What are the Requirements of an HSR Antitrust Filing for a Merger or Acquisition?

In the United States, mergers and acquisitions involving companies of a certain size must be reviewed by one of the competition authorities—the Federal Trade Commission or the Department of Justice.

Under 15 U.S.C. § 18a, commonly known as the Hart-Scott-Rodino Antitrust Improvements Act, parties to certain mergers and acquisitions must submit premerger notification filings known as HSR filings and wait a prescribed amount of time before consummating the transaction.

Below are some frequently asked questions and answers about HSR filings.

How is a merger defined for antitrust purposes?

For antitrust purposes, a “merger” includes any acquisition of assets, stock, or share capital of another person or entity, even if the acquisition does not result in control of the target company. An acquisition of less than a controlling interest does not obviate HSR filing requirements if the acquisition exceeds the operative thresholds.

What are the relevant thresholds that trigger HSR filing requirements?

Three thresholds determine the applicability of HSR filing requirements. First, one of the parties to the transaction must be in commerce in the United States or otherwise affect U.S. commerce.

Second, the acquiring party must be acquiring securities, non-corporate interest, or assets of the target in excess of $80.8 million.

Third, if the transaction exceeds $80.8 million but does not exceed $323 million, at least one party involved in the transaction must have annual net sales or total assets of at least $161.5 million, and the other party must have annual net sales or total assets of at least $16.2 million. All of the threshold amounts stated in this article apply in 2017, and are updated annually.

What are the HSR filing requirements?

HSR filings are premerger notifications that parties to a proposed merger transaction make with both the Federal Trade Commission and the Department of Justice. Subject to minor exceptions, both the seller and the buyer must each separately file with both agencies. Once the filing is made, a mandatory waiting period begins.

What agencies have jurisdiction over HSR filings?

Both the U.S. Department of Justice and the Federal Trade Commission have jurisdiction over HSR filings. Because either agency may choose to review a merger, parties must submit HSR filings to both agencies.

When does the mandatory waiting period begin?

The HSR waiting period begins the day after both the FTC and DOJ receive complete HSR filings from both the buyer and the seller of the transaction (for most filings). If one of the filings is not deemed complete, it may be “bounced,” where the waiting period is delayed, until the deficiencies identified by the agency are correct.

How long is the waiting period?

For most filings, the mandatory initial waiting period is 30 days, beginning the day after the filings are received complete and ending at 11:59pm on the 30th day thereafter (unless a federal holiday is on either date).

If an agency makes a request for additional information (called a “Second Request”), the transaction cannot be consummated at the expiry of the initial waiting period. Typically Second Requests are issued on the last day before the expiration of the initial waiting period.

What happens during the waiting period?

During the waiting period, an agency will review the filing. If the agency decides not to take further action, it will do nothing and, when the waiting period expires, the parties are free to consummate the transaction.

If an agency decides to conduct further review, it will issue a request for additional information called a “Second Request.”

Can we do anything to speed it up?

Either party may request “early termination” (ET) of the waiting period. Only one party to the transaction need request ET, but both agencies must grant the ET request for it to apply. ET may be requested in an HSR filing or made by separate request after filing. Because the agencies work on different timelines, one agency may grant long before the other. And because the agencies are independent, one agency may grant ET but not the other. For these reasons, parties should not rely on the possibility of ET. Of course, every terminations do occur.

What happens after a Second Request?

If an agency makes a Second Request, the parties must make an attempt to “substantially comply” with the request. Once the parties comply with the request and submit valid certifications of substantial compliance, the waiting period will then end 30 days after the date of the certification.

If consummation is delayed, how long is the HSR filing valid?

Once a transaction’s waiting period expires, the acquiring party has exactly one year from that date to consummate the transaction, regardless of whether that date falls on a weekend or holiday. After one year, the HSR filing is expired, and the parties must submit new HSR filings.

What can we do to run time?

Acquiring parties seeking to run time may “withdraw and refile” its HSR filing without paying a new filing fee, but it provides for a new waiting period. This can benefit both the filing parties and the agencies because it can allow agencies to timely review the transaction without issuing a Second Request. The withdraw and refile process is not available if a Second Request has already been issued.

If you have any questions about antitrust and competition issues relating to mergers or acquisitions, please contact us.