Category: Mergers & Acquistions

December 2024 Legal News: Law Firm News and Mergers, Industry Awards and Recognition, DEI and Women in Law

Thank you for reading the National Law Review’s legal news roundup, highlighting the latest law firm news! As the country enters the final month of the year, the legal industry does not appear to be slowing down. Please read below for the latest in law firm news and industry expansion, legal industry awards and recognition, and DEI and women in the legal field.

Law Firm News and Mergers

Ogletree, Deakins, Nash, Smoak & Stewart, P.C. announced that they are opening the firm’s 58th office in Baltimore. The office will be shared with Shawe Rosenthal, which will help strengthen both firms’ presence in the city.

The new office, which will open its doors on January 2, 2025, will be led by Parker Thoeni. An experience team of attorneys will be joining him, including shareholders Courtney Amelung, Paul Burgin, Chad Horton, Darryl McCallum, Mike McGuire, Fiona Ong, Mark Swerdlin and Veronica Yu Welsh, of counsel Gary Simpler, Eric Hemmendinger, Stephen Shawe and Elizabeth Torphy-Donzella, and associates Evan Conder, Jordan Dunham and Jamie Salazer.

von Briesen & Roper, s.c. announced the addition of Erik M. Gustafson as an associate in the Litigation & Risk Management Practice Group in the firm’s Milwaukee office.

Mr. Gustafson will focus his practice on insurance coverage and analysis, first-party property coverage and bad faith counseling and claims. He received a J.D., magna cum laude, and a Certificate in Litigation Practice from Marquette University and a B.A., summa cum laude, from Creighton University.

Jake Oresick joined Tucker Arensberg, P.C. as a Senior Counsel attorney. He brings with him extensive experience in labor and employment, real estate, construction, insurance, commerical litigation and environmental law.

Mr. Oresick’s practice focuses on representing individuals, insurers and businesses in matters such as trade secrets, construction defects, breach of contract and insurance bad faith. His client-focused approach has shown a proven track-record of resolving complex disputes.

“We are excited to welcome Jake to the firm,” said Irving Firman, Managing Shareholder. “His legal skills and dedication will enhance our firm’s ability to provide exceptional litigation services.”

Legal Industry Awards and Recognition

Bradley Arant Boult Cummings LLP announced that four of their attorneys were named to Georgia Trend’s Legal Elite for 2024. The list recognizes lawyers from across 15 different fields.

Laura Hester, Stephen Opler, Sidney Welch and Scott Zweigel were recognized as among  the best in their respective fields. They were chosen based on nominations by members of the state bar who live in Georgia.

Ward and Smith, P.A. attorneys Grant Osborne, Will Oden and Ken Gray are now recognized by the North Carolina State Bar Board of Legal Specialization as specialists in Employment Law. They are among the first twelve ever recognized in the state.

Ronald A. Christaldi, a partner at Shumaker, Loop & Kendrick, LLP and President/CEO of Shumaker Advisors Florida, was awarded the 2024 H.L. Culbreath Jr. Profile in Leadership Award by the Tampa Bay Chamber. It is the region’s most esteemed recognition for those whose leadership has impacted the community.

Mr. Christaldi has previously been named by Florida Trend Magazine as one of the top 100 lawyers in Florida and by the Tampa Bay Business Journal as one of the 100 most influential lawyers in the nation.

“Ron embodies the spirit of this award through his selfless contributions and unwavering commitment to making Tampa Bay a better place for all,” said former Tampa Mayor Bob Buckhorn, who currently serves as Executive Vice President and Principal U.S. Cities Practice for Shumaker Advisors Florida. “His leadership continues to inspire and create a lasting impact across our region.”

DEI and Women in Law

Barnes & Thornburg LLP announced that Dallas partner Ashley Deweese was named a 2024 Connect CRE Lawyers in Real Estate Award honoree for the Texas region. The award recognizes distinguished real estate attorneys.

Ms. Deweese focuses her practice on commercial real estate in the office, multifamily, hospitality, industrial, healthcare and retail arenas. She has broad experience in representing developers, borrowers, buyers and sellers in the development of property, as well as in dispositions and acquisitions.

Bracewell LLP partner Catherine D. Little was named by Hart Energy’s Oil & Gas Investor Magazine as one of its 2025 Influential Women in Energy. The platform recognizes women who have excelled in the oil and gas industry.

Ms. Little was recognized for her track record of helping clients excel during energy transition initiatives and regulatory requirements, as well as counseling clients on oil and gas pipeline compliance and enforcement matters.

She regularly manages large-scale confidential audits and investigations to assist clients in identifying legal risks, as well as preparing defenses to favorably resolve criminal investigation matters.

Moore & Van Allen announced that Wealth & Estate Planning Member Caitlin Horne was appointed to serve a two-year term as Chair of the Board of Directors for InReach, a nonprofit that provides services to individuals with developmental and intellectual disabilities.

Ms. Horne has served as a board member and volunteered with InReach for the past four years. She has held leadership positions as Chair of the Personnel Committee, as well as the Nominating Committee.

Copyright ©2024 National Law Forum, LLC
For more law firm news, visit the NLR Law Office Management section

Revisions to HSR Form Released

On October 7, 2024, the Federal Trade Commission (FTC), with the concurrence of the U.S. Department of Justice (DOJ), released its long-awaited final rule related to the revision of the Hart-Scott-Rodino (HSR) premerger notification form (the “Final Rule”).

The Final Rule will be effective 90 days after its publication in the Federal Register. The FTC and DOJ state that the revisions are intended to close the perceived gaps in current information provided in the HSR process, such as the disclosure of entities and individuals within the acquiring person; identification of potential labor market effects; identification of acquisitions that create a risk of foreclosure; identification of actions that may involve innovation effects, future market entry, or nascent competitive threats; and disclosure of roll-up or serial acquisition strategies.

