Key Takeaways
- Requires premerger notifications for large deals.
- Enables FTC and DOJ to review mergers early.
- Imposes waiting periods before transaction closing.
- Penalties for premature deal closings or violations.
What is Hart-Scott-Rodino Antitrust Improvements Act of 1976?
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) is a U.S. federal law that requires companies to notify federal agencies before completing large mergers or acquisitions. This premerger notification enables the Federal Trade Commission (FTC) and Department of Justice (DOJ) to review transactions for potential anticompetitive effects, helping maintain fair competition in the market.
By amending the Clayton Antitrust Act, the HSR Act ensures that significant deals receive regulatory scrutiny before closing, preventing harmful monopolistic consolidations and promoting healthy competition among oligopolies and other market structures.
Key Characteristics
The HSR Act establishes clear rules and thresholds for merger notifications to facilitate timely antitrust reviews.
- Premerger notification: Parties must file detailed disclosures including business descriptions and competitive overlaps before closing.
- Waiting period: A mandatory 30-day waiting period allows the FTC and DOJ to investigate; it can be extended by second requests.
- Thresholds: Filing requirements depend on transaction size and the size of the parties involved, updated annually to reflect economic changes.
- Enforcement: Violations such as premature closing ("gun-jumping") can result in civil penalties or injunctions.
- State involvement: Title III empowers state attorneys general to sue for damages on behalf of citizens in antitrust cases.
How It Works
When you plan a merger or acquisition that meets the HSR Act thresholds, you must file a notification with the FTC and DOJ. This filing includes financial data, subsidiaries, and competitive analysis relevant to the transaction.
After filing, you observe a 30-day waiting period during which agencies assess whether the deal could substantially lessen competition. If concerns arise, they issue a second request for more information, extending the review period. Only after clearance or expiration of the waiting period can the transaction close legally.
Examples and Use Cases
The HSR Act applies across industries, ensuring antitrust compliance in diverse business scenarios.
- Airlines: Mergers involving Delta and American Airlines require careful HSR filings to prevent monopolistic routes and pricing power.
- Technology: Large acquisitions such as Microsoft's cloud services deals often trigger extended FTC reviews under the HSR Act.
- Investment strategies: Evaluating large-cap stocks frequently involves considering the impact of possible mergers subject to HSR regulations.
Important Considerations
Understanding HSR filing obligations is critical to avoid costly penalties and delays. Ensure your transaction meets thresholds and submit timely, accurate filings to the FTC and DOJ.
Companies should also be mindful of operational restrictions during the waiting period to prevent violations. If you invest in sectors prone to consolidation, such as airlines or technology, staying informed on HSR rules supports better analysis of potential market changes. For investors, exploring growth stocks may involve watching for merger activity subject to HSR review.
Final Words
The Hart-Scott-Rodino Act ensures critical antitrust review before major mergers close, protecting competition and consumers. If your transaction meets filing thresholds, start preparing your notification now to avoid delays.
Frequently Asked Questions
The Hart-Scott-Rodino Act is a U.S. federal law that requires companies to notify the Federal Trade Commission and Department of Justice before completing certain large mergers or acquisitions. This allows antitrust authorities to review the deal for potential anti-competitive effects before it closes.
Enacted in 1976, the Act was designed to close gaps in antitrust enforcement by requiring advance notification of significant deals. This premerger review helps prevent mergers that could substantially lessen competition, giving authorities time to investigate before companies finalize transactions.
Parties involved in mergers, acquisitions, or asset transfers that meet certain size thresholds must file. This includes companies with significant assets or sales, and transactions that exceed minimum values, ensuring that large deals get reviewed for competitive impact.
As of early 2026, transactions valued at $133.9 million or more require filing. For deals under approximately $478 million, the acquiring company must have at least $239 million in assets or sales, and the target company at least $23.9 million. Larger deals over $368 million require filing regardless of party size.
Once a filing is made, there is a mandatory 30-day waiting period during which the FTC and DOJ review the transaction. This period can be extended if the agencies request additional information, and no closing can occur until clearance is granted to avoid penalties.
Violating the Act, such as closing a deal before the waiting period ends, can lead to daily civil penalties up to $51,744 per party. Authorities can also seek injunctions to stop illegal mergers and ensure compliance with antitrust laws.
By requiring early notification and review of large transactions, the Act helps prevent mergers that could reduce market competition. This protects consumers from higher prices, reduced innovation, and fewer choices by allowing authorities to intervene before deals are finalized.
Title III of the Act empowers state attorneys general to sue for antitrust damages on behalf of citizens, acting as parens patriae. This allows them to recover damages from widespread harms like overcharges that individual consumers might find difficult to litigate alone.
