On March 13, 2015, the Federal Trade Commission (“FTC”) announced revisions to its rules regarding the FTC’s process of determining whether to continue on with an administrative challenge to a merger in the situation when it loses a preliminary injunction motion in federal court.
When the FTC seeks to challenge a transaction, the FTC generally seeks a preliminary injunction in federal court to prevent consummation of the transaction pending the outcome of an internal administrative trial. If the injunction is implemented, it prevents the parties from integrating the assets until the conclusion of the administrative proceeding. The preliminary injunction is important as it preserves the FTC’s ability to create an effective merger remedy in the event the FTC’s Administrative Law Judge (“ALJ”) finds that the merger violates the antitrust laws.
Under new changes to Commission Rule of Practice 3.26, if the FTC loses its request for an injunction, the pending administrative proceeding will be automatically withdrawn or stayed if the parties file a motion to have the administrative case withdrawn. If all respondents move to have the administrative case withdrawn from adjudication, it will automatically be withdrawn two days after the motion is filed. If any motion to dismiss the administrative complaint is filed, the administrative case will automatically be stayed until seven days after the Commission rules on the motion for dismissal. All deadlines will be tolled for the amount of time the proceeding is stayed. While the automatic withdrawal of the complaint and stay are characterized as new changes to FTC rules, the changes to Rule 3.26 actually reinstate the long standing practice of an automatic withdrawal from, or stay of, the administrative litigation that was in place until 2009.
What does not change, however, is that the FTC has a right to disagree. Indeed, the FTC retains the ability to determine that continuing the litigation would serve the public interest. This means that the FTC will not automatically continue its internal administrative hearing to block a merger if it loses the injunction hearing in federal court.
When deciding whether to continue its administrative proceedings, the FTC will continue to evaluate five factors to determine whether it is in the public interest:
(1) a federal court’s factual findings and legal conclusions;
(2) any new evidence developed during the preliminary injunction proceeding;
(3) whether administrative proceedings will resolve important issues of fact, law or merger policy raised by the transaction;
(4) an overall assessment of the costs and benefits of further proceedings; and
(5) any other matter that influences whether it would be in the public interest to continue with the merger challenge.
The Commission is trying to tweak the rules in an effort to combine long standing policy with the revision of Rule 3.26 in 2009 to create an improved process with the goals of having predictable outcomes, resolving matters sooner, and becoming more transparent. Regardless of the change to automatic withdrawal or stay, the FTC will still evaluate the specific circumstances of each case when determining whether to proceed with administrative litigation after losing a preliminary injunction motion in federal court.