FTC Has Funds to Stay Open for Three Weeks in a Federal Shutdown

The Federal Trade Commission has funding to continue operations for three weeks if the government fails to avert a shutdown by Sept. 30, but will furlough staff and ask to pause litigation if the stalemate continues longer.

The Oct. 20 grace period is thanks to a balance left over from the prior year’s budget, FTC spokesperson Douglas Farrar told Bloomberg Law. That surplus will come in handy as the agency pursues a variety of legal challenges and rulemaking, including its much-anticipated plan to ban nearly all noncompete agreements.

But after three weeks, agency operations will largely halt, Farrar said. A prolonged shutdown will slow the work of the agency’s nearly 1,400 staff to analyze comments on its noncompete ban and its joint efforts with the Justice Department to revamp the deal disclosure form and merger guidelines, Farrar said.

In that scenario, the FTC’s current litigation will likely be put on hold, pending agreement from each case’s presiding judge. The agency’s most high profile cases of late include an appeal of Microsoft Corp.‘s $69 billion acquisition of Activision Blizzard Inc. and a new lawsuit against US Anesthesia Partners Inc.

The agency’s long-running attempt to force Meta Platforms Inc. to divest its acquisition of Instagram and WhatsApp is also likely to go on ice. It’s exceedingly rare for litigation to continue after staff begin to go on furlough, especially once federal courts begin shuttering, said David Shonka, a former FTC principal deputy general counsel who faced nine shutdowns during his tenure.

Republicans in Congress, who have launched a salvo of investigations into the agency, will have to wait longer for responses as well, Farrar said.

“If people are furloughed due to a government shutdown, it’s difficult to provide the enormous amount of documents and information that committees normally ask for and we provide for oversight,” he said.

Bitter disagreements among House Republicans have increased the likelihood that a spending plan won’t be reached by the end of the fiscal year on Sept. 30. If Congress fails to bridge that gap, appropriations will expire, halting federal programs and the functioning of many agencies.

The last time the government shut down, in December 2018, an agreement wasn’t reached for more than a month.

Keeping the Lights On

Most staff must go on furlough, although the FTC’s commissioners can continue working, according to the agency’s fiscal 2023 contingency plan. The commissioners’ staff are usually furloughed, however, said Maureen Ohlhausen, a former FTC commissioner and acting chair who experienced two government shutdowns during her tenure.

The FTC was the first federal agency forced to temporarily close as the result of a budget dispute, said Shonka, who started working there in 1976. In 1980, frustrated by the agency’s aggression and in particular its attempt to restrict TV ads marketing sugared foods to children, Congress postponed a vote on the FTC’s appropriations bill for a day, forcing it to shutter temporarily.

The FTC is continuing to make revisions to the shutdown contingency plan as needed, Farrar said.

During the three-week period that it still has funding, the FTC will mostly function as normal, but will examine its expenditures “with an eye towards the fact that the government has shut down and we’re going to run out of money in three weeks,” Farrar said.

FTC chairs are typically granted a degree of flexibility in determining when and how to shutter the agency, Ohlhausen said. But once it starts, the goal is effectively “triage,” said Shonka, now a partner at Redgrave LLP.

Once funding runs out, though, agency lawyers in pending litigation will ask courts to halt proceedings until a spending deal is reached. If a judge refuses, the trial team on that case will be granted a furlough exception, according to the FTC’s shutdown plan.

Agency attorneys in the Premerger Notification Office will continue to work, although they may reduce their hours, according to the plan. They also won’t be available to answer questions or fill requests for information from companies that disclose their deals under the Hart-Scott-Rodino Act.

But companies shouldn’t take the opportunity to try and slip deals past federal enforcers.

“We have a runway of three weeks,” Farrar said. “Following that, there will be an impact on litigation, but in the aggregate, there will not be an impact on overall merger review.”