By Natalie DeCoste

The Federal Trade Commission (FTC) has voted to rescind a 1995 policy statement that eliminated prior approval and prior notice provisions from most merger settlements.

The FTC voted on July 21 to repeal “The 1995 Policy Statement on Prior Approval and Prior Notice Provisions.” The agency claimed the statement made it more difficult and burdensome to deter problematic mergers and acquisitions. The policy statement had ended the FTC’s practice that required parties that proposed unlawful mergers to receive prior approval and give prior notice for future transactions and limited prior approval and notice to situations where there was a credible risk of merging parties reattempting anticompetitive deals.

Now that the policy is rescinded, the FTC will regain its enforcement tool against unlawful mergers. The agency will have significantly greater authority to review and block future transactions of companies. Notably, there will be significant implications for the negotiation of antitrust risk provisions in transaction agreements.

“Since the FTC substantially reduced using these prior approval provisions, the agency has encountered numerous examples of companies repeatedly proposing the same or similar deals in the same market, despite the fact that the Commission had earlier determined that those deals were problematic. Companies have also in several cases sought to buy back assets that the Commission ordered those same companies to divest,” said FTC Chair Lina M. Khan during an open Commission meeting.

Before the implementation of the policy statement, the FTC mandated that all companies who violated the law in a previous merger must obtain prior approval by the FTC for any future transactions in the same market in which the original violation occurred. Then in 1995, the FTC implemented the policy statement based on the presumption that the Hart-Scott-Rodino premerger notification requirements would suffice.

However, the current FTC was not satisfied with the notification requirements still standing, finding that the FTC has been forced to re-review the same transaction on numerous occasions at considerable expense because of the setup.

“Without a prior approval provision, the Commission must initiate a whole new investigation and then go into court to block the deal anew. This additional burden drains the already strapped resources of the Commission,” said Khan.

Now the FTC will not have to go through the additional burden of re-reviewing companies. Instead, companies seeking to merge must demonstrate why their reattempted merger would not harm competition or create the same risks flagged by the FTC.

“This might give the administration a shot at avoiding some of these mergers that in retrospect look like they are perhaps more problematic than they seemed at the time,” said K. Craig Wildfang, co-chair of the antitrust and trade regulation group at Robins Kaplan LLP.

In the announcement for the repeal, the FTC noted that the agency is “significantly under-resourced.” The agency explained that its staff count remains at roughly 50% less than during the 1980s, which was a time when the economy was much smaller than it is now. With the increased size of the economy, the FTC now handles a growing number of merger filings, and the policy statement was a drain on the limited resources of the agency.

The move comes just weeks after the FTC voted to rescind another policy, known as Section 5 of the FTC Act, which limits how the agency uses its authority known in bringing antitrust cases.