The Federal Trade Commission (FTC) updated its contingency plan for how it will operate if Congress fails to fund the government last week. Likely the most striking change is the closure of the FTC’s Premerger Notification Office. The contingency plan document states:
The Commission’s Premerger Notification Office (PNO) will be closed during the shutdown, and the Commission will not receive, accept, or process premerger notification filings under [Hart-Scott-Rodino], or respond to questions or requests for information or advice from outside parties.
The Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 requires companies to file with the FTC and the Department of Justice’s (DOJ) Antitrust Division if their proposed transaction meets certain thresholds. The HSR Act also has a mandatory waiting period, usually 30 days, before the parties can consummate the merger. This gives the antitrust agencies time to review the merger for any anticompetitive concerns.
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.
The FTC and DOJ did suspend the granting of “early terminations” during the past two government shutdowns. The agencies can grant early termination if they determine that a proposed transaction poses no anticompetitive threat, allowing the companies to consummate the merger before the conclusion of the mandatory waiting period.
Suspending early terminations wouldn’t exactly be an option this time around, because the agencies have already done so, indefinitely. The FTC and DOJ “temporarily” suspended the granting of early termination due to the “unprecedented volume of HSR filings” in early February 2021. The agencies have yet to officially reinstate the practice but did grant early termination to five transactions in 2022, according the most recent HSR Annual Report.
In the past, most HSR reportable transactions received early termination. In the nine years prior to its suspension, from 2012 to 2020, 58 percent of total transactions received early termination. Of those that requested early termination during the same time period, 78 percent were granted.
Douglas Farrar, director of the Office of Public Affairs at the FTC spoke to Bloomberg Law about the change in the FTC’s contingency plan, saying that the continual threats of a potential government shutdown prompted the agency to reassess its protocol.
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 FTC issued a notice of proposed rulemaking (NPRM) in June of last year on the HSR Form, greatly expanding the volume of documents and information required to file with the program. Former FTC attorney Amanda Wait called it a “mini second request,” because some of new requirements included information that would ordinarily be obtained with a second request. Second requests are sent to HSR filers when the antitrust agencies have lingering antitrust concerns after the initial filing. Only about 3 percent of transactions receive these requests.
Three months prior to the release of the NPRM, Sarah Miller joined the FTC as a special advisor to Chair Lina Khan. Miller was the executive director and founder of the American Economic Liberties Project, a non-profit organization that advocates for aggressive antitrust enforcement.
Miller co-authored a paper entitled “To Save Jobs and Slow Inequality, Stop the Merger Frenzy” in January 2022. In it, she suggests that “The FTC could automatically make a second request for every merger reportable under the Hart-Scott-Rodino Act.” Further, she argued that “the suspension of early termination should be made permanent.” This seems in line with both the FTC’s recent activity and inactivity on the HSR Act.
Miller became the FTC’s chief of staff in November 2023.
CEI argued in our comments on the HSR Form changes that the FTC’s recent administration of the HSR Act is being done solely for the purpose of discouraging mergers, as oppose to a good faith effort to make the process more effective and efficient.
It seems as though Khan’s FTC won’t let a crisis go to waste if Congress is unable to fund the government in the future.