The Federal Trade Commission finalized changes to a rule that will require healthcare companies to provide more information to regulators ahead of merger and acquisition deals.
The agency said the changes that will improve the ability of the FTC and Antitrust Division of the U.S. Department of Justice (DOJ) to detect illegal mergers and acquisitions prior to consummation.
"The final rule requires additional information that is necessary to determine which deals require an in-depth antitrust investigation," the FTC said in a press release.
The update will increase the information companies are required to prepare and provide to the regulator, which the FTC said was necessary in light of the increasing volume and complexity of deals made in recent years. The 460-page final rule can be found here (PDF).
The agency said it's responding to "changes in corporate structure and deal-making, as well as market realities in the ways businesses compete, that have created or exposed information gaps that prevent the agencies from conducting a thorough antitrust assessment of transactions subject to mandatory premerger review."
It's the first time the FTC has updated its art-Scott-Rodino (HSR) premerger notification form in 45 years.
The commission had unveiled in late June 2023 its proposed changes to the Hart-Scott-Rodino (HSR) Form and accompanying instructions, which outline requirements for merger hopefuls during the initial waiting period.
The agency also acknowledged at the time that its proposal would roughly quadruple the per-hour filing burden on merging organizations, as the current estimated average of 37 hours per filing would balloon to an average of 144 hours.
The FTC voted unanimously to finalize changes to the premerger notification form and associated instructions, as well as the premerger notification rules implementing the Hart-Scott-Rodino (HSR) Act.
The American Hospital Association immediately pushed back on the proposal when t was introduced a year ago, saying the increased paperwork would comprise “more information than the agencies could feasibly review in 30 days” and would “function as little more than a tax on mergers."
Based on stakeholder feedback, the FTC "substantially modified" its proposals, resulting in a final rule that is tailored to the potential antitrust risk of a reported transaction.
While the AHA acknowledged that the final rule is less burdensome than the proposed rule, the updates still increase the reporting requirements on the current HSR form, particularly for the buyer.
"The AHA is disappointed that the FTC moved forward with this flawed and pointless rule,” Chad Golder, AHA general counsel and secretary said in a statement on October 10 when the final rule was released. “As we explained in our comment letter, it functions as little more than a tax on mergers."
Golder continued, "The FTC still has not sufficiently explained why all this information is needed. The agency already has more than enough information about hospital transactions, and it has shown no hesitation in challenging them. The final rule will just require hospitals to divert time and resources away from patient care towards needless compliance costs.”
The final rule and HSR form will go into effect 90 days after publication in the federal register.
“Premerger review is a critical task for the antitrust agencies and to do it well, we need information about each deal’s potential antitrust risk,” said Shaoul Sussman, Associate Director for Litigation of the FTC’s Bureau of Competition in a statement. “This rulemaking is a much needed update to address changes in the marketplace that have undermined the agencies’ ability to detect and prevent illegal mergers, while at the same time creating a more efficient review process."
Under the final rule, companies must begin to submit data about minority stakeholders and investors. Companies also are required to provide additional transaction documents from the supervisor of each merging party’s deal team as well as a small set of high-level business plans related to competition;
Premerger notification forms also will require a description of the business lines of each filer to reveal existing areas of competition between the merging firms, including for products or services that are in development, and supply relationships.
The FTC also is introducing a new online portal for market participants, stakeholders, and the general public to directly submit comments on proposed transactions that may be under review by the FTC. The Commission welcomes information on specific transactions and how they may affect competition.