Adjusting merger review to deal with the surge in merger filings

Given the recent surge in merger filings, the FTC is reviewing its processes to determine how best to use its limited resources.

The FTC reviews mergers per the Hart-Scott-Rodino (HSR) Act, which requires that companies provide the FTC and Department of Justice with advance notice of certain transactions above a certain threshold. (The current minimum size-of-transaction threshold is $92 million.) After the merging parties submit a filing with information about the transaction, the statute generally gives the agencies 30 days to pursue an initial investigation and determine whether additional information is needed to evaluate the transaction. If the FTC or DOJ seeks additional information through what’s known as a “second request,” the deal is then put on hold until the companies have fully complied with the additional investigatory request. Once the parties have submitted all of the additional information, the reviewing agency has a limited number of days to file a complaint challenging the proposed merger ahead of its consummation. The purpose of this process is to give the FTC and DOJ time to identify illegal mergers prior to their consummation. However, the law permits the antitrust agencies to determine that a merger is illegal even after the companies have merged and even if the merger was subject to premerger review. When the FTC does not challenge a transaction prior to its consummation, this does not constitute an “approval” or “clearance” of the deal, and the agency maintains the right to challenge a deal regardless of whether it was initially investigated. The FTC always has the right to take such further action as the public interest may require.

This year, the FTC has been hit by a tidal wave of merger filings that is straining the agency’s capacity to rigorously investigate deals ahead of the statutory deadlines. (We now post our monthly HSR figures on the website and they are astounding.) We believe it is important to be upfront about these capacity constraints. For deals that we cannot fully investigate within the requisite timelines, we have begun to send standard form letters alerting companies that the FTC’s investigation remains open and reminding companies that the agency may subsequently determine that the deal was unlawful. Companies that choose to proceed with transactions that have not been fully investigated are doing so at their own risk. Of course, this action should not be construed as a determination that the deal is unlawful, just as the fact that we have not issued such a letter with respect to an HSR filing should not be construed as a determination that a deal is lawful.

The form of the letter is posted in its entirety below.