During a recent panel of the ABA's 2014 Antitrust Merger Enforcement Trends and Strategies, Alexis Gilman, deputy assistant directorat at the FTC's Bureau of Competition, and Harry Robins, an antitrust attorney with Morgan, Lewis & Bockius, presented wildly divergent views about the use of antitrust timing agreements, reports Corporate Counsel.
As outlined by the FTC, the Hart-Scott Rodino Act requires that, with certain exceptions, parties must report any deal that is valued at more than $66 million to the FTC and DOJ for review. After the companies report a proposed deal, the agencies will do a preliminary review to determine whether it raises any antitrust concerns that warrant closer examination. During the preliminary review, the parties must wait 30 days (15 days in the case of a cash tender or bankruptcy transaction) before closing their deal. Based on what the agency finds, it can: 1) terminate the waiting period and allow the parties to consummate their transaction (this action often is referred to as an “early termination”); 2) let the waiting period to expire, which allows the parties to consummate the transaction; or 3) if the initial review has raised competition issues, the agency may extend the review and ask the parties to turn over more information so it can take a closer look at how the transaction will affect competition (this action often is referred to as a “second request.”). If a second request is issued, the companies must provide more information. Once the parties have certified that they have substantially complied with the request, the Commission has 30 additional days (10 days in the case of a cash tender or bankruptcy transaction) to complete its review of the transaction and to take action if necessary. The agency may decide at this point to: 1) close the investigation; 2) enter into a settlement with the companies; 3) take legal action in federal district court or through the FTC’s administrative process to block the deal from going forward. A timing agreement delays a proposed deal and allows the government extra time to investigate, typically extending the 30-day period for another 30 days and allowing it to be renewed repeatedly.
As reported by Corporate Counsel, Mr. Robins says that timing agreements are "an example of very smart and able government lawyers trying to stretch the limits of what the law intended" and claimed the government uses its "leverage" to intimidate companies into agreeing to more time. The government, Mr. Robins added, "says either enter a timing agreement, or we'll stop looking at your merger and just prepare to litigate." Conversely, Mr. Gilman argued that a timing agreement can make a merger process more efficient because it's not uncommon for parties to drop millions of documents on the government toward the end of the process, giving investigators only 30 days under the law to assess them. "In terms of actually having the staff focus on the merits of the merger, a timing agreement really enhances that by showing we are not trying to jam you, that we want to look at the information you present."
While the government's position regarding timing agreements is not surprising, companies are probably more likely to agree with Mr. Robins's assessment of them: "There is no easy solution to a timing agreement. We just have to live with it until we get more clients with enough backbone to be willing to challenge the government." If you are interested in seeing how other companies have handled this issue -- and what happened to the deals under investigation -- click here for an excellent report by Ober Kaler regarding the role timing agreements played in four 2011 prospective mergers: ProMedica-St. Luke's Hospital Merger; LabCorp-Westcliff Medical Labs Merger; Providence Health-Spokane Cardiologist Merger; and Northeast Health, St. Peter’s Health Care Services and Seton Health Hospital Merger.