FTC Proposes New Rules on Withdrawal of Hart-Scott-Rodino Merger Notifications

On February 1, 2013, the Federal Trade Commission published a proposed rule that would formalize procedures for the withdrawal of merger notifications under the Hart-Scott-Rodino Act.

The changes are intended to both codify existing practices, and free up agency resources that would otherwise be spent investigating transactions that are no longer being pursued.

But not everyone is a fan, write Daniel Hemli and Jacqueline Java of law firm Bracewell & Giuliani LLP:

“[N]ew FTC Commissioner Joshua Wright … issued a concurring statement questioning the wisdom of the automatic withdrawal mechanism. Calling the proposal “a solution in search of a problem,” Commissioner Wright notes the lack of evidence of agency resources being devoted to truly hypothetical transactions. He also warns that the changes could increase the costs of corporate takeovers and distort the market for corporate control by forcing firms to restart their antitrust review, leading to significant delays and added expenses.”

For your reference, here’s a look at the three principal provisions of the proposed rule:

1. Voluntary withdrawal:

“Under proposed [rule changes], either party can withdraw its HSR filing by notifying in writing both the FTC and the Antitrust Division of the Department of Justice (DOJ). Such notification voids the filing and terminates any pending Request for Additional Information (so-called Second Request). Additionally, for transactions in which the HSR waiting period has expired or been terminated, withdrawal of the HSR filing terminates the one year period that parties have to consummate the transaction.” (Skadden)

2. Automatic withdrawal:

“[T]he FTC has also suggested a rule that would create an automatic HSR withdrawal mechanism by linking the HSR filing with disclosures required by the SEC under U.S. securities laws. Specifically, an HSR filing would be deemed to have been withdrawn if companies make a filing with the SEC announcing the expiration, termination or withdrawal of a tender offer or the termination of an agreement or letter of intent, unless the antitrust agencies have already completed an investigation of the transaction.” (Bracewell & Giuliani)

3. Refiling notifications:

“For years, the FTC has informally permitted an acquiring person to voluntarily withdraw a pending premerger notification and resubmit it within two business days without paying an additional filing fee in order to restart the waiting period… Through [the new rule], the FTC proposes to formalize this procedure [but] the acquiring person may use the procedure only once and only under [certain] circumstances.” (Sheppard Mullin)

The updates:

Find additional updates on the Hart-Scott-Rodino Act at JD Supra>>