The Final Rule dictates the use of two separate forms: one for the acquiring entity and one for the entity to be acquired. Each party will have to designate a “deal team lead” whose files must be searched for 4(c) and 4(d) documents, even if the deal team lead is not an officer or director. In addition, the acquiring entity must provide details not previously requested, including an organization chart, a list of officers and directors, a description of the ownership structure of the entity, and information on the transaction rationale.

While the information requested in the Final Rule is more limited than what was included in the original proposed rule, there are substantial changes that parties should expect to add significant time and cost to the filing process.

©2024 Epstein Becker & Green, P.C. All rights reserved.
For more on Hart-Scott-Rodino, visit the NLR Antitrust Trade Regulation section.

FTC Finalizes Major Rewrite of HSR Filing Requirements

Last week, the Federal Trade Commission (FTC) voted unanimously to issue a final rule that implements significant changes to the Hart-Scott-Rodino (HSR) premerger notification form and accompanying instructions. While the final rule includes numerous modifications from the draft proposal that was announced in June 2023 (see our previous client alert), this still represents the most substantial change to the HSR filing requirements in decades, and will require parties to HSR-reportable transactions to gather and provide considerably more information and documents than under the current rules. The final rule will take effect 90 days after publication in the Federal Register (unless there is a successful court challenge in the interim).

Under the HSR Act, parties to certain mergers and acquisitions are required to submit premerger notification forms that disclose information about their proposed deal and business operations. The FTC and the Antitrust Division of the US Department of Justice (DOJ) use this information to conduct a competitive impact assessment within the statutory HSR waiting period, which is typically 30 calendar days. According to the FTC’s press release accompanying the final rule, the new requirements are a necessary response “to changes in corporate structure and deal-making, as well as market realities in the ways businesses compete, that have created or exposed information gaps that prevent the agencies from conducting a thorough antitrust assessment of transactions subject to mandatory premerger review.”

Key Changes to HSR Filing Requirements

Some of the main changes will require the following:

  • A description of each party’s strategic rationales for the transaction, with cross-references to documents submitted with the HSR filings that support the stated rationales.
  • A new Overlap Narrative section that will require the buyer and target to identify and provide (i) a written description of current or planned products or services where they compete (or could compete) with each other, (ii) actual or projected revenues for each such product or service, (iii) a description of all categories of customers that purchase or use the product or service, and (iv) the top 10 customers for each customer category (e.g., retailer, distributor, broker, national account, local account, etc.).
  • A narrative describing supply relationships between the transaction parties or between the buyer and any other business that competes with the target, including the amount of revenue involved and the top 10 customers or suppliers.
  • In addition to requiring documents discussing the competitive aspects of the proposed transactions that were prepared by or for officers and directors (current Item 4(c)), filing persons must also submit (i) transaction-related documents prepared by or for a “supervisory deal team lead”, and (ii) ordinary course business plans and reports about overlapping products and services that were provided to the CEO or Board of Directors within a year prior to filing.
  • Acquiring persons must list all current and recent officers and directors (or in the case of unincorporated entities, individuals exercising similar functions) in cases where those individuals hold similar positions in entities that have overlapping operations with the target.
  • Identification of minority holders of additional entities related to the transaction parties, as well as more information about minority interest holders, including limited partners in partnerships where the limited partner has certain rights related to the board (or similar bodies) of the acquiring entity and its related parties, and in some cases, the target. (Currently, the HSR form only requires disclosure of the general partner.)
  • Additional information regarding certain prior acquisitions by both the buyer and the target. (Currently, only buyers must provide information regarding prior acquisitions.)
  • If an HSR filing is being made based on an executed letter of intent or term sheet rather than a definitive agreement, the filing must include a dated document containing sufficient details about the transaction.
  • Parties must submit the entirety of all agreements related to the transaction (not just the principal transaction agreement).
  • All foreign-language documents must be accompanied by English-language translations.
  • Filing parties must disclose economic subsidies received from certain foreign governments or entities of concern to the United States.
  • Information related to certain contracts with defense or intelligence agencies. 

    It is worth noting that a few particularly onerous or controversial proposals from the initial draft rule were not adopted, including the proposal to require collection and production of all drafts of responsive documents (rather than just final versions), as well as specific information about labor markets and each filing party’s workers.

    Related Changes to the Merger Review Process

    Significantly, the FTC announced that, following the final rule coming into full effect, it will lift its suspension on early termination of the waiting period for HSR filings involving transactions that clearly raise no competitive issues. According to the FTC, “[b]ecause the final rule will provide the agencies with additional information necessary to conduct antitrust assessments, the rule will help inform the processes and procedures used to grant early terminations.”

    The FTC also stated that it is introducing a new online portal for market participants, stakeholders, and the general public to directly submit comments on proposed transactions that may be under review by the FTC (it is unclear if the DOJ will follow suit). According to its press release, the FTC “welcomes information on specific transactions and how they may affect competition from consumers, workers, suppliers, rivals, business partners, advocacy organizations, professional and trade associations, local, state, and federal elected officials, academics, and others.”

    Practical Implications for Deals

    The final rule issued by the FTC marks a sea change in the preparation of filings for HSR-reportable transactions. The new requirements will significantly increase the time, effort and cost of preparing all HSR filings, with the impact likely to be magnified for deals where the buyer and target are competitors or operate within the same supply chain. Transaction parties will need to account for this new reality in their deal timelines and budgets. Transaction agreements will need to allow for more time to file HSR, and it may be advantageous for some parties to begin filing preparations much earlier in the deal process. In addition, the new transaction agreement requirements mean that key terms of deals will need to be more fully fleshed out before parties can file HSR and start the 30-day clock.

