States Want to Join the Merger Review Fun

WHAT HAPPENED?

While the US states have traditionally taken a backseat to federal merger reviews they are now becoming more involved, and may even require premerger notification on a large scale. The Uniform Law Committee adopted its Uniform Antitrust Pre-Merger Notification Act as model legislation on July 24, 2024. This Act serves as a template to help states adopt their own premerger notifications legislation. It also provides uniform guidance to states who are considering their premerger notifications regimes.

• The person filing the form has its principal business in the state. Or
• The individual “directly or indirect had annual net sales” in
  • State. . . SS3(a)(1)-(2). SS3(a)(1)-(2). Under the current HSR thresholds, that means sales of approximately $24 million in a state would satisfy the state-level filing requirement.
  • The Model Act also provides for automatic confidential treatment of materials submitted to the state.
    [the]Additionally, the attorneys general may communicate with the federal agencies about filing materials.
• This can avoid the current practice of having to negotiate individual confidentiality agreements with any state interested in reviewing a transaction.
  • The Model Act does not impose any waiting or suspension period for notified transactions.
  • This continues a trend of government agencies obtaining more notice of M&A transactions. At the end of last year, Congress inserted Section 857 into the National Defense Authorization Act, which requires parties to provide their HSR materials to the US Department of Defense (DoD) for any proposed merger or acquisition that will require DoD review.
• BACKGROUND
• State attorneys general have broad investigatory and enforcement powers with respect to transactions implicating local competition concerns. States generally have the authority to issue investigative subpoenas, compelling production of documents and information to parties who merely sell products in a state without any further physical connection to the state.

Typically, states focus their efforts on transactions that have a particular impact on the state’s consumers or an industry important to the state’s economy.

For example, transactions involving hospitals or retail locations are traditionally more likely to draw the attention of a state’s attorney general than transactions involving national markets or consumer goods.

• However, state enforcers have increasingly initiated their own efforts to challenge transactions.
  • This trend can be seen in the lawsuit filed by the Colorado Attorney General to stop the Kroger-Albertsons merge.
• Colorado is seeking a nationwide injunction and not merely an injunction on the acquisition in the state, raising a novel question with potentially significant impact on antitrust enforcement by the states.
  • Colorado is proceeding independently of the Federal Trade Commission’s (FTC) challenge to the transaction.
    • In the past few years, several states have enacted legislation to require notice and reporting of some transactions and imposing waiting periods to allow for the state’s review.
    • Many state laws require filing of healthcare transactions that often have a localized connection.
• McDermott keeps track of these health-specific laws here.
  • Other States have been moving towards broader filing requirements:
    It would require that any person conducting business in the state provide a copy of its HSR filing to the attorney general at the same time as it is submitted to FTC and US Department of Justice. It would require anyone conducting business in the State to submit a copy of their HSR filing to both the FTC and US Department of Justice at the same time. Healthcare entities are required to file state-level notification forms along with any HSR filings. Transactions involving out-of-state entities may also be captured. Similar requirements have been imposed for retail grocery and pharmacy transactions.
    • WHAT THIS MEANS FOR COMPANIES
  • Even though only few states have enacted or proposed to enact their state-specific merger notification regimes, many others may seek to adopt the Uniform Antitrust Pre-Merger Notification Act.
    • If states adopt the legislation, companies contemplating transactions will need to track their sales generated in each state to properly assess whether notification to the state attorneys general will be required.
    • Many companies collect information annually to have their HSR materials “on the shelf,” and this could add yet another item to that process.

Companies should seek counsel to evaluate any relevant competitive impacts that implicate local markets. It is important to identify the relevant local markets, as state enforcement officials are often concerned about localized geographic markets, and their competitive landscapes.