On July 24, 2024, with the support of the American Bar Association (ABA) Antitrust Section, the Uniform Law Commission (ULC) approved (by a wide majority) model legislation outlining a standardized approach requiring companies to provide filings submitted to the Federal Trade Commission (FTC) or Antitrust Division of the US Department of Justice (DOJ) pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act or HSR Filings) to state Attorneys General (State AGs) and permitting State AGs to share HSR Filings with each other. The model legislation’s passage reflects the growing trend among states (currently at around 14) to have their own “baby HSR Acts.” The “Uniform Antitrust Pre-Merger Notification Act,” if enacted by each state, likely will add to transacting parties’ regulatory compliance burdens. It will also likely lead to increased scrutiny by State AGs who could have divergent enforcement priorities from the FTC and DOJ.
Key Take-Aways
- The model legislation requires parties to submit their HSR Filings to a State AG if (1) a filing entity is principally located in a state or (2) a filing entity’s parent has sufficient sales in a state. The creation of a new state-level filing obligation would add another compliance element to be monitored to avoid a potential liability for failure to notify.
- States may be encouraged or incentivized to pass legislation with provisions that go beyond the template language of the model, with, for example, waiting periods or filing fee requirements.
- Giving State AGs up-front access to HSR Filings opens the door to more state-level review, particularly for those transactions that have an outsized local impact and/or that may not otherwise have attracted the attention of either the FTC or DOJ.
Model Legislation Functions Similarly to the HSR Act, Minus the Filing Fee, Waiting Period, and Strong Confidentiality Protections
The ULC model legislation requires an entity to submit an electronic copy of a HSR Filing, including all documentary attachments, with a State AG, in one of two scenarios:
- Scenario 1: The entity’s principal place of business is the state; or
- Scenario 2: The entity has annual net sales in the state equal to at least 20% of the dollar value of the HSR Filing threshold when the HSR Filing is submitted. Given that the HSR Filing threshold is currently only $119.5 million, an entity needs to have only $23.9 million in annual net sales in a state to trip this threshold, which may not be that hard to meet depending on the entity.
If Scenario 1 occurs, an entity is automatically required to file with the relevant State AG. However, for Scenario 2, the entity must file only on request of the State AG, and no later than 7 days after receipt of such request. If an entity fails to submit the required filing, the State AG may seek a civil penalty of up to $10,000 per day for every day the entity is in violation. The model legislation does not include a provision for a filing fee or a pre-closing waiting period.
Importantly, while the model legislation prohibits the State AG from making public the HSR Filing or the transaction discussed therein, a State AG would be permitted to share information with the FTC, DOJ, or another State AG that has enacted the same model statute (or one with similar confidentiality protections). This contrasts with the strong confidentiality protections afforded by the federal HSR Act, which prohibits the FTC and DOJ from disclosing any information relating to a HSR Filing absent consent from the parties in all but a few narrow circumstances. The model legislation permits a State AG to disclose a HSR Filing to another State AG (so long as that state has enacted the model statute or a substantially similar one) and at least two business days’ notice was given to the entity that submitted the HSR Filing.
States Are Free to Deviate from the Model Legislation, Including on Waiting Periods and Filing Fees
The model legislation is “intended . . . [to create] a simple, non-burdensome mechanism for AGs to receive access to HSR [F]ilings at the same time as the federal agencies” to alleviate potential information asymmetries between the federal and state merger review processes. States remain free to enact their own versions of the legislation, which could lead to divergence and undermine the ULC’s intent of reducing “costs and uncertainties for the merging parties.”
One point of potential deviation for some states could be the lack of a pre-closing waiting period. Many of the “baby HSR Acts” already on the books include at least a 30-day (or longer) waiting period (and at least one, as long as 180 days). States investigating complicated health care transactions, for example, may want longer lead times to ensure they have time to review thoroughly all areas of potential concern, particularly where such states may not have the same resources as the FTC or DOJ.
A second issue on which states might diverge from the model legislation could be the lack of a filing fee. States, such as California, have expressed concern that the model statute will not be “meaningful unless it is coupled with significant additional financial support for enforcement.” A recent report on state-level antitrust enforcement by the California Law Revision Commission, an independent state agency, argued that while the federal antitrust authorities receive thousands of filings per year, the cost of review is “defrayed” by filing fees. The fact that the model legislation has no filing fees creates an “unfunded burden” upon a State AG and “may in fact nullify legislative efforts to provide for filing fees” in other contexts.
Conclusion
The model legislation could significantly expand the scope of state-level antitrust review, particularly for those transactions that have a state-level nexus and opens the door for state-level enforcement priorities. For example, California’s new law establishing its own merger control notification regime for retail grocery stores and pharmacies opens with finding “that the increasing consolidation of chain retail grocery stores […] and chain retail pharmacies […] impacts the public health of Californians.” While a purported aim of the model legislation is to “balance the needs of state enforcers for information with the burdens and risks to filers,” complying with this additional filing obligation may be an added challenge if the final legislation passed in certain states have differing compliance requirements. Monitoring passage of this law at the state level will be key to navigating filing requirements, legal compliance and managing transaction timetables.
