Baker Botts Washington Recap: First Year of the Biden Administration - Episode 2
In the latest installment of our video series on important regulatory and legislative events in the first year of the Biden Administration, Partner Jeff Oliver gives us the latest update on the current 2-2 split at the FTC. The split is likely to continue for at least the next few months, making deadlocks like the one over 7-Eleven/Speedway merger more likely. M&A parties should take care in crafting their closing conditions in the midst of this regulatory uncertainty.
FTC commissioners are currently evenly split, with two Democrat and two Republican commissioners. The even split recently led to an apparent deadlock over the 7-Eleven/Speedway merger.
Last August, 7-Eleven agreed to purchase some 3,800 Speedway stores in 38 states. After a nine-month FTC investigation, the parties reached settlement terms with the FTC staff, agreeing to divest nearly 300 of the acquired stores. FTC commissioners, however, asked for more time to review the proposed settlement. Having already granted four extensions of the relevant waiting period, the parties refused to grant this last request and closed the deal on May 14, once the last extension expired. This decision to close a deal in the midst of regulatory uncertainty is unusual, though not entirely unpredictable.
The two Republican and two Democrat commissioners appear to have disagreed over whether to:
– approve the negotiated settlement
– ask for better terms; or
– sue the parties to block the merger.
After the parties closed their transaction, the two Republican commissioners – Christine Wilson and Noah Joshua Phillips released a statement blaming the Democrat commissioners for the FTC’s inaction. In turn, the Democrat commissioners – Rebecca Kelly Slaughter and Rohit Chopra – also released a statement blaming the parties to the transaction. Senator Mike Lee, Co-Chair of the Senate Subcommittee on Antitrust, issued his own stern letter to FTC Acting Chair Rebecca Kelly Slaughter calling the FTC’s inaction on the deal a sign of “incompetence”.
President Biden has yet to nominate anyone for the empty seat on the FTC . Lina Khan, President Biden’s nominee to replace Rohit Chopra, is awaiting Senate confirmation.
This is all to say that the current 2-2 split at the FTC is likely to continue for at least the next few months, making such deadlocks more likely.
M&A parties should take care in crafting their closing conditions:
– Sellers will want to ensure that they have the leverage to force buyers to close in the face of such regulatory uncertainty
– Buyers will want to try to retain some flexibility in the closing timing
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