Making the Second Request Process Both More Streamlined and More Rigorous During this Unprecedented Merger Wave

By: Holly Vedova (Federal Trade Commission)

Given the recent surge in merger filings and the Commission’s obligation to protect Americans from illegal transactions, the Bureau of Competition is instituting new process reforms to best to use its limited resources. These reforms build on other enhancements the Bureau announced in an August blog post.

The Hart-Scott-Rodino (HSR) Act requires that companies provide the FTC and Department of Justice with advance notice of certain transactions above a certain threshold, to provide the agencies 30 days to pursue an initial investigation and to determine whether additional information is needed to assess the legality of the transaction. If the FTC or DOJ seeks additional information through what is known as a “second request,” the law forbids merging firms from consummating a transaction until the companies have substantially complied with the additional investigatory request. When the FTC issues a second request, FTC staff typically engage in negotiations (sometimes quite extensive) with merging companies to tailor the scope of search to meet the specific needs of our investigation, and to consider modifications requested by the companies under investigation.

Mergers and acquisitions have hit an all-time high. Mergers filed with the antitrust agencies have doubled from 2010 to 2020 to nearly 2,000 deals a year. In the first eight months of 2021 alone, 2,436 acquisitions have already been filed with the agencies, meaning that right now these eight months have already seen many more filings than most other years. Based on the trend in these numbers, we project that we may hit 3,500 merger filings before the end of the year. There is no question now that this is going to be a record-setting year. This merger wave – which includes anticompetitive transactions that should have never been contemplated – has taxed federal antitrust agencies. Between 2010 and 2016, FTC and DOJ funding stagnated in nominal terms, and, in real terms, effectively declined. In 2017 and 2018, the FTC’s full-time employee headcount declined, and it remains roughly two-thirds of what it was 40 years ago. And, since the 1990’s, the scope of investigation and litigation discovery has expanded exponentially, with voluminous electronic submissions demanding substantial staff resources.