District Court Vacates Rule Substantially Revising HSR Premerger Notification Form

In the recent case of Chamber of Commerce v. FTC, the U.S. District Court for the Eastern District of Texas vacated a rule (the “Rule”) promulgated by the Federal Trade Commission (FTC) substantially modifying the requirements of the Hart-Scott-Rodino (HSR) premerger notification form (the “Form”).

In vacating the Rule, which, by the FTC’s own account, more than triples the time and expense of filing, the district court found that the FTC failed to substantiate its contention that the new Form was “necessary and appropriate” to determine whether any acquisition was unlawful under antitrust law. The district court found it particularly relevant that the FTC could not identify any potentially unlawful transaction that had evaded detection because of the use of the prior Form.

Furthermore, the district court rejected the FTC’s reliance on a study—purportedly analyzing the price effects of hospital mergers—to substantiate the need for a more burdensome Form because each transaction analyzed in that study had been subjected to a second request. As a result, the court concluded that the prior Form worked in triggering the additional agency review.

The FTC’s inability to demonstrate that the new Form was necessary and appropriate led the district court to conclude that promulgation of the Rule violated the HSR Act and was arbitrary and capricious under the Administrative Procedure Act (APA). The district court also determined that there was no basis to deviate from the default remedy of vacatur as “the only statutorily prescribed remedy for a successful APA challenge to a regulation.”

However, the district court did stay the applicability of its ruling for seven days, and on February 17, the FTC asked the district court to extend its stay pending its appeal. If the district court denies that motion, the FTC has expressed its intention to seek an emergency stay before the U.S. Court of Appeals for the Fifth Circuit.

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