Parties to transactions requiring review by the Committee on Foreign Investment in the United States (“CFIUS”) and/or the United States Department of Justice Antitrust Division (“DOJ”) and Federal Trade Commission (“FTC”) should be aware that the ongoing government shutdown may affect the review and timing of their transaction and additional time may be required to complete these regulatory processes.
CFIUS Foreign Investment Review
During the course of a government shutdown, CFIUS will continue only “caretaker” functions related to (1) cases that were already under review or investigation prior to the enactment of the Foreign Investment Risk Review Modernization Act (“FIRRMA”), which became law in August 2018, or (2) CFIUS-related national security exigencies. Pursuant to FIRRMA, deadlines will be tolled for all other cases, whether submitted by notice or declaration, that were formally under review or investigation by CFIUS at the time the shutdown commenced. While CFIUS will not take any action on new submissions, parties may submit notices to CFIUS during the shutdown. In late 2018, CFIUS instituted a Pilot Program requiring parties to certain transactions involving critical technologies to submit declarations to CFIUS a minimum of 45 days prior to the expected completion date of the relevant transaction. The regulations implementing the Pilot Program do not address the effect of a shutdown on the timing of mandatory filings, nor did the Department of the Treasury address those requirements in its publicly released contingency plans.
CFIUS is known to carry a heavy case load, particularly following the expansion in its jurisdiction introduced in FIRRMA and its corresponding Pilot Program. Depending on the length of the shutdown, parties should expect that the backlog of cases that will result from it will cause further delays once CFIUS resumes full operations. Given the time restraints on formal review, this delay will most likely lead to an increase in the time between submission and acceptance as well as an increase in transactions pushed into investigations, if only to protect CFIUS’ prerogatives.
FTC/DOJ Antitrust Review
While the government is shut down, the FTC and DOJ will accept filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), but will maintain only a limited staff to receive and process such filings. While statutory HSR waiting periods will run as normal during the shutdown, early termination of such waiting periods will not be granted. Parties will, therefore, not be able to close their transaction until any applicable waiting periods have expired. The agencies will utilize limited staff to investigate transactions during the shutdown.
In terms of practical effect, it is probable that there will be additional delays before transactions that might have otherwise been quickly granted early termination absent the shutdown may be closed. Moreover, given the agencies’ more limited resources during the shutdown, it is possible that parties to transactions presenting potential competitive issues may need to use the “pull-and-refile” procedure to restart the HSR waiting period, allowing additional time for agency review in hopes that any questions can be resolved in time to eliminate any need for a “Second Request.”