In a critical development for companies engaged in mergers and acquisitions, the U.S. District Court for the Eastern District of Texas vacated the Federal Trade Commission's rule that expanded premerger notification requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
The rule had increased reporting requirements on the HSR form — including, as noted by attorneys in the Antitrust and Competition Group at Duane Morris LLP, organizational charts, transaction rationale disclosures, competition documents, overlap descriptions, supply relationship descriptions, and information regarding subsidies from foreign entities. According to the FTC, compliance with the new form requires an average of 105 hours, compared to 37 hours under the prior form.
"The Rule is arbitrary and capricious because its benefits do not 'bear a rational relationship' to its costs," wrote U.S. District Judge Jeremy D. Kernodle in his Feb. 12 opinion. "The Final Rule exceeds the FTC's statutory authority because the agency has not shown that the Rule's claimed benefits will 'reasonably outweigh' its significant and widespread costs."
The final rule was challenged in 2024 by the U.S. Chamber of Commerce, on grounds that the expanded requirements imposed significant compliance costs on companies without sufficient statutory backing. Similarly, the American Hospital Association (AHA) called the changes "unnecessary and unlawful." According to AHA officials, "key aspects of [Kernodle's] decision, including the court's rejection of the FTC's reliance on a study regarding hospital mergers, were based on arguments made in the AHA's amicus brief."
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