    Also, since filing parties will now have an affirmative obligation to disclose competitive overlaps as well as supplier-customer relationships, careful consideration will need to be given to how those are described, since statements made in the HSR filing could later be used against the parties in an in-depth investigation (if the reviewing agency issues a “Second Request”) or in litigation (if the agency challenges the deal). Moreover, for serial acquirors, descriptions of products and overlaps in one filing could have consequences for future HSR-reportable transactions.

    Additionally, the new obligation on filers to provide customer and/or supplier information in the HSR filing may cause parties to re-evaluate their approach towards third party outreach regarding proposed transactions, given the possibility of earlier and more frequent FTC/DOJ calls to those customers and suppliers.

    © 2024 Bracewell LLP
    For more on HSR, visit the NLR Antitrust Trade Regulation section.

SEC Brings Multiple Enforcement Actions Relating to Beneficial Ownership and Other Reporting Obligations

On September 25, 2024, the Securities and Exchange Commission (the SEC) announced that it had instituted and settled enforcement actions under Section 13(d), Section 13(g) and Section 16(a) of the Securities Exchange Act of 1934 (as amended, the Exchange Act). The actions involved 21 individuals and entities that allegedly had failed to timely file Schedule 13D or 13G to report beneficial ownership of greater than 5% of the registered equity securities outstanding and/or amendments to such reports, and/or to timely file Form 3, 4 or 5 to report ownership of, and transactions in, registered equity securities by executive officers, directors and greater-than-10% beneficial owners (collectively, insiders). As part of the settlements, individual respondents agreed to pay civil monetary penalties ranging from $10,000 to $200,000, and entities agreed to pay civil penalties ranging from $40,000 to $750,000. As part of the same set of settlements, the SEC also instituted and settled two enforcement actions against public companies for allegedly causing certain of their insiders’ Form 3, 4 or 5 filing failures or for failing to report such filing delinquencies. Just a week earlier, the SEC had announced the institution and settlement of enforcement actions under Section 13(f) and Section 13(h) of the Exchange Act against 11 institutional investment managers that allegedly had failed on a timely basis to file one or more quarterly Form 13F reports and/or periodic Form 13H reports.

The Bottom Line

The foregoing actions are part of an SEC enforcement initiative aimed at ensuring compliance with ownership disclosure and other reporting rules. Insofar as the beneficial ownership and insider actions are concerned, the most recent set of settlements suggest a possible willingness on the SEC’s part to bring enforcement actions even for minor and technical violations. Insofar as the institutional investor enforcement actions, the recent “sweep” appears to mark the first such broad action by the SEC. Notably, for two of the sanctioned institutional investment managers that were based outside the US and where the managers self-reported their errors to the SEC, no monetary penalties were assessed. A third institutional investment manager did not pay a monetary penalty for its Form 13H filing delinquency, which had been self-reported to the agency. Further, the SEC’s public announcement of the settlements indicated that the SEC staff used data analytics to identify the delinquent filings. The SEC has occasionally used various technological solutions to search for late filings and other violations of law in the vast EDGAR database, and as artificial intelligence and similar applications become more widespread and economical, we expect the SEC to make greater use of automated techniques in the future as part of its ongoing filing review process.

The Full Story

5% Beneficial Owners, Insiders and Public Company Issuers

Under Section 13(d)(1) of the Exchange Act and Rule 13d-2(a) promulgated thereunder, any person who acquired beneficial ownership of more than 5% of a public company’s stock must, within 10 calendar days of the relevant acquisition,[1] file an initial set of disclosures on Schedule 13D with the SEC. The beneficial owner must then file updates with the SEC to report any material changes to its position or other facts disclosed in prior filings. Certain investors (mostly passive ones) are eligible to file a simplified set of disclosures on Schedule 13G. The deadline to file a Schedule 13G was also within 10 calendar days of acquiring more than 5% beneficial ownership, but certain institutional investors were permitted to defer disclosing their passive holdings on Schedule 13G until 45 days after the end of the calendar year.[2]

Under Section 16(a) of the Exchange Act and Rule 16a-3 promulgated thereunder, officers and directors of public companies, and any beneficial owners of greater than 10% of stock in a public company, were (and currently are) required to file initial statements of holdings on Form 3 either within 10 calendar days of becoming an insider or on or before the effective date of the initial registration of the stock. Such insiders are then obligated to keep this information current by reporting subsequent transactions on Forms 4 and 5 (in most instances, within two business days of any change). In addition, Section 13(a) of the Exchange Act and Item 405 of Regulation S-K promulgated thereunder require issuers to disclose information regarding delinquent Section 16(a) filings by insiders in their annual reports.

Here, the SEC alleged that 14 persons, who were obligated to file Forms 3/4/5, failed to timely file or update such reports required under Section 16(a), that two public companies caused some of those late filings and/or did not disclose the late filings when required, and that 18 persons who were obligated to file and/or amend Schedules 13D/13G failed to do so timely as required under Sections 13(d) and (g). In most of the non-issuer settlements, there appear to have been repeated failures over multiple issuers, sometimes over several years. However, not all persons settling with the SEC had failures that were repeated or otherwise egregious. Each of two of the matters that settled for $25,000 or less alleged only a few violations (and one of those included two alleged Schedule 13D violations that arguably are supported by a compliance and disclosure interpretation but not by the actual wording of Section 13 and its implementing rules). By contrast, among the 11 beneficial ownership settlements that the SEC announced nearly a year ago, none were below $66,000. This suggests that the SEC may once again be bringing less serious enforcement actions and pursuing even minor infractions.

