A federal judge in Texas has vacated the Federal Trade Commission’s adoption of a sweeping overhaul of the federal pre-merger notification regime that became effective in February 2025. The court found that the significant additional costs and burdens on transaction parties required to submit filings under the Hart-Scott-Rodino Act (HSR) were not justified by the asserted benefits to the federal antitrust agencies and thereby overstepped the FTC’s rulemaking authority.
In granting summary judgment to the U.S. Chamber of Commerce and other business groups who filed suit to block the new rules prior to their effective date, the court found the FTC’s adoption of the rules was undertaken without sufficient consideration of the costs and benefits of the move, and that the FTC’s action was therefore “arbitrary and capricious.” The court vacated and set aside the new rules, while granting a one-week stay of its order to allow the FTC to appeal to Fifth Circuit Court of Appeals.
Shortly after her appointment, Biden-era FTC Chair Lina Khan asserted in 2021 that the HSR premerger review process did not provide the antitrust agencies sufficient information to adequately review proposed deals in a timely manner and announced her intention to revisit the HSR rules to fill perceived gaps.
Three years later, and after proposing and revising an initial proposed set of sweeping HSR rules changes, in October 2025 Khan announced a unanimous FTC vote to adopt the final version of the new rules. The new HSR rules imposed substantial additional costs and burdens on all filing parties through a raft of new and expanded requirements for disclosures of information and production of documents.
The U.S. Chamber of Commerce and other business groups to sued to have the new rules vacated on January 10, 2025. Notably, the Chamber’s complaint filed in the U.S. District Court for the Eastern District of Texas, did not request a preliminary injunction blocking implementation, and the rules became effective on February 10, 2025.
The FTC’s rulemaking authority under the HSR Act flows from the language of the statute, which says that the FTC “shall require that the [premerger] notification ... be in such form and contain such documentary material and information relevant to a proposed acquisition as is necessary and appropriate to enable the [FTC and DOJ] to determine whether such acquisition may, if consummated, violate the antitrust laws” (emphasis added). The court interpreted “necessary and appropriate” to mean that the HSR Act “requires that any benefits to the FTC in mandating additional information in the premerger notice ‘reasonably outweigh’ the costs.”
The FTC argued that prior unlawful transactions had escaped the notice of the FTC and DOJ as a consequence of the agencies not having received the kinds of information required under the new rules, and thus that the new rules were “necessary and appropriate” to close this gap. However, the court found the claimed benefits were “illusory or, at least, unsubstantiated.” According to the court, the FTC failed to identify even a single historical instance of such a failure, and that the evidence the agency did produce tended to support a conclusion that the prior version of the rules was effective in carrying out the aims of the HSR Act.
In the absence of this basic justification for the imposition of substantial additional costs, according to the court, the FTC exceeded its statutory rulemaking authority under the HSR Act. The court held that because the FTC’s rulemaking did not satisfy the required analysis of costs and benefits, and because the FTC failed to properly consider less burdensome alternatives, the new rules were “arbitrary and capricious” and therefore also unlawful under the Administrative Procedures Act.