Washington D.C. Corporate Merger Filing

A critical first step in a corporate merger is determining if a pre-merger notification filing is required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). This act mandates that parties to certain large mergers or acquisitions file a Notification and Report Form with the FTC and the DOJ. The form requires detailed information about the companies, their businesses, and the proposed transaction. The filing triggers a statutory waiting period during which the transaction cannot be closed, allowing the government to review it for potential antitrust issues.

The HSR Act applies to transactions that meet specific "size of transaction" and "size of person" thresholds, which are adjusted annually. As of 2025, a transaction is generally reportable if the acquiring person will hold voting securities, assets, or non-corporate interests valued at more than $126.4 million. If the transaction value is between $126.4 million and $505.8 million, an additional "size of person" test applies. This test is met if one party has annual net sales or total assets of $252.9 million or more and the other party has $25.3 million or more. Transactions valued over $505.8 million are reportable regardless of the parties' size.

After the HSR filing is submitted, a waiting period begins. For most transactions, this is a 30-day period. For all-cash tender offers or bankruptcy transactions, the period is 15 days. During this time, the parties cannot close the deal. The purpose of this waiting period is to give the FTC and DOJ time to conduct an initial review. At the end of the period, the agencies can either allow the waiting period to expire, terminate it early, or issue a "Second Request." A Second Request is a formal demand for a substantial amount of additional information, extending the review period by another 30 days (or 10 days for all-cash tender offers) after the parties have substantially complied.

Parties to a merger may request early termination of the waiting period. If the reviewing agency determines that no further investigation is needed, they may grant this request, allowing the parties to close the transaction sooner. While early termination is not guaranteed, it is often granted for transactions that clearly present no competitive concerns. This can significantly expedite the deal process.

The primary focus of the agencies' review is on the potential for the merger to harm competition. They will analyze factors such as the market definition, the market shares of the merging parties, and the potential for a combined entity to raise prices, reduce quality, or stifle innovation. This analysis is especially critical for horizontal mergers, where the merging parties are direct competitors. However, the agencies also review vertical and conglomerate mergers for potential anti-competitive effects, such as a company using its power in one market to foreclose competition in another.

For digital markets, the agencies consider factors like network effects, multi-sided platforms, and the importance of data. They may assess how a merger could increase a company's market power by giving it access to a larger user base or more extensive data. In these cases, the traditional measures of market share may be less relevant, and the agencies might look at other metrics like user engagement or technological innovation. The review can also consider a merger's potential for "nascent competition," where an acquiring firm buys a smaller, innovative competitor to eliminate it before it becomes a significant threat.

Failure to comply with the HSR Act's filing requirements can result in severe penalties. The penalties for failing to file a notification or for "gun-jumping" (closing a transaction before the waiting period expires) can be substantial, with civil penalties of up to $51,744 per day (as of 2025). This can accumulate to millions of dollars in fines, in addition to the risk of the FTC or DOJ seeking to unwind the transaction.

Given the strict regulatory oversight, companies considering a merger should engage in strategic planning from the earliest stages of the transaction. This includes: (1) assessing whether an HSR filing is required, (2) anticipating potential antitrust issues and preparing arguments for why the merger is not anti-competitive, and (3) preparing for a potential Second Request by organizing and analyzing relevant data and documents in advance. Proactive engagement with legal experts can help identify and mitigate risks, streamline the filing process, and increase the likelihood of a successful transaction.