In our last post, we began looking at some of the legal aspects of corporate mergers, which involve not only potentially complicated filing requirements under state law, but also possible review by authorities responsible for enforcing federal antitrust laws.
The two agencies responsible for enforcing these laws are the Federal Trade Commission and the Department of Justice. Most of what the agencies do is examine the potential effects of proposed mergers before they occur, though the agencies do also examine some completed mergers that do harm to consumers after the fact.
The process by which the agencies review mergers is known as premerger notification and the merger review process. The first step in the process is for companies to file notice of a proposed merger deal with the FTC. This is not necessary with every proposed merger, but only for deals which meet minimum values and companies meeting a minimum size. After notice is given, the case is assigned to either the FTC or the DOJ, and the reviewing agency receives clearance to obtain non-public information about the companies either from them or from other sources.
Once the agency conducts a preliminary interview of the proposed merger, one of a couple things can happen. If the agency grants early termination of the required waiting period, or the waiting period expires, the companies are free to pursue the merger. If, on the other hand, the agency makes a request for additional information, the waiting period is extended and the companies cannot close the deal until they have substantially complied with the request for additional information. Once there is substantial compliance with this request, there is usually another period of time for the agency to review the proposal and take any action. Often, this waiting period is determined by agreement of the parties and the agency.
Once the waiting period has expired, the agency may close the investigation, which would allow the companies to proceed with the merger. The agency may, however, also seek to secure an agreement with the companies aimed to addressing any competitive concerns proposed by the merger. If the transaction is deemed to be irredeemable, the agency may then seek to have the proposed transaction terminated.
In our next post, we’ll say more about how an experienced attorney can help businesses navigate this process, and mergers in general.