With COVID-19-related closures rolling in daily, you may have questions about the operating status of the federal government’s antitrust enforcement agencies. Currently, the HSR review process does not seem to be significantly impacted, although the agencies will not grant a request for early termination during this period (as noted in our recent update, the FTC will again process early termination requests as of March 30, though on a more limited basis and later in the process than historically provided). Unlike the government shutdowns in 2013 and 2018, all FTC and DOJ staff are working full time. In addition, the agencies have implemented a mandatory e-filing system for all HSRs.
Given that the agencies will continue to work full-time and that an e-filing system is in place, we think it is unlikely that there will be significant impact on timing for the vast majority of transactions, particularly where there is no competitive overlap between the transacting companies.
There is increased potential, however, that more time than usual could be needed to conduct initial antitrust reviews. The process likely is working less efficiently with remote work and changes to agency procedures, as well as disruptions in the commercial world, which may result in more time to assess matters where some level of inquiry will be needed—for example, transactions involving competitors or vertical mergers. For example, in a matter where there is some competitive overlap between the parties, the agency will often conduct a quick initial investigation during the 30-day HSR waiting period to assess the extent of the overlap, number of rivals, etc. For such transactions, it may be more difficult than usual for staff to interview industry participants and knowledge leaders to draw conclusions during the initial 30 days. If FTC or DOJ indicate that more time may be needed, it may be beneficial to “pull and refile,” to restart the initial 30-day waiting period. Again, we think this timing risk likely will have limited impact given that the vast majority of HSR filings raise no antitrust issues, but we will need to monitor the situation as it changes daily.
Please note, however, that HSR timing could still change because of Congressional action or dramatic changes in how COVID-19 progresses. Currently, if the initial 30-day waiting period expires without the FTC or DOJ issuing a Second Request, HSR is no longer an impediment to closing. Both Democrats and Republicans, however, have made proposals as part of the COVID-19 aid bill that could give FTC and DOJ new procedures in times of crisis (such as now) to extend the initial HSR waiting period at the discretion of the agencies or even automatically, and without a second request. We will continue to monitor these developments and will let you know if any of these proposals become law and how they would impact the HSR process.
One additional note is that DOJ issued a press release on March 17 stating:
“For mergers currently pending or that may be proposed, the Antitrust Division is requesting from merging parties an additional 30 days to timing agreements to complete its review of transactions after the parties have complied with document requests. If circumstances require, the Division may revisit its timing agreements with merging parties in light of further developments.”
This statement does not appear to impact timing associated with the initial HSR waiting period. The initial HSR waiting period is a statutory period that can only be changed by a legislative act. Here, DOJ is referring to adding more time to the procedural timing agreements for complicated transactions that receive a Second Request. In those transactions, the FTC or DOJ will often reach a procedural agreement with the parties (outside of the statutory framework) to govern timing of the process. DOJ’s press release indicates that for these complicated transactions, DOJ will want more time than it previously has requested and may request parties provide additional time under existing timing agreements.
*Updated March 27, 2020 based upon revised guidance from the Premerger Notification Office that early termination requests will again be considered as of March 30, 2020.