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The ability of artificial intelligence programmes such as ChatGPT to generate and read reams of text could help deal lawyers more than already expected. Last week, the US Federal Trade Commission and Department of Justice proposed sweeping changes to how companies clear M&A competition reviews.
Since the 1970s, acquisitions of a certain size and greater — at present $111mn — require completion of so-called “Hart-Scott-Rodino” forms. Now the federal authorities want far more information. They say takeovers have become more complicated and standards of competition have changed.
The agencies estimate that a process previously taking 37 hours will now take 144 hours. They assume lawyer billings are cheap — $460 per hour — so that in aggregate the annual cost of the augmented information will be only $350mn.
Perhaps AI can reduce the burden. Perhaps there will be fewer deals to review: some buyers and sellers may decide that the burden is not worth it. Perhaps that is the real point of the reform.
The FTC and DoJ explicitly note that in the past 40 years, labour’s share of national income has declined and this may be due to corporate concentration. They want information on overlaps between buyer and seller, combined business plans, details on equity owners and creditors, labour analysis and a range of deal documents.
Dealmakers complain the information will be burdensome to collate and superfluous for a vast majority of transactions that do not merit heightened scrutiny.
The question remains why Hart-Scott Rodino forms are not enough to highlight tie-ups that deserve a deeper dive. Any chill to M&A is unwelcome if we assume that in at least some instances it benefits consumers, innovation or employees.
Some on Wall Street speculate that the agencies simply want to build institutional knowledge about dealmaking rather than throw sand in the dealmaking machinery
But if so, how are officials supposed to read and make sense of the welter of extra information? ChatGPT hopefully plans to offer discounted governmental licences.
The Lex team is interested in hearing more from readers. Please tell us what you think of the federal proposals in the comments section below