On February 4, 2021, the Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ) announced that the agencies would temporarily suspend the practice of granting early termination of the 30 day waiting period in appropriate circumstances for filings made under the of Hart-Scott-Rodino (HSR) Act. Earlier this week, the FTC announced on its Competition Matters blog that—far from resuming early termination—the agency has begun sending cautionary letters to filers if the agency has been unable to complete its investigation within the statutory 30 day period. The warning to recipients of these letters is: proceed at your own risk.
The FTC's announcement explains that the agency "has been hit by a tidal wave of merger filings that is straining the agency's capacity to rigorously investigate deals ahead of the statutory deadlines," and its publicly-reported HSR transactions by month bear this out. For the six month period ending July 2021, parties filed 1,857 premerger notifications packages (an average of nearly 310 per month). By contrast, the six month period ending July 2020 saw about a third of that—653 total filings, an average of 109 per month.
As a result, the FTC announced that "[f]or deals that we cannot fully investigate within the requisite timelines, we have 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." The letter warns parties that if they choose to consummate their transaction before the FTC has completed its investigation, they "do so at their own risk," and that the FTC "may challenge transactions—before or after their consummation—that threaten to reduce competition and harm consumers, workers, and honest businesses."
This announcement suggests that parties and practitioners should not hold out much hope that routine early termination will resume as a matter of course in 2021. Although the FTC's Early Termination webpage showed that two transactions did receive early termination in July 2021, both of those transactions appear to have been reported months earlier, and it appears that the grant of "early" termination was simply a way for the FTC to confirm for the parties that any pending investigation had been closed.
The FTC's announcement this week also introduces a new element of uncertainty to merger timing, particularly depending on the phrasing of certain closing conditions. Companies should carefully review the closing conditions governing their transactions to understand whether receipt of this new form letter will hold up their closings or whether, as the FTC puts it, they can proceed at their own risk.
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