Institutional Investment Managers

Under Section 13(f) of the Exchange Act and Rule 13f-1 promulgated thereunder, entities with investment discretion over at least $100 million worth of specified US publicly-traded securities (and certain securities exercisable for or convertible into such securities) (institutional investment managers) are required to file quarterly Form 13F reports detailing their ownership of such securities regardless of the percentages owned. Reports can omit certain de minimis positions, though the de minimis level is set quite low so relatively few positions are typically excluded from Form 13F on this basis. The $100 million threshold was originally set in 1975, is not indexed for inflation and has not been adjusted since. Each report for a calendar quarter must be filed no later than 45 calendar days after the end of the preceding quarter.

Under Section 13(h) of the Exchange Act and Rule 13h-1 promulgated thereunder, persons who trade US publicly-traded securities equal to or exceeding two million shares or $20 million during any calendar day, or 20 million shares or $200 million during any calendar month (collectively, large traders) are required to file required Form 13H reports with the SEC. Unlike the beneficial ownership reports and Form 13F, Form 13H reports are confidential and viewable only by the SEC. While the specific reporting thresholds for Form 13F and Form 13H are different, most (but not all) large traders will also be institutional investment managers. But most institutional investment managers will not necessarily be large traders.

The SEC alleged that nine institutional investment managers failed to timely file required Form 13F reports—often over a long period of years. Those nine firms (not including one which was part of the beneficial owner settlements discussed above but had also not filed Form 13F for a number of years) agreed to pay in aggregate more than $3.4 million to settle those cases. Notably, two additional settling parties (both institutional investment managers located outside the US) were not assessed penalties relating to their delinquent Form 13F’s because they self-reported their failure to report directly to the SEC.

Two of the parties settling Form 13F failures also were charged with failing to timely file required Form 13H reports. Because both of these parties self-reported their Form 13H filing failures, neither was assessed a penalty relating to Section 13(h).

[1] The deadlines described here were in effect during the relevant periods in the settled actions. Effective on and after February 5, 2024, the initial Schedule 13D must be filed within five business days of the relevant acquisition.

[2] The deadlines described here were in effect during the relevant periods in the settled actions. Effective on and after September 30, 2024, the filing deadline for an initial Schedule 13G (other than for certain institutional investors) is within 5 business days of the relevant acquisition; certain institutional investors are permitted to delay their initial filing of Schedule 13G to 45 calendar days after the end of relevant calendar quarter.

Copyright © 2024, Hunton Andrews Kurth LLP. All Rights Reserved.
For more on SEC Enforcement Actions, visit the NLR Securities SEC section.

DOJ, FTC, DOL, and NLRB Join Forces and Announce Memorandum of Understanding on Labor Issues in Merger Investigations

On August 28, the US Department of Justice (DOJ) Antitrust Division, which enforces the US antitrust laws including the Sherman Act and Clayton Act, and the Federal Trade Commission (FTC), which enforces the Federal Trade Commission Act and other laws and regulations prohibiting unfair methods of competition (together, Antitrust Agencies), along with the US Department of Labor (DOL) and National Labor Relations Board (NLRB) (together, Labor Agencies), announced that they entered into a Memorandum of Understanding on Labor Issues in Merger Investigations (MOU).
The MOU took effect on August 28 and expires in five years, unless it is extended or terminated upon written agreement of each of the agencies.

Purpose of the MOU

The MOU outlines a collaborative initiative between the signatory agencies to assist the Antitrust Agencies with labor issues that may arise during the course of antitrust merger and acquisition (M&A) investigations, commenced under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR). The HSR requires that parties to certain large M&As provide information to the Antitrust Agencies prior to the transaction’s consummation, which allows these agencies to analyze the anticipated transaction(s) and provide greater certainty to the parties regarding potential antitrust concerns.

From a labor perspective, these investigations may aim to evaluate whether the effect of a merger or acquisition could substantially lessen competition for labor. The stated goal of this MOU is to protect employees and promote fair competition in labor markets. Specifically, the MOU outlines methods by which the Labor Agencies may aid or advise the Antitrust Agencies on potential labor issues identified during the course of these evaluations. These methods include the following.

1. Labor Information Sharing

The MOU outlines various ways in which the Antitrust Agencies may work with the Labor Agencies to gather information used to evaluate potential impacts of M&As on labor markets. These include:

  1. Soliciting information from relevant worker stakeholders and organizations.
  2. Seeking the production of information and data with respect to labor markets.
  3. Searching publicly available sources of information made available by the Labor Agencies.
  4. Seeking production of non-public information and data related to labor markets from the Labor Agencies.

2. Providing Training and Technical Assistance

Labor Agencies agree to provide technical assistance and training to personnel from the Antitrust Agencies related to subject matter under their jurisdictions. For example, the NLRB will train personnel from Antitrust Agencies on labor-related issues such as the duty to bargain in good faith, successor bargaining obligations, and unfair labor practices. Additionally, the Antitrust Agencies may seek technical assistance on labor and employment law matters in merger reviews, including in the resolution of labor market merger investigations.

3. Collaborative Meetings

The Labor Agencies and Antitrust Agencies will seek to meeting biannually to discuss the implementation and coordination of activities outlined in the MOU.

This MOU expands upon collaborative efforts amongst the agencies and builds upon several MOUs executed in 2022 and 2023. MOUs between the DOJ and DOL, DOJ and NLRB, DOL and FTC, and FTC and NLRB all indicate that the purpose and scope of the agreements are to “strengthen the Agencies’ partnership through greater coordination in information sharing, coordinated investigations and enforcement activity, training, education, and outreach.”

Takeaways

This multi-agency agreement further emphasizes the current administration’s focus on protecting employees from alleged unfair methods of competition. This MOU is further evidence that antitrust regulators are looking at antitrust enforcement from a new perspective. Traditionally, Antitrust Agencies evaluated proposed M&As to identify potential risks of harm to consumers through the reduction of options or increased prices. Now, Antitrust Agencies appear to have turned their focus towards anticompetitive behaviors that may harm employees.

