New state law adds reporting requirement for major mergers in California beginning next year
SACRAMENTO, Calif. (KEYT) – This week, Governor Newsom signed new antitrust legislation into law requiring businesses conducting a major merger to provide additional documentation to the California Attorney General.
The new law, formerly known as SB 25 or the California Uniform Antitrust Pre-Merger Notification Act, was authored by State Senator Thomas Umberg and alters California's Business and Professions Code to grant access to merger details already required to be reported to the Federal Trade Commission and the U.S. Department of Justice under federal law to the state's top prosecutor proactively instead of requiring a subpoena.
The new law will apply to pre-merger notifications filed on or after Jan. 1, 2027.
"The Governor’s signature on SB 25 is a strong start to the year," shared State Senator Umberg. "SB 25 is a first-of-its-kind measure in the antitrust space, creating a fairer, more efficient merger review process that balances the needs of businesses while protecting consumers."
Beginning next year, a person filing a pre-merger notification in compliance with Section 201 of the Hart-Scott-Rodino Antitrust Improvement Acts of 1976 with federal agencies will be required to file an electronic copy of that disclosure with the Office of California Attorney General within one business day if the principal place of business is in the state or if the annual net sales in California involved in the transaction of at least 20 percent of the existing reporting threshold.
The new law does not allow the state's Attorney General to share the notification and exempts the disclosure of the notification's contents through the California Public Records Act.
"Under the status quo, the Attorney General already has the power to obtain merger filings from the federal government and regularly does so upon request and upon entering into direct confidentiality agreements with the merging parties. The Attorney General already can review transactions and raise competition related concerns and claims. SB 25 simply adds administrative and legal costs by duplicating the federal process unnecessarily," argued a coalition of business groups opposing the bill's passage. "SB 25 imposes unnecessary burdens on businesses that represent the future of California's inclusive economy. Instead of encouraging responsible growth and innovation, it would penalize good-faith efforts to build, invest, and scale in California."
California's Attorney General is not precluded by the new law from sharing information from the notification with an attorney general from another state and, except under a court order or existing law, requires the Attorney General to destroy or return the notification materials within 120 days of the merger's closure or upon the conclusion of legal proceedings connected to the transaction.
"Attorneys general are allowed to share merger documents with another state that has enacted the Uniform Antitrust Premerger Notification Act, or a substantively equivalent act, leaving to interpretation the level of confidentiality protection that would be afforded and without the engagement of the merging parties," noted CTIA, a Washington D.C.-based organization that advocates on behalf of the wireless communications industry. "The timeframes for filing the Hart-Scott-Rodino forms with an attorney general, as well as for submission of additional documents, are unrealistic given the administrative effort it would entail."
"The premerger notification information and materials subject to this act are highly sensitive, future-looking business information," admitted the text of the new state law. "Release of these materials outside of law enforcement and investigatory purposes could cause material harm to the filing companies and foster securities law violations and anticompetitive conduct by third parties. This is why these filings are confidential at the federal level and must remain confidential at the state level."
Failure to comply with the new reporting requirements can be met with a written notice and a three business day period to cure followed by the potential for civil penalties of up to $25,000 per day of noncompliance.
According to the Assembly Appropriations Committee, the state's Department of Justice anticipated costs of $516,000 in fiscal year 2025-2026 and annual costs of $921,000 thereafter with some of those costs covered by the collection of processing fees and potential civil penalties from enforcement actions.
