In light of both agencies’ response to COVID-19, parties to transactions requiring agency review should expect extensions of the waiting periods and delays in the processing of investigations.
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act), transactions subject to reporting and waiting period requirements (generally, those valued in excess of $94 million) are reviewed by the United States Federal Trade Commission (FTC) and the Department of Justice Antitrust Division (DOJ). The two agencies have 30 days from receipt of an HSR filing to review the materials, investigate and decide whether to issue a second request for documents and information, which imposes an additional waiting period during which the parties to the transaction may not close. In light of both agencies’ response to COVID-19, parties to transactions requiring agency review should expect extensions of the waiting periods and delays in the processing of investigations.
In normal times, the agencies might grant early termination of the initial 30-day waiting period for transactions where there is no apparent competitive concern. In other transactions, many things occur within the first 30 days. First, the HSR filings must go through a clearance procedure to determine which agency will conduct the review. Then, staff at the agency conducting the investigation may contact counsel for the parties, issue a voluntary access letter seeking voluntary production of information that may assist in determining whether to issue a second request, conduct interviews with customers and competitors of the parties, and prepare recommendations to agency management as to whether a second request should be issued.
If a second request is issued, the agencies may request a timing agreement, under which the parties agree not to close for some time in addition to the statutory 30-day waiting period following certification of compliance with the second request. Timing agreements allow for orderly review of the extensive documents and information produced in response to second requests, follow-up discussions to address the agency’s competitive concerns and negotiation of an agreed-upon remedy to resolve those concerns prior to initiation of litigation before the courts. In 2018, the DOJ had stated a goal of resolving most investigations within six months of the HSR filing, provided that the parties promptly comply with DOJ requests throughout the entire process. The FTC was more reluctant to agree to such a timing goal.
With the ongoing COVID-19 pandemic, the staff at the agencies are working remotely and holding conferences by phone rather than conducting in-person meetings. The agencies are no longer accepting physical HSR filings in paper or by physical delivery of DVDs. All HSR filings must now be made through an electronic file transfer system previously used by the FTC for document productions.
The agencies have suspended grants of early termination, so parties should expect that even for transactions without competitive concerns, the full initial 30-day waiting period before closing will be required. In the past 12 months (predating the emergence of COVID-19), practitioners have noted an increase in clearance disputes between the agencies, which had delayed the agencies’ initial contact with the parties in transactions requiring investigation. As a result of all that is required within the first 30 days to determine whether to issue a second request, practitioners noted an increase in “pull and refile” procedures at the end of the initial 30-day waiting period to give the agency an additional 30 days for review.
The DOJ has issued notice that it is requesting an additional 30 days on timing agreements in light of COVID-19 delays, and postponing depositions to arrange for secure videoconferences. Similarly, the FTC has announced that it is conducting a matter-by-matter review and requesting modification of timing agreements.
The agencies are hard at work and focusing efforts on their core activities, while cancelling or rescheduling nonessential and social-interactive events. Like everyone else, they are working remotely, which presents new challenges and likely delays, including delays in contacting others who are working remotely. In the days ahead, companies should expect that:
- Routine transactions with no competitive issues will not be able to close until 30 days after HSR filings―no early terminations;
- Transactions that require some investigation to determine whether to issue a second request are more likely to require a pull and refile procedure and may not be able to close until 60 days after HSR filings, even if no second request is issued;
- If the agencies are not able to resolve competitive concerns within the initial 30 or 60 days, they may be more likely to issue a second request to ensure that such competitive concerns are examined, investigated and resolved to their satisfaction;
- Where investigations are underway or are about to begin, the process is likely to take longer than it would have absent COVID-19 restrictions; and
- Parties should be prepared promptly to provide information requested by the agencies in order to help expedite the process.
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Duane Morris has created a COVID-19 Strategy Team to help organizations plan, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.
For More Information
If you have any questions about this Alert, related issues and our practice before the FTC and DOJ, please contact Edward G. Biester III, Wayne A. Mack, Christopher H. Casey, Sean S. Zabaneh, Sean P. McConnell, F. Reid Avett, any of the attorneys in our Antitrust and Competition Group, any member of our COVID-19 Strategy Team or the attorney in the firm with whom you are in regular contact.
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