply 
Relationships Description requires each filer to identify whether it 
supplies not just the other party but a different company that competes 
with the other party.
    Two commenters urged the Commission to narrow the scope of the 
required information by adopting a limitation for de minimis levels of 
related sales or related purchases, for example by restricting 
requirements to those related sales or purchases generating over $10 
million in U.S. revenue in the past fiscal year. One commenter noted 
that the pre-2001 reporting for vendor-vendee information was limited 
to transactions between the parties and to purchases or sales over $1 
million, and stressed the need for the Agencies to establish a similar 
objective criteria to guide filers and avoid reporting thousands of 
routine or competitively benign purchases. Another commenter questioned 
the need for the Commission to revive a request that it deemed 
insufficient as a screen for potential non-horizontal relationships.
    After careful consideration of these comments, and in light of the 
Commission's intention to reduce cost wherever practical, the 
Commission has made several modifications to the Supply Relationships 
Description. As with the Overlap Description, the Commission declines 
to exclude information related to sales outside the United States. Here 
too, such an exclusion is not justified for the significant number of 
transactions for which sales occur outside the United States and yet 
the transaction has sufficient nexus to the United States to require 
reporting. Nonetheless, the Commission has determined that the rule 
should include a de minimis exclusion to reduce the cost of collecting 
information related to competitively insignificant sales or purchases. 
The final rule excludes reporting unless the product, service, or asset 
(including data) represented at least $10 million in revenue. In order 
to ensure that the de minimis exclusion does not cause filers to 
underrepresent their own production or capacity to supply the market, 
the de minimis amount is inclusive of internal transfers within the 
filing person. That means that when applying the de minimis exclusion, 
the filer should include the value of the product that it supplies to 
itself because that reflects the filer's ability to meet the demand for 
the product. For example, if the acquiring firm sells Product X to the 
target, when calculating the total revenue for Product X to determine 
whether Product X represents at least $10 million in revenue, the filer 
must include its own consumption of Product X and sales of Product X to 
anyone else. If all of the filer's sales (including internal sales) of 
Product X represent less than $10 million in revenue, the filer does 
not need to respond to the Supply Relationships Description for sales 
of Product X.
    As with the Overlap Description, several commenters objected to the 
Supply Relationships Description on the grounds that it is subjective 
and burdensome and that it would require premature disclosure of the 
deal or improperly shift the burden of proving an antitrust violation 
from the Agencies to the filing parties. Accordingly, the Commission 
has determined to make similar modifications to the Supply 
Relationships Description as it did for the Overlap Description, in 
order to reduce the cost of reporting. Specifically, the final rule 
limits the reporting period to the most recent fiscal year and requires 
reporting for sales only in dollars, not also in units. It also 
eliminates the requirement for contact information for individuals at 
customers or suppliers, requiring only the identity of the company to 
limit the risk of inadvertent disclosure. With these modifications, the 
Supply Relationships Description will provide a factual basis to 
determine whether the transaction requires a closer look to assess the 
risk of foreclosure, while minimizing the cost as much as practicable.
3. Labor Markets Information
    The Commission proposed creating a new Labor Markets Information 
section within the Instructions that would require each filing person 
to provide certain information about its workers in order to screen for 
potential labor market effects arising from the transaction. As noted 
in the NPRM, the Agencies have increasingly recognized the importance 
of evaluating the effect of mergers and acquisitions on labor 
markets.\384\ Yet, as noted in section II.B.2., the Agencies' HSR Form 
does not collect information from filers about their employees or the 
type of work that their employees do that would allow the Agencies to 
identify the parties as competitors for certain labor services, raising 
challenges for the effective enforcement of section 7 to protect 
competition that benefits workers.\385\
---------------------------------------------------------------------------

    \384\ NPRM at 42197.
    \385\ 15 U.S.C. 18.
---------------------------------------------------------------------------

    Within the Labor Markets section, the Commission proposed requiring 
each filing person to (1) provide the aggregate number of employees for 
each of the five largest 6-digit Standard Occupational Classification 
(SOC) codes; (2) identify the top five largest 6-digit SOC codes in 
which both parties employ workers, and for each of these SOCs, list the 
overlapping ERS-defined commuting zones and the total number of 
employees within each commuting zone; and (3) identify any penalties or 
findings that were issued against the acquiring person or acquired 
entity by the DOL's Wage and Hour Division, NLRB, or OSHA during the 
five-year period before the filing.\386\
---------------------------------------------------------------------------

    \386\ NPRM at 42197-42198.
---------------------------------------------------------------------------

    The Commission received many comments focused on the labor market 
proposals. Several commenters, including hundreds of individual 
commenters, supported the Agencies' attention to the potential for 
merger-induced harm in labor markets and the requirement that parties 
submit information about their employees for premerger screening. 
Supportive commenters stated that filers have sophisticated legal and 
accounting personnel and systems to minimize the burden on the 
companies of collecting and reporting employee information. Other 
commenters asserted that requesting labor market information in the 
earlier stages of merger review would lead to a more efficient and 
uniform process that could result in the Agencies' termination of the 
HSR waiting period prior to the end of the initial 15 or 30 days in a 
greater number of mergers where no labor market issues exist.

[[Page 89320]]

    Other commenters, including law firms, private equity and venture 
capital groups, and industry groups, raised broad objections to the 
Commission's proposal to collect labor market information in the HSR 
Form. These organizations argued that the effort required by the Labor 
Markets section would be significant and would greatly increase costs 
for companies wishing to engage in reportable transactions. Moreover, 
they argued that this increased burden was not justified by the utility 
of the employee information required by the proposed rule for antitrust 
screening. Some commenters stated that the increased burden of 
complying with these reporting requirements would have a chilling 
effect on transactions.
    In light of the comments, as well as the Agencies' recent 
experience in identifying and investigating transactions that may harm 
competition for workers, the Commission has determined not to require 
specific information about employees at this time. After considering 
several options to collect worker information that would be specific 
enough to allow the Agencies to screen for potential labor market 
effects without unduly burdening filers, the Commission has determined 
that the Agencies will rely on other information required by the final 
rule to identify transactions that require an in-depth investigation 
for potential labor market effects. This includes the new Competition 
Descriptions, which together will provide the Agencies with a better 
understanding of the premerger competition between the merging parties. 
The Commission believes that this information is likely to reveal those 
transactions where the filers are likely to compete for workers that do 
the same or similar types of jobs because they supply similar or 
related products or services. In addition, the new document 
requirements, including plans and reports and additional transaction-
related documents, should reveal whether the parties view themselves as 
competing for labor services. From these documents, as well as a 
description of the rationale for the transaction from the buyer, the 
HSR Filing should reveal whether the buyer anticipates any impact on 
workers or labor costs as a result of the transaction.
    The Commission acknowledges the need to obtain detailed information 
about employees for some transactions during the merger review process 
and will continue to consider whether it is appropriate, on a case-by-
case basis, to require the production of such information in a Second 
Request.
a. Worker and Workplace Safety Information
    The Commission proposed to create a Worker and Workplace Safety 
Information section that would require filing persons to identify any 
penalties or findings that were issued against the acquiring person or 
acquired entity by the U.S. Department of Labor's Wage and Hour 
Division, the National Labor Relations Board, or the Occupational 
Safety and Health Administration during the five-year period before the 
filing. Several commenters supported the inclusion of the Worker and 
Workplace Safety Information, noting that the information could prove 
indicative of a concentrated labor market and market power. One 
commenter stated that it had previously alleged that repeated and 
widespread labor law violations constituted direct evidence of labor 
market dominance that could be relevant to merger analysis. Others 
noted that this information is often known to the filers and may be 
indicative of a concentrated labor market.
    Some commenters urged the Commission not to require the submission 
information about past workplace violations due to the lack of a clear 
nexus between labor law violations and merger analysis. Other 
commenters stated that labor law violations may be tied to issues that 
are irrelevant to market power, such as the presence of an organized 
labor group that is more inclined to report potential violations, and 
the requirement should be limited to the industries where violations 
are more prevalent. Some stated that the existence of labor law 
violations was government data that was already available to the 
Agencies without placing the obligation on parties to report such 
violations.
    The Commission acknowledges that information regarding some of 
these violations may be publicly available or otherwise available to 
the Agencies. The U.S. Department of Labor and the National Labor 
Relations Board maintain public accessible databases containing labor 
enforcement case information on their respective websites.\387\ In 
addition, the Agencies have each established Memoranda of Understanding 
(MOUs) with the Department of Labor and the National Labor Relations 
Board that would allow for the Agencies to obtain relevant non-public 
information regarding labor law violations.\388\ Accordingly, when the 
Agencies identify potential harms to labor market competition through 
information contained in the HSR Filing or through other means, they 
can seek information on labor violations from publicly available 
sources, from the Department of Labor and the National Labor Relations 
Board under their respective MOUs, and when appropriate, from the 
filers on a voluntary basis or in response to Second Requests. Because 
this information may be available to the Agencies through means that 
would not require filers to provide this information in the HSR Filing, 
the Commission does not adopt the requirement for filers to submit 
information on worker and workplace safety, and it is not required by 
the final rule.
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    \387\ See U.S. Dep't of Labor, ``Enforcement Data,'' https://enforcedata.dol.gov/Enfdata/search.php; Nat'l Labor Relations Bd., 
``Case Search,'' https://www.nlrb.gov/search/case.
    \388\ See Press Release, Fed. Trade Comm'n, ``FTC, Department of 
Labor Partner to Protect Workers from Anticompetitive, Unfair, and 
Deceptive Practices'' (Sept. 21, 2023), https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-department-labor-partner-protect-workers-anticompetitive-unfair-deceptive-practices; Press 
Release, Fed. Trade Comm'n, ``Federal Trade Commission, National 
Labor Relations Board Forge New Partnership to Protect Workers from 
Anticompetitive, Unfair, and Deceptive Practices'' (July 19, 2022), 
https://www.ftc.gov/news-events/news/press-releases/2022/07/federal-trade-commission-national-labor-relations-board-forge-new-partnership-protect-workers; Press Release, U.S. Dep't of Justice, 
``Justice Department and National Labor Relations Board Announce 
Partnership to Protect Workers'' (July 26, 2022), https://www.justice.gov/opa/pr/justice-department-and-national-labor-relations-board-announce-partnership-protect-workers; Press Release, 
U.S. Dep't of Justice, ``Departments of Justice and Labor Strengthen 
Partnership to Protect Workers'' (Mar. 10, 2022), https://www.justice.gov/opa/pr/departments-justice-and-labor-strengthen-partnership-protect-workers.
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b. Requests To Expand Requirements for Information Related to Labor 
Markets
    Some commenters encouraged the Commission to request more 
information about employees, including the merging companies' histories 
of labor law violations dating back ten years rather than only five 
years; information about their remote, temporary, or contract workers; 
and the merging companies' union avoidance activities and expenditures. 
Certain commenters encouraged the Agencies to consider the role of 
unions and collective bargaining to accurately assess employer market 
or monopsony power. In particular, commenters suggested that the 
Agencies could collect the following information to animate such an 
analysis: (1) a list of unions at controlled entities, associates, and 
franchisee/cooperatives; (2) copies of collective bargaining 
agreements, at least with any common unions; and (3) a narrative 
describing any opposition to

[[Page 89321]]

efforts to unionize, including union avoidance activities and 
expenditures. The Commission acknowledges the utility of collecting 
this information for some transactions during the merger review process 
but does not believe that this information is necessary for all filings 
at the screening stage. As a result, the Commission has not included 
requirements for this information in the final rule but will continue 
to consider whether it is appropriate, on a case-by-case basis, to 
request such information during the investigation of the transaction.
    In sum, the Commission has determined that the requirements of the 
final rule to provide descriptions of areas of competitive interaction 
between the parties are necessary and appropriate to enable the 
Agencies to identify transactions that may violate the antitrust laws 
and that the requirements, as modified, have been tailored to reduce 
the cost of reporting as much as practicable.

J. Revenues and Overlaps

    The Commission proposed a Revenues and Overlaps section to collect 
information currently required by Items 5(a), 6(c), 7, and 8, subject 
to proposed modifications. The Commission proposed substantive changes 
to the reporting of revenue by NAICS code, how NAICS overlaps of 
controlled entities are reported, which minority-held entities must be 
reported, and which prior acquisitions must be reported. As discussed 
below, the Commission adopts some of the changes as proposed, adopts 
others with modifications, and does not adopt others.
1. NAICS Codes
    In the NPRM, the Commission proposed several changes related to 
revenue reporting. One of the changes was ministerial in nature--
adopting the 2022 version of the NAICS codes. This proposal received no 
comments, and the Commission adopts it as proposed.
    The Commission proposed other, non-ministerial changes to revenue 
reporting that reflect a substantively different approach to revenue 
information by: (1) eliminating the requirement that filing persons 
provide the precise amount of revenue attributed to each NAICS code and 
instead report revenues within ranges; (2) reporting NAICS codes on a 
descriptive basis through engagement with individuals familiar with the 
business operations of each operating company and providing additional 
information if more than one code would be appropriate; (3) requiring 
acquiring persons and acquired entities with more than one operating 
company or unit to identify which entity(s) derives revenue in each 
code; (4) requiring acquiring and acquired persons to report NAICS 
codes for certain pipeline or pre-revenue products; (5) clarifying that 
the acquired person must report the NAICS codes relevant to the 
acquired entity(s) at the time of closing; and (6) eliminating the 
requirement for filing persons engaged in manufacturing to provide 
revenue by NAPCS-based codes. As discussed below the Commission adopts 
some of these changes, adopts a modified version of others, and does 
not adopt certain of these proposed changes.
a. Reporting Revenues in Ranges
    The Commission received several comments in support of the proposal 
to eliminate the requirement that filing persons provide the precise 
amount of revenue attributed to each NAICS code and instead report 
revenues within one of five ranges. One commenter stated that the 
introduction of levels proposed in the NPRM will simplify compliance 
with the NAICS allocation requirement. Two other commenters expressed 
general support for the proposed set of reorganized revenue 
information. The Commission did not receive any comments opposed to 
this change and adopts it as proposed.
b. Reporting Revenues on a Descriptive Basis
    Regarding the proposal to report NAICS codes on a descriptive basis 
through engagement with individuals familiar with the business 
operations of each operating company and provide additional information 
if more than one code would be appropriate, two commenters objected on 
the grounds that it would be overly burdensome. One commenter noted 
that many NAICS codes are broad and disconnected from the modern 
economy, making it difficult to determine whether a particular code 
applies. The other commenter objected to the proposal to list all the 
codes that describe the products or services offered, explaining that 
it would be extremely difficult to comply with when relying on 
personnel at various operating companies that have varying familiarity 
with the NAICS system. The same commenter noted that if the Agencies 
are concerned about missing potential overlaps, the Overlap Description 
is a more effective way to address that concern.
    The Commission acknowledges the concerns about cost and adopts this 
proposal with modifications. As noted in the proposed rule, in the 
Commission's experience, reliance on financial records often results in 
under-reporting or reporting revenues in codes that may not actually be 
descriptive of the products or services provided. Having knowledgeable 
business personnel select the appropriate NAICS codes that best 
describe the filer's business lines is the best way to ensure that the 
NAICS code revenues contained in the HSR Filing reflect the full range 
of products and services offered from a business perspective. However, 
the Commission will not require a particular methodology to collect 
NAICS codes and notes that the intent of this change is to have filers 
report codes that descriptively represent their revenues, and not need 
to rely on how they are captured in financial systems.
c. Identifying Entities That Derive Revenues in Each Code
    Two commenters objected to the proposed requirement to report NAICS 
information separately by operating entity. Each of the commenters 
asserted that this additional requirement would likely create 
significant new burdens, in particular for larger companies with 
numerous subsidiaries. While this type of reporting may be more 
difficult for those with numerous subsidiaries, these are exactly the 
filings for which the Agencies cannot determine which entities generate 
revenues that are related to those of the other party. When parties 
report revenues by entity, the Agencies can quickly home in on which 
business lines are competitively relevant. The Commission notes that 
some filers already provide revenues in this way and it is extremely 
useful to the Agencies when they do. Although the Commission 
acknowledges that this proposal may be more difficult for some filers, 
it is necessary for the Agencies to have at the outset a clear picture 
of how revenues are generated within the filing person. The Commission 
adopts this change as proposed.
d. Reporting Revenues for Pre-Revenue Products or Services
    The Commission received several comments regarding the proposal to 
require acquiring and acquired persons to report NAICS codes for 
certain pipeline or pre-revenue products. A group of State antitrust 
enforcers supported the proposal, noting that they are particularly 
concerned with acquisitions of potential or nascent competitors and the 
protection of rivalrous innovation. Critics of the proposed requirement 
expressed concerns about compliance. One commenter pointed out that the 
Commission did not provide a clear standard for what ``under 
development''

[[Page 89322]]

means or what information the acquiring person must have to ``know'' 
about the target's product pipeline. Other commenters noted that 
classifying pre-revenue products or products under development is 
inherently speculative and that the NAICS classifications sometimes lag 
changes in technology and business.
    The Commission acknowledges the potential challenges in complying 
with this change and believes it is sufficient for the Agencies to rely 
on the Competition Descriptions section for information related to pre-
revenue products or services. In the Overlap Description, filers are 
required to list and briefly describe each current or known planned 
products or services that compete or could compete with those of the 
other party. As a result, similar information related to potential 
NAICS code revenues would be largely duplicative. Given the 
Commission's interest in reducing the cost of complying with the final 
rule where the additional information provides little benefit to the 
Agencies, the Commission does not adopt this proposal.
e. Overlap Reporting Revenues as of Time of Closing
    Regarding the proposal to clarify that the acquired person must 
report the NAICS codes relevant to the acquired entity(s) at the time 
of closing, the Commission did not receive any comments. The Commission 
adopts this item as proposed.
f. Eliminating Reporting by NAPCS Codes
    Regarding the proposal to eliminate the requirement for filing 
persons engaged in manufacturing to provide revenue by NAPCS-based 
code, the Commission did not receive any comments. The Commission 
adopts this item as proposed.
2. Controlled Entity Geographic Overlaps
    Information about the geographic areas related to overlapping 
products and services is currently required by Item 7. The Commission 
proposed modifying these requirements to: (i) add a requirement to 
provide the name(s) by which entities have done business within the 
last three years, (ii) require the filing person to identify the 
overlapping entity within its own person, rather than the other filing 
person, (iii) update the NAICS codes that require geographic reporting 
at the street address level, (iv) require the identification of 
locations of franchisees for certain NAICS codes, and (v) add a 
requirement to provide geolocation data. As discussed below, the 
Commission adopts the some of the proposals as proposed, some with 
modification, and does not adopt others.
a. NAICS Overlaps of Controlled Entities
    The Commission proposed several changes to the information 
concerning NAICS overlaps of controlled entities. First, the Commission 
proposed requiring the acquiring person to identify the entity(s) 
within its own person that has operations in the same NAICS code as the 
acquired entity(s), and the acquired person to identify the entity(s) 
within the acquired entity(s) that has operations in the same NAICS 
codes as the acquiring person. Second, it proposed requiring the 
identification of ``doing business as'' or ``formerly known as'' names 
used within the last three years by entities with U.S. operations in 
overlapping NAICS codes. Finally, the Commission proposed that filing 
persons be required to identify the entity(s) that have U.S. operations 
in the overlapping NAICS code(s).
    Regarding the proposal to require the identification of ``doing 
business as'' or ``formerly known as'' names used within the last three 
years by entities with U.S. operations in overlapping NAICS codes, the 
Commission received two comments. One commenter expressed support for 
the proposal, noting that information regarding how private equity 
portfolio companies are commonly known in the marketplace is necessary 
for the Agencies to assess potential anticompetitive overlaps. Another 
commenter, however, stated that the new requirement may be difficult 
for filing parties to meet if they do not maintain such records, 
meaning they would need to recreate the information for the HSR filing. 
The same commenter questioned the value of the information for entities 
beyond those that either (i) generate revenue that results in a NAICS 
overlap or (ii) are parties to Material Other Agreements.
    The Commission believes ``doing business as'' names will be of 
great value to the Agencies in the initial waiting period and thus 
adopts the proposal to require filing parties to identify names by 
which entities do business at the time of filing. However, as part of 
its overall efforts to lessen costs, the Commission does not adopt the 
proposal to require ``formerly known as'' names.
    Regarding the proposal to have each filing person only report 
entities within its own person that derive revenue in the overlapping 
NAICS codes, the Commission did not receive any comments. The 
Commission adopts this change as proposed.
    Finally, regarding the proposal to require filing persons to 
identify the entity(s) that have U.S. operations in the overlapping 
NAICS codes, the Commission did not receive any comments. The 
Commission adopts this change as proposed.
    In addition, one commenter suggested that the Commission require 
identification of overlaps at the 3-digit, rather than 6-digit level, 
stating that 6-digit NAICS codes are too narrow. While the Commission 
agrees that some 6-digit NAICS codes are too narrow to identify 
products or services that effectively compete in the market, it also 
finds that other codes are overly broad. Further, identification of 
overlaps also triggers the reporting of additional information, 
including geographic information, identification of authors of 
documents, production of certain annual reports, information about 
certain officers and directors, identification of certain prior 
acquisitions, and certain defense and intelligence contracts. Thus, the 
Commission declines to adopt this suggestion but notes that this final 
rule includes a Competition Descriptions section, as discussed in 
section VI.I, to address the shortcomings of revenue reporting by NAICS 
codes.
b. Geographic Market Information
    The Commission proposed two changes related to geographic markets. 
First, the Commission proposed updating the list of NAICS codes for 
which locations need only be identified at the State level and NAICS 
codes for which street-level information would be required. These 
adjustments reflect the Commission's periodic review of which NAICS 
codes need more granular street, city, and State address information, 
and which NAICS codes need only be reported at the State level. 
Information about where each filer generates revenues is important to 
determining whether the parties sell or supply products or services in 
the same local markets. Geographic market information often provides a 
factual basis for the Agencies to conclude that the merging parties do 
not sell the same products in the same local areas. Keeping this 
information up-to-date allows the Agencies to rely on geographic market 
information to conclude that the transaction does not warrant the 
issuance of Second Requests.
    The Commission received two comments regarding this requirement, 
one in support of it and one opposed. The supportive comment emphasized 
the need for street-level information in

[[Page 89323]]

the agriculture industry, where the relevant markets for evaluating 
competition tend to be local and regional due to the perishable nature 
of agricultural products. The Commission agrees that street-level 
information is key in local and regional markets and articulated this 
as the basis for the expansion of the requirement in the NPRM.
    The comment in opposition to the proposal stated that it would 
impose additional costs on filing parties given the wide range of 
industries for which street-level information would be required. The 
Commission acknowledges the cost, but for the reasons discussed above, 
believes that street-level geographic information is necessary to the 
Agencies' ability to conduct appropriate premerger screening of 
transactions that are most likely to affect competition at a local 
level. The Commission adopts this change as proposed.
    The Commission also proposed requiring filers to list locations 
where franchisees of the acquiring or acquired person (as appropriate) 
generate revenue in overlapping NAICS codes that require street-level 
reporting. The Commission did not receive any comments on this change 
and adopts it as proposed.
c. Geolocation
    The Commission also proposed requiring filers to report latitude 
and longitude information for street addresses. The Commission received 
comments both in support and in opposition to this requirement. The 
supportive comment stated that many companies already keep lists of 
latitude/longitude waypoints, while the comment opposed stated that 
exceedingly few businesses maintain geolocation data in the ordinary 
course of business.
    As helpful as this information would be to the Agencies, especially 
during the initial waiting period when the Agencies need to determine 
whether there are any geographic markets in which the parties compete, 
in its overall effort to reduce costs to filing parties, the Commission 
does not adopt this proposal. Agency staff can continue to pursue 
sources for this information when necessary and as time permits during 
the initial waiting period.
3. Minority-Held Entity Overlaps
    The Commission proposed creating a Minority-Held Overlaps section 
to collect information related to minority holdings that is currently 
required by Item 6(c). Item 6(c) requires the identification of 
holdings of the acquiring person and its associates or the acquired 
entity (as appropriate) of greater than 5% but less than 50% if such 
holdings derive revenue in any of the same 6-digit NAICS codes (or 
industries) as the other party. In the NPRM, the Commission proposed 
eliminating the option to list all the minority-held entities, rather 
than just those that are in overlapping NAICS codes or industries. The 
Commission also proposed requiring filers to provide the names by which 
the listed entities do business, if known. The Commission adopts these 
changes as proposed.
    Regarding the proposal to eliminate the option to list all 
minority-held entities, the Commission received three comments, one 
comment in support of the proposed change and two comments opposed to 
it. The supporter of the proposal stated that it is critical to 
understand a company's minority holdings, which may allow it to 
exercise a level of competitive control in a market. One commenter 
questioned the probative value of information about minority interests 
generally but did not address this specific proposal. Another commenter 
expressed concern that the proposal could lead to greater scrutiny of 
``growth equity'' firms that primarily take minority stakes in 
companies, and asserted that it could have a chilling effect on certain 
investments.
    The Commission addresses concerns that increased transparency may 
lead to more enforcement actions in section III.C.1. and states that 
the identification of overlapping minority holdings is a key reform of 
the final rule because where these relationships exist, the Agencies 
should scrutinize them as part of their premerger review. The 
Commission also emphasizes that filers are currently required to 
identify overlapping minority holdings. However, the current 
Instructions allow filers to identify all minority holdings rather than 
only those that overlap. The Commission has found that lists not 
limited to the overlapping entities hinder efficient screening for 
transactions that may require further investigation, resulting in extra 
effort even when it would not be required if the overlaps were known as 
well as not surfacing transactions that do have such overlaps. In 
contrast, when filers submit a list of only those minority-held 
entities that derive revenue in the same NAICS code, or are in the same 
industry as the other party, the Agencies can quickly focus in on 
holdings that could create a competitive concern. Additionally, as 
minority interest holders, the filers are in a better position than the 
Agencies to identify which, if any, of their holdings operate in the 
same space as the other party. Given the importance of this information 
to the Agencies, the Commission adopts this change as proposed.
    Regarding the proposal to require filers to provide the names by 
which the listed entities do business, if known, one commenter 
supported the proposal while another stated that it may be difficult 
for filing parties to comply with if they do not maintain such records. 
As discussed in sections VI.D.1.d.(i) and (iii) and VI.D.2.a., the 
legal names of entities are not always directly related to the name by 
which the entity is known to the marketplace. Knowing the public-facing 
names of entities facilitates efficient review of transactions by the 
Agencies because those names may be better known to other market 
participants. For investors of 5% or more, the Commission believes this 
information should be readily available to filers. However, if this 
information is not known, a statement of non-compliance can be 
submitted with the filing, as discussed in section VI.A.5. Accordingly, 
the Commission adopts this requirement as proposed.
    In sum, the Commission has determined that the reporting 
requirements for revenues and overlaps contained in the final rule are 
necessary and appropriate to enable the Agencies to identify 
transactions that may violate the antitrust laws in any line of 
commerce or section of the country and that the requirement, as 
modified, has been tailored to reduce the cost of reporting as much as 
practicable.
4. Prior Acquisitions
    The Commission proposed creating a Prior Acquisitions section 
within the Instructions to collect information required by Item 8 of 
the current Form, as well as additional information. First, the 
Commission proposed requiring both the acquiring person and the 
acquired entity to provide information about prior acquisitions, 
expanding the current requirement that is limited to the acquiring 
person. Second, the Commission proposed extending the time frame to 
report prior acquisitions from five years to ten years. Third, the 
Commission proposed eliminating the dollar threshold for listing prior 
acquisitions, which currently limits reporting to only acquisitions of 
entities with annual net sales or total assets greater than $10 million 
in the year prior to the acquisition. Fourth, the Commission proposed 
treating asset transactions involving the prior acquisition of 
substantially all of the assets of a business in the same manner as 
prior acquisitions of voting securities or non-corporate interests. The 
Commission also proposed requiring

[[Page 89324]]

filers to report whether all or substantially all of the acquired 
voting securities, non-corporate interests, or assets are still held at 
the time of filing. As discussed below the Commission declines to adopt 
several of these proposals and modifies others.
    As noted in the NPRM, information about prior acquisitions has 
always been important for the Agencies, allowing them to identify 
strategies to gain market share through acquisitions rather than 
internal expansion or more vigorous competition. Filers have been 
required to provide information about prior acquisitions from the 
beginning of the premerger notification program. As discussed in 
section II.B.5., the Commission believes that additional information 
about prior acquisitions will reveal roll-up or serial acquisition 
strategies that have become increasingly prevalent in certain sectors 
as well as among certain investors and acquirors, and that have been an 
effective strategy for increasing concentration. A history of prior 
acquisitions in the same sector can provide an independent basis for 
the Agencies to take a closer look at the filed-for transaction to 
ensure that merger enforcement takes place at a time when it can be 
effective in preventing undue levels of market concentration.
    Several comments provided general support for the Commission's 
efforts to expand this item. According to a group of State antitrust 
enforcers, details about a filing entity's prior acquisitions are vital 
for evaluating mergers and industry concentration trends. They contend 
that, in an era of so-called ``stealth acquisitions,'' premerger tools 
used by antitrust enforcers require sharpening. Another commenter also 
expressed this concern, observing a rise in serial acquisition 
strategies that are potentially aimed at sidestepping regulatory 
scrutiny.
    Other commenters provided research supporting the proposed 
expansion of information about prior acquisitions. One commenter 
offered that his research supports claims made in the NPRM that prior 
acquisitions have important consequences for competition. He explained 
that even minor deals can produce major changes in market structure, 
firm behavior, and consumer welfare. Other commenters described their 
research or experience with roll-up acquisitions that have occurred in 
various sectors of the economy, explaining that more expansive 
disclosures of prior acquisitions will allow the Agencies to better 
identify serial acquisitions and their potentially anticompetitive 
effects.
    But several comments raised broad objections to the Commission's 
proposal to collect additional information on prior acquisitions. 
Several comments broadly asserted that the burden of providing this 
additional information about prior acquisitions would be too high. One 
commenter asserted that expanding the information required would create 
a chilling effect that could discourage acquisitions of startups, as 
many potential acquirers of startups are likely to have made several 
small acquisitions in the technology sector. Similarly, some comments 
explained that the expansion of information related to prior 
acquisitions would have particular impact on specific industries or 
financial sectors, including pharmaceuticals, technology, agriculture, 
and private equity. Other commenters said that providing more complete 
information about prior acquisitions would reduce investments in 
startup companies. Finally, certain comments suggested that the 
proposed changes would adversely affect venture capital and funding 
acquisitions.
    The Commission has addressed some of these general concerns in 
section III.C., as well as more detailed concerns about the cost to 
complete this requirement, below. It believes that many of these broad 
concerns are either not directly relevant to this rulemaking or 
otherwise in tension with historical reporting practice.\389\ 
Nonetheless, the Commission has determined not to adopt most of the 
expansions contained in the proposed rule, including the extension of 
the lookback period from five to ten years or the elimination of the 
$10 million exception. Instead, the Commission adopts modest 
adjustments to the current requirements and extends the reporting 
requirement to prior acquisitions of the target. The adopted 
adjustments contained in the final rule include: (1) the elimination of 
the $1 million threshold for revenue when determining which overlapping 
NAICS codes are relevant; (2) the requirement to include prior 
acquisitions of assets or entities that also provide competing products 
or services listed in the filing person's Overlap Description; and (3) 
the proposal to treat prior acquisitions of substantially all of the 
assets of a business in the same manner as prior acquisitions of voting 
securities or non-corporate interests.
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    \389\ The Commission previously required information about prior 
acquisitions for a full ten years. The Commission is not aware of 
any evidence, and commenters did not point to any, of any noticeable 
impact on the level of startup activity or venture capital funding 
during that period.
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    This information related to prior acquisitions will better reflect 
current market dynamics in the very lines of business that will be the 
focus of the Agencies' premerger assessment. The final rule does not 
require reporting on all prior acquisitions, only those in in business 
lines which the parties have identified as areas of overlapping current 
or future competition, either on the basis of NAICS code reporting or 
in the Overlap Description. This limitation focuses the required 
information on the specific antitrust risk that one or both parties 
have a pattern or strategy of rolling up competitors. It also alerts 
the agencies to potential changes in the competitive environment that 
may not be publicly available, which is valuable information in 
assessing whether or not the filed for transaction may violate the 
antitrust laws. In addition, parties are required to report only those 
acquisitions of U.S. entities or assets and foreign entities or assets 
with U.S. sales, thus targeting acquisitions that are likely to affect 
local markets within the United States. With these limitations, 
information collected about prior acquisitions is properly focused on 
the antitrust risk that the merging parties are pursuing a roll up 
strategy that is harming or could harm competition in the United States 
in violation of the antitrust laws.
    As discussed in section II.B.5., the antitrust laws have always 
applied to anticompetitive serial acquisitions. In light of the 
increased use of these strategies and evidence of their harmful effects 
in certain sectors, there is a clear benefit to antitrust enforcement 
from disclosing prior acquisitions that may reveal a pattern or 
strategy of rolling up competitors in violation of the antitrust laws. 
This risk can be especially acute when the transaction involves a 
merger between `consolidators,' with both firms having many prior 
acquisitions in the same lines of business. The final rule is properly 
tailored to focus on the risk that the transaction is part of such a 
strategy. Information about prior acquisitions need only be submitted 
for business lines that the parties have identified as areas of current 
or future competition. Moreover, any burden imposed by the additional 
reporting requirements would be limited. Based on the Agencies' 
experience, information about prior acquisitions is well-known to 
companies that are parties to an acquisition agreement, as this 
information is often collected as part of the due diligence process for 
the pending transaction. Other companies, even relatively small 
companies, routinely provide this information to the

[[Page 89325]]

Agencies in response to a Second Request.
    The Commission acknowledges that this requirement imposes a new 
obligation on acquired companies but believes this information is 
necessary and appropriate for the Agencies to conduct their premerger 
review. Information about prior acquisitions is specifically targeted 
to uncover prior acquisitions where the parties have existing or 
emerging overlaps; if the acquired person completed many acquisitions 
over the past five years in these overlapping business lines, that 
information would be highly relevant to assessing the transaction's 
likely effect on future competition in those overlap sectors. Moreover, 
serial acquisition strategies may be going on simultaneously in a 
particular business line, and the acquired person's history would 
reveal whether the acquiring person is acquiring a firm that was also 
pursuing such a strategy.
    The benefit to the Agencies from collecting this information from 
both parties is directly related to the number of prior acquisitions in 
the same business lines: the more acquisitions recorded during the 
prior five years, the more relevant is the information about them. Both 
the acquiring person and the acquired entity can and do make 
acquisitions that have an impact on the relevant competitive landscape. 
In addition, requiring this information from both filers may help deter 
acquisition strategies whereby a target buys several related companies 
that fall under the HSR thresholds and then the acquiring person 
purchases the target; the current rule does not reveal this history of 
prior acquisitions in the same business lines. Being able to clearly 
understand this history from the time a filing is made assists the 
Agencies in identifying a potential pattern of acquisitions in a 
particular industry that has contributed to a trend toward 
concentration or vertical integration that affects the competitive 
dynamics for the parties to the transaction, as well as the commercial 
realities of post-merger competition. One commenter suggested that 
parties report prior acquisitions only from the point in time when the 
current UPE acquired control of the acquiring or acquired entity, but 
this would limit the Agencies' ability to fully understand patterns and 
current competition. Thus, the Commission declines to further limit the 
requirement in this way.
    The Commission also proposed expanding the time frame for reporting 
prior acquisitions from five to ten years to allow the Agencies to have 
a more complete understanding of how past acquisitions in the affected 
business lines affect the competitive landscape of the current 
transaction under review. Even though the Commission has required ten 
years of prior acquisition information on the HSR Form in the past, 
commenters questioned the expansion of the requirement now. Some 
comments focused on the added burden, noting that individuals who have 
institutional knowledge of past acquisitions may no longer be employed 
by the filing entity. Another comment pointed out that the Commission 
previously recognized that a ten-year lookback period was unduly 
burdensome when it reduced the information request from ten years to 
five years in 1987. The Commission acknowledges the cost associated 
with reporting many prior acquisitions, and after careful consideration 
of the comments, has determined not to require reporting for prior 
acquisitions occurring more than 5 years prior to filing.
    But the Commission disagrees that concerns about roll-up strategies 
are not well-grounded in antitrust law. As discussed in section 
II.B.5., U.S. antitrust law clearly addresses concerns about the 
acquisition or maintenance of market power through serial acquisitions. 
As stated above, it is precisely this information that allows the 
Agencies to fairly measure the competitive landscape and on-going 
trends toward concentration in certain business lines, making the 
information relevant to the Agencies' initial antitrust assessment of 
the transaction. The Commission also disagrees that the HSR Act does 
not permit the Agencies to use section 7 of the Clayton Act to 
challenge serial acquisitions. Section 7 clearly prohibits acquisitions 
that were preceded by a series of acquisitions that rendered the 
market(s) under review concentrated,\390\ and it is not improper for 
the Commission to require the reporting of prior acquisitions to better 
detect a pattern of acquisitions that may also violate other antitrust 
statutes, such as section 2 of the Sherman Act or section 5 of the FTC 
Act. Although the Commission agrees that the information submitted with 
the HSR Form must be used to examine the potential competitive impact 
of the filed-for transaction, it disagrees that the scope of section 7 
is so limited as to prevent the Agencies (or other enforcers of the 
Federal antitrust laws) from alleging harm that derives from a 
cumulation of similar acquisitions in the same market.\391\
---------------------------------------------------------------------------

    \390\ See United States v. Phila. Nat'l Bank, 374 U.S. at 367. 
See also Credit Bureau Reps., Inc., v. Retail Credit Co., 358 F. 
Supp. 780, 794 (S.D. Tex. 1971), aff'd, 476 F.2d 989 (5th Cir. 
1973).
    \391\ See Brown Shoe Co. v. United States, 370 U.S. 294, 334 
(1962) (citing S. Rep. No. 81-1775, at 5 (1950) and H.R. Rep. No. 
81-1191, at 8 (1949)). In particular, S. Rep. No. 81-1775, at 5 
noted that where several large enterprises are extending their power 
by successive small acquisitions, the cumulative effect of their 
purchases may be to convert an industry from one of intense 
competition among many enterprises to one in which only a few large 
concerns supply the market.
---------------------------------------------------------------------------

    The Commission also proposed eliminating the $10 million threshold 
for identifying prior acquisitions and received several comments on 
this point. One comment urged the Commission to keep the existing 
limitation that requires reporting only those acquisitions of more than 
$10 million in total assets and annual net sales in the year prior to 
the acquisition as a way to eliminate the burden of reporting a large 
number of extremely small transactions that are competitively 
insignificant. One comment suggested maintaining the current $10 
million threshold for prior acquisitions but exempting certain, 
specified NAICS codes related to emerging technology sectors from the 
threshold.
    Yet another commenter suggested the Commission broaden its proposed 
rule to include prior acquisitions based on three-digit NAICS codes, 
rather than relying on six-digit NAICS code overlaps, which the 
commenter found to be often too narrow or imprecisely defined. The 
Commission acknowledges that three-digit NAICS codes would include more 
prior acquisitions and present a broader picture of the competitive 
landscape. But because prior acquisitions also include products or 
services described in the Overlap Description, which in some instances 
may encompass a broader set of acquisitions than reliance on NAICS 
codes alone, the Commission declines to use three-digit NAICS codes as 
the standard.
    In sum, the Commission has determined that the reporting 
requirements for prior acquisitions contained in the final rule are 
necessary and appropriate to enable the Agencies to identify 
transactions in which the merging parties are engaged in a pattern or 
strategy of roll-up acquisitions and that the requirement, as modified, 
has been tailored to reduce the cost of reporting as much as 
practicable.

