U.S. Government Shutdown: Implications for Antitrust and CFIUS Filings
Partner, Global Co-Head International Trade and Regulatory Law Group, and Global Head of the firm's Environmental Law Group
Partner, Co-Head Antitrust
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The U.S. federal government is facing a possible shutdown beginning this Sunday, October 1, 2023. Congress has until September 30, which marks the end of the fiscal year, to enact appropriations for government agencies and programs.
If Congress is unable to enact funding, agencies and programs that rely on annual appropriations will suspend all non-essential activities and furlough non-essential employees. Some Members of Congress are currently pursuing a stopgap funding measure to temporarily extend federal government funding beyond the end of the fiscal year. Shutdowns and brinksmanship negotiations have plagued Congress in recent years. One likely scenario is an agreement to fund the government for only a limited period while negotiations for the full fiscal year continue. These “continuing resolutions” might allow the government to continue to function for a few weeks.
While negotiations are ongoing, there is a moderate possibility that an agreement will be reached in time to avoid a lapse in funding, or “funding gap”. For context, there have been numerous government shutdowns in recent history, including the longest ever shutdown in 2018-2019, which lasted 34 days.
In this bulletin, we provide an overview of the potential impacts of a government shutdown on antitrust merger enforcement and the Committee on Foreign Investment in the United States (CFIUS) review process.
In the event of a lapse in funding, the FTC’s Premerger Notification Office (the PNO) will continue to accept and process new Hart-Scott-Rodino filings. However, the PNO will not respond to questions, or requests for information or advice, from outside parties. The PNO may also reduce the days or hours of operation during a shutdown. The FTC will continue HSR investigations, “to the extent that the circumstances of a reported merger or acquisition indicate that a failure by the government to challenge the transaction before it is consummated will result in a substantial impairment of the government’s ability to secure effective relief later.” Similarly, the DOJ’s Antitrust Division (the ATR) will also continue to prepare for cases that face HSR deadlines, but “only when an extension or waiver cannot be obtained and ATR leadership determines that allowing a proposed merger to go forward without objection would pose a reasonable likelihood of peril to property in which the United States has an immediate interest.” In practice, we would expect that merger reviews are likely to be impacted on a case-by-case basis. In addition, ATR operations for non-merger investigations will continue while FTC non-merger investigations are suspended “except as necessary to prevent statutes of limitations from precluding monetary remedies.”
We advise our clients who are engaged in or contemplating transactions that may trigger HSR notification to monitor the status of the government funding negotiations and plan accordingly for potential delays and challenges in obtaining antitrust clearance.
The U.S. Department of Treasury (Treasury), which chairs CFIUS, has also issued a contingency plan for operating during a shutdown.
In the event of a government shutdown, CFIUS will suspend its review of cases and will not initiate any new reviews or investigations. All deadlines for cases under review will be tolled, i.e. any deadline or time limitation imposed upon CFIUS to make a determination or provide comment will be extended by the number of days that the shutdown lasts. Certain Treasury CFIUS activities will continue, as appropriate, if they have a source of funding that is not annually appropriated.
Persons engaged in or contemplating transactions that may implicate CFIUS should plan accordingly for potential disruptions and extensions of the CFIUS process. We also recommend that clients carefully consider the timing implications for any transactions that may need to be notified to CFIUS in the coming weeks or months.
On September 30, 2023, Congress passed a bill that will temporarily keep the government open for another 45 days (until November 17, 2023). However, if Congress cannot come to a permanent resolution by November 17 once this temporary funding lapses, the government will face a shutdown and the above guidance will continue to assist parties to M&A transactions.
For additional information, please reach out to one of the A&O contacts listed here.