COVID-19 Impact on Hart-Scott-Rodino Process
In response to the disruption in the market as a result of COVID-19, the Federal Trade Commission (FTC) and Department of Justice (DOJ) have put in place a temporary e-filing system for the submission of filings under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 which may impact the timing of review and approval of transactions that are currently under review and other transactions that are submitted while these temporary rules remain in place.
The HSR Act requires that parties to certain mergers and acquisitions, which meet requirements as to size of the transaction and size of the parties, submit pre-transaction notice filings with the FTC and DOJ. Currently, the thresholds are set at transactions in which the acquiring party will, as a result of the transaction, hold an aggregate amount of voting securities, non-corporate interests or assets of the acquired party following completion of the transaction valued at $94 million or more, one party to the transaction has annual net sales or total assets of $188 million or more and the other party has annual net sales or total assets worth $18.8 million or more.
Normally, parties submit their HSR filings in hard copy or on a DVD delivered to the FTC Premerger Notification Office and the DOJ in Washington, D.C. Effective as of March 17, 2020, during the COVID-19 emergency, hard copy and DVD submission has been suspended and all HSR filings will need to be submitted to the FTC and the DOJ electronically via the Accellion secure file-sharing system.
Following the filing, parties must observe a statutory 30-day waiting period before proceeding with closing a transaction subject to HSR. However, it is customary practice for parties to seek, and often receive, early termination of this waiting period. For the period that this e-filing system remains in place, the FTC will continue to review all HSR filings that are submitted in due course, but will not be granting early termination of the 30-day HSR waiting period. Parties who require HSR clearance for a transaction should factor in a full 30 days for HSR clearance when planning their closing timetables.
Congress is also currently discussing legislation that would allow the agencies to extend the initial 30-day HSR waiting period during the current emergency. Reported possibilities under consideration include allowing discretionary extensions on a case by case basis or extending the review period for all transactions until the end of the emergency. As of March 25th, no congressperson has yet introduced a bill specifically relating to such a change in the HSR waiting period.
Additionally, review of filings often involves meetings with parties to the transaction and counsel and additional requests for information, and in certain cases of transactions which are deemed anti-competitive could result in the FTC or DOJ seeking to enjoin a transaction. The FTC and DOJ have indicated that they will conduct all meetings by phone or video conference to the extent possible and absent extenuating circumstances. All scheduled depositions will be temporarily postponed and rescheduled to use secure video conferencing capabilities.
Below is a list of practical notes related to the temporary e-filing system:
- To submit an HSR filing electronically, filers must email email@example.com and request a link; “Request for HSR Filing Link” should be used in the subject line.
- The FTC and DOJ will consider submissions received after 5:00 pm ET as received on the next business day.
- FTC and DOJ review of filings will continue and filing parties should expect to receive notification of receipt of their filings and the start of the 30-day HSR waiting period a day or two after filing.
- The FTC and DOJ will accept electronic signatures on the HSR certification and affidavit during the COVID-19 emergency. Though electronic signatures are acceptable during the emergency, the FTC suggests parties mail original signature pages to the FTC so reviewers have them upon returning to the office.
- Once normal agency operations resume, filing parties may have to submit hard copies or DVDs of filings that were made using the temporary e-filing system.
For further information please contact Lori Smith (firstname.lastname@example.org; 212.714.3075), Gary Biehn (email@example.com; 215.864.7007), Gwenn B. Barney (firstname.lastname@example.org; 215.864.7063) or another member of the Corporate and Securities Group.
As we continue to monitor the novel coronavirus (COVID-19), White and Williams lawyers are working collaboratively to stay current on developments and counsel clients through the various legal and business issues that may arise across a variety of sectors. Read all of the updates here.