K. Additional Information

1. Subsidies From Foreign Entities or Governments of Concern
    While the Commission did not receive any comments objecting to the 
proposed new defined terms ``foreign entity or

[[Page 89326]]

government of concern'' and ``subsidy'' discussed in section IV.B., it 
did receive several comments about the reporting requirements included 
in the proposed Instructions. One commenter objected that the Committee 
on Foreign Investment in the US (``CFIUS'') already is tasked with the 
review of certain transactions involving foreign investment in the 
United States and that requiring information about foreign subsidiaries 
in the HSR form would add to the burden of notifying parties (and the 
Agencies) without providing concurrent value for the substantive 
antitrust analysis. In response to this comment, the Commission notes 
that it must defer to Congress in implementing the requirement to 
report information about foreign subsidies in the HSR Form.
    Another commenter suggested introducing a de minimis threshold so 
that the reporting obligation is limited to only those subsidiaries 
from foreign governments and entities of sufficiently large amounts to 
potentially distort the competitive process in markets in the United 
States in which the merging parties compete. Citing the EU Foreign 
Subsidies Regulation as an example, this commenter claimed that such a 
threshold would save merging parties the burden of compiling small 
subsidy amounts that could not be expected to result in competition 
concerns. The Commission acknowledges that a de minimis requirement may 
indeed make sense as part of the information required, but Congress did 
not provide for a de minimis threshold, and the Commission does not yet 
have sufficient data to make that determination or establish an amount 
at this time. Once the Agencies have begun to receive information about 
foreign subsidies, the Commission can revisit this issue, if warranted.
    Finally, a comment from a senator and a representative noted that 
information about the financing activities of merging parties would 
also be useful in addressing a host of national security challenges and 
encouraged the Agencies to share such information with other 
governmental bodies, including Congressional committees. The Commission 
agrees the Agencies should facilitate this kind of information sharing 
to the extent permitted by current law, regulations, guidelines, and 
practices governing information sharing within the Federal government.
2. Defense or Intelligence Contracts
    The Commission proposed creating a Defense or Intelligence 
Contracts section that would require filing persons to report 
information related to certain contracts with defense or intelligence 
agencies to speed up outreach to those agencies related to the reported 
transaction. As proposed, both the acquiring and acquired person would 
have been required to identify whether they have existing or pending 
procurement contracts with the Department of Defense (``DoD'') or 
Intelligence Community (``IC''), as defined by 10 U.S.C. 101(a)(6) and 
50 U.S.C. 3003(4), valued at $10 million or more, and provide 
identifying information about the award and relevant DoD or IC 
personnel. The Commission reasoned that for filings from companies that 
supply DoD or IC with products or services, this information would 
greatly enhance the Agencies' ability during the initial waiting period 
to identify and contact appropriate stakeholders within DoD or IC to 
seek their input as customers that might be impacted by the proposed 
transaction and to speak to knowledgeable experts about the products or 
services provided to the government by the parties. As discussed below 
and in response to concerns raised in public comments, the Commission 
adopts the proposal with modification.
    The Commission received several comments on this proposal. One 
commenter stated that the Commission provides limited explanation of 
its authority or justification for this proposed requirement and that 
it does not explain its focus on these agencies. The Commission 
responds that it proposed special reporting requirements for the 
defense and intelligence agencies because they are often the only 
customer for products and services offered by defense companies, and a 
thorough review of these transactions is a priority for the Agencies. 
Products and services sold to DoD or the IC are often unique and not 
sold to any other customer. As noted in the NPRM, the Agencies 
regularly review filings from companies that supply the DoD or the IC 
with products or services, and it is important for them to be able to 
quickly contact DoD and IC staff to collect key insights and 
information to prevent mergers that may have an anticompetitive impact. 
A recent study by the General Accountability Office highlights the 
importance of DoD's input to the Agencies regarding potential 
competition risks to the defense industrial base and DoD programs.\392\ 
The Agencies have relied on interactions with DoD personnel, and to a 
lesser extent IC personnel, to investigate and challenge defense 
mergers over the years. Without information about specific DoD or IC 
contracts or knowledge of which unit handles that contract, the 
Agencies often face difficulty and delay in identifying appropriate 
relevant personnel or stakeholders with knowledge of the contracts, 
programs, or products or services at issue.
---------------------------------------------------------------------------

    \392\ See U.S. Gov't Accountability Office, Defense Industrial 
Base: DOD Needs Better Insight into Risks from Mergers and 
Acquisitions 28 (Oct. 2023) (GAO-24-106129).
---------------------------------------------------------------------------

    Any delay in identifying the right DoD or IC personnel with deep 
knowledge of complex and highly sensitive programs hinders the 
Agencies' ability to identify and fully assess competition issues in 
the reported transaction that would impact DoD or IC programs or 
budget. The Commission has determined that to be fully proactive about 
these concerns, and to seek DoD or IC input at an early stage of the 
inquiry, parties with certain pending or current DoD or IC contracts 
need to provide that information with their notification. Although the 
Agencies are also attentive to any merger that may affect purchases by 
other parts of the government, these transactions involve products and 
services that are also sold to commercial customers and can be 
investigated using our standard approach.
    Beyond this comment on the general focus of the requirement, 
commenters addressed three primary areas of concern: vagueness, 
confidentiality, and the burden of compliance. First, commenters 
expressed concern about the lack of clarity in the proposed rule, for 
instance pointing out that neither the NPRM nor the cited statutes 
define what constitutes a ``pending'' procurement contract. This 
commenter suggested that, to avoid this ambiguity, the new rule should 
apply only to active procurement contracts, not pending contracts. The 
Commission agrees there is a need to clarify which contracts should be 
reported and modifies the Final Rule to require reporting for (1) 
pending proposals submitted to the U.S. Department of Defense or any 
member of the U.S. intelligence community, as defined by 10 U.S.C. 
101(a)(6) or 50 U.S.C. 3003(4), and (2) awarded procurement contracts 
with the U.S. Department of Defense or any member of the U.S. 
intelligence community, as defined by 10 U.S.C. 101(a)(6) or 50 U.S.C. 
3003(4). The Commission declines to limit the reporting requirement to 
active contracts only. Submission of a proposal indicates that the 
filer is a competitor, regardless of

[[Page 89327]]

whether it is ultimately awarded the contract. The Commission believes 
that these changes address some of the ambiguities raised by 
commenters.
    According to one commenter, it is not clear what method of 
valuation should be used to determine if a contract is valued at $10 
million or more, particularly for open-ended supply contracts. First, 
as discussed below, the Commission increases the threshold to $100 
million. Second, the Commission clarifies that filers should use the 
maximum estimated quantity or value in their proposed or awarded prices 
to determine the estimated value of the contract. Otherwise, filers 
should use reasonable judgment in determining how to value their 
contracts and may explain the method of valuation used.
    With respect to confidentiality concerns, one commenter stated that 
it is not clear how a company may provide this information without 
violating Federal laws and regulations restricting the dissemination of 
such sensitive information. Commenters proposed suggestions to avoid 
such conflicts. For instance, one suggested that the proposed 
instruction should be clarified to exclude any contracts that are 
classified or otherwise subject to a government-imposed duty of 
confidentiality. Another recommended that the Agencies consider the 
appropriateness and potential applicability of a national security 
exception to certain requirements within this proposed rule.
    As an initial matter, the Commission notes that there is nothing in 
the HSR Act that overrides the protections due classified information, 
and the Commission specifically intends to not require the submission 
of classified information. To alleviate concerns about the sensitivity 
of the information related to these contracts, the Commission revises 
the Instructions to expressly state that parties should not include 
classified information but that they should note when responsive 
information is withheld on that basis. The Commission believes that 
this modification addresses the concerns raised in the comments and 
preserves protections for classified information. The Commission 
declines to adopt the proposal to exclude any contracts that are 
classified or otherwise subject to a government-imposed duty of 
confidentiality. The fact that the parties have submitted a proposal in 
response to a request from DoD or the IC or have an existing contract 
is not classified information. Such an exclusion is overbroad and would 
not allow the Agencies the benefit of reviewing non-classified 
information related to these pending proposals or active contracts. The 
Commission believes that the revision stating that parties should not 
include classified information in their submissions addresses this 
issue. For the same reason, the Commission declines to adopt the 
proposal to create a national security exception to the rule. The 
confidentiality provisions of the Act provide sufficient protection for 
any confidential but unclassified information about these documents. 
The Commission additionally notes that many of the products and 
services the Agencies investigate have similar national security 
implications even if they involve customers other than DoD or the IC.
    As to the burden of complying with this requirement, one commenter 
noted that the requested information is often not maintained in the 
ordinary course of business, nor is it created in the course of a deal 
negotiation, and that due to confidentiality concerns, these data are 
often not centrally maintained and may not be known, even among senior 
leadership. To limit the burden, one commenter recommended that the 
requested information be limited to those DoD or IC contracts with a 
primary NAICS code for which the filing parties have identified NAICS 
overlaps or that the Agencies obtain this information from the Federal 
Procurement Data System.
    To reduce the cost of complying with this request, and in light of 
the general concern that classified materials are not widely known or 
shared, the Commission makes two significant modifications to limit the 
scope of this requirement. In line with the proposal above, the 
Commission limits the set of responsive contracts to those involving a 
6-digit NAICS industry code overlap or a product or service described 
in the Overlap Description or the Supply Relationships Description. The 
Agencies' need for information about pending or active DoD or IC 
contracts is directly related to the specific antitrust risks 
associated with the transaction, and limiting this information in this 
way targets the most relevant contracts, if they exist. In addition, in 
response to concerns that the $10 million de minimis level will require 
reporting for purchases by DoD or the IC of mundane products and 
services, rather than critical defense purchases, the Commission has 
determined to increase the de minimis threshold for these contracts 
from $10 million to $100 million. The Commission believes that this is 
the appropriate threshold for limiting this request to products that 
are uniquely sold to the DoD or the IC. The Commission declines to make 
any modification in response to the suggestion that the Agencies get 
this information from the Federal Procurement Data System. It is not 
feasible for the Agencies to rely on discovering critical DoD or IC 
proposals or contracts from this database for the purpose of 
identifying key personnel at those agencies and obtaining information 
about complex products and services during the initial waiting period. 
This information is known by the parties and easy to verify, especially 
with the limitation that the contracts be worth more than $100 million 
annually. Contracts or commitments of this size are likely subject to 
close monitoring.
    In addition, to further reduce the burden of this requirement, the 
Commission excuses select 801.30 transactions from reporting 
information related to DoD or IC proposals or contracts. These 
transactions do not involve an agreement between the parties.
    Finally, two commenters noted a typographical error in the proposed 
Instructions: the reference to 50 U.S.C. 3033(4) should refer to 50 
U.S.C. 3003(4). The Commission revises the instructions to correct the 
typographical error noted by the commenters.
    In sum, the Commission has determined that the reporting 
requirements for pending proposals and active contracts with DoD or the 
IC contained in the final rule are necessary to provide the Agencies 
with the ability to identify transactions in which the merging parties 
are providing critical products or services to the government and to 
quickly reach out to those agencies for their input. The requirement, 
as modified, has been appropriately tailored to reduce the cost of 
reporting as much as practicable.
3. Voluntary Waivers
    The Commission proposed amending the Instructions to allow filing 
persons to waive the confidentiality provision contained in the Act, 15 
U.S.C. 18a(h), for any non-U.S. competition authorities or State 
Attorneys General they identify. As stated in the NPRM, allowing filers 
to waive the confidentiality protections in the HSR Filing would 
provide an efficient mechanism for filers to consent to limited waivers 
of confidentiality at the outset of any agency review to facilitate 
early cooperation among competition enforcers. The proposed voluntary 
waivers would allow the Agencies to disclose the existence of an HSR 
Filing and the information contained in the HSR Filing, but only for 
those non-U.S. competition authorities or State Attorneys General 
identified by the filing person. The

[[Page 89328]]

Commission also proposed modifying the language that would inform 
filers about potential disclosures based on the waivers to track the 
language of the Act more closely. As discussed below, the Commission 
adopts this proposed change with modifications.
    The Commission received three comments addressing this proposal. A 
group of State Attorneys General, who would be the recipients of HSR-
related information if filers granted access on a voluntary basis, 
encouraged the Commission to consider three changes. First, they 
proposed requiring filing persons to identify the relevant States where 
the parties do business, regardless of whether they opt to provide 
waivers or check the box. Second, they encouraged the Agencies to, by 
default, disclose to the public the fact of filing and the expiration 
date of the waiting period. They argued that nothing in the HSR Act 
requires that the fact of filing and the waiting period be kept 
confidential and that this information should not be treated as such. 
The comment urged the Agencies to exercise their authority to disclose 
this information to the public or to the States. They recommended that 
to avoid disclosure, the parties should have to provide a basis for 
keeping the fact and timing of the filing confidential. If the Agencies 
adopted the second proposal, they also encouraged the Agencies to 
include a check box to allow parties to waive confidentiality of the 
information and documents filed with the notification so that these 
materials could be shared with affected States. Third, if the Agencies 
chose not to adopt the above recommendation regarding public 
disclosure, the State antitrust enforcers suggested disaggregating the 
check box into two separate boxes, one to allow disclosure of the fact 
of filing and the associated waiting period and another to allow 
sharing of the information and documents in the filing with affected 
State Attorneys General. They stated that disaggregating the check box 
increases the likelihood that States at least receive notification of 
the transaction.
    The Agencies have historically not publicly disclosed or provided 
to the States or international enforcers information regarding HSR 
filings, including the fact that a filing was made and the waiting 
period, in the absence of a waiver from the parties. Without weighing 
on the merits of the States' legal arguments regarding the scope of the 
HSR Act's confidentiality protections, the Commission at this time 
believes it is appropriate to maintain its prior practice. The 
Commission does adopt the States' suggestion to disaggregate the waiver 
check boxes, which would allow for greater flexibility in providing the 
Agencies consent to disclose and provide filers with the option to 
disclose some information but not all information contained in the HSR 
Filing.\393\ The waiver would apply only to those non-U.S. competition 
authorities or State Attorneys General selected by the filing person. 
The Commission declines to adopt the proposal by the State antitrust 
enforcers to require parties to identify the relevant States where they 
do business, regardless of whether they waive confidentiality. The 
Commission will likely receive much of this information through the new 
requirements contained in the final rule.
---------------------------------------------------------------------------

    \393\ The Commission's implementation of this suggestion differs 
from the text proposed by the States. The Commission does not adopt 
the States' suggestion, with respect to the fact of filing and the 
waiting period, that, in order to prevent disclosure, the parties be 
required to affirmatively check a box and provide a basis for 
keeping the information confidential.
---------------------------------------------------------------------------

    The Commission received two other comments on this proposal. One 
commenter expressed concern about confidential information becoming 
publicly known once it is shared more widely due to the increased risk 
of leaks. On this point, the Commission notes that these waivers are 
voluntary. The parties can decide not to waive confidentiality if they 
have concerns about confidentiality. Further, the Agencies take 
seriously the confidentiality requirements of the Act and require law 
enforcement colleagues to abide by these protections. In the many 
decades of case cooperation pursuant to voluntary waivers, these 
protections have worked to prevent improper disclosures. The Commission 
believes that concerns about an increased risk of leaking due to the 
option to waive confidentiality at the time of filing are unfounded.
    Finally, according to one commenter, the proposed rule appears to 
contemplate a single check box that does not permit notifying parties 
to communicate their willingness to waive confidentiality as to some 
international competition authorities but not as to others. The 
Commission notes that this commenter misunderstands the requirement and 
clarifies that the voluntary waiver will only apply to those 
jurisdictions that the party affirmatively indicates in the HSR Filing. 
In addition, failure to check either box or indication of only a few 
jurisdictions for waivers does not prevent the parties from providing 
these waivers or adding jurisdictions later. The inclusion of these 
waiver options in the Form is simply meant to serve as an efficient 
mechanism for filers to provide their clear consent at the outset even 
if only on a limited basis.
    The Commission did not receive any comments regarding the proposal 
to modify the language informing filers about potential disclosures 
based on the waivers to track the language of the Act more closely. 
Thus, the Commission adopts this change as proposed.
    In sum, the Commission has determined that offering the option for 
parties to waive the confidentiality provisions of the Act to allow for 
the sharing of HSR materials with non-U.S. jurisdictions or State 
enforcers in the final rule will provide a benefit to the Agencies in 
facilitating case cooperation at an early stage in the Agencies' 
assessment of antitrust risk. The option, as modified, has been 
tailored to provide a clear choice for filers who wish to facilitate 
the sharing of information by providing a waiver.
4. Identification of Communications and Messaging Systems
    In conjunction with the proposed requirement that filing persons 
certify they have taken steps to prevent destruction of relevant 
information, as discussed in section VI.L., the Commission also 
proposed that filers identify and list all communications systems or 
messaging applications on any device used by the filing person that 
could be used to store or transmit information or documents related to 
its business operations. The Commission does not adopt this proposal.
    In the proposed rule, the Commission reasoned that, as companies 
have increasingly been relying on new forms of communication to do 
business and make key operational decisions, these communications 
systems have become an important part of the Agencies' investigations. 
In the Agencies' experience, these systems contain highly relevant 
information on the transaction itself, as well as on topics that are 
critical for the Agencies' assessment of the transaction such as 
competition, competitors, markets, customers, and industry 
characteristics. Nevertheless, many parties do not appear to fully 
understand or comply with document preservation obligations for these 
new modalities.
    The Commission received several comments on this proposal, mainly 
regarding the burden of the request and its utility in screening for 
anticompetitive transactions during the initial waiting period. 
Multiple commenters expressed doubt about the Commission's assertion 
that this

[[Page 89329]]

information is readily available to the filing person and that 
identifying these systems would impose minimal burden. One association 
of antitrust practitioners noted that because there is no limitation on 
the requirement, large or diffuse organizations may have hundreds of 
communications systems that would require identification but are 
unknown or unused by the filing person's employees who are involved in 
preparing the HSR filing. One commenter also flagged the inevitable 
complications caused by, for example, special IT systems, legacy IT 
systems, and individual employees who do not follow corporate IT 
policies. According to another, the process of gathering this 
information often requires the expertise of counsel and entails 
interviews of key employees as well as a careful review of company 
practices and policies. As a result, this commenter stated that the 
burdens associated with the additional requirements would fall more 
harshly on small companies that are not equipped to navigate the 
regulatory process. In addition, comments also objected that the 
information requested would not assist the Agencies in determining 
whether to issue a Second Request. They noted that the identification 
of these systems is best reserved for the transactions that are 
investigated as is the Commission's current practice when issuing 
Second Requests.
    After carefully considering these comments, and as part of its 
overall effort to reduce burden on filing parties, the Commission does 
not adopt this proposal. The Commission notes, however, that the 
Agencies have taken steps to update their guidance related to 
obligations to preserve ephemeral messages and similar communications 
systems, and have provided language in the Model Second Request to 
reflect document production and retention obligations for these 
communication systems.\394\ Based on this guidance, companies that take 
steps to preserve information related to these communications systems 
may reduce the likelihood that they will face consequences for non-
compliance with a Second Request.
---------------------------------------------------------------------------

    \394\ See Press Release, U.S. Dep't of Justice, ``Justice 
Department and FTC Update Guidance that Reinforces Parties' 
Preservation Obligations for Collaboration Tools and Ephemeral 
Messaging'' (Jan. 26, 2024), https://www.justice.gov/opa/pr/justice-department-and-ftc-update-guidance-reinforces-parties-preservation-obligations. See also Fed. Trade Comm'n, ``Slack, Google Chats, and 
other Collaborative Messaging Platforms Have Always Been and Will 
Continue to be Subject to Document Requests,'' Fed. Trade Comm'n 
Competition Matters blog (Jan. 26, 2024), https://www.ftc.gov/enforcement/competition-matters/2024/01/slack-google-chats-other-collaborative-messaging-platforms-have-always-been-will-continue-be-subject.
---------------------------------------------------------------------------

L. Certification

    Each HSR Filing is accompanied by a notarized certification, signed 
by the person preparing or supervising the preparation of the filing. 
The person signing the certification attests to the veracity of the 
information submitted in the filing. The Commission proposed amending 
this certification to require filers to affirm that they have taken the 
steps necessary to prevent the destruction of documents and information 
relevant to the transaction. The Commission also proposed adding 
language to the Instructions to remind filers that criminal statutes 
prohibit practices that impede or frustrate functions of government 
agencies, such as submitting false information. This proposal would 
require most HSR filers to establish new document retention policies or 
revise existing policies prior to filing. As explained in the NPRM, the 
deletion of information or documents that could be called for in a 
Second Request could lead to a loss of information critical to the 
Agency's ability to conduct an in-depth investigation.
    The Commission received approximately ten comments on this 
proposal. Some commenters noted that the proposed rule would expand 
document preservation beyond current law, which obligates parties to 
preserve documents and information related to an ongoing or anticipated 
government investigation \395\ or if they have a reasonable 
anticipation of litigation.\396\ Commenters noted that very few filers 
have an obligation to preserve information about the transaction since 
they are not yet under investigation and do not have a reasonable 
anticipation of litigation.
---------------------------------------------------------------------------

    \395\ Federal law provides serious criminal penalties, including 
up to twenty years imprisonment, for any person who knowingly 
alters, destroys, mutilates, conceals, covers up, falsifies, or 
makes a false entry in any record, document, or tangible object with 
the intent to impede, obstruct, or influence an ongoing or 
anticipated Federal investigation. See, e.g., 18 U.S.C. 1519.
    \396\ Zubulake v. UBS Warburg LLC, 220 FRD. 212, 218 (S.D.N.Y. 
2003) (holding that once a party reasonably anticipates litigation, 
it must suspend its routine document retention/destruction policy 
and put in place a litigation hold to ensure the preservation of 
relevant documents).
---------------------------------------------------------------------------

    Commenters also described the burden, particularly the cost, 
associated with document preservation obligations. Several commenters 
explained that litigation holds are expensive and difficult to design 
and implement, especially concerning the breadth of documents and 
information that would be subject to a hold. One commenter noted that a 
document hold does not simply encompass the suspension of auto-delete 
policies, can be difficult and expensive to implement with precision, 
and typically extends to individuals, databases, communication systems, 
and materials beyond the scope of the transaction. Another pointed out 
that data is expensive to store and that filers would be required to 
retain documents that cover large components of their day-to-day 
operations. According to one commenter, at the time of filing, the 
notifying party may not know enough about what issues will be of 
interest to the Agencies to identify a set of custodians who are likely 
to have information related to the proposed transaction.
    After carefully considering the comments, the Commission has 
determined not to adopt this proposal. The Commission notes that, under 
current law, when litigation is reasonably foreseeable, parties have an 
obligation to preserve documents relating to the proposed transaction. 
This obligation could arise before or after HSR filing. In addition, it 
is a Federal crime for any person to knowingly alter, destroy, 
mutilate, conceal, cover up, falsify, or make a false entry in any 
record, document, or tangible object with the intent to impede, 
obstruct, or influence an ongoing or anticipated Federal 
investigation.\397\
---------------------------------------------------------------------------

    \397\ See 18 U.S.C. 1519.
---------------------------------------------------------------------------

    The Commission also received a few comments on the addition of 
language reminding the filer of potential criminal liability under 
other Federal statutes that prohibit various deceptive practices aimed 
at frustrating or impeding the legitimate functions of government 
departments or agencies. Commenters raised general concerns about how 
this language could alter how filers prepared their notification. One 
commenter stated that when read together with the requirement to 
preserve documents, the reminder of criminal penalties would prevent 
filers from instituting a tailored legal hold. Another stated that it 
seems to suggest that filers should fully expect a harsh and punitive 
response to filing errors. Commenters primarily noted that the added 
language merely restated existing law. Given that the proposed 
certification on criminal liability does not increase the burden or 
cost of filing and may have a benefit of putting some unaware filers on 
notice of possible criminal penalties, the Commission adopts this 
proposal as a simple restatement of existing penalties.

[[Page 89330]]

M. Affidavit

    As discussed in section V.D., the Commission proposed requiring 
filings for transactions without definitive agreements to include a 
term sheet or draft agreement that describes with specificity the scope 
of the transaction that would be consummated. In conjunction with that 
proposal, the Commission also proposed that parties making such filings 
attest in their affidavit that a term sheet or draft agreement that 
describes with specificity the scope of the transaction that will be 
consummated has been submitted with the executed letter of intent or 
agreement in principle.
    As described above, the Commission modified the proposal and has 
made a conforming change to this section of the Instructions as part of 
the final rule.

VII. Severability

    In the NPRM, the Commission noted that Sec.  803.90 contains a 
separability (or severability) provision such that, if any provision of 
the Rules (including the Form) or the application of any such provision 
to any person or circumstance is held invalid, the other provisions of 
the Rules and their application to other persons or circumstances shall 
be unaffected.
    The Commission did not propose any changes to the severability 
provision in Sec.  803.90 and does not adopt any changes. However, as 
it did in the NPRM, the Commission confirms its intent that, if a court 
were to invalidate any provision, any part of any provision, or any 
application of the final rule, the remainder of the final rule would 
remain in effect to the greatest extent possible. The Commission's 
general view is that each substantive requirement of the final rule is 
severable from each of the others. The Agencies need the information 
requested by the final rule for the reasons discussed above. Each 
requirement in the final rule serves an important, related, but 
distinct purpose and provides a distinct benefit separate from, and in 
addition to, the benefit provided by other requirements. However, if a 
court finds that certain provisions are invalid, the following analysis 
applies.
    The Commission notes that some reporting requirements are 
contingent upon filers reporting overlapping products or services in 
(1) the Overlap Description; (2) the Supply Relationships Description; 
and (3) the same NAICS codes. The severability of these reporting 
requirements are as follows:
Officers and Directors
    If product or service overlaps are identified in the Overlap 
Description or Supply Relationships Description, the final rule 
requires the acquiring person to list officers and directors (or in the 
case of unincorporated entities, individuals exercising similar 
functions), and those who have served in the position within the past 
three months for each entity within the acquiring person responsible 
for the development, marketing, or sale of products or services that 
are identified as overlaps and who have also served in these roles with 
the target. The Commission does not view this requirement as severable 
from the Overlap or Supply Relationships Descriptions. However, the 
Commission's view is that the two other reporting requirements 
regarding Officers and Directors are severable and would remain if the 
Overlap or Supply Relationships Descriptions are held invalid. These 
are the requirements to (1) list all individuals likely to serve as, 
nominate, or appoint an officer or director of the acquiring entity 
(and the accompanying requirements); and (2) for each officer and 
director identified, list all other entities operating in commercial 
activities in the same NAICS codes reported by the target for which the 
individual currently serves as an officer or director. The Agencies 
need the information in the first requirement for the reasons discussed 
above in sections II.B.1. and VI.D.3.c., and this first requirement 
would not be affected by invalidation of the Overlap or Supply 
Relationships Descriptions. With respect to the second requirement, the 
Commission has long required reporting of NAICS code information, and 
the reporting of NAICS code information stands independent of, and can 
operate separately from, the Overlap or Supply Relationships 
Descriptions. The changes the Commission has finalized here are modest 
and do not significantly alter the existing requirement to report 
certain NAICS code information. Accordingly, the Commission believes 
that the requirement to report certain officer and director information 
in any identified NAICS code overlap would stand even if either (1) the 
Overlap or Supply Relationships Descriptions were held invalid, or (2) 
any of the final rule's changes regarding NAICS code reporting were 
invalidated.
Prior Acquisitions
    Filers (both acquired and acquiring persons) are required to report 
certain information regarding prior acquisitions that (1) derived 
revenue in an identified NAICS code overlap or (2) provided or produced 
an overlap product or service as described in the Overlap Description. 
If the Overlap Description is invalidated, the Commission does not view 
the second part of the Prior Acquisitions reporting requirement as 
severable from that reporting requirement. However, the first 
requirement regarding derived revenue in an identified NAICS code 
overlap would remain in place, for the same reasons discussed 
previously in connection with the severability of the Officers and 
Directors requirement.
Defense or Intelligence Contracts
    Filers are required to identify (1) proposals submitted to the U.S. 
Department of Defense or any member of the U.S. intelligence community, 
and (2) awarded procurement contracts with the U.S. Department of 
Defense or any member of the U.S. intelligence community, valued at 
$100 million or more, that (A) are or will be the source of revenues in 
any identified NAICS code overlap or (B) involve or will involve an 
overlapping product or service identified in the Overlap Description or 
the Supply Relationships Description. If the Overlap or Supply 
Relationships Descriptions are invalidated, the Commission does not 
view the portion of the Defense or Intelligence Contracts reporting 
requirement referring to the Overlap or the Supply Relationships 
Descriptions as severable from those reporting requirements. However, 
the portion requiring the reporting of certain information in any 
identified NAICS code overlap would remain in place, for the same 
reasons discussed previously in connection with the severability of the 
Officers and Directors requirement.
Annual Reports and Audit Reports for Acquiring Entities
    The final rule requires the acquiring entities whose revenues 
contribute to a NAICS code overlap or any overlap identified in the 
Overlap Description to provide the most recent annual report or audit 
report and CIK number if annual reports are filed with the SEC. If the 
Overlap Description is invalidated, the Commission does not view the 
portion of the Annual Reports and Audit Reports requirement referring 
to the Overlap Description as severable from the requirement to provide 
an Overlap Description. However, the portion requiring annual reports 
or audit reports relating to NAICS code overlap would stand, for the 
same reasons discussed previously in connection with the

[[Page 89331]]

severability of the Officers and Directors requirement.
Author Information for Business Documents
    For Business Documents, if (1) a NAICS code overlap has been 
identified, (2) an overlap within the Overlap Description has been 
identified, or (3) a supply relationship within the Supply 
Relationships Description has been identified, filers must provide 
certain information about the author of the documents. If the Overlap 
or Supply Relationships Descriptions are invalidated, the Commission 
does not view the portions of the Author Information requirement 
referring to those descriptions as severable from the Overlap and 
Supply Relationships Descriptions requirements. However, the portion 
requiring the reporting of author information if a NAICS ode overlap 
has been identified would stand, for the same reasons discussed 
previously in connection with the severability of the Officers and 
Directors requirement.
    The Commission views all remaining provisions, parts of provisions, 
and applications of the final rule not specifically identified as non-
severable above to be severable. These reporting requirements would 
have been adopted individually regardless of whether the other 
reporting requirements were adopted and could function effectively 
without the other provisions. If a reviewing court were to stay or 
invalidate any reporting requirement (or part or application thereof) 
not identified as non-severable above, the Commission states its intent 
to have adopted the remainder of the final rule.

