HSR Antitrust Review

The Hart-Scott-Rodino Act (HSR) requires that large mergers and acquisitions in the United States be reported to the Federal Trade Commission and Department of Justice before closing. The filing triggers a mandatory 30-day waiting period during which regulators review the deal for competition concerns; transactions exceeding size thresholds cannot close until that period expires or is waived.

Why HSR exists

In the 1970s, Congress worried that large mergers could be consummated and substantially consummated before regulators even learned of them. By then, unravelling the deal—separating databases, customer lists, operations—was traumatic and economically wasteful. HSR inverts the burden: notify first, close later. It gives the Federal Trade Commission and Department of Justice a window to investigate before assets are commingled.

HSR is purely a procedural gate, not a substantive veto. A merger does not need the FTC’s approval to proceed; rather, it must file and then wait. If regulators see no problem, they remain silent and the parties can close after 30 days (or immediately if the waiting period is terminated early). If they see potential antitrust risk, they can request additional information or seek an injunction to block the deal.

The size thresholds

HSR applies only to transactions above a specified size. The thresholds are adjusted annually for inflation. As of recent years, a transaction must involve at least $101 million in value to trigger HSR (for transactions where one party is a non-US issuer, the threshold is higher). Both parties must meet certain asset or revenue tests; both are usually subject to the regime.

Some transactions are exempt: acquisitions of less than 10 per cent of a company’s stock (passive investments), acquisitions of assets that will be held for resale (not to be integrated), acquisitions that fall below the size thresholds, and mergers where the target is a shell or has no material assets.

Calculating whether a transaction exceeds the threshold can be surprisingly tricky. The value includes not just the purchase price but also assumed debt, options, earn-outs, and any contingent payments. A buyer acquiring a $90 million company with $15 million of assumed debt has a notifiable transaction.

The filing process and contents

The acquiring company (or both parties, depending on circumstances) must file a Form HSR with the FTC, typically at the same time the definitive agreement is signed or shortly thereafter. The filing includes:

• A description of the transaction and the business of each party
• A summary of financials for both parties
• Any documents relating to the transaction, including financing commitments and board resolutions
• Details of all assets or lines of business being acquired
• Information about overlapping product lines and competitive position in relevant markets

The filing fee ranges from roughly $100 to $116,000 depending on the transaction value. It is a one-time payment; early termination of an acquisition typically triggers no refund.

The filing is largely mechanical for straightforward deals: a buyer acquiring a supplier in an unrelated industry with no overlapping customers or products. Regulators scan the form, see no competitive overlap, and let the clock run.

The waiting period

Once the form is filed, the clock starts. For 30 calendar days, the parties cannot close. During this period, regulators review publicly available information about the two companies and preliminary economic analysis.

On day 30, three outcomes are possible:

1. Silence: The FTC and DOJ take no action. The 30-day waiting period expires, and the parties may close immediately.
2. Second Request: Regulators issue a “Second Request for Information,” formally demanding additional documents, data, and testimony. This resets the clock. The parties must respond to the Second Request within a specified timeframe (usually 10 days, often extended by agreement), and then a second 30-day waiting period begins after substantial compliance.
3. Lawsuit: Regulators seek an injunction in federal court to block the deal. This is rare and usually preceded by a Second Request.

Most transactions proceed without a Second Request, particularly when the parties have disclosed strong pro-competitive justifications (a smaller player acquiring a competitor to improve efficiency, a buyer acquiring an asset from a struggling seller).

Second requests and deal timing risk

A Second Request turns a 30-day gate into a 6–12-month investigation. Regulators demand copies of internal emails, strategic plans, pricing studies, customer lists, and competitive analyses. The parties hire antitrust economists and submit declaration comments. Regulators hold meetings (called “4(c) meetings”) with each party to discuss competitive concerns and potential remedies.

For time-sensitive deals—where customer churn, employee departure, or financing commitments are issues—a Second Request is devastating. The certainty of the 30-day first-phase window dissolves. The deal may ultimately be approved, conditioned, or blocked, but the timeline becomes unpredictable.

This is where deal structure matters. Acquisition agreements typically include financing conditionality, allowing a buyer to back out if it cannot obtain committed debt capital. If the Second Request drags on for a year, the buyer’s debt financing may expire, and the buyer can walk. Sellers negotiate for a buyer commitment to extend or refinance the financing if needed, turning that power back to the buyer.

Remedies and conditions

If regulators issue a Second Request but do not seek an outright ban, the dialogue often moves to remedies. The buyer might agree to:

• Divest a product line, brand, or division to reduce competitive overlap
• License patents or technology to a competitor to avoid monopolisation
• Maintain firewall agreements preventing the combined entity from sharing customer information across divisions
• Accept monitoring by an outside trustee for a period of years

These remedies make the deal “cleaner” from a competition standpoint, allowing regulators to close their investigation with a settlement rather than litigation.

Cross-border transactions and multiple jurisdictions

A US deal involving a foreign buyer (or a foreign target with US operations) often requires HSR filing in the US and separate filing in the European Union, United Kingdom, and other jurisdictions. Each region has its own waiting period and review mechanics. A global acquisition might face concurrent 30-day waiting periods in four countries, each with different competitive concerns.

The timelines can be staggered. A deal might be cleared by the FTC but blocked (or conditioned) by the European Commission. Parties sometimes negotiate a termination right if one regulator blocks the deal, or they structure the transaction in phases to obtain approval from one jurisdiction before moving to the next.

Strategic use and timing

Sophisticated deal teams build HSR timing into their acquisition strategy. If a deal is likely to trigger scrutiny, the parties might file early (before signing a binding agreement) to test the regulatory waters, or they might time the filing for a period when regulators are less stretched. The FTC has periods of high activity (back-to-back deals in the same industry) and quieter periods.

Filing strategy also interacts with working-capital adjustments, employee retention, and financing certainty. A buyer that is not certain of its financing may delay an HSR filing to avoid the clock running while it negotiates debt terms.

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