FTC Adopts Stricter Reporting Rules for Mergers, Delays Expected in 2025

After more than a year of deliberations, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) are set to introduce substantial changes to the antitrust review process for mergers and acquisitions in the U.S. Starting in January 2025, parties filing under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act will face more complex and time-consuming requirements. This reform, finalized on October 10, 2024, marks the first significant overhaul in years and could reshape the landscape for corporate transactions, according to Reuters.

The FTC’s new rules mandate that companies provide far more detailed information when submitting HSR filings, including data about their competitors, supply chain, and top customers. The expanded filing requirements will compel acquiring and acquired parties to complete separate forms. The FTC estimates that, depending on the complexity of the transaction, the new forms could add up to 121 hours to the current filing process, which has traditionally taken less than a week to complete. On average, the process is expected to require more than 40 additional hours under the new guidelines, Reuters reports.

A Notice of Proposed Rulemaking (NPRM) introduced in June 2023 outlined the new filing obligations, sparking over 700 comments from stakeholders, many of whom expressed concerns over the increased burden and potential delays in closing deals. According to Reuters, the new requirements are expected to slow the HSR review process, potentially reducing deal certainty for companies in acquisition talks.

Under the updated rules, both parties in a transaction must submit a narrative detailing their strategic rationale, as well as information on overlapping products or services. For acquiring entities, the filing requirements are even more extensive, covering information about their executives, corporate structure, and significant investors. Filers may also need to provide historical data on prior transactions going back five years — a substantial increase from the previous one-year lookback.

Read more: FTC’s Watchdog Role in Pharma Mergers: Road Bumps and The Way Forward

One of the new rule’s notable changes pertains to the Letter of Intent (LOI) process, a tool that has allowed parties to start the 30-day HSR waiting period before a formal acquisition agreement is finalized. The updated requirements demand that an LOI outline specific details, including the transaction’s structure, a clear valuation, and anticipated employee retention policies, among other material terms. This added level of detail in LOIs could complicate the sign-and-close transaction structure that some filers have historically relied upon.

In addition to these changes, the new rules require “vertical overlap” disclosures — information about supply chain relationships and key customers, extending beyond the “horizontal overlap” information already required. Companies may need to identify their top 10 customers, potentially offering regulators greater insight into competitive impacts beyond immediate rivals.

For transactions lacking obvious anticompetitive concerns, the FTC has announced that it will reinstate early termination for certain filings, an option that has been suspended for more than three years. Furthermore, the FTC plans to launch a public portal, allowing stakeholders to submit comments on mergers and acquisitions under review.

The timeline for implementing these rules, however, remains uncertain. According to Reuters, the rules are scheduled to take effect 90 days after publication in the Federal Register, anticipated in early November 2024. However, Congress and the courts could intervene. Legal challenges, similar to those that delayed the Corporate Transparency Act, could hinder implementation. Additionally, Congress has the authority under the Congressional Review Act to overturn the rules within 60 legislative days after their publication. If the current session adjourns before the review period ends, the newly seated Congress in 2025 would also have the opportunity to repeal the rules.

Source: Reuters