Key Takeaways:

• The Department of Justice Antitrust Division (DOJ) recently announced "targeted" second requests with the stated goal of expediting reviews and reducing merger litigation. Simultaneously, DOJ unveiled an updated model timing agreement.
• DOJ subsequently announced its first closure of an investigation under these procedures, acknowledging the emergence of AI competitors as sufficient to permit consolidation of horizontal competitors in traditional software development.
• DOJ also settled its lawsuit against private equity firm KKR, alleging that it failed to file HSR notifications, failed to include all responsive documents with its HSR filings, and altered the content of responsive documents. KKR agreed to pay a record $250 million to settle the lawsuit.

In a busy summer for the DOJ, several notable announcements concerning enforcement of the HSR Act were recently released. First, DOJ announced a return of "targeted" second requests, which have the potential to meaningfully reduce burdens on transacting parties subject to a second request. Second, just a few weeks later, DOJ announced the first closure of such an investigation under these new procedures. Substantively, this announcement signals DOJ's potential openness to early resolution of second request investigations. Finally, DOJ announced a settlement with KKR, ending a lawsuit alleging KKR's systematic failure to file, failure to include responsive documents, and in some cases, intentional alteration of the content of its HSR filings. We discuss each of these developments in turn.

Return of "Targeted" Second Requests

On July 23, the DOJ announced the return of "targeted" second requests, as well as a revised model timing agreement.[1] Associate Attorney General Stanley E. Woodward Jr. stressed that the DOJ remains committed to cutting red tape and staying out of the way of the vast majority of mergers and acquisitions that do not cause antitrust concerns. The DOJ also reiterated that, at all times, it remains open to negotiated relief that would resolve a potential competition concern in lieu of litigation to block a transaction.

When parties to a proposed transaction file HSR, either the Federal Trade Commission or DOJ reviews the filings for competition concerns. The vast majority of transactions clear without any follow-up from the agencies. But in about 2 percent of such transactions, the agencies identify a competition concern that the parties are unable to resolve before the expiration of the statutory waiting period. These filers are served with a "second request" - the equivalent of a broad and burdensome subpoena for documents, data and narrative responses. By statute, the service of a second request extends the waiting period until 30 days after both parties "substantially comply" with the second request, which gives the agencies a defined window to sue to block the transaction if they believe the transaction should be blocked. Compliance with a second request is typically burdensome, time-consuming and expensive for transacting parties.

The announcement only applied to DOJ's review of merger transactions. Specifically, to potentially reduce this burden in some cases, the DOJ announced the return of "targeted" second requests, whereby the filing party would be required to provide DOJ with information and documents that DOJ identifies as priority items. Upon receipt of the priority items, DOJ commits to a quicker review, followed by a decision to close the investigation, to modify the second request to reduce burden, or to keep the investigation open fully. While this could enable quicker substantial compliance with a second request, to receive this "targeted" treatment, a filer would need to enter into a timing agreement.

Although the streamlined procedures could result in a focused review and a quick DOJ determination as to whether an investigation may be closed, parties will need to evaluate the implications of the new timing agreement for their closing. The new timing agreement does not provide a commitment that the "expedited review" will resolve the DOJ's concerns. DOJ instead retains discretion to require full compliance with the second request if its concerns are not resolved by the "expedited review." Additionally, if the investigation is not resolved in the expedited window, the timing agreement includes an "Earliest Closing Date" - 60 days after the compliance date. This doubles the waiting period that is required by statute - 30 days. And before a party could even certify substantial compliance, the model timing agreement requires a minimum 30-day period following production of structured data to certify substantial compliance. In total, this means that a party to a second request that seeks streamlined treatment would effectively face a 90-day waiting period to close a transaction from the time when structured data productions are complete.

So the question becomes: which is better, (a) a standard second request and a standard 30-day post-compliance waiting period, or (b) a potentially "targeted" second request, which if granted, would result in a streamlined investigation, but if refused by the DOJ, would result in a filer's being bound to a timing agreement that effectively includes a 90-day waiting period post-production of structured data and other concessions favorable to DOJ? There are trade-offs. Certainly, the reduced cost and burden of a more-focused investigation are benefits to HSR filers if the expedited process results in clearance. But if the expedited process fails to result in clearance, then the timing agreement requires more time before the merger can be completed. Where the equities lie will vary depending on the circumstances of a given transaction and the goals of the parties.

First "Targeted" Second Request Investigation Closed

On Aug. 19, DOJ announced its first closure of a second request investigation under the framework for targeted second requests.[2] The proposed merger of Seismic Software Inc. and Highspot Inc. presented potential horizontal competition issues. The proposed transaction is a horizontal consolidation of two companies that "offer sales enablement software platforms to businesses." The parties' primary argument against anticompetitive harm as a result of the horizontal consolidation involved AI. As software providers, the parties asserted that horizontal consolidation allowed traditional software providers to better compete against the emerging AI-based competitors. To explore these arguments, DOJ caused the parties to enter into a timing agreement and collected priority materials addressing these arguments. Following the review of the priority materials, DOJ agreed with the parties and closed the investigation. Woodward again heralded the targeted second request procedures, saying, "The resolution of this matter using a targeted approach is an excellent example of the Antitrust Division efficiently reviewing a proposed merger with an expedited focus on key dispositive issues."

DOJ Settles KKR Lawsuit for Record $250 Million

On Aug. 26, DOJ announced the settlement of a landmark lawsuit against private equity firm KKR.[3] DOJ sued KKR in Jan. 2025, alleging a number of violations of premerger review law where KKR had been party to more than 100 HSR-reportable transactions since 2021.[4] DOJ alleged that from 2021 to 2022, KKR violated the HSR Act at least 16 times and failed to make any HSR filing for at least two transactions that were HSR reportable. DOJ also claimed that KKR systemically omitted responsive "Item 4" documents - those documents that address substantive competitive issues with a transaction and must be produced in connection with the preparation of an HSR filing - from at least 10 of the suspect HSR filings. Finally, DOJ alleged that KKR altered the content of its Item 4 documents for at least eight of the suspect HSR filings.

Penalties for violation of the HSR Act are significant and can be assessed per day, per violation.[5] DOJ and KKR settled the lawsuit for $250 million, but DOJ claimed that the maximum penalty available for the alleged violations exceeded $650 million. Woodward touted the settlement and the DOJ's efforts: "This historic $250 million civil penalty - more than 20 times any prior HSR penalty obtained by the DOJ - sends a powerful message: the Department is committed to vigorous enforcement of the Act . . . . Companies that disregard their legal obligations will face serious consequences."

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BakerHostetler's merger clearance team has extensive experience in assessing HSR reportability, preparing HSR submissions and conducting cost-effective post-filing advocacy, including successful clearance of second request investigations. The merger clearance team includes former DOJ Antitrust Division leaders and state attorney general personnel who have experience investigating mergers for competition concerns. Please feel free to contact any of our experienced professionals if you have questions about this alert.

[1] https://www.justice.gov/opa/pr/justice-department-resumes-targeted-hsr-merger-review-process

[2] https://www.justice.gov/opa/pr/statement-department-justice-antitrust-division-closing-its-investigation-merger-seismic

[3] https://www.justice.gov/opa/pr/kkr-agrees-pay-record-250m-penalty-serial-violations-federal-premerger-review-law

[4] https://www.justice.gov/archives/opa/pr/justice-department-sues-kkr-serial-violations-federal-premerger-review-law

[5] The maximum daily fine increases annually. The current maximum daily fine is $53,088.