On February 4, 2021, the U.S. antitrust agencies announced that they are temporarily suspending the discretionary practice of granting early termination of the waiting period to filings made under the Hart-Scott-Rodino ("HSR") Act. Since January 16, the agencies granted ET in just one transaction, which involved diagnostic tests for COVID-19. The current pause, as articulated, does not include any exceptions, for example, for deals involving pandemic-related products.
The HSR Act requires parties to certain mergers or acquisitions of assets or voting securities valued above $94 million (until March 4), to notify the Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") of their transaction, and to observe a waiting period prior to closing to allow the government time to review the transaction. In most cases, the HSR Act waiting period runs for 30-days. If the government does not extend the waiting period with a Request for Additional Information, the parties can close their deal upon its expiration. Alternatively, parties can request early termination ("ET") of the waiting period, which the agencies have discretion to grant (or not) if they determine that further review is not required. In FY2019, 72% of reported transactions included an ET request, and the agencies granted 73% of those requests (approximately 55% of filed transactions).
The FTC said that its "temporary suspension will be brief," but is necessitated by "an historically unprecedented volume of filings during a leadership transition amid a pandemic." Early in the pandemic, the agencies suspended ET for 17 days in March 2020 while they grappled with a new e-filing system and work-from-home mandates. In November, an FTC commissioner, now the FTC's Acting Chair, indicated support for "pausing" merger review during the pandemic out of concern that the agencies are missing anticompetitive transactions.
The FTC's two Republican commissioners objected to the decision, stating that they see "no rationale sufficient to justify suspending all grants of ET," particularly because ET is reserved for transactions with "no apparent competitive concern," including index fund acquisitions or M&A in unconcentrated markets. Aside from the COVID-19 pause and government shutdowns (when agencies are not allowed to perform certain work), the commissioners noted that agency staff have capably continued to review filings and grant ET during other crises (e.g., September 11, the 2008 financial crisis), political transitions, or periods when transaction volumes were high. The commissioners reported that the agency staff that reviews HSR filings "is not strained," noting that several large merger reviews have ended recently and the number of filings declined from a high of 424 in November 2020 to approximately 200 in each of December 2020 and January 2021.
Until the agencies resume granting ET, merging parties must observe the entire 30-day waiting period in all transactions that require an HSR filing. If timing is a critical factor to your deal, consider whether to make an HSR filing on the basis of a letter of intent to start the HSR review in parallel with negotiations over the transaction agreement. When the agencies restart ET, ET will temporarily take longer to receive, if granted at all, as there will be a backlog of transactions as ET grants ramp up.
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