Legal Definitions - Hart–Scott–Rodino Antitrust Improvement Act

The Hart–Scott–Rodino Antitrust Improvement Act, often shortened to the HSR Act, is a federal law enacted in 1976 that significantly strengthens the U.S. government's ability to enforce antitrust laws. Its primary purpose is to prevent mergers and acquisitions that could harm competition before they are completed.

Specifically, the HSR Act requires companies planning certain mergers, acquisitions, or other significant transactions to notify the Federal Trade Commission (FTC) and the Department of Justice (DOJ) *before* closing the deal. This pre-merger notification is mandatory if the companies involved meet specific financial thresholds. For instance, if one company has annual revenues or assets exceeding $100 million, and the value of the acquisition or the acquired company exceeds $15 million, the HSR Act typically applies.

This notification period allows antitrust regulators to review the proposed transaction for potential anti-competitive effects, such as creating a monopoly or substantially reducing competition in a market. If regulators find concerns, they can investigate further, request more information, or even challenge the deal in court to prevent it from going forward.

Here are some examples of how the HSR Act applies:

• Example 1: Technology Giant Acquiring an Innovative Startup
  Imagine "GlobalTech Inc.," a massive technology company with billions in annual revenue, announces its intention to acquire "InnovateNow LLC," a smaller but rapidly growing startup specializing in a niche artificial intelligence software. If the acquisition price for InnovateNow LLC is $50 million, GlobalTech Inc. would be required to file an HSR notification with the FTC and DOJ. This allows regulators to examine whether GlobalTech Inc. is buying InnovateNow LLC to stifle competition in the AI market rather than to genuinely enhance its products, potentially harming consumers by limiting choices or increasing prices.

• Example 2: Merger of Regional Supermarket Chains
  Consider "FreshFoods Markets," a regional supermarket chain with $250 million in annual sales, proposing to merge with "DailyHarvest Grocers," another regional chain valued at $75 million. Since both companies meet the financial thresholds (FreshFoods exceeds $100 million in revenue, and the acquisition value exceeds $15 million), they must submit an HSR filing. The government would then review if this merger would significantly reduce competition in specific local markets where both chains operate, potentially leading to higher grocery prices or fewer options for shoppers in those areas.

• Example 3: Private Equity Firm Taking a Controlling Stake
  A large private equity firm, "Capital Growth Partners," which manages funds totaling over $500 million, decides to acquire a controlling 60% stake in "Nationwide Logistics Corp.," a shipping and delivery company, for $120 million. Even though Capital Growth Partners is an investment firm and not a direct competitor, this transaction still triggers HSR notification requirements because the financial thresholds are met, and it involves acquiring control of a significant business. Regulators would assess if this acquisition, or Capital Growth Partners' existing portfolio companies, could create anti-competitive issues within the logistics industry.