The US federal government is at risk of a partial shutdown unless Congress can enact appropriations to fund certain federal operations by September 30, 2023. Both the Department of Justice (DOJ) and Federal Trade Commission (FTC) have issued plans for how a shutdown will impact antitrust merger enforcement. Separately, a shutdown will impact the Committee on Foreign Investment in the United States (CFIUS) and its ability to review new and existing filings.
Key Takeaways
US Merger Enforcement
- Hart-Scott-Rodino (HSR) filings will be accepted by the agencies during the government shutdown.
- The FTC has indicated it has funding to continue normal operations for three weeks.
- Due to its limited staff, the Premerger Notification Office of the FTC may not answer email or telephone inquiries regarding HSR rules or filing procedures.
- HSR waiting periods will continue to run during a government shutdown and DOJ and FTC staff will continue to review premerger filings and conduct investigations to determine whether to challenge reported transactions under the antitrust laws.
- Second Requests will continue to be issued.
- If engaged in merger litigation, FTC and DOJ attorneys will notify opposing parties and the courts of the government shutdown and attempt to negotiate timing extensions and suspensions. If such relief is not available, they will continue to litigate the matter.
- The FTC and DOJ websites will be available during a shutdown but will not be regularly updated.
- The agencies’ review of public comments on proposed changes to the HSR form and the US merger guidelines may be delayed.
- Additional guidance may be published by the FTC or DOJ after the shutdown goes into effect.
CFIUS
- The deadlines for cases (including notices and declarations) are “tolled” during the lapse. CFIUS filings can be submitted during the government shutdown but will not be commented upon or accepted for review.
- For extended shutdowns, longer-than-usual delays in providing comments on drafts or accepting formal filings are likely to occur after the government reopens.
Analysis
The DOJ and FTC have developed shutdown plans in the event of a government shutdown. Each plan designates which employees are furloughed during a shutdown and which employees are excepted from the furlough requirement.
US Merger Enforcement
The DOJ and the FTC both issued contingency plans indicating that certain employees connected to antitrust enforcement within the Antitrust Division of the DOJ and the Bureau of Competition at the FTC will be excepted from the furlough and will continue to conduct antitrust enforcement activities.
During the government shutdown, the FTC and DOJ will accept HSR filings and certain staff from the Commission’s Premerger Notification Office will be excepted from furlough to accept filings and organize them for review. HSR waiting periods will run their normal course during the shutdown, and both agencies will keep sufficient staff on hand to investigate mergers that could raise competitive issues. For litigated matters, both agencies have indicated that when possible, they will attempt to secure a continuance or otherwise request suspensions of dates for trials, hearings and filings, or similar relief to preserve the government’s claim. If such relief is not available, both agencies will commence litigation or continue to litigate the matter.
In the current DOJ Contingency Plan, of the 746 Antitrust Division employees, a total of 437 (59%) are excepted from furlough in the case of a government shutdown. In the current FTC Contingency Plan, of the 416 total Bureau of Competition employees, a total of 208 (50%) are excepted from the furlough. Moreover, within the Bureau of Economics, of the 120 employees, 11 (9%) are excepted from the furlough.
It is difficult to anticipate whether the FTC or DOJ would be more likely to request that merging parties refile their HSR forms (starting a new waiting period), or whether they would be more likely to issue a Second Request because of more limited staffing. It will likely depend on how long a shutdown lasts and how substantial the merger review workload is during a shutdown.
CFIUS Review
With respect to CFIUS, the U.S. Department of the Treasury (which chairs CFIUS) recently issued guidance advising that all deadlines or time limitations for cases under review by CFIUS will be tolled. If, for example, the shutdown lasts 10 days, an extra 10 days would be added to any 30-day declaration assessment period or 45-day notice review or investigation period. Mitigation agreement negotiations, as well as comments and acceptances of filings, will also be suspended during the appropriations lapse.
A prolonged shutdown (like in 2013) could cause a backlog in new filings and could affect deals insofar as closing is conditioned on CFIUS’s clearance. Moreover, once the shutdown ends, CFIUS may be delayed in providing comments on new draft filings or accepting new formal filings.
Links to the current DOJ, FTC, and Treasury Contingency Plans can be found here:
