HSR and Potential Government Shutdown

After an extension signed into law in mid-January 2024, the U.S. government’s funding bills are now set to expire on March 1 or March 8, 2024. It is therefore possible once again that there will soon be a government shutdown, with important consequences for the Hart-Scott-Rodino (HSR) filing process and the running of the HSR waiting period. 

The problem is this: If the size of a transaction exceeds a certain threshold — currently $119.5 million — and certain other statutory or regulatory criteria are satisfied, the transaction cannot be consummated unless the parties file a premerger notification and report form with the antitrust agencies, and the waiting period under the HSR Act has expired, irrespective of whether the transaction raises antitrust concerns. However, if the government will not accept HSR filings during a shutdown, parties may be prevented from consummating their deal.

In January, the Federal Trade Commission (FTC) published a new shutdown plan, which currently remains in effect. The plan addresses the operations of the FTC once its appropriations run out, which could be as early as the expiration of the current funding bills at the beginning of March. Insofar as the plan relates to HSR, it provides:

1. If an HSR filing has been made before a shutdown occurs, the waiting period will continue to run and “HSR investigations” will continue. Unless a second request is made, the transaction for which the filing has been made may close during the shutdown once the waiting period expires.
2. The Premerger Notification Office (PNO) — which intakes and processes HSR filings on behalf of the FTC and the Department of Justice — will be closed in the event of a shutdown, and it will not “receive, accept, or process premerger notification filings.”

Under the HSR Act, the HSR waiting period begins to run “on the date of the receipt by the Federal Trade Commission and the Assistant Attorney General in charge of the Antitrust Division of the Department of Justice” of the HSR form. If the PNO will not receive HSR filings during a shutdown, the HSR waiting period cannot commence. This will have the apparent consequence that transactions for which a required HSR filing is not made before the shutdown cannot close until the PNO reopens for business, an HSR filing is then made, and the 30-day waiting period runs. The FTC’s shutdown plan does not suggest any workaround for this.

If a shutdown appears imminent, parties may wish to accelerate their HSR filings to make sure they are made before the shutdown occurs. One option parties have would be to make the HSR filing based on a term sheet or a letter of intent rather than a definitive agreement.