Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: FTC rule change limits administrative adjudication after denial of preliminary injunction, (Mar 16, 2015)

By Jeffrey May, J.D.

The FTC will suspend an administrative challenge to an acquisition or merger when a district court denies a preliminary injunction in a section 13(b) case and the merging parties seek withdrawal from adjudication or dismissal. The Commission issued amendments to its rules or practice to clarify that the suspension will be automatic upon the request of the respondents. However, the FTC still can pursue the litigation if it is determined that the proceedings would serve the public interest.

The original 1995 Rule 3.26 provided that a motion for withdrawal generally would result in an automatic withdrawal and that a motion for dismissal would result in an automatic stay. Due to concerns over delays in proceedings, the rule was modified in 2009 such that motions for withdrawal or dismissal would not result in an automatic withdrawal or an automatic stay. The Commission has now returned to the automatic mechanisms in the 1995 rule.

The Commission is, however, retaining certain timing requirements in the 2009 rule for the filing of motions and deadlines for Commission determinations of these motions. The agency noted that the timeframe for complaint counsel to respond to motions for dismissal has been shortened from 14 days to seven days.

In deciding whether to pursue Part 3 administrative litigation, the agency will continue to follow its 1995 Policy Statement Regarding Administrative Merger Litigation Following the Denial of a Preliminary Injunction. The FTC will consider the specific circumstances of each case when making this decision.

Other rule changes. In addition to technical corrections to other Part 3 Rules of Practice, the Commission is amending rules in Part 4 pertaining to procedures and contact information for accessing public record materials. The changes implement technical revisions to the rule governing Freedom of Information Act requests and to the FTC’s Privacy Act rule.

The Commission also revised certain rules governing the conduct of its investigations (Part 2). Changes to Part 2 add the director and deputy director of the Office of Policy Planning to the list of FTC officials who have the authority to modify the terms of compliance with compulsory process because of that Office’s frequent role in conducting studies that involve the use of process. The Commission is extending by 10 days its deadline for disposing of petitions to limit or quash compulsory process.

Effective date. The rule changes will take effect immediately upon publication in the Federal Register, which is expected shortly. The agency takes the position that, because these rule revisions relate solely to agency procedure and practice, publication for notice and comment is not required under the Administrative Procedure Act.

Response from federal lawmakers. Some Republican lawmakers question the wisdom of allowing the FTC to utilize the different processes when seeking to block a proposed merger or acquisition, as well as the different standards that apply to the two federal antitrust agencies when seeking a preliminary injunction in court. House Judiciary Committee Chairman Bob Goodlatte (R-Va.), Regulatory Reform, Commercial and Antitrust Law Subcommittee Chairman Tom Marino (R-Pa.), and Regulatory Reform, Commercial and Antitrust Law Subcommittee Vice-Chairman Blake Farenthold (R-Tex.) applauded the FTC's decision to limit adjudicative proceedings following a denial of a preliminary injunction request. However, they do not believe the rule change is enough.

“Under existing law, the rules for reviewing a merger or acquisition differ depending on whether the FTC or the Justice Department reviews the merger,” the lawmakers noted. “Although the FTC has taken a step to address the disparities in the merger review process, the rule does not go far enough and there is still more work to be done. This reform needs to be made permanent so that it is not subject to discretion or the whims of an ever-changing agency. ”

The lawmakers intend to introduce legislation, known as the “Standard Merger and Acquisition Reviews Through Equal Rules Act (SMARTER Act),” to address their concerns.

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