Merger & Acquisitions

Citing "Unprecedented Times," Government Suspends Early Terminations of Merger Reviews

Greater antitrust enforcement capacity needed.

Agency review of business deals submitted to the federal government will now take at least the permissible full 30 days while the Federal Trade Commission and Antitrust Division of the Department of Justice examine the review process. The agencies say the review and suspension are necessary in light of the confluence of three significant circumstances: 1) an “unprecedented volume” of filings required by the pre-merger notification program of the Hart-Scott-Rodino Act (HSR); 2) the transition to the Biden administration; and 3) challenges posed by the COVID-19 pandemic.

“For this period, the agency will not grant early terminations. We anticipate that this temporary suspension will be brief,” according to the FTC.

For the reasons provided by the government, this temporary suspension seems justified and we can expect that early terminations will be back online soon.

The program is designed so the agencies can assess mergers and acquisitions before they are consummated. This is an efficiency that gives parties a heads up on any anti-competitive concerns the government might raise. Normally and in most circumstances, the review process is quick; the government frequently terminates its review early, before the permitted 30 days expires, and announces an “early termination.” If the 30-day review period expires without government action the parties may proceed with their deal. But if the government raises a concern during that period it may extend the review period and issue a “second request” for additional information.

Acting Chair of the FTC, Rebecca Kelly Slaughter, says she presumes the government will need the full 30 days in all circumstances, at least for now, “to ensure we are doing right by competition and consumers.” Concurring with Slaughter is Richard A. Powers, Deputy Assistant Attorney General and Senior Supervisory Official of the DOJ Antitrust Division.

FTC Commissioners Noah Joshua Phillips and Christine S. Wilson disagree with the move, seeing “no rationale sufficient to justify suspension” of all early terminations. “In 45 years of administering the HSR Act,” they say, “the Agencies have done so only when a crisis made them unable to discharge their duties. Even when the HSR filings more than doubled in November 2020 compared to November 2019, the processing of [early termination] requests continued. And the number of filings has fallen by approximately 70 percent since last November. Absent exigent circumstances, an indefinite suspension of the [early termination] process – with no clarity regarding when and under what circumstances it will resume – is unwarranted.”

Phillips and Wilson say the suspension “introduces inefficiency into market operation, harming consumers and other stakeholders involved in transactions ....”

This temporary suspension of early terminations, while imposing some hardships and uncertainties on merging parties, seems justified from the agency perspective by the circumstances cited and by a need to enhance or re-build public confidence in the merger review process.

If, as anticipated, suspension of early termination is terminated early as announced, we should be back to business as normal relatively quickly. In light of all of the other disruptions to the legal system as a result of the pandemic, the transition to the new administration and the agencies’ backlog, this seems relatively modest and short-lived. On the other hand, it certainly underscores the need for staffing up antitrust enforcement.

Edited by Tom Hagy for MoginRubin LLP

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