FTC Reinstates Notice and Approval Requirements in All Merger Settlement Agreements
Prior to 1995, the Federal Trade Commission (“FTC”) required parties to a Commission Order entered in a merger case to obtain the FTC’s prior approval for any future transaction in similar markets above a de minimis threshold. This frequently included the requirement to provide prior notice of transactions that fell below the reporting thresholds of the Hart-Scott-Rodino Antitrust Improvements Act (“HSR”).
In 1995, pursuant to its Policy Statement on Prior Approval and Prior Notice Provisions (“Policy Statement”), the FTC ended its blanket practice of requiring prior notice and approval in merger cases. At that time, the FTC concluded that the HSR process provided an effective means of investigation, challenging most anticompetitive transactions before they occurred and that implementation of this new Policy Statement would act as a guardrail against questionable exercises of enforcement discretion. In addition, the FTC concluded that in circumstances where a credible concern that parties to an unlawful merger might attempt the same or similar transaction, or engage in an otherwise unreportable anticompetitive merger, a more narrow prior approval provision would be appropriate.
Recently, however, claiming that the FTC is too understaffed and burdened to rely on HSR alone, the Commission voted 3-2 to rescind the 1995 Policy Statement, and revert back to the pre-1995 requirement that all merger-related settlement agreements include notice and prior approval provisions. This reversion back to the pre-1995 policies may increase merger costs, potentially deter the entry of pro-competitive transactions, and possibly inject more uncertainty into the merger enforcement process. It also provides another example of the FTC’s apparent shift from enforcer to regulator.