HSR Waiting Period Expired? FTC Says Close at Your Own Risk

Yesterday the US Federal Trade Commission (FTC) announced that for certain transactions where it “cannot fully investigate within the requisite timelines,” it will now send letters to merging parties to inform them that although the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act) may be set to expire shortly, the FTC’s investigation “remains open and ongoing.” The standard form letter warns merging parties that if they "consummate this transaction before the Commission has completed its investigation, they would do so at their own risk.” The FTC framed its announcement as a direct response to the “tidal wave of merger filings that is straining the agency’s capacity to rigorously investigate deals ahead of the statutory deadlines.”

Under the HSR Act, parties to reportable transactions must file an HSR notification with the FTC and the Antitrust Division of the US Department of Justice (DOJ) and observe a mandatory 30-day waiting period (15 days for cash tender offers and certain bankruptcy transactions) before closing. In cases where the FTC or DOJ has competition concerns about the transaction that warrant an in-depth investigation, they issue a so-called "Second Request," which extends the HSR waiting period until the merging parties certify substantial compliance with the Second Request and then allow an additional 30-day waiting period (10 days for cash tender offers and certain bankruptcy transactions) to expire. The FTC and DOJ do have the authority to investigate and challenge transactions where the HSR waiting period has expired – although in practice, they have used this authority very rarely.

Despite this announcement, we expect that, for most transactions, the period prior to expiration of the HSR waiting period and the Second Request process will remain the critical period for risks of remediation and divestiture requirements. However, the FTC’s announcement reflects a broader trend of more aggressive merger enforcement at the FTC that we have seen under the Biden Administration. Parties considering mergers that may raise antitrust concerns need to account for this more aggressive FTC posture in preparing antitrust analyses of their transactions, and should consider whether and how to address the potential for a continued FTC investigation after expiration of an HSR waiting period in drafting closing conditions and regulatory covenants in transaction agreements.