HSR Act: Overview, definition, and example

What is the HSR Act?

The HSR Act, or Hart-Scott-Rodino Antitrust Improvements Act of 1976, is a U.S. federal law that requires certain large mergers, acquisitions, or transfers of voting securities or assets to be reported to the Federal Trade Commission (FTC) and Department of Justice (DOJ) before they can close. The goal is to give regulators time to review deals for potential antitrust issues.

Why is the HSR Act important?

If a transaction meets the HSR thresholds, the parties must submit filings and observe a waiting period—usually 30 days—before completing the deal. Failing to comply can lead to hefty fines, delays, or the unwinding of a completed transaction. Contracts that involve mergers or large asset purchases often include HSR-related language to confirm whether the law applies and assign responsibility for any filings.

Understanding the HSR Act through an example

A large tech company agrees to acquire a smaller startup for $150 million. Because the deal exceeds the current HSR thresholds, both companies are required to file HSR notifications with the FTC and DOJ and wait for the review period to expire. Their merger agreement includes a clause stating that both parties will cooperate on the filing and not close the transaction until HSR clearance is received.

If either party tries to close early or avoid the filing, they could face fines of over $50,000 per day, along with possible legal action from regulators.

Example of an HSR Act clause

Here’s how an HSR Act clause may look like in a contract:

Conclusion

The HSR Act clause helps businesses navigate the legal requirements around major transactions. It signals whether pre-merger filings are needed and ensures both parties understand their role in complying with antitrust law. If your deal crosses certain size thresholds, this clause becomes a critical part of the closing process.

Frequently asked questions (FAQs)