Bloomberg Law
March 20, 2020, 10:58 AM

ANALYSIS: Merger Review Slowing, Moving Online With Covid-19

Eleanor Tyler
Eleanor Tyler
Legal Analyst

It won’t be business as usual during—or likely after—the coronavirus crisis. For one thing, mergers and acquisitions that require review by the Federal Trade Commission or the Department of Justice are going to take more time and will go through different procedures for the duration of the emergency.

The FTC said on March 16 that it has adopted new procedures for the crisis, and the DOJ announced similar changes on March 17.

The European Union also warned parties that merger review is likely to take more time. The U.K.'s Competition and Markets Authority said that it is working remotely and expects to meet statutory deadlines, but will extend timetables “as necessary.” The German authority, the Bundeskartellamt, asked parties to put off filings if possible and moved to online communication.

But it is somewhat remarkable that, with much of the world working from home, on hiatus, or out of work altogether during the crisis, merger enforcement authorities are still open for business. It will be difficult to get information from third parties about markets and supply chains, for example, and access to secure databases and systems can be difficult for distant workers.

So what are the biggest changes that merging parties can expect? First, there may well be delays past the statutorily mandated “simple review” or waiting period, and the FTC won’t waive the waiting period for deals during the crisis.

The agencies discouraged parties from trying to leverage the statutory deadlines to push through mergers that make the authorities uncomfortable. As the FTC put it, “Companies and their counsel should appreciate that, as always, we will take affirmative action to protect consumers when necessary, including when an unmodified time period does not allow us to address competitive concerns.” In other words, if the authorities aren’t comfortable with what they can gather about a merger within the statutory waiting period, they will issue a second request for information (or, in the case of the EU, initiate an in-depth review) to be sure.

But the whole crisis also serves as a test for sending in these submissions digitally. That might end up being the biggest change merging parties see after the crisis winds down.

Most Important U.S. Changes

Perhaps the biggest change that the FTC announced is that the agency will not grant early terminations during the crisis. By itself, this will make a big difference in how mergers are handled. According to the FTC’s latest annual report, in fiscal year 2018, early termination was requested in 74% (1,500) of the adjusted transactions reported, and early termination was granted in 78% of those cases (1,170 cases, or 57.7% of the total adjusted transactions noticed). That means that more than half of noticed transactions were cleared within the initial 30-day waiting period mandated by the Hart-Scott-Rodino Act (HSR). Those deals will now be waiting at least until the 30-day period expires.

Second, the FTC cautioned that it is probably going to need more time to review the roughly 26% of cases that require more consideration. The agency is “conducting a matter-by-matter review of our investigations and litigations to consider appropriate modifications of statutory or agreed-to timing.” In other words, the agency is triaging deals to determine which ones it can likely finish reviewing on time and which ones are a bridge too far.

Although the FTC said that parties could expect to hear from the agency about timing modifications, the agency also said that they should “feel free” to reach out proactively to discuss timing themselves. For its part, the DOJ is asking for 30 days above current timing agreements for pending and to-be-filed mergers.

Electronic Frontier

The FTC is accepting only electronic submissions at present, with submissions received after 5 p.m marked as received the following business day. The DOJ and EU continue to accept paper submissions, but are encouraging electronic filing. The Bundeskartellamt had to change how it handles email communication to facilitate distance work for its staff.

As with so many of the challenges involved in distance work, the crisis may wind up an important opportunity to knock the kinks out of electronic submissions. If receiving the bulk of merger notifications digitally works well for authorities, it may mark the end of hand-delivering a big envelope of paperwork to a government building in order to merge two companies. Once the delays and the teleconferences and the postponed deadlines are past, that might be a lasting legacy of the coronavirus crisis.