VIII. Paperwork Reduction Act

    On June 29, 2023, the Commission published its intention to submit 
the proposed rule and the associated Supporting Statement to OMB for 
review under the Paperwork Reduction Act of 1995 (``PRA''), 44 U.S.C. 
3501 et seq.\398\ The Commission emphasized that some of the proposed 
changes were intended to reduce the burden of filing \399\ and that 
other proposed changes offered clarifications to the current rules and 
were unlikely to change the burden on filers.\400\ Further, the 
Commission highlighted proposed changes that would require a filer to 
collect and report information kept in the filer's ordinary course of 
business records, minimizing the burden of new collection 
requirements.\401\ The Commission noted that many of the proposed 
changes would increase the burden on all filers; \402\ the Commission 
also noted that some of the proposed changes would significantly 
increase the burden on only certain filers.\403\
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    \398\ 88 FR 42178, 42207-08 (June 29, 2023).
    \399\ Id. at 42,207 (e.g., the proposal to report NAICS codes in 
ranges rather than by specific dollar amount).
    \400\ Id. (e.g., the proposal to eliminate references to paper 
and DVD filings).
    \401\ Id. (e.g., the proposal to require the reporting of 
minority investors in additional entities related to the filed 
transaction).
    \402\ Id. (e.g., the proposal to require narratives regarding 
transaction rationale).
    \403\ Id. (e.g., filers whose businesses have existing 
horizontal, non-horizontal, or labor market overlaps or 
relationships).
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    In conducting the PRA analysis for the proposed rule, in order to 
estimate the projected change in burden due to the proposed changes and 
to provide a baseline for public comment, PNO staff consulted current 
Agency staff attorneys who had previously prepared HSR filings for 
clients while in private practice. These experienced attorneys provided 
estimates of how many hours the proposed changes would require, 
depending on the complexity of the filing at issue. To estimate an 
average number of additional hours, the Commission conservatively 
assumed that 45% of HSR filings would be highly complex and 55% would 
be less complex. The Commission next multiplied the average estimate of 
additional hours per filing (107 hours) by the 7,096 non-index HSR 
filings that the Commission projected it would receive in FY 2023.\404\ 
Finally, the Commission multiplied the total hours by an estimate of 
the hourly rate for executive and attorney compensation ($460/hour).
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    \404\ In January 2023, the Commission requested a three-year 
extension of its PRA clearance for information collection 
requirements related to the existing HSR rules, which was approved 
by OMB on February 23, 2023, through February 28, 2026 (OMB Control 
Number 3084-0005). See 88 FR 3413, 3414 (Jan. 19, 2023). At that 
time, FTC staff projected an average of 7,096 non-index filings per 
year for fiscal years 2023-2025. This estimate of 7,096 non-index 
filings was based on the fact that the FTC received 6,518 non-index 
filings in fiscal year 2022 and had experienced an average annual 
increase in filings of 4.3% in the pre-COVID fiscal years 2017-2019. 
Actual non-index filings in FY 2023 totaled 3,515. See Fed. Trade 
Comm'n & Dep't Just., Hart-Scott-Rodino Annual Report, Fiscal Year 
2023 appendix A (FY 2023).
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    The Commission received numerous public comments referencing the 
NPRM's PRA burden analysis. One commenter supported the analysis, 
noting that the increase in the estimated time required to prepare an 
HSR filing is ``inconsequential,'' even ``trivial'' considering that 
these reporting requirements only apply to transactions valued at more 
than the reporting threshold. This commenter further asserted that it 
is appropriate to shift costs from the Agencies to the merging parties.
    Some commenters, however, criticized the Commission's analysis for 
significantly underestimating the extent of the burden, and many raised 
concerns about the methodology employed by the Commission to calculate 
such burden. For instance, they raised concerns that the estimates are 
not based on empirical data or discussions with current practitioners; 
and that the Commission's methodology is non-verifiable, and thus not 
subject to empirical validation. They also argued that Agency staff's 
prior experience in preparing HSR filings is not relevant given the 
wholly different and new information requested under the proposed rule. 
One commenter called the Commission's approach biased and inaccurate, 
stating that there is no indication that Agency staff relied on any 
data when trying to create an estimate based on memories from past 
private practice. Additionally, several commenters also criticized the 
Commission's explanation of its PRA analysis. With respect to the 
survey of Agency staff, one commenter stated that the Commission failed 
to provide basic information, such as the number of staff surveyed, who 
these staff are, their level of experience in preparing HSR filings, 
when they last prepared HSR filings, and the results of the survey. 
Another commenter stated that it had no context for what the median 
might be for filings to better understand whether the low and high ends 
are outliers or the anticipated typical experience.
    The Commission carefully reviewed the comments asserting that its 
analysis underestimated the extent of the cost and delay that would be 
imposed if the Commission adopted the proposed rule. The Commission was 
persuaded by commenters who asserted that the PRA analysis in the NPRM 
underestimated the time and expense associated with the proposed rule. 
To address commenters' concerns and recognizing the changes from the 
proposal discussed above in section II, the estimates are revised as 
reflected below.
    As outlined in section I and discussed more fully in sections IV to 
VI above, the Commission has not adopted certain requirements in the 
proposed rule in an effort to reduce compliance costs, and has also 
modified other proposed requirements in a manner that reduces the 
burden in certain respects. Specifically, the Commission is not 
adopting proposals that would have required a timeline of key dates for 
closing the proposed transaction; organization charts; certain 
information about other interest holders; drafts of

[[Page 89332]]

submitted documents; information about employees; information about 
board observers; geolocation information; prior acquisitions involving 
entities with less than $10 million in sales or revenues or consummated 
more than 5 years prior to filing; and information about steps taken to 
preserve documents or use of messaging systems. These items were 
frequently cited by commenters as unduly burdensome. While this 
information is relevant to the Agencies' premerger assessment, the 
Commission has determined it can forgo requiring this information at 
this time. The Commission also has modified, in some instances 
substantially, many other proposed information requirements, which will 
reduce the burden on filers to collect and report this information. As 
a result, the information requirements contained in the final rule are 
significantly less burdensome than those reflected in the proposed 
rule, and the costs imposed on filers are thus reduced as compared to 
the proposed rule.
    Before finalizing the changes adopted in the final rule, the 
Commission undertook a new survey of Agency staff that responds to 
comments critiquing the estimate in the NPRM and implemented several 
improvements to its methodology, as explained below. The Commission 
believes that in light of these improvements, the estimates of the 
incremental costs associated with the final rule are reliable and 
consistent with survey techniques used by others to calculate the 
burden of filling out a form.\405\
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    \405\ This same survey technique, asking experienced HSR 
practitioners to estimate the time required to comply with the new 
information requirements in addition to other costs, was used in the 
Kothari Report, discussed below.
---------------------------------------------------------------------------

    The new survey included 15 current FTC and DOJ attorneys who have 
recent experience preparing HSR filings in private practice. The 
Commission asked each survey participant to estimate, based on their 
own experience with preparing HSR Filings, the incremental change in 
hours that would be required to respond to each of the new and updated 
items in the final rule. They were also asked to estimate how much time 
would be saved by no longer having to provide information for current 
requirements that are not included in the final rule. The survey 
participants were provided with (1) the current HSR Form and 
Instructions; (2) the HSR Form and Instructions for both acquiring and 
acquired persons for the final rule; (3) a spreadsheet listing each of 
the new, updated, and eliminated items for three categories of 
transactions; and (4) instructions regarding how to input their 
responses.
    The survey participants provided estimates for the amount of time 
required to collect and submit information responsive to each of the 
new and updated items in the final rule, separately for acquiring and 
acquired persons, and separately for three types of HSR-reportable 
transactions that reflect varying levels of complexity and antitrust 
risk: (1) the new category of select 801.30 transactions; (2) 
transactions with no reportable competitive overlaps (e.g., where an 
investment fund is buying or selling a portfolio company with no NAICS 
or competitive overlap or supply relationship); and (3) transactions 
where the parties report at least one NAICS code overlap or have an 
existing overlap or supply relationship (referred to below as 
``overlap'' filings). They were asked to estimate the incremental 
change in costs of complying with each new and adjusted information 
requirement contained in the final rule in each of the categories and 
for each type of filer. Also, for each item, the survey participants 
were asked to indicate what percentage of the additional time required 
would be time spent by company personnel as compared to a law firm 
hired to prepare the HSR Filing or any third parties that would need to 
be hired to complete the HSR Form (e.g., data vendors).
    In generating their estimates, the survey participants were asked 
to consider all time spent to complete the HSR Form,\406\ including 
time spent reviewing the HSR Instructions; generating and compiling the 
materials necessary for collection; acquiring, installing, and 
utilizing any necessary technology or systems; and completing and 
reviewing the collected information, among other tasks. They were also 
asked to consider whether filers would need to incur additional costs 
not necessarily measured in hours, e.g., the costs associated with new 
IT investments, long-lived facilities or equipment, related one-time 
expenditures, and other non-labor expenditures, such as attorney 
training or general HSR resources.
---------------------------------------------------------------------------

    \406\ The Commission notes that parties to acquisitions, whether 
HSR-reportable or not, may hire antitrust counsel to assess whether 
the transaction would violate any of the antitrust laws. This is a 
different task from evaluating whether a transaction requires 
notification pursuant to the HSR Act, and if so, how to comply with 
the Form and Instructions. The final rule does not require any 
information from attorneys or any other advisors to assess the 
antitrust risk of the transaction. As a result, any cost related to 
the assessment of the potential for a substantive antitrust risk, 
rather than compliance with the information requirements of the Form 
and Instructions, are not costs attributable to the final rule and 
are not included in this PRA analysis.
---------------------------------------------------------------------------

    The Commission took several steps to increase the reliability of 
its survey. First, to reduce sampling bias as much as possible, the 
Commission relied on Agency staff who have not been involved in this 
rulemaking and thus have no more familiarity with the changes to the 
HSR Form and Instructions than an attorney in private practice would 
have. As exclusion criteria, the Commission did not survey any staff 
from the FTC's Premerger Notification Office, nor any staff at either 
Agency who were part of the core team responsible for drafting the 
final rule.
    Second, the survey participants were asked to provide details about 
their experience preparing HSR filings in private practice, both in 
terms of how many years they were in private practice and the number 
and types of transactions involved. Collectively, the survey 
participants had experience with each of the three types of HSR-
reportable transactions described above. Based on the information 
provided, the survey participants with the most experience tended to 
generate a lower estimated number of hours than the average.
    The Commission believes that, with these controls, the individuals 
who provided estimates for the PRA burden assessment had sufficient 
experience with the current HSR reporting requirements and enough 
understanding of the HSR Rules and practice to make their estimates of 
incremental costs reliable.
    Based on the survey responses, the Commission finds that the 
average number of additional hours required to prepare an HSR filing 
with the changes outlined in the final rule is 68 hours, with an 
average low of 10 hours for select 801.30 transaction filings by the 
acquired person and an average high of 121 hours for filings from 
acquiring person in a transaction with overlaps or supply 
relationships. As noted, however, the estimate varies significantly 
based the type of filings, with filings that are more likely to raise 
antitrust risk requiring higher hours.
    To calculate the average number of additional hours, the averages 
of the estimates provided by respondents were calculated separately for 
each change for both the acquiring and acquired person within each 
category of transaction. These averages were then summed by category of 
transaction and then divided by two to provide category-specific 
estimated averages for an individual filer to comply with all changes. 
The overall average estimate for an

[[Page 89333]]

individual filer was calculated as a weighted average of these 
category-specific estimates for an average filer, using as weights the 
Agencies' estimate of the fraction of filings that fall into each of 
the three categories. Specifically, the Commission estimates that 8 
percent of filings will meet the definition of a select 801.30 
transaction,\407\ 45 percent will have a NAICS code overlap or an 
overlap or supply relationship identified in the Competition 
Descriptions section, and 47 percent of filings will have no overlaps 
or supply relationship.
---------------------------------------------------------------------------

    \407\ Estimated based upon a review of HSR Filings from fiscal 
years 2018 through 2022.
---------------------------------------------------------------------------

    One commenter commissioned a report (the Kothari Report, referenced 
in section III.C.2.) to estimate the additional monetary costs of the 
proposed rule and relied on a survey of company and private counsel to 
estimate the time required to comply with the new requirements of the 
proposed rule as compared to the current rules.\408\ From the responses 
to this survey, the Kothari Report estimated that the proposed rule as 
published in the NPRM would have added 101.6 hours of internal 
personnel time and 140.3 hours of outside counsel time above the 
current requirements for a total incremental increase of 241.9 hours. 
Although this estimate is substantially higher than the estimate based 
on the Commission's new survey, the Kothari Report estimated costs for 
the proposed rule, and may have included costs related to advocacy 
about whether a transaction violates an antitrust law, rather than only 
costs related to collection and submission of information required by 
the Form and Instruction, as indicated by its inclusion of costs of 
economic experts. In contrast, the Commission has estimated the 
additional time attributable to the less burdensome requirements of the 
final rule and has included in its estimates only that time that is 
required to complete an HSR Filing that is fully compliant with the Act 
and the Rules. Given the significant modifications from the proposed 
rule to the final rule that lessen the estimated burden, the Commission 
finds the results of its new survey to be generally consistent with the 
survey relied on in the Kothari Report.
---------------------------------------------------------------------------

    \408\ Comment of U.S. Chamber of Com., Doc. No. FTC-2023-0040-
0684. The Kothari Report reflects the results of a survey of 
antitrust practitioners conducted by the Chamber of Commerce seeking 
input on the proposed rule as well as the Agencies' draft merger 
guidelines. See U.S. Chamber of Com., ``U.S. Chamber HSR/Merger 
Guides Practitioner Survey'' (Sept. 19, 2023), https://www.uschamber.com/finance/antitrust/antitrust-experts-reject-ftc-doj-changes-to-merger-process. The Kothari Report was prepared by 
Professor S.J. Kothari and is appended to its comment at 54-85.
---------------------------------------------------------------------------

    Several commenters also questioned the hourly rate that the 
Commission relied on to calculate the estimated cost of compliance. One 
commenter stated that the Commission's estimate of $460 per hour may 
underestimate the blended hourly rate applicable to most HSR filings, 
particularly given attorney billing rates and that such filings often 
require senior executive participation. Another noted that the rate is 
below the nationwide average hourly rate for M&A attorneys. Others 
objected to the lack of support for the previously assumed hourly wage 
and description of how the Commission calculated the assumed hourly 
wage. One commenter suggested that a more realistic average rate for 
outside counsel is $936 per hour; however, no law firm that submitted 
comments specified a different hourly rate that should be applied.
    The Commission has carefully reviewed and considered the comments 
submitted regarding the hourly rate and has determined to apply a 
blended hourly rate of $583. To reach this number, the Commission 
consulted additional resources regarding the rates for outside counsel 
and in-house personnel. In an effort to make as few assumptions as 
possible, the Commission used current data from reliable, publicly 
available sources. Although the actual rates charged by HSR 
practitioners (and attorneys generally) are not typically publicly 
available (and no commenter provided actual rates), the Commission 
reviewed public media and industry reports to determine a range of 
approximate values that would realistically reflect the costs to 
prepare an HSR filing.
    The ELM Solutions 2023 Real Rate Report published by Wolters Kluwer 
reports data regarding the 2023 hourly rates charged by corporate M&A 
attorneys.\409\ According to the report, at firms with more than 1,000 
lawyers, the nationwide mean rate charged by partners in 2023 was 
$1,254 per hour and the nationwide mean rate charged by associates in 
2023 was $781 per hour. At firms with 501 to 1,000 lawyers, the 
nationwide mean rate charged by partners was $1,213 per hour and for 
associates it was $801 per hour. At firms with 201 to 500 lawyers, the 
nationwide mean rates were $786 per hour for partners and $519 per hour 
for associates.
---------------------------------------------------------------------------

    \409\ Wolters Kluwer's ELM Solutions, 2023 Real Rate Report 
(2023). See also Ctr. Ethics & L. Prof. at Geo. L. & Thomson Reuters 
Inst. 2024 Report on the State of the US Legal Market 11-12 (Jan. 8, 
2024) (discussing rise in law firm worked rates over the past five 
years as well as the counterinfluence of billing realization 
practices); Andrew Maloney, ``Where Are Partner Billing Rates 
Surging the Most in Big Law?,'' Am. L. (May 24, 2023) (noting a 2023 
median hourly rate for M&A partners of $955 per hour).
---------------------------------------------------------------------------

    The Commission notes that HSR filings are not typically prepared 
exclusively by M&A law firm partners or exclusively by M&A associate 
attorneys. As a result, relying on one mean rate or the other would be 
inappropriate. The WK 2023 Real Rate Report indicates that with regard 
to corporate M&A matters from 2020-2023 that resulted in 40-100 total 
billed hours, approximately 45% of the hours billed were at the partner 
hourly rate, and approximately 49% of the hours billed were at the 
associate hourly rate.\410\ The report further notes that approximately 
7% of the hours billed were at a lower paralegal hourly rate.\411\
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    \410\ Wolters Kluwer's ELM Solutions, supra note 410, at 214.
    \411\ Instead of separately estimating a paralegal hourly rate, 
the Commission conservatively estimated that the remaining 7% 
assigned to paralegals in the WK 2023 Real Rate Report would be work 
performed at the associate's hourly rate.
---------------------------------------------------------------------------

    The Commission further notes that HSR filings are not prepared 
exclusively by the largest law firms, nor is it necessary for filers to 
engage such counsel. To account for filings prepared by small to mid-
sized firms, the Commission calculated blended rates for both partners 
and associates by weighting the nationwide mean rates for firms with 
more than 1,000 lawyers (67%) and firms with 201 to 500 lawyers (33%). 
Applying the billing percentages in the WK 2023 Real Rate Report to 
those blended rates, the Commission calculated a blended rate for 
outside counsel of approximately $878 per hour.
    To generate an overall blended rate, the Commission also accounted 
for the cost of client time spent preparing the filing, which could 
include a range of employees depending on the type of business and may 
include in-house counsel. The Commission has factored in an hourly rate 
for in-house personnel of approximately $140 per hour, which reflects 
current wage data reported by the Bureau of Labor Statistics.\412\ 
Additionally, the Commission believes that 60% of the time required to 
prepare

[[Page 89334]]

the HSR filing is time spent by outside counsel and 40% is time spent 
by the client. These percentages are supported by survey results from 
Agency staff and are also consistent with the survey results in the 
Kothari Report. By weighting the hourly rates for outside counsel and 
in-house personnel accordingly, the Commission calculates an overall 
blended rate of $583 per hour. This adjusted hourly rate generally 
reflects publicly available information; however, it does not reflect 
real-world factors that would likely drive down the overall cost of 
preparing an HSR filing under the final rule (e.g., client-negotiated 
rates, discounts, write-offs, alternative fee agreements, and work 
shifted to paralegals and other support staff at substantially lower 
rates).
---------------------------------------------------------------------------

    \412\ This assumed hourly rate is based on the median wage for 
lawyers, which according to the Bureau of Labor Statistics was 
$70.08 in 2023. See https://www.bls.gov/ooh/legal/lawyers.htm. The 
Commission doubles this number to reflect the lost productivity of 
the worker. The Commission notes that a company's top executives may 
also participate in preparing or reviewing the filing; however, 
since the median wage for top executives was $49.92 in 2023, to be 
conservative the Commission values top executive time at the same 
rate as lawyer time. See https://www.bls.gov/ooh/management/top-executives.htm.
---------------------------------------------------------------------------

    Multiple commenters cited to the Kothari Report as providing a 
better estimate of the additional costs of the proposed changes and 
concluding that the true cost of the proposed rule may be many times 
greater than the NPRM suggested. But the Commission has accounted for 
many of the same costs in its own estimates, such as the time required 
from outside counsel, in-house counsel, and business personnel. Much of 
the difference in estimates is attributable to the higher hourly rate 
applied to the required hours, which the Kothari Report suggests is 
more likely $936 per hour, and a category of ``other'' costs that is 
nearly one-third of the total projected costs.\413\ These additional 
costs are attributable to ``other external costs'' that include 
economic consultants, investment bankers, and data vendors.
---------------------------------------------------------------------------

    \413\ Comment of U.S. Chamber of Com., Doc. No. FTC-2023-0040-
0684 at 74-75 (other costs estimated at $102,917, added to external 
costs of $234,259 for a total of $313,828, with other costs 33% of 
total).
---------------------------------------------------------------------------

    The Commission does not believe that there will be this level of 
additional costs outside of internal personnel and outside counsel. In 
particular, completing the new requirements contained in the final rule 
should not require the services of economic consultants or investment 
bankers. As described above, the Form and Instructions require 
information from the parties' own records. The Commission specifically 
is not seeking an analysis or post-hoc rationales developed by external 
parties. As for data vendors and similar services for the collection 
and production of the required information, in its new survey of Agency 
staff, the Commission asked the survey participants to indicate for 
each item the percentage of time that should be allocated to third 
parties that they did not otherwise attribute to time spent by outside 
counsel. Only a few of the survey participants indicated any need for 
third-party involvement--and even for those few, they estimated only a 
small percentage of time for a limited set of items (e.g., for 
translations). As a result, there is no basis to further adjust the 
Commission's estimates to account for ``other'' external costs.
    Commenters also objected that the Commission failed to consider the 
indirect costs to the economy that would result when parties are 
discouraged from pursuing clearly nonproblematic deals. The PRA does 
not require the Commission to consider potential indirect costs to the 
economy presented by the changes described in the proposed rule. Under 
the PRA, the term ``burden'' means time, effort, or financial resources 
expended by persons to generate, maintain, or provide information to or 
for a Federal agency, including the resources expended for (A) 
reviewing instructions; (B) acquiring, installing, and utilizing 
technology and systems; (C) adjusting the existing ways to comply with 
any previously applicable instructions and requirements; (D) searching 
data sources; (E) completing and reviewing the collection of 
information; and (F) transmitting, or otherwise disclosing the 
information.\414\ Comments related to indirect costs attributable to 
the final rule are discussed in section III.C.
---------------------------------------------------------------------------

    \414\ 44 U.S.C. 3502(2); see also 5 CFR 1320.3(b) (defining 
burden); U.S. General Services Administration & Office of Management 
and Budget, ``A Guide to the Paperwork Reduction Act: Estimating 
Burden,'' https://pra.digital.gov/burden/.
---------------------------------------------------------------------------

    Despite these points of disagreement, the Commission notes that its 
estimate for the increase in the average number of hours required to 
prepare an HSR filing is generally consistent with the estimates put 
forth by commenters, including in the Kothari Report, which were based 
on the proposed rule but not the final rule. The Commission believes 
that the differences in projected total costs are mainly attributable 
to (1) the significant modifications that were made to the final rule 
as compared to the proposed rule; (2) the difference in the hourly 
rates ($583 versus $936); (3) a category of ``other'' costs that unduly 
increased total costs by one-third; and (4) use of projected filings 
for FY 2023 (7,096), which the Commission now replaces in its 
calculation with the actual number of filings for FY 2023 (3,515). The 
Commission's PRA assessment for the final rule addresses concerns 
raised by the commenters related to the methodology used in the NPRM.
Net Effect
    The changes outlined in the final rule only affect non-index 
filings which, for FY 2023, totaled 3,515. As described above, the 
Commission estimates that the amendments to the HSR Rules and 
Notification and Report Form contained in the final rule could increase 
the time required to prepare responses for non-index filings, with an 
estimated average increase of 68 hours per filing. Thus, the annual 
estimated additional hours burden is 239,020 (3,515 non-index filings 
multiplied by 68 additional hours per filing). Applying the revised 
estimated hours, 239,020, to the updated hourly rate of $583 for 
executive and attorney compensation yields approximately $139.3 million 
in total additional annual costs for a year with that number of 
filings. The additional per filing cost is estimated at $39,644 (68 
hours multiplied by $583 per hour). However, the Commission believes 
that this PRA cost estimate may overestimate the actual PRA burden. For 
a variety of reasons, costs for any particular transaction are likely 
to be different from these estimates. The final rule will result in 
higher costs for those transactions that present the most antitrust 
risk, and the PRA estimates do not take account of the substantial 
benefits to the Agencies, the parties, and third parties generated from 
a more efficient premerger review process that shifts some of the 
burden of information collection and reporting away from third parties 
to the merging parties and allows the Agencies to obtain critical 
business facts earlier in the initial waiting period, which in turn 
helps mitigate avoidable costs associated with Second Requests that 
might have been avoided or that were not tailored to areas of 
competitive concern due to insufficient information in the HSR Filing. 
In addition, the annual costs associated with the final rule will be 
directly related to the number of reportable transactions. See section 
III.C. Finally, any estimated additional hours burden is expected to 
decline over time as filers become more familiar with the HSR Form and 
Instructions.
    The amendments are expected to impose either minimal or no 
additional capital or other non-labor costs, as businesses subject to 
the HSR Rules generally have or obtain necessary equipment for other 
business purposes.

[[Page 89335]]

The Commission believes that the above requirements necessitate 
ongoing, regular training so that covered entities stay current and 
have a clear understanding of Federal mandates, but that this would be 
a small portion of and subsumed within the ordinary training that 
employees receive apart from that associated with the information 
collected under the HSR Rules and the corresponding Instructions.
Basis for OMB Assessment
    Finally, one commenter stated that the proposed rule provides an 
insufficient basis for the Office of Management and Budget (OMB) to 
conduct the informed and accurate assessment required by the PRA. The 
OMB typically defers its substantive review until the final rule stage 
and did not provide substantive feedback on the NPRM. However, the 
Commission disagrees with the commenter and believes that it has 
provided a sufficient basis for OMB to conduct an informed and accurate 
PRA assessment. Based on comments it received, the Commission narrowed 
the information requirements in the final rule, conducted a new survey 
to estimate costs, and revised its PRA analysis accordingly. The 
Commission believes that its revised assessment provides a sufficient 
basis for OMB review under the PRA.

IX. Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 through 612, 
requires that an agency conduct an initial and final regulatory 
analysis of the anticipated economic impact of the proposed amendments 
on ``small entities,'' unless the agency certifies that the regulatory 
action will not have a significant economic impact on a substantial 
number of small entities.\415\ Pursuant to section 605(b) of the 
Regulatory Flexibility Act, 5 U.S.C. 605(b), the Commission certifies 
that the final rule will not have a significant economic impact on a 
substantial number of small entities.
---------------------------------------------------------------------------

    \415\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    The Commission finds that the final rule will not affect a 
substantial number of small entities, because small entities will be 
affected only when they are party to a transaction that exceeds the HSR 
Act thresholds, and less than 0.02% of the nation's small entities file 
premerger notifications in any given year. Furthermore, the economic 
impact on the very few small entities that are required to file is not 
significant, because smaller businesses generally have fewer employees, 
generate fewer documents related to a transaction, and are involved in 
less complex transactions, all of which will minimize their costs of 
complying with the final rule. Further, these costs will generally 
account for a small fraction (less than 0.5%) of the value of the 
transaction. This document serves as the required notice of this 
certification to the SBA's Chief Counsel for Advocacy.\416\
---------------------------------------------------------------------------

    \416\ Id.
---------------------------------------------------------------------------

    The Commission also certified in the NPRM that the changes in the 
proposed rule would not, if adopted, have a significant economic impact 
on a substantial number of small entities. Commenters objected to the 
Commission's reliance on this certification and stated that the 
Commission failed to use the proper definition of small business or to 
discuss the proposed rule's impact on them.\417\ The Commission 
responds by providing an assessment of how many small businesses are 
subject to the reporting requirements of the HSR Act and therefore 
would be impacted by the final rule. The Commission also notes that the 
final rule does not change which entities (including which small 
entities) are required to submit HSR Filings.
---------------------------------------------------------------------------

    \417\ One commentor suggested that the increased information 
requirements will, on the margin, lead to less investment by private 
equity in small businesses. Such indirect effects are not the proper 
subject of RFA analyses. See, e.g., Cement Kiln Recycling Coalition 
v. EPA, 255 F.3d 855, 868 (D.C. Cir. 2001) (rejecting the contention 
that the RFA applies to small businesses indirectly affected by the 
regulation of other entities).
---------------------------------------------------------------------------

    Under the RFA, ``small entities'' are defined as small businesses, 
not-for-profit organizations that are independently owned and operated 
and not dominant in their fields, and governmental jurisdictions with 
populations of less than 50,000.\418\ The term ``small business'' has 
the same meaning as the term ``small business concern'' under section 3 
of the Small Business Act, meaning that it must be independently owned 
and operated and not dominant in its field of operation.\419\ The Small 
Business Act permits the Small Business Administration (SBA) to specify 
size standards by which a business may be determined to be a ``small 
business concern.'' \420\ The SBA publishes these standards at 13 CFR 
121.201.
---------------------------------------------------------------------------

    \418\ 5 U.S.C. 601.
    \419\ See id. at 601(3) (cross-referencing 15 U.S.C. 632).
    \420\ 15 U.S.C. 632(a)(2)(A). The Commission does not expect 
that the final rule will impact other types of ``small entities'' 
(not-for-profit organizations that are independently owned and 
operated and not dominant in their fields and governmental 
jurisdictions with populations of less than 50,000). In the 
Agencies' experience, governmental jurisdictions are typically not 
parties to transactions that would be subject to the HSR Act. As a 
result, the Commission has focused its analysis on small businesses 
as defined by the SBA.
---------------------------------------------------------------------------

    To determine whether a regulatory action will impact a 
``substantial number'' of small entities, SBA Guidance encourages 
agencies to examine the number of small businesses affected by a given 
rule relative to the total number of small businesses in the regulated 
industry. The regulated industry may include the ``entire universe of 
small businesses'' where a rule's reach is economy wide.\421\ That is 
the case here, as the HSR Rules apply broadly to the entire economy, 
and all persons involved in reportable transactions are required to 
file an HSR Form, irrespective of industry.
---------------------------------------------------------------------------

    \421\ U.S. Small Bus. Admin., Office of Advocacy, ``How to 
Comply with the Regulatory Flexibility Act'' 21 (Aug. 31, 2017), 
https://advocacy.sba.gov/2017/08/31/a-guide-for-government-agencies-how-to-comply-with-the-regulatory-flexibility-act/ (``Depending on 
the rule, the substantiality of the number of small businesses 
affected should be determined on an industry-specific basis and/or 
on the number of small businesses overall. For example, the Internal 
Revenue Service, when changing the tax deposit rules, would examine 
the entire universe of small businesses to see how many would be 
affected.'').
---------------------------------------------------------------------------

    The SBA estimates that, as of March 2023, there were approximately 
33.2 million small businesses in the United States.\422\ As explained 
below, due to the filing thresholds Congress established in the HSR 
Act, the small businesses that would have to report a transaction under 
the HSR Act represent a tiny fraction of this number. Even under the 
counterfactual and extreme assumption that all of 6,288 HSR filings 
received in FY2022 were made by small businesses,\423\ less than 0.02% 
(6,288 divided by 33.2 million) of all small businesses would need to 
file an HSR Form. Such a de minimis number of small businesses does not 
qualify as a ``substantial number'' of small entities under the SBA's 
Guidance.\424\ In an abundance of caution, however, as detailed below, 
the Commission analyzed a randomized sample of the filings received in 
FY2022 and further estimates that the final rule will apply to less 
than 0.0007% of small businesses. Therefore, the final rule will

[[Page 89336]]

not apply to a substantial number of small businesses.
---------------------------------------------------------------------------

    \422\ U.S. Small Bus. Admin., Office of Advocacy, ``Frequently 
Asked Questions'' (Mar. 2023), https://advocacy.sba.gov/wp-content/uploads/2023/03/Frequently-Asked-Questions-About-Small-Business-March-2023-508c.pdf.
    \423\ Federal Trade Commission, Hart-Scott-Rodino Annual Report 
Fiscal Year 2022, appendix A.
    \424\ U.S. Small Bus. Admin., Office of Advocacy, supra note 
424, at 21 (``The interpretation of the term `substantial number' is 
not likely to be five small firms in an industry with more than 
1,000 small firms.'').
---------------------------------------------------------------------------

    The SBA regulations define ``small business'' primarily based on 
firm revenue or total number of employees, depending on the 
industry.\425\ For industries where the SBA uses revenue to define 
``small business,'' the revenue thresholds vary from $2.25 million to 
$47 million. In other industries, the SBA definition of small is based 
upon the number of employees. These thresholds range from 100 to 1,500 
employees. Finally, certain finance-related industries are defined as 
small if they have less than $850 million in assets. Each NAICS code 
has a corresponding SBA threshold to determine whether a business 
generating revenue in that code is ``small.'' \426\ In addition to 
these thresholds, businesses must also be independently owned and 
operated and not dominant in their fields on a national basis and 
satisfy additional criteria to be considered ``small.'' \427\ The 
calculation of the size of a business must also give present effect to 
agreements to mergers and acquisitions, including agreements in 
principle.\428\
---------------------------------------------------------------------------

    \425\ 13 CFR 121.201.
    \426\ Id.
    \427\ 15 U.S.C. 632.
    \428\ 13 CFR 121.103(d)(1).
---------------------------------------------------------------------------

    To estimate how many small entities so defined might be required to 
make an HSR filing, the Commission analyzed a randomly selected, 
statistically significant 10% sample of the filings submitted in FY 
2022. Of that sample, the Commission first eliminated filings made by 
individuals in their individual capacity, and not as the ultimate 
parent entity of a business, such as for filings resulting from 
executive compensation. Second, the Commission used NAICS code 
information and financials reported by the acquiring or acquired person 
to determine if they qualified as a small business by revenue or 
assets, as applicable. For NAICS codes with thresholds based upon the 
number of employees, the Commission used public information or 
documents submitted by the filing parties to determine if they 
qualified as a small business based on the number of employees. For 
transactions in which the acquiring person filed for control of the 
acquired entities, the Commission analyzed the acquiring person and 
acquired entities after giving effect to the change of control.\429\ 
Additionally, because a small business must be independently owned and 
operated, all filings where an investment group was the ultimate parent 
entity of the acquiring or acquired person were coded as not small 
businesses. The Commission does not have information sufficient to 
determine whether other filers are independently owned and operated, 
but where the Commission lacked sufficient information to exclude a 
business on this basis, they were counted as a small business even if 
they may not truly qualify as one. As a result, the estimates below are 
likely over-inclusive; that is, it is likely that fewer filers were 
small than were coded as small in the sample.
---------------------------------------------------------------------------

    \429\ The Commission notes that filers must attest (1) to their 
good faith intent to consummate a transaction, and (2) in all 
transactions to which 16 CFR 801.30 does not apply, that a contract, 
agreement in principle or letter of intent to merge or acquire has 
been executed. See 16 CFR 803.5.
[GRAPHIC] [TIFF OMITTED] TR12NO24.051

    As shown above in Table 6,\430\ the Commission estimates that in FY 
2022, it received up to 220 filings from businesses that meet the 
definition of small (22 found in the 10% sample). Of these, 
approximately 180 (18 found in the 10% sample) were the targets of the 
transaction, and 40 (4 found in the 10% sample) were the buyers. As a 
result, the Commission estimates than less than 0.0007% of small 
businesses will be affected by the final rule.\431\
---------------------------------------------------------------------------

    \430\ See Table 1 (showing 15,734 acquisitions in 2022).
    \431\ Though the SBA regulations give effect to agreements, 
including agreements in principle, when determining size, the 
Commission also analyzed whether the sample of filers might meet the 
thresholds if agreements resulting in a change of control were not 
considered. Here too, the Commission finds that the final rule does 
not affect a substantial number of small entities. It estimates that 
in FY2022 approximately 850 filers may have met the definition of 
small if the effect of agreements is not considered, representing 
less than 0.003% of small businesses in the United States, 
approximately 2.70% of the estimated number of M&A parties, and 
13.52% of FY 2022 HSR filers.
---------------------------------------------------------------------------

    This is consistent with the structure of the HSR Act, which focuses 
on larger mergers, as defined by dollar value.\432\ The framework of 
the Act established three tests that together serve to limit the 
applicability of the Act for small businesses: (1) the Commerce Test; 
(2) the Size of the Transaction Test; and (3) the Size of the Person 
Test.\433\
---------------------------------------------------------------------------

    \432\ The Commission now provides this information to give 
context about the reach of the Act and does not rely upon any of the 
HSR reporting thresholds in this certification, since it has 
conducted an analysis of the filing parties using the SBA's 
definitions of small, as described above. Therefore, the Commission 
does not address comments related to the RFA analysis provided in 
the NPRM that drew different conclusions from the statutory 
thresholds.
    \433\ 15 U.S.C. 18a(a).

