Don’t let a government shutdown stop mergers
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With a March 14 deadline looming, the US is heading towards another government shutdown. Congressional Democrats seem willing to let funding lapse unless they can check the new administration’s ambitious goals for downsizing the federal bureaucracy.
Government shutdowns are not entirely useless. As CEI’s Clyde Wayne Crews Jr. argues, “Federal shutdowns—along with the debt limit . . . may represent the last remaining pressure points to compel fiscal and regulatory restraint.”
However, it is unclear how the Federal Trade Commission (FTC) will operate in the event of a government shutdown. Periodically, the FTC updates its plan entitled “Shutdown of Federal Trade Commission Operations Upon Failure of the Congress to Enact Appropriations.” The agency last updated this document on January 23, 2024, under the previous chair, Lina Khan.
The most striking change to the contingency plan under Khan was a provision indicating that the FTC’s Premerger Notification Office would be closed if Congress failed to fund the government. Parties subject to the Hart-Scott-Rodino (HSR) Act’s premerger notification requirements would be unable to submit their filings, thus impeding mergers.
The January 2024 contingency plan is no longer available on the FTC’s website, raising questions as to whether the Commission under the new leadership of Chair Andrew Ferguson intends to close the Premerger Notification Office. Two prior versions of the contingency plan remain active on the FTC’s website: one from February 12, 2019, and another earlier version.
I wrote about Khan’s change to the FTC’s contingency plan last year, noting that the agency continued to accept premerger filings during past government shutdowns:
With the new contingency plan issued last week, companies will no longer be able to file with the FTC’s Premerger Notification Office in the case of a government shutdown. This is in contrast with procedure during the past two shutdowns.
The last shutdown spanned from December 22, 2018 to January 25, 2019 and was the longest in US history. Still, both the FTC and DOJ accepted HSR filings during the time and the statutory waiting periods continued to run. The agencies also accepted HSR filings during the 2018 shutdown, which only lasted 3 days, from January 20 to 23. . . .
Prior to last week’s change, the Commission updated its contingency plan twice in the last two years, once in October 2022 and again in July 2023. Neither included the closing of the Premerger Notification Office. It’s difficult to discern why 2024 is different.
The new FTC may be waiting on the Office of Management and Budget (OMB), as OMB Bulletins help instruct the agency on how to handle government shutdowns.
Nevertheless, the FTC should make clear that mergers will not be delayed if Congress fails to fund the government. If Democrats regain the House during the midterm elections, the ensuing partisan gridlock and threat of government shutdowns might become more prevalent. Beneficial and procompetitive mergers should not be brought to a standstill by Congress’s inability to pass a budget.