“The clock” is a central part of a merger lawyer’s life. HSR merger review is all about managing the clock effectively. Here are some things we’ve been known to say: Is the clock running? When does the clock start? How much time is on the clock?
Conducting a merger investigation under the Hart-Scott-Rodino Act requires that we always be aware of the timing, and where we are on the clock. Once the parties to a proposed transaction have filed an HSR notification form, the initial waiting period provided by the Act begins to run—thirty days for the vast majority of deals, less for a Cash Tender Offer (CTO) or a bankruptcy filing. During those first thirty days, we have to figure out if there are any competitive issues that warrant additional scrutiny. If there are such issues, we need to work quickly to learn as much as possible so that we can craft a Second Request that captures the data and information needed to assess the potential competitive impact if the merger were to occur. In the process, we also work hard to set aside the areas where there are no competitive issues.
Sometimes as we near the end of the initial review period, there are still open issues that might be resolved relatively quickly with a bit more information or investigation—if we had more time. But since the HSR statute requires a “thumbs-up-or-or-thumbs-down” determination by the end of the initial waiting period, the only way we are able get that additional time is to issue a Second Request. The alternative—letting the waiting period run and the transaction close—may deprive the Commission of the opportunity to obtain the most effective relief if it turns out that the open issues are not resolved.
While we are faced with a go/no go decision at the end of the initial waiting period, the parties are not. For years, they have had the option to provide staff with additional time to conduct their initial review by pulling their HSR filing and refiling. Pulling-and-refiling restarts the clock, and gives reviewing staff (and the parties) a second initial waiting period—that is, more time to work through the competitive issues, obtain documents and get information from third parties. At times, this option has allowed staff to determine that Second Requests are not needed. At a minimum, the additional time can help narrow the scope of a Second Request.
Last fall, the FTC issued a final rule that formalized the long-standing practice that allows parties to pull-and -refile one time without paying an additional filing fee. For those who are not familiar with the process, staff in the Premerger Notification Office developed a Tip Sheet with the procedural things to keep in mind if you are thinking about pulling-and-refiling. The one new requirement contained in the rule is that, in addition to submitting any new Item 4 materials generated since the original filing and a new certification, the acquiring party also must submit a new affidavit. Check with the Premerger Notification Office (PNO) if you have any questions about the process.
Here are a few other things to consider if you have a merger under review at the agency:
- Pull-and-refile is optional for the merging parties, but you may want feedback from staff about the open issues and how they may be resolved before deciding whether that option makes sense.
- Parties who want to take advantage of the rule need to let staff know that you intend to restart the clock on the initial review by pulling the HSR filing. (You also must let the PNO and DOJ know in writing that you intend to pull the filing. That’s on the Tip Sheet.)
- The best practice is to let staff know as soon as possible, and well before the end of the initial waiting period, that you plan to pull-and-refile. This is because, near the end of the waiting period, staff is usually consumed by preparing Second Requests and accompanying memos recommending that the Commission issue those requests. You won’t want to lose those precious days if they can be better used allowing staff to run to ground facts and information that further the investigation.
- It is very important to remember that a pull-and-refile only pushes back the date by which a Second Request decision has to be made. It does not in any way guarantee that a Second Request will not issue, or that if it does, it will not address certain areas. What it does ensure is that staff and the parties will have more time to narrow and potentially resolve the competitive issues, which in many situations is to the parties’ advantage.
In the world of HSR review, timing is important. But what’s even more important from the Commission’s perspective is to make sure that we are able to properly identify the competitive issues raised by the transactions we are charged with reviewing, and work to prevent the ones that are likely to harm competition and consumers. And it’s also important that we clear the transactions that do not pose a risk to competition so that we can to focus our resources on the ones that do. For us, the clock stops when an investigation is closed.