Will the Solo/Dart Deal Receive an HSR "Second Request"?

While only a minority of all proposed deals in the size-range of Dart/Solo (under $400 million, net of debt assumed) draw a formal second request from the HSR authorities, when it happens, it usually results in a significant delay in the deal's closing timetable. So, while it is far from certain that Dart/Solo will receive a second request, it is also at least possible that the FTC/DoJ will want more information, beyond that provided in the initial Dart Container/Solo Cup HSR pre-merger notification filings -- especially as to the United States-based markets for foam cups -- before allowing the transaction to proceed to closing.

Either the FTC or the Department of Justice, Antitrust Division may extend the initial 30-calendar-day Hart Scott- waiting period by issuing a request for additional information (a “second request”) to Dart and/or Solo for the purpose of conducting a more in-depth antitrust review of the transaction. The second request waiting period adds an additional 30 days to the waiting period, which begins running only after the Dart and Solo have complied with the second request.

Formal DoJ/FTC second requests -- which are essentially subpoenas -- are generally very broad, and responding to them usually takes several months (i.e., say good bye to those top-hat bonuses, Korzenski and Reed!). However, the FTC and/or DoJ have the discretionary authority to waive burdensome or irrelevant portions of second requests. If the reviewing agency insists on certain information that Dart and/or Solo claim would be unduly burdensome to produce, or a dispute arises with respect to whether Dart and/or Solo have substantially complied with the request, Dart or Solo may appeal to the Director of the Bureau of Competition at the FTC or the Deputy Assistant Attorney General for Mergers at the Antitrust Division of the Department of Justice. The agencies cannot extend the second request waiting period, but may seek a "voluntary" consent from Dart and Solo to delay the expiration of the waiting period. These "voluntary" consent requests are rarely refused by the parties, because the agencies have the immediate unreviewable right to bring suit to stop the merger, which generally ends the possibility of the deal getting done (think AT&T/T-Mobile, here, as one recent example).

If there is a genuine antitrust issue raised by a proposed transaction -- and consider here that in at least some product lines and markets (foam cups in the United States), No. 3 is being bought by No. 1 -- Dart and Solo may end up in negotiations with the reviewing agencies, and thus again end up having to provide additional information -- in order to avoid a more formal second request.

Other market participants, like Pactiv, or customers -- like Kraft Foods, Burger King or Starbucks Coffee -- may also voluntarily check in the the FTC/DoJ to express any concerns they might have, related to the Dart/Solo transaction. The FTC and DoJ take this input very seriouly, as it usually represents the thoughtfully-considered view of other market participants -- as to whether the deal will likely reduce price competition in certain segments and markets.

If, at the end of any second request period (and any extension), the FTC/DoJ determines that the transaction will violate the antitrust laws -- and Dart and/or Solo indicate that they still plan to go forward -- the agency may seek an injunction to bar the deal. Alternatively Dart -- here, the acquiring party -- may attempt to negotiate a consent agreement with the DoJ/FTC, under which the deal would be modified in a manner that addresses the agencies' concerns (for example, by divesting certain business-lines, or assets).

Even so, only the government may sue to enforce the HSR Act. Private parties may complain to the FTC and Department of Justice about alleged violations, but private parties may not seek to enforce the HSR remedies, nor obtain damages under the HSR Act.

[Finally, while I am not certain about this -- and haven't bothered to do any additional research -- I do believe a similar filing process (under Mexico's FLEC) will be required/already underway, south of the border. In addition, filings may be required in the United Kingdom -- as one or more of the parties may have substantial operations there, too -- and thus must file with the Office of Fair Dealing, for clearance to close.] We will -- as ever -- keep you apprised.