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Aug. 12, 2021

What HSR Filers Should Know About New FTC Warnings

By Denise M. Gunter, Colleen Pleasant Kline, Carrie A. Hanger

Law 360

The Hart-Scott-Rodino Antitrust Act requires parties to some mergers, acquisitions, joint ventures and other transactions notify the Federal Trade Commission and the U.S. Department of Justice and observe a waiting period before the transaction can close. In a recent article for Law360, Nelson Mullins partners Denise M. Gunter, Colleen Pleasant Kline, and Carrie A. Hanger provided actionable insights for HSR filers amid the immense rise in merger and acquisition activities, lower reporting thresholds under the HSR Act, and new warnings from the FTC to filers.

“Filers should expect to wait the full 30 days – 15 days in the case of bankruptcies and cash tender offers – before any notified transaction may close,” the authors caution. While the only apparent exception is early termination may be granted after a second request, i.e., an extensive subpoena for additional information and documents, issues. However, the process of drafting and issuing a second request requires significant government resources, and parties of course wish to avoid receiving and responding to second requests.

The authors also note that the FTC has announced that it has begun to issue “Pre-Consummation Warning Letters” to counsel for parties in certain cases where an investigation transaction has already begun. These letters advise that even though the HSR waiting period is about to expire imminently, the investigation remains open, so the parties will be closing the transaction at their own risk. These warning letters will be sent only where a second request has not been issued.

Assume you filed an HSR on behalf of a client and received such a letter. Now what? The authors write, “Several scenarios are possible, and they all require close collaboration of the legal teams in mergers and acquisition, antitrust, and corporate governance to help clients understand and manage potential risks. But well before such a letter arrives, thoughtful planning and execution in the early stages of a transaction may make it less likely that a warning letter is ever sent.”