The new Acting Chair of the Federal Trade Commission (FTC) took actions last week that may slow and increase the cost of some deals, as she temporarily halted all expedited antitrust clearances and called on Congress to increase pre-merger filing fees for large transactions.
On Thursday, Feb. 3, 2021, Acting FTC Chair Rebecca Kelly Slaughter announced that the agency was halting “early terminations” of waiting periods under the Hart-Scott-Rodino Antitrust Improvements (HSR) Act. Since 1976, the HSR Act has generally required parties and individuals acquiring or selling stakes in companies of a certain size (an indexed threshold of $92 million goes into effect next month) to submit filings to the FTC and US Department of Justice Antitrust Division (DOJ), and observe a 30-calendar day (or in some cases 15-day) waiting period. Transactions for which filings are needed under the HSR Act may not close until that period, which allows for a review of relevant antitrust issues by the agencies, expires.
In FY19, more than 2,000 transactions – ranging from mega-mergers to individuals’ acquisitions of voting securities – were required to be reported under the HSR Act. The FTC has long had a discretionary procedure for ending the waiting period sooner, namely granting “early termination” (ET), to deals that did not raise competitive concerns. Citing an increased HSR Act filing docket, a change of leadership at the agency (former chair Joe Simons stepped down Jan. 29), and the Covid-19 pandemic, Slaughter said the halt to “ETs” was necessary to adequately review deals and to assess the ET process.
The acting leadership of the DOJ stated it supported the FTC’s action. Two Republican-appointed FTC commissioners issued a statement calling the halt unprecedented, unjustified and harmful to a market economy.
The next day, Acting Chair Slaughter also released a statement, joined by another Democratic commissioner (who is being nominated to lead the Consumer Financial Protection Bureau), calling on Congress to increase HSR Act filing fees for transactions over $1 billion and index all filing fees annually. Current fees, which range from $45,000 to $280,000, provide funding for agency enforcement activities. There have been proposals in the past to adopt such changes, but none were enacted into law.
These activities come as the FTC reviews potential changes to its rules under the HSR Act that may affect investment funds and members of Congress have introduced legislation that may dramatically alter the legal standards for merger challenges. For example, Sen. Amy Klobuchar (D-Minn.), who will lead the Senate Judiciary Committee’s antitrust subcommittee, has proposed changing relevant burdens of proof and legal standards for merger cases brought by DOJ and FTC, including adding tests based on the share and size of a merging party that will make it easier for the government to prevail. Senator Josh Hawley (R-Mo.) and outgoing Trump Administration DOJ antitrust chief Makan Delrahim also have called for changes to merger law, potentially indicating bipartisan support for some action in this area in the coming session of Congress.