In anticipation of the shutdown by the U.S. federal government, which began early this morning, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) released contingency plans that detail the impact on all aspects of the agencies’ operations, including their review of mergers and acquisitions.1
The Bureau of Competition at the FTC will maintain a limited staff to accept and process new Hart-Scott-Rodino (HSR) filings. The agencies will then determine whether circumstances warrant further investigation of any reported transaction during the shutdown.
Although the agencies can technically challenge a merger outside of the initial 30-day statutory review period, the FTC concedes that “the nature of the available relief changes dramatically once a merger or acquisition is consummated.” As a result, the FTC intends to initiate or continue investigations where it believes that “a failure…to challenge the transaction before it is consummated will result in a substantial impairment of the government’s ability to secure relief at a later time.”
For matters currently in litigation, the FTC will “request suspensions of dates for trials, hearings and filings, or similar relief to preserve the government’s claim,” and will maintain limited staff to litigate matters where it cannot obtain deadline extensions. All non-merger investigations currently underway at the Bureau of Competition will be suspended during the shutdown.
The Antitrust Division at DOJ will similarly limit staffing to those employees necessary to launch or continue merger investigations or litigation where it cannot obtain a continuance or extension of a statutory deadline and where DOJ “leadership determines that allowing a proposed merger to go forward without objection would pose a reasonable likelihood of peril" to the government’s interests.
Given the limited staffing, parties intending to submit HSR filings in the coming days (and possibly weeks) should work closely with counsel to determine the impact of the shutdown on the review of their transactions.
Parties submitting filings to the agencies are unlikely to receive early termination and should plan for the full 30-day waiting period in determining closing dates. Parties that wish to close by 31 December 2013 would need to file no later than Friday, 29 November 2013 assuming no early termination.
The Bureau of Competition typically provides informal interpretations of HSR rules and regulations to parties analyzing whether HSR filings are required or preparing filings; but such guidance will likely be unavailable during the shutdown.
Significant transactions are still likely to receive scrutiny by the agencies, and the shutdown may not decrease the likelihood of a Second Request or challenge if the agencies believe circumstances warrant such action.
If the shutdown lasts only a week or two, some parties who file during the shutdown may be more likely to get a Second Request than they would have been in the absence of the shutdown since they will not have the full 30 days to provide information to address an agency’s initial questions. In such cases, a pull and re-file of its HSR form by the acquiring person, giving the agencies a second 30-day waiting period in which to examine the transaction, may make sense.
Parties with transactions currently under investigation by the agencies should confer with counsel to determine the impact of the shutdown, and may wish to contact the reviewing attorneys at the FTC or DOJ.
While the agencies’ plans are intended to cover any shutdowns occurring in fiscal year 2014, parties should continue to monitor the FTC and DOJ websites for updated information. We will send additional updates if the agencies significantly alter their contingency plans.