Rule by Vibes, Ruined by Reality: Why the FTC’s HSR Loss Demands a Legislative Fix

The Federal Trade Commission (FTC) is doubling down on a losing hand. Despite a stinging courtroom defeat last week that vacated its 2024 premerger notification rule, the agency is stubbornly appealing the decision to maintain what essentially functions as an unnecessary $139 million annual tax on mergers and acquisitions.

Under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, companies are required to file the premerger notification form with the FTC and the Department of Justice’s (DOJ) Antitrust Division when their transaction meets certain size thresholds. The 2024 rule was the first time in 46 years that the FTC overhauled the HSR Form, and the Commission estimated that it would increase the compliance burden by nearly three-fold.

The agency justified this significant burden by asserting that the new Form would create a more efficient premerger review process for both the antitrust agencies and the merging parties. A federal district court struck down the regulation, ruling that the FTC failed to demonstrate that the rule’s benefits bear a rational relationship to its significant costs.

The FTC’s defeat should have come as no surprise. Numerous commenters argued that the Commission faced a steep legal hurdle under the HSR Act, which limits premerger notification to information that is “necessary and appropriate” to enable antitrust review, such as the parties’ revenues and basic transaction terms. While the aggressive rulemaking began under former FTC Chair Lina Khan, the persistence of legal failures under the current Chair Andrew Ferguson suggests a larger problem. It’s time for Congress to step in and restore some common sense to antitrust law.

There was no justification for the huge compliance burden. The court looked at the FTC’s own data and the seminal study that analyzed twenty years of premerger enforcement data and noted that only about 3 percent of transactions triggered a request for more information and that 92 percent required no investigation at all.

If the vast majority of transactions require no investigation, then such a substantial burden increase is unnecessary. Much of that data originates from the HSR Annual Report, a joint publication by the FTC and DOJ. Remarkably, the FTC’s initial proposed rulemaking failed to reference these reports even once.

Ultimately, the court didn’t buy the FTC’s efficiency arguments, noting that the FTC “could not identify a single illegal merger in the forty-six-year history of the prior Form that the Final Rule’s new form would have prevented.” The FTC attempted to regulate based on intuition and vibes rather than the empirical reality that most mergers pose no anticompetitive concern.

There’s even some indication that the new form made the review process far less efficient by delaying regulatory clearance. Gail Slater, the DOJ antitrust chief ousted just last week, observed in August that only 25 percent of reported transactions received “early termination” during the first six months of the new Form. The agencies grant early termination for transactions that pose little to no anticompetitive concern, allowing them to close before the mandatory waiting period expires. From 2011 to 2020, the agencies granted early termination 58 percent of the time, according to the HSR Annual Report for Fiscal Year (FY) 2020.

Congress should take notice and enact some modest amendments to the HSR Act. They should start by permanently reenacting the statutory mandate for the HSR Annual Report, which details the antitrust agencies’ annual enforcement actions and transaction statistics. This reporting requirement, formerly 15 U.S.C. § 18A(j), was mistakenly swept up in the Federal Reports Elimination and Sunset Act of 1995 and terminated in 2000.

For years, the FTC and DOJ were so accustomed to the report that they didn’t even notice the mandate had expired. They rightly continued to produce it, but not without controversy. For the FY 2023 Annual Report, Republican commissioners leveled accusations of “gamesmanship” against the Democratic leadership, pointing to methodological inconsistencies in the presentation of litigation results.

Those reports are mandated through FY 2027 by the Consolidated Appropriations Act of 2023, but that’s a temporary fix. Congress should permanently restore the reporting provision to the HSR Act with clear methodologies and terminology to ensure transparency and bolster accuracy. Lawmakers should build upon this requirement by including metrics such as the number of days agencies take to review transactions, as the FTC did in its Performance Report for FYs 1999 and 2000.

This information would enable the public to assess the purported efficiency claims of future rules under the HSR Act. Congress should not hesitate to require any information that the antitrust agencies already have or can easily retrieve.

For now, the good news is that the federal district court’s decision demonstrates that, in the face of aggressive agency overreach, facts still matter. It was data from past HSR Annual Reports that ultimately dismantled the FTC’s case and dispelled the unsubstantiated efficiency claims.

By permanently reenacting the HSR reporting mandate, Congress can safeguard this vital source of information from political gamesmanship and bureaucratic neglect. This isn’t a partisan issue. It’s common sense, evidence-based governance. Most importantly, it will help guarantee that future rulemakings are guided by empirical reality rather than administrative intuition.