HSR filing: Overview, definition, and example
What is an HSR filing?
An HSR filing refers to the submission of information to the Federal Trade Commission (FTC) and the Department of Justice (DOJ) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). The HSR filing is required when certain mergers, acquisitions, or other business transactions meet specified size thresholds. The purpose of the filing is to give U.S. antitrust authorities the opportunity to review the transaction and assess whether it may substantially reduce competition or create a monopoly. The filing includes detailed information about the parties involved, the nature of the transaction, and its potential competitive impact.
Why is an HSR filing important?
An HSR filing is important because it ensures that potentially anti-competitive transactions are reviewed by U.S. regulators before they are completed. This pre-merger notification process helps to prevent mergers and acquisitions that could harm competition, raise prices, or reduce consumer choice. It is a critical tool in the enforcement of antitrust laws in the United States. Failure to file an HSR notice when required can lead to significant penalties, including fines and the potential unwinding of the transaction if it is found to be anti-competitive.
Understanding HSR filing through an example
Imagine that two large companies in the tech industry, Company A and Company B, are negotiating a merger. The combined value of the companies exceeds the threshold set by the HSR Act, which mandates that certain mergers and acquisitions involving companies with significant revenues or assets must be filed with the FTC and DOJ before completion. Before proceeding with the merger, both companies must submit a detailed HSR filing, which includes information about their financials, competitive positions, and the nature of the merger. The agencies will then review the filing, and if they do not raise concerns, the companies can proceed with the merger. If the agencies have concerns about anti-competitive effects, they may request additional information, delay the transaction, or block the merger altogether.
In another example, a private equity firm is acquiring a controlling interest in a manufacturing company. The transaction meets the HSR filing requirements due to the size of the companies involved. The private equity firm submits an HSR filing to the FTC and DOJ, which begins the regulatory review process to determine if the acquisition may reduce competition in the relevant market.
Example of an HSR filing clause
Here’s how an HSR filing clause might appear in a merger agreement:
“The Parties agree to comply with the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) and will promptly file all necessary documents and submissions with the Federal Trade Commission (FTC) and the Department of Justice (DOJ) as required. The Parties shall cooperate in obtaining any required regulatory approvals and shall not consummate the transaction until the applicable waiting period under the HSR Act has expired or been terminated, unless waived by mutual consent.”
Conclusion
An HSR filing is a critical part of the antitrust review process for mergers, acquisitions, and certain other business transactions. It ensures that U.S. regulators have the opportunity to review the competitive impact of a transaction before it is completed. Compliance with HSR filing requirements is essential for avoiding penalties and ensuring that mergers and acquisitions are in line with antitrust laws. Companies involved in large transactions must be aware of the HSR filing process and the thresholds that trigger the need for submission, as failure to file can lead to legal consequences and delays in completing the transaction.
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.