According to Commissioner Phillips, the FTC has sent out over 50 "close at your own peril" letters. These are letters to parties who have reported reportable transactions under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the waiting period for those transactions has expired. The letters suggest that the Commission is continuing to investigate the transaction even though the Commission has allowed the waiting period to expire and the parties are legally allowed to close. The implication is that the Commission stands a pretty good chance of asking for more documents and information, or even suing to "block" the transaction.
Parties rightfully wonder how they should deal with this new uncertainty, and it's not entirely clear what the Commission hopes the parties will do. Should they keep their deal open while the Commission fiddles? Or perhaps just abandon the deal without obliging the Commission to deploy the resources required to sue to block a deal?
The answer is that parties should do nothing special to deal with this new uncertainty, and close the transaction as they would have in the past.
Much as Lady MacBeth's life, the "close at your own peril" letters are "full of sound and fury, Signifying nothing." HSR prohibits parties from consummating a transaction until they have substantially complied with requests for additional documents and information and the applicable waiting periods have expired. During this pre-closing limbo period the parties are at a significant disadvantage versus the Commission. However, once the waiting periods have terminated, all the Commission's leverage goes away. They cannot "forbid" parties from closing a non-reportable deal. They cannot demand (and compel production of) any documents or information without new compulsory process. And they face a formidable challenge in trying to get a court to unwind a completed deal particularly after they've given it a pass. Effectively, the "close at your own peril letters" are encouraging parties to voluntarily give the agencies rights that Congress did not in their wisdom deem them due.
Accordingly, if the agencies have given up the suspensory aspects of HSR voluntarily, take them up on their generous offer, and don't look back.
From an enforcement perspective, I wonder why the FTC would even bother sending these letters. They in effect say what has always been the case since Section 7 was passed a hundred years ago: The government always has the right to sue to unwind an anticompetitive merger irrespective of whether it investigated and closed. Perhaps the FTC believes that, for deeply problematic deals, these letters will suggest to the parties that there is heightened risk of consummating and therefore it is preferable to terminate rather than go through the expense of litigation. But that is not the case. The deal was reportable, and the Commission held all the cards and folded. It is nonsensical to think that the Commission would voluntarily give up that advantage so it could continue investigating from a position of significant disadvantage where the probability of loss is enhanced.
When I first heard of these "peril" letters, I thought they were silly, much like the suspension of the Early Termination program. A year into it and 50 letters later, they are becoming much less Lady MacBeth's life and much more a bronze on the mantle of a Second Empire style drawing room.
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