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[[Page 89337]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.052

    The Commerce Test is met if either party is engaged in commerce or 
any activity affecting commerce.
    Under the Size of the Transaction Test, no filing is required if 
the transaction is valued at $119.5 million \434\ or less. Transactions 
valued between $119.5 million and $478 million only must be reported if 
the acquiring and acquired person also meet the Size of the Person 
Test. Transactions valued at more than $478 million are reportable 
regardless of the Size of the Person Test.
---------------------------------------------------------------------------

    \434\ When Congress passed the HSR Act, it created minimum 
dollar thresholds for mandatory premerger reporting. In 2000, 
Congress amended the HSR Act to require an annual adjustment of 
these thresholds based on the change in gross national product. As a 
result, reportability under the Act changes from year to year as the 
statutory thresholds adjust. The most recent adjustment became 
effective March 6, 2024.
---------------------------------------------------------------------------

    Where the Size of the Person Test applies, premerger notification 
is required only if (1) the acquiring person has total assets or annual 
net sales of $23.9 million (2024 adjusted value) and the acquired 
person has total assets or annual net sales of $239 million (2024 
adjusted value); or (2) the acquiring person has total assets or annual 
net sales of $239 million (2024 adjusted value) and the acquired person 
has total assets (or, if it is ``engaged in manufacturing,'' annual net 
sales) of $23.9 million (2024 adjusted value). If these size thresholds 
are not met, no filing is required. For example, in 2024, if the size 
of a transaction were $475 million and the acquiring person had $1 
billion in assets and revenue, but the acquired person was not engaged 
in manufacturing and had $220 million in revenue but only $20 million 
in assets, no filing would be required.
    The final rule also will not have a significant economic impact on 
small entities that are required to file. An HSR filing is not an 
ongoing cost for small businesses. Instead, the costs are incurred only 
when a small business is a party to a reportable transaction. 
Therefore, the Commission does not expect that the costs of complying 
with the final rule will cause a significant impact on affected small 
businesses.
    For the less than 0.0007% of American businesses that will remain 
small after engaging in an HSR reportable transaction, the impact will 
be minimal. Even in a case of a complex transaction between two small 
businesses where the size of the transaction was at the threshold 
(currently $119.5 million), the Commission estimates that the 
additional cost imposed by the final rule would be approximately 0.12% 
of the value of the transaction.\435\ For the majority of transactions 
involving small businesses, actual costs are likely much lower and 
would represent an even smaller percentage of the proceeds from the 
transaction. For example, based upon the Commission's review of the 
sample of FY 2022 transactions, in some transactions involving a 
presumptively small business, the size of transaction value exceeded $1 
billion, resulting in the additional cost of the final rule 
representing less than 0.015% of the transaction value for even a 
complex transaction.\436\
---------------------------------------------------------------------------

    \435\ Estimated cost for acquiring and acquired persons combined 
in transactions with overlaps using highest average cost (242 hours 
x $583) divided by the $119,500,000 threshold.
    \436\ Estimated cost for acquiring and acquired persons combined 
in transactions with overlaps using highest average cost (242 hours 
x $583) divided by $1,000,000,000.
---------------------------------------------------------------------------

    Finally, the Commission has no reason to believe that the final 
rule will have a significant economic impact on any entity, let alone 
entities that have assets or revenues substantial enough to meet the 
HSR Act's reporting thresholds but that nevertheless qualify as small 
businesses. As detailed in the final rule, the Commission estimates 
that the changes would result in approximately 10 to 121 additional 
hours per filing, depending on the complexity of the filing at issue. 
In the Commission's experience, smaller businesses have fewer lines of 
business and fewer employees, generate fewer documents related to a 
transaction and maintain fewer ordinary course documents, and are 
involved in less complex transactions, all of which will minimize their 
costs of responding to the document requests contained within the final 
rule, to the extent their compliance is even triggered under the HSR 
Act's thresholds.
    Accordingly, the Commission hereby certifies that the final rule 
will not have a significant impact on a substantial number of small 
entities.

X. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs has designated this 
rule as a ``major rule,'' as defined by 5 U.S.C. 804(2).

List of Subjects

16 CFR Parts 801

    Antitrust.

16 CFR Part 803

    Antitrust, Fees, Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, the Federal Trade 
Commission amends 16 CFR parts 801 and 803 as set forth below:

PART 801--COVERAGE RULES

0
 1. The authority citation for part 801 is revised as follows:

    Authority: 15 U.S.C. 18a(d); 15 U.S.C. 18b.

0
2. Amend Sec.  801.1 by revising examples 1, 4, 5, and 6 in paragraph 
(d)(2) and by adding paragraph (r) to read as follows:


Sec.  801.1  Definitions

* * * * *
    (d) * * *
    (2) * * *
    Examples: 1. ABC Investment Group has organized a number of 
investment partnerships. Each of the partnerships is its own ultimate 
parent, but ABC makes the investment decisions for all of the 
partnerships. One of the partnerships intends to make a reportable 
acquisition. For purposes of the Notification and Report Form, each of 
the other investment partnerships, and

[[Page 89338]]

ABC Investment Group itself, are associates of the partnership that is 
the acquiring person. In the Minority-Held Entity Overlaps section of 
the Notification and Report Form, the acquiring person will disclose 
any of its 5 percent or greater minority holdings that generate 
revenues in any of the same NAICS codes as the acquired entity(s) in 
the reportable transaction. In this same section, the acquiring person 
would also report any 5 percent or greater minority holdings of its 
associates in the acquired entity(s) and in any entities that generate 
revenues in any of the same NAICS codes as the acquired entity(s). In 
the Controlled Entity Geographic Overlaps section of the Notification 
and Report Form, the acquiring person will indicate whether there are 
any NAICS code overlaps between the acquired entity(s) in the 
reportable transaction, on the one hand, and the acquiring person and 
all of its associates, on the other.
* * * * *
    4. CORP1 controls GP1 and GP2, the sole general partners of private 
equity funds LP1 and LP2 respectively. LP1 controls GP3, the sole 
general partner of MLP1, a newly formed master limited partnership 
which is its own ultimate parent entity. LP2 controls GP4, the sole 
general partner of MLP2, another master limited partnership that is its 
own ultimate parent entity and which owns and operates a natural gas 
pipeline. In addition, GP4 holds 25 percent of the voting securities of 
CORP2, which also owns and operates a natural gas pipeline.
    MLP1 is acquiring 100 percent of the membership interests of LLC1, 
also the owner and operator of a natural gas pipeline. MLP2, CORP2 and 
LLC1 all derive revenues in the same NAICS code (Pipeline 
Transportation of Natural Gas). All of the entities under common 
investment management of CORP1, including GP4 and MLP2, are associates 
of MLP1, the acquiring person.
    In the Controlled Entity Geographic Overlaps section of the 
Notification and Report Form, MLP1 would identify MLP2 as an associate 
that has an overlap in pipeline transportation of natural gas with 
LLC1, the acquired person. Because GP4 does not control CORP2 it would 
not be listed in this section, however, GP4 would be listed in the 
Minority-Held Entity Overlaps section of the Notification and Report 
Form as an associate that holds 25 percent of the voting securities of 
CORP2. In this example, even though there is no direct overlap between 
the acquiring person (MLP1) and the acquired person (LLC1), there is an 
overlap reported for an associate (MLP2) of the acquiring person in the 
Controlled Entity Geographic Overlaps section of the Notification and 
Report Form.
    5. LLC is the investment manager for and ultimate parent entity of 
general partnerships GP1 and GP2. GP1 is the general partner of LP1, a 
limited partnership that holds 30 percent of the voting securities of 
CORP1. GP2 is the general partner of LP2, which holds 55 percent of the 
voting securities of CORP1. GP2 also directly holds 2 percent of the 
voting securities of CORP1. LP1 is acquiring 100 percent of the voting 
securities of CORP2. CORP1 and CORP2 both derive revenues in the same 
NAICS code (Industrial Gas Manufacturing).
    All the entities under common investment management of the managing 
entity LLC, including GP1, GP2, LP2 and CORP1 are associates of LP1. In 
Minority-Held Entity Overlaps section of the Notification and Report 
Form, LP1 would report its own holding of 30 percent of the voting 
securities of CORP1. It would not report the 55 percent holding of LP2 
in Minority-Held Entity Overlaps section of the Notification and Report 
Form because it is greater than 50 percent. It also would not report 
GP2's 2 percent holding because it is less than 5 percent. In the 
Controlled Entity Geographic Overlaps section, LP1 would identify both 
LP2 and CORP1 as associates that derive revenues in the same NAICS code 
as CORP2.
    6. LLC is the investment manager for GP1 and GP2 which are the 
general partners of limited partnerships LP1 and LP2, respectively. LLC 
holds no equity interests in either general partnership but manages 
their investments and the investments of the limited partnerships by 
contract. LP1 is newly formed and its own ultimate parent entity. It 
plans to acquire 100 percent of the voting securities of CORP1, which 
derives revenues in the NAICS code for Consumer Lending. LP2 controls 
CORP2, which derives revenues in the same NAICS code. All of the 
entities under the common management of LLC, including LP2 and CORP2, 
are associates of LP1. For purposes of the Controlled Entity Geographic 
Overlaps section of the Notification and Report Form, LP1 would report 
LP2 and CORP2 as associates that derive revenues in the NAICS code that 
overlaps with CORP1. Even though the investment manager (LLC) holds no 
equity interest in GP1 or GP2, the contractual arrangement with them 
makes them associates of LP1 through common management.
* * * * *
    (r)(1) Foreign entity or government of concern. The term foreign 
entity or government of concern means:
    (i) An entity that is a foreign entity of concern as that term is 
defined in section 40207 of the Infrastructure Investment and Jobs Act 
(42 U.S.C. 18741(a)(5)); or
    (ii) A government, or an agency thereof, of a foreign country that 
is a covered nation as that term is defined in section 40207 of the 
Infrastructure Investment and Jobs Act (42 U.S.C. 18741(a)(5)(C)).
    (2) Subsidy. The term subsidy has the meaning given to the term in 
part IV of title VII of the Tariff Act of 1930 (19 U.S.C. 1677(5)(B)).

PART 803--TRANSMITTAL RULES

0
3. The authority citation for part 803 is revised to read as follows:

    Authority: 15 U.S.C. 18a(d); 15 U.S.C. 18b.

0
4. Amend Sec.  803.2 by:
0
a. Revising paragraph (a);
0
b. Removing paragraph (b) and the undesignated example following 
paragraph (b);
0
c. Redesignating paragraphs (c), (d), (e), and (f) as paragraphs (b), 
(c), (d), and (e), respectively; and
0
d. Revising newly redesignated paragraphs (b), (d), and (e). The 
revisions read as follows:


Sec.  803.2  Instructions applicable to Notification and Report Form.

    (a)(1) The notification required by the act shall be filed by the 
preacquisition ultimate parent entity, or by any entity included within 
the person authorized by such preacquisition ultimate parent entity to 
file notification on its behalf. In the case of a natural person 
required by the act to file notification, such notification may be 
filed by his or her legal representative: Provided however, That 
notwithstanding Sec. Sec.  801.1(c)(2) and 801.2 of this chapter, only 
one notification shall be filed by or on behalf of a natural person, 
spouse and minor children with respect to an acquisition as a result of 
which more than one such natural person will hold voting securities of 
the same issuer.
    Example 1 to paragraph (a)(1). Jane Doe, her husband, and minor 
child collectively hold more than 50 percent of the shares of family 
corporation F. Therefore, Jane Doe (or her husband or minor child) is 
the ``ultimate parent entity'' of a ``person'' composed to herself (or 
her husband or minor child) and F; see Sec.  801.1(a)(3), (b), and 
(c)(2) of of this chapter. If corporation F is to

[[Page 89339]]

acquire corporation X, under this paragraph only one notification is to 
be filed by Jane Doe, her husband, and minor child collectively.
    (2) Persons that are both acquiring and acquired persons shall 
submit separate forms, one as the acquiring person and one as the 
acquired person, following the appropriate instructions for each.
    (b) In response to the Revenue and Overlaps section of the 
Notification and Report Form, information need not be supplied with 
respect to assets or voting securities to be acquired, the acquisition 
of which is exempt from the requirements of the act.
* * * * *
    (d) For annual reports and audit reports required by the 
Notification and Report Form, a person filing the notification may, 
instead of submitting a document, provide a cite to an operative 
internet address directly linking to the document, if the linked 
document is complete and payment is not required to access the 
document. If an internet address becomes inoperative during the waiting 
period, or the document is otherwise rendered inaccessible or 
incomplete, upon notification by the Commission or Assistant Attorney 
General, the parties must make the document available to the agencies 
by either referencing an operative internet address where the complete 
document may be accessed or by providing electronic copies to the 
agencies as provided in Sec.  803.10(c)(1) by 5 p.m. Eastern Time on 
the next regular business day. Failure to make the document available, 
by the internet or by providing electronic copies, by 5 p.m. Eastern 
Time on the next regular business day, will result in notice of a 
deficient filing pursuant to Sec.  803.10(c)(2).
    (e) Filings must comply with all format requirements set forth at 
the Premerger Notification Office pages at https://www.ftc.gov. The use 
of any format not specified as acceptable, or any other failure to 
comply with the applicable format requirements, shall render the entire 
filing deficient within the meaning of Sec.  803.10(c)(2).

0
5. Amend Sec.  803.5 by redesignating the paragraph (a)(1) heading as 
the paragraph (a) heading and republishing it and revising paragraphs 
(a)(1) introductory text, (a)(3), and (b) to read as follows:


Sec.  803.5  Affidavits required.

    (a) Section 801.30 acquisitions. (1) For acquisitions to which 
Sec.  801.30 of this chapter applies, the notification required by the 
act from each acquiring person shall contain an affidavit attesting 
that the issuer or unincorporated entity whose voting securities or 
non-corporate interests are to be acquired has received written notice 
delivered to an officer (or a person exercising similar functions in 
the case of an entity without officers) by email, certified or 
registered mail, wire, or hand delivery, at its principal executive 
offices, of:
* * * * *
    (3) The affidavit required by this paragraph must have attached to 
it a copy of the written notice received by the acquired person 
pursuant to paragraph (a)(1) of this section.
    (b) Non-section 801.30 acquisitions. For acquisitions to which 
Sec.  801.30 of this chapter does not apply, the notification required 
by the act shall contain an affidavit attesting that a contract, 
agreement in principle, or letter of intent to merge or acquire has 
been executed, and further attesting to the good faith intention of the 
person filing notification to complete the transaction. If the executed 
agreement is not the definitive agreement, the affidavit must attest 
that a dated document that provides sufficient detail about the scope 
of the entire transaction that the parties intend to consummate has 
also been submitted.

0
6. Revise Sec.  803.8 to read as follows:


Sec.  803.8  Foreign language documents.

    Documentary materials or information in a foreign language required 
to be submitted at the time of filing a Notification and Report Form 
and in response to a request for additional information or documentary 
material must be submitted with verbatim English language translations. 
All verbatim translations must be accurate and complete.

0
7. Amend Sec.  803.9 by revising paragraph (c) to read as follows:


Sec.  803.9  Filing fee.

* * * * *
    (c) For a reportable transaction in which the acquiring entity has 
two ultimate parent entities, both ultimate parent entities are 
acquiring persons; however, if the responses for both ultimate parent 
entities would be the same for the NAICS Codes section of the 
Notification and Report Form, only one filing fee is required in 
connection with the transaction.
* * * * *

0
8. Amend Sec.  803.10 by revising paragraphs (c)(1)(i) and (ii) and 
redesignating the example following paragraph (c)(1)(ii) as Example 1 
to paragraph (c)(1).
    The revisions read as follows:


Sec.  803.10  Running of time.

* * * * *
    (c) * * *
    (1) * * *
    (i) The date of receipt shall be the date of electronic submission 
if such date is not a Saturday, Sunday, a legal public holiday (as 
defined in 5 U.S.C. 6103(a)), or a legal public holiday's observed 
date, and the submission is completed by 5 p.m. Eastern Time. In the 
event electronic submission is unavailable, the FTC and DOJ may 
designate procedures for the submission of the filing. Notification of 
the alternate delivery procedures will normally be made through a press 
release and, if possible, on the https://www.ftc.gov website.
    (ii) Delivery effected after 5 p.m. Eastern Time on a business day, 
or at any time on any day other than a business day, shall be deemed 
effected on the next following business day. If submission of all 
required filings is not effected on the same date, the date of receipt 
shall be the latest of the dates on which submission is effected.
* * * * *

0
9. Amend Sec.  803.12 by revising paragraph (c)(1)(iii) to read as 
follows:


Sec.  803.12  Withdraw and refile notification.

* * * * *
    (c) * * *
    (1) * * *
    (iii) The resubmitted notification is recertified, and the 
submission, as it relates to Transaction-Specific Agreements, 
Transaction-Related Documents, and Subsidies from Foreign Entities of 
Concern sections of the Notification and Report Form, is updated to the 
date of the resubmission;
* * * * *

0
10. Revise appendices A and B to part 803 to read as follows:

Appendix A to Part 803--Notification and Report Form for Certain 
Mergers and Acquisitions

BILLING CODE 6750-01-P

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Appendix B to Part 803--Instructions to the Notification and Report 
Form for Certain Mergers and Acquisitions
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BILLING CODE 6750-01-C

    By the direction of the Commission.
April J. Tabor,
Secretary.

    Note:  The following statements will not appear in the Code of 
Federal Regulations.

Statement of Chair Lina M. Khan Joined by Commissioner Rebecca Kelly 
Slaughter and Commissioner Alvaro Bedoya

    The Federal Trade Commission, with the collaboration and 
concurrence of the Assistant Attorney General of the Department of 
Justice's Antitrust Division, has voted unanimously to issue a Final 
Rule to amend the Hart-Scott-Rodino (``HSR'') Form and Instructions. 
This marks the first time in 46 years that the agencies have undertaken 
a top-to-bottom review of the form (``HSR Form'') that businesses must 
fill out when pursuing an acquisition that must be notified in 
accordance with the HSR Act.\1\ Alongside this Final Rule, the

[[Page 89395]]

Commission voted to submit to Congress its FY2023 Annual Report 
regarding the Federal Trade Commission and Department of Justice's 
administration of the HSR Act. This Annual Report highlights the 
agencies' work investigating and challenging illegal mergers.\2\
---------------------------------------------------------------------------

    \1\ Press Release, Fed. Trade Comm'n, FTC Finalizes Changes to 
Premerger Notification Form (Oct. 10, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/10/ftc-finalizes-changes-premerger-notification-form.
    \2\ Press Release, Fed. Trade Comm'n, FTC, DOJ Issue Fiscal Year 
2023 Hart-Scott-Rodino Notification Report and Announce Corrected 
Fiscal Year 2022 Report (Oct. 10, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/10/ftc-doj-issue-fiscal-year-2023-hsr-report-and-announce-corrected-2022-report. On July 1, 2024, the 
Commission and DOJ Antitrust Division submitted to Congress a 
summary of this Report.
---------------------------------------------------------------------------

    Much has changed in the 48 years since the HSR Act was passed. 
Changes in the economy, corporate structure, and investment strategies 
have reshaped how businesses compete in today's marketplace. The number 
of transactions reported to the agencies surged during fiscal years 
2021 and 2022 and remains high.\3\ And deal valuations have soared. In 
FY2019, only 13.3% of transactions reported to the agencies exceeded $1 
billion.\4\ Those high-value transactions now represent nearly a 
quarter (24%) of all transactions that come before the agencies.\5\ 
Transactions have also become increasingly complex in both structure 
and potential competitive impact.\6\
---------------------------------------------------------------------------

    \3\ Fed. Trade Comm'n & Dept. of Justice, Hart-Scott-Rodino 
Annual Report Fiscal Year 2023 (2024) [hereinafter FY23 Report] at 
20.
    \4\ Fed. Trade Comm'n & Dept. of Justice, Hart-Scott-Rodino 
Annual Report Fiscal Year 2019 (2020) at Ex. A, Table I, https://www.ftc.gov/system/files/documents/reports/federal-trade-commission-bureau-competition-department-justice-antitrust-division-hart-scott-rodino/p110014hsrannualreportfy2019.pdf.
    \5\ FY2023 Report at Ex. A, Table I.
    \6\ See Remarks by Chair Lina M. Khan, Private Capital, Public 
Impact Workshop on Private Equity in Healthcare (March 5, 2024), 
https://www.ftc.gov/system/files/ftc_gov/pdf/2024.03.05-chair-khan-remarks-at-the-private-capital-public-impact-workshop-on-private-equity-in-healthcare.pdf; Statement of Chair Lina M. Khan Joined by 
Comm'r Rebecca Kelly Slaughter & Comm'r Alvaro Bedoya in the Matter 
of EQT Corporation (Aug. 16, 2023), https://www.ftc.gov/legal-library/browse/cases-proceedings/public-statements/statement-chair-lina-m-khan-joined-commissioner-rebecca-kelly-slaughter-commissioner-alvaro-m-bedoya-4.
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    The HSR Form, meanwhile, has largely stayed the same. Against the 
backdrop of vast changes in the structure of business associations and 
corporate transactions, the information currently collected by the HSR 
Form is insufficient for our teams to determine, in the initial 30 days 
provided by the HSR Act, whether a proposed deal may violate the 
antitrust laws and hence warrant an in-depth investigation. The 
antitrust agencies are put in the position of expending significant 
time and effort to develop even a basic understanding of key facts. 
They must often rely on information provided in third-party interviews 
that can be challenging to obtain in 30 days. Much of the key 
information, moreover, is known only to the firms proposing the merger, 
such as the breadth of their business operations, including any 
existing relationship with the other party, the deal rationale, and the 
structure of each relevant entity. Seeking this information on a 
voluntary basis can leave critical gaps that allow unlawful deals to go 
undetected.
    By reflecting modern day commercial realities, the HSR Form updates 
in the Final Rule will provide the antitrust agencies with information 
that is more probative as to whether a proposed deal risks violating 
the antitrust laws. Several aspects of the Final Rule bear particular 
mention:
     Shed light on complex and opaque entities, including 
private equity and minority holders. The existing HSR Form did not 
require information about the entities between the ultimate parent 
entity and the acquiring entity. Nor did it allow the agencies to 
determine whether the acquiring person may have competitively relevant 
premerger entanglements with the target's industry or whether minority 
holders have significant rights to direct the acquiring entity's 
actions. To close this gap, the Final Rule requires parties to provide 
information about the entities and individuals involved in the deal 
that will have the ability to influence decision-making post-merger.
     Report vertical and other non-horizontal relationships. 
The existing HSR Form failed to provide agencies with meaningful 
information about non-horizontal relationships. After a decades-long 
focus primarily on mergers between direct competitors, the antitrust 
agencies in recent years have reinvigorated merger enforcement against 
non-horizontal deals that violate the antitrust laws. Since 2021, the 
FTC has brought six enforcement actions against mergers involving a 
vertical combination--more than the total number of vertical cases 
pursued in the last decade overall.\7\ The FTC's efforts have already 
resulted in the government's first litigated victory against a vertical 
merger in over 50 years.\8\ As we continue building on this work, 
ensuring that the agencies receive information on non-horizontal 
components of deals is vital. Accordingly, the Final Rule requires 
filers to report supply relationships to reveal whether the transaction 
may undermine competition, including through limiting rivals' access to 
key products or services they need to compete. The Final Rule also 
contains new document requirements that are intended to reveal any 
existing or future non-horizontal business relationships that could 
give rise to competitive risks.
---------------------------------------------------------------------------

    \7\ Illumina, Inc. v. FTC, 88 F.4th 1036 (5th Cir. 2023); FTC v. 
IQVIA et al, 710 F.Supp.3d 329 (S.D.N.Y. 2024); FTC v. Tempur Sealy 
Intern'l, Inc., 4:24-cv-02508 (S.D. Tex. July 2, 2024); In re 
Lockheed Martin Corp., Docket No. 9405 (2022), https://www.ftc.gov/legal-library/browse/cases-proceedings/211-0052-lockheedaerojet-matter (alleging that the merger would enable missile systems 
manufacturer to use control over missile propulsion systems to harm 
rival defense prime contractors) (transaction abandoned); In re 
Nvidia Corp., Docket No. 9404 (2021), https://www.ftc.gov/legal-library/browse/cases-proceedings/2110015-nvidiaarm-matter (alleging 
that the merger would give chip manufacturer the ability and 
incentive to use control over microprocessor design technology to 
undermine competitors) (transaction abandoned); In re 
Intercontinental Exchange, Inc. & Black Knight, Inc., Docket No. 
9413, https://www.ftc.gov/legal-library/browse/cases-proceedings/221-0142-intercontinental-exchange-incblack-knight-inc-matter 
(2023).
    \8\ Illumina, Inc., 88 F.4th 1036.
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     Reveal areas of future competition and emerging rivals. As 
section 7 instructs us to arrest anticompetitive tendencies in their 
incipiency, the agencies must scrutinize acquisitions that may 
eliminate emerging rivals or threaten competition in lines of products 
that are still in development.\9\ The existing HSR form has been 
particularly ill-suited to this task, as it gives no insight into 
merging parties' ongoing product development efforts or pipeline 
projects that could implicate future areas of competition. The Final 
Rule fixes this problem by requesting key information about products 
and services under development that are not yet generating revenues. In 
recent years the FTC pursued an enforcement action involving a pipeline 
product still in early-stage development, as well as successfully 
litigated a case involving the market for research and development.\10\ 
The new HSR Form will further bolster these efforts.
---------------------------------------------------------------------------

    \9\ See Illumina, Inc. v. FTC, 88 F.4th 1036, 1049-51 (2023) 
(stating that antitrust markets are not limited to products that 
exist but may include those that are anticipated or expected or 
encompass research, development and commercialization of products in 
development); FTC v. PPG Indus., Inc., 798 F.2d 1500, 1504 (D.C. 
Cir. 1986) (noting that merging firms competed in evolving high 
technology market at the request-for-proposal stage of product 
development).
    \10\ In re Sanofi/Maze Therapeutics, Docket No. 9422 (2023), 
https://www.ftc.gov/legal-library/browse/cases-proceedings/2310091-sanofimaze-therapeutics-inc-matter; Illumina, Inc., 88 F.4th 1036.
---------------------------------------------------------------------------

     Identify a greater range of prior acquisitions. Another 
notable trend has been the rise of serial acquirers, firms that engage 
in numerous strategic acquisitions in the same industry and sometimes 
``roll up'' many small competitors in the same or adjacent

[[Page 89396]]

markets. This strategy can consolidate a market through a series of 
smaller deals that fly below the radar of antitrust enforcers. Private 
equity firms and other investors have deployed roll-up strategies 
across a range of industries, from healthcare to housing--with 
potentially major ramifications for the public.\11\ Indeed, the FTC's 
lawsuit against U.S. Anesthesia Partners charges the entity with 
acquiring over a dozen anesthesiology providers across Texas in the 
span of eight years, a reduction in competition that cost consumers and 
businesses tens of millions of dollars.\12\ The Commission's 
investigations into acquisitions of veterinary clinics have also 
revealed roll-up plays.\13\ To understand whether a proposed 
transaction is part of an anticompetitive roll-up scheme, the agencies 
need insight into what prior acquisitions the entity has made within 
the same lines of business. While the existing Form required some 
reporting of these acquisitions, the Final Rule provides a more 
complete picture of the merging parties' overarching acquisition 
strategies by requiring that both entities provide information on 
certain prior acquisitions that closed within the previous five years.
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    \11\ See, e.g., Richard M. Scheffler et al., Am. Antitrust 
Inst., Soaring Private Equity Investment in the Healthcare Sector: 
Consolidation Accelerated, Competition Undermined, and Patients at 
Risk 8-16 (2021), https://publichealth.berkeley.edu/wp-content/uploads/2021/05/Private-Equity-I-Healthcare-Report-FINAL.pdf; Atul 
Gupta, et al., Does Private Equity Investment in Healthcare Benefit 
Patients? Evidence from Nursing Homes (Becker Friedman Inst., 
Working Paper No. 2021-20, 2021), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3537612. The Commission recently hosted a 
public workshop to discuss the growing body of economic research 
examining the role of private equity investment in health care 
markets. Fed. Trade Comm'n, Private Capital, Public Impact: An FTC 
Workshop on Private Equity in Health Care (Mar. 5, 2024), https://www.ftc.gov/news-events/events/2024/03/private-capital-public-impact-ftc-workshop-private-equity-health-care.
    \12\ Complaint, FTC v. U.S. Anesthesia Partners, Inc., et al., 
No. 4:23-cv-03560 (S.D. Tex. Sept. 21, 2023), https://www.ftc.gov/legal-library/browse/cases-proceedings/2010031-us-anesthesia-partners-inc-ftc-v.
    \13\ In re JAB Consumer Partners, et al., Docket Nos. C-4766 & 
C-4770 (2022), https://www.ftc.gov/legal-library/browse/cases-proceedings/2110140-jab-consumer-partnersnational-veterinary-associatessage-veterinary-partners-matter.
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    The notice of proposed rulemaking included a requirement that would 
have aided the agencies' assessment of whether the proposed deal would 
risk threatening competition in labor markets. This proposal fit within 
a wider effort at the agencies to correct for antitrust enforcers' 
decades-long neglect of promoting fair competition in labor markets. As 
Commissioner Bedoya rightly notes, when antitrust enforcers did pay 
attention to workers, it usually involved weaponizing antitrust against 
them.\14\ This disposition had no basis in the law--and, as 
Commissioner Bedoya notes, directly contravenes the goals Congress 
sought to advance in passing the antitrust laws. No antitrust law gives 
primacy to some market participants over others or states that some are 
entitled to greater protection from unlawful monopolization or mergers; 
to the contrary, the Clayton Act prohibits mergers that may 
substantially lessen competition ``in any line of commerce.'' \15\ I am 
pleased that in recent years the FTC has reoriented towards a more 
faithful application of the law, including--for the first time in our 
110-year history--through challenging a transaction on the grounds that 
it risks undermining competition in labor markets.\16\
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    \14\ Statement of Comm'r Alvaro M. Bedoya Joined by Comm'r 
Rebecca Kelly Slaughter & Chair Lina M. Khan in the Matter of 
Amendments to the Premerger Notification and Report Form and 
Instructions and the Hart-Scott-Rodino Rule (Oct. 10, 2024).
    \15\ 15 U.S.C. 18. See also, Statement of Comm'r Alvaro M. 
Bedoya, id.
    \16\ Press Release, Fed. Trade Comm'n, FTC Challenges Kroger's 
Acquisition of Albertsons (Feb. 26, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/02/ftc-challenges-krogers-acquisition-albertsons; see also, Statement of Comm'r Rebecca Kelly 
Slaughter & Chair Lina M. Khan Regarding FTC and State of Rhode 
Island v. Lifespan Corporation and Care New England Health System 
(Feb. 17, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/public_statement_of_commr_slaughter_chair_khan_re_lifespan-cne_redacted.pdf.
---------------------------------------------------------------------------

    While the Final Rule pares back some of the labor market 
requirements, I believe that the information required by other 
provisions of the Final Rule will position the agencies to identify 
transactions that threaten competition in labor markets. In particular, 
the newly-mandated information on overlap and supply relationship 
descriptions, as well as new high-level business and transaction-
related documents, will enable the agencies to identify whether a 
proposed deal risks undermining competition for workers. And 
partnerships with the National Labor Relations Board and the Department 
of Labor will allow the FTC to continue deepening its expertise in how 
competition works in labor markets.\17\
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    \17\ Press Release, Fed. Trade Comm'n, FTC, Department of Labor 
Partner to Protect Workers from Anticompetitive, Unfair, and 
Deceptive Practices (Sept. 21, 2023), https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-department-labor-partner-protect-workers-anticompetitive-unfair-deceptive-practices, Press 
Release, Fed. Trade Comm'n, FTC, National Labor Relations Board 
Forge New Partnership to Protect Workers from Anticompetitive, 
Unfair, and Deceptive Practices (July 19, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/07/federal-trade-commission-national-labor-relations-board-forge-new-partnership-protect-workers.
---------------------------------------------------------------------------

    The FTC also announced today that, following the Final Rule coming 
into effect, we will lift the categorical suspension on early 
termination of filings made under the HSR Act. When the antitrust 
agencies grant early termination, merging parties can consummate their 
deal without waiting for the full 30-day period ordinarily required 
under the law. The Commission initially suspended early termination due 
to a historic volume of filings amidst the COVID-19 pandemic.\18\ But a 
revisiting of the FTC's early termination policy was overdue. Data 
reveal that permissively granting early termination led to the 
consummation of some deals that resulted in significant harm.\19\ 
Moreover, the law makes clear that the granting of early termination is 
purely a discretionary function.\20\ Merging

[[Page 89397]]

parties are not entitled to early termination, and I question the 
wisdom of using agency resources on a discretionary function while 
resource constraints impede our ability to fully execute on our 
mandatory functions. Because the Final Rule will provide the agencies 
with additional information necessary to probe the competitive risk 
that a transaction may pose, we will be better positioned to determine 
the right set of policies and procedures around early termination, 
including which subset of deals may receive it and under what 
circumstances.
---------------------------------------------------------------------------

    \18\ Press Release, Fed. Trade Comm'n, FTC, DOJ Temporarily 
Suspend Discretionary Practice of Early Termination,'' Federal Trade 
Commission (Feb. 4, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/02/ftc-doj-temporarily-suspend-discretionary-practice-early-termination.
    \19\ See Premerger Notification; Reporting and Waiting Period 
Requirements, 16 CFR parts 801, 803 (2024) at 17 (The consequences 
of inadequate detection are revealed in a recent analysis of 
hospital mergers that were reported to the Agencies for premerger 
review co-authored by two economists from the Commission's Bureau of 
Economics. Keith Brand et al., ``In the Shadow of Antitrust 
Enforcement: Price Effects of Hospital Mergers from 2009-2016,'' 66 
J. L. Econ. 639 (2023). The paper examined a set of consummated 
hospital mergers and measured the effect of each merger on prices. 
The study concluded that mergers not reportable under the HSR Act 
did not result in larger price increases than reportable mergers. In 
contrast, the authors found different outcomes among mergers that 
were subject to premerger review based on how much review the 
transaction received. Of the mergers reported to the Agencies, the 
largest average percentage price increase occurred for those mergers 
that received early termination of the initial waiting period. This 
suggests that the HSR Filings failed to provide sufficient 
information to trigger additional investigations that could have 
blocked these harmful mergers before they were consummated; instead, 
the filings resulted in early termination of the waiting period. 
While the study was not designed to test the impact of this 
rulemaking, the study supports the Commission's belief that there 
are information deficiencies with the current HSR Rules that prevent 
the Agencies from identifying mergers that may violate the antitrust 
laws.'').
    \20\ Both the Clayton Act and the HSR Act provide for an 
exception to the waiting period by empowering the FTC and DOJ to 
grant early terminations ``in their discretion.''16 CFR 803.11(c) 
(HSR Act: ``The Federal Trade Commission and the Assistant Attorney 
General may, in their discretion, terminate a waiting period upon 
the written request of any person filing notification or . . . sua 
sponte.''); 15 U.S.C.A. 18a(2) (Clayton Act: ``The Federal Trade 
Commission and the Assistant Attorney General may, in individual 
cases, terminate the waiting period specified in paragraph (1) and 
allow any person to proceed with any acquisition subject to this 
section, and promptly shall cause to be published in the Federal 
Register a notice that neither intends to take any action within 
such period with respect to such acquisition.'').
---------------------------------------------------------------------------

