FTC Is Pinpointing Where Merger Reviews Get Held Up

Federal Trade Commission staffers are tracking how long certain parts of the agency’s merger review procedures are taking to hone in on problem areas, the agency’s competition chief told Bloomberg Law in an interview.

The FTC is focused on the “second request” stage, which is reserved for the small percentage of proposed deals that raise competition concerns. Second requests are costly, preventing merging companies from completing their deals, and can drag on for months or even years.

Bayer AG closed its $63 billion acquisition of Monsanto Co. in June after a two-year process of reviews involving regulators around the world, including the U.S. Justice Department.

Linde AG’s $47 billion merger deal with Praxair Inc. has faced similar delays in the U.S. and elsewhere. The FTC is still scrutinizing the agreement after issuing a second request a year ago.

“We’ve been working on obtaining better data on the duration of particular parts of the second request process,” Bruce Hoffman, director of the FTC’s competition bureau, told Bloomberg Law. “That, I think, will help us figure out if there’s some part of the process that’s particularly prone to delay or that could be more efficient. Without that kind of data, to some extent, you’re shooting in the dark.”

The initiative, a key priority for FTC Chairman Joseph Simons, is part of a larger move to streamline merger reviews, Hoffman said.

Model Timing Agreement

The FTC on Aug. 7 unveiled a related “model timing agreement” designed to provide a framework for certain steps in merger investigations. The agreement gives merging parties and FTC staff a clear set of expectations to work with when determining timelines, Hoffman said.

A big holdup is the amount of information demanded when the FTC or Justice Department issues a second request, practitioners said. The growing size and complexity of deals and the rise of antitrust enforcement regimes worldwide are other factors that have been cited.

The FTC is aware of the problem and is exploring different ways to improve its own procedures, but that can be a difficult balancing act, Hoffman said. The new model timing agreement is just one of several overhaul steps.

Some of the agency efforts stem from a major project initiated last year while Republican FTC Commissioner Maureen Ohlhausen was acting chairman.

“There are limits on what we can do,” Hoffman said. “Everyone has a stake in trying to make this process as efficient as possible. It’s a matter of trying to find ways to do it that don’t compromise our investigations.”

The model timing agreement provides for more uniformity between the merger shops within the agency’s competition bureau, according to James Fishkin, an antitrust partner at Dechert LLP.

“This is the first publicly released model timing agreement by the FTC,” he told Bloomberg Law. “Prior to the issuance of this, timing agreements at the FTC were negotiated separately, with the lead attorney on each matter in each merger shop.”

Increased Leverage?

The agreement falls short of the kind of process improvements the business community has been seeking, according to another industry source who asked not to be identified.

“It’s written to increase the leverage that the FTC has against the parties,” the source said. “There are no process improvements here to reduce the burden, just additional limitations on the parties’ ability to drive timing.”

The agreement requires parties to agree not to close their proposed transaction for up to 90 calendar days after the FTC certifies “substantial compliance” with its second request for information.

There might be circumstances in which the timing agreement could slow down the review process rather than speed it up, Hoffman said.

“The agreement sets specific timing periods, so you could certainly have a subset of cases that end up having a slightly longer review than you might have had without an agreement,” he said.

“But I don’t think that will be true in the majority of cases,” he said. “Generally, the merging parties work pretty closely with the staff to get mutually acceptable timing. This agreement just simplifies the process of doing that.”

To contact the reporter on this story: Alexei Alexis in Washington at aalexis@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com