Employers interested or involved in an M&A deal should conduct thorough internal reviews to ensure compliance with both labor-related and fair competition laws. In the event of a review by the DOJ or FTC, employers should partner with experienced labor and employment lawyers to navigate through these investigations.

© 2024 ArentFox Schiff LLP
For more on Merger Investigations, visit the NLR Mergers Acquisitions section

The Antitrust Investigator Will See You Now: What Healthcare And Pharma Should Expect In A World Of Enhanced Antitrust Scrutiny

Highlights

  • Healthcare entities should expect heightened government scrutiny of mergers, acquisitions, and business behaviors that could be construed as restricting competition in healthcare and pharma
  • The FTC, DOJ, and HHS have advanced a “whole-of-government approach,” including data sharing, cooperative enforcement, and enhanced antitrust training
  • Businesses should take note of practices that are likely to trigger investigatory and enforcement actions

According to media reports, the Department of Justice (DOJ) has opened an antitrust investigation into UnitedHealth Group, which is the owner of the United States’ largest health insurer, UnitedHealthcare. The focus of the inquiry appears to be the relationship between the UnitedHealthcare insurance plan and one of its health services divisions, Optum, and the potential impact on rivals and consumers.

While tech giants have grabbed most of the headlines when it comes to enhanced antitrust scrutiny, this new matter is the DOJ’s second antitrust investigation into UnitedHealth Group in recent years, giving teeth to the administration’s claim that it has an aggressive antitrust policy in the healthcare sector.

In another example of increased antitrust scrutiny, the Federal Trade Commission (FTC) recently announced a new initiative in partnership with the DOJ and Department of Health and Human Services (HHS) to address what they consider to be the effects of anticompetitive behavior in the healthcare and pharmaceutical spaces. According to the government, these new efforts are aimed at lowering consumer costs and will include “partnering on new initiatives which include a joint Request for Information to seek input on how private-equity and other corporations’ control of health care is impacting Americans.”

Although interagency cooperation is the focus of the recent push to ramp up antitrust investigations and enforcement, each agency will still spearheaded their own regulatory activity.

Federal Trade Commission

FTC Chair Lina Khan has made it clear that her agency will devote more resources to enforcement in the healthcare industry, and emphasized that “safeguarding fair competition and rooting out unlawful business practices in health care markets is a top priority for the FTC.” In furtherance of these priorities, the commission has recently taken the following actions:

  • Orange Book Policy: The FTC challenged more than 100 patents held by pharmaceutical companies that they claim are inaccurately or improperly listed in the FDA’s Orange Book. The commission also released a policy statement explaining its renewed focus on Orange Book infractions.
  • Proposed Non-compete Rule: The FTC presented a new rule that would place a ban on non-compete clauses in employee contracts.

U.S. Department of Justice

Jonathan Kanter, Assistant Attorney General of the DOJ’s Antitrust Division, highlighted the division’s emphasis on the healthcare space when he said, “we are committed to weeding out anticompetitive practices and market consolidation that hinder Americans’ access to quality care at affordable rates, or deprive health care workers of fair wages and opportunity.” The following are just a few examples of how the DOJ has implemented this renewed focus:

  • Criminal Penalties: Recently, the DOJ’s Antitrust Division successfully secured a deferred prosecution agreement against Teva Pharmaceuticals, obtaining the largest monetary penalty ever (over $200 million) against a purely domestic producer that was allegedly operating an antitrust cartel.
  • Blocked Mergers: The Antitrust Division filed a suit to stop Aon plc’s $30 billion proposal to acquire Willis Towers Watson, two of the three largest brokers of health insurance and retirement benefits consulting. The companies later ceased their pursuit of the merger.

U.S. Department of Health and Human Services

HHS Secretary Xavier Becerra made his agency’s priorities clear when he recently stated that “the Biden-Harris Administration remains laser-focused on increasing access to high-quality, affordable health care for all Americans, like by making hearing aids available for sale over the counter and lowering prescription drug costs through the Inflation Reduction Act.” The department’s initiatives have included:

  • Ownership Transparency: For the first time, HHS, via the Centers for Medicare & Medicaid Services, made ownership data available on federal qualified health centers and rural health clinics on data.cms.gov. HHS hopes the release of this data will help catalyze enforcement actions by identifying common ownership.
  • Medicare Advantage Marketing: HHS also announced new efforts to crack down on what it considers “predatory marketing” that seeks to steer patients towards Medicare Advantage plans that “may not best meet their needs.”

Takeaways

In light of the government’s renewed focus on increased competition, expanded enforcement actions, access to quality care, more affordable services and products, and transparency of ownership in the healthcare and pharmaceutical industries, legal and compliance departments should consider being proactive about conducting thorough reviews of current practices. This is particularly true for mergers and acquisitions, competitive strategies, and pricing decisions, which are the business activities most likely to conflict with these recently energized regulatory bodies. Even healthcare providers with stellar compliance programs should expect to receive more frequent and targeted requests for information from enforcement authorities about their business partners, payors, and marketing practices.

© 2024 BARNES & THORNBURG LLP
For more news on Antitrust Enforcement in the Healthcare Sector, visit the NLR Health Law & Managed Care section.

FTC Announces 2024 Increase in HSR Notification Thresholds and Filing Fees

The Federal Trade Commission (FTC) has announced the annual revisions to the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) thresholds and HSR filing fees, which will become effective on March 6, 2024. The revised thresholds will apply to any merger or acquisition closing on or after the effective date.

The FTC is required to adjust the HSR thresholds annually based upon the change in gross national product. This year, the change in the “size of transaction” threshold has increased from $111.4 million to $119.5 million.

