Antitrust Review, HSR and Second Requests

Two companies sign a merger agreement, but signing doesn't mean the deal can close the next day. Before most sizable US mergers can complete, they have to clear antitrust review — a process that can range from a formality lasting a month to a grinding, multi-year fight if regulators believe the deal would hurt competition.

The HSR waiting period

The Hart-Scott-Rodino Act requires companies above certain transaction-size thresholds to notify the Federal Trade Commission and the Department of Justice before closing, and then wait — typically 30 calendar days — before proceeding. During that initial window, regulators review basic deal information and decide whether the transaction warrants a deeper look. For the large majority of mergers, nothing happens: the waiting period simply expires and the deal can close, because most mergers don't meaningfully affect competition in any market.

The Second Request

If regulators are concerned that a deal could reduce competition — most often because the two companies compete directly in the same market — they issue a Second Request: a formal demand for extensive additional documents, data, and information. Complying with a Second Request is a major undertaking, often requiring companies to produce millions of pages of internal documents, and the HSR waiting period doesn't resume (and closing can't happen) until the companies have "substantially complied." This process commonly takes six months to a year, and sometimes ends with regulators suing to block the deal outright, or negotiating a consent decree requiring divestitures — selling off overlapping business units — as a condition of approval.

Worked example

Two competing regional grocery chains announce a $4 billion merger.

1. HSR filing: both companies file with the FTC and DOJ, starting the initial 30-day waiting period.
2. Second Request issued: because the two chains compete head-to-head in dozens of overlapping local markets, the FTC issues a Second Request on day 25, demanding internal pricing strategy documents, store-level overlap data, and executive communications about the deal's competitive rationale.
3. Compliance takes 8 months: producing the requested documents and data takes the companies most of a year, during which the deal cannot close and both companies continue operating independently, bearing the cost and distraction of an unresolved pending merger.
4. Resolution: the FTC ultimately agrees to clear the deal on condition that the combined company divest 40 overlapping stores to a third-party buyer — the merger closes, but in a modified form from what was originally announced.

What this means in practice

Deals in industries prone to Second Requests — direct competitors, or "merger to monopoly" situations in narrow markets — are priced and structured with this risk in mind, which is why reverse termination fees tend to be larger in deals facing meaningful antitrust risk: they compensate the target for tying up its business in limbo, and sometimes ultimately losing the deal entirely, if regulators decide to sue to block it.