How Merger Control Works: the Step-by-Step Review Process

In the United States, merger control operates under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the underlying substantive antitrust statutes, primarily the Sherman Act and the Clayton Act. The Hart-Scott-Rodino Act established a mandatory pre-merger notification system requiring parties to transactions meeting specified size thresholds to file detailed information with the Federal Trade Commission and the Department of Justice Antitrust Division before closing. This framework applies to acquisitions, mergers, and certain asset purchases that cross dollar-amount thresholds adjusted annually for inflation. The Federal Trade Commission and the Department of Justice then conduct a review period, typically 30 calendar days, during which either agency may issue a Second Request for additional information if competitive concerns arise. Parties cannot close their transaction until the waiting period expires or the agencies grant early termination. The statutory test for challenging a proposed merger focuses on whether the transaction may substantially lessen competition or tend to create a monopoly in any line of commerce. State attorneys general and private parties also retain independent authority to challenge mergers under state antitrust laws or common law principles, adding a second layer of scrutiny beyond federal review.

The Hart-Scott-Rodino Act defines filing obligations by reference to the size of the transaction and the parties involved. The current threshold, adjusted annually, generally requires notification when the acquiring party or the acquired party has annual net sales or assets exceeding a specified floor (for 2024, approximately $111 million) and the acquired party or assets being purchased exceed a lower threshold (approximately $18.5 million), or when certain voting securities are being acquired. Parties must calculate whether their transaction meets these thresholds by looking at the total consideration paid, the nature of assets transferred, and the revenue or asset base of each party. A transaction that appears below the threshold but includes contingent payments, earn-outs, or future milestones may trigger notification if those contingencies are reasonably expected to occur. Corporations often engage counsel early to model transaction structures and confirm whether Hart-Scott-Rodino filing is required, because the consequences of filing late or not filing when required can be severe. The statute imposes a 30-day waiting period after filing, during which parties must hold their closing in abeyance; if either agency issues a Second Request, the waiting period extends an additional 30 days (or longer if the parties agree to extend). Failure to file when required can expose the acquiring party to Federal Trade Commission enforcement action seeking transaction divestiture or civil penalties.

When the Federal Trade Commission or Department of Justice receives a Hart-Scott-Rodino filing, the reviewing agency examines the proposed transaction to assess competitive effects in the relevant product and geographic markets. The agency's staff analyzes whether the merger would increase market concentration, create or enhance barriers to entry, eliminate a significant competitor, or otherwise harm consumers through higher prices, reduced output, or diminished innovation. During the initial 30-day review period, the agency may request additional documents, financial data, customer lists, pricing information, and competitive analyses from the parties and, in some cases, from third parties such as customers, competitors, or suppliers. If the agency develops competitive concerns during this phase, it typically issues a Second Request, which extends the waiting period and requires the parties to produce voluminous additional information within a compressed timeframe. Parties often work with outside counsel to prepare substantive responses, economic analyses, and affidavits addressing the agency's theories of competitive harm. Some transactions are resolved through negotiated remedies, such as divestitures of overlapping business units, licensing arrangements, or behavioral commitments, which allow the parties to proceed once the agency is satisfied that competitive concerns are mitigated. In contested cases, either the Federal Trade Commission or Department of Justice may seek a preliminary injunction in federal court to block the transaction, or the Federal Trade Commission may initiate an administrative proceeding after the transaction closes. The burden falls on the agency to demonstrate that the transaction violates the Clayton Act, but courts apply a presumption of anticompetitive effect when the transaction significantly increases market concentration in a concentrated market, shifting the burden to the parties to rebut the presumption with evidence of countervailing procompetitive benefits.

State attorneys general retain independent authority to challenge mergers under state antitrust statutes and common law principles, even if the transaction has been cleared by the Federal Trade Commission or Department of Justice. States often focus on local competitive effects, such as impacts on employment, small suppliers, or regional markets where the parties have significant overlap. In high-profile transactions, multiple state attorneys general may coordinate their enforcement efforts, filing suit in federal court or in state courts to block or modify the deal. A state challenge does not suspend the federal waiting period, so parties may close their transaction after federal clearance even if state litigation is pending, creating uncertainty and potential liability if a state court later orders divestiture. Corporations pursuing significant acquisitions must assess the state-level competitive landscape and consider whether particular states have strong antitrust enforcement traditions or unique market characteristics that could trigger state-level opposition. Some transactions are structured to include state-level remedies or state-specific divestitures to address state concerns preemptively. The interplay between federal and state merger review adds complexity, particularly in industries such as healthcare, telecommunications, and energy, where state regulators have strong interests in local market conditions.

Corporations preparing for a significant acquisition should engage antitrust counsel early in the transaction planning process to assess filing obligations, identify potential competitive issues, and develop a strategy for managing regulatory review. Counsel will analyze the relevant product and geographic markets, quantify market shares and concentration levels using tools such as the Herfindahl-Hirschman Index, and evaluate whether the transaction is likely to attract Second Request scrutiny or enforcement action. The corporation should compile a deal team that includes finance, operations, legal, and investor relations personnel, because merger control review often requires coordination across multiple functions. Documentation and data governance become critical during the filing and review phases; corporations must preserve internal communications, competitive analyses, and strategic documents that may be requested by the agencies. Many transactions are structured to include termination rights or reverse termination fees if regulatory approval is not obtained within a specified timeframe, protecting the buyer if the deal cannot close. Some parties negotiate Hart-Scott-Rodino timing agreements with the agencies to extend the initial review period in exchange for additional time to prepare substantive responses, reducing the pressure of compressed Second Request deadlines. Corporations also evaluate whether to propose remedies proactively, such as divestitures or behavioral commitments, to expedite clearance and demonstrate good faith to the reviewing agencies. The cost of merger control compliance, including counsel fees, economic expert fees, and internal resource allocation, can be substantial, particularly in highly concentrated industries or transactions involving significant competitive overlaps.

Acquisitions in the asset management sector often trigger merger control scrutiny because the acquiring firm may gain control over substantial assets under management, significant client relationships, or competitive capabilities in particular investment strategies. When an asset manager acquires another firm or acquires a business unit managing specific asset classes, the transaction may meet Hart-Scott-Rodino thresholds and may raise competitive concerns if the parties overlap in geographic markets, investment products, or client segments. Conversely, when a corporation divests a business unit or conducts a company demerger, the transaction typically does not trigger merger control filing obligations because the parties are not combining; however, if the divested entity is later acquired by a competitor, that downstream acquisition may be subject to review. Corporations contemplating company demergers should consult with antitrust counsel to understand whether the separation itself requires regulatory notification and to assess the competitive profile of the separated entity in anticipation of future acquisition interest.