In a September 28 blog post, the Federal Trade Commission (FTC) announced sweeping changes to how it will handle merger investigations. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, transactions valued at or above a certain dollar threshold must be reported to the FTC and Department of Justice Antitrust Division (DOJ) to allow the agencies 30 days to conduct an initial investigation into whether the transaction might harm competition. If the agencies have additional questions, they can issue a "second request," which prevents the parties from closing on the transaction until 30 days after they have substantially complied with the document and data requests issued by the agencies. (These time periods can be modified by "pull and refile" or a timing agreement.)
As announced by the Bureau of Competition, which oversees merger review at the FTC, the FTC is changing how it conducts second requests in order to accommodate the increased number of filings and to better align with President Biden's Executive Order on Competition. (See our prior analysis of the Executive Order.) Specifically, the FTC has announced the following changes:
- Second Requests may cover topics not previously addressed by FTC or DOJ merger investigations, including the potential impact a proposed transaction has on labor markets or cross-market effects of a proposed transaction.
- FTC staff will be more rigorous (and perhaps less flexible) in granting modifications to Second Requests, which has traditionally been a tool for both the agencies and merging parties to better tailor an investigation to the issues most relevant to investigating staff and limiting the parties' burden of compliance.
- Parties will be required to get FTC signoff on any proposed use of e-discovery tools and procedures the parties may want to use in order to comply with the Second Request, a practice already used by DOJ staff.
- Parties will need to provide complete privilege logs rather than abbreviated or "partial" privilege logs, increasing the amount of time parties will need to budget to create privilege logs into their compliance planning.
- Commissioners will automatically receive access to copies of every Second Request and voluntary access letter issued by the FTC, alleviating recent issues of Commissioners being unable to access those materials internally.
In light of these changes, the FTC also cautioned that it anticipates publishing an updated Model Second Request in the near future.
Although these changes were described as being made in part to better allocate limited resources, it is unclear how creating additional substantive areas to investigate, eliminating staff's ability to pare down the scope of a Second Request and instituting a new e-discovery approval process will streamline the process. Indeed, we anticipate that these new implementations will create a significantly more lengthy review process, particularly those investigations that require full substantial compliance.
If you have questions about the changes at the FTC, Norton Rose Fulbright lawyers are prepared to guide you through the merger review process.