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(Repeat) Buyers Beware: Complying with Prior Notice and Approval Requirements in Merger Remedies

Joshua Wade

(Repeat) Buyers Beware: Complying with Prior Notice and Approval Requirements in Merger Remedies
Melinda Podor via Getty Images

Recent regulatory action by the FTC highlights why it is so important for merging parties to timely plan for and implement internal controls to ensure compliance with all aspects of negotiated resolutions to merger challenges.  On December 4, 2023, the FTC filed a complaint in federal court alleging that 7-Eleven violated certain “prior notice” provisions in a 2018 consent decree that required 7-Eleven to provide the FTC with information concerning certain potential transactions.  The FTC’s challenge comes a little over two years after the FTC in October 2021 issued its “prior approval” policy statement, noting that, going forward, prior approval provisions would be included in the FTC’s consent decrees resolving merger challenges.  Taken together, the FTC’s actions highlight the need for companies (and in-house and outside counsel assisting them) to monitor and enforce compliance with these prior notice and approval provisions.


In 2018, 7-Eleven purchased over 1,000 retail fuel outlets from Sunoco.  The FTC raised concerns that the transaction would lessen competition in certain geographic markets, and, as a result, 7-Eleven agreed to divest certain retail fuel outlets (or leave them with Sunoco).  As part of the consent decree approving the transaction, 7-Eleven was required to provide advance written notification to the FTC if it purchased an interest in certain retail fuel outlets identified by the FTC on a non-public schedule.  That notice was to include the information required in a Hart-Scott-Rodino Act form, as well as information related to other retail fuel outlets in the same geographic area.

In its suit, the FTC alleges that, after entering into this consent decree, 7-Eleven acquired a leasehold in a St. Petersburg, Florida retail fuel outlet listed on the non-public schedule, but did not provide notice to the FTC of the acquisition.  The complaint then alleges that 7-Eleven subsequently sold the acquired St. Petersburg outlet to a third party after it disclosed the acquisition to the FTC.

The FTC additionally alleges that 7-Eleven submitted certain reports concerning its compliance with the consent decree, and that eight of these reports contained false certifications that 7-Eleven was complying with its obligations.  The FTC further alleges that 7-Eleven’s internal controls for compliance with the consent decree were inadequate, although details concerning 7-Eleven’s controls were redacted from the complaint.  The FTC is seeking civil penalties of up to $77 million for 7-Eleven’s alleged violation.

7-Eleven has not yet filed a responsive pleading, but in a public statement it explained it has “been working in good faith with the FTC to rectify an oversight involving one store in St. Petersburg, Florida.”  The statement also stated that 7-Eleven “self-report[ed]” to the FTC “after discovering this unintentional error” and then “divested this store expeditiously.”

Prior Approval Policy

This enforcement action builds on a recent change in the FTC’s approach to prior approval provisions.  In particular, in October 2021, the FTC restored a long-dormant policy requiring all parties to an M&A transaction entering into a consent decree with the FTC to obtain prior approval from the FTC “before closing any future transaction affecting each relevant market for which a violation was alleged.”  In other words, this prior approval policy requires any party that enters into a merger-related consent decree (for example, an order requiring divestiture of overlapping assets) to seek the FTC’s approval of future deals in the same space, no matter how de minimis the size of the future deal is and regardless of whether the transaction would require a filing under the Hart-Scott-Rodino Act.

To be sure, the FTC’s prior approval policy is not directly implicated by the 7-Eleven enforcement action—the FTC entered into the 7-Eleven consent decree before it revitalized its prior approval policy, and the 7-Eleven consent decree included notice (not approval) provisions.  However, both regulatory actions underscore that the FTC is using merger remedies to police and investigate future transactions that it believes may be anticompetitive.

Compliance Takeaways

Regardless of how the 7-Eleven litigation concludes (for its part, 7-Eleven has said that it hopes the matter will “be resolved quickly and fairly”), these regulatory actions highlight the need for compliance counsel to have controls in place to monitor and comply with prior notice and approval provisions.  These controls should function in at least two ways: (1) at the front end, when considering new transactions, and (2) when confirming or certifying compliance to the FTC.

First, it is critical that business development / M&A teams and corporate counsel be educated on any merger consent decrees under which a company may be operating.  All notice and approval requirements under the decree should be communicated to these individuals both when the company enters into the decree as well as in any ongoing training tailored to ensure timely compliance with the provisions.

Second, companies need to consider how they can accurately certify any reports made to the FTC regarding compliance with these provisions.  Challenges can arise because different counsel may be responsible for negotiating the original consent decree, submitting compliance reports, and negotiating ongoing transactions.  For example, a consent decree may be negotiated by outside antitrust counsel, annual reporting to the FTC handled by in-house compliance counsel, and negotiation of ongoing transactions (some of which may not be HSR-reportable) handled by deal counsel.  Company counsel, and especially counsel responsible for certifying compliance to the FTC, need to work together across business and legal units to ensure the company is complying with its obligations and able to accurately certify to that compliance.