FTC’s New M&A Rules Came from Rare, Bipartisan Compromise

A new US antitrust rule requiring companies to give the government more information on their mergers and acquisitions came with a surprise twist: The Federal Trade Commission passed it with a rare 5-0 vote.

The agency’s two Republican commissioners, who have vociferously opposed some of Chair Lina Khan’s other major rulemakings, joined the panel’s three Democrats in supporting changes to rules for complying with the Hart-Scott-Rodino Act. The discussions also involved the agency’s top competition staffer and the Justice Department’s antitrust division.

The update, released Oct. 10, followed months of intense behind-the-scenes negotiations in which the Republicans — Andrew Ferguson and Melissa Holyoak — won some concessions. It was akin to the bipartisan collaboration that characterized previous commissions and came just ahead of national US elections that have created a deeply polarized political atmosphere.

In the end, the rule was done “consistently with the law, and in a reasonable and sound way,” Ferguson said in an interview. “While I would not have included every item in the Final Rule, overall, it modernizes the filing requirements to be more congruous with today’s economy while remaining within the bounds of the law.”

The bipartisan turn caught some by surprise.

The FTC and Justice Department had jointly proposed a revision of the rules in June 2023 that was hotly contested by industry, which warned the changes would impose significant costs on merging companies. Both the Chamber of Commerce, the nation’s largest business lobby, and the American Investment Council, a trade association for the private equity industry, had threatened potential litigation. Both groups have said they are reviewing the final rule and considering next steps.

Read more: US Merger Review Revamp Set to Delay Deals by Months

Henry Liu, director of the FTC’s Bureau of Competition, declined to discuss details of the negotiations, but said the rule was a product of “healthy dialogue among the commissioners” including “a rigorous cost-benefit discussion about the new requirements.”

“The fact that we had a bipartisan 5-0 vote is important for the longevity and sustainability” of the rule, Liu said in an interview. “It has a better chance of being supported regardless of a change in administration.”

Behind the Scenes

In exchange for their votes and statements of support for the rule, the Republicans garnered a promise that the FTC will seek to reinstate quicker reviews on non-problematic deals and the withdrawal of a controversial pact with the Biden administration’s labor agencies, said people familiar with the negotiations, who asked not to be named discussing internal agency deliberations.

Read more: Merging Firms Must Reveal More Data in Antitrust Rule Revamp

The agencies initially planned to release the final rule in early April, but delayed after the Senate confirmed the two Republican commissioners in late March.

The Republican commissioners began pushing for changes to the HSR rules soon after they joined the agency, the people familiar said.

The negotiations became more serious over the summer, when Liu sought a concrete list of changes the GOP members would need for their vote, the people said.

Holyoak and Ferguson provided a written file of what they wanted removed, the people said, with the biggest request being the deletion of the section related to labor — a key feature for the Democrats. They also pushed for eliminating the need to provide organizational charts and draft versions of merger documents as well as reducing the amount of detail on previous acquisitions that companies must provide, according to the people.

The negotiations took on renewed vigor after a federal judge in Texas ruled against the FTC in its non-compete rulemaking in early July, the people said. Judge Ada Brown’s decision adopted many of the same arguments that Holyoak and Ferguson had articulated in their dissents. The FTC’s Democrats hoped that unanimous, bipartisan support for the merger rules would make business groups less likely to sue, the people said, or help the agency win in court if a lawsuit was filed.

The judge later blocked the non-compete rule from going into effect; the FTC is appealing.

Liu played a key role in brokering the compromise, according to the people, speaking to each commissioner individually. The Republicans also insisted on two conditions not directly related to the rule, the people said: the reinstatement of quick sign-offs for non-problematic mergers and the withdrawal of the FTC from a memorandum of understanding with the National Labor Relations Board.

When companies file unproblematic mergers for antitrust review, they can request the agencies grant them so-called early termination rather than waiting a full 30 days for the statutory deadline to expire. In February 2021, the Biden administration said it was suspending the process because of an unprecedented number of merger filings. While the agencies said the suspension was temporary, the FTC and DOJ never reinstated the practice, even after the volume of deals slowed.

The justifications for pausing early terminations ended long ago, Republican commissioner Ferguson said.

The return “removes a politically motivated bureaucratic burden on procompetitive transactions,” he said.

Read more: FTC Withdraws From Labor Pact in Antitrust Merger Enforcement

The Republicans also balked at the FTC’s decision in late August to sign on to a deal with the NLRB and Department of Labor, the people said. On Sept. 27, the FTC quietly backed out of the deal, without offering a reason. The FTC already has separate individual agreements with both the NLRB and the Department of Labor.

After the rule goes into effect, the FTC will establish parameters for when it may allow deals to close early without waiting the full 30 days. The final rule has yet to be published in the Federal Register and will go into effect 90 days after that.

At an Oct. 16 public appearance, Democratic commissioner Rebecca Kelly Slaughtersaid the new HSR rules were a “product of compromise,” acknowledging that the Democrats agreed to drop some features they had wanted.

“For me, the question at the end of the day is, does this proposed rule, compromises included, represent a meaningful and measurable improvement?” she said. “And I think it really does. With the unanimous support of all the commission, we can have confidence that the rule will have staying power.”

To contact the reporter on this story:
Leah Nylen in Washington at lnylen2@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Elizabeth Wasserman

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