FTC and DOJ Revise Suspension of Early Terminations: Beginning of the End or Just a Red Herring?

UPDATE: On February 4, 2021,¹ we reported that the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) announced a suspension of the process of granting early termination (ET) of the waiting period for merger and acquisition filings made pursuant to the Hart-Scott-Rodino Act (HSR Act). More than five weeks after implementing this suspension, the agencies have now moved to close a narrow loophole that applies only to deals that are subject to an extensive “Second Request” competition review. Going forward, the agencies will grant ET in the limited circumstance when, following the issuance of a Second Request, the competition concerns are resolved prior to the parties’ certifying substantial compliance.²

A filing under the HSR Act triggers an initial 30-day waiting period during which the parties cannot close their deal. If the investigating agency determines that the deal raises competition concerns, it issues a Second Request prior to the end of that initial waiting period. The HSR Act then prohibits the parties from closing the deal until 30 days after certifying substantial compliance.

But what happens if the investigating agency and the parties reach an agreement to resolve the competitive concerns prior to actual substantial compliance, such as when the agency determines there is no case or the parties enter into a settlement? In such situations, the parties remain stuck in HSR Act limbo, unable to close their deal, because they never certified and therefore did not restart the statutory 30-day clock.

The HSR Act provides an out for this scenario by allowing the agencies the power, “in their discretion,” to terminate a waiting period upon a party’s request.³ This is exactly what happened prior to the February 4 suspension of ETs—the agencies would grant early termination of the waiting period once the competition concerns were resolved. However, the blanket suspension of ET forecloses this safety valve.

The revised guidance clarifies that the agencies will grant ET in these situations. To be certain, though, this revision affects only a minority of deals. The agencies, on average, issue Second Requests in only about 3 percent of HSR filings,⁴ and a far smaller number involve deals in which the reviewing agency was able to resolve its concerns at a point prior to substantial compliance.

This policy shift is welcome in that it shows that the agencies are attempting to address specific concerns raised by the ET suspension policy. But, for now, larger concerns continue in that all reportable transactions remain subject to at least the initial 30-day waiting period. Parties still should plan accordingly.

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