Antitrust Agency Response to 2019 Novel Coronavirus Disease (COVID-19)

Practical Law Legal Update w-024-4726 (Approx. 6 pages)

Antitrust Agency Response to 2019 Novel Coronavirus Disease (COVID-19)

by Practical Law Antitrust

FTC Procedural Changes

The FTC announced the following procedural changes, but stated it will continue to take affirmative action to protect consumers when necessary:

Moving almost all employees to a teleworking model.
Canceling all non-essential meetings and travel. FTC Bureau of Competition (BOC) staff may only travel with the Front Office's permission and only in compelling circumstances.
Conducting almost all essential meetings, including those with Commissioners and any Front Office meetings with the BOC, remotely by telephone or videoconference.
Contacting parties to discuss any proposed modifications to statutory or agreed-on timing of investigations and litigations, which will be made on a matter by matter basis. Counsel may reach out proactively to staff to begin these discussions, and should be flexible and reasonable.
Moving the Hart-Scott-Rodino (HSR) filing process to an electronic filing system (see HSR Filing Guidance).
Reallocating resources to maintain core operations, which may result in some loss of capacity in non-enforcement activities.

(See FTC, Changes in Bureau Procedure During COVID-19 Coronavirus Pandemic (March 16, 2020).)

DOJ Procedural Changes

On March 17, 2020, the DOJ announced temporary changes to its civil merger investigation process in response to COVID-19 during its move to a telework model. These changes include:

Requesting an additional 30 days for timing agreements in pending and proposed mergers to allow the DOJ to complete its review of a transaction after parties comply with document requests. If circumstances require, the Division may revisit its timing agreements with merging parties in light of further developments.
Moving the HSR filing process to an electronic filing system (see HSR Filing Guidance).
Conducting all meetings by telephone or videoconference when possible, unless there are extenuating circumstances.
Postponing all scheduled depositions, to be rescheduled using secure videoconferencing capabilities.

HSR Filing Guidance

On March 16, 2020, the FTC issued guidance for filing parties stating that the FTC and DOJ's Premerger Notification Offices (PNO) will implement the following procedures for Hart-Scott-Rodino (HSR) Act filings:

Beginning Tuesday, March 17, 2020, at 8:30am, HSR filings may only be submitted using a temporary electronic filing system and no hard copy and DVD submissions will be accepted. However, once normal procedures resume, all filing parties may have to submit hard copies or DVDs of HSR filings made using the temporary system.
Review of HSR filings will continue as usual, and while initially temporarily suspended, effective March 30, 2019, the agencies will continue to grant early termination in their discretion while the temporary system is in place.
The FTC PNO will continue to answer general questions via email at [email protected], and questions about specific HSR filings at [email protected].
Withdrawal or refile letters should be submitted as usual. The FTC PNO will supply the link for the contents of a refile on request.

Counsel using the temporary system will need to upload documents to a secure Accellion file-transfer platform. To use the electronic HSR filing system:

For each HSR filing being submitted, counsel must email [email protected] to request a link to use the system. Counsel should use "Request for HSR Filing Link" in the subject line. Counsel should not request a link until ready to file because requested links expire.
Counsel will then receive an email from the FTC containing a link that loads a form. First time users will then need to select a password.
Counsel should add all HSR filing documents using the same naming conventions and format for DVD filings, but should not upload Zip files (see FTC PNO Style Sheet for Hart-Scott-Rodino Filings). Counsel should then hit Submit. This uploads the documents to the cloud and sends them to both agencies' premerger offices.
Counsel should use the following naming convention in filling out the HSR form in the Subject Line: Attorney ### - Parties – Acquired or Acquiring – Date (for example: "SMITH 001 – A Company-B Company – Acquiring – 03-22-20." The ### should begin with 001, and increase for each filing counsel submits using the new system.
Counsel may submit certification and affidavit pages that have been electronically signed, but original signature pages should be:
- included among the files uploaded; and
- mailed to the FTC PNO so that they are at the agency when it reopens.
Any HSR electronic submission received after 5:00pm will be credited as received on the next business day.

(See FTC PNO, Guidance for Filing Parties March 16, 2020 (rev. March 17, 2020).)