    The new HSR Form marks a generational upgrade that will sharpen the 
antitrust agencies' investigations and allow us to more effectively 
protect against mergers that may substantially lessen competition or 
tend to create a monopoly. But it is not the only part of the HSR 
regime that requires upgrading. As I've noted in past years, the HSR 
Act must be modernized for today's economy.\21\ In particular, the 
statutory timelines laid out in the HSR Act have not kept pace with the 
surge in deal volume, the complexity of transactions, and the increased 
burden associated with proving in court a violation of section 7. The 
HSR Act gives the agencies 30 days to determine whether a deal warrants 
close investigation, and then another 30 days after parties certify 
they have ``substantially complied'' with the inquiry. These timelines 
were set in an era when document productions were measured in the 
number of boxes and not the number of terabytes--and when lawmakers 
expected the agencies would receive around 150 merger notifications per 
year, rather than 150 notifications per month (as the agencies now 
routinely receive).\22\ While the new HSR Form will bolster the 
antitrust agencies' ability to adequately screen proposed deals during 
the initial waiting period, Congress should revisit HSR and 
appropriately extend these timelines to match today's realities.\23\
---------------------------------------------------------------------------

    \21\ Statement of Chair Lina M. Khan Joined by Commissioner 
Rebecca Kelly Slaughter and Commissioner Alvaro M. Bedoya Regarding 
the FY2022 HSR Annual Report to Congress (Dec. 21, 2023), https://www.ftc.gov/legal-library/browse/cases-proceedings/public-statements/statement-chair-lina-m-khan-joined-commissioner-rebecca-kelly-slaughter-commissioner-alvaro-m-bedoya-5.
    \22\ See id.
    \23\ Presently, FTC staff are routinely at the mercy of merging 
parties granting extensions of the statutory deadline so that staff 
has the necessary time to review the transaction. But it should not 
be merging parties that get to determine the amount of time FTC 
staff has to review mergers and do the work required by law.
---------------------------------------------------------------------------

    Faithfully discharging the Commission's statutory obligations also 
requires adequate funding. The HSR Annual Report summarizes the 
agencies' merger enforcement work over FY2023.\24\ During that period 
the FTC's work resulted in challenges to 15 transactions that risked 
threatening competition.\25\ Ten of these challenges resulted in 
parties abandoning the transactions, nearly double the average annual 
number of abandonments from the preceding 10 years. Our efforts to keep 
building on this efficacy, however, will run into major resource 
constraints. The FTC's enacted budget for fiscal year 2024 represented 
a one percent reduction from the previous year. Alongside a statutorily 
mandated five percent pay raise and higher non-pay costs resulting from 
inflation, the result of this reduction has been significantly fewer 
resources to support the FTC's mission. While our teams work diligently 
to faithfully enforce the antitrust laws, resource constraints have 
meant the FTC has been forced to make difficult triage decisions and 
forgo meritorious investigations--likely resulting in the public 
bearing the cost of illegal mergers. Additional resources would better 
equip the Commission to fully pursue its mandate and protect the 
public.
---------------------------------------------------------------------------

    \24\ Commissioners Holyoak and Ferguson dissent from the 
issuance of the HSR Annual Report. In particular, Commissioner 
Holyoak disagrees with the longstanding practice to count 
abandonments and deals where parties were not required to make an 
HSR filing. Dissenting Statement of Commissioner Melissa Holyoak, 
Hart-Scott-Rodino Annual Report, Fiscal Year 2023 (Oct. 10, 2024) at 
2. For over a decade, the Report has been clear that it includes 
certain non-HSR reportable matters. FY23 Report at n.28 (``The cases 
listed in this section were not necessarily reportable under the 
premerger notification program. Given the confidentiality of 
information obtained pursuant to the Act, it would be inappropriate 
to identify the cases initiated under the program except in those 
instances in which that information has already been disclosed.''); 
see also Fed. Trade Comm'n, FY 2010 Hart Scott Rodino Annual Report 
(2011) at n.18. A proposed merger may be anticompetitive even if it 
falls below the threshold that would require an HSR filing. As a 
result, FTC staff may raise concerns regarding certain transactions 
even where such a filing has not been made. Those matters are part 
of the FTC's merger enforcement work and including them faithfully 
represents the Commission's work to Congress. The HSR Annual Report 
also states plainly that it references certain deals where ``the 
transaction was abandoned or restructured as a result of antitrust 
concerns raised during the investigation,'' id. at 2, and 
Commissioner Holyoak does not identify any inconsistency or explain 
any insufficiency in how the numbers are tabulated here versus how 
the Commission has historically done so. Commissioner Ferguson notes 
in his dissent that the precise timing of HSR reports is not 
mandated by Congress and has varied in past years, but neglects to 
mention that timing under prior administrations also varied 
significantly. Dissenting Statement of Commissioner Andrew N. 
Ferguson Regarding the FY2023 HSR Annual Report to Congress (Oct. 
10, 2024) at 1-2. See, e.g., Fed. Trade Comm'n, Annual Competition 
Reports (last visited Oct. 9. 2024), https://www.ftc.gov/policy/reports/annual-competition-reports (for example, the FY19 Annual HSR 
Report was released in July of 2020, the FY18 Annual HSR Report was 
released Sept 2019, the FY17 Annual HSR Report was released Apr. 11, 
2018, the FY16 Annual HSR Report was released Oct. 4, 2017. 
Strangely, Commissioner Ferguson also suggests that the decision to 
issue this year's report in October is part of some political scheme 
related to giving the Democratic ticket an advantage in the 
forthcoming presidential election. I am unaware of any reports, 
research, or evidence suggesting that the HSR Report has any bearing 
on voting patterns or electoral outcomes.
    \25\ One transaction challenged in FY2023 remains in litigation.
---------------------------------------------------------------------------

    Finally, the FTC today is launching a new online portal so that 
members of the public can directly submit comments on mergers that may 
threaten competition.\26\ This portal is part of the FTC's broader work 
to ensure we are opening our doors to hear from people across the 
country on issues of public concern.\27\ Whether the antitrust agencies 
do or do not take action against a merger can be of enormous 
consequence--determining how much people pay for essential goods and 
services, how much workers earn on a job, whether independent 
businesses can keep serving their communities, whether an entrepreneur 
can bring a breakthrough innovation to market, and whether our supply 
chains are brittle or resilient. Ensuring the antitrust agencies are 
positioned to make these high-stakes decision with a full understanding 
of what may follow from a merger is vital. Well-resourced businesses 
know how best to inform the agencies' investigations, but one shouldn't 
need to hire a lawyer to provide public enforcers with relevant 
information on a merger. This new portal will allow the FTC to 
systematize the regular gathering of public input on mergers and 
continue broadening the types of expertise and experience that inform 
our work.
---------------------------------------------------------------------------

    \26\ See Press Release, Fed. Trade Comm'n, FTC Finalizes Changes 
to Premerger Notification Form (Oct. 10, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/10/ftc-finalizes-changes-premerger-notification-form.
    \27\ When the FTC in recent years has invited public input, we 
have received thousands--and sometimes tens of thousands--of 
comments, including on issues relating to merger enforcement. See, 
e.g., Public Docket FTC-2023-0043, Draft Merger Guidelines for 
Public Comment, Regulations.gov (Jul. 19, 2023); Public Docket FTC-
2024-0028, FTC and DOJ Seek Info on Serial Acquisitions, Roll-Up 
Strategies Across U.S. Economy, Regulations.gov (May 23, 2024).
---------------------------------------------------------------------------

    The Final Rule, HSR Report, and new merger portal reflect 
tremendous work by teams across the FTC, in particular from the 
Premerger Notification Office, the Office of Policy and Coordination, 
and the Office of Policy Planning, as well as from throughout the 
Bureau of

[[Page 89398]]

Competition, the Office of General Counsel, and the Bureau of 
Economics. I am grateful to this team for their diligent efforts, as 
well as to the FTC's partners at DOJ for their collaboration, and to my 
fellow Commissioners for their thoughtful engagement.

Statement of Commissioner Alvaro M. Bedoya Joined by Chair Lina M. Khan 
and Commissioner Rebecca Kelly Slaughter

    My colleagues Commissioners Ferguson and Holyoak write at some 
length in support of the Commission's decision not to adopt, at this 
time, a set of proposed requests for employment information (``the 
labor screen'') that was included in the original notice of proposed 
rulemaking.\1\ Rather than litigating the merits of the labor screen, I 
write to respond to one of the ideas underlying my colleagues' 
arguments against it.
---------------------------------------------------------------------------

    \1\ Premerger Notification; Reporting and Waiting Period 
Requirements, 88 FR 42178, 42197 (June 29, 2023) (to be codified at 
16 CFR pts. 801, 803).
---------------------------------------------------------------------------

    The Sherman Act was passed in 1890; the Clayton Act and the Federal 
Trade Commission Acts were passed in 1914, creating this Commission and 
empowering it to enforce this newly expanded set of antitrust laws.\2\ 
Yet it was only in 2021 that a Federal antitrust enforcer first stopped 
a merger because of its impact on competition in the labor market.\3\
---------------------------------------------------------------------------

    \2\ 15 U.S.C. 1-38; 15 U.S.C. 12-27; 15 U.S.C. 41-58.
    \3\ United States v. Bertelsmann SE & Co. KGaA, 646 F. Supp. 3d 
1, 1 (D.D.C. 2022).
---------------------------------------------------------------------------

    My colleagues cite the absence of such merger challenges as a key 
reason for dropping the labor screen. Both stress the extensive efforts 
the antitrust agencies have expended to identify such mergers.\4\ They 
argue that, if enforcers have been working for years to identify 
mergers that harm competition in labor markets and have not brought 
more challenges, how can we justify requesting additional data to 
identify those mergers? In fact, Commissioner Holyoak seems to imply 
that labor monopsony is rare, going so far as to say that the labor 
screen ``was a solution in search of a nonexistent problem.'' \5\
---------------------------------------------------------------------------

    \4\ Statement of Commissioner Melissa Holyoak, Final Premerger 
Notification Form and the Hart-Scott-Rodino Rules, at 9; Concurring 
Statement of Commissioner Andrew N. Ferguson, In the Matter of 
Amendments to the Premerger Notification and Report Form and 
Instructions and the Hart-Scott-Rodino Rule, at 11.
    \5\ Statement of Commissioner Melissa Holyoak, Final Premerger 
Notification Form and the Hart-Scott-Rodino Rules, at 9.
---------------------------------------------------------------------------

    History tells a different story. While my colleagues suggest that 
the absence of labor-based merger challenges exists ``not for a lack of 
trying,'' \6\ a review of the first hundred years of that history finds 
dreadfully little trying. Indeed, most of the history of antitrust 
enforcement has been marked by a clear aversion to protecting labor 
market competition. This arguably has only been reversed in the last 
decade.
---------------------------------------------------------------------------

    \6\ Id.; see also Concurring Statement of Commissioner Andrew N. 
Ferguson, In the Matter of Amendments to the Premerger Notification 
and Report Form and Instructions and the Hart-Scott-Rodino Rule, at 
11 (``It is not for a lack of effort.'').
---------------------------------------------------------------------------

    The historical record reveals several reasons for the lack of 
labor-based merger challenges, none of which suggest that labor 
monopsony is rare. The first would be early antitrust enforcers' overt 
hostility to labor organizing specifically and labor organizations more 
generally--a position that put them in sharp opposition to the 
legislators who created American antitrust law.
    From the first Senate debates over passage of the law that would 
come to bear his name, Senator John Sherman made clear he was concerned 
with combinations of companies that could unilaterally set the price of 
labor. In denouncing the ``trust,'' he explained that:

    ``The sole object of such a combination is to make competition 
impossible. It can control the market, raise or lower prices, as 
will best promote its selfish interests. . . It dictates the terms 
to transportation companies, it commands the price of labor without 
fear of strikes, for in its field it allows no competitors. Such a 
combination is more dangerous than any heretofore invented. . .'' 
\7\
---------------------------------------------------------------------------

    \7\ 21 Cong. Rec. 2457 (Mar. 21, 1890) (remarks of Sen. John 
Sherman of Ohio).

    He wasn't the only legislator who was concerned with labor. The 
debates in 1890 as well as 1914 were defined by an overriding concern 
that the laws being considered would be misused to stop labor 
organizing. Thus, the Sherman Act was amended not once but twice to 
avoid such a result, ultimately being rewritten nearly in its entirety; 
sections 6 and 20 of the Clayton Act were enacted for the same reason 
24 years later.\8\
---------------------------------------------------------------------------

    \8\ See Alvaro M. Bedoya & Bryce Tuttle, ``Aiming at Dollars, 
Not Men'': Recovering the Congressional Intent Behind the Labor 
Exemption to Antitrust Law,'' 85 Antitrust L.J. 805, 809-812 (2024).
---------------------------------------------------------------------------

    Early antitrust enforcers ignored this legislative intent, as did 
the courts hearing challenges brought under the laws. Prosecutors 
instead turned the Sherman Act into what Professor Hovenkamp termed a 
``savage weapon'' against labor, \9\ using it to break the strikes of 
longshoremen in New Orleans and hungry Pullman Palace Car workers in 
Illinois.\10\ The labor protections in the Clayton Act arguably fared 
worse. Despite the law's clear prohibition against the use of antitrust 
laws against labor organizing, courts in the 1920s used it to stop 
2,100 strikes.\11\
---------------------------------------------------------------------------

    \9\ Herbert Hovenkamp, Labor Conspiracies in American Law, 1880-
1930, 66 Tex. L. Rev. 919, 928 (1988).
    \10\ See Bedoya & Tuttle, supra note 8, at 811-812; see also 
U.S. v. Workingmen's Amalgamated Council of New Orleans, 54 F. 994, 
996 (E.D. La. 1893); Melvin I. Urofsky, Pullman Strike, Encyc. 
Britannica (Sept. 2, 2022), https://www.britannica.com/event/Pullman-Strike.
    \11\ See William E. Forbath, Law and the Shaping of the American 
Labor Movement 158 (1991).
---------------------------------------------------------------------------

    In short, for the first four decades of their existence, the 
antitrust laws were used as a cudgel against organized labor, not a 
tool to detect and block mergers that risked harming labor markets. 
While the law was there to allow for a challenge to a merger based on 
its impact on labor market competition,\12\ the idea that the DOJ or 
FTC of that era would try to block such mergers finds no basis in 
reality.
---------------------------------------------------------------------------

    \12\ In 1926, in line with Senator Sherman's intent, the Supreme 
Court held that antitrust law could be used affirmatively to protect 
competition in labor markets, allowing a group of sailors to sue 
shipowners for wage-fixing. Anderson v. Shipowners Ass'n of the Pac. 
Coast, 272 U.S. 359, 365 (1926).
---------------------------------------------------------------------------

    In his treatise exploring the absence of antitrust enforcement 
targeted at labor markets, Professor Posner presents two other reasons 
for the lack of labor-based merger challenges, both of which post-date 
the heyday of the labor injunction in the first half of the 20th 
century.\13\ He argues that, starting in the 1960s, legal scholars 
began to prevail upon law enforcers to target antitrust enforcement on 
conduct and combinations that raised the prices on products and 
services sold to the public--that is, ``consumer welfare.'' More 
interestingly, he explains that until very recently, most economists 
assumed labor markets were more or less competitive, and labor market 
power--the power of employers to set wages below a competitive level--
was thus not an important problem for society.\14\
---------------------------------------------------------------------------

    \13\ See generally Eric A. Posner, How Antitrust Failed Workers 
(2021).
    \14\ See id at 4. Professor Posner cites a popular economics 
textbook from 2005 which declared that ``[m]ost labor economists 
believe there are few monopsonized labor markets in the United 
States.'' Id. citing Dennis W. Carlton & Jeffrey M. Perloff, Modern 
Industrial Organization 108 (2005). See also David Card, Who Set 
Your Wage? American Economic Review at 1075 (2022) (``the time has 
come to recognize that many--or even most--firms have some wage-
setting power. Such a shift was made with respect to firm's price-
setting power many decades ago[. . .] In the past few years we may 
have reached a tipping point for a similar transition in labor 
economics, driven by the combination of new (or at least post-1930) 
theoretical perspectives, newly available data sources, and 
accumulating evidence on several different fronts.''); id. at 1086 
(``By insisting that `markets set wages,' labor economists ceded the 
field, and had very little to say about questions like the design of 
online labor markets, or the effects of no-solicitation or no-
poaching agreements--other than that they should not matter[. . .] 
One of the most exciting developments in the field today is the 
evidence of labor economists taking questions about wage setting 
seriously[. . .] I also expect this work to lead to some rethinking 
on policies such as minimum wages, the regulation of trade unions, 
and anti-Trust'').

---------------------------------------------------------------------------

[[Page 89399]]

    That understanding of labor markets has begun to unravel. New 
research suggests that the fewer companies in a community competing for 
workers, the lower the wages.\15\ Research also suggests that mergers, 
specifically, help companies keep wages low.\16\ This appears to be a 
common problem in American society. Professor Posner found it plausible 
that in many labor markets, workers receive thousands of dollars less 
than the competitive rate.\17\ Two years ago, the Treasury Department 
estimated that as a result of current employer market concentration as 
well as how time consuming it is to find, interview for, and accept a 
job, Americans likely lose out on the equivalent of eight weeks of pay 
every year. In other words, in a perfectly competitive labor market--in 
a world where we can easily switch jobs to one of any number of firms, 
most of us would be about two to four paychecks richer.\18\ Few people 
may know about ``labor monopsony,'' but anyone on a budget knows what 
they'd do with that money.
---------------------------------------------------------------------------

    \15\ See, e.g., Efraim Benmelech, et al., Strong Employers and 
Weak Employees: How Does Employer Concentration Affect Wages, 57. J. 
of Hum. Res. S200, S203 (Supplement) (2022).
    \16\ See Elena Prager & Matt Schmitt, Employer Consolidation and 
Wages: Evidence from Hospitals, 111 Am. Econ. Rev. 397, 397 (2021); 
Benmelech, supra note 3, at S200 (``instrumenting concentration with 
merger activity shows that increased concentration decreases 
wages''); David Arnold, Mergers and Acquisitions, Local Labor Market 
Concentration, and Worker Outcomes (unpublished) (Oct. 29, 2021) 
(``M&As that increase local labor market concentration have negative 
impacts on worker earnings with the largest impacts in already 
concentrated markets.''), available at https://sites.google.com/site/davidhallarnold/research.
    \17\ See Posner, supra note 13, at 28.
    \18\ The report's review of academic studies ``places the 
decrease in wages at roughly 20 percent relative to the level in a 
fully competitive market.'' This is a middle estimate from an 
estimated range of $0.15 to $0.25 cents of lost wages on every 
dollar. The ``eight weeks of pay'' figure applies the lower bound of 
that estimate ($0.15, or 15%) to 52 weeks of pay. See U.S. Dep't of 
Treasury, The State of Labor Market Competition, at ii (2022) (``20 
percent''); id. at 24-25 (``15-25 cents on the dollar'').
---------------------------------------------------------------------------

    In short, my colleagues seem to say that labor monopsony is not a 
problem even though we've only just started to look for that problem. 
Then, they wave away tools to help find that problem because we haven't 
found it yet.\19\
---------------------------------------------------------------------------

    \19\ Commissioner Holyoak states that ``[t]he agencies have 
never made a standalone labor challenge to an acquisition,'' and 
Commissioner Ferguson states that the agencies have never made a 
challenge ``based on labor market theories that could have been 
identified by the proposed requirements.'' Statement of Commissioner 
Melissa Holyoak, Final Premerger Notification Form and the Hart-
Scott-Rodino Rules, at 9-10; Concurring Statement of Commissioner 
Andrew N. Ferguson, In the Matter of Amendments to the Premerger 
Notification and Report Form and Instructions and the Hart-Scott-
Rodino Rule, at 11. I evaluate this new era quite differently. In 
2021, our colleagues at the Antitrust Division successfully blocked 
a proposed merger between two of the nation's largest book 
publishers based on a labor theory that the elimination of 
competition between the merging publishers likely would have 
negatively impacted the advances paid to authors for their work. See 
United States v. Bertelsmann SE & Co. KGaA, 646 F. Supp. 3d 1 
(D.D.C. 2022). What's more, in addition to Commission staff's 
challenge of the Kroger/Albertson's merger in part on a labor 
theory, FTC staff just last month submitted a comment urging the 
Indiana Department of Health to deny an application that seeks to 
combine Union Hospital and Terre Haute Regional Hospital, in part 
because, in staff's view, the proposed merger would likely depress 
wage growth for hospital employees and exacerbate challenges with 
recruiting and retaining healthcare professionals. See Complaint, 
FTC v. Kroger Co., and Albertsons Co., (D. Or. Feb. 26, 2024); 
Federal Trade Commission Staff Submission to Indiana Health 
Department Regarding the Certificate of Public Advantage Application 
of Union Health and Terra Haute Regional Hospital at 54-63 (Sept. 5, 
2024). The Commission unanimously authorized staff to file the 
comment. Press Release, Fed. Trade Comm'n, FTC Staff Opposes 
Proposed Indiana Hospital Merger (Sept. 5, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/09/ftc-staff-opposes-proposed-indiana-hospital-merger. Additionally, in 2018, 
under Republican leadership, the Commission alleged that Grifols 
S.A.'s proposed acquisition of Biotest U.S. Corporation would likely 
have enabled the combined firm to decrease fees paid to blood plasma 
donors and required Grifols to divest certain assets as a condition 
of the acquisition. See Complaint, In the Matter of Grifols S.A. and 
Grifols Shared Services North America, Inc. (Aug. 1, 2018). Finally, 
I note that prior to my arrival at the Commission, Chair Khan and 
Commissioner Slaughter sounded the alarm on labor concerns in the 
abandoned merger between Lifespan Corporation and Care New England 
Health System stating that, in addition to allegations contained in 
staff's complaint, they would have also supported an allegation on 
labor grounds. See Concurring Statement of Comm'r Rebecca Kelly 
Slaughter and Chair Lina M. Khan Regarding FTC and State of Rhode 
Island v. Lifespan Corporation and Care New England Health System, 
Fed. Trade Comm'n (Feb. 17, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/public_statement_of_commr_slaughter_chair_khan_re_lifespancne_redacted.pdf.
---------------------------------------------------------------------------

    All of this said, a key barrier to any merger challenge, including 
labor-based challenges, is a lack of time. The changes voted out today 
will help FTC staff quickly find and focus on the mergers that hurt 
competition in any market, including labor markets. For this and many 
other reasons, I am proud to support them.

Statement of Commissioner Melissa Holyoak

I. Introduction

    The Commission issued its notice of proposed rulemaking for the 
Premerger Notification, Reporting and Waiting Period Requirements which 
implements the Hart-Scott-Rodino Antitrust Improvements Act (``NPRM'') 
on June 29, 2023.\1\ The contents of the NPRM were harrowing and 
generated (justifiably) substantial outcry from many commentors. Many 
of the contemplated filing requirements, if implemented, would have 
been beyond the Commission's legal authority, arbitrary and capricious, 
unjustifiably burdensome, and just plain bad policy.\2\
---------------------------------------------------------------------------

    \1\ Premerger Notification; Reporting and Waiting Period 
Requirements, 88 FR 42178 (proposed Jun. 29, 2023) (to be codified 
at 16 CFR parts 801 and 803) (hereinafter NPRM).
    \2\ Out of the gate, the NPRM made broad assertions about 
increasing concentration as a justification for the unprecedented 
and wide-sweeping proposed changes. NPRM, supra note 1, at 42179. 
The concentration literature upon which it relied, id. at 42179 n.7, 
however, has been heavily criticized and debunked. See, e.g., Chad 
Syverson, Macroeconomics and Market Power: Context, Implications, 
and Open Questions, 33 J. Econ. Perspectives 23 (2019); Carl 
Shapiro, Antitrust in a Time of Populism, 61 Int'l J. Indus. Org. 
714 (2018); Gregory J. Werden & Luke M. Froeb, Don't Panic: A Guide 
to Claims of Increasing Concentration, Antitrust Magazine, Fall 
2018. Most notably, the literature cited by the NPRM does not use 
well-defined antitrust markets in its assessment or conclusions. 
Further, even if increasing concentration had been a reality, it 
only has a limited role in analyzing competitive effects. See infra 
note 57.
---------------------------------------------------------------------------

    The Commission worked together on the monumental task of modifying 
the NPRM into the Final Rule,\3\ ensuring the Final Rule does not 
suffer from the many legitimate criticisms raised by the commentors. 
The Final Rule modifies many provisions in the NPRM while taking great 
care to avoid unduly burdening merging parties or chilling the many 
procompetitive transactions that happen each year. To be clear, this 
Final Rule does not align exactly with my preferences. But I have 
worked to curb the excesses of the NPRM in meaningful ways that would 
not have happened absent my support. These significant modifications 
resulted in a Final Rule that is not only consistent with the agencies' 
statutory grant of authority but will also close certain informational 
gaps that affect the agencies' ability to conduct effective premerger 
screening.
---------------------------------------------------------------------------

    \3\ Fed. Trade Comm'n, Premerger Notification; Reporting and 
Waiting Period Requirements, Final Rule (Oct. 3, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/p110014hsrfinalrule.pdf 
(hereinafter Final Rule).
---------------------------------------------------------------------------

    Commissioner Ferguson, in section III of his statement, describes 
in detail the

[[Page 89400]]

benefits of certain provisions that the Commission included in the 
Final Rule. These provisions that he describes fill information gaps in 
the agencies' current ability to fulfill their missions under the HSR 
Act. I agree with Commissioner's Fergusson's assessments and applaud 
the Commission's efforts to include these new requests in the Final 
Rule.
    Simultaneous with today's issuance of the Final Rule, the 
Commission has also announced that it will lift its suspension of early 
termination when the Final Rule takes full effect. The suspension 
itself has been in place for more than three-and-a-half years, even 
though the suspension was supposed to be ``temporary'' and ``brief.'' 
\4\ I have been baffled by this unjustified delay and disappointed that 
it took the promulgation of this Final Rule to lift the suspension of 
early termination. One of the virtues of the Final Rule is that certain 
provisions will allow staff to more quickly identify which mergers 
should receive early termination, a significant benefit to both staff 
and merging parties. So I guess late is better than never.
---------------------------------------------------------------------------

    \4\ Press Release, Fed. Trade Comm'n, FTC, DOJ Temporarily 
Suspend Discretionary Practice of Early Termination (Feb. 4, 2021), 
https://www.ftc.gov/news-events/news/press-releases/2021/02/ftc-doj-temporarily-suspend-discretionary-practice-early-termination.
---------------------------------------------------------------------------

    For the remainder of my statement, I write to demonstrate the 
dramatic differences between this Final Rule and the proposed rule set 
forth in the NPRM, and also to elaborate on some of the changes, in 
addition to lifting the early termination suspension, that drove my 
decision to vote in favor of the Final Rule. My overview of the Final 
Rule is not a substitute to the text of the Final Rule or the analysis 
in the Statement of Basis and Purpose (``SBP''),\5\ both of which 
should be consulted by all filers.
---------------------------------------------------------------------------

    \5\ Fed. Trade Comm'n, 16 CFR parts 801 and 803, Premerger 
Notification; Reporting and Waiting Period Requirements, Statement 
of Basis and Purpose (Oct. 3, 2024) (hereinafter SBP).
---------------------------------------------------------------------------

    Of the twenty-nine primary proposals in the NPRM, ten were rejected 
entirely, including, among others, the request for labor information, 
the obligation to produce draft transaction documents, and the 
requirements to create organizational charts. Of the remaining nineteen 
proposals, the Final Rule includes just two without modification; we 
have made meaningful changes to the other seventeen requirements.

                       Table 1--Rejected Proposals
------------------------------------------------------------------------
                 NPRM provision                    Results in final rule
------------------------------------------------------------------------
Labor Market/Employee Information...............  Proposal rejected.
Drafts of Transaction-Related Documents.........  Proposal rejected.
Organizational Chart of Authors and Recipients..  Proposal rejected.
Other Types of Interest Holders that May Exert    Proposal rejected.
 Influence.
Expand Current 4(d)(iii) to Include Financial     Proposal rejected.
 Projections to Synergies and Efficiencies.
Deal Timeline...................................  Proposal rejected.
Provision of Geolocation Information............  Proposal rejected.
Identification of Messaging Systems.............  Proposal rejected.
Litigation Hold Certification Language..........  Proposal rejected.
Identification of F/K/A Names...................  Proposal rejected.
------------------------------------------------------------------------

    For example, the prior acquisition proposal that called for ten 
years of prior acquisitions without any size threshold was reversed in 
the Final Rule to request only five years of acquisitions, and 
reinstated the $10 million threshold--returning to the time period 
adopted in 1987 \6\ and dollar threshold that had existed since the 
original rules in 1978.\7\ The NPRM proposal that would have required 
the filers to identify and produce all agreements between the merging 
parties has been modified significantly in the Final Rule to simply 
require the filers to check boxes to indicate whether they have a few 
types of agreements between them--nothing has to be produced or 
described. The Final Rule similarly modifies the NPRM's overlap and 
supply ``narratives'' to require only ``brief'' descriptions instead. 
And, among other revisions, the Final Rule's overlap and supply 
descriptions requirement makes clear that antitrust analysis is not 
required.
---------------------------------------------------------------------------

    \6\ 52 FR 7066 at 7078 (Mar. 6, 1987) (``[The Commission] 
believes that this change can be made without harming the agencies' 
ability to conduct a thorough antitrust review since an account of 
the acquiring person's acquisitions over the past five years will 
give adequate notice of possible trends toward concentration.'').
    \7\ 43 FR 33450 at 33534 (July 31, 1978) (``The item permits the 
omission of prior transactions that did not involve the acquisition 
of more than 50 percent of the voting securities or assets of a 
person with preacquisition sales or assets of $10 million, since 
smaller acquisitions are likely to be less significant from an 
antitrust standpoint.''). Unlike prior iterations of the rules, the 
Final Rule does require the acquired entity to also identify prior 
acquisitions and clarified that an acquisition of ``all or 
substantially all'' of the assets of a business must be reported.
---------------------------------------------------------------------------

    Further, many of the modifications exempt ``Select 801.30 
Transactions'' from having to report certain information required by 
the Final Rule. Select 801.30 Transactions are acquisitions of third 
parties' voting securities where the acquirer does not gain control, no 
agreements between the acquiring and acquired person govern the 
transaction, and the acquiror does not have the ability to appoint or 
serve on a board.\8\ The Final Rule likewise exempts transactions where 
there is no horizontal overlap or supply relationship from certain 
information requirements, and sets a de minimis threshold to exclude 
the requirement to describe supply relationships where the sale or 
purchase of the product, service, or asset represents less than $10 
million in revenue in the most recent year. Table 2 highlights some of 
the main modifications that have been made in the Final Rule (again, 
this list is not exhaustive and does not substitute for the text of the 
Final Rule).
---------------------------------------------------------------------------

    \8\ The Final Rule defines Select 801.30 Transactions as ``[a] 
transaction to which Sec.  801.30 applies and where (1) the 
acquisition would not confer control, (2) there is no agreement (or 
contemplated agreement) between any entity within the acquiring 
person and any entity within the acquired person governing any 
aspect of the transaction, and (3) the acquiring person does not 
have, and will not obtain, the right to serve as, appoint, veto, or 
approve board members, or members of any similar body, of any entity 
within the acquired person or the general partner or management 
company of any entity within the acquired person. Executive 
compensation transactions also qualify as select 801.30 
transactions.'' 16 CFR part 803, appendix B at 1.

