On August 7, 2018, the FTC’s Bureau of Competition announced a new new Model Timing Agreement for its merger reviews. This is part of its initiatives to streamline its merger review process.
New FTC Model Timing Agreement
Merger investigations typically involve timing agreements, which provide an agreed-upon framework for the timing of certain steps in the investigation. Timing agreements provide the FTC staff with notice of when the parties plan to close the deal. Both parties and staff benefit from having such a framework established shortly after issuance of the Second Request as it allows staff and the parties to engage in substantive discussions with more certainty about the timing.
The version of the Model Timing Agreement supersedes any versions that parties may have seen previously. It is worth noting that a timing agreement does not affect the statutory expiration of the Hart-Scott-Rodino waiting period. Regardless of the commitments made in the timing agreement, the HSR waiting period expires 30 days after the parties certify substantial compliance with the Second Request or 15 days in a cash tender or bankruptcy filing.
Key Provisions of the Model Timing Agreement
Many of the provisions in the Model Timing Agreement are similar to what has been used in the past.
The Model requires parties to agree not to close the proposed transaction until 60 to 90 calendar days following certification of substantial compliance with the Second Request depending on the complexity of the competition issues raised by the deal. This timeframe, which is consistent with prior practice, is intended to serve as a benchmark and not an upper limit. The post-compliance timing will depend on the circumstances of each case. For instance, in matters involving particularly complicated issues and industries, staff may need more than 90 days to analyze data or information before making a recommendation to the Commissioners.
The Model also requires that the parties provide 30 calendar days’ notice before certifying substantial compliance with the Second Request, and 30 calendar days’ notice before consummating the proposed transaction. These notice requirements help staff structure the timing of preparing a recommendation on the matter. It also allows the parties and FTC staff time to plan for any meetings that the parties would like to have with management, the Bureau of Competition’s Front Office, and individual Commissioners.
Parties that try to limit staff’s time to review Second Request materials may cause additional problems for themselves. By taking such action, they will likely be foreclosed from meeting with the Bureau of Competition or Commissioners. In addition, parties are advised not to file their notice of intent to consummate the transaction if they know that they cannot close within 30 days. Rather, they should file the notice when they actually expect to be able to close. An early notice would force the Bureau of Competition to assume that closing was imminent and take any necessary steps based on that assumption. Such a misunderstanding could negatively alter on-going negotiations with the parties.
With respect to communication and exchange of information, the Model Timing Agreement commits Bureau of Competition staff to engage in a good-faith continuing dialogue regarding facts and relevant legal and economic issues related to the case. Parties are encouraged to raise arguments and present white papers early in the review process. Waiting until the meeting with the Bureau of Competition’s Front Office, or even until meeting with the Commissioners is probably too late. So, best practices are to make those arguments sooner so that they can be vetted by staff and division management. While the Model anticipates continuing dialogue with staff, the Bureau of Competition Front Office will meet only once with the parties during the Bureau of Competition’s review of the transaction. Parties are free to take that meeting whenever they like, but an early meeting on a discrete issue, rather than a later meeting on the Bureau’s broader recommendation to the Commission, may not be the parties’ best use of this opportunity.
The Model contains timing and logistics provisions regarding document productions and depositions. These timelines ensure that FTC staff has adequate time to review information submitted by the parties, and provides parties with sufficient notice of the identity of potential deposition witnesses.
Finally, the Model includes a stipulated Temporary Restraining Order (“TRO”) that prevents the parties from consummating the proposed transaction until after the fifth business day following a court ruling on a motion for a preliminary injunction. This provision is designed to avoid time-consuming and distracting negotiations between the parties and staff related to a TRO. This avoids the necessity of arguing a TRO.
Parties still encouraged to reach out to staff early on in a Second Request investigation to negotiate a timing agreement. The FTC expects that most parties will enter into timing agreements that will conform to the new Model Timing Agreement. But as always, different circumstances will result in deviations from the Model. The Bureau of Competition’s Front Office will review all timing agreements before execution and will consider the justification for any changes or deviations from the Model. Part of the goal of an effective timing agreement is to facilitate constructive feedback between staff and the parties by creating more certainty about the timing of an investigation. The new Model allows parties to better anticipate the Bureau of Competition’s expectations in negotiating timing agreements.