Hart–Scott–Rodino Antitrust Improvements Act: Overview, definition, and example
What is the Hart–Scott–Rodino Antitrust Improvements Act?
The Hart–Scott–Rodino Antitrust Improvements Act of 1976 (often called the HSR Act) is a U.S. federal law that requires companies to notify the Federal Trade Commission (FTC) and the Department of Justice (DOJ) before completing certain large mergers, acquisitions, or transfers of voting securities or assets. The law is designed to give regulators time to review transactions for potential antitrust concerns before they are finalized.
Why is the Hart–Scott–Rodino Act important?
The HSR Act plays a critical role in maintaining competitive markets by preventing mergers and acquisitions that could lead to monopolies or reduce competition. It gives the government a chance to assess whether a proposed deal might harm consumers by increasing prices, reducing innovation, or limiting choices. The Act also establishes a waiting period, typically 30 days, during which the transaction cannot be completed unless the government grants early termination or extends the review.
Understanding the Hart–Scott–Rodino Act through an example
If Company A plans to acquire Company B for $200 million, and both companies meet the size thresholds set by the HSR Act, they must file pre-merger notification forms with the FTC and DOJ. The agencies then have time to evaluate the deal. If they believe the transaction may substantially lessen competition, they can investigate further or take legal action to block the deal. If the companies proceed without filing, they can face significant fines—currently up to $50,120 per day of non-compliance (adjusted annually for inflation).
Example of how an HSR reference may appear in a contract
Here’s how a reference to the HSR Act may appear in a merger agreement:
"Each Party shall, as promptly as practicable, make all filings and notifications required under the Hart–Scott–Rodino Antitrust Improvements Act of 1976 and shall cooperate in responding to any inquiries or requests for additional information issued by the Federal Trade Commission or the Department of Justice."
Conclusion
The Hart–Scott–Rodino Act is a key part of U.S. antitrust enforcement, requiring companies to notify regulators before closing certain large transactions. It helps prevent anti-competitive mergers and gives the government time to protect market integrity. Businesses involved in significant deals should always assess whether an HSR filing is required and ensure they comply with its timing and reporting requirements.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.