[[Page 89401]]



                 Table 2--Select Modified NPRM Proposals
------------------------------------------------------------------------
                                           Select modification in final
             NPRM provision                            rule
------------------------------------------------------------------------
Prior Acquisitions \9\.................  Among others, retain the five-
                                          year lookback and $10 million
                                          sales/assets threshold that
                                          existed in prior iterations of
                                          the HSR rules.
Other Agreements Between the Parties     Among others, filers are not
 \10\.                                    required to produce or
                                          describe agreements between
                                          the parties; instead, they
                                          must only, via checkbox,
                                          identify types of agreements
                                          between them, if any.
Officers, Directors, and Board           Among others, (1) exclude
 Observers \11\.                          reporting on board observers;
                                          (2) limit to acquiring person
                                          only; (4) limit to officers/
                                          directors of entities in
                                          overlap industries as
                                          described by the text of the
                                          Final Rule.
4(c) Documents by/for Supervisory Deal   Limit to only apply to one
 Team Lead(s) \12\.                       individual (not the plural
                                          ``leads'' like in the NPRM)
                                          supervisory deal team lead, as
                                          defined in the text of the
                                          Final Rule.
Supply Relationships \13\..............  Among others, (1) require only
                                          ``brief'' descriptions rather
                                          than a narrative; (2) exclude
                                          ``Select 801.30
                                          Transactions''; (3) impose a
                                          de minimis threshold and (4)
                                          limit descriptions to a
                                          business assessment rather
                                          than an antitrust analysis
                                          (see SBP).
Overlap Products and Services \14\.....  Among others, (1) require only
                                          ``brief'' descriptions rather
                                          than a narrative; (2) exclude
                                          ``Select 801.30
                                          Transactions''; and (3) limit
                                          description to a business
                                          assessment rather than an
                                          antitrust analysis (see SBP).
Ordinary Course Documents (Periodic      Among others, limit to exclude
 Plans and Reports) \15\.                 ``Select 801.30 Transactions''
                                          and limited to only require
                                          documents provided to Chief
                                          Executive Officers.
Identification of Limited Partners \16\  Among others, limit disclosure
                                          requirements for limited
                                          partners who do not have
                                          management rights.
Description of Entity Structures and     Among others, eliminate
 Organizational Chart for Funds and       requirement to create an
 MLPs \17\.                               organizational chart.
Transaction Diagram \18\...............  Among others, exclude ``Select
                                          801.30 Transactions'' and only
                                          necessary if diagrams
                                          previously existed (i.e., no
                                          need to create diagrams).
Mandatory Identification of Foreign      Limit to acquiring person.
 Jurisdiction Reporting by Both Parties
 \19\.
Requiring a draft agreement or term      Clarify scope and provide more
 sheet and transaction specific           details about the information
 agreements for filings on non-           required.
 definitive agreements \20\.
Transaction Rationale \21\.............  Among others, exclude ``Select
                                          801.30 Transactions.''
Voluntary Waivers for State AGs and      Allow filers to voluntarily
 International Enforcers \22\.            check two separate boxes that
                                          would permit certain
                                          disclosures.
Defense or Intelligence Contracts \23\.  Among others, limit to
                                          contracts generating $100
                                          million or more of revenue and
                                          only if there is an Overlap or
                                          Supply Relationship.
Document Log Requirements \24\.........  Among others, limit requirement
                                          to identify authors to certain
                                          and limited circumstances.
Adjustments to NAICS revenue reporting   Modified to limit scope.
 \25\.
------------------------------------------------------------------------

    Notably, only two of the main proposals in the NPRM were adopted 
without modification: the requirements to translate foreign-language 
documents and to report subsidies from foreign entities of concern, 
which was mandated by the Merger Filing Fee Modernization Act of 
2022.\26\ All other proposals were rejected or significantly modified. 
Taken together, the dramatic revisions to the proposed rule set forth 
in the NPRM result in a Final Rule that I can support. The decisions 
made to scale back the proposed requirements in the NPRM will limit 
burden, aligns the Final Rule with the Commission's legal authority 
under the HSR Act, and is tailored to address information gaps that 
have hampered the agencies' premerger review.\27\
---------------------------------------------------------------------------

    \9\ See Final Rule, supra note 3, Acquiring Person Instructions, 
at 14-15.
    \10\ See id. at 9.
    \11\ See id. at 5.
    \12\ See id. at 1.
    \13\ See id. at 10.
    \14\ See id. at 9-10.
    \15\ See id. at 9.
    \16\ See id. at 4-5.
    \17\ See id. at 5.
    \18\ See id. at 8.
    \19\ Compare id. at 7 (requiring disclosure for acquiring 
person) with Final Rule, supra note 3, Acquired Person Instructions 
(not requiring disclosure of transactions subject to international 
antitrust notification).
    \20\ See Final Rule, supra note 3, Acquiring Person 
Instructions, at 9.
    \21\ See id. at 8.
    \22\ See id. at 15-16.
    \23\ See id. at 15.
    \24\ See id. at 2.
    \25\ See id. at 10-11.
    \26\ See 15 U.S.C. 18b (requiring the Commission to promulgate a 
rule requiring HSR filings to include information on subsidies 
received from certain foreign governments or entities that are 
identified as foreign entities of concern); Consolidated 
Appropriations Act, 2023, Public Law 117-328 (2023) (reflecting the 
appropriations bill that included the Merger Filing Fee 
Modernization Act of 2022).
    \27\ The incremental burden estimated in the NPRM decreased from 
107 hours to only 68 hours in the Final Rule, a result that was 
critical to my decision. NPRM, supra note 1, at 42208 (reporting 107 
incremental hours); SBP, supra note 3, at section VIII, 386 of 406 
(reporting 68 incremental hours).
---------------------------------------------------------------------------

    Sections II through IV of my statement explain why three proposals 
in the NPRM were especially problematic to me, and why their 
elimination or substantial revision was critical to my vote on this 
Final Rule: (II) Labor Market/Employee Information, (III) Drafts of 
Transaction-Related Documents, and (IV) Ten Years of Prior Acquisitions 
Without any Size Thresholds. To be clear, by focusing on these three 
proposals I do not mean to diminish the importance of the other changes 
reflected in the Final Rule. Each of the many revisions that scaled 
back the proposed requirements in the NPRM contributed to my vote to 
issue the Final Rule. Finally, I discuss in section V some additional 
considerations that led me to support the Final Rule, including 
important limitations in the Final Rule that ensure

[[Page 89402]]

the Final Rule will not result in fishing expeditions.
    Before proceeding, I want to discuss the Commission's authority to 
issue today's Final Rule, an issue that is critical to me as a 
Commissioner.\28\ The HSR Act obligates the Commission, ``with the 
concurrence of the Assistant Attorney General,'' to issue rules that 
require information to be submitted in HSR filings that will ``be in 
such form and contain such documentary material and information 
relevant to a proposed acquisition as is necessary and appropriate to 
enable the Federal Trade Commission and the Assistant Attorney General 
to determine whether such acquisition may, if consummated, violate the 
antitrust laws.'' \29\ While this mandate affords some discretion to 
the Commission, this discretion is not unbounded. Critically, Congress 
did not give the Commission authority to promulgate rules to gather 
information generally, or to merely heap burden upon merging parties in 
an effort to dissuade acquisitions. Rather, the Act explains that the 
purpose of HSR filings, and the rules determining the content of 
filings, is for the agencies ``to determine whether such acquisition 
may, if consummated, violate the antitrust laws.'' \30\ Many proposals 
in the NPRM--including the three discussed below--have been rejected or 
substantially modified to ensure the Final Rule includes only new 
requirements that are consistent with the text and structure of the HSR 
Act.
---------------------------------------------------------------------------

    \28\ See, e.g., Dissenting Statement of Commissioner Melissa 
Holyoak, Joined by Commissioner Andrew N. Ferguson, In the Matter of 
the Non-Compete Clause Rule, Matter Number P201200 (June 28, 2024), 
https://www.ftc.gov/system/files/ftc_gov/pdf/2024-6-28-commissioner-holyoak-nc.pdf.
    \29\ 15 U.S.C. 18a(d).
    \30\ Id. (emphasis added).
---------------------------------------------------------------------------

II. Labor Market Information

    The NPRM contained many problematic proposals. Chief among them was 
its proposal to collect information from filers about labor 
markets.\31\ As proposed, filers would report three different types of 
information related to labor:
---------------------------------------------------------------------------

    \31\ NPRM, supra note 1, at 42197.

     ``Largest Employee Classifications[:] Provide the 
aggregate number of employees . . . for each of the five largest 
occupational categories'' based upon 6-digit SOC classifications; 
\32\
---------------------------------------------------------------------------

    \32\ Id. at 42215. SOC codes are ``Standard Occupational 
Classification'' codes used by the Bureau of Labor Statistics of the 
Department of Labor. See id. at 42210.
---------------------------------------------------------------------------

     ``Geographic Market Information for Each Overlapping 
Employee Classification[:] Indicate the five largest 6-digit SOC 
codes in which both parties . . . employ workers [and also provide] 
each ERS commuting zone in which both parties employ workers with 
the 6-digit classification and provide the aggregate number of 
classified employees in each ERS commuting zone; and'' \33\
---------------------------------------------------------------------------

    \33\ Id. at 42215.
---------------------------------------------------------------------------

     ``Worker and Workplace Safety Information[:] Identify 
any penalties or findings issued against the filing person by the 
U.S. Department of Labor's Wage and Hour Division (WHD), the 
National Labor Relations Board (NLRB), or the Occupational Safety 
and Health Administration (OSHA) in the last five years and/or any 
pending WHD, NLRB, or OSHA matters.'' \34\
---------------------------------------------------------------------------

    \34\ Id. Filers also had to provide, ``[f]or each identified 
penalty or finding . . . (1) the decision or issuance date, (2) the 
case number, (3) the JD number (for NLRB only), and (4) a 
description of the penalty and/or finding.'' Id.

    All three of these requirements (``Labor Proposal'') were 
completely rejected in the Final Rule. Chair Khan asserts in her 
statement that ``the Final Rule pares back some of the labor market 
requirements.'' \35\ Despite this confusing statement, the text of the 
Final Rule makes clear that all (not ``some'') of the labor 
requirements have been fully removed (not ``pare[d] back''). And for 
good reason. Despite repeated and extensive efforts to make harm in 
labor markets a standard component of merger enforcement, no evidence 
exists to justify including the Labor Proposal in the Final Rule. 
Accordingly, the Labor Proposal was rightfully excluded from the Final 
Rule and, absent new evidence, has no place in any future rulemaking 
that the Commission may contemplate.
---------------------------------------------------------------------------

    \35\ Statement of Chair Lina M. Khan, Regarding The Final 
Premerger Notification Form and the Hart-Scott-Rodino Rules, 
Commission File No. P239300, and Regarding the FY2023 HSR Annual 
Report to Congress Commission File No. P859910 at 5-6 (Oct. 3, 2024) 
(hereinafter Statement of Chair Khan).
---------------------------------------------------------------------------

    To be sure, a merger may theoretically create anticompetitive 
effects in a relevant labor market.\36\ A post-merger entity might, for 
example, be able to lower wages for workers when the merger eliminates 
a critical employment option for workers. Such a scenario is more 
likely when the merger involves specialized workers who may have fewer 
comparable alternatives than less skilled workers.\37\ Theory aside, 
the Labor Proposal would have asked for information generally unhelpful 
for determining whether an acquisition violates the antitrust laws.
---------------------------------------------------------------------------

    \36\ Ioana Marinescu & Herbert J. Hovenkamp, Anticompetitive 
Mergers in Labor Markets, 94 Ind. L.J. 1031, 1032 (2019).
    \37\ Id. at 1038.
---------------------------------------------------------------------------

    First, the ``worker and workplace safety information'' would have 
provided no measurable benefit to the agency in its initial 
determination of whether the proposed merger violates the antitrust 
laws. To support burdening all filers with providing this information, 
the NPRM asserted that ``[i]f a firm has a history of labor law 
violations, it may be indicative of a concentrated labor market where 
workers do not have the ability to easily find another job.'' \38\ No 
evidence, empirical or otherwise, was presented to support this 
assertion. And I am not aware of any supportive literature and have 
never seen a court opinion that suggests such evidence indicates 
competitive harm from a merger under section 7 of the Clayton Act (or 
any other antitrust violation under the Sherman Act or otherwise). 
Instead, this proposal seems like an overt way to harass firms with any 
workplace failure under the guise of an antitrust investigation. As the 
Supreme Court observed, ``[e]ven an act of pure malice by one business 
competitor against another does not, without more, state a claim under 
the [F]ederal antitrust laws; those laws do not create a [F]ederal law 
of unfair competition or `purport to afford remedies for all torts 
committed by or against persons engaged in interstate commerce.' '' 
\39\ We simply do not have authority under the HSR Act to require 
filers to submit information about workplace safety.
---------------------------------------------------------------------------

    \38\ NPRM, supra note 1, at 42198.
    \39\ Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 
U.S. 209, 225 (1993) (quoting Hunt v. Crumboch, 325 U.S. 821, 826 
(1945)); cf. Rambus Inc. v. FTC, 522 F.3d 456, 464 (D.C. Cir. 2008) 
(``Deceptive conduct--like any other kind--must have an 
anticompetitive effect in order to form the basis of a 
monopolization claim. `Even an act of pure malice by one business 
competitor against another does not, without more, state a claim 
under the [F]ederal antitrust laws,' without proof of `a dangerous 
probability that [the defendant] would monopolize a particular 
market.' '' (alteration in original) (quoting Brooke Grp., 509 U.S. 
at 225)).
---------------------------------------------------------------------------

    Second, the proposed request for Standard Occupational 
Classification (``SOC'') codes would have been of--at most--limited 
value because SOC codes by themselves are not sufficient to define a 
relevant labor market for antitrust purposes.\40\ Phrased differently, 
they are not tethered to the hypothetical monopolist test which has 
been applied by the agencies and courts in various iterations of the 
merger guidelines for decades.\41\ Depending on the merger, SOC codes 
may be too broad

[[Page 89403]]

to accurately assess labor competition,\42\ limiting their predictive 
value for assessing competitive harm. The NPRM itself appeared to 
acknowledge the limited value of SOC codes: ``[t]he use of [SOC] codes 
as a screening tool is not intended to endorse their use for any other 
purpose, such as defining a relevant labor market.'' \43\ In fact, just 
a few examples demonstrate the limited value SOC codes would provide to 
the Commission:
---------------------------------------------------------------------------

    \40\ See Comment of U.S. Chamber of Com., Doc. No. FTC-2023-
0040-0684 at 34 (hereinafter U.S. Chamber Comment) (``The data 
sought by the proposed rules defines labor markets imprecisely at 
best.'').
    \41\ See Fed. Trade Comm'n v. Advoc. Health Care Network, 841 
F.3d 460, 468-70 (7th Cir. 2016) (using the hypothetical monopolist 
test to inform market definition); Fed. Trade Comm'n v. Hackensack 
Meridian Health, Inc., 30 F.4th 160, 167 (3d Cir. 2022) (similar).
    \42\ E.g., Jose Azar et al., Concentration in US Labor Markets: 
Evidence from Online Vacancy Data, 66 Labor Econ. 101886, 5 (2020). 
(``[T]he 6-digit SOC is too broad of a market according to the 
[small significant non-transitory reduction in wage test].'').
    \43\ NPRM, supra note 1, at 42197; see Comment of International 
Center for Law & Economics, Doc. No. FTC-2023-0040-698 at 15 
(``Given the systematic misfit between the proposed `Labor Markets' 
section and any actual labor markets, given the agencies lack of 
experience in analyzing the local labor-market effects of proposed 
mergers, and given the hard questions of when or under what 
conditions such labor-market effects might be both material and 
unlikely to covary with product-market effects, we suggest that the 
screening utility of the new information remains unclear.'').

    Attorneys working across diverse areas of expertise are broken 
down into attorneys (23-1011 Lawyers) and . . . well, attorneys, 
although there is a separate category for Judges, Magistrate Judges, 
and Magistrates (23-1023), who are likely lawyers, too. To 
paraphrase Shakespeare (or a character in ``Henry VI, Part 2''), 
let's kill all the widgets.
    To the best of my recollection, the agencies tend to slice the 
professional salami a little thinner than that when hiring staff.
    Physicians fare a little better, although 10 categories of 
specialist physicians, plus ``family medicine physicians'' and 
``physicians, all other'' leave out some specialties (like, say, 
surgery and ophthalmology) and make no room for subspecialties, 
which might be of interest if you're hiring a cardiothoracic surgeon 
to do a quad bypass or an orthopedic surgeon to do a hip replacement 
(or both, but you care which surgeon does which procedure).\44\
---------------------------------------------------------------------------

    \44\ Daniel J. Gilman, Antitrust at the Agencies Roundup: Kill 
all the Widgets Edition, Truth on the Market (Aug. 4, 2023), https://truthonthemarket.com/2023/08/04/antitrust-at-the-agencies-roundup-kill-all-the-widgets-edition/ (ellipses in original).

    Third, the agencies have not relied upon the Economic Research 
Service (``ERS'') commuting zones to allege a relevant labor 
market,\45\ and based upon this limited experience, they cannot be 
considered sufficiently applicable to require all filers to provide the 
ERS data proposed by the NPRM. Further, the NPRM proposal on ERS 
commuting zones relied upon data from 2000--yes, 24-year-old data--even 
though more recent iterations are available.\46\ And newer data confirm 
that the older data fail to reflect current market realities, including 
the widespread transition to telework.\47\ Given that there is no 
evidence that forcing all filers to provide the proposed labor market 
information would assist the agencies in determining whether the filed-
for acquisition violates the antitrust laws, the Commission lacks 
authority to request the information under the HSR Act.
---------------------------------------------------------------------------

    \45\ The Commission did not use SOC codes or ERS commuting zones 
in their complaint allegations that reference concerns in labor 
markets in its recent litigations. See Compl., In re Tapestry, Inc., 
& Capri Holdings Ltd., No. 9429 (F.T.C. Apr. 22, 2024); see Compl., 
In re The Kroger Co. & Albertsons Cos., Inc., No. D-9428 (F.T.C. 
Feb. 26, 2024). And the DOJ did not rely upon ERS commuting zones in 
United States v. Bertelsmann SE & Co. KGaA See Compl., United States 
v. Bertelsmann SE & Co. KGaA, 646 F. Supp. 3d 1 (D.D.C. 2022); see 
also infra note 48 (explaining why Bertelsmann is not properly 
considered a case about harm in a labor market, but rather a 
monopsony input case).
    \46\ Comment of Wachtell, Lipton, Rosen & Katz, Doc. No. FTC-
2023-0040-0670 at 8.
    \47\ Id.
---------------------------------------------------------------------------

    Even if one were to assume that the agencies had the authority to 
request the proposed labor market information, it was nonetheless 
properly excluded from the Final Rule because it was a solution in 
search of a nonexistent problem. The agencies have never brought a 
standalone labor challenge to an acquisition.\48\ And this is not for 
lack of trying. Officials at the Commission,\49\ Department of 
Justice,\50\ and State enforcers \51\ have stated their desire to focus 
on harms to the labor market, especially in mergers, since at least 
2018, but the expended resources so far have been to no avail.
---------------------------------------------------------------------------

    \48\ Some have considered United States v. Bertelsmann SE & Co. 
KGaA, 646 F. Supp. 3d 1, 1 (D.D.C. 2022) to be a labor-market case. 
I disagree. On balance, this was more of a traditional monopsony 
input case. Id. The primary concern was whether there would be 
sufficient outlets for best-selling books. Id. I am also unaware of 
merger challenges by private parties where the plaintiffs alleged 
harm in a labor market. See Suresh Naidu et al., Antitrust Remedies 
for Labor Market Power, 132 Harv. L. Rev. 536, 571 (2018) (``[W]e 
[have not] found a reported case in which a court found that a 
merger resulted in illegal labor market concentration.''). The 
Commission, as reflected in the SBP, also classifies Bertelsmann as 
an input monopsony case. SBP, supra note 5, at section II.B.2, 32 of 
406.
    \49\ See Testimony of Fed. Trade Comm'n Chair Joseph Simons, US 
Congress, Oversight of the Enforcement of the Antitrust Laws, Senate 
Judiciary Committee, 2018, available at https://www.judiciary.senate.gov/meetings/10/03/2018/oversight-of-the-enforcement-of-the-antitrust-laws (staff instructed to ``look for 
potential effects on the labor market with every merger they 
review'').
    \50\ Assistant Attorney General Makan Delrahim, Remarks at the 
Public Workshop on Competition in Labor Markets 3 (Sept. 23, 2019), 
https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-public-workshop-competition (``With 
respect to mergers, the Division also has challenged transactions 
where the merged firm would likely have the ability to depress 
reimbursement rates to physicians, including the Anthem/Cigna merger 
challenge.''); Counsel to the Assistant Attorney General of the 
Antitrust Division Doha Mekki Testifies Before House Judiciary 
Committee on Antitrust and Economic Opportunity: Competition in 
Labor Markets (Oct. 29, 2019), available at https://www.justice.gov/opa/speech/counsel-assistant-attorney-general-antitrust-division-doha-mekki-testifies-house (``[L]abor competition issues are a high 
priority for Assistant Attorney General Delrahim and for the 
Antitrust Division. We have devoted significant resources to 
enforcement and advocacy in this area recently.''); id. (``The 
Division has also been busy developing and implementing screens to 
help agency staff detect mergers that are likely to create or 
enhance monopsony power in labor markets. Over the last 18 months, 
the Division has developed important new specifications for Second 
Requests and Civil Investigative Demands to determine whether a 
transaction will create or enhance labor monopsony. Moreover, the 
Division has leveraged improved search and review technology to 
identify labor competition concerns in merger and non-merger 
investigations.'').
    \51\ Testimony of Rahul Rao before Subcommittee on Antitrust, 
Commercial and Administrative Law of the Committee on the Judiciary, 
U.S. Hours of Rep. (Oct. 29, 2019), available at https://www.govinfo.gov/content/pkg/CHRG-116hhrg45126/html/CHRG-116hhrg45126.htm. (``Labor is an input, and it is a critical input. 
It's one that directly affects people's lives in that, when there's 
a monopoly power, the effect is increase in prices for consumers. 
When there is monopsony power of a dominant buyer, it decreases 
wages for workers.'').
---------------------------------------------------------------------------

    Granted, the Commission has included tagalong labor claims in 
addition to traditional theories of harm.\52\ And, in a press release, 
the Commission has taken credit for protecting against harms in the 
labor market even though the actual complaint being announced by the 
press release did not allege harm in a labor market.\53\ But these few 
and obscure outliers do not justify the widespread proposal to include 
labor market information in the Final Rule, especially information 
(e.g., SOC codes) that has never been used in any of the agencies' 
filings (litigated or otherwise).
---------------------------------------------------------------------------

    \52\ See Compl., In re The Kroger Company and Albertsons 
Companies, Inc., No. D-9428 (F.T.C. Feb. 26, 2024).
    \53\ See Press Release, Fed. Trade Comm'n, FTC Moves to Block 
Tempur Sealy's Acquisition of Mattress Firm (Jul. 2, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-moves-block-tempur-sealys-acquisition-mattress-firm (stating that ``[t]his deal 
isn't about creating efficiencies; it's about crippling the 
competition, which . . . could lead to layoffs for good paying 
American manufacturing jobs in nearly a dozen States,'' even though 
nothing in the complaint suggests any harm in the labor markets); 
see also Compl. In re Tapestry, Inc., and Capri Holdings Limited, 
No. 9429 (F.T.C. Apr. 22, 2024) (discussing labor issues but not 
alleging violations of the law based upon harm in labor markets).
---------------------------------------------------------------------------

    Moreover, the NPRM did not identify any economics literature that 
justified the request for labor information.\54\ As explained by 
Albrecht et al.:
---------------------------------------------------------------------------

    \54\ See NPRM, supra note 1, at 42197-98.

    [D]espite growing interest in the use of antitrust law to 
address labor monopsony, such efforts are not supported by empirical 
and theoretical foundations sufficient to bear the weight of these 
galvanized efforts . . . .
    Empirical data concerning the magnitude and impact of labor 
monopsonies is

[[Page 89404]]

inconsistent. Evidence on the extent of labor-market power is mixed, 
with studies reaching divergent conclusions depending on the data, 
methodology, and markets analyzed.\55\
---------------------------------------------------------------------------

    \55\ Brian C. Albrecht et al., Labor Monopsony and Antitrust 
Enforcement: A Cautionary Tale, ICLE White Paper No. 2024-05-01 at 1 
(2024); see also Suresh Naidu et al., Antitrust Remedies for Labor 
Market Power, 132 Harv. L. Rev. 536 (2018) (``[W]e have not found a 
reported case in which a court found that a merger resulted in 
illegal labor market concentration.''). I also note that a variety 
of articles sometimes cited to support increased antitrust scrutiny 
in labor markets fail to justify imposing a request for labor 
information in HSR filings--nor does the literature necessarily 
support broader enforcement of antitrust laws in labor markets. See 
Anna Stansbury & Lawrence H. Summers, ``The Declining Worker Power 
Hypothesis: An Explanation for the Recent Evolution of the American 
Economy'' at 1 (Nat'l Bureau of Econ. Rsch., Working Paper No. 
27193, 2020), https://www.nber.org/papers/w27193 (identifying 
decreased ability to unionize, not monopsony power, as the source of 
declining labor share of income); David Berger et al., Labor Market 
Power, 112 Am. Econ. Rev. 1147 (2022) (at 1 in SSRN version) (``[We] 
conclude that changes in labor market concentration are unlikely to 
have contributed to the declining labor share in the United 
States.''); Chen Yeh at al., Monopsony in the US Labor Market, 112 
Am. Econ. Rev. 2099, 2099 (2022) (``[T]he growing gap between worker 
pay and productivity might be more about technological change than 
about employers' bargaining power--a very different issue than the 
monopsony problem that antitrust law could (potentially) 
address.''); id. (``[T]he correlation between markdowns and 
employment concentration is quite modest, both cross-sectionally 
(across local labor markets) and in the aggregate over time.''); id. 
at 2125 (``[A]t least within manufacturing--cross-sectional and 
temporal variation in local employment concentration may not 
necessarily reflect variation in employer market power as measured 
by markdowns.''); David Arnold, Mergers and Acquisitions, Local 
Labor Market Concentration, and Worker Outcomes at 2 (Oct. 29, 2021) 
(``The evidence . . . does not support the conclusion that lack of 
antitrust scrutiny for labor markets has been a major contributor to 
labor market trends such as the falling labor share or stagnant wage 
growth. Most mergers do not generate large shifts in concentration 
and I find no evidence that the number of anticompetitive mergers in 
labor markets has been increasing over time.''); Elena Prager & Matt 
Schmitt, Employer Consolidation and Wages: Evidence from Hospitals, 
111 Am. Econ. Rev. 397, 397 (2021) (``For unskilled workers, we do 
not find evidence of differences in wage growth post-merger, 
irrespective of the change in employer concentration induced by the 
merger.'').

    The NPRM also asserted that alleged increases in concentration 
justified its proposals, including its proposal for labor 
information.\56\ While concentration levels may have a role in 
antitrust enforcement (e.g., merger presumptions), general and 
imprecise observations of increased concentration are a slender reed 
upon which to base such a significant expansion of HSR authority.\57\ 
These limitations also apply in the labor context. ``Many factors other 
than concentration can affect wages, such as differences in firm 
productivity, local labor-market conditions (e.g., urban vs. rural), 
and institutional factors like unionization rates.'' \58\ Further, as 
explained by Berry et al.:
---------------------------------------------------------------------------

    \56\ NPRM, supra note 1, at 42179 (``This concentration may 
reflect decreased competition, which can result in higher prices for 
consumers, decreased innovation, reduction in output, and lower 
wages for workers.'' (emphasis added))
    \57\ See Carl Shapiro, Protecting Competition in the American 
Economy: Merger Control, Tech Titans, Labor Markets, 33 J. Econ. 
Persp. 69, 75-76 (2019) (increased concentration ``does not prove 
that competition in that market has declined.''); Carl Shapiro, 
Antitrust in a Time of Populism, 61 Int'l J. Indus. Org. 714, 722-23 
(2018) (``Sheer size and market power are just not the same 
thing.''); Dennis W. Carlton & Jeffrey M. Perloff, Modern Industrial 
Organization 268 (4th ed. 2005) (``[P]erhaps the most significant 
criticism is that concentration itself is determined by the economic 
conditions of the industry and hence is not an industry 
characteristic that can be used to explain pricing or other 
conduct.''); Timothy J. Muris, Improving the Economic Foundations of 
Competition Policy, 12 Geo. Mason L. Rev. 1, 10 (2003) (``The 
[structural] paradigm was overturned because its empirical support 
evaporated.''); Fiona Scott Morton, Modern U.S. Antirust Theory and 
Evidence Amid Rising Concerns of Market Power and Its Effects, Wash. 
Ctr. for Equitable Growth at 24 (May 29, 2019) (``[I]t is widely 
understood that either vigorous competition could cause 
concentration to increase or increased concentration could reduce 
competition.''); Cristina Caffarra & Serge Moresi, Issues and 
Significance Beyond U.S. Enforcement, Mlex Magazine, Apr.-June 2010, 
at 41, 42-43 (``Most economists would agree that market shares and 
the HHI often are poor indicators of market power.''); Herbert 
Hovenkamp, The Looming Crisis in Antitrust Economics, 101 Boston 
Univ. L. Rev. 489 (2021) (``The pursuit of business concentration or 
bigness for its own sake will injure consumers far more than it 
benefits small business, the intended beneficiaries.''); Timothy F. 
Bresnahan & Peter C. Reiss, Entry and Competition in Concentrated 
Markets, 99 J. Pol. Econ. 977, 978 (1991) (``[O]nce a market has 
between three and five firms, the next entrant has little effect on 
competitive conduct . . . . These data show that prices fall when 
the second and third firms enter and then level off.''); Albrecht et 
al, supra note 55 at 17 n.76 (providing additional supporting 
citations).
    \58\ Albrecht et al., supra note 55 at 17.

    A main difficulty in [the monopsony power literature] is that 
most of the existing studies of monopsony and wages follow the 
structure-conduct-performance paradigm; that is, they argue that 
greater concentration of employers can be applied to labor markets 
and then proceed to estimate regressions of wages on measures of 
concentration. [S]tudies like this may provide some interesting 
descriptions of concentration and wages but are not ultimately 
informative about whether monopsony power has grown and is 
depressing wages.\59\
---------------------------------------------------------------------------

    \59\ Id. at 18 (quoting Steven Berry, Martin Gaynor, & Fiona 
Scott Morton, Do Increasing Markups Matter? Lessons from Empirical 
Industrial Organization, 33 J. Econ. Persp. 44, 57 (2019)).

    In short, the economic literature does not provide any conclusive 
evidence on the viability or likelihood of merger harms in labor 
markets that would justify the NPRM's proposals regarding labor 
information.
    Finally, the Commission's HSR rulemaking authority does not extend 
to heaping burdens upon merging parties as a fishing expedition in the 
hopes of developing new merger enforcement theories. Instead, if labor 
market concerns exist, then the Commission should conduct merger 
retrospectives or utilize its 6(b) authority to investigate the issue. 
The Commission has done neither, and it cannot rely on the need for 
general information gathering as a basis for demanding that all merging 
parties provide this information.
    And no doubt, the NPRM's proposal would have come with a 
substantial and unjustifiable burden upon filers and also the agencies. 
First, firms do not typically maintain SOC codes in the ordinary course 
of business.\60\ Investing in the expertise to generate and report the 
codes would have required substantial resources.\61\ And smaller 
businesses who make filings infrequently will be particularly 
disadvantaged compared to frequent filers. Second, the agencies' staff 
would have borne the burden of this additional information. Staff have 
limited experience working with SOC codes, and utilizing the data would 
have required aid from already extremely overtaxed economist staffers. 
But shifting resources has an opportunity cost, particularly when 
Congress has flatlined our budget, significantly limiting staff's 
capacity to take on new work.\62\ Thus it is unclear how the Commission 
would have found resources to utilize the information. This 
substantial, unjustified burden to filers and the agencies made it 
impossible for me to support any rule that included the Labor Proposal.
---------------------------------------------------------------------------

    \60\ See, e.g., Comment of Wachtell, Lipton, Rosen & Katz, Doc. 
No. FTC-2023-0040-0670 at 8.
    \61\ Comment of American Bar Association's Antitrust Law 
Section, Doc. No. FTC-2023-0040-0723 at 10-12.
    \62\ Given current budgetary constraints at the Commission and 
reduced hiring, this is unlikely to change either. Fed. Trade 
Comm'n, FTC Appropriation and Full-Time Equivalent (FTE) History, 
available at https://www.ftc.gov/about-ftc/bureaus-offices/office-executive-director/financial-management-office/ftc-appropriation 
(demonstrating that the FTC budget went down from 2023 to 2024); 
Caroline Nihill, FTC Modernization, Enforcement Efforts Jeopardized 
by Cuts, Officials Say, FedScoop (Jul. 10, 2024) (``Commissioner 
Rebecca Slaughter noted that proposed fiscal year 2025 budget cuts 
would result in the agency passing `up important investigations and 
enforcement matters' in addition to considering furloughs and 
workforce reductions.''); see also Statement of Chair Khan, supra 
note 35, at 5-6.
---------------------------------------------------------------------------

    As a final comment on the Labor Proposal, I recognize that excising 
it from the Final Rule may not have been the desired outcome for some 
of my colleagues on the Commission.\63\ I

[[Page 89405]]

nonetheless commend them for agreeing to this unanimous outcome, and I 
am equally pleased that the Chair rescinded the most recent Memorandum 
of Understanding Related to Antitrust Review of Labor Issues in Merger 
Investigations.\64\ These efforts reflect an evolution in thinking by 
the Commission toward evidence over rhetoric.\65\
---------------------------------------------------------------------------

    \63\ See Statement of Chair Khan, supra note 35, at 3-4; see 
generally Statement of Commissioner Alvaro M. Bedoya, Joined by 
Chair Lina M. Khan and Commissioner Rebecca Kelly Slaughter, 
Regarding Amendments to the Hart-Scott-Rodino Rules and Premerger 
Notification Form and Instructions (Oct. 10, 2024).
    \64\ Press Release, Fed. Trade Comm'n, FTC, DOJ Partner with 
Labor Agencies to Enhance Antitrust Review of Labor Issues in Merger 
Investigations (Aug. 28, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/08/ftc-doj-partner-labor-agencies-enhance-antitrust-review-labor-issues-merger-investigations (discussing 
Chair Khan's unilateral decision to enter a memorandum of 
understanding with the Department of Labor, National Labor Relations 
Board, and the Department of Justice); Press Release, Fed. Trade 
Comm'n, Statement on Memorandum of Understanding Related to 
Antitrust Review of Labor Issues in Merger Investigations (Sep. 27, 
2024), https://www.ftc.gov/news-events/news/press-releases/2024/09/statement-memorandum-understanding-related-antitrust-review-labor-issues-merger-investigations (rescinding the same memorandum of 
understanding).
    \65\ Chair Khan and Commissioner Bedoya each write to express 
continued support for the now jettisoned Labor Proposal. I respect 
their enthusiasm for the idea. But between the decision to reject 
the Labor Proposal and rescind the memorandum of understanding, the 
public should rely more on revealed versus expressed preferences.
---------------------------------------------------------------------------

III. Drafts of Transaction-Related Documents

    Historically, filers have not been required to provide drafts of 
transaction-related documents with their filings.\66\ The production 
and review of drafts typically occurs during a full-phase 
investigation, usually after the reviewing agency issues a second 
request.\67\ The NPRM proposed abandoning this practice and requiring 
that drafts of responsive documents be produced as well.\68\ The NPRM 
explained that requiring the production of drafts would allow staff to 
have ``documents that reflect pre-transaction assessments of business 
realities, as opposed to `sanitized' versions.'' \69\ Many commentors 
on the NPRM opposed this requirement.\70\ The Commission ultimately 
rejected this proposal, which was critical to my vote.
---------------------------------------------------------------------------

    \66\ NPRM, supra note 1, at 42194. One exception has been when a 
draft was sent to the board of directors. Id.
    \67\ Id.
    \68\ Id.
    \69\ Id.
    \70\ See, e.g., U.S. Chamber Comment, supra note 40, at 21-22.
---------------------------------------------------------------------------

    Simply put, the likely burden of producing drafts would have 
outweighed any perceived benefit. Depending upon the practice of the 
individuals drafting the documents, and how many people are involved in 
preparing different sections of the documents, there may be ``dozens or 
even hundreds of iterative drafts.'' \71\ No question, filings would be 
much larger under the proposal.\72\ Forensic collections, that is a 
full collection of an individual's emails or documents, are incredibly 
burdensome. They not only require resources from a technical team to 
collect the materials; they also require time from the individual 
businesspeople and then, in most cases, counsel, to review the 
collected materials, identify responsive documents, conduct privilege 
reviews, prepare more expansive privilege logs, and prepare the 
documents for production. The status quo for HSR filings, where 
generally only final versions are produced, typically does not require 
a forensic collection. But if all drafts became a requirement for all 
transactions, then forensic collections, with all their costs, would 
become standard practice for almost all HSR filings.\73\ The use of 
online collaborative workspaces further complicates the issue--and adds 
burden--because when multiple parties simultaneously revise the same 
document, it becomes difficult to know which versions constitute 
drafts.\74\
---------------------------------------------------------------------------

    \71\ Comment of Foley & Lardner LLP, Doc. No. FTC-2023-0040-0653 
at 11 (hereinafter Foley Comment).
    \72\ Id. (``The proposed instruction could potentially increase 
the size of at least some HSR filings by a factor of ten or 
twenty.'').
    \73\ U.S. Chamber Comment, supra note 40, at 21-22.
    \74\ Id.
---------------------------------------------------------------------------

    To defend the proposal, the NPRM argued drafts are more likely to 
contain a ``smoking gun.'' \75\ As evidence to support this claim, the 
NPRM observed the drafts produced during a second request have more 
salacious content.\76\ But receiving all drafts amounts to building a 
haystack around a needle. Even if some drafts contain some interesting 
content, that content does not support the NPRM's proposed expansive 
production obligations for two reasons. First, earlier drafts of 
transaction documents sometimes contain information that may not have 
been finalized, may occasionally reflect incorrect assumptions, and in 
some situations may be based on iterations of the transaction that were 
not part of the final, executed agreement.\77\ Not every change to a 
draft document is nefarious. Many of the drafts, compared to the final 
version, would consist of minor or inconsequential edits, excessive 
repetition, or incomplete thoughts that will require much effort for 
staff to review.\78\ The dramatic increase in the number of documents 
associated with each filing would have been sufficiently onerous that 
staff would be simply unable to scrutinize the differences among drafts 
as they triage dozens of filings each week.
---------------------------------------------------------------------------

    \75\ NPRM, supra note 1, at 42194.
    \76\ Id.
    \77\ See Comment of Wachtell, Lipton, Rosen & Katz, Doc. No. 
FTC-2023-0040-0670 at 11-12; Foley Comment, supra note 71, at 11-13.
    \78\ Id. at 12.
---------------------------------------------------------------------------

    Second, for each of the alleged ``smoking gun'' drafts identified 
in a second request by staff, other information contained in the HSR 
filings already prompted the staff to issue a second request. Phrased 
differently, the agencies already had enough information, without the 
drafts, to decide to issue a second request in each of those cases. And 
beyond bald assertions, the NPRM did not provide any evidence 
demonstrating the drafts would have made a difference in the decision 
whether to issue a second request.
    In summary, the extensive burden resulting from the production and 
review by staff of drafts would have outweighed any benefits of the 
requirement. I struggle to imagine any circumstance in which all draft 
documents would become a ``necessary and appropriate'' input for the 
agencies' initial review of proposed mergers, and therefore believe the 
inclusion of this requirement in any future revision would exceed the 
Commission's rulemaking authority. I would not have supported a Final 
Rule that required drafts and am heartened by the removal of this 
provision.