Under the HSR Act, when a deal satisfies the “size of person” and “size of transaction” thresholds, and no exemption from reporting is available, the deal must be reported to the FTC and the US Department of Justice, and the parties must wait for a designated period of time before closing the transaction.

Size of Person. The revised size of person thresholds will generally be met if one party involved in the deal has assets or annual sales totaling $239 million or more and one other party involved in the deal has assets or annual sales of at least $23.9 million. Satisfaction of the size of person thresholds is not required, however, if the transaction is valued at more than $478 million.

Size of Transaction. The revised size of transaction threshold will be met if the buyer will hold an aggregate amount of stock, non-corporate interests and/or assets of the seller valued at more than $119.5 million as a result of the deal.

The notification thresholds applicable to purchases of voting securities will increase as follows:

February 1, 2001 Thresholds (Original) Current Thresholds as of February 27, 2023 New Thresholds Effective March 6, 2024
$50 million $111.4 million $119.5 million
$100 million $222.7 million $239 million
$500 million $1.1137 billion $1.195 billion
25% if worth more than
$1 billion		 25% if worth more than $2.2274 billion 25% if worth more than $2.39 billion
50% if worth more than
$50 million		 50% if worth more than $111.4 million 50% if worth more than $119.5 million

The thresholds applicable to many exemptions, including those governing foreign acquisitions, also will increase. However, the $500 million threshold applicable to acquisitions of producing oil and gas reserves and associated assets will not change.

The civil penalty for failing to comply with the notification and waiting period requirements of the HSR Act has also increased to up to $51,744 per day for each day a party is in violation.

HSR Filing Fees. Additionally, the HSR filing fee thresholds and filing fee amounts have increased as follows:

Original Filing Fee Original Applicable Size of Transaction 2024 Adjusted Filing Fee 2024 Adjusted Applicable Size of Transaction
$30,000 Less than $161.5 million $30,000 Less than $173.3 million
$100,000 Not less than $161.5 million but less than $500 million $105,000 Not less than $173.3 million but less than $536.5 million
$250,000 Not less than $500 million but less than $1 billion $260,000 Not less than $536.5 million but less than $1.073 billion
$400,000 Not less than $1 billion but less than $2 billion $415,000 Not less than $1.073 billion but less than $2.146 billion
$800,000 Not less than $2 billion but less than $5 billion $830,000 Not less than $2.146 billion but less than $5.365 billion
$2,250,000 $5 billion or more $2,335,000 $5.365 billion or more

The new fees also will become effective on March 6, 2024.

© 2024 Bracewell LLP
For more news on FTC Merger and Acquisition Regulations, visit the NLR Antitrust & Trade Regulation section.

Updated Merger Guidelines Finalized

On December 18, 2023, the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) jointly issued a significantly revised version of the Merger Guidelines that describes the frameworks the enforcement agencies use when evaluating potential mergers.

The newly finalized Merger Guidelines are the result of a nearly two-year effort that involved both agencies soliciting public input via listening sessions, written comments, and workshops.

The agencies describe the new Merger Guidelines as necessary to address the modern economy and how firms now do business. The Merger Guidelines are broken into multiple sections: Guidelines 1–6 describe the frameworks the agencies use when attempting to identify a merger that the agencies believe raises a prima facie concern, while Guidelines 7–11 explain how to apply those frameworks in specific settings. The guidelines also identify evidence the agencies will consider to potentially rebut an inference of competitive harm. Finally, these guidelines include a discussion of the tools the agencies use when evaluating the relevant facts, the potential harm to competition, and how to define the relevant markets.

The Merger Guidelines are notable for signaling the FTC’s and DOJ’s desire to pursue a more aggressive enforcement agenda, specifically, by lowering the threshold at which proposed mergers will be deemed presumptively anticompetitive by those enforcement agencies. The new guidelines also seek to address relatively new concerns the agencies have identified, such as cross-market transactions and sequences of smaller transactions.

©2024 Epstein Becker & Green, P.C. All rights reserved.
For more on Merger Guidelines, visit the NLR Antitrust & Trade Regulation section.

FTC and DOJ Propose Significant Changes to US Merger Review Process

On 27 June 2023, the Federal Trade Commission (FTC) and the Department of Justice–Antitrust Division (DOJ) (collectively, the Agencies) announced sweeping proposed changes to the US-premerger notification filing process. The proposed changes mark the first significant overhaul of the federal premerger notification form since its original release in 1978 and would require parties to report

On 27 June 2023, the Federal Trade Commission (FTC) and the Department of Justice–Antitrust Division (DOJ) (collectively, the Agencies) announced sweeping proposed changes to the US-premerger notification filing process. The proposed changes mark the first significant overhaul of the federal premerger notification form since its original release in 1978 and would require parties to reportable transactions to collect and submit significantly more information and documentation as part of the premerger review process. If finalized, the proposed rule changes would likely delay deal timelines by months, requiring significantly more time and effort by the parties and their counsel in advance of submitting the required notification form.

In this alert, we:

  • Provide an overview of the current merger review process in the United States;
  • Describe the proposed new rules announced by the Agencies;
  • Explain the Agencies’ rationale for the new proposed rules;
  • Predict how the proposed new rules could impact parties’ premerger filing obligations, including deal timelines; and
  • Explain what companies should expect over the next several months.

BACKGROUND ON THE HSR MERGER REVIEW PROCESS

The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act or “HSR”) requires certain persons making acquisitions of assets, voting securities, and non-corporate interests (i.e., interests in partnerships and limited liability companies) to:

(a)    File premerger notifications with the FTC and DOJ; and

(b)    Wait until the expiration or termination of a waiting period (usually 30 days) before consummating the acquisition.

Most mergers and acquisitions valued in excess of USD$111.4 million fall under the HSR Act subject to size-of-party thresholds in certain cases. Additionally, there are several exemptions that may apply to an otherwise reportable transaction.

