How the FTC’s Disdain for Mergers Became Shutdown Protocol

Sean Heather
Senior Vice President, International Regulatory Affairs & Antitrust, U.S. Chamber of Commerce

Published

March 04, 2024

As part of today’s routine budget brinksmanship, federal agencies must create lists of essential functions and personnel in the event of a government shutdown. In particular, to prepare for possible lapses in congressional appropriations, agencies must determine which functions and personnel would continue even in the absence of federal funds. Agencies prepare these lists with their respective leadership and general counsels, as both the law and policy priorities come into play.

For years, the Federal Trade Commission (FTC) had concluded that merger review constituted an essential function required both by law and policy. As recently as last fall, FTC’s internal guidance noted, in the event of an appropriations lapse:

A small number of employees would also be excepted from furlough because they are engaged in activities that are necessarily implied by law. In this regard, the [Hart-Scott-Rodino] statute requires parties to notify the Commission and the DOJ before they may consummate certain proposed mergers and acquisitions. The HSR form must be submitted to the agencies via an electronic portal. Once those documents are delivered to the Commission, they must be reviewed and processed – and where appropriate, investigated – within a statutory deadline to determine whether the U.S. Government has a cognizable interest in challenging the transaction before it is consummated.

On January 23, 2024, however, the FTC reversed course. In its latest memo, the FTC now asserts that it will not process mergers in the event of a government shutdown. It notes:

The Commission’s Premerger Notification Office (PNO) will be closed during the shutdown, and the Commission will not receive, accept, or process premerger notification filings under HSR, or respond to questions or requests for information or advice from outside parties.

What compelled the FTC to flip-flop on its legal analysis? By all accounts, nothing besides its disdain for mergers it seems. There has not been an intervening change in law or in the government’s interests before January 23, which would be required given that federal statutes impose a deadline on the government to determine whether it has a cognizable interest in challenging a transaction.

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Ultimately, it’s the Administration’s general hostility to mergers and the Commission’s willingness to bend the law to suit its own policy preferences to blame for this notable departure from past precedence.

Under its current leadership, the FTC has repeatedly subverted existing norms and statutes, such as “temporarily” suspending early terminations; attempting to rewrite decades of antitrust precedent via the revised merger guidelines; inappropriately coordinating with foreign competition agencies; ignoring recusal recommendations; and seeking to more than quadruple the costs of reporting a transaction.

Add this latest flip-flop to the list of ways in which the Commission is trying to chill lawful and pro-competitive merger activity, and its politically motivated agenda becomes even clearer. While in the grand scheme of things, this particular action may be smaller than the FTC’s other anti-competition moves, it should raise questions in Congress and the courts about this Commission’s willingness to bend the law to suit its own policy preferences.