ASA Submits Comments on Proposed FTC Rule Amending HSR Pre-Merger Filing Process
WASHINGTON, DC – The American Securities Association (ASA) recently submitted comments regarding the U.S. Federal Trade Commission (FTC), with the concurrence of the U.S. Department of Justice (DOJ) Antitrust Division, proposal to amend Hart-Scott-Rodino (HSR) pre-merger notification instructions and report forms.
“Public policy that promotes competition and does not prohibit industry consolidation is necessary to support a well-functioning economy. The FTC’s sweeping and burdensome approach would put the agency in the position of refereeing thousands of potential mergers that do not raise questions about competitive or economic harm,” said ASA President & CEO Chris Iacovella. “It’s imperative that the FTC and DOJ balance regulatory goals and economic growth thoughtfully and carefully.”
In particular, ASA provided the FTC with comments on the following areas of concern:
I. The Proposals are Overly Broad. The proposed guidelines are overly broad because they apply thresholds and descriptions that capture too many small and mid-size transactions. When considering a merger or commencing initial merger discussions, companies would have to calculate the inevitable costs and delays that would result from an extended regulatory review. This could result in more decisions not to pursue mergers even if the ultimate outcome would have otherwise been beneficial to customers.
II. The Proposals are Overly Burdensome. The proposals seem to suggest that nearly every transaction will be deemed anti-competitive. The new Hart Scott Rodino (HSR) notification rules would demand substantially more information be disclosed, adding unnecessary complexity to the process. Public companies would also be compelled to announce and file details with the Securities and Exchange Commission (SEC) about signed deals, creating additional hurdles that will test investor confidence.
III. Enforcement Guidelines Already Exist. Current guidelines already provide ample opportunity for enforcement. Rather than expanding these guidelines, the focus should be on providing greater clarity on current enforcement policy to ensure a fair and transparent regulatory environment.
IV. Proposals Will Cause Uncertainty in the Markets. The application of these guidelines will cause widespread uncertainty regarding which transactions will be subject to review and potential regulatory delays. This uncertainty will hinder the ability of participants to negotiate and enter into transactions with confidence.
V. Proposals Would Impose Unnecessary Costs. As the FTC concedes, the proposed guidelines would significantly increase the time and cost required to execute and close even the most routine transactions. The merger guidelines' exemptive thresholds do not strike an appropriate balance between regulatory goals and the burdens placed on participants, particularly smaller participants.
The letter also expresses concerns regarding the FTC and DOJ’s posture towards vertical transactions. Vertical transactions, which are currently attracting greater regulatory scrutiny, play a crucial role in re-shoring supply chains and reducing exposure to Chinese technology and sources of supply. These transactions algin with broader national economic and security objectives and should not be discouraged.
The full comment letter can be found here.
About the American Securities Association
American Securities Association, based in Washington, DC, represents the retail and institutional capital markets interests of regional financial services firms who provide Main Street businesses with access to capital and advise hardworking Americans how to create and preserve wealth. ASA’s mission is to promote trust and confidence among investors, facilitate capital formation, and support efficient and competitively balanced capital markets. This mission advances financial independence, stimulates job creation, and increases prosperity. The ASA has a geographically diverse membership of almost one hundred members that spans the Heartland, Southwest, Southeast, Atlantic, and Pacific Northwest regions of the United States.