Takeaways
- Now that the government shutdown has ended, U.S. antitrust agencies are catching up on cases with looming deadlines.
- Mergers which will benefit most from the reopening of the government are the roughly 15% of total transactions which raise relatively minor issues that could potentially be addressed without a prolonged antitrust investigation, according to a former senior FTC official.
- The DOJ and FTC may prioritize mergers which were in a “holding pattern,” including those in which the parties have already received a second request, according to Ben Gris, an antitrust partner at Shearman & Sterling who previously served as assistant director of the FTC’s Bureau of Competition.
- The FTC is “in the process of getting back to normal operations and will be doing so as soon as possible,” said Betsy Lordan, an agency spokesperson. According to the former senior FTC official mentioned above, agency staff members have already made calls and sent emails to resume investigations.
According to several former FTC practitioners, the DOJ and FTC are now catching up on merger cases with looming deadlines, after the longest government shutdown in U.S. history came to an end on Friday, Jan. 25.
The antitrust agencies have a backlog of cases with deadlines, both those in their initial 30-day waiting period and those nearing the end of their deadlines extended by pull-and-refiles and second requests, former agency staffers
previously told this publication. According to Gorav Jindal, an antitrust partner at Akin Gump, the agencies will see these cases as a priority and allocate resources appropriately now that the shutdown has ended.
“My view is that the reopening will at least allow the agencies to prioritize those cases where deadlines are looming,” said Jindal, who previously worked at the FTC’s Bureau of Competition. “I would expect management to allocate staff specifically to cases where deadlines are coming up, addressing those cases where there are near-term inflection points.”
Practitioners are divided, however, as to which of these deadline-driven cases the agencies will prioritize. According to a former FTC senior official, there are generally three types of transactions. The first type are “no-brainers” with no issues, and the second type are transactions which raise obvious concerns. The agencies are now likely prioritizing the third type of cases, which are those which have not received a second request but may have small issues “that ought to get resolved fairly easily,” the former senior official said.
In terms of the effects of a reopened government, the most important category are these matters which raise some issues that “ought to be able to get resolved within the first 30 days,” the former senior official said. These transactions faced higher-than-normal risk during the shutdown because the agencies could not make calls and conduct a preliminary investigation. If the agencies had unresolved questions, “they were just going to have to issue a second request,” the former senior official said.
Other practitioners said they believe, however, that the agencies’ highest priorities will be those cases that already have entered the second request phase. According to Ben Gris, an antitrust partner at Shearman & Sterling, the agencies’ highest priority are those cases which were “in a holding pattern” during the shutdown. The agencies should dedicate a good chunk of their resources now to those cases that “were in second request but not on the clock, or went to second request during the shutdown,” Gris said.
In response to questions from Reorg M&A regarding how quickly the FTC anticipates getting back up to speed on matters, FTC spokesperson Betsy Lordan said that the agency has made headway. “We are in the process of getting back to normal operations and will be doing so as soon as possible,” said Lordan. “Most staff is back and working.” Lordan declined to provide details regarding the status of the agency’s various merger investigations, saying that the agency “can’t discuss now the extent to which they may have changed.”
According to Gris, who previously served as assistant director of the FTC’s Bureau of Competition during the Obama administration, the agencies’ transition to normal operations after shutdowns is not a difficult one. “It only took us a couple days to get back up and running,” said Gris, referring to his time working at the FTC during the 2013 federal shutdown. “It’s not going to take multiple days to allocate staffing.”
Now that the shutdown has ended, practitioners agreed that the agencies will quickly resume activities they could not during the shutdown. For example, staff at the FTC’s Premerger Notification Office could not answer questions from merging parties’ counsel regarding their deal’s HSR filing. “There’s going to be a backlog of questions that staff will look to answer now,” said Gris. “The agencies take those questions seriously.”
According to David Shonka, an antitrust partner at Redgrave, pre-merger activities have traditionally been considered essential by the agencies. “I would therefore not expect the shutdown to have any lasting effects on the premerger programs or on any specific pending matter,” said Shonka, who previously served three terms as acting general counsel at the FTC.
As a specific example of how the reopening affects transactions, the antitrust agencies can now resume issuing voluntary access letters, or VALs. Commonly issued and complied with in most merger investigations, VALs serve as ways for agency staff to gather certain information from merging parties which they did not include in their initial HSR filing, such as market share estimates and lists of customers.
That sort of work was not “getting done with any regularity” because staff was unavailable, a key point given that those deals were most at risk of being affected by the shutdown. Agency staff has already made calls and sent emails to resume investigations, said the former FTC senior official.
--Matt Tracy and Ryan Lynch