IV. Prior Acquisitions

    The NPRM proposed radical changes to the prior acquisition request 
in the 2011 Rule. The proposed changes included: (1) expanding the 
lookback period for reporting prior acquisitions from five years to ten 
years; (2) eliminating the prior de minimis exception that required 
reporting only for prior acquisitions that ``had annual net sales or 
total assets greater than $10 million''; (3) requiring the acquired 
entity to also report prior acquisitions; and (4) requiring that 
acquisitions of substantially all of the assets of a business be 
treated the same as acquisitions of securities or non-corporate 
interests.\79\ My vote was conditioned on the Commission eliminating 
the first two of these proposed changes. I write to explain why I 
believe it was proper to remove those requirements from the Final Rule

[[Page 89406]]

and why the Commission should not revisit these proposals in future 
revisions to the HSR rules.
---------------------------------------------------------------------------

    \79\ NPRM, supra note 1, at 42203.
---------------------------------------------------------------------------

    Prior acquisitions may, in limited circumstances, be relevant to 
analyzing the filed-for transaction, but consideration of these prior 
transactions comes with risk of government overreach. A prior 
acquisition may be relevant to analyzing a filed-for transaction when 
the competitive effects of the prior acquisition have not yet 
manifested. For example, if a firm acquired a rival and integration was 
ongoing or existing contractual terms prevent the effects of the merger 
from being fully realized, a prior acquisition may help the agencies 
better understand the dynamics and competitive effects of the filed-for 
transaction. Once firms have completed integration, realized 
efficiencies, and implemented any strategies they plan to orchestrate, 
prior acquisitions provide almost no value \80\ to the agencies as they 
assess the competitive conditions surrounding the filed-for transaction 
because at that juncture, the condition of the current market will 
reflect the effects of past transactions.\81\
---------------------------------------------------------------------------

    \80\ As one exception, the agencies have considered the ability 
to realize efficiencies in past transactions as evidence of the 
likelihood of achieving efficiencies in the current transaction. But 
even that information becomes stale and loses probative value at 
some point.
    \81\ Dan O'Brien, The 2023 Merger Guidelines: A Giant Leap in 
the Wrong Direction, Consumer Technology Association (Jun. 2024) 
(``[T]he acquisition history is irrelevant to the current merger 
except to the extent it provides information about the current 
merger's likely competitive effects.''); see also Brown Shoe Co. v. 
United States, 370 U.S. 294, 332 (1962) (``[T]he statute prohibits a 
given merger only if the effect of that merger may be substantially 
to lessen competition.'').
---------------------------------------------------------------------------

    For the last thirty-seven years, the Commission has determined that 
five years of prior acquisitions, with a threshold based upon the sales 
and assets of the entity that was acquired, was justifiable.\82\ I do 
not seek to relitigate thirty-seven years of precedent. The question is 
whether the rulemaking record contained sufficient evidence to justify 
the request to reach ten years of prior acquisitions without any size 
threshold. I conclude that it did not.
---------------------------------------------------------------------------

    \82\ NPRM, supra note 1, at 42203.
---------------------------------------------------------------------------

    The HSR Act limits the information that can be required under the 
Commission's HSR Rules to ``documentary material and information 
relevant to a proposed acquisition as is necessary and appropriate to 
enable the Federal Trade Commission and the Assistant Attorney General 
to determine whether such acquisition may, if consummated, violate the 
antitrust laws.'' \83\ Based upon this text, HSR Rules can seek only 
the information the agencies need to screen for potential violations of 
the antitrust laws arising from consummation of the filed-for 
transaction.\84\
---------------------------------------------------------------------------

    \83\ 15 U.S.C. 18a(d)(1).
    \84\ Id.
---------------------------------------------------------------------------

    Since 1987, the Commission has required only five years of prior 
acquisitions.\85\ Despite the Commission making no efforts to change 
this rule for thirty-seven years, the NPRM contended that it needed the 
additional five years of prior acquisitions ``because the current five-
year requirement for prior acquisitions is often insufficient to 
meaningfully identify patterns of serial acquisitions or a trend toward 
concentration or vertical integration.'' \86\ Further, the NPRM alleged 
that ``changes to the economy and the varied acquisition strategies of 
filing parties'' justified ``a more detailed consideration of how 
numerous past acquisitions, including those in related sectors, affect 
the competitive landscape of the current transaction under review.'' 
\87\ The Supreme Court has explained that when an agency ``depart[s] 
from a prior policy,'' ``the agency must show that there are good 
reasons for the new policy.'' \88\ And ``a more detailed 
justification'' is required when an agency's ``new policy rests upon 
factual findings that contradict those which underlay its prior 
policy.'' \89\ Beyond bald and conclusory assertions, however, neither 
the NPRM nor the rulemaking record presented ``good reasons'' that 
justified the production of ten years of prior acquisitions, let alone 
``a more detailed justification'' that is required in this 
circumstance.\90\
---------------------------------------------------------------------------

    \85\ Premerger Notification; Reporting and Waiting Period 
Requirements, 50 FR 38742, 38769 (Sep. 24, 1985) (to be codified at 
16 CFR parts 801, 802, and 803).
    \86\ NPRM, supra note 1, at 42203.
    \87\ Id.
    \88\ FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 
(2009) (Scalia, J.).
    \89\ Id.; see also id. at 537 (Kennedy, J., concurring) (``Where 
there is a policy change the record may be much more developed 
because the agency based its prior policy on factual findings. In 
that instance, an agency's decision to change course may be 
arbitrary and capricious if the agency ignores or countermands its 
earlier factual findings without reasoned explanation for doing so. 
An agency cannot simply disregard contrary or inconvenient factual 
determinations that it made in the past, any more than it can ignore 
inconvenient facts when it writes on a blank slate.'').
    \90\ Id. at 515. In 1987, when the Commission adopted the rule 
that required filers to report five years of prior acquisitions, it 
explained that ``[t]he Commission believes that this change can be 
made without adversely affecting the agencies' ability to conduct a 
thorough antitrust review. The Commission believes than an accurate 
account of the acquiring person's acquisitions over the past five 
years will adequately put it on notice of possible trends toward 
concentration in the affected industry.'' Premerger Notification; 
Reporting and Waiting Period Requirements, 50 FR 38742, 38769 (Sep. 
24, 1985) (to be codified at 16 CFR parts 801, 802, and 803). The 
simple conclusory statements in the NPRM do not qualify as ``a more 
detailed justification,'' which is necessary here because the 
Commission now contradicts its previous factual finding that five 
years was adequate for review.
---------------------------------------------------------------------------

    Insofar as the NPRM's proposal required the production of 
information in order to investigate past transactions--i.e., not the 
filed-for transaction--under theories of serial acquisitions or 
otherwise,\91\ the Commission lacks the authority to gather that 
information via an HSR filing. Because neither the NPRM nor the 
rulemaking record provided evidence that ten years would be relevant to 
analyzing the effects of the filed-for transaction, the NPRM's proposal 
did nothing more than attempt an end-run around the HSR Act's 
reportability requirements.\92\ Congress already specified which 
transactions must be reported to the agencies, and the Commission 
cannot gather information that does not help the agencies analyze the 
filed-for transaction.\93\ Sensibly, the Final Rule does not adopt the 
proposed changes to the lookback period. In the SBP for the Final Rule, 
the Commission explains that the information required for prior 
acquisitions is limited to what the agencies need to analyze the 
anticompetitive effects of the filed-for transaction.\94\
---------------------------------------------------------------------------

    \91\ See NPRM, supra note 1, at 42203.
    \92\ The HSR Act identifies which transactions must be 
reported--i.e., filed--based upon three tests: the commerce test, 
size of transaction test, and the size of person test. 15 U.S.C. 
18a(a); see also Fed. Trade Comm'n, Steps for Determining Whether an 
HSR Filing is Required (last visited Oct. 4, 2024), https://www.ftc.gov/enforcement/premerger-notification-program/hsr-resources/steps-determining-whether-hsr-filing.
    \93\ Under the Administrative Procedure Act, a court reviewing 
an agency rule can declare it ``unlawful and set aside agency 
actions found to be . . . in excess of statutory jurisdiction, 
authority, or limitations, or short of statutory right.'' 5 U.S.C. 
706 (Under the Administrative Procedure Act, a court reviewing an 
agency rule can deem it ``unlawful and set aside agency actions 
found to be . . . in excess of statutory jurisdiction, authority, or 
limitations, or short of statutory right''). ``[N]o matter how 
important, conspicuous, and controversial the issue, . . . an 
administrative agency's power to regulate in the public interest 
must always be grounded in a valid grant of authority from 
Congress.'' FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 
161 (2000).
    \94\ See SBP, supra note 5, at section II.B.5, 61 of 406 
(explaining focus is on reportable transaction).
---------------------------------------------------------------------------

    The proposed removal of the $10 million threshold also suffered 
deficiencies. The $10 million threshold has been the threshold for 
prior acquisitions since the original HSR

[[Page 89407]]

Rules in 1978.\95\ But the NPRM disregarded this forty-six-year history 
where the threshold, despite inflation, has been the same. To justify 
abandoning the threshold, the NPRM pointed to ``the Commission's 
technology acquisition study [that] revealed that between 39.3% and 
47.9% of transactions were for target entities that were less than five 
years old at the time of their acquisition.'' \96\ It then stated, 
without citation, ``[g]iven the relative nascency of these acquired 
companies, the Commission believes that excluding prior acquisitions of 
firms that have not yet had the chance to achieve $10 million in net 
sales or assets does not provide a comprehensive picture of each 
filer's acquisition strategy.'' \97\ Nothing cited by the NPRM suggests 
that just because an acquisition target is less than five years old, 
that its sales will be below $10 million. Moreover, nothing in the NPRM 
explained why the age of targets in ``technology acquisitions'' would 
be relevant to the whole economy, and yet the proposed rule would have 
applied universally. Indeed, neither the NPRM nor the rulemaking record 
presented evidence to justify this dramatic expansion, and without 
evidence, there is no justification to impose such a requirement on 
filers.
---------------------------------------------------------------------------

    \95\ Premerger Notification; Reporting and Waiting Period 
Requirements, 43 FR 33450 at 33534 (July 31, 1978).
    \96\ NPRM, supra note 1, at 42203.
    \97\ Id.
---------------------------------------------------------------------------

    The NPRM's proposal to double the time period and to remove the $10 
million threshold would have added substantial burden to filing 
parties. The NPRM appeared content with the burden because it provided 
an expanded ability to analyze non-reportable prior acquisitions, 
including under theories of serial acquisitions.\98\ But as explained, 
this benefit contravenes the Commission's rulemaking authority. Because 
the Final Rule must be limited to the Commission's authority, the focus 
must also be limited to how it assists the agencies' assessment of the 
filed-for transaction during the initial waiting period. As explained 
above, the NPRM's prior acquisition expansion would have provided 
almost nothing that would help the agencies to assess filed-for 
transactions.
---------------------------------------------------------------------------

    \98\ The NPRM sought to right the wrongs of the so-called 40 
years of failed antitrust enforcement. See Exec. Order No. 14,036, 
Executive Order on Promoting Competition in the American Economy; 
see NPRM, supra note 1, at 42203.
---------------------------------------------------------------------------

V. Additional Considerations

    The changes implemented by the Final Rule request information to 
analyze only the filed-for transaction. The changes are not to 
authorize the agencies to engage in general fishing expeditions to 
analyze non-reportable transactions or other allegedly problematic 
conduct divorced from the effects of the filed-for transaction. The 
same could not be said for some of the proposals in the NPRM, and those 
concerns have been rectified in the Final Rule. I understand potential 
filers may be skeptical that the information gathered in HSR filings 
may be collected with an eye toward other purposes. In the Final Rule, 
each of these provisions is now modified to collect only information 
that is necessary and appropriate to analyze the filed-for 
transaction.\99\
---------------------------------------------------------------------------

    \99\ To be clear, if a filing demonstrates anticompetitive 
conduct, such as price fixing, it can prompt another investigation.
---------------------------------------------------------------------------

    The Final Rule requires filers to produce new information about 
officers and directors within the ``stack'' of companies. The ultimate 
rule differs substantially from the NPRM's proposal.\100\ Among the key 
changes, the request only applies to acquiring persons; filers no 
longer have to provide information about board observers; and the 
request is limited to only those entities who generate revenue in the 
same NAICS codes as the target. This information, like all the 
information requested by the Final Rule, is designed to help staff 
better analyze the filed-for transaction. The SBP provides a detailed 
description of why this requested information helps obtain that 
goal.\101\ The purpose of this revision is not a general fishing 
expedition; it is to illuminate complicated and overlapping management 
structures that may impact the competitive effects of the filed-for 
transaction.
---------------------------------------------------------------------------

    \100\ See app. A.
    \101\ SBP, supra note 5, at section VI.D.3.c., 241-254 of 406.
---------------------------------------------------------------------------

    The additional information about minority shareholders and limited 
partners has also raised concern. The Final Rule again reflects key 
changes to the proposals in the NPRM. In particular, the final version 
eliminates the requirement to create an organization chart and 
eliminates the requirement to disclose limited partners that do not 
also have management rights. The complicated nature of this request, 
especially as included in the NPRM, raised confusion and concern of the 
Commission's purpose for this request. The SBP goes to great lengths to 
describe--and illustrate via helpful diagrams--why this information 
will be important to analyzing the filed-for transactions. The purpose 
is not to pursue or launch general investigations into theories of harm 
based upon fringe concepts such as common ownership.\102\ Nor do I 
believe it would be possible to construct such theories based upon the 
information required by the Final Rule. My vote in support of the Final 
Rule reflects my understanding and belief this information will help 
the agencies to more quickly understand the competitive dynamics of a 
filed-for transaction, and nothing more.
---------------------------------------------------------------------------

    \102\ See, e.g., Einer Elhauge, Horizontal Shareholding, 129 
Harv. L.R. 1267 (2016). Though beyond the scope of this statement, I 
do note that no court has endorsed such a theory of harm and it has 
faced scrutiny in the literature. See Matthew Backus, Christopher 
Conlon & Michael Sinkinson, The Common Ownership Hypothesis: Theory 
and Evidence, Brookings Econ Studies (Jan. 2019), https://www.brookings.edu/wp-content/uploads/2019/02/ES_20190205_Common-Ownership.pdf; Keith Glovers & Douglas H. Ginsburg, Common Sense 
About Common Ownership, 2018 Concurrences Rev. 28 (Fall 2018); 
Thomas A. Lambert & Michael E. Sykuta, Calm Down About Common 
Ownership, Regulation (Fall 2018).
---------------------------------------------------------------------------

VI. Conclusion

    The Final Rule has been scaled back dramatically from the NPRM. And 
rightly so. I voted in favor of the Final Rule because of the revisions 
and outright removal of certain proposals in the NPRM. As modified, I 
believe the Final Rule is consistent with that statutory grant of 
authority and will help staff analyze the filed-for transaction and 
protect consumers without unduly burdening the filing parties.
    On a going forward basis, the Commission can and should carefully 
scrutinize the effect of the Final Rule on our enforcement efforts and 
on the burden it imposes upon filing parties and the agencies' staff. A 
thoughtful retrospective will allow the Commission to modify the Final 
Rule, if necessary, in a principled and evidence-based fashion.

Concurring Statement of Commissioner Andrew N. Ferguson

    Today, the Commission updates the Hart-Scott-Rodino Act (``HSR'' or 
``the Act'') \1\ notification form requirements. It concurrently 
announces that, after an over three-and-a-half-year wait, it will lift 
its categorical ``temporary suspension'' of early terminations once the 
Final Rule goes into effect.\2\ Unlike

[[Page 89408]]

the Commission's recent, doomed effort to ban noncompete agreements,\3\ 
Congress undoubtedly gave us authority to promulgate rules governing 
HSR notification requirements.\4\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 18a.
    \2\ Press Release, FTC, FTC, DOJ Temporarily Suspend 
Discretionary Practice of Early Termination (Feb. 4, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/02/ftc-doj-temporarily-suspend-discretionary-practice-early-termination.
    \3\ See Dissenting Statement of Comm'r Andrew N. Ferguson, 
Joined by Comm'r Melissa Holyoak, In the Matter of the Non-Compete 
Clause Rule, Matter No. P201200 (June 28, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/ferguson-noncompete-dissent.pdf; Ryan LLC v. FTC, No. 3:24-CV-00986-E, 2024 WL 3879954 
(N.D. Tex. Aug. 20, 2024) (vacating the Commission's Non-Compete 
Rule).
    \4\ See Pharm. Rsch. & Mfrs. of Am. v. FTC, 790 F.3d 198, 208 
(D.C. Cir. 2015) (hereinafter ``PhRMA'') (``There is no doubt that 
the Commission's action was taken pursuant to express delegations of 
authority. The Act grants the FTC the authority to act by 
rulemaking.'' (citing 15 U.S.C. 18a)).
---------------------------------------------------------------------------

    The notice of proposed rulemaking (``NPRM'') that launched today's 
rulemaking would have abused that authority by imposing onerous, 
unlawful requirements that could not have survived judicial review.\5\ 
But the NPRM also proposed some important, lawful updates to the HSR 
instructions. Mergers have become increasingly complex since we first 
adopted an HSR rule nearly five decades ago. The current HSR 
instructions do not adequately address forms of business association 
that were rare in 1978. And long experience implementing HSR has taught 
the Commission which information is most important to fulfilling 
Congress's mandate to conduct premerger review. The current HSR 
instructions did not always ensure that the Commission and the 
Antitrust Division (together, the ``Antitrust Agencies'') had the 
information they needed to fulfill Congress's intention.
---------------------------------------------------------------------------

    \5\ FTC, Notice of Proposed Rulemaking, Premerger Notification; 
Reporting and Waiting Period Requirements, 88 FR 42178 (June 29, 
2023) (hereinafter ``NPRM'').
---------------------------------------------------------------------------

    The NPRM, however, was a nonstarter. My colleagues and I engaged in 
intense negotiations to separate the lawful wheat from the lawless 
chaff. Today's Final Rule,\6\ and the lifting of the early-termination 
ban, are the culmination of those negotiations. Were I the lone 
decision maker, the rule I would have written would be different from 
today's Final Rule. But it is a lawful improvement over the status quo. 
And although not required for the Final Rule's lawfulness, the 
Commission wisely accompanies the Final Rule with a lifting of the ban 
on early termination. I therefore concur in its promulgation.
---------------------------------------------------------------------------

    \6\ FTC, Premerger Notification; Reporting and Waiting Period 
Requirements, Final Rule (Oct. 10, 2024) (hereinafter ``Final 
Rule''), https://www.ftc.gov/system/files/ftc_gov/pdf/p110014hsrfinalrule.pdf.
---------------------------------------------------------------------------

    I. Congress passed HSR in 1976, adding section 7A to the Clayton 
Antitrust Act of 1914.\7\ It requires merging firms to notify the 
Antitrust Agencies before consummating large mergers, and forbids them 
from consummating the merger until some period after notifying the 
Antitrust Agencies. The purpose of this premerger notify-and-wait 
requirement was to give the Antitrust Agencies the opportunity to 
investigate mergers and sue to block them. Premerger review dispenses 
with ``interminable post-consummation divestiture trials . . . [and] 
advance[s] the legitimate interests of the business community in 
planning and predictability, by making it more likely that Clayton Act 
cases will be resolved in a timely and effective fashion.'' \8\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 18a(a); see also PhRMA, 790 F.3d at 199.
    \8\ H.R. Rep. No. 94-1373, at 11 (1976).
---------------------------------------------------------------------------

    Obviously, the Antitrust Agencies need information about the 
proposed transactions to review them. Congress therefore provided that 
firms seeking to merge must ``file notification pursuant to rules under 
subsection (d)(1)'' of the Act.\9\ Subsection (d), titled ``Commission 
rules,'' in turn commands the Commission to, ``by rule,'' ``require 
that [a merging party's] notification . . . contain such documentary 
material and information relevant to a proposed acquisition as is 
necessary and appropriate to enable the [Antitrust Agencies] to 
determine whether such acquisition may, if consummated, violate the 
antitrust laws.'' \10\ The Commission may also ``prescribe such other 
rules as may be necessary and appropriate to carry out the purposes of 
this section.'' \11\ ``Taken together, these statutory provisions give 
the FTC . . . great discretion . . . to promulgate rules to facilitate 
Government identification of mergers and acquisitions likely to violate 
[F]ederal antitrust laws before the mergers and acquisitions are 
consummated.'' \12\
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    \9\ 15 U.S.C. 18a(a).
    \10\ 15 U.S.C. 18a(d)(1). If the initial notification reveals a 
potential competitive problem, the Antitrust Agencies may seek 
additional information, which delays the proposed transaction until 
the merging parties have complied. See 15 U.S.C. 18a(e).
    \11\ 15 U.S.C. 18a(d)(2).
    \12\ PhRMA, 790 F.3d at 205.
---------------------------------------------------------------------------

    The Commission has regularly deployed the rulemaking power Congress 
conferred on it in the Act. The Commission published its first final 
HSR rule two years after Congress passed the Act.\13\ In the 
intervening decades, the Commission has made dozens of changes to the 
HSR form and instructions.\14\ Some changes expanded the scope of 
information requested.\15\ Others narrowed it.\16\ Only one faced 
judicial review. In 2013, an industry association challenged a 
Commission rulemaking that required parties to file HSR notifications 
when they transferred most, but not all, of their pharmaceutical patent 
rights. The D.C. Circuit held that the rule was a proper exercise of 
the Commission's rulemaking authority and reflected reasoned decision-
making.\17\ The revised HSR rule survived and took effect, as have many 
HSR form changes beforehand and afterwards.
---------------------------------------------------------------------------

    \13\ See 43 FR 33450 (July 31, 1978) (publishing final rules for 
premerger notification).
    \14\ See FTC, 16 CFR parts 801 and 803, Premerger Notification; 
Reporting and Waiting Period Requirements, Statement of Basis and 
Purpose, 107, n.248 (Oct. 10, 2024) (hereinafter ``SBP''), https://www.ftc.gov/system/files/ftc_gov/pdf/p110014hsrfinalrule.pdf.
    \15\ E.g., 76 FR 42471 (July 19, 2011) (adding Items 4(d), 
6(c)(ii) and 7(d) to capture additional information).
    \16\ E.g., 70 FR 73369 (Dec. 12, 2005) (amending Form and 
Instructions to reduce the burden of complying with Items 4(a) and 
(b)).
    \17\ PhRMA, 790 F.3d at, 209-12.
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    II. The Administrative Procedure Act (``APA'') \18\ governs our HSR 
rulemakings.\19\ ``The APA `sets forth the procedures by which 
[F]ederal agencies are accountable to the public and their actions are 
reviewed by courts.' '' \20\ First, the Rule must be promulgated in 
``observance of procedure required by law.'' \21\ For a rule like the 
Final Rule, section 4 of the APA \22\ is the ``procedure required by 
law,'' and it ``prescribes a three-step procedure.'' \23\ ``First, the 
agency must issue a `general notice of proposed rulemaking,' ordinarily 
by publication in the Federal Register.'' \24\ We published the NPRM 
for the Final Rule on June 29, 2023.\25\ ``Second, if `notice is 
required,' the agency must give `interested persons an opportunity to 
participate in the rule making through submission of written data, 
views, or arguments.' '' \26\ We received approximately 721 comments 
during the 90-day comment period.\27\ ``Third, when

[[Page 89409]]

the agency promulgates the final rule, it must include in the rule's 
text a `concise general statement of its basis and purpose.' '' \28\ 
With today's Final Rule the Commission includes a statement of basis 
and purpose that thoroughly explains its reasoning for each of the 
changes contained in the Final Rule. The Commission has therefore 
satisfied the APA's procedural requirements.\29\
---------------------------------------------------------------------------

    \18\ 5 U.S.C. 551 et seq.
    \19\ PhRMA, 790 F.3d at 209.
    \20\ Dep't of Homeland Security v. Regents of the Univ. of Cal., 
591 U.S. 1, 16 (2020) (quoting Franklin v. Massachusetts, 505 U.S. 
788, 796 (1992)).
    \21\ 5 U.S.C. 706(2)(D).
    \22\ Id. section 553.
    \23\ Perez v. Mortgage Bankers Ass'n, 572 U.S. 92, 96 (2015).
    \24\ Ibid. (quoting 5 U.S.C. 553(b) (cleaned up)).
    \25\ NPRM, supra note 5.
    \26\ Perez, 572 U.S. at 96 (quoting 5 U.S.C. 553(c) (cleaned 
up)).
    \27\ SBP, supra note 14, at 6, n.4; Press Release, FTC, FTC and 
DOJ Extend Public Comment Period by 30 Days on Proposed Changes to 
HSR Form (Aug. 4, 2023), https://www.ftc.gov/news-events/news/press-releases/2023/08/ftc-doj-extend-public-comment-period-30-days-proposed-changes-hsr-form.
    \28\ Perez, 572 U.S. at 96 (quoting 5 U.S.C. 553(c) (cleaned 
up)).
    \29\ See Little Sisters of the Poor Saints Peter & Paul Home v. 
Pennsylvania, 591 U.S. 657, 685-86 (2020) (explaining that an agency 
satisfies the procedural requirements of the APA so long as it 
complies with the ``objective criteria'' of notice, opportunity to 
comment, and a concise general statement of basis and purpose).
---------------------------------------------------------------------------

    APA section 10's standard of judicial review also imposes 
substantive limits on the exercise of our authority under HSR. The APA 
requires courts to ``hold unlawful and set aside agency action'' that 
is ``arbitrary, capricious, an abuse of discretion, or otherwise not in 
accordance with law''; ``contrary to constitutional right, power, 
privilege, or immunity''; or ``in excess of statutory jurisdiction, 
authority, or limitations, or short of statutory right.'' \30\ The APA 
standard generally requires an agency to show two things. First, that 
it has a lawful grant of authority from Congress to issue the rule 
\31\--that is, that Congress enacted a statute conferring on the agency 
power to issue the rule,\32\ and that the statute is consistent with 
the Constitution.\33\ Second, that the agency has exercised that grant 
of authority in a lawful way.\34\
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    \30\ 5 U.S.C. 706(2)(A), (B), (C).
    \31\ NFIB v. Dep't of Labor, 595 U.S. 109, 117 (2022) (per 
curiam) (``Administrative agencies are creatures of statute. They 
accordingly possess only the authority that Congress has 
provided.'').
    \32\ FEC v. Cruz, 596 U.S. 289, 301 (2022) (``An agency, after 
all, `literally has no power to act' . . . unless and until Congress 
authorizes it to do so by statute.'' (quoting La. Pub. Serv. Comm'n 
v. FCC, 476 U.S. 355, 374 (1986))).
    \33\ FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 161 
(2000) (``[N]o matter how important, conspicuous, and controversial 
the issue, and regardless of how likely the public is to hold the 
Executive Branch politically accountable, an administrative agency's 
power to regulate in the public interest must always be grounded in 
a valid grant of authority from Congress.'' (cleaned up) (emphasis 
added)).
    \34\ Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 
374 (1998) (``Not only must an agency's decreed result be within the 
scope of its lawful authority, but the process by which it reaches 
that result must be logical and rational.'').
---------------------------------------------------------------------------

    To be sure, the Commission recently has been all too happy to issue 
rules without valid grants of authority from Congress.\35\ But today's 
Final Rule is plainly authorized by a valid grant of authority from 
Congress. HSR commands the Commission to issue rules governing the form 
and contents of premerger-notification filings as it determines are 
``necessary and appropriate to enable [the Antitrust Agencies] to 
determine whether'' mergers ``may, if consummated, violate the 
antitrust laws.'' \36\ Congress further authorized us to ``prescribe 
such other rules as may be necessary and appropriate to carry out the 
purposes of'' the Act.\37\ The text of HSR therefore unambiguously 
commands the agency to issue rules of the type we today issue.\38\ And 
I am not aware of any serious arguments that this grant of discretion 
to prescribe the procedures by which firms notify the Commission of a 
pending merger--distinct from the power to adjudicate merger challenges 
\39\--violates the Constitution. We therefore have statutory and 
constitutional authority to issue the Final Rule.\40\
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    \35\ See Ryan LLC v. FTC, No. 3:24-CV-00986-E, 2024 WL 3879954 
(N.D. Tex. Aug. 20, 2024) (vacating the Commission's Non-Compete 
Rule).
    \36\ 15 U.S.C. 18a(d)(1).
    \37\ Id. section 18a(d)(2)(C).
    \38\ PhRMA, 790 F.3d at 208 (``There is no doubt that the 
Commission's action was taken pursuant to express delegations of 
authority.'').
    \39\ See, e.g., Compl. ]] 45, 55-59, 72-76, The Kroger Co. v. 
FTC, No. 1:24-cv-438 (S.D. Ohio Aug. 19, 2024), ECF No. 1 
(challenging constitutionality of FTC administrative proceedings as 
a violation of Article III of the Constitution).
    \40\ When the judiciary last reviewed one of our HSR rules, it 
deferred to our interpretation of various undefined terms of the Act 
under the doctrine announced in Chevron U.S.A. Inc. v. Nat. Res. 
Def. Council, Inc., 467 U.S. 837 (1983). See PhRMA, 790 F.3d at 204 
(``[W]e apply the familiar Chevron framework . . .''). The Supreme 
Court has since overruled Chevron, correctly interpreting the APA to 
require the judiciary to resolve statutory ambiguities without 
deferring to administrative agencies' views on how to resolve those 
ambiguities. See Loper Bright Enter. v. Raimondo, 144 S. Ct. 2244, 
2261 (2024) (``On the contrary, by directing courts to `interpret 
constitutional and statutory provisions' without differentiating 
between the two, [the APA] makes clear that agency interpretations 
of statutes--like agency interpretations of the Constitution--are 
not entitled to deference. Under the APA, it thus remains the 
responsibility of the court to decide whether the law means what the 
agency says.'' (cleaned up)). The Court in Loper Bright held, 
however, that ``[i]n a case involving an agency, . . . the statute's 
meaning may well be that the agency is authorized to exercise a 
degree of discretion.'' Id. at 2263. The Court gave as examples 
statutes that delegate ``to an agency the authority to give meaning 
to a particular statutory term,'' and ``[o]thers'' that ``empower an 
agency to `fill up the details' of a statutory scheme, or to 
regulate subject to the limits imposed by a particular term or 
phrase that `leave the agencies with flexibility,' such as 
`appropriate' or `reasonable.' '' Ibid. (quoting Wayman v. Southard, 
23 U.S. (10 Wheat.) 1, 43 (1825), and Michigan v. EPA, 576 U.S. 743, 
752 (2015)). HSR expressly authorizes the Commission to promulgate 
rules ``defin[ing] the terms used in'' the Act, and to issue all 
rules that are ``necessary and appropriate to carry[ing] out the 
purposes of'' the Act. 15 U.S.C. 18a(d)(2)(A), (C); see also id. 
18a(d)(1) (authorizing the Commission to issue rules that are 
``necessary and appropriate to enable the [Antitrust Agencies] to 
determine whether such acquisition may, if consummated, violate the 
antitrust laws''). HSR thus appears to be the sort of discretion-
conferring statute that the Loper Bright Court suggested may require 
some modicum of judicial deference to agency decision making. My 
vote in favor of the Final Rule, however, does not depend on the 
Commission receiving any judicial deference. I conclude that the 
Final Rule properly interprets and implements HSR.
---------------------------------------------------------------------------

    The question, then, is whether the Commission has lawfully 
exercised the power Congress unambiguously conferred on it. As a 
general matter, an agency lawfully exercises power conferred on it by 
``engag[ing] in reasoned decisionmaking,'' which requires that the 
``agency['s] action . . . rest[ ] `on a consideration of the relevant 
factors.' '' \41\ We must ``examine the relevant data and articulate a 
satisfactory explanation for [our] action including a `rational 
connection between the facts found and the choice made.' '' \42\ This 
``standard is deferential'' to the agency's policy choices, so long as 
``the agency has acted within a zone of reasonableness and . . . 
reasonably considered the relevant issues and reasonably explained the 
decision.'' \43\
---------------------------------------------------------------------------

    \41\ Michigan, 576 U.S. at 750 (quoting Motor Vehicle Mfrs. 
Ass'n of U.S. v. State Farm Mut. Automobile Ins. Co., 463 U.S. 29, 
43 (1983)); see also Dep't of Homeland Sec. v. Regents of the Univ. 
of Cal., 591 U.S. 1, 16 (2020) (The APA ``requires agencies to 
engage in reasoned decision-making, and directs that agency actions 
be set aside if they are arbitrary and capricious.'' (cleaned up)).
    \42\ State Farm, 463 U.S. at 43 (quoting Burlington Truck Lines 
v. United States, 371 U.S. 156, 246 (1962)).
    \43\ FCC v. Prometheus Radio Project, 592 U.S. 414, 423 (2021); 
see also Dep't of Commerce v. New York, 588 U.S. 752, 773 (2019) 
(Courts ``may not substitute [their] judgment for that of the 
[agency], but instead must confine [them]selves to ensuring that 
[the agency] remained within the bounds of reasoned 
decisionmaking.'' (cleaned up)); Garland v. Ming Dai, 593 U.S. 357, 
369 (2021) (``[A] reviewing court must `uphold' even `a decision of 
less than ideal clarity if the agency's path may reasonably be 
discerned.''' (quoting Bowman Transp., Inc. v. Arkansas-Best Freight 
Sys., Inc., 419 U.S. 281, 286 (1974)).
---------------------------------------------------------------------------

    Importantly, this standard does not change because we are amending 
an existing rule. The APA does not require that ``agency action 
representing a policy change must be justified by reasons more 
substantial than those required to adopt a policy in the first 
instance.'' \44\ ``The statute makes no distinction . . . between 
initial agency action and subsequent agency action undoing or revising 
that action.'' \45\ When an agency revises an existing regulation, 
reasoned decision-making ``would ordinarily demand that it display 
awareness that it is changing its position,'' and it must show ``that 
there

