Merger Acquisition Newsroom

HSR Act Helps Monitor Monopoly And Mergers

The HSR Act is an important component of U.S. antitrust merger policy. The law provides the agencies with the time and ability to review and, when appropriate, challenge mergers prior to consummation when they are likely to be anticompetitive. Since the HSR Act became operational in 1978, however, merging parties' burdens in responding to second requests have increased substantially.

In 1976, Congress increased the agencies' ability to enforce the antitrust laws with respect to mergers and acquisitions when it passed the HSR Act. The HSR Act requires parties to transactions of a specified size to notify the FTC and DOJ of their intention to consummate a merger or acquisition, and then wait until at least the expiration of an "initial waiting period" (usually 30 days) before they complete the transaction. Over the past five years, the agencies have "cleared" approximately 95% of all transactions reported under the HSR Act during the initial waiting period.

The HSR Act also provides that if either agency determines during the initial waiting period that additional inquiry is necessary, the agency may issue a second request. A second request extends the waiting period for a specified time period (usually 30 days) after the parties have substantially complied with the request. While the FTC and DOJ jointly drafted a "Model Second Request," in most instances, the agencies issue second requests that are variations on the model that have been customized for particular industries.

The HSR process substantially increased the accuracy and consistency of the merger review process because it enabled the agencies to review transactions before consummation, and standardized some merger review procedures. Before the passage of the HSR Act, the agencies often learned about a transaction after it had closed. Antitrust review of completed transactions proved expensive, and in some cases impractical, because the merging parties quickly combined their operations.