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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.

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: Effective 90 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL

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:

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

See, e.g., Brown Shoe Co. v. United States, 370 U.S. 294, 318 n.32 (1962).

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.

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

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.

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).

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 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.

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:

•

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;

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.

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.

•

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;

•

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

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.

•

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 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

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

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.

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).

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-peterw-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.”).

15 U.S.C. 18a(d)(1).

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.

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.

S. Rep. No. 94-803, at 1 (1976).

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.

15 U.S.C. 18a(d)(1).

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

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.

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).

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

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.

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 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

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

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).

Cunningham et al., supra note 15, at 653.

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 Am. 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)).

Thomas G. Wollmann, “Stealth Consolidation: Evidence from an Amendment to the Hart-Scott-Rodino Act,” 1

Am. Econ. Rev.: Insights 77-78 (2019) (hereinafter “Stealth Consolidation”).

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).

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.

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

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/pressreleases/2013/12/ftc-approves-polypore-internationals-application-sell-microporous-seven-mile-capital-partnerssale. 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.

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-bureauscompetition-economics/p143100_ftc_merger_remedies_2006-2012.pdf.

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.

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 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,

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-suspenddiscretionary-practice-early-termination.

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.

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.

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

Keith Brand et al., “In the Shadow of Antitrust Enforcement: Price Effects of Hospital Mergers from 2009 –

2016,” 66 J. L. Econ. 639 (2023).

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

•

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

•

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 nearmonopoly 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

•

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

•

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

Anonymous Comment, Doc. No. FTC-2023-0040-0134.

Anonymous Comment, Doc. No. FTC-2023-0040-0203.

Comment of Joan Friedman, Doc. No. FTC-2023-0040-0237.

Comment of Cybersecurity Engineer, Doc. No. FTC-2023-0040-0238.

important. . . . A thorough understanding of the purpose of mergers should help

ensure that deals are not anti-competitive. 30

•

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 the common good and

promoting competition within and across industries. 31

•

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

•

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 commonsense and much needed reporting requirements. 33

•

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

•

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

Comment of Joseph Cook, Doc. No. FTC-2023-0040-0244.

Comment of Sue Ravenscroft, Doc. No. FTC-2023-0040-0259.

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

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

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

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.

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,

15 U.S.C. 12(a).

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

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

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).

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.

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).

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).

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).

the Commission has defined as the Ultimate Parent Entity or “UPE.” 42 But to determine 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 decisionmaking, 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.

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

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.

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).

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).

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.

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

E.g., United States v. Univision Commc’ns., Inc., No. 1:03cv-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).

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).

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. Pub. L. 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).

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

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

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

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. Rogé 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).

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).

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-investmentfunds/private-equity.

Timothy Bresnahan & Steven C. Salop, “Quantifying the competitive effects of production joint ventures,” 4 Int’l

J. Indus. Org. 155 (1986).

anticompetitive harm from an unlawful acquisition will go 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

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

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).

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).

Rune Stenbacka & Geert Van Moer, “Cross ownership and divestment incentives,” 201 Econ. Letters 109748

(2021).

Nadav Levy et al., "Partial Vertical Integration, Ownership Structure, and Foreclosure," 10 Am. Econ. J.:

Microeconomics 132 (2018).

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 20012010); 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 20042013); 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 20132022). 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 § 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.

referred to as “portfolio companies”). In either scenario, the entity is part of the structure of a

larger investment company or group.

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

43 FR 33450, 33531 (July 31, 1978).

NPRM at 42188.

minority holders that have the ability to influence competitive decision-making and to harm

competition via acquisitions that violate the antitrust laws.

Corporate Structure Changes

Several commenters supported the need for additional information that would identify

entities holding minority 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.

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.

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 decisionmaking 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

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

See Jill E. Fisch, “Governance by Contract: The Implications for Corporate Bylaws,” 106 Cal. L. Rev. 373, 379

(2018).

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).

Rauterberg, supra note 43.

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).

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

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

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

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.

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

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.

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).

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.

