September 21, 2021

Volume XI, Number 264


September 20, 2021

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FTC and DOJ Suspend Early Termination Option for Hart-Scott-Rodino Filings; FTC Decreases Thresholds for Interlocking Directorates Under Clayton Act

The Federal Trade Commission (FTC) announced a new temporary suspension of grants of early termination for Hart-Scott-Rodino (HSR) waiting periods, effective February 4, 2021, while the FTC and the Department of Justice Antitrust Division (DOJ) review the “processes and procedures” used in granting early terminations. In announcing its decision to suspend early terminations, the FTC cited unprecedented volume of premerger notification filings coinciding with the transition to the new Biden administration amid the ongoing pandemic.

The HSR Premerger Notification Program requires companies to report certain proposed mergers, acquisitions and other large transactions to the FTC and the DOJ before they are consummated, to give the agencies the opportunity to review and, if necessary, challenge those deals that have the possibility to substantially lessen competition in the marketplace. During the agencies’ preliminary review period, the parties typically must wait 30 days (or 15 days in the case of a cash tender or bankruptcy transaction) before closing their deal. However, under usual circumstances, a filing party may request the termination of the applicable waiting period before its end. A request for “early termination” can be granted only after all parties have made their required HSR filings, and both the FTC and the DOJ have completed their review and determined neither will extend its review. According to the FTC and DOJ’s most recently published HSR Annual Report for deals that occurred during the 2019 fiscal year, early termination was requested in 74.2% of reported transactions, and of those requests, 73.4% were granted.

Speaking about the temporary suspension of granting early terminations, Rebecca Kelly Slaughter, acting chairwoman of the Federal Trade Commission, stated: “The law provides 30 days for the agencies to review the competitive implications of transactions. Given the confluence of an historically unprecedented volume of filings during a leadership transition amid a pandemic, we will presume we need those 30 days to ensure we are doing right by competition and consumers.”

News of the suspension is likely to cause frustration among parties engaged in negotiating a deal with no competitive concerns, as many of them would typically seek — and be granted — early termination. Nevertheless, Acting Chair Slaughter subsequently tweeted a reminder of the discretionary nature of the early termination practice: “As the FTC has made clear for years: parties are not entitled to early termination of the HSR Act’s required waiting periods. Under the law ET may be granted at any time during the waiting period, or not at all.”

Early termination was previously suspended on March 13, 2020, to allow the Premerger Notification Office to implement its new e-filing system. Although that suspension was expected to be in effect through the end of April 2020, it was lifted on March 27, 2020. The FTC and the DOJ anticipate that the current suspension will be brief, although no timeline has been announced.

The early termination suspension follows the February 2, 2021, announcement of adjusted HSR thresholds, which decreased for the first time since 2010 due to reductions in gross national product (GNP) in the wake of the global pandemic.

At the same time those adjusted HSR thresholds were announced, the FTC also announced reduced thresholds for interlocking directorates under Section 8 of the Clayton Act. Like the HSR Act, Section 8 requires the FTC to adjust the applicable thresholds annually based on changes to GNP.

Section 8 generally prohibits an individual from simultaneously serving as an officer or director of two competing corporations if each corporation has capital, surplus and undivided profits of more than $37,382,000 (down from $38,204,000). However, Section 8 provides for several exceptions where competitive overlaps are “too small to have competitive significance.”

For example, the parties will not violate Section 8 where (1) the competing sales of either corporation are less than $3,738,200 (down from $3,820,400); (2) the competitive sales of either corporation are less than 2% of the corporation’s total sales; or (3) the competing sales of each corporation are less than 4% of the corporation’s total sales. The revised thresholds are effective as of January 21, 2021.

Allison C. Schten also contributed to this article.

© 2021 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.National Law Review, Volume XI, Number 40

About this Author

Kathy Osborn Antitrust Lawyer Faegre Drinker Law Firm

Kathy Osborn helps clients limit and manage risk on multiple fronts. She is a commercial litigator and trial attorney who represents clients in complex antitrust, commercial contract, shareholder, corporate, class action, insurance, white collar, and high-wealth fiduciary/estate/probate matters. Kathy also is an active antitrust compliance counselor and co-chair of the firm’s antitrust and trade regulation practice. She uses creativity, strong advocacy and strategic thinking to resolve disputes and minimize risk for clients.

Kathy educates and aids executives by providing briefings...

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Alicia Batts AntiTrust Attorney Faegre Drinker Law Firm

Alicia Batts has extensive experience representing clients in antitrust matters in a multitude of business sectors. Fortune 500 and other leading companies turn to Alicia for creative solutions to competitive impact concerns raised by the Federal Trade Commission (FTC) and Department of Justice (DOJ). Alicia’s 30-plus years in competition law include a two-year tenure as an attorney adviser to an FTC commissioner, where she gained firsthand insight into the processes and analysis that inform enforcement actions. Alicia’s practice includes the full range of antitrust and unfair competition-...

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Joanne Lewers, Antitrust lawyer, Drinker Biddle

Joanne C. Lewers is a litigation partner and member of the Antitrust Practice Group. In addition to advising on antitrust matters, she works on consumer protection and other complex cases.

Joanne represents clients involved in state and federal antitrust suits alleging conspiracy and monopolization claims. She also appears before the federal antitrust agencies on behalf of clients seeking antitrust clearance for their proposed mergers or acquisitions. She regularly offers clients antitrust compliance counseling in a range of...

Jason D. Kimpel Insurance Lawyer Faegre Drinker

Jason Kimpel helps businesses reach the next level through corporate and strategic transactions, primarily involving the insurance industry.

He advises stock and mutual insurance companies, insurance holding companies, and captive insurance companies in connection with a variety of corporate transactions, securities issues and related matters, including:

  • Mergers and acquisitions involving insurers, captives and HMOs.
  • Demutualizations, affiliations and mutual insurance holding company transactions.
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Robin Sampson, Antitrust lawyer, Drinker Biddle

Robin Sampson provides her clients with antitrust counseling in connection with business transactions. She helps clients evaluate the competitive impact of proposed transactions, counsels clients on communications between or among competitors, and provides guidance to clients on antitrust “gun-jumping.” Robin has extensive experience in analyzing whether a transaction must be reported to the Department of Justice and the Federal Trade Commission under the Hart-Scott Rodino Antitrust Improvements Act, and has prepared more than 300 such notifications in...

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