Premerger Notifications

From Bruce Hoffman, Acting Director, Bureau of Competition, FTC
December 20, 2017

When preparing an HSR filing for a proposed acquisition, some practitioners counsel their clients not to submit binding agreements or side letters negotiated between the merging parties that reflect the parties’ antitrust review obligations, risk-sharing commitments, and potential remedial measures. Some claim that these “side agreements” are ancillary to the main agreement, while others withhold such side agreements believing they are protected by a common interest privilege or as part of a joint defense agreement. Both positions are legally incorrect, and contrary to the requirements of HSR Rules.

The Instructions for Item 3(b) of the HSR Form clearly specify that filing parties must:

“Furnish copies of all documents that constitute the agreement(s) among the acquiring person(s) and the person(s) whose assets, voting securities or non-corporate interests are to be acquired,” [emphasis added].

(...) the parties may not exclude documents if they “contain … other agreements between the parties or other important items of the transaction” -- meaning any agreement entered by the parties or their representatives that bears on the terms of the transaction and is binding on the parties must be submitted as part of the HSR filing. This includes any agreement that alters the terms of the merger during the antitrust review process, regardless of where those commitments are written down. If there is an enforceable agreement that binds the parties to take actions related to antitrust clearance, it must be submitted as part of the HSR form.

Side agreements between merging parties are not covered by any privilege or protection (such as the attorney work product doctrine) and may not be withheld, even if the parties have signed a joint defense agreement. Whenever side agreements are part of the transaction negotiations, they are part of the agreement between the parties and responsive to Item 3(b). Of course, analyses, recommendations, and strategy explanations that are not binding or enforceable by the merging parties need not be turned over pursuant to Item 3(b). Nonetheless, these materials may still be responsive to Items 4(c) or (d) and, if privileged, as with other privileged 4(c) or 4(d) materials, should still be listed in the privilege log. Specifically, the privilege log must comply with the detailed requirements in the HSR Instructions, which indicate that parties must state the factual basis supporting the privilege claim in sufficient detail to enable staff to assess the validity of the claim.

In order for parties to comply with the requirements of the HSR Act and Rules, they must complete their HSR forms accurately and submit all required documents. Remember that certifying to the veracity of the HSR Form must be done in the presence of a notary or contain language found in 28 U.S.C. § 1746 relating to unsworn declarations under penalty of perjury. Failing to comply with the HSR Act can lead to significant penalties, such as restarting the HSR waiting period and civil penalties of over $40,000 per day a party is in violation of the Act.