Understanding Chamber of Commerce v. FTC and Its Implications for the HSR Act

The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) was enacted to ensure that the antitrust authorities – the Antitrust Division of the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) – receive advance notice of significant mergers and acquisitions and an ability to investigate those significant transactions before they are consummated.

The HSR Act requires companies entering into transactions greater than an annually adjusted "size-of-transaction" threshold – currently $119.5 million and recently set at $126.4 million for 2025 (once published in the Federal Register and effective) – and certain other requirements to file a premerger notification with the FTC and DOJ and generally wait at least 30 days to allow the DOJ and FTC to determine whether they believe a thorough investigation of the proposed transaction is warranted (in which case the agencies issue what is referred to as a "Second Request").

Recent Changes to the HSR Rules

In 2023, the FTC proposed significant changes to the HSR premerger notification form, marking the first large-scale reorganization since the HSR Act's inception. The proposed changes aimed to expand the information required in the notification form, including detailed narratives on competitive impacts, information on products and services (and particularly products and services of the acquiring organization that compete or could compete with the target), and extensive documentation on company operations. These changes were intended to enhance the DOJ and FTC's ability to assess potential antitrust issues but have been criticized for significantly increasing the burden on businesses and are currently scheduled to become effective on Feb. 10, 2025. (See Holland & Knight's previous alert, "FTC Issues New HSR Rules Significantly Expanding Current Antitrust Reporting Obligations," Oct. 15, 2024.)

Chamber of Commerce of the United States of America v. FTC

On Jan. 10, 2025, the U.S. Chamber of Commerce, along with other prominent business organizations such as the Business Roundtable and American Investment Council, initiated a lawsuit against the FTC and its current chair, Lina Khan, challenging the recent amendments to the HSR premerger notification rules. The plaintiffs argue that the FTC has overstepped its statutory authority by implementing requirements that are not "necessary and appropriate" for an initial antitrust review, as stipulated by the HSR Act. They assert that these new rules impose excessive burdens on businesses, particularly a large number of transactions that will pose no serious antitrust risk, and could potentially deter beneficial mergers and acquisitions.

The lawsuit contends that the FTC's rule changes fail any sort of rational cost-benefit analysis and violate the Administrative Procedure Act by being arbitrary and capricious. The plaintiffs claim that the FTC failed to adequately justify the need for such extensive changes, which significantly increase the compliance costs and complexity of the premerger notification process. They argue that the FTC did not provide sufficient evidence to demonstrate that the existing HSR process was inadequate or that the new requirements would effectively address any identified issues. The plaintiffs seek a judicial declaration to set aside the new rule, maintaining that it exceeds the FTC's authority and imposes unjustified burdens on the business community.

Central to the lawsuit is the argument that the FTC's changes disrupt the balance intended by the HSR Act, which aims to facilitate antitrust review without unduly hindering legitimate business activities. The plaintiffs emphasize that the new requirements could lead to delays and increased costs for transactions that do not pose significant antitrust risks. They argue that the FTC should have considered less burdensome alternatives, such as improving the use of existing tools such as Second Requests, rather than imposing a broad and costly overhaul of the premerger notification process.

Potential Impacts of the Lawsuit on the Substance and Effective Date of the New HSR Rules

The outcome of this lawsuit could have far-reaching implications for the future of the HSR rules and regulatory environment for mergers and acquisitions. If the court rules in favor of the Chamber of Commerce, some or all of the recent changes may be set aside, thereby preserving the existing premerger notification framework. This could relieve businesses of the heightened compliance burdens but might also limit the FTC's ability to proactively address antitrust concerns in complex transactions.

Conversely, if the FTC prevails, the new rules will likely be enforced, leading to more rigorous scrutiny of mergers and acquisitions. This could enhance the FTC's capacity to identify and prevent anti-competitive practices but at the cost of increased compliance efforts and expenses for companies. Businesses may need to allocate more resources to meet the expanded requirements, potentially affecting the pace and volume of merger activities.

Moreover, the decision could set a precedent for how regulatory agencies implement changes and the extent of their authority under existing statutes. It may influence future rulemaking processes and the balance between regulatory oversight and business interests.

Given the short time before the scheduled effective date of the new HSR rules, it is possible that the plaintiffs will also seek a preliminary injunction or temporary restraining order to postpone the scheduled Feb. 10, 2025, effective date of such rules. One additional possibility for postponement noted by some commentators is that the incoming administration may institute a 60-day "regulatory freeze" covering new regulations that have not yet taken effect on or shortly after Jan. 20, 2025.

Conclusion

The Chamber of Commerce's lawsuit against the FTC underscores the ongoing tension between ensuring competitive markets and fostering an environment conducive to economic growth and innovation. As the legal proceedings unfold, stakeholders across the business and legal communities will be closely monitoring the implications for antitrust regulation and corporate strategy but, pending announcement of any delay or adjudication of the new HSR rules, should also plan for the significantly increased information gathering and related time necessary for filings under the new HSR rules beginning as early as Feb. 10, 2025.