The FTC Inserts More Uncertainty into the HSR Review Process

In a blog post released on August 3, 2021, FTC Bureau of Competition Acting Director, Holly Vedova, announced that, in response to “a tidal wave of merger filings,” the FTC had begun to send standard form letters “alerting companies that the FTC’s investigation remains open and reminding companies that the agency may subsequently determine that the deal was unlawful.” Merging parties receiving such letters were warned by the blog post that although they may “choose to proceed with transactions that have not been fully investigated, they are “doing so at their own risk.” Technically, the blog post reiterates what the law already provides. The Hart-Scott-Rodino Act already states that “any failure of [the FTC or the DOJ] to take any action … shall not bar any proceeding or any action with respect to such acquisition at any time,” and that nothing in the HSR Act limits the authority of the FTC or DOJ to obtain documents, testimony, or information under the Antitrust Civil Process Act, the FTC Act, or otherwise. 18 U.S.C. § 18a(i). But, notwithstanding the recent FTC challenge to Facebook’s acquisition of Instagram and WhatsApp (albeit under §2 of the Sherman Act rather than §7 of the Clayton Act), such post-consummation challenges (or even investigations) of transactions that have previously been subject to HSR review are exceedingly rare. Accordingly, we have four take-aways from Holly Vedova’s blogpost:

• The blogpost is another indication that the FTC under Chairwoman Lina Khan may be more serious about challenging mergers — including consummated mergers.
• Parties need carefully to consider this new policy in negotiating merger agreements, because closing conditions predicated on the expiration of relevant waiting periods are likely unaffected by the receipt of such a warning letter. Parties may wish to consider whether closing conditions predicated on the absence of a pending or threatened investigation are satisfied where the FTC has issued such a warning letter stating that the “investigation remains open and ongoing.”  And parties may wish explicitly to address in their merger agreements the effect of the receipt of such a warning letter.
• Unless the Antitrust Division of the DOJ adopts a similar policy, this creates another meaningful distinction between the federal antitrust enforcement agencies in terms of merger review practice.
• Because prior challenges to consummated HSR-reviewable transactions have been so rare, institutionalizing the issuance of this type of warning letter – and the potential for the perpetuation of investigations with no statutory or other limit on their duration – introduces an element of uncertainty into deal planning that runs counter to the almost 50-year course of practice under the HSR Act.

Parties should pay close attention to how aggressively the FTC proceeds under this new policy over the next few months. The policy injects another dose of uncertainty at a time when merger review practice is already being changed.