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 transactionrelated 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

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.

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.

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

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).

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).

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

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

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 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

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

Am. Econ. Rev. 1147 (2022); Chen Yeh at al., “Monopsony in the US Labor Market,” 112 Am. Econ. Rev. 2099

(2022); José Azar et al., “Labor Market Concentration,” 57 J. Hum. Resources S167 (2022).

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_lifespancne_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).

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/pressreleases/2021/10/ftc-imposes-strict-limits-davita-incs-future-mergers-following-proposed-acquisition-utah-dialysis.

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

•

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

•

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

•

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 jobsearching 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

•

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

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

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

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

Comment of John Kurpierz, Doc. No. FTC-2023-0040-0462.

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

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

Comment of Alice Stanley, Doc. No. FTC-2023-0040-0508.

Anderson v. Shipowners Ass’n of the Pac. Coast, 272 U.S. 359, 365 (1926).

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).

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).

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

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 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

Alston, 594 U.S. at 109-110 (Kavanaugh, J., concurring).

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-remarkspublic-workshop-competition.

See Elena Prager & Matt Schmitt, “Employer Consolidation and Wages: Evidence from Hospitals,” 111 Am.

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.

Deslandes v. McDonald’s USA, LLC, 81 F.4th 699, 703-04 (7th Cir. 2023).

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

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.

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

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).

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.

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 postmerger 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

NPRM at 42179.

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.

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 nonhorizontal 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

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).

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 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 nonhorizontal 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

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).

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-andfigma-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-irobotantitrust-europe/.

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

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

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).

Id.

Brown Shoe Co. v. United States, 370 U.S. 294, 317 (1962); Celler-Kefauver Antimerger Act of 1950, Pub. L. No.

81-899, 64 Stat. 1125 (1950).

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).

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).

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).

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).

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.

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.

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

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).

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

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.

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 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

NPRM at 42196-97.

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.

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

United States v. Marine Bancorp, Inc., 418 U.S. 602, 630 (1974).

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).

100

101

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

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

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

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-generalvanita-gupta-delivers-remarks-georgetown-law-s-15th-annual. See also supra note 15 (collecting studies).

105

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

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-cv00108 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. 3:20cv8570 (N.D.

Cal. filed Dec. 3, 2020).

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

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 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

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).

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).

108

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.

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

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.”).

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).

113

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

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

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.

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).

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

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

Shapiro, supra note 120, at 70.

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).

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).

122

123

between products or services that have not yet been developed can also violate the antitrust

laws. 128

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

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-afterjustice-department; In re Nielsen Holdings N.V., No. C-4439 (F.T.C. Feb. 28, 2014) (Commission order requiring

divestiture).

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:

•

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

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 Szücs, “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).

129

product. Most engineers I know want to develop new products and many mergers

stop this from happening. 132

•

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

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,

Comment of Darryl Pretto, Doc. No. FTC-2023-0040-0434.

Anonymous Comment, Doc. No. FTC-2023-0040-0600.

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).

132

133

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.

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 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

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,”

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/pressreleases/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-selecttechnology-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.

139

Other competition enforcement agencies around the world conducted similar studies involving acquisitions of

digital platform companies. Id. at 2 n.6.

136

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.

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

Id. at 23-26.

Id. at 15.

142

Id. at 21-22.

140

141

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.

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

As explained in Section VI.I., the parties should not exchange information for the purpose of responding to the

Competition Descriptions.

143

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

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 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-

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).

144

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.

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

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/mergersacquisitions-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

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

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

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/newsevents/events/2024/03/private-capital-public-impact-ftc-workshop-private-equity-health-care.

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.

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

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

151

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

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).

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 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

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-HSRreportable 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

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.

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 Am. 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).

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.

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

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.

In re Agnaten SE, No. C-4707 (F.T.C. Apr. 9, 2020) (decision and order).

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).

158

159

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

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

162

Comment of Nora Johnson, Doc. No. FTC-2023-0040-0618.

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 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

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.

163

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

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.

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

164

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

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

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

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