Second Requests a First-Order Issue in M&A
These discovery requests call on companies to sift through massive amounts of data and produce relevant information that will be used by the government to investigate the deal and its potential outcomes.
April 29, 2015 at 12:08 AM
4 minute read
Last week's announcement that the blockbuster $45 billion merger of Comcast Corp. and Time Warner Cable Inc. had fallen through served as a reminder that regulators can thwart deals that once seemed like a sure thing. Even for transactions that ultimately succeed, there are methods that regulators can use to put on the brakes temporarily, costing the companies precious time and resources.
One way the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice can—and sometimes do—stall deals due to concerns about the transactions' effects on competition is through the use of “second requests,” which were authorized in the Hart-Scott-Rodino Antitrust Improvements Act of 1976. These discovery requests call on companies to sift through massive amounts of data and produce relevant information that will be used by the government to investigate the deal and its potential outcomes.
In the FTC's last report on the HSR Act, which covered the government's fiscal year 2013, the agency indicated that 47 second requests were issued for proposed M&A deals. With the M&A market growing more active, it looks like the numbers are going to rise. “In our business and practice there has been a huge increase in second requests,” Josh Hogue, a managing director at Huron Legal, told CorpCounsel.com. He added that the trend likely corresponds with both the overall jump in the number of deals being made, as well as the growth of mega-deals. The bigger the deal, the more likely it is that the government may be interested in investigating it for possible antitrust violations.
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