Federal court strikes down FTC mergers and acquisitions reporting rule
A 2024 Biden-era rule enforced by the Federal Trade Commission (FTC) saw companies engaging in mergers and acquisitions—including hospitals and health systems—to comply with additional reporting requirements designed to give regulators more oversight on the transaction. However, last week a federal judge in Texas struck down the Final Rule, citing the “significant and widespread costs” it imposed on private entities.
The pre-merger rule was an extension of the Hart–Scott–Rodino Antitrust Improvements Act of 1976, which required organizations to submit details on mergers, acquisitions or transfers to the FTC and the U.S. Department of Justice, in an effort to crack down on deals that severely limit consumer choice or put public infrastructure at risk.
The new rule added additional details, including disclosures on the leadership of stakeholders, investor money streams, and vertical integrations that could lead to anti-competitive synergy in the market.
While the U.S. District Court for the Eastern District of Texas did not outright declare the FTC regulation unconstitutional, the ruling will force regulators to demonstrate that the new reporting will generate enough protection for the public to justify the burden a slowdown of the merger process will have on participating parties.
More than 100 hours needed to complete documents
By the FTC’s own estimates, companies would need to spend 105 labor hours to fill out the new documents on mergers, up from the 37 expected under the law pre-2024. Regulators argued this was necessary, given the increasing complexity of financial transactions, to ensure there are no antitrust violations occurring.
“On the merits, the agency claims that the information sought by the Final Rule is both necessary and appropriate to determine whether a proposed transaction would violate the antitrust laws,” the court wrote. “And the FTC defends its rulemaking, explaining that it considered the costs and benefits and reasonably rejected the alternatives.”
But the judge disagreed that the agency was able to demonstrate that, and further challenged whether it has the statutory authority under the law to enforce additional reporting that goes beyond what was passed by Congress in Hart–Scott–Rodino.
“On standing, Plaintiffs have properly shown that they are associations representing members who face imminent injury because of the Final Rule,” the ruling reads. “Plaintiffs also succeed on the merits. First, the Final Rule exceeds the FTC's statutory authority because the agency has not shown that the Rule’s claimed benefits will ‘reasonably outweigh’ its significant and widespread costs.”
The plaintiffs in this case were members of the U.S. Chamber of Commerce, an association of businesses that lobbies the government in its interest. They sued, claiming the Final Rule violated the Administrative Procedure Act, a 1946 law that governs how federal agencies propose and establish regulations without an additional act of Congress.
The court gave the FTC seven days to respond with an appeal, which would be heard in a higher court. If the agency fails to file, the ruling in Texas will stand and the new reporting requirement will be officially overturned.
Regulators would then need to rework the rule and pass a new iteration after a public comment period.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.