The FTC or the DOJ reviews the parties’ HSR filings during the waiting period to determine whether the transaction may substantially lessen competition in violation of the antitrust laws. If, at the end of the waiting period any concerns have not been placated, the reviewing agency may issue a Request for Additional Documents and Information (commonly referred to as a Second Request), a very broad subpoena-like document seeking documents, data, and interrogatory responses from the filers. This tolls the waiting period until both parties substantially comply with the Second Request. The reviewing agency then has an additional 30-day period to decide whether to challenge the transaction in court.

WHAT ARE THE PROPOSED CHANGES?

On 27 June 2023, the FTC and DOJ announced a number of significant changes to the HSR notification form and filing process, the first such overhaul in almost 45 years. The Agencies released the proposed changes and rationale for the same in a 133-page Notice of Proposed Rulemaking (Notice) that will be published in the Federal Register later this week. While antitrust practitioners are still digesting the full extent of all of the proposed changes, it is clear that they would require parties to submit significantly more information and documentation to the Agencies as part of their HSR notification form. The most notable additional information and documentation includes:

  • Submission of additional deal documents, including draft agreements or term sheets (as opposed to just the preliminary agreement), where a definitive transaction agreement has not yet been executed; draft versions of all deal documents (as opposed to just the final versions); documents created by or for the deal team lead(s) (as opposed to just officers and directors); and verbatim translations of all foreign language documents.
  • Details about acquisitions during the previous 10 years.
  • Identification of and information about all officers, directors, and board observers of all entities within the acquiring person, including the identification of other entities these individuals currently serve, or within the two years prior to filing had served, as an officer, director, or board observer.
  • Identification of and information about all creditors and entities that hold non-voting securities, options, or warrants totaling 10% or more.
  • Disclosure of subsidies (e.g., grants and loans), by certain foreign governments, including North Korea, China, Russia, and Iran.
  • Narrative description of the strategic rationale for the transaction (including projected revenue streams), a diagram of the deal structure, and a timeline and narrative of the conditions for closing.
  • Identification and narrative describing horizontal overlaps, both current and planned.
  • Identification and narrative describing supply agreements/relationships.
  • Identification and narrative describing labor markets, as well as submission of certain data on the firms’ workforce, including workforce categories, geographic information on employees, and details on labor and workplace safety violations.
  • Identification of certain defense or intelligence contracts.
  • Identification of foreign jurisdictions reviewing the deal.

WHY ARE THESE CHANGES BEING PROPOSED?

In its press release announcing the proposed new rules, the FTC stated that “[t]he proposed changes to the HSR Form and instructions would enable the Agencies to more effectively and efficiently screen transactions for potential competition issues within the initial waiting period, which is typically 30 days.”1 The FTC further explained:

Over the past several decades, transactions (subject to HSR filing requirements) have become increasingly complex, with the rise of new investment vehicles and changes in corporate acquisition strategies, along with increasing concerns that antitrust review has not sufficiently addressed concerns about transactions between firms that compete in non-horizontal ways, the impact of corporate consolidation on American workers, and growth in the technology and digital platform economies. When the Agencies experienced a surge in HSR filings that more than doubled filings from 2020 to 2021, it became impossible to ignore the changes to the transaction landscape and how much more complicated it has become for agency staff to conduct an initial review of a transaction’s competitive impact. The volume of filings at that time also highlighted the significant limitations of the current HSR Form in understanding a transaction’s competitive impact.2

Finally, the FTC also cited certain Congressional concerns and the Merger Fee Filing Modernization Act of 2022, stating that the “proposed changes also address Congressional concerns that subsidies from foreign entities of concern can distort the competitive process or otherwise change the business strategies of a subsidized firm in ways that undermine competition following an acquisition. Under the Merger Filing Fee Modernization Act of 2022, the agencies are required to collect information on subsidies received from certain foreign governments or entities that are strategic or economic threats to the United States.”

HOW WILL THESE CHANGES POTENTIALLY IMPACT PARTIES’ HSR FILINGS?

The proposed changes, as currently drafted, would require significantly more time and effort by the parties and their counsel to prepare the parties’ respective HSR notification forms. For example, the proposed new rules require the identification, collection, and submission of more deal documents and strategic documents; significantly more information about the parties, their officers, directors and board observers, minority investments, and financial interests; and narrative analyses and descriptions of horizontal and non-horizontal relationships, markets, and competition. Gathering, analyzing, and synthesizing this information into narrative form will require significantly more time and resources from both the parties and their counsel to comply.

Under the current filing rules, it typically takes the merging parties about seven to ten days to collect the information needed for and to complete the HSR notification form. Under the proposed new rules, the time to gather such information and complete an HSR notification form could be expanded by multiple months.

WHAT IS NEXT?

The Notice will be published in the Federal Register later this week. The public will then have 60 days from the date of publication to submit comments. Following the comment period, the Agencies will review and consider the comments and then publish a final version of the new rules. The new rules will not go into effect until after the Agencies publish the final version of the new rules. This process will likely take several months to complete, and the new rules–or some variation of them–will not come into effect until that time.

While the final form of the proposed rules are not likely to take effect for several months, the Agencies’ sweeping proposed changes to the notification form and filing process are in line with the type of information that the Agencies have been increasingly requesting from parties during the merger review process. Accordingly, parties required to submit HSR filings over the next several months should be prepared to receive similar requests from the Agencies, either on a voluntary basis (e.g., during the initial 30-day waiting period) or through issuance of a Second Request, and they should build into their deal timeline (either pre- or post-signing) sufficient time to comply with these requests.

 

1 “FTC and DOJ Propose Changes to HSR Form for More Effective, Efficient Merger Review,” FTC Press Release, June 27, 2023, available at FTC and DOJ Propose Changes to HSR Form for More Effective, Efficient Merger Review | Federal Trade Commission.  

