The House of Representatives yesterday passed a bill – the Standard Merger and Acquisition Reviews Through Equal Rules (SMARTER) Act of 2018, H.R. 5645 – designed to align procedures and standards under which the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) review and challenge proposed mergers.
Companies contemplating a merger (meeting Hart-Scott-Rodino reporting thresholds) must submit information about the proposed transaction to both the FTC and DOJ. If the proposed merger raises potential competition concerns, however, only one of the agencies actually conducts an investigation.
The "clearance" process that determines which agency is assigned responsibility to review a deal can have significant consequences for the merging parties. Under current law, the FTC brings challenges to mergers under the FTC Act in its own administrative courts, where it is believed to possess a "home-field" advantage, while the DOJ must proceed in federal courts under the Clayton Act. To obtain a preliminary injunction to temporarily block parties from consummating a challenged merger, the FTC must proceed to federal court, but can obtain an injunction merely by establishing that entry of the injunction "would be in the public interest." The DOJ, in contrast, has to meet the traditional preliminary injunction standard and establish, among other requirements, a likelihood of success in the merits and irreparable harm if the preliminary injunction is not entered. The FTC's "public interest" standard is generally regarded to be lower and easier for it to achieve.
The SMARTER Act would eliminate differences between the agencies' approaches to merger challenges by requiring the FTC to litigate contested merger challenges in federal court, rather than through its administrative review process.
Proponents of the SMARTER Act argue that it provides greater certainty for companies by reconciling the disparate processes used by the FTC and DOJ. Opponents view the proposal as an attack on the FTC's ability to properly carry out its duties, unnecessarily weakening the FTC by removing this enforcement tool from its powers.
A previous version of the bill stalled in Congress last year after passing in the House but failing to move forward in the Senate.