Letter to FTC Chair Khan: HSR Proposal Did Not Properly Consider Small Business Impact

By at 2 February, 2024, 1:53 pm

The Honorable Lina M. Khan


Federal Trade Commission

600 Pennsylvania Avenue NW

Washington, D.C. 20580

Via email


Dear Chair Khan,

As an organization dedicated to promoting entrepreneurship and protecting small business, the Small Business & Entrepreneurship Council (SBE Council) is focused on ensuring that the federal regulatory process is fair, transparent and inclusive to startups and Main Street businesses. A significant part of that work – in addition to weighing in on regulatory proposals through comments and roundtables – is focused on the regulatory process to ensure regulators take into account the impact of proposed rules on small to mid-size businesses. The Regulatory Flexibility Act (RFA) is an important tool and law that regulators are required to comply with to determine if proposed rules negatively impact small businesses. It is our view that the Federal Trade Commission (FTC) mistakenly “certified” that small businesses will not be affected by the significant changes being proposed to the Hart-Scott-Rodino (HSR) pre-merger reporting requirements, and therefore has not complied with the RFA, as a detailed analysis was not prepared as required by law.

In its proposal, the FTC certified that HSR amendments “will not have a significant economic impact on a substantial number of small entities” given existing exemption thresholds. In SBE Council’s review of past HSR filings, based on a 2022 report the FTC and Department of Justice (DOJ) submitted to Congress, we found that 709 transactions were subject to pre-merger filings where the sales revenue of these acquired entities was less than $50 million. These deals likely involved the acquisition of a small business. The “less than” $50 million transaction range was the highest category of HSR transactions at 23.4% out of 3029 total transactions. Moreover, it would not be surprising if a sizable number of the 513 transactions in the $50-$100 million range and 305 transactions in the $100-$150 million range involved the acquisition of a small business.

The scope and volume of information that filers would be required to submit under the proposal will significantly increase the cost and time associated with the preparation of HSR filings. The FTC estimates s quadrupling of the financial burden, although outside reports estimate a much higher burden. For example, a U.S. Chamber of Commerce report estimates costs that are “nearly seven times the Agencies’ estimate” – an actual average filing cost of $437,314 versus the FTC’s estimate of $66,240. Resource constrained small firms will be crushed – along with their aspirations and dreams of being acquired – due to these excessive costs and new barriers.

The RFA is meant to protect small businesses from the disproportionate effect of costly rules and regulations. Besides requiring that federal agencies put detailed effort and analysis into determining if and how small entities will be impacted by a proposed rulemaking, the RFA requires that agencies develop less harmful compliance alternatives. Small businesses and entities impacted by these proposed actions need to be alerted so that they have the opportunity to “comment” and provide feedback on a proposed rule.

Based on SBE Council’s review of the data, we believe that the FTC did not comply with the statutory requirements of the RFA. Therefore, the proposed rule should be vacated, and a potential restart of the proposal must include a detailed analysis relative to small business impact. After all, startups and small businesses would like their voice to be heard on this costly proposal that may impact their exit strategies and acquisition plans.

Please feel free to contact me or the SBE Council office for questions or additional information. Thank you for your attention to this important matter.


Karen Kerrigan, President & CEO



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