The Federal Trade Commission has voted to finalize a proposed rulemaking codifying the informal "pull and refile" option for parties to a proposed merger that required a Hart-Scott-Rodino (HSR) filing. The new rule also mandates automatic withdrawal of parties' HSR filings where the transaction will not go forward. Despite initial indications that the automatic withdrawal provision might be objectionable to private parties, the FTC received only a single comment and voted 3-1 in favor of the proposed rule without alteration.
As described in a prior alert ( http://www.jonesday.com/antitrust-alert--us-ftc-proposes-amendment-to-hsr-rules-codifies-pull-and-refile-and-mandates-withdrawal-for-deals-that-will-not-proceed-02-14-2013/), the option to "pull and refile" HSR filings has been informally permitted by the FTC's Premerger Notification Office for years. Parties often choose to "pull and refile" to provide the agencies with more time to investigate and in the hope of avoiding a Second Request. The new FTC rule formalizes this process. At least initially more controversial was the aspect of this rulemaking that mandates automatic withdrawal of HSR filings when a party to a transaction files certain required disclosures with the SEC indicating that a transaction has been terminated or that an offer to acquire shares from third parties has expired.
In the proposed rulemaking, the Commission explained the automatic withdrawal rule as a means to avoid expending scarce agency resources investigating "hypothetical transactions," namely those that have been publicly terminated or withdrawn under SEC regulations. In a concurring statement, Commissioner Joshua Wright referred to the proposed rule as "a solution in search of a problem," and worried that it would "impose costs in excess of any potential benefits." In light of his concerns, Commission Wright expressed hope that interested parties would "avail themselves of the opportunity to submit public comments so that the Commission can make an informed decision" about the potential burdens of this rule.
The Commission received only a single comment, from a law student, expressing the view that "the automatic withdrawal rule will discourage some of the mergers, acquisitions, and transfers that contribute to market growth" by imposing substantial costs and causing confusion. In its response to this comment, the Commission dismisses these concerns as not supported by any evidence and points out that "no comments were received from bar associations, industry groups, companies, or individuals who are likely to be directly affected by the rules," suggesting that no one whose business might actually be subject to this rule appears to share the concerns of the lone commenter. Commissioner Wright dissented, reiterating his view that "the record does not support the conclusion that the new automatic withdrawal rule offers any benefits that justify its adoption."
The new rule, 16 C.F.R. 803.12, requires the filing party to notify the FTC and DOJ if any filing has been made with the SEC publicly announcing the expiration, termination, or withdrawal of a tender offer or the termination of an agreement or letter of intent. The HSR notification will be deemed to have been withdrawn effective on the date of the SEC filing. The automatic withdrawal rule does not affect a transaction if the waiting period has expired or has been terminated, unless there is a timing agreement in place with the reviewing agency to delay closing of the transaction beyond the HSR Act waiting period.
The June 28, 2013, final amendments, Commissioner Wright's dissenting statement, and the public comment can be found here: http://www.ftc.gov/opa/2013/06/hsr.shtm
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