After submitting an HSR filing using the electronic system:

Counsel will receive confirmation from Accellion that the filing has been completed, and should not email the FTC PNO before receiving confirmation.
Counsel will receive notification the HSR waiting period beginning and end dates within a day or two.
No transaction number will be assigned to a filing.
The FTC PNO will contact counsel for any deficient filing to coordinate the submission of additional or amended materials. In general, counsel can make additional submissions of:
- less than two pages by email; and
- more than two pages using Accellion.

The agencies may see a decreased need for resources devoted to HSR filings if the changing economic situation results in less deal activity and more abandoned transactions resulting in withdrawn HSR filings.

Competitor Collaborations Related to Public Health

On March 24, 2020, the FTC and DOJ issued a joint statement setting out an expedited antitrust procedure and guidance for businesses collaborating on public health projects during the COVID-19 pandemic (see FTC and DOJ, Joint Antitrust Statement Regarding COVID-19 (March 24, 2020)). The agencies acknowledged that unprecedented amounts of cooperation will be needed among private and public entities to protect the public's health and safety in response to COVID-19. The agencies reminded the public that there are many ways competitors can collaborate without violating the antitrust laws. The agencies committed to review of proposed conduct using an expedited procedure, providing that they will:

Respond expeditiously to requests to evaluate proposed conduct relating to COVID-19.
Resolve requests relating to public health and safety within seven days of receipt of required information.
Quickly process filings for new joint ventures under the National Cooperative Research and Production Act.
The FTC's Bureau Competition will temporarily accept requests for expedited staff advisory opinions concerning the likely analysis of proposed conduct under the antitrust laws

To allow individuals and agencies to act immediately in the face of the COVID-19 event, the agencies provided guidance on certain joint activities relating to health and safety that generally do not violate the antitrust laws, such as:

Research and development collaborations.
Sharing technical know-how, rather than company-specific data about prices, wages, outputs, or costs.
Providers' suggested standards for patient management developed for use in clinical decisionmaking.
Most joint purchasing arrangements among healthcare providers that increase efficiency and lower transaction costs.
Private lobbying relating to the use of federal emergency authority, including private industry meetings with the federal government to discuss ways to respond to COVID-19.

The agencies also stated they will continue to investigate and hold accountable those who use COVID-19 as a way to subvert competition or prey on vulnerable Americans. The agencies will bring civil antitrust actions for price-fixing, decreased wages or output, or reduced quality and efforts by monopolists to use their market power to engage in exclusionary conduct. The DOJ will also continue to criminally prosecute antitrust law violations for price-fixing, bid rigging, and market allocation.

Potential Further Agency Action

Although a federal government shutdown is not anticipated, the antitrust agencies' actions during the 2018 to 2019 federal government shutdown, which significantly reduced the workload that the agencies were able to perform, may give some insight into other potential responses to COVID-19. For example, if the move to teleworking overloads computer networks, the agencies may need to take steps to lessen their workload. During the shutdown, the US antitrust agencies:

Maintained essential staff for reviewing deals within the initial 30-day HSR waiting period.
Did not staff any matters without a statutory deadline or obligation, meaning that deals in Second Requests and all non-merger investigations were placed on hold.

The inability to perform these functions impacted the timing of closing for some deals. For example, the shutdown delayed the closing of the Amcor Ltd/Bemis Co Inc. deal, where the parties had secured antitrust clearances and other regulatory consents in all other jurisdictions besides the US (see Reuters, Australia's Amcor Delays Bemis Takeover Citing U.S. Gov't Shutdown (Jan. 24, 2019)).

Other steps the agencies could take to reduce their workload if needed include:

Issuing a Second Request to stop the HSR waiting period from running on filings under review, whether or not there are competitive issues.
Prioritizing matters with pending or active litigation, or where a consent is close to being finalized.

For more on how antitrust agencies review mergers, see Practice Note, How Antitrust Agencies Analyze M&A. For a clause merging parties can use to extend a transaction's drop-dead date if a US federal government shutdown affects Hart-Scott-Rodino (HSR) Act antitrust review, see Standard Clause, Purchase Agreement: Drop-Dead Date Extension for Government Shutdown Preventing HSR Approval.

Antitrust Agency Response to 2019 Novel Coronavirus Disease (COVID-19) | Practical Law