2 “Q and A on the Notice of Proposed Rulemaking for the HSR Filing Process,” FTC Proposed Text of Federal Register Publication, available at 16 CFR Parts 801 and 803: Premerger Notification; Reporting and Waiting Period Requirements | Federal Trade Commission (ftc.gov).

Copyright 2023 K & L Gates

Tempur Sealy Acquisition of Mattress Firm: A Vertical Bridge Too Far for the FTC?

In a deal announced on May 9, Tempur Sealy International, Inc., the world’s largest mattress manufacturer, has agreed to acquire Houston-based Mattress Firm Group, Inc., the largest U.S. brick-and-mortar bedding retailer, with more than 2,300 locations and a robust e-commerce platform. The companies hope to finalize the $40 billion deal in the second half of 2024.

Following pre-merger notification of the deal last October, the FTC is reportedly taking a deep dive into the mattress industry to assess whether the transaction is likely to harm competition. The depth of the investigation itself signals a departure from the antitrust agencies’ traditional approach to “vertical” mergers in which firms in the same industry but in non-overlapping market segments (such as manufacturing and retailing the same product category) benefit from a soft presumption of legality. Customarily, vertical integration was perceived to be benign, if not somehow “efficiency enhancing.”

Whatever the merits of applying such leniency to traditional supply chains of widgets, it does not serve competition policy well in an economy dominated by technology-driven platforms that serve several enormous groups of customers at once. In today’s markets, non-overlapping vertical arrangements can severely affect whether rival firms can gain access to inputs, markets, or prospective customers.

Evidence of the FTC’s awareness of the potential for vertical mergers to cause competitive harm abounds. On September 15, 2021, the FTC withdrew the FTC/Department of Justice 2020 Vertical Merger Guidelines and Commentary. The Commission’s majority said that the 2020 Guidelines included a “flawed discussion of the purported procompetitive benefits (i.e., efficiencies) of vertical mergers, especially its treatment of the elimination of double marginalization” and by failing to address “increasing levels of consolidation across the economy.”

Mattresses and Widgets

A course correction is borne out by the Commission’s recent challenges to several proposed vertical mergers, including Nvidia Corp.’s attempted acquisition of Arm Ltd., Lockheed Martin Corporation’s attempted acquisition of Aerojet Rocketdyne Holdings, Inc., Microsoft Corp.’s acquisition of Activision Blizzard Inc., and Illumina, Inc.’s acquisition of GRAIL, Inc. After the parties abandoned the Nvidia/Arm acquisition, the FTC’s press release was effusive: “This result is particularly significant because it represents the first abandonment of a litigated vertical merger in many years,” the Commission said.

Enter the Tempur Sealy/Mattress Firm transaction, a vertical acquisition in a product category whose markets resemble widgets more than online merchandising or payment networks. Tempur Sealy became the world’s largest mattress manufacturer in 2012, when Tempur-Pedic acquired Sealey Corp. for $1.3 billion. The company currently earns revenues of $5 billion a year, almost a third of the $17 billion U.S. mattress market. Mattress Firm, the largest mattress retailer in the U.S. with annual revenues of $2.5 billion a year, has been owned since 2016 by German retail holding company Steinhoff International Holdings NV. The firm filed for Chapter 11 bankruptcy protection in October 2018, but quickly emerged the following month after closing 700 stores.

The merging parties are no strangers to one another, having engaged in a commercial relationship for the past 35 years. In 2017, Tempur Sealy sued Mattress Firm for selling mattresses that infringed on the Tempur-Pedic line-up, but in 2019, after its emergence from bankruptcy, Mattress Firm and Tempur Sealy struck a long-term partnership agreement. A merger of the two firms has been under discussion in one form or another for most of the past decade.

Public statements by the parties stress the complementarity of the deal, which they describe as combining “Tempur Sealy’s extensive product development and manufacturing capabilities with vertically integrated retail.” The merged entity will end up with about 3,000 retail stores, 30 e-commerce platforms, 71 manufacturing facilities, and 4 R&D facilities around the world. It is the kind of combination of complementary businesses that not long ago might not have even earned a Second Request from the antitrust agencies.

The FTC, which at least since last December has been investigating the potential effects on the mattress industry of a merger between the two market leaders, issued a Second Request earlier this month. By February, the Commission had already interviewed executives from the top 20 mattress manufacturers, according to a report in Furniture Today (February 2, 2023).

Disruptors and Goliaths

The FTC is likely to discover a large and growing global industry undergoing significant changes in how mattresses are designed, marketed, and sold in reaction to changing consumer preferences.

Several online mattress-in-a-box companies have disrupted the industry. Today, nearly half of all consumers purchases are online. They will also find fairly low barriers to entry into both brick-and-mortar and online retailing and mattress manufacturing. Their review of the Tempur Sealy/Mattress Firm transaction will also encounter two players in the market with a long history of cooperation.

With 20 manufacturers significant enough to interview, the Commission would appear to be faced with a fairly competitive market – one in which little or no foreclosure of rivals to the ability to obtain inputs or the availability of channels of distribution to reach consumers will result from the proposed transaction. Additional competitive pressure comes from Amazon, which began selling its own mattresses in 2018 as part of the Amazon Essentials line, and Walmart, which introduced its own mattress-in-box brand, Allswell, available online and in stores.

On balance, the acquisition of Mattress Firm by Tempur Sealy would not appear to raise significant antitrust issues. A challenge to this transaction by the FTC may be a vertical bridge too far. That is no doubt the assessment reached by Scott Thompson, chairman and CEO of Tempur Sealy, who expressed confidence in clearing the FTC’s antitrust review, “either in the traditional sense or through litigation.”

© MoginRubin LLP

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