[[Page 89410]]

are good reasons for the new policy.'' \46\ But the APA does not 
require that the agency show that ``the reasons for the new policy are 
better than the reasons for the old one; it suffices that the new 
policy is permissible under the statute, that there are good reasons 
for it, and that the agency believes it to be better, which the 
conscious change of course adequately indicates.'' \47\
---------------------------------------------------------------------------

    \44\ FCC v. Fox Television Stations, Inc., 556 U.S. 502, 514 
(2009) (Scalia, J.).
    \45\ Id. at 515.
    \46\ Ibid.
    \47\ Ibid (emphasis in original).
---------------------------------------------------------------------------

    The Final Rule is not perfect, nor is it the rule I would have 
written if the decision were mine alone. But I believe that it 
addresses important shortcomings in the current HSR rule, and that it 
is ``necessary and appropriate'' to enable the Antitrust Agencies to 
determine whether proposed mergers may violate the antitrust laws.\48\
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 18a(d)(1).
---------------------------------------------------------------------------

    III. I turn now to the specific provisions of the Final Rule to 
address whether they are ``necessary and appropriate'' to executing the 
premerger-review provisions of HSR.\49\
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 18a(d)(1).
---------------------------------------------------------------------------

    A. The Final Rule requires the disclosure of some information not 
currently required by the old HSR rule. That information is ``necessary 
and appropriate'' to the execution of our premerger-review mandate 
under the Act, and the burdens the disclosure requirements impose on 
merging firms are justified by the requirements of effective premerger 
review.
    Mergers and acquisitions have become increasingly complex since 
1978. The Antitrust Agencies review a large number of deals involving 
corporate structures that were rare when we adopted our first HSR rule. 
For example, twenty years ago, only ten percent of acquiring firms were 
funds or limited partnerships; now, that figure is close to forty 
percent.\50\ Such firms may be shell companies that disclose little 
public information about their holdings or operations, and, in many 
cases, have no other assets. But these deals can still present 
competitive problems through the acquiring person's relationships with 
other entities. Minority investors, including limited partners, might 
pull the strings for the acquiring person. And those minority investors 
might also control entities that compete with the transaction target, 
creating potential antitrust concerns.\51\ The current rule does not 
require disclosure of investors in entities between the parent company 
and the acquiring person, nor does it require disclosure of any limited 
partners, even if they have management rights for the acquiring person. 
The Final Rule addresses this shortcoming. It requires disclosure of 
investors that own at least a five percent share in certain entities 
related to the acquiring person; if those entities are limited 
partnerships, filers must disclose limited partners that have certain 
management rights, such as a board seat. But unlike the NPRM, the Final 
Rule sensibly does not require disclosure of limited partner investors 
without any management rights.\52\ The Final Rule's minority investor 
disclosures are a reasonable way to address what the Antitrust Agencies 
fairly determined was a shortcoming of the previous rule, and are 
necessary and appropriate to determining the competitive effects of a 
transaction involving limited partnerships or complex corporate 
structures.\53\
---------------------------------------------------------------------------

    \50\ See SBP, supra note 5, at 25.
    \51\ See id. at 225-27 (``some limited partnerships function as 
aggregation vehicles that allow private equity or other investor 
groups to direct the strategic business decisions of the portfolio 
companies in which they invest.'').
    \52\ See FTC, 16 CFR part 803--appendix B, Notification for 
Certain Mergers and Acquisitions: Acquiring Person Instructions, 4-5 
(Oct. 10, 2024) (hereinafter ``Acquiring Person Instructions''); SBP 
at 226-27.
    \53\ See SBP at 28-31; 15 U.S.C. 18a(d)(1).
---------------------------------------------------------------------------

    The Final Rule also requires merging firms to disclose information 
about their potential vertical relationships--that is, whether the two 
merging firms currently interact with each other at different levels of 
the supply chain.\54\ HSR rules long required disclosure of information 
about vertical relationships, but a 2001 amendment to the HSR rules 
removed that requirement.\55\ Since 2001, however, the Antitrust 
Agencies under the leadership of both parties have increased their 
scrutiny of, and rate of enforcement actions against, vertical mergers. 
During the Trump Administration, the Antitrust Division litigated the 
first vertical merger challenge in decades.\56\ The Antitrust Agencies 
released the 2020 Vertical Merger Guidelines, the first major revision 
to agency guidance on vertical mergers since 1984.\57\ The Commission 
released its 2020 Commentary on Vertical Merger Enforcement, which 
demonstrated the breadth of Commission investigations and consent 
agreements involving vertical transactions.\58\ And the Commission 
investigated Illumina's proposed acquisition of Grail, which ultimately 
led to a successful 2023 Fifth Circuit opinion that effectively blocked 
the vertical transaction.\59\ These efforts continue today. I recently 
joined a unanimous Commission vote authorizing a complaint to challenge 
a vertical merger between America's leading mattress supplier and its 
leading mattress retailer.\60\
---------------------------------------------------------------------------

    \54\ FTC, 16 CFR part 803--appendix A, Notification and Report 
Form for Certain Mergers and Acquisitions: Acquiring Person, 6-7 
(Oct. 10, 2024) (hereinafter ``Acquiring Person Form'') (requesting 
``other agreements between the acquiring person and target'' and the 
``supply relationship description'').
    \55\ See SBP at 327 (describing past requests for information on 
vendor-vendee relationships); 66 FR 8680 (Feb. 1, 2001) (HSR rule 
amendment removing that request).
    \56\ See United States v. AT&T Inc., 310 F. Supp. 3d 161, 193-94 
(D.D.C. 2018) (``the Antitrust Division apparently has not tried a 
vertical merger case to decision in four decades''), aff'd 916 F.3d 
1029 (D.C. Cir. 2019).
    \57\ Press Release, FTC, FTC and DOJ Issue Antitrust Guidelines 
for Evaluating Vertical Mergers (June 30, 2020), https://www.ftc.gov/news-events/news/press-releases/2020/06/ftc-doj-issue-antitrust-guidelines-evaluating-vertical-mergers.
    \58\ Press Release, FTC, FTC Issues Commentary on Vertical 
Merger Enforcement (Dec. 22, 2020), https://www.ftc.gov/news-events/news/press-releases/2020/12/ftc-issues-commentary-vertical-merger-enforcement.
    \59\ Illumina, Inc. v. FTC, 88 F.4th 1036 (5th Cir. 2023).
    \60\ Press Release, FTC, FTC Moves to Block Tempur Sealy's 
Acquisition of Mattress Firm, (July 2, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-moves-block-tempur-sealys-acquisition-mattress-firm.
---------------------------------------------------------------------------

    Since 2001, however, the Antitrust Agencies have had to rely on 
limited acquisition-related documents and publicly available 
information to identify potential vertical-competition concerns. Not 
every competitive issue shows up in transaction documents or is 
apparent to Commission staff without experience in the industry. As a 
result, some anticompetitive transactions have likely slipped through 
the cracks. The Final Rule will also provide the Antitrust Agencies 
with other information that they can use to quickly identify (or rule 
out) potential vertical-competition problems. The new Supply 
Relationships Description requires filers to identify whether they 
supply, or are supplied by, the other merging party or its 
competitors.\61\ The buyer must also now indicate whether it has 
certain types of existing contracts with the seller.\62\ This 
information is ``necessary and appropriate'' to carrying out Congress's 
command that the Antitrust Agencies review mergers--including vertical 
mergers--to determine whether they violate the antitrust laws.\63\
---------------------------------------------------------------------------

    \61\ See Acquiring Person Instructions at 10.
    \62\ See Acquiring Person Form at 6.
    \63\ 15 U.S.C. 18a(d)(1).
---------------------------------------------------------------------------

    The Final Rule requires the disclosure of additional information 
that will facilitate effective premerger review. Filers must now 
provide some regularly prepared plans and reports that analyze market 
shares or competition.\64\ Such information, particularly market-share

[[Page 89411]]

data, often is not available publicly, nor does it always appear in 
transaction documents. But market-share data are critical to antitrust 
enforcement. The Supreme Court many decades ago concluded that mergers 
of competitors constituting thirty percent or more of the relevant 
market presumptively violate the Clayton Act.\65\ And one of the 
leading metrics for assessing the competitive effects of a transaction 
is the Herfindahl-Hirschman Index (HHI),\66\ which uses market shares 
to assess the level of concentration in the relevant market, and the 
change in concentration that the merger would create.\67\ Market-share 
data therefore are not only ``necessary and appropriate to . . . 
determin[ing] whether [an] acquisition may, if consummated, violate the 
antitrust laws.'' \68\ They are vital to our enforcement mandate. 
Requiring the provision of these data also promotes efficiency. If the 
market shares of the two firms are small, the Antitrust Agencies may 
swiftly conclude that little further investigation is needed--and, 
thanks to the concurrent lifting of the unfortunate ban on early 
termination, may also facilitate the grant of early termination in 
appropriate cases once the Final Rule becomes effective. And the cost 
of compliance is modest; parties must collect only documents provided, 
within the past year, to individuals already subject to other document 
requests.
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    \64\ See Acquiring Person Instructions at 9.
    \65\ See United States v. Phila. Nat'l Bank, 374 U.S. 321, 363-
65 (1963) (``Without attempting to specify the smallest market share 
which would still be considered to threaten undue concentration, we 
are clear that 30% presents that threat.'').
    \66\ ProMedica Health Sys., Inc. v. FTC, 749 F.3d 559, 568 (6th 
Cir. 2014) (``Agencies typically use the Herfindahl-Hirschman Index 
(HHI) to measure market concentration.'').
    \67\ See FTC v. H.J. Heinz Co., 246 F.3d 708, 716 (D.C. Cir. 
2001) (``Sufficiently large HHI figures establish the FTC's prima 
facie case that a merger is anti-competitive.'').
    \68\ 15 U.S.C. 18a(d)(1).
---------------------------------------------------------------------------

    In addition, the Overlap Description will require filers to 
identify whether they compete with the other merging party.\69\ Under 
the current form, parties identify overlaps only through Census Bureau 
NAICS revenue codes.\70\ These codes can be painfully vague or 
overinclusive, particularly for new sectors. For example, NAICS code 
518210 covers ``companies that provide computing infrastructure, data 
processing, web hosting, and related services'' such as ``data entry 
services, cloud storage services and cryptocurrency mining.'' \71\ 
Despite a NAICS overlap, many firms within this broad category 
undoubtedly do not compete. Many other NAICS codes present similar 
concerns, flagging overlaps where none truly exist. Misleading or 
overbroad NAICS code overlaps may lead to unnecessary investigations. 
The Overlap Description will mitigate this problem by permitting filers 
to explain misleading NAICS code overlaps up front.\72\
---------------------------------------------------------------------------

    \69\ See Acquiring Person Form at 6.
    \70\ See SBP at 301. Federal statistical agencies use the North 
American Industry Classification System to classify businesses. See 
id. at 147, n.296 (citing U.S. Census Bureau, North American 
Industry Classification System (rev. Sept. 10, 2024), https://www.census.gov/naics/).
    \71\ Id. at 300.
    \72\ See id. at 301.
---------------------------------------------------------------------------

    Improving the type of information the Commission receives in an HSR 
notification is likely to improve the merger-review process for many 
merging parties. If Commission staff believes that a proposed merger 
merits investigation beyond the initial HSR filing and publicly 
available information, it must formally open an investigation and 
obtain clearance for that investigation from the Antitrust Division. 
Most such investigations show that the transaction poses little risk of 
competitive harm and are closed without a second request for additional 
information.\73\ Once the investigation is begun, however, the 
Antitrust Agencies can fall victim to bureaucratic inertia. We, like 
all law-enforcement agencies, have limited resources. Commencing an 
investigation and obtaining clearance eats up some of those resources. 
Commission leadership may therefore resist recommendations to close an 
investigation quickly even if the early stages of the investigation 
demonstrate that the merger presents no competitive concerns. 
Additionally, even investigations that do not lead to a second request 
can still involve significant cost and delay for merging parties.\74\ 
The information required by the Final Rule will mitigate the risk of 
false positives. It can reveal that a merger presents no competitive 
threat at all, and the Commission can avoid crawling down rabbit holes 
in unnecessary investigations.
---------------------------------------------------------------------------

    \73\ In Fiscal Year 2023, the Commission received clearance to 
investigate 124 transactions but only issued second requests for 
additional information for 26 transactions. See FTC and DOJ, HSR 
Annual Report Fiscal Year 2023, at Exhibit A, Table 1, https://www.ftc.gov/policy/reports/annual-competition-reports.
    \74\ See SBP at 89 (``[A]n average of 73 transactions each year 
. . . were delayed by an additional 30 days and filers were burdened 
by having to submit additional materials on a voluntary basis even 
though the investigation did not lead to the issuance of Second 
Requests. These delays impose costs on the parties and the Agencies, 
as well as third parties contacted during the extended initial 
review period.'').
---------------------------------------------------------------------------

    Third parties will benefit, too. Commission staff regularly 
requests voluntary interviews with the merging parties' customers, 
suppliers, and competitors following an HSR filing. These third parties 
often cooperate, at the cost of their senior executives' time and legal 
fees paid to outside lawyers. As these third parties explain the 
industry and competitive landscape, the lack of any competitive issues 
can quickly become apparent. By providing the Antitrust Agencies with 
greater information upfront, the Final Rule can remove the need to 
burden third parties with such fruitless engagement.
    B. The Final Rule must be considered in light of another decision 
the Commission announces today: the lifting of the suspension on early 
termination. ``Early termination'' describes the Commission practice of 
informing merging parties that the Commission is terminating its 
investigation into the merger before the conclusion of the statutory 
waiting period, thereby freeing them to consummate the merger 
immediately. The benefits of early termination are obvious. It reduces 
financing costs associated with the delay inherent in premerger review, 
and it allows companies and consumers to realize the benefits of 
procompetitive mergers more quickly.
    Until 2021, Commission staff routinely granted early termination of 
the initial HSR review period for acquisitions that obviously presented 
no competitive issues.\75\ In February 2021, however, the then-Acting 
Chairwoman announced a ``temporary suspension'' of early termination 
due to ``the confluence of an historically unprecedented volume of 
filings during a leadership transition amid a pandemic.'' \76\ The 
Antitrust Agencies announced that they ``anticipate[d] the suspension 
[to] be brief.'' \77\
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    \75\ See id. at 16, n.22, 95; see also Statement of Comm'r Noah 
J. Phillips and Comm'r Christine S. Wilson Regarding the 
Commission's Indefinite Suspension of Early Terminations, at 2 (Feb. 
4, 2021), https://www.ftc.gov/legal-library/browse/cases-proceedings/public-statements/statement-commissioners-noah-joshua-phillips-christine-s-wilson-regarding-commissions-indefinite.
    \76\ Press Release, FTC, FTC, DOJ Temporarily Suspend 
Discretionary Practice of Early Termination (Feb. 4, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/02/ftc-doj-temporarily-suspend-discretionary-practice-early-termination.
    \77\ Ibid.
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    The ``confluence'' has been over for some time. The pandemic long 
ago subsided. We have had a permanent Chair since June 2021. And merger 
filings have slowed to about half the

[[Page 89412]]

number we saw in 2021 and 2022.\78\ Nevertheless, the ``temporary 
suspension'' persisted. The Final Rule recognizes that this persistence 
is no longer tenable: ``if the Agencies can determine from review of an 
HSR Filing that a transaction does not present [competitive concerns], 
the Agencies can more quickly and confidently determine that the 
transaction does not require a more in-depth review and may proceed to 
consummation.'' \79\
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    \78\ See FTC and DOJ, HSR Annual Report Fiscal Year 2023, at 
Appendix A (showing 7,002, 6,288 and 3,515 HSR filings for 2021, 
2022, and 2023, respectively), https://www.ftc.gov/policy/reports/annual-competition-reports.
    \79\ SBP at 16.
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    Indeed, maintaining the ban would have been absurd in light of the 
Final Rule's explicit recognition that many transactions pose no 
competitive risks. Specifically, the Final Rule takes a tailored 
approach to identify and reduce compliance costs for transactions with 
lower risks of harm. The Final Rule creates a new category--``select 
801.30 transactions''--for acquisitions that almost never present 
competitive concerns, such as executive compensation agreements. For 
these deals, filers are excused from many new requirements, including 
descriptions and some document requests.\80\ The Final Rule also 
recognizes when enough is enough. It tailors the burdens of acquiring 
and acquired persons, rather than requiring both sides of a transaction 
to provide the same information. Accordingly, it significantly pares 
back the requests for acquired persons.\81\ Finally, the Final Rule 
also employs a conditional-request format--a series of if/then 
queries--to omit certain requirements for acquisitions that do not 
involve an overlap or vertical relationship.\82\ Again, the burden is 
reduced commensurate with the lower risk of harm.
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    \80\ See id. at 150-51.
    \81\ See id. at 152.
    \82\ See id. at 152-54.
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    I am pleased that today the Commission announces that it will lift 
the categorical ban on early termination and restore this important 
feature of the merger-review process once the Final Rule becomes 
effective. It should have happened earlier. I have objected before to 
the majority's tendency to use our HSR authority to accomplish 
political objectives.\83\ An indefinite ban on early termination was 
just more of the same. Maintaining the ban after the Final Rule's 
effective date would have undermined the efficiencies that justify the 
new information that the Final Rule requires. I am glad it is gone.
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    \83\ See Dissenting Statement of Comm'r Andrew N. Ferguson, In 
the Matter of Chevron Corp. and Hess Corp., FTC Matter No. 2410008, 
at 6 (Sept. 30, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/chevron-hess-ferguson-statement_0930.pdf; Joint Dissenting Statement 
of Comm'r Melissa Holyoak and Comm'r Andrew N. Ferguson, In re 
ExxonMobil Corp., FTC Matter No. 2410004 (May 1, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/2410004exxonpioneermh-afstmt.pdf.
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    IV. The Final Rule must stand on its own feet. An arbitrary-and-
capricious rule is not lawful merely because it is better than a bad 
NPRM. And the NPRM with which the Commission launched today's Final 
Rule was about as bad as it gets. It was indefensible bureaucratic 
overreach and could not have survived judicial review. It drew no 
distinctions between merger filings that presented little risk of 
competitive harm--such as executive compensation agreements--and those 
that raised potentially serious concerns. Instead, the NPRM applied the 
same blunderbuss approach to every filing. To make matters worse, the 
NPRM proposed a deluge of new onerous requirements the benefits of 
which could never have justified the burdens imposed on merging 
parties. In fact, several would have added little or no value to the 
Antitrust Agencies at all during their brief window to identify 
transactions that warrant further investigation. Had today's Final Rule 
been identical to the NPRM, I would not have voted for it.
    Although today's Final Rule is a logical outgrowth of the NPRM,\84\ 
it dramatically curtails the NPRM's wild overreach. That curtailment 
unsurprisingly followed the arrival of Republican Commissioners. A 
Final Rule identical to the NPRM would have been little more than a 
procedural auxiliary to the majority's general suspicion of mergers and 
acquisitions.\85\ I would not have voted for it. The changes adopted 
after the arrival of Republicans to the Commission, however, rescued 
the Final Rule from the NPRM's lawlessness. The Final Rule, unlike the 
NPRM, is a reasoned decision about what is ``necessary and 
appropriate'' to carrying out Congress's premerger-review mandate. It 
also reasonably addresses shortcomings in the old HSR rule. It 
therefore satisfies the requirements of both the HSR and APA. None of 
this was true about the NPRM.
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    \84\ Mock v. Garland, 75 F.4th 563, 583 (5th Cir. 2023) (``After 
the required NPRM is published in the Federal Register, with either 
the terms or substance of the proposed rule or a description of the 
subjects and issues involved, the final rule the agency adopts must 
be a logical outgrowth of the rule proposed.'' (cleaned up)); Env't 
Integrity Project v. EPA, 425 F.3d 992, 996 (D.C. Cir. 2005) 
(``Given the strictures of notice-and-comment rulemaking, an 
agency's proposed rule and its final rule may differ only insofar as 
the latter is a `logical outgrowth' of the former.''); see also Long 
Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 160 (2007) (``The 
Courts of Appeals have generally interpreted this to mean that the 
final rule the agency adopts must be a logical outgrowth of the rule 
proposed.'' (cleaned up)).
    \85\ See infra pp. 11-14; Statement of Comm'r Melissa Holyoak, 
Final Premerger Notification Form and the Hart-Scott-Rodino Rules, 
File No. P239300, at 7-19 (Oct. 10, 2024).
---------------------------------------------------------------------------

    Although the Final Rule's lawfulness does not turn on how much 
better it is than the NPRM, the changes from the unlawful NPRM 
demonstrate that the Final Rule is in fact the product of reasoned 
decision-making, which required us to respond to valid objections about 
the NPRM's many problems.\86\ The most important climbdown from the 
NPRM is the abandonment of the proposed Labor Markets section.\87\ This 
section would have forced merging parties to classify their employees 
by job category codes from the U.S. Bureau of Labor Statistics,\88\ 
even though few companies use such codes in the ordinary course of 
business. And it would have required filers to classify their employees 
by the U.S. Department of Agriculture's ERS commuting zones, even 
though companies do not use them in the ordinary course of business and 
these zones have not been updated since 2000 and are unreliable. The 
new burden would have been massive, and commenters understandably 
objected vociferously.\89\
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    \86\ See, e.g., Perez, 575 U.S. at 96 (``An agency must consider 
and respond to significant comments received during the period for 
public comment.''); Chamber of Commerce of the U.S. v. SEC, 85 F.4th 
760, 774 (5th Cir. 2023) (An agency must ``consider all relevant 
factors raised by the public comments and provide a response to 
significant points within. Comments the agency must respond to 
include those that can be thought to challenge a fundamental premise 
underlying the proposed agency decision or include points that if 
true and adopted would require a change in an agency's proposed 
rule.'' (cleaned up)); Bloomberg L.P. v. SEC, 45 F.4th 462, 476-77 
(D.C. Cir. 2022) (``[A]n agency must respond to comments that can be 
thought to challenge a fundamental premise underlying the proposed 
agency decision. Indeed, the requirement that agency action not be 
arbitrary or capricious includes a requirement that the agency 
adequately explain its result and respond to relevant and 
significant public comments. In sum, an agency's response to public 
comments must be sufficient to enable the courts to see what major 
issues of policy were ventilated and why the agency reacted to them 
as it did.'' (cleaned up)).
    \87\ For a fulsome accounting of the economic and legal errors 
that infected the Labor Markets instruction, see Statement of Comm'r 
Melissa Holyoak, Final Premerger Notification Form and the Hart-
Scott-Rodino Rules, File No. P239300, at 7-13 (Oct. 10, 2024).
    \88\ NPRM, 88 FR at 42197.
    \89\ See, e.g., Comment of A.B.A. Antitrust L. Sec., Doc. No. 
FTC-2023-0040-0723 at 10-12; Comment of Wachtell, Lipton, Rosen & 
Katz, Doc. No. FTC-2023-0040-0670 at 6-10; Comment of Dechert LLP, 
FTC-2023-0040-0659 at 3-5.
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    Beyond the major burden and methodological problems, the NPRM's

[[Page 89413]]

Labor Markets instructions were a clear abuse of Congress's mandate 
that the Commission require only information ``necessary and 
appropriate'' to identify transactions that ``violate the antitrust 
laws.'' \90\ In the nearly half century since Congress passed HSR, the 
Antitrust Agencies have never successfully challenged any transactions 
based on labor market theories that could have been identified by the 
proposed requirements.\91\ Until recently, the Antitrust Agencies had 
never even tried.\92\ It is not for a lack of effort. For years, the 
Commission and Antitrust Division looked for viable labor market 
theories when investigating transactions that present other competition 
concerns. The lack of any success lays bare that the Commission never 
could have justified the immense cost of requiring every single filer 
to provide extensive labor-related information. Fortunately, my 
colleagues on the Commission agreed to jettison the Labor Markets 
section that likely would have doomed the Final Rule.\93\
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    \90\ 15 U.S.C. 18a(d)(1).
    \91\ The NPRM identified two successful merger challenges with 
purported labor theories. See NPRM, 88 FR at 42197, n.47. The first, 
the Antitrust Division's challenge to Penguin Random House's 
acquisition of Simon & Schuster, did not involve harm to employees 
of the merging firms. Instead, the alleged harm was in the market 
for ``publishing rights to anticipated top-selling books.'' United 
States v. Bertelsmann SE & Co. KGaA, 646 F. Supp. 3d 1, 12 (D.D.C. 
2022). The second, the Commission's challenge to Lifespan 
Corporation's acquisition of Care New England, did not include a 
labor market count in the complaint. See Compl., In the Matter of 
Lifespan Corp. and Care New England Health Sys., FTC Matter No. 
2110031 (Feb. 17, 2022). Commissioner Bedoya identifies another 
purported merger challenge based on a labor theory, specifically 
``decrease[d] fees paid to blood plasma donors.'' Statement of 
Comm'r Alvaro M. Bedoya, In the Matter of Amendments to the 
Premerger Notification and Report Form and Instructions and the 
Hart-Scott-Rodino Rule, File No. P239300, at n.20 (Oct. 10, 2024) 
(``Statement of Comm'r Bedoya''). But, like the Antitrust Division's 
Bertelsmann challenge, the complaint did not allege harm to the 
merging parties' employees and therefore could not have been 
identified by the NPRM's proposed demands for employee information. 
See Compl., In the Matter of Grifols S.A. and Grifols Shared 
Services North America, Inc., FTC Matter No. 1810081 (Aug. 1, 2018).
    \92\ Given the pendency of litigation within the Commission's 
administrative tribunal, I withhold comment on the strength of the 
Commission's labor market theory in its challenge to The Kroger 
Company's acquisition of Albertsons Companies, Inc.
    \93\ Commissioner Bedoya defends the NPRM's Labor Markets 
section, reasoning that because the antitrust laws apply to the 
labor markets, the Commission should screen every single merger 
subject to HSR for potential labor-competition problems. Statement 
of Comm'r Bedoya, supra n.89, at 2, 4. I do not disagree that the 
antitrust laws apply to labor markets. But that fact would not have 
made lawful a rule that was identical to the NPRM. Under ordinary 
principles of administrative law, the Commission would have to 
``examine the relevant data and articulate a satisfactory 
explanation for its action, including a rational connection between 
the facts found and the choices made.'' State Farm, 463 U.S. at 43 
(cleaned up). That means the Commission would need enough evidence 
of labor-competition problems in mergers to establish that the 
labor-markets instruction's onerous costs were reasonable. The 
evidence marshalled by Commissioner Bedoya--a couple papers and a 
book--comes nowhere near to clearing that bar. Statement of Comm'r 
Bedoya at 3. The majority made the same mistake in the Noncompete 
Rule by relying on sparse social-science research to justify massive 
regulatory burdens. See Dissenting Statement of Comm'r Andrew N. 
Ferguson, Joined by Comm'r Melissa Holyoak, In the Matter of the 
Non-Compete Clause Rule, Matter No. P201200, at 37-45 (June 28, 
2024), https://www.ftc.gov/system/files/ftc_gov/pdf/ferguson-noncompete-dissent.pdf (``The handful of academic papers cited in 
the Final Rule cannot justify its incredible reach and relying on 
them to prohibit noncompete agreements categorically is a clear 
error of judgment.'' (cleaned up)); Ryan LLC v. FTC, No. 3:24-CV-
00986-E, 2024 WL 3879954, at *13-14 (N.D. Tex. Aug. 20, 2024) 
(finding the Noncompete Rule arbitrary and capricious because 
``[t]he record does not support the Rule.''). Making that mistake 
here would have been a ``clear error of judgment'' requiring vacatur 
under the APA. Huawei Technologies USA, Inc. v. FCC, 2 F.4th 421, 
434 (5th Cir. 2021) (cleaned up).
---------------------------------------------------------------------------

    The Final Rule also eliminates the NPRM's requirement that merging 
parties provide all drafts of transaction-related ``document[s] that 
were sent to an officer, director, or supervisory deal team lead(s).'' 
\94\ Commenters rightly pointed out that this requirement would have 
imposed an undue burden on merging parties,\95\ with the American Bar 
Association noting that this provision could have forced filers to use 
e-discovery tools to capture every draft.\96\ The cost of this 
information demand is high. But the value to the Antitrust Agencies 
would have been low. Commission staff would have struggled to comb 
through a dozen versions of the same document. And insofar as the goal 
was to catch merging parties giving honest appraisals about the 
anticompetitive effects of mergers, I doubt demanding drafts would have 
succeeded. Knowing that such drafts would have to be produced, parties 
would just create methods to avoid exposing their honest thoughts in 
documents that are guaranteed to wind up in the hands of enforcers. 
Demanding drafts of documents in every transaction would have likely 
increased the expense of merging--of great benefit to antitrust 
lawyers--without giving the Antitrust Agencies the sort of ``hot docs'' 
for which they were hoping. The Final Rule appropriately eliminated 
this requirement for every transaction. The Commission can obtain 
drafts under the only circumstances it would ever need them--when it 
opens investigations into those few mergers that the HSR filings reveal 
present a genuine risk of anticompetitive effects.
---------------------------------------------------------------------------

    \94\ NPRM, 88 FR at 42214.
    \95\ SBP at 270-71.
    \96\ Comment of A.B.A. Antitrust L. Sec., Doc. No. FTC-2023-
0040-0723 at 15-16.
---------------------------------------------------------------------------

    Similarly, the Final Rule curtailed several of the NPRM's other 
burdensome requirements for merging parties to produce documents. It 
revises the definition of ``supervisory deal team lead'' to limit it to 
a single individual, eliminating the need to review multiple employees' 
files to fulfill this request for transaction-related documents.\97\ 
The Final Rule also removes the NPRM's demand for ordinary course plans 
and reports that were shared with senior executives but not the CEO. 
Commenters rightfully noted that this would have forced filers to 
search the files of additional custodians, greatly increasing the 
burden on merging parties.\98\ Instead, the Final Rule limits the 
request to certain plans and reports directly provided to the CEO or 
board of directors.\99\ Lastly, the Final Rule no longer forces merging 
parties to produce all agreements between them. The NPRM's requirement 
to produce every single agreement between the parties would have been 
burdensome and expensive, but likely would have shed little light on 
the potential competitive effects of the merger. Some agreements 
between merging parties might shed light on competitive effects, but 
the vast majority would tell us nothing. The Final Rule acknowledges 
this mismatch of costs and benefits, and instead requires parties to 
note only whether they have particular types of agreements.\100\
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    \97\ See SBP at 203-05.
    \98\ E.g., Comment of U.S. Chamber of Com., Doc. No. FTC-2023-
0040-0684 at 22, 24.
    \99\ See id. at 274-77.
    \100\ See id. at 291-93.
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    The Final Rule makes many additional changes to the abusive NPRM. 
It makes clear that filers do not need to disclose any individual's 
role in a ``non-profit entity organized for a religious or political 
purpose.'' \101\ This exception is important. Requiring a Catholic 
hospital, for example, to disclose its membership rolls merely because 
it wishes to make a reportable acquisition, without regard to the 
competitive effects of that acquisition, would raise serious First 
Amendment concerns.\102\ The Final Rule also creates

[[Page 89414]]

de minimis exclusions, which remove the need for filers to note tiny 
prior acquisitions, supply relationships, and defense contracts that 
could not plausibly move the competitive needle.\103\ The Final Rule 
shortens lookback periods for many requests, including prior 
acquisitions, which limits the burdens associated with digging through 
dated company records.\104\ It removes demands for filers to create 
some new documents, such as deal timelines and organization 
charts.\105\ And the Final Rule includes other important, burden-
reducing changes from the indefensible NPRM, all of which help tailor 
the Final Rule to only those things that are necessary and appropriate 
to carry out the requirements of HSR.\106\
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    \101\ See Acquiring Person Instructions at 5.
    \102\ See, e.g., Americans for Prosperity Found. v. Bonta, 594 
U.S. 595, 606 (2021) (``This Court has `long understood as implicit 
in the right to engage in activities protected by the First 
Amendment a corresponding right to associate with others.' Protected 
association furthers `a wide variety of political, social, economic, 
educational, religious, and cultural ends,' and `is especially 
important in preserving political and cultural diversity and in 
shielding dissident expression from suppression by the majority.' '' 
(quoting Roberts v. U.S. Jaycees, 468 U.S. 609, 622 (1984)); id. at 
608 (forbidding mandatory disclosure of donor rolls unless the 
disclosure requirement is narrowly tailored to vindicate an 
important government interest); NAACP v. Alabama ex rel. Patterson, 
357 U.S. 449, 462-63 (1958) (holding that mandatory disclosure of 
membership rolls without a sufficient justification violates the 
First Amendment).
    \103\ See SBP at 153-54.
    \104\ See id. at 151-52.
    \105\ See id. at 6, 293-95.
    \106\ See id. at 6-8, 147-56.
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    I still would prefer a deeper cut. For example, I would not have 
included the transaction rationale requirement.\107\ Our requests for 
transaction-related documents already cover the same ground, in the 
parties' own words. I expect most transaction rationales will be 
heavily lawyered essays designed to ensure that the rationale matches 
these transaction documents. Indeed, I cannot imagine any lawyer worth 
his or her salt ever permitting the rationale to depart meaningfully 
from other parts of the notification. I therefore doubt that the 
rationales will provide any valuable information that we could not 
glean elsewhere. Perhaps in some cases parties may use the transaction 
rationale to explain why a merger that appears suspect at first blush 
presents no competitive problems. But on the whole, I doubt the 
transaction rationale will benefit the Antitrust Agencies in the mine 
run of cases, and I would not impose the burden on every filer.
---------------------------------------------------------------------------

    \107\ See SBP at 253-56.
---------------------------------------------------------------------------

    This example highlights an important consideration the Commission 
must bear in mind for the future. If post-promulgation experience 
teaches us that some parts of the rule are not working well, we can and 
should get rid of them in subsequent rulemakings. We have done that in 
the past.\108\ If, for example, my prediction about the value of the 
transaction rationale proves correct, we can and should jettison it. 
The same is true of all provisions of the Final Rule. Although we have 
satisfied the APA's requirement that the Final Rule be the product of 
reasoned decision making about what is necessary and appropriate to 
carry the Act into execution, experience almost certainly will reveal 
that the Final Rule can be improved. The Commission should abandon 
whatever parts of the Final Rule do not work.
---------------------------------------------------------------------------

    \108\ E.g., 70 FR 73369 (Dec. 12, 2005) (amending Form and 
Instructions to reduce the burden of complying with Items 4(a) and 
(b)); SBP at 107, n.248 (summarizing numerous changes to HSR Rule 
since 1978).
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    Considered as a whole, however, the additional information sought 
in the Final Rule is ``necessary and appropriate'' for the Antitrust 
Agencies to identify transactions that may violate the antitrust 
laws.\109\ Its benefits are many, and, by comparison, the added burdens 
are reasonable.
---------------------------------------------------------------------------

    \109\ 15 U.S.C. 18a(d)(1).
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    Because the Final Rule represents the Commission's reasoned 
decision about what is necessary and appropriate to carry into 
execution the requirements of HSR, and because I believe it lawfully 
addresses shortcomings in the current HSR rule, I concur in its 
promulgation.

[FR Doc. 2024-25024 Filed 11-8-24; 8:45 am]
 BILLING CODE 6750-01-P`