FTC Appeals Ruling to Vacate Burdensome Merger Notification Form
The Federal Trade Commission (FTC) is appealing a federal court ruling earlier this month that vacated a Biden-era rule that imposed new requirements on business mergers.
In June 2023, then-FTC Chair Lina Khan issued a notice of proposed rulemaking calling for a total revision of the Hart-Scott-Rodino premerger notification form that businesses must submit to the agency 30 days before finalizing a merger. The form, which was used for more than 40 years, collected information about each company’s business, such as shareholder information, annual reports and financial statements, and market data. Government officials used that information to determine whether the acquisition might violate antitrust laws. If, during that 30-day period, the FTC determined the merger needed further scrutiny, it could enter a Second Request phase and require the companies to submit additional information or documentary material. Between 2001 and 2020, only about 3% of transactions triggered a Second Request.
Under Khan’s leadership, the FTC claimed the form failed to provide sufficient data on potential mergers, leading the agency to issue a new final rule in October 2024 that required 20 new categories of information and documents. As a result, the estimated time to complete a premerger notification form increased from 37 hours to 105, representing a major new burden on businesses.
Acting on behalf of businesses, the U.S. Chamber of Commerce filed a lawsuit to block the new rule. On Feb. 12, the U.S. District Court for the Eastern District of Texas ruled in favor of the Chamber, vacating the FTC’s final rule. In its opinion, the court determined the final rule failed a cost-benefit analysis. “The FTC lacks any evidence that the final rule would detect illegal mergers more effectively than the prior form,” the court wrote. “And it failed to show that the claimed benefit of saving time and resources reasonably outweighs the final rule’s significant costs. Thus, the rule is arbitrary and capricious because its benefits do not ‘bear a rational relationship’ to its costs.”
Business advocacy organizations, including the U.S. Chamber, applauded the ruling. "We are pleased with the court’s decision today rejecting the Biden administration’s onerous merger tax,” Daryl Joseffer, executive vice president and chief counsel for the U.S. Chamber Litigation Center, said in a statement.
On Feb. 19, the FTC appealed the decision and the U.S. Court of Appeals for the Fifth Circuit granted an administrative stay on the lower court’s ruling. As a